LMTI Laser Master International (CE)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2008

or

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ________________ to ______________________

Commission File Number 2-76262-NY

LASER MASTER INTERNATIONAL, INC.

 (Exact name of registrant as specified in its charter)

New York	11-2564587
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1000 First Street, Harrison, NJ	07029
(Address of principal executive offices)	(Zip Code)

(973) 482-7200

(Registrant's telephone number, including area code)

Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     YES |X| NO |  |

As of December 10, 2008, the Registrant had outstanding 10,840,380 shares of common stock, par value $0.01 per share.

   

Transitional Small Business Disclosure Format (Check one): Yes |  | No |X|

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Table of Contents

PART I.  Financial Information

3

Item 1. Financial Statements

3

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

10

Item 3. Controls And Procedures

12

PART II - Other Information

13

Item 6. Exhibits.

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PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

LASER MASTER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
	August 31, 2008	November 30, 2007
ASSETS:
Current Assets
Cash and cash equivalents	$            281,507	$                  601,962
Accounts receivables, net of allowance for doubtful accounts of	$            729,618	$               3,252,684
$287,490 and $ 397,997 as of August 31, 2008 and November   30, 2007,respectively
Inventories	$         2,011,795	$               1,607,866
Short-term investments, available for sale	$              44,881	$                    52,392
Prepaid expenses and other current assets	$         1,749,284	$               1,425,889
Total Current Assets	$         4,817,085	$               6,940,794
Property and equipment - net	$         9,258,153	$               9,280,007
Investment	$         1,980,570	$               1,654,637
Other Assets	$              55,515	$                    55,945
TOTAL ASSETS	$       16,111,323	$             17,931,382
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable & Accrued Liabilities
Accounts payable	$            663,197	$               1,554,628
Accrued expenses	$            296,826	$                  454,964
State income tax payable	$              62,823	$                    62,823
Current maturities of long-term debt	$            166,116	$                  158,782
Total Current Liabilities	$         1,188,962	$               2,231,197
Long-term debt - net of current portion	$         6,266,071	$               6,342,357
Deferred Income	$            113,412	$                    64,188
TOTAL LIABILITIES	$         7,568,445	$               8,637,742
Stockholders' Equity
Common stock, $0.01 par value, 50,000,000 shares authorized;	$            108,404	$                  108,404
10,840,380 shares issued and outstanding
Additional paid-in capital	$         5,162,638	$               5,162,638
Retained Earnings	$         3,263,020	$               4,006,271
Accumulated other comprehensive income	$                8,816	$                    16,327
Total Stockholders' Equity	$         8,542,878	$               9,293,640
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$       16,111,323	$             17,931,382
The accompanying notes are an integral part of these consolidated financial statements

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LASER MASTER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	For the Three Months period ended		For the Nine Months period ended
	August 31, 2008	August 31, 2007	August 31, 2008	August 31, 2007
Revenues, Net	$            3,819,612	$         5,564,609	$       11,380,295	$       14,858,986
Cost of Revenue	$            2,935,029	$         4,143,380	$         8,674,177	$       10,641,732
Gross Profit	$               884,583	$         1,421,229	$         2,706,118	$         4,217,254
Operating Expenses:
Selling Expenses	$               220,771	$            447,340	$            750,005	$         1,327,562
General and administrative expenses	$               797,777	$            687,392	$         2,609,456	$         2,374,778
Depreciation and Amortization Expenses	$                 53,886	$              57,066	$            169,020	$            172,435
Total Operating Expenses	$            1,072,434	$         1,191,799	$         3,528,481	$         3,874,775
Income (Loss) From Operations	$             (187,851)	$            229,430	$          (822,363)	$            342,479
Other (Income) and Expenses
Interest Expense	$                 98,171	$              99,621	$             295,575	$            300,056
Interest Income	$                    (142)	$                 (695)	$                  (212)	$                 (879)
Rental Income	$             (126,225)	$         (121,500)	$           (374,475)	$          (363,000)
Total Other (Income) and Expenses	$               (28,196)	$           (22,575)	$             (79,112)	$            (63,823)
Income before Provision for Income taxes	$             (159,655)	$           252,004	$           (743,251)	$            406,301
Income Tax Expense	$                            -	$                       -	$                         -	$                         -
Net Income	$             (159,655)	$           252,004	$           (743,251)	$            406,301
Other Comprehensive Income:
Unrealized gain (Loss on securities	$                 (3,612)	$                       -	$               (7,511)	$                         -
Comprehensive Income	$             (163,267)	$             52,004	$           (750,762)	$            406,301
Earnings per common share:
Basic and diluted earnings per share	$                   (0.02)	$                 0.02	$                 (0.07)	$                  0.04
Weighted average common shares outstanding	10,840,380	10,840,380	10,840,380	10,840,380
The accompanying notes are an integral part of these consolidated financial statements.

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LASER MASTER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	For the Nine Months ended
	August 31, 2008	August 31, 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$          (743,253)	$              406,301
Adjustments to reconcile Net Income (Loss) to net Cash:
(Increase) Decrease in:
Provision for doubtful accounts	$            (23,066)	$           (323,127)
Depreciation and amortization	$             169,020	$             172,435
Changes in operating assets and liabilities:
Accounts receivable	$          2,546,132	$          3,904,166
Inventories	$           (403,928)	$          (193,505)
Prepaid Expenses and Other Current Asset	$           (323,395)	$            (86,935)
Accounts payable and accrued expenses	$        (1,049,136)	$       (4,060,976)
Deferred income	$               49,225	$                         -
Net Cash Provided By (Used In) Operating Activities	$             221,599	$          (181,640)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate joint ventures	$          (325,933)	$          (432,828)
Acquisition of property and equipment	$              (7,506)	$            (42,689)
Net Cash Used In Investing Activities	$          (333,439)	$          (475,517)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) on notes payable - related party	$                         -	$          (161,513)
Proceeds (payment) from long-term debt	$          (208,615)	$         1,194,878
Net Cash Provided By (Used In) Financing Activities	$          (208,615)	$         1,033,366
Net Increase (Decrease) in Cash and Cash Equivalents	$          (320,455)	$            376,208
CASH AT BEGINNING OF PERIOD	$            601,962	$            434,593
Cash and Cash Equivalents - end of period	$            281,507	$            810,801
Supplemental Disclosure of Cash Flow Information:
Cash Paid For:
Interest	$            295,575	$            300,056
Taxes
Non-Cash Investing Activities:
Investment property note payalbe	$            139,230	$                        -
Unrealized gain (loss)on investments, available for sale	$                7,511	$                        -
The accompanying notes are an integral part of these consolidated financial statements.

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LASER MASTER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
____________________________________________________________________________________

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of Laser Master International Inc. and its wholly owned subsidiaries (collectively the “Company”).  All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying financial statements are unaudited for the interim periods, but include all adjustments (consisting only of normal recurring accruals) which management considers necessary to present fairly the financial position at August 31, 2008 and the results of operations and cash flows for all periods presented.  The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period.  Actual results could vary from these estimates.  These financial statements should be read in conjunction with the Company's Annual Report at November 30, 2007, and for the year then ended, as filed with the Securities and Exchange Commission on Form 10-KSB.

The results reflected in the interim periods, are not necessarily indicative of the results of the entire fiscal year to end on November 30, 2008.

Name and brief description of the Company’s trade names and wholly owned subsidiaries are summarized as follows:

Trade Names:

Flexo-Crafts Prints Inc.

Harrison First Realty Corp.

Passport Papers Inc.

East River Arts Inc.

Wholly-owned Subsidiaries:

1540 57 LLC

This company owns 100 acres of land in Swan Lake, New York.   

SCP 2006-C23-033 LLC

This company owns a building in Chicago, Illinois which is leased to a retailer.

Allowance for Doubtful Account s – The company reserves for bad debts and creates its allowance by identifying specific Accounts Receivable by customer based upon age and collectability. When an account is determined to be uncollectible, it is removed from the accounts receivable and the allowance is reduced.  

Inventories – Inventories which consist of mostly finished goods are stated at the lower of cost or market, with cost being determined by the weighted average first-in, first-out method.

Property and Equipment – Deprecation of property and equipment is computed by the straight-line method at rates calculated to amortize cost over the estimated useful lives which approximate 39 years for buildings and building improvements and 5 to 10 years for machinery and equipment, computer equipment and furniture and fixtures. Maintenance and repairs are charged to operations as incurred, while the cost of betterments and improvements is capitalized. The cost and related accumulated depreciation of assets sold or otherwise disposed of are eliminated from the accounts and any resulting gain or loss is reflected in operations.  

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LASER MASTER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
____________________________________________________________________________________

Long-Lived Assets – The Company follows Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.  This statement requires that the Company review certain long-lived assets and identifiable intangibles for impairment or disposal whenever events or changes in circumstances indicated the carrying amount may not be recoverable.  In that regard, the Company addresses recoverability based upon estimated non-discounted cash flow forecasts.  The Company has determined that an impairment loss does not need to be recognized for applicable assets through August 31, 2008 and 2007.

Investments – Investments consist of real estate joint ventures. The Company accounts for the investments under the equity method.

Revenue Recognition – The Company recognizes revenues in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”).  Under SAB 104, revenues from merchandise sales are recorded when all four of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the Company’s price to the buyer is fixed or determinable; and collectability is reasonably assured.  The Company reports its sales levels on a net revenue basis, with net revenues being computed by deducting from gross revenues the amount of actual sales returns and discounts.

New Accounting Pronouncements – The Company does not expect the adoption of recently issued accounting pronouncements tohave a significant impact on the Company’s results of operations, financial position or cash flows.

NOTE 2 – INVESTMENTS

As of August 31, 2008, the Company is a one-third member of a limited liability corporation that is a 55% member of another limited liability corporation which is a real estate joint venture.  As of August 31, 2008 the Company contributed $590,570 to the joint venture which represented 33% of the total capital of the joint venture.  For the period ending August 31, 2008 there was no earnings or losses in the joint venture for the Company to recognize.  

As of August 31, 2008 the Company is a one-third member of a limited liability corporation that is a 55% member of another limited liability corporation which is a real estate joint venture.  As of August 31, 2008 the Company contributed $591,000 to the joint venture which represented 33% of the total capital of the joint venture.  For the period ending August 31, 2008 there was no earnings or losses in the joint venture for the Company to recognize.  

As of August 31, 2008 the Company is a 7.75% member of a limited liability corporation which is a real estate joint venture.  As of August 31, 2008 the Company contributed $799,000 to the joint venture which represented 21% of the total capital of the joint venture.  For the period ending August 31, 2008 there were no earnings or losses in the joint venture for the Company to recognize.  

NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following as of:

	August 31, 2008	November 30, 2008
Prepaid Insurance	$31,671	$48,122
Prepaid Inventory	460,006	451,178
Receivable due from Factor	239,285	518,077
Receivable due from Supplier	226,590	-
Loan Receivable	-	300,000

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LASER MASTER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
____________________________________________________________________________________

Insurance Claim	-	108,512
Prepaid manufacturing expense	299,594	-
Deposits to suppliers	437,696	-
Other	54,442	-
Total	$1,749,284	$1,425,889

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows as of:

	August 31, 2008	November 30, 2007
Land $	1,789,230	$       1,650,000
Building and improvements	7,745,889	7,745,889
Machinery and equipment	73,382	73,382
Computer equipment, furniture and fixtures	158,050	150,544
Total Fixed Asset	9,766,551	9,619,815
Less  accumulated depreciation	(508,398)	(339,808)
	$              9,258,153	$   9,280,007

For the periods ended August 31, 2008 and November 30, 2007 depreciation expense totaled $169,020 and $229,628, respectively.

NOTE 5 – OTHER ASSETS

Other assets is primarily comprised of the cash value of company owned life insurance on key employees.   As of August 31, 2008 the cash value was $52,374

NOTE 6 – ACCRUED EXPENSES

	August 31, 2008	November 30, 2007
Audit, Accounting, Legal, Professional Fee	$7,500	$45,000
Customer refund for damaged goods	226,590	283,813
Commission for sale of building	-	39,265
Environmental	59,494	59,494
Accrued payroll	-	22,965
Other Accrued expenses	3,242	4,427
Total	$296,826	$454,964

NOTE 7 – LONG-TERM DEBT

Long-term debt is comprised of the following as of:

	August 31, 2008	November 30, 2007
Mortgage with a bank due December 10, 2028, secured by a building.  Fixed monthly payments of $45,570.  Interest @ 6.036% per annum.	$     6,382,611	$      6,501,140

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LASER MASTER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
____________________________________________________________________________________

Notes payable due to a related party for 52.5% ownership of investment property.  Note matures on  February 19, 2013.  Interest @ 6% per annum	$          49,576
Less current maturities	$      (166,116)	$      (158,782)
Total  long-term debt	$    6,266,071	$    6,342,358

 NOTE 8 – INCOME TAXES

The tax provision for income taxes consists of the following:

	August 31, 2008	November 30, 2007
Current:
Federal	-	-
State and local	-	$17,029
	-	$17,029

As of August 31, 2008, the Company has federal net operating losses of approximately $5,674,405, which expire in various years through 2027, available to offset future taxable income.  

 

As of February 29, 2008, the Company has New Jersey net operating loss carryforwards of approximately $6,434,657 available to offset future New Jersey taxable incomeBeginning 2005, the Company’s utilization of net operating loss carryforwards are not to exceed 50% of the entire net income. A full net operating loss deduction is allowed for beginning on or after January 1, 2006. The Company may offset up to 100% of its New Jersey taxable income for fiscal year-end November 30, 2008, by using its available New Jersey net operating loss carryforward.

In assessing the realizability of net deferred tax assets, management considers whether it is more likely than not that some portion or all of the net deferred tax assets will be realized.  The ultimate realization of net deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making the assessment.  Based upon historical taxable losses and the uncertainty of future projected taxable income, management believes it is more likely than not that the Company will not realize the benefits of the deductible differences of its net deferred tax assets. And therefore, no deferred tax is recorded.

NOTE 9 –RENTAL INCOME

The Company owns an investment property in Chicago, Illinois.  The investment property is being leased to a retailer for fixed monthly rental payments of $45,571 per month over 265 months.  The lease term is 302 months expiring January 1, 2032.  The Company is recording the rental income under the straight-line method.  As a result, as of August 31, 2008 the Company has deferred income of $113,412.  For the periods ended August 31, 2008 the Company recognized rental income of $364,500.

The Company owns 52.5% of an investment property in Magnoia, Texas. The property is being leased on month to month basis for $2,500 per month.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The statements contained in this report that are not historical are forward-looking statements, including statements regarding our expectations, intentions, beliefs or strategies regarding the future. Forward-looking statements include our statements regarding liquidity, anticipated cash needs, and availability and anticipated expense levels. All forward-looking statements included in this report are based on information available to us on this date, and we assume no obligation to update any such forward-looking statement. It is important to note that our actual results could differ materially from those in such forward-looking statements. The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes appearing elsewhere in this report.

Overview

Historically our principal business has been printing for the textile and gift wrap paper industry using a computerized laser printing system. We have experienced significant price competition from low-cost printing operations in other countries, particularly China. In response to this competitive pressure we diversified our customer base to national retail chain stores, and broadened our product line into different types of packaging and gift wrap products. We currently purchase our products from the domestic USA markets, China and other countries. We have in house design, creative and prepress departments and also use outside sources for these services. Generally, we have had no trouble finding domestic or overseas suppliers. We are experiencing price increases due to the exchange rate of the US dollar versus foreign currencies and the general cost increase of raw materials, energy and labor.

Three months ended August 31, 2008 compared to three months ended August 31, 2007.

Revenue decreased approximately 31.3% for the quarter ended August 31,2008 ($3,819,612 for the three months ended August 31, 2008 compared to $5,564,609 for the three months ended August 31, 2007) due to a general slowdown in retail sales and our customers having a overstock.  Our gross margin for the three months ended August 31, 2008 was 23.1% compared to 25.5 % for the three months ended August 31, 2007. The gross margin for period ending August 31, 2007 is a inflated number due to inventory adjustments being done in the fourth qtr of 2007. Selling expenses for the three months ended August 31, 2008 decreased as a percentage of revenue from $447,340 (8% of revenue) for the three months ended August 31,2007 to $220,771 (5.7% of revenue) for the three months ended August 31, 2008. General and administrative expenses for the three months ended August 31, 2008 increased to $797,777 (20.8% of revenue) from $687,392 (12.3% of revenue) as for the three months ended August 31, 2007.

Interest expense was approximately the same for the three months ended August 31, 2008 as for the three months ended August 31, 2007.

.

Nine months ended August 31, 2008 compared to Nine months ended August 31, 2007.

Revenue decreased approximately 23.4% for the quarter ended August 31,2008 ($11,380,295 for the nine months ended August 31, 2008 compared to $14,858,986 for the nine months ended August 31, 2007) due to a general slowdown in retail sales and our customers having a overstock.  Our gross margin for the nine months ended August 31, 2008 was 23.7% compared to 28.3% for the nine months ended August 31, 2007. The gross margin for period ending August 31, 2007 is an inflated number due to inventory adjustments being done in the fourth quarter of 2007. Selling expenses for the nine months ended August 31, 2008 decreased as a percentage of revenue from $1,327,562 (8.9% of revenue) for the nine months ended August 31,2007 to $750,005 (6.5% of revenue) for the nine months ended August 31, 2008. We do not regard this as a material variation. General and administrative expenses were approximately the same for the nine months ended August 31, 2008 as for the nine months ended August 31, 2007.

Interest expense was approximately the same for the nine months ended August 31, 2008 as for the nine months ended August 31, 2007.

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Liquidity and Capital Resources.

For the nine months ended August 31, 2008 operations required a net cash flow of $320,455, primarily to finance an increase in our inventories ($403,928), prepaid deposits ($323,395), and investments ($591,132) and to reduce our accounts payable ($1,049,136).

The principal source of cash to meet these requirements was a reduction in our accounts receivable of $2,546,132 as a result of cash collections from our seasonal and holiday sales in the last quarter. We also drew on available cash, reducing cash to $281,507 as of the end of the quarter compared to $601,962 at the beginning of the quarter.

Liquidity is sustained principally through funds provided from operations and the factoring facility.

Inventories are up as a percentage of our current assets as of the close of the quarter (approximately 41.7 % as of August 31, 2008 versus approximately 23.2%% as of November 30, 2007), and accounts receivable are down as percentage of current assets as of that date (approximately 15.1% as of August 31, 2008 versus approximately 46.9% as of November 30, 2007).  This is because our seasonal sales increase our accounts receivable in the fourth qtr.

Cash plus accounts receivable exceeded our current liabilities. We believe we will be able to meet our cash requirements for the next 12 months without additional financing based on current projected sales.

The company has arranged for a factoring facility of up to $5,000,000. The company agreed to offer for sale to the factor certain of its accounts. The factor has the absolute right in its sole discretion to reject any or all offered accounts. The factor may advance up to 85% of the face value of the invoices. The remaining 15% of balance is received when customer pays the invoice to the factor.   

Each account is purchased by the factor without recourse against the Company. All losses incurred by the factor from the financial inability of the applicable account debtor to pay such account over and above any and all residual payments and reserve amounts offset shall be borne solely by the factor.  

As of November 30, 2007 and February 29, 2008 the factor charges the company 1% of the invoice amount if the customer repays the invoice within 60 days and 1.25% for up to 90 days.

The factor has a security interest in all of our accounts receivable, inventory, deposit accounts, and general intangibles. We find that this arrangemen is a convenient and cost efficient way to turn our accounts receivable into cash on an as needed basis.  

Critical Accounting Policies and Estimates

Use of Estimates.  In preparing our financial statements, we must make a number of estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions, and these differences may be material.  We believe the following critical accounting policies affect our more significant judgments and estimates used in preparing our financial statements.

Allowance for Doubtful Account s –We reserve for bad debts and create our allowance by identifying specific accounts receivable by customer based upon age and collectibility. When we determined that an account is uncollectible, we remove it from the accounts receivable and reduce the related allowance. Our estimates of collectibility are based on a number of subjective factors including our appraisal of the particular customer's history with us into any identifiable factors that may particularly affect that customer's segment of the market. If our estimates as to collectibility are incorrect the amount of our reserve may be too small, resulting in greater future charges to income if and when the uncollectibility of that account becomes clear. If we were to apply another

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method of determining our allowance for doubtful accounts, such as applying historical percentages to the aggregate dollar amount of accounts outstanding, the result in any particular period could be very different.

Inventories – Inventories which consist of mostly finished goods are stated at the lower of cost or market, with cost being determined by the weighted average first-in, first-out method. The effect of this policy is to reduce the cost of goods sold when cost of inventory are rising as compared to the cost of goods sold that would apply if we were to determine cost on a last in first-out basis. Conversely, our policy would result in a reduction in the cost of goods sold during periods of falling inventory prices.

Property and Equipment –We compute depreciation of property and equipment by the straight-line method at rates calculated to amortize cost over the estimated useful lives which approximate 39 years for buildings and building improvements and 5 to 10 years for machinery and equipment, computer equipment and furniture and fixtures. We charge maintenance and repairs to operations as incurred, while we capitalize the cost of betterments and improvements. The cost and related accumulated depreciation of assets sold or otherwise disposed of are eliminated from the accounts and any resulting gain or loss is reflected in operations.  If we were to apply shorter useful lives in estimating the applicable depreciation, depreciation expense would be higher. In addition, we must apply judgment in determining whether particular work should properly be regarded as maintenance and repairers, and not a long-term increase in the value of the underlying asset. To the extent that we classify work on an asset as a cost of that asset rather than an expense to be deducted currently, our stated earnings for the applicable period would be increased.

Long-Lived Assets –We follow Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.  This statement requires us to review certain long-lived assets and identifiable intangibles for impairment or disposal whenever events or changes in circumstances indicated the carrying amount may not be recoverable.  We address recoverability based upon estimated non-discounted cash flow forecasts.  Technological changes and other changes in the marketplace may result in a particular asset's becoming recoverable in a shorter period of time than we have estimated. If that were to occur, our earnings would be reduced at such time as we determined that our initial estimate was too long. We have determined that we do not need to recognize an impairment loss for applicable assets through August 31, 2008 and 2007.

Revenue Recognition – We recognize revenues in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”).  Under SAB 104, we record revenues from merchandise sales when all four of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the Company’s price to the buyer is fixed or determinable; and collectibility is reasonably assured.  We report our sales levels on a net revenue basis, with net revenues being computed by deducting from gross revenues the amount of actual sales returns and discounts. The determination of whether collectibility is reasonably assured is in substantial part subjective. If we are too optimistic in estimating collectibility, revenues would be overstated for the period prior to our becoming aware that an account has become uncollectible.

Item 3. Controls And Procedures

(a) Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including our Chairman, Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report, and based on their evaluation, our Executive Chairman, Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure

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that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Executive Chairman, Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal controls.

There were no significant changes in our internal controls or in other factors that could significantly affect our internal control over financial reporting.

PART II - OTHER INFORMATION

 

Item 6. Exhibits.

(a)

Exhibits

Exhibit 31

Chief Executive Officer and Chief Financial Officer - Rule 13a-15(e) Certification

Exhibit 32

Chief Executive Officer and Chief Financial Officer - Sarbanes-Oxley Act Section 906 Certification

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LASER MASTER INTERNATIONAL, INC.

Date: December 29, 2008	/s/ Mendel Klein
	Mendel Klein                        Chief Executive Officer and Chief Financial officer

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