<PAGE>
 
                                   Exhibit 99

                          Cautionary Factors Under the
                Private Securities Litigation Reform Act of 1995

LaserMaster desires to take advantage of the new "safe harbor" provisions
contained in the Private Securities Litigation Reform Act of 1995 (the "Act").
Contained in this Form 10-Q are statements which are intended as
"forward-looking statements" within the meaning of the Act. The words or phrases
"expects", "will continue", "is anticipated", "management believes", "estimate",
"projects", "hope" or expressions of a similar nature denote forward-looking
statements. Those statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical results or from
those results presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on forward-looking statements. Readers
should also be advised that the factors listed below have affected the Company's
performance in the past and could affect future performance. Those factors
include, but are not limited to, the risk that a product may not ship when
expected or may contain technical difficulties; uncertain demand for new or
existing products; the impact of competitor's advertising, products or pricing;
availability or reliability of component parts, including sole source parts;
manufacturing limitations; availability of sources of financing; economic
developments, both domestically and internationally; new accounting standards;
and, the impact of the initiation, defense and resolution of litigation.

Other factors include the following:

Cash Needs. Although the Company has a credit agreement with a commercial
finance company that has adequately financed its cash requirements in the past.
Previously, net operating losses in fiscal 1996 and fiscal 1997 and
manufacturing and inventory requirements for product offerings resulted in a
need for additional financing. In September 1996, projected cash requirements in
excess of available sources required the issuance of private placements of
common stock and warrants to purchase common stock in the Company. There can be
no assurances that cash availability under the credit agreement will be adequate
to meet future needs, or that other sources of financing would be available to
the Company on favorable terms, or at all, if the Company's operations are
further affected by declining revenue from a lack of sales or significant
returns of existing products, introduction difficulties with new product lines,
competitive product introductions, or by market conditions in general. In
addition, there can be no assurance that the Company can achieve or maintain
profitability on a quarterly or annual basis in the future.

The Company's Senior Debt Agreement includes financial covenants which the
Company must meet. The financial performance of the Company in the past has made
it necessary for the Company to renegotiate the financial covenants to avoid
being declared in violation of the covenants by General Electric Capital Credit,
Inc.. If future financial performance were to cause covenant violations and the
Company is unable to renegotiate its loan covenants at that time, it could be
forced to seek replacement financing at prices which may not be favorable to the
Company. If adequate sources of financing are not available, the Company may be
required to sell certain product lines or technologies on less than favorable
terms.

Expansion and Diversification to Software and Services Outside of The Core
Printer Business. The Company's continuing efforts to expand sales and increase
profits and desire to reposition itself as a diversified technology company is
stimulating a series of new product development activities. Currently the focus
of these new business opportunities is primarily internet based software and
service businesses. During this past year, the Company launched an electronic
commerce (e-commerce) initiative for selling specialty media for wide format
printers under the brand name of Media*By*Air(TM). Internet based software and
service activities represent an extension 

                                       1
<PAGE>
 
of many of the printing and publishing tools which are integral to the core
technology of the Company.

Expansion into technologies outside of the core hard-copy base printer business
involves significant risk. Such risk includes, but is not limited to, the
following factors: New products may not meet customer needs or may face
significant competition from companies with lower overhead and product costs
and/or greater marketing and promotional budgets. In addition, the Company may
not be able to attract and retain key personnel and it may not be able to
develop the products in the time needed to gain market acceptance. Due to the
early stage development, the Company may not be able to predict product features
needed to gain market acceptance, development may require more time and
resources than anticipated for the development, it may turn out that the product
can not be feasibly developed. Diversification also carries the risk that the
new activity will distract management time and resources from focusing on the
core hard-copy based printer business. In addition, diversification may involve
risks related to the resources required to participate in this new business
including, but not limited to risks related to raising cash or obtaining cash
investments, doing business with one or more "partners" as a partnership or
joint venture, and risks related to acquisitions or other combinations of
businesses.

Product Development and Technological Change. The pre-press and wide-format
color printing industries are highly competitive and are characterized by
frequent technological advances and new product introductions and enhancements.
As product life-cycles get shorter, the resulting consumable stream generated by
the installed base may be negatively impacted. Accordingly, the Company believes
that its future success depends upon its ability to enhance current products, to
develop and introduce new and superior products on a timely basis and at
acceptable pricing, to respond to evolving customer requirements, and to design
and build products which achieve general market acceptance. This process
involves adopting new and emerging technologies and components which may not
have product histories or long term use testing to establish expected life
cycles in the field or to assure long term field use. Any quality, durability or
reliability problems with existing or new products, regardless of materiality,
or any other actual or perceived problems with the Company's products could have
a material adverse effect on market acceptance of such new products. Any quality
problems with components could result in "epidemic" failures of the products in
the field causing return and refund requests that would likely have a material
effect on the financial results of the Company and future sales potential. There
can be no assurance that such problems or perceived problems will not arise with
respect to any existing products or that even in the absence of such problems,
the Company's products will achieve market acceptance. In addition, the market
anticipation or the announcement of new products and technologies, whether
offered by the Company or its competitors, could cause customers to defer
purchases of the Company's existing products, which could have a material
adverse effect on the Company's business and financial condition.

The Company is currently undertaking a number of development projects and has
introduced a new family of printers, the DisplayMaker 4000, 5000 and 6000 HiRes
8-Color series, during September 1997. Although the Company has had successes
introducing new products in the past, some earlier products have experienced
limited market acceptance, the introductions of some products have been delayed,
and the quality and reliability reputation of certain products may unfavorably
affect new products. There can be no assurance that the Company will be
successful with the new DisplayMaker series or future product introductions,
that future market introductions will be timely and competitive, that future
products will be priced appropriately, or that future products will achieve
market acceptance. The Company's inability to achieve market acceptance, for
technological or other reasons, could have a material adverse effect on the
Company's financial condition.

The Company is aware of intermittent customer issues with the performance and
formulation of certain inks used in the Company's printers. The Company is
taking steps to address the ink issues. However, failure to address ink
functionality issues, or some other failure of the product to perform as
expected by the customer may result in customer requests for compensatory
supplies or other requests which could have a material adverse effect on

                                       2
<PAGE>
 
the Company's financial performance.

The Company is dependent on a sole source supplier for the printheads for the
PressMate-FS. The Company has experienced availability and quality consistency
issues from this supplier. If the Company is unable to resolve the availability
and quality issues, the Company's production, support of its installed base, and
quality requirements will be adversely affected.

Various potential actions by any of the Company's competitors, especially those
with a substantial market presence, could have a material adverse effect on the
Company's business, financial condition and results of operations. Such actions
may include reduction of product price, increased promotion, announcement or
accelerated introduction of new or enhanced products, product giveaways, product
bundling or other competitive actions. Additionally, a competitor's entry into
the wide-format market in such ways as to compete more directly and effectively
with the Company's products could adversely affect operational results.

Competition. The computer printer industry is intensely competitive and rapidly
changing. Some of the Company's existing competitors, as well as a number of
potential new competitors, have longer operating histories, greater technical
resources, more established and larger sales and marketing organizations,
greater name recognition, larger customer bases and significantly greater
financial resources than the Company, which may result in a competitive
advantage. Suppliers of wide-format print engines and systems compete on the
basis of print quality, color, print time, print size, product features,
including ease of use, service, and price. Competitive product sales practices
such as price reductions, increased promotion, product giveaways and bundling,
or announcement or accelerated introduction of new or enhanced products could
have a material adverse effect on the sales and financial condition of the
Company. New product introductions and changes in pricing structure by
competitors have had, and can be expected to continue to have, a significant
impact on the demand for the Company's products. Currently Hewlett Packard Co.
(HP) has announced a new 54 inch wide-format inkjet printer it expects to begin
shipping in the near future. The product is expected to compete for market share
with the Company's current DisplayMaker 5000 and 6000 printers. It is possible
that the Company's sales of certain products will compete with, or displace
sales of other products sold by the Company.

The Company's DisplayMaker HiRes 8-Color series products are based on relatively
new technology, are complex and must be reliable and durable to achieve market
acceptance and enhance revenue opportunities. Development and production of new,
complex technologies and products often have associated difficulties and delays.
Consequently, customers may experience unanticipated reliability and durability
problems that arise only as the product is subjected to extended use over a
prolonged period of time. There can be no assurance that the Company has
completely resolved operational problems that have occurred in the past or that
the Company will successfully resolve any future problems in the manufacture or
operation of the Company's existing printers or any new product. Failure by the
Company to resolve manufacturing or operational problems with its existing
printers or any new product in a timely manner could have a material adverse
effect on the Company's business, financial condition and results of operations.

The Company's HiRes 8-Color DisplayMaker 4000, 5000 and 6000 series of printers
and the DesignWinder product platform utilize HP licensed inkjet technology. The
Company also purchases licensed inkjet cartridges from HP who is a sole source
of the cartridge component for the Company's aqueous ink consumable offerings.
The Company also competes with HP in the wide-format digital color printing
market. Both Companies design and market wide-format printing devices.
Currently, the Company has been granted access to these and select new
technologies for use in its products and pays a royalty for those rights. As new
technologies are developed, there can be no assurance the Company will be able
to negotiate additional licenses for newly developed technologies or that the
new terms are equal to the terms currently in place.

                                       3
<PAGE>
 
Certain companies that supply the Company with consumable products such as ink
and media compete with the Company by selling directly to users or selling to
competitors who may offer the products to the users. Additionally, OEM private
label ink products that may be used in the Company's own products may compete
with ColorSpan products. Further, a number of competitors have introduced
consumables which they allege to be compatible with the Company's products and
have priced the consumables below the ColorSpan-branded consumables. Although
the Company believes that its Big Color products possess certain advantages over
the competitors' products, the increased competition has impacted sales volumes
and margins and may continue to impact volumes and margins in the future. The
Company has generally competed in these markets by introducing technologically
advanced products that create new market demand and products which offer optimum
performance characteristics. There can be no assurance that the Company will be
able to continue to innovate to the extent necessary to maintain a competitive
advantage in these markets or that other competitors will not achieve sufficient
product performance to achieve customer satisfaction with their products
offering better pricing or other competitive features.

Dependence on Component Availability and Costs. Certain components used in the
Company's current and planned products, including printer marking engines and
other printer components, are currently available from sole sources, and certain
other components are available from only a limited number of sources. The
Company has in the past experienced delays as a result of the failure of certain
suppliers to meet requested delivery schedules and standards of product
performance and quality. In addition, recent losses from operations of the
Company have restricted cash availability and the ability to keep supplier debt
current or within the established credit limits. The requirement to bring
certain component suppliers' debt obligations current, or other restrictions in
credit terms of such component suppliers, could result in an inability to
manufacture certain product lines and thereby adversely affect the financial
performance of the Company. The Company's inability to obtain sufficient supply
of components, or to develop alternative sources, could result in delays in
product introductions, interruptions in product shipments, the need to redesign
products to accommodate substitute components or the need to substitute
alternative components which may not have the same performance capabilities, any
of which could have a material adverse effect on the Company's operating
results. A portion of the total manufacturing cost of the Company's typesetting
and Big Color products is represented by certain components, particularly
dynamic random access memory chips ("DRAMs"), the prices of which have
fluctuated significantly in recent years. Significant increases or decreases in
the price or reductions in the availability of DRAMs or other components, could
have a material affect on the Company's operating results.

The Company is dependent on a sole source supplier for the printheads and hot
melt ink used in DisplayMaker Express. The Company has experienced availability
and quality issues with this supplier that have affected shipping schedules and
customer satisfaction and have negatively impacted operating results in the
past. While the Company has taken strong corrective measures in dealing with
this supplier, there can be no assurance that this supplier will be able to meet
the Company's production requirements in the future or that the quality of
on-going product supply will be acceptable.

The Company sells consumable print media and inks for use with its Big Color
product line, and film used with the PressMate-FS. The Company depends on the
availability of consumable products to support its installed base of print
engines. There is no assurance that the suppliers of these consumables will
continue to offer their products to the Company, or that the consumable products
will continue to be available to the company at the same quantity, pricing and
terms. The unavailability of consumable products or negative changes in quality
could adversely impact the market acceptance of the Company's new and existing
products, and may adversely affect sales of consumables.

Uncertainty Regarding Development of Wide-Format Market; Uncertainty Regarding
Market Acceptance of

                                       4
<PAGE>
 
New Products. The Wide-Format market is relatively new and evolving. The
Company's future financial performance will depend in large part on the
continued growth of this market and the continuation of present, Wide-Format
printing trends such as use and customization of large-format advertisements,
use of color, transferring of color images onto a variety of substrates,
point-of-purchase printing, in-house graphics design and production and the
demand for limited printing runs of less than 200 copies. The failure of the
Wide-Format market to achieve anticipated growth levels or a substantial change
in Wide-Format printing customer preferences could have a material adverse
effect on the Company's business, financial condition and results of operations.
Additionally, in a new market, customer preferences can change rapidly and new
technology can quickly render existing technology obsolete. Failure by the
Company to respond effectively to changes in the Wide-Format market, to develop
or acquire new technology or to successfully conform to industry standards could
have a material adverse effect on the business and financial condition and
results of operations of the Company.

The Company's products currently target the high-performance production segment
of the Wide-Format printing market. The future success of the Company will
likely depend on its ability to develop and market new products that provide
superior performance at acceptable prices within this segment. In addition, the
Company's future success will likely depend on the Company's ability to
successfully introduce lower-cost products aimed at a broader segment of the
Wide-Format market. Any quality, durability or reliability problems with such
new products, regardless of materiality, or any other actual or perceived
problems with new Company products, could have a material adverse effect on
market acceptance of such products. There can be no assurance that such problems
or perceived problems will not arise, or that even in the absence of such
problems, new Company products will receive market acceptance. In addition, the
announcement by the Company of new products and technologies could cause
customers to defer purchases of the Company's existing products, which could
have a material adverse effect on the Company's business, financial condition
and results of operations.

Returns Reserves. The Company has established reserves for the return of
merchandise. The amount of the returns reserve is based on historical data
regarding returns of products. For new products there may be insufficient
information to accurately predict return rate and therefore the required reserve
may not be sufficient. Additionally, there is no assurance that there will not
be an unknown or unanticipated problem with a product or any component thereof,
or a defect or shortage of repair components or the consumable media or inks
that are needed to use the product which could cause the actual returns to
exceed the reserves. Returns of a product which exceed reserves could have an
adverse effect on the financial operations and results of the Company.

Fluctuations in Quarterly Operating Results. The Company's quarterly results of
operations have fluctuated and are expected to continue to fluctuate
significantly. These fluctuations have been caused by various factors,
including, but not limited to: the timing of new product announcements; product
introductions and price reductions by the Company and its competitors; the
availability and cost of key components and materials for the Company's
products; fluctuations and availability in customer financing; the relative
percentages of sales of consumables and printer architectures; risks related to
international sales and trade; and general economic conditions. In addition, the
Company's operating results are influenced by the seasonal buying patterns of
its customers, which have in the past generally resulted in reduced revenues and
earnings during the Company's first fiscal quarter. Further, the Company's
customers typically order products on an as-needed basis, and virtually all of
the Company's sales in any given quarter result from orders received in that
quarter. Certain products require significant capital expenditures, causing some
customers to delay their purchasing decision. Delays in purchases of low-volume,
high-cost printers may cause significant fluctuations in the sales volume for a
given period. Also, the Company's manufacturing plans, sales staffing levels and
marketing expenditures are primarily based on sales forecasts. Accordingly,
deviations from these sales forecasts may cause significant fluctuations in
operating results from quarter to quarter and may result in unanticipated
quarterly earnings shortfalls or losses. Historically, a large percentage of
orders have been received and shipped near the end of each month. If

                                       5
<PAGE>
 
anticipated sales and shipments do not occur, expenditure and inventory levels
may be disproportionately high and operating results could be adversely
affected.

Dependence on Consumables Revenues. The Company anticipates it will derive an
increasing component of its revenues and operating income from the sale of ink,
paper, film and other consumables to its customers. To the extent sales of the
Company's consumables are reduced because its customers are unsuccessful in
marketing their own printing services, product iterations by competitors and the
Company make the Company's products obsolete or customers substitute third-party
or private label consumables for those of the Company, the Company's results of
operations could be adversely affected. Reduced life-cycles of hardware products
are expected to negatively impact consumable revenues. Further, although the
Company's consumables are manufactured specifically to operate with its printing
products to produce optimum results, there can be no assurances that other
manufacturers of printing inks and papers will not develop products that can be
sold and compete with the Company's printing products, or that other products
will not produce results which are satisfactory to the customer at a lower cost.
The Company alleges that at least one manufacturer has improperly used the
Company's trade secrets to commence such competition. Although the Company is
involved in legal action against such manufacturer for misappropriation of trade
secrets, there can be no assurances that other manufacturers will not
independently and legitimately develop competing consumable products. In
addition, product quality issues, limitations in the availability of sole source
consumables or changes in credit or trade terms from sole sources could
adversely affect the sales of consumables.

Intellectual Property and Proprietary Rights. The Company's ability to compete
effectively will depend, in part, on its ability to maintain the proprietary
nature of its technologies through patents, copyrights and trade secrets.
Important features of the Company's products are incorporated in proprietary
software, some of which is licensed from others and some of which is owned by
the Company. The Company attempts to protect its proprietary software with a
combination of patents, copyrights, trademarks and trade secrets, employee and
third-party nondisclosure agreements and other methods of protection. Despite
these precautions, it may be possible for unauthorized third parties to copy
certain portions of the Company's products or to reverse-engineer or obtain and
use information that the Company regards as proprietary. Further, the Company's
intellectual property may not be subject to the same level of protection in all
countries where the products are sold. There can be no assurance that the
measures taken by the Company will be adequate to protect the intellectual
property or that others will not independently develop or patent products
similar or superior to those developed, patented or planned by the Company, or
that others will not be able to design products which circumvent any patents
relied upon by the Company.

The Company has been granted various United States patents for inventions
related resolution of conventional laser printer engines, high-resolution
imaging and image enhancement and wide-format printing technologies and
techniques, the Company's Big Ink Delivery System, product patents, and
comsumable formulations. Additional patent applications are pending. There can
be no assurance that patents will be issued from any of these pending
applications. With regard to current patents or patents that may be issued,
there can be no assurance that the claims allowed will be sufficiently broad to
protect the Company's technology or that issued patents will not be challenged,
invalidated or violated, requiring expenditures of cash to pursue and enforce
the Company's rights in the patented technology. Applications to patent the
basic TurboRes, ThermalRes and Big Ink Delivery System approaches and related
technologies have been filed in selected foreign countries. Patent applications
filed in foreign countries are subject to laws, rules and procedures which
differ from those of the United States, and there can be no assurance that
foreign patents will be granted as a result of these applications. Furthermore,
even if these patent applications result in the issuance of foreign patents,
some foreign countries provide significantly less patent protection than the
United States.

                                       6
<PAGE>
 
The Company relies on a variety of trademarks in the promotion and
identification of its products. The Company has a variety of trademarks which
are registered, and others that are not registered, or cannot be registered.
There is no assurance that there will not be some challenge to the rights of the
Company to use one or more trademarks, or an allegation that the use or display
of one or more trademark violates the trademark rights of another party, which
could subject the Company to damages and losses related to the inability to use
recognized marks in the promotion of its products.

Additionally, patent, copyright and trademark protection has not been sought, or
may not be available in all foreign countries. Although the Company has not
received any notices from third parties alleging intellectual or proprietary
property infringement, there can be no assurance that third parties will not
assert infringement claims against the Company in the future or that any such
assertion will not require the Company to expend funds defending such claims or
requiring the Company to enter into royalty arrangements on such terms as may be
available, which may adversely affect financial performance of the company. Any
claim that the Company's current or future products or manufacturing processes
infringes on the proprietary rights of others, with or without merit, could
result in costly litigation which could adversely affect the financial
performance of the company.

The Company is actively pursuing development of new and unique print solutions
and processes, media and inks. Although the research and development process
involves an analysis of protected proprietary rights in any technology that is
being pursued, there is no assurance that competitors or others will not
interpret any such products or processes developed by the Company as violating
protected intellectual rights and pursue legal action, which could be costly and
may affect the financial performance of the Company. In addition, although the
Company does not have any knowledge of violations of its intellectual property
rights, there can be no assurance that the Company will not be forced to take
action to protect its intellectual property portfolio. Such enforcement activity
could require the expenditure of significant cash resources and could affect the
financial performance of the Company.

Although the Company has not received notices from third parties alleging
infringement claims that the Company believes would have a material adverse
effect on the Company's business, there can be no assurance that third parties
will not claim that the Company's current or future products or manufacturing
processes infringe the proprietary rights of others. Any such claim, with or
without merit, could result in costly litigation or might require the Company to
enter into a royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company, or at all, which could have a material adverse effect upon the
Company's business, financial condition and results of operations. If the
Company does not obtain such licenses, it could encounter delays in product
introductions while it attempts to design around such patents, or it could find
that the development, manufacture or sale of products requiring such licenses
could be enjoined. In addition, the Company could incur substantial costs in
defending itself in suits brought against the Company on such patents or in
bringing suits to protect the Company's patents against infringement, which
could adversely affect the Company's financial condition or results. If the
outcome of any such litigation is adverse to the Company, the Company's business
and financial results could be adversely affected.

Litigation and Litigation Costs. The Company has instituted action against a
competitor for patent infringement, misappropriation of trade secrets and other
causes of action. The competitor had counter-claimed for false advertising,
patent misuse, and unfair competition by LaserMaster. The counterclaims have
been dismissed. Although the Company does not believe any of its practices
violate applicable trade or anti-trust laws, there is no assurance that claims
or actions will not be commenced by customers, competitors or governmental
authorities based on trade or anti-trust claims which could affect the Company's
operations and cash position.

The Company is also engaged in various actions related to transactional matters,
employee matters, customers

                                       7
<PAGE>
 
credit and product quality and/or warranty issues. Some of these actions include
claims against the Company for punitive, exemplary or multiple damages. An award
of punitive damages may not bear a direct relationship to the actual or
compensatory damages claimed from the Company. Although the Company does not
believe there are any actions pending or threatened against the Company which
would have a material adverse impact on the financial position of the company,
there is no assurance that there will not be an adverse award of multiple
punitive or exemplary damages which could adversely affect the cash position of
the company.

Any litigation which the Company is involved in may have an adverse impact on
the Company's operations and may result in a distraction or diversion of
management's attention, thereby adversely affecting the operations of the
Company.

International Operations. The Company expects that international revenues will
continue to represent a substantial portion of its total revenues. International
operations are subject to various risks, including exposure to currency
fluctuations, political and economic instability, differing economic conditions
and trends, differing trade and business laws, unexpected changes in applicable
laws, rules, regulatory requirements or tariffs, difficulty in staffing and
managing foreign operations, longer customer payment cycles, greater difficulty
in accounts receivable collection, potentially adverse tax consequences and
varying degrees of intellectual property protection. Fluctuations in currency
exchange rates could result in lower sales volume reported in U.S. dollars.
Fluctuations in foreign exchange rates are unpredictable and may be substantial.
From time to time the Company has engaged in limited foreign currency hedging
transactions. There can be no assurance that the Company will be successful if
it engages in such practices to a significant degree in the future.

Dependence on Key Personnel. The Company's success depends to a significant
extent upon certain key personnel, including Mr. Masters, its Chief Executive
Officer and President, Lawrence Lukis, Chief Engineer, and key research and
development staff. The loss of key management or technical personnel, could
adversely affect the Company's business. The Company maintains key person life
insurance in the amount of $2,000,000, payable to the Company, on each of Mr.
Masters and Mr. Lukis. In addition, the Company has certain non-compete and
continuation contracts with key personnel. The Company also depends on its
ability to attract and retain highly skilled personnel. Competition for
employees in technology related markets is high and there can be no assurance
that the Company will be able to attract and retain the employees needed. In
addition, past financial performance of the Company may limit the ability to
hire and retain management professionals.

The Year 2000 Issue. The Company has assessed and continues to assess the impact
of The Year 2000 Issue on its operational systems and its products. The Year
2000 Issues exists because many computer systems and applications currently
store a two-digit date field to designate a year. As the century date occurs,
date sensitive systems will recognize the year 2000 as 1900 or not at all.

Management believes the Company's Big Color products are compliant with this
issue and performance will not be significantly impacted by the date changes
into the 21st century. The Company has initiated projects to identify and
correct the potential problem in all of its enterprise systems. The cost of such
programs, most of which has been incurred and expended already, is not
considered material to the Company's financial results. Management believes it
has taken the necessary steps to prepare for this issue, but there can be no
assurance additional issues will not occur or unforeseen problems arise causing
additional expense to the Company.

Environmental. The Company is subject to local and federal laws and regulations
regarding the use, storage and disposition of inks used with the Company's print
products. Although the Company believes it is in compliance with all such laws
and regulations, and the Company is not aware of any notice or complaint
alleging any violation of such laws or regulations, there can be no assurance
that there will not be some accidental

                                       8
<PAGE>
 
contamination, disposal or injury from the use, storage, or disposition of inks
or other materials used in the Company's operations. In the event of such
accident, the Company could be held liable for any damages that result and any
such liability could have a material adverse effect on the Company's financial
condition. In addition, there can be no assurance that the Company will not be
required to comply with environmental claims, laws, or regulations in the future
which could result in significant costs which could materially adversely affect
the Company's financial condition.

Tax Liability. The Company sells its products from its offices in Eden Prairie,
Minnesota and reports sales and income tax liability based on sales occurring at
that location. It is possible that one or more state or local taxing authorities
could determine that there have been taxable transactions occurring within their
jurisdiction and seek recovery of taxes for current and/or past periods. In
addition, it is possible that local, state or federal taxing authorities will
take issue with the reporting or determination of tax liability and seek
additional taxes for current and/or past periods. The Company currently has a
net operating loss ("NOL") carry forward that may be used to offset future
federal taxable income. However, there is no assurance that the NOL will
continue to be available as an offset against future federal taxable income or
that there will be sufficient taxable income to fully utilize the NOL.

Volatility of Stock Price. The trading price of the Company's common stock is
subject to wide fluctuations in response to variations in operating results,
changes in the laws or regulations to which the company may be subject,
announcements of new products or technological innovations by the Company or its
competitors, overall economic conditions and indicators, market conditions
unrelated to Company performance, and general conditions in the industry.
Factors such as quarterly variation in actual or anticipated operating results,
changes in earnings estimates by analysts, and analysts' reactions to Company
statements and actions also contribute to stock price fluctuations. In addition,
the prices of securities of many high technology companies have experienced
significant volatility in recent years for reasons frequently unrelated to the
operating performance of the specific companies. These fluctuations may
materially affect the market price of the Company's common stock.

One time in the past, following fluctuations in the market price of the
Company's stock, a securities action was commenced alleging that the Company and
certain insiders had knowledge of certain material, adverse information about
the Company prior to the time that such information allegedly caused a drop in
the market price of the stock. Because the Company's stock has historically
fluctuated significantly, it is possible that following a significant change in
the market price of the stock another securities action could be commenced
against the company. Such action, whether commenced by one or more individuals,
or by a class of securities holders, could result in substantial costs and
diversion of management's attention and resources and thereby cause an adverse
effect on the business and financial performance of the Company.

Brand Awareness. The Company has changed the name of its principal operating
subsidiary from LaserMaster Corporation to ColorSpan Corporation. The Company
has significant brand awareness associated with its LaserMaster trade names. If
the market is unable to accept or delays the acceptance of the name change, the
Company's financial performance and sales may be negatively impacted.

Industry Consolidation. As a growth industry, the wide-format digital printing
market has generated many new entrants into the fragmented market with new
products and new technologies. As the market matures, and the industry's growth
rate slows, companies with technological or manufacturing efficiency advantages
will emerge as the market leaders maintaining or increasing their market share.
Those companies with less marketable advantages will face significant pressure
on revenue growth and gross margins. In order to remain competitive, the smaller
companies within this sector may have to seek merger or consolidation
opportunities with other companies.

                                       9
<PAGE>
 
Technological Advancements. The digital color inkjet printing market is rapidly
moving to two distinct technologies for the placement of ink on a substrate:
thermal inkjet cartridges and piezo-electric print heads. Any company without a
secure, economical source of these products will face serious competitive
pricing and margin pressures going forward. The Company currently has a license
to remanufacture specific HP 300 dpi inkjet cartridges for use in its
wide-format color inkjet printers. HP has introduced a new inkjet cartridge with
a visual resolution of 600 dpi. In addition, Lexmark is believed to have
developed a 600 dpi inkjet cartridge. Both companies are competitors in the
wide-format color market. Should the market for wide-format color demand the
increased resolution provided by these new products and the Company be unable to
secure adequate supplies at reasonable prices or develop a reasonably priced
substitute from other sources, the Company's sales of printer engines and the
related gross margins could be negatively impacted.

The Company's products target the market for high quality printing output.
Hardware and software technological advances have enhanced actual and perceived
resolution. There is no assurance that other companies will not achieve actual
or apparent resolution with less expensive printers and supplies and therefore
capture the market held by higher cost printers.

                                       10