UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
Commission File No. 000-21325
MANSUR INDUSTRIES INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
8425 S.W. 129TH TERRACE
MIAMI, FLORIDA 33156
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(Address of Principal Executive Offices)
(305) 232-6768
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(Issuer's Telephone Number, Including Area Code)
FLORIDA 65-0226813
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Act of 1934 during the past 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_____
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of July 31, 1997, the Company had 4,601,309 shares of Common Stock, par value
$.001, issued and outstanding.
MANSUR INDUSTRIES INC
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Balance Sheets-
As of June 30, 1997 and December 31, 1996
Condensed Statements of Operations-
For the three and six months ended
June 30, 1997 and 1996
Condensed Statements of Cash Flows-
For the six months ended June 30, 1997 and 1996
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operations
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
MANSUR INDUSTRIES INC.
CONDENSED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(In thousands, except per share data)
JUNE 30, DECEMBER 31,
1997 1996
(Unaudited) (Audited)
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ASSETS
Current assets:
Cash and cash equivalents $3,530 $5,321
Accounts receivable, net 1,261 570
Inventories 1,422 617
Other assets 225 30
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Total current assets 6,438 6,538
Property and equipment, net 424 373
Intangible assets, net 59 46
================== ==================
Total Assets $6,921 $6,957
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LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $664 $298
Deferred revenue 108 95
Current installments of long-term debt 59 55
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Total current liabilities 831 448
Long-term debt, excluding current installments 88 118
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Total liabilities 919 566
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Stockholders' equity
Common stock, $0.001 par value. Authorized 25,000,000
shares, issued and outstanding 4,601,309 shares
for 1997 and 1996 5 5
Additional paid-in capital 11,116 11,116
Accumulated deficit (5,119) (4,730)
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Total stockholders' equity 6,002 6,391
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Total liabilities and stockholders' equity $6,921 $6,957
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See accompanying notes to condensed financial statements.
MANSUR INDUSTRIES INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1997 AND 1996
(Unaudited)
(In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------- ----------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
------------- --------------- -------------- --------------
Sales $ 1,345 $ - $ 2,498 $ -
-
Cost of sales 859 - 1,607
------------ --------------- -------------- --------------
Gross margin
486 - 891 -
Operating expenses:
Research and product development 26 175 179 365
Sales, general and administrative 651 439 1,206 623
------------ --------------- -------------- --------------
677 614 1,385 988
------------ --------------- -------------- --------------
Loss from operations (191) (614) (494) (988)
Interest income (expense), net 46 (10) 105 (13)
Exchange expense on redeemable
preferred stock - (345) - (345)
------------ --------------- -------------- --------------
Net loss $ (145) $ (969) $ (389) $ (1,346)
Dividends on redeemable preferred stock - (73) - (147)
------------ --------------- -------------- --------------
Net loss to common shares $ (145) (1,042) $ (389) $ (1,493)
============ =============== ============== ==============
Net loss per common share $ (0.03) $(0.36) $ (0.08) $ (0.53)
============ =============== ============== ==============
Weighted average shares
outstanding 4,601,309 2,923,629 4,601,309 2,799,071
============ =============== ============== ===================
See accompanying notes to condensed financial statements.
MANSUR INDUSTRIES INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(In thousands)
SIX MONTHS ENDED
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JUNE 30, JUNE 30,
1997 1996
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Cash flows from operating activities:
Net loss $(389) $(1,346)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation 35 22
Common stock issued for services - 105
Changes in operating assets and liabilities:
Inventory (805) (219)
Accounts receivable (691) -
Other assets (195) (158)
Intangible assets (13) (24)
Accounts payable and accrued expenses 379 166
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Net cash used in operating activities (1,679) (1,454)
Cash flow from Investing activities:
Purchase of property and equipment (86) (7)
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Net cash used in investing activities (86) (7)
Cash flows from financing activities:
Proceeds from notes payable - 1,012
Repayment of notes payable (26) (172)
Exchange expense on preferred stock exchanged for
common stock - 345
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Net cash provided by (used in) financing activities (26) 1,185
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Net increase (decrease) in cash and cash equivalents (1,791) (276)
Cash and cash equivalents, beginning of period 5,321 916
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Cash and cash equivalents, end of period $ 3,530 $ 640
=================== ===================
See accompanying notes to condensed financial statements.
MANSUR INDUSTRIES INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED) AND
DECEMBER 31, 1996
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mansur Industries Inc. (the "Company") is primarily engaged in the marketing and
production of industrial parts cleaning equipment for use in automotive, marine,
airline and general manufacturing industries. The Company's focus is on the
design, development and manufacture of industrial cleaning equipment which
incorporate continuous recycling and recovery technologies for solvents and
solutions, thereby reducing the need to replace and dispose of contaminated
solvents and solutions.
The accompanying unaudited condensed financial statements have been prepared
pursuant to the rules and regulations for reporting on Form 10-QSB. Accordingly,
certain information and footnotes required by generally accepted accounting
principles for complete financial statements are not included herein. The
condensed interim statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-KSB filed with the Securities and Exchange Commission for the year ended
December 31, 1996.
Condensed interim financial statements are subject to possible adjustments in
connection with the annual audit of the Company's accounts for the year ended
December 31, 1997. In the Company's opinion, all adjustments necessary for a
fair presentation of the interim statements have been included and are of a
normal and recurring nature.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the
Financial Statements, including the notes thereto, contained elsewhere in this
Quarterly Report on Form 10-QSB and the Company's Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission for the year ended December
31, 1996.
GENERAL
The Company was a development stage company through June 30, 1996, and commenced
its planned principal operations in July 1996. The Company has been unprofitable
since its inception and anticipates that it will incur losses until such time,
if ever, as the Company is able to generate sufficient revenues to offset its
operating costs and the costs of its continuing expansion. In light of the
material uncertainties in connection with the commencement of the Company's
operations, the Company cannot reasonably estimate the length of time before the
Company may generate net income, if ever.
The Company has made its SystemOne/registered trademark/ Washer and services
available to the public through a third party leasing program and through cash
sales of the equipment. Under the third party leasing program, the Company
recognizes the revenue from the sale of a machine at the time that the equipment
is delivered either to the third party lessor or directly by the Company to the
lessee.
In January 1997, the Company entered into an agreement with the Valvoline
Company and First Recovery, both affiliates of Ashland, Inc. ("Ashland"), to
serve as the Company's exclusive sales representative in a territory comprising
14 major metropolitan markets across the United States (the "Territory"). The
agreement has a term of one year. Either party may terminate the agreement at
any time, with or without cause, upon 90 days prior written notice. Pursuant to
the terms of the agreement, Ashland receives a commission on all units sold.
The marketing program with Ashland commenced in January 1997 and replaced the
Company's limited original pilot program with Valvoline and First Recovery
covering the Dallas and Houston, Texas markets. To assist in the marketing and
support of this agreement, the Company plans to open support centers in each of
the metropolitan areas comprising the Territory. Since the Valvoline Company and
First Recovery have extensive sales forces, the Company does not plan to hire
additional sales staff at this time. Although to date, this program has
proceeded as planned, there can be no assurance of the continued success of the
program. The Company may market and service the SystemOne/registered trademark/
Washers outside the Territory with its own marketing, service and technical
support personnel.
In February 1997, the Company entered into a lease with respect to a 30,000
square foot facility located in Miami, Florida which became the Company's
primary manufacturing facility commencing in August 1997. The lease agreement
was amended in August 1997 to include an additional 14,000 square feet, bringing
the total facility to 44,000 square feet.
During the second quarter 1997, the Company's SystemOne/registered trademark/
Series 500 product line was certified to meet product safety standards under the
UL 2208 Standard for solvent distillation units. The Company's
SystemOne/registered trademark/ product line now carries the ETL
Listed/registered trademark/ and C-ETL Listed/registered trademark/ (Canada)
marks.
Also during the second quarter 1997, the Company successfully launched initial
sales of two new product lines including the Company's SystemOne/registered
trademark/ Series 100 Brake Washer and MultiProcess Jet Washer.
The Company received a notice of allowance from the U.S. Patent Office on its
fourth patent for the SystemOne/registered trademark/ Washer. This new patent
further strengthens the patent claim coverages of existing Company patents as
well as having the effect of extending the term of the SystemOne/registered
trademark/ Washer patent coverage through the year 2015.
RESULTS OF OPERATIONS
The Company was a development stage company and did not generate any operating
revenues prior to June 30, 1996. Therefore, comparison between the periods
presented is not meaningful in certain instances.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Revenues for the three month period ended June 30, 1997 were $1,345,619. The
Company commenced its principal operations in July, 1996, and it had no
revenues prior to July 1996.
Cost of sales as a percentage of net sales were 63.8% for the three month
period ended June 30, 1997. Cost of sales is comprised of direct material cost,
direct labor cost, and manufacturing overhead expenses.
The Company's research and product development expenses for the three month
period ended June 30, 1997 decreased 85% to $25,909 from the comparable period
in 1996. This decrease is primarily the result of the Company's accelerated
prototype development during the three month period ended June 30, 1996, as
opposed to the basic and applied research conducted during the latter period of
1997.
The Company's selling, general and administrative expenses for the three month
period ended June 30, 1997 increased by 48% to $651,297 from the comparable
period in 1996. The increase is primarily attributable to the Company's hiring
of additional management and the opening of support centers pursuant to the
Company's agreement with The Valvoline Company and First Recovery. The Company
anticipates that its monthly selling, general and administrative expenses will
continue to increase over the next twelve months as a result of the
Company's anticipated growth pursuant to its proposed business plan. However, a
portion of the selling, general and administrative expenses are considered
fixed; therefore, the Company anticipates that selling, general and
administrative expenses as a percentage of revenue will decrease as the fixed
costs are spread over a higher volume of sales.
The Company's interest income (expense), net for the three month period ended
June 30, 1997 and 1996 was $45,665 and ($10,000), respectively. The Company's
interest income, net for the three month period ended June 30, 1997 increased
compared to the three month period ended June 30, 1996 due to a relative
decrease in indebtedness of the latter period as compared to the prior period
and the investment of the proceeds of the Company's initial public offering (the
"IPO") consummated on October 2, 1996. The Company anticipates that its monthly
interest income from cash deposits will decrease over the next twelve months as
the proceeds from the public offering are used in the Company's business
operations.
The Company paid dividends on redeemable preferred stock for the three month
period ended June 30, 1996 of $73,000. In addition, the Company incurred an
exchange expense of $344,631 on redeemable preferred stock for the three month
period ended June 30, 1996. Given that all redeemable preferred stock was
exchanged on or prior to June 30, 1996, there were no comparable transactions
for the three month period ended June 30, 1997.
As a result of the foregoing, the Company's net loss to common shares decreased
by $896,834, or 86%, from $1,041,790 for the three month period ended June 30,
1996 to $144,956 for the three month period ended June 30, 1997.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenues for the six month period ended June 30, 1997 were $2,498,225. The
Company commenced its principal operations in July, 1996, and it had no
revenues prior to July 1996.
Cost of sales as a percentage of net sales were 64.3% for the six month period
ended June 30, 1997. Cost of sales is comprised of direct material cost, direct
labor cost, and manufacturing overhead expenses.
The Company's research and product development expenses for the six month period
ended June 30, 1997 decreased 51% to $179,083 from the comparable period in
1996. The decrease is primarily the result of the Company's accelerated
prototype development during the six month period ended June 30, 1996, as
opposed to the basic and applied research conducted during the comparable period
of 1997.
The Company's selling, general and administrative expenses for the six month
period ended June 30, 1997 increased by 94% to $1,205,563 from the comparable
period in 1996. The increase is primarily attributable to
the Company's hiring of additional management and the opening of support centers
pursuant to the Company's agreement with The Valvoline Company and First
Recovery. The Company anticipates that its monthly selling, general and
administrative expenses will continue to increase over the next twelve months as
a result of the Company's anticipated growth pursuant to its proposed business
plan. However, a portion of the selling, general and administrative expenses are
considered fixed; therefore, the Company anticipates that selling, general and
administrative expenses as a percentage of revenue will decrease as the fixed
costs are spread over a higher volume of sales.
The Company's interest income (expense), net for the six month period ended June
30, 1997 and 1996 was $104,613 and $(13,094), respectively. Interest income
(expense), net increased due to a relative decrease in the indebtedness of the
Company and the investment of the proceeds of the Company's IPO consummated on
October 2, 1996. The Company anticipates that its monthly interest income from
cash deposits will decrease over the next six months as the proceeds from the
IPO are used in the Company's business operations.
The Company paid dividends on redeemable preferred stock for the six month
period ended June 30, 1996 of $147,000. In addition, the Company incurred an
exchange expense on redeemable preferred stock for the six month period ended
June 30, 1996 of $344,631. Given that all redeemable preferred stock was
exchanged on or prior to June 30, 1996, there were no comparable transactions
for the six month period ended June 30, 1997.
As a result of the foregoing, the Company's net loss to common shares decreased
by $1,104,186, or 74%, from $1,492,801 for the six month period ended June 30,
1996 to $388,615 for the six month period ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had working capital of $5,606,845 and cash and
cash equivalents of $3,529,849.
Capital requirements relating to implementation of the Company's business plan
have been and will continue to be significant. Based on current assumptions
relating to the implementation of the Company's proposed business plan
(including the timetable of and the cost associated with development of
manufacturing capabilities, a service fleet, corporate headquarters, and
research and development facilities), the Company will seek to develop
additional service centers in conjunction with its proposed product rollout. The
Company believes that its ability to generate cash from operations is dependent
upon, among other things, demand for its products and services as well as the
Company's third party leasing program with Oakmont Financial Services pursuant
to which Oakmont agreed to provide third party leasing services to customers
leasing the Company's SystemOne/registered trademark/ Washers. If the Company's
third party leasing arrangements with Oakmont proves to be unsuccessful, and the
Company is unable to locate another third party willing to provide comparable
third party leasing services, the Company believes that it will be substantially
dependent upon the remaining proceeds of the IPO to execute its proposed plan of
operations during the remainder of 1997. In order to reduce certain of the
Company's up-front capital requirements associated with manufacturing equipment
as well as service center and service fleet development, the Company intends to
lease, to the extent possible, rather than purchase certain equipment and
vehicles necessary. There can be no assurance that the Company will have
sufficient capital resources to permit the Company to fully implement its
business plan. The Company has no current arrangements with respect to, or
sources of, additional financing. There can be no assurance that any additional
financing will be available to the Company on acceptable terms, or at all. If
adequate funds are not available from additional sources of financing, the
Company's business may be materially adversely affected.
In addition to meeting SystemOne/registered trademark/ Washer purchase and lease
orders, the Company's material financial commitments principally relate to its
obligations to make lease payments pursuant to certain real property and
equipment leases (currently approximately $38,618 per month), and installment
payments for manufacturing equipment (currently approximately $5,690 per month).
The Company anticipates that its material commitments will increase
significantly over the next 12 months as a result of the Company's planned
expansion.
As indicated in the accompanying financial statements, as of June 30, 1997, the
Company's accumulated deficit totalled $5,118,480.
The Company's cash and cash equivalents balance decreased $1,790,759 during the
six month period ended June 30, 1997 to an ending balance of $3,529,849
primarily due to net cash used in operating activities of $1,677,831.
CAUTIONARY STATEMENT RELATING TO FORWARD LOOKING STATEMENTS.
The foregoing Management's Discussion and Analysis contains various "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which represent the Company's expectations or beliefs concerning future
events, including, but not limited to, statements regarding growth in sales of
the Company's products and the sufficiency of the Company's cash flow for its
future liquidity and capital resource needs. These forward looking statements
are further qualified by important factors that could cause actual events to
differ materially from those in such forward looking statements. These factors
include, without limitation, increased competition, the sufficiency of the
Company's patents, the ability of the Company to manufacture its systems on a
cost effective basis, market acceptance of the Company's products and the
effects of governmental regulation. Results actually achieved may differ
materially from expected results included in these statements as a result of
these or other factors.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1997 Annual Meeting of Shareholders on June 6, 1997; two
items were submitted to a vote of security holders at that time: (1) to elect
five members to the Company's Board of Directors to hold office until the
Company's 1998 Annual Meeting of Shareholders or until their successors are duly
elected and qualified; and (2) to consider and vote upon a proposal to approve
and ratify the Company's 1996 Executive Incentive Compensation Plan, as amended.
With respect to Item 1, 3,551,387 votes were cast in favor of the re-election of
each of Pierre G. Mansur, Paul I. Mansur, Dr. Jan Hedberg, Elias F. Mansur and
Joseph E. Jack as Directors of the Company. No votes were withheld for voting
for each nominee. With respect to Item 2, 2,736,286 votes were cast in favor of
the proposal to approve and ratify the Company's Executive Incentive
Compensation Plan, as amended. 75,150 votes were cast against the proposal and
37,664 votes were marked as abstentions.
ITEM 5. OTHER INFORMATION.
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
10.31 Notice of Allowance and Issue Fee Due
10.32 Intertek Testing Services Listing, Labeling, and Follow-up
Service Agreement
27.1 Financial Data Schedule
99.1 Listing Report ETL Testing Laboratories, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mansur Industries Inc.
Date: August 14, 1997 /s/ PAUL I. MANSUR
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PAUL I. MANSUR
Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1997 /s/ RICHARD P. SMITH
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RICHARD P. SMITH
Vice President of Finance
and Chief Financial Officer
(Principal Financial Accounting Officer)
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.31 U.S. Patent Office Notice of Allowance and Issue Fee Due
10.32 Intertek Testing Services Listing, Labeling, and Follow-up
Service Agreement
27.1 Financial Data Schedule
99.1 Listing Report ETL Testing Laboratories, Inc.