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 MARCH 31, 1997
Commission File No. 000-21325
Mansur Industries Inc.
------------------
(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
-----------------
(Issuer's Telephone Number, Including Area Code)
Florida 65-0226813
- ------------------------------- -----------------------------
(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_____
The number of shares of common stock par value $.001 outstanding as of the close
of business April 30, 1997 was 4,601,309.
<PAGE>
MANSUR INDUSTRIES INC
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets-
As of March 31, 1997 and December 31, 1996
Statements of Operations-
For the three months ended
March 31, 1997 and 1996
Statements of Cash Flows-
For the three months ended March 31, 1997 and 1996
Notes to Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
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
<PAGE>
<TABLE>
<CAPTION>
MANSUR INDUSTRIES INC.
BALANCE SHEETS
(In thousands, except per share data)
March 31, December 31,
1997 1996
(Unaudited) (Audited)
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,804 $ 5,321
Accounts receivable, net 663 570
Inventories 939 617
Other assets 43 30
-------- -------
Total current assets 6,449 6,538
Property and equipment, net 416 373
Intangible assets, net 52 46
-------- -------
Total Assets $ 6,917 $ 6,957
======== =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 489 $ 298
Deferred revenue 120 95
Current installments of long-term debt 57 55
-------- -------
Total current liabilities 666 448
Long-term debt, excluding current installments 104 118
-------- -------
Total liabilities 770 566
-------- -------
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 (4,974) (4,730)
-------- -------
Total stockholders' equity 6,147 6,391
-------- -------
Total liabilities and stockholders' equity $ 6,917 $ 6,957
======== =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MANSUR INDUSTRIES INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
-----------------------------
March 31, March 31,
1997 1996
---------------- -----------
Sales $ 1,153 $ -
Cost of sales 748 -
-------- ---------
Gross margin 405 -
Operating expenses:
Research and product development 153 190
Sales, general and administrative 555 184
-------- ---------
708 374
-------- ---------
Loss from operations (303) (374)
Interest income (expense), net 59 (77)
-------- ---------
Net loss $ (244) $ (451)
========= =========
Loss per share:
Net loss $ (0.05) $(0.17)
========= =========
Weighted average shares
outstanding 4,601,309 2,663,130
========= =========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
MANSUR INDUSTRIES INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Three Months Ended
-------------------------------
March 31, March 31,
1997 1996
--------------- -------------
<S> <C> <C>
Cash used in operating activities:
Net loss $ (244) $ (451)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation 17 11
Changes in operating assets and liabilities:
Inventory (321) 7
Accounts receivable (93) -
Other assets (14) (6)
Intangible assets (5) -
Dividend payable - 74
Accounts payable and accrued expenses 216 (7)
--------- -------
Net cash used in operating activities (444) (372)
Investing activities:
Purchase of property and equipment (59) (6)
--------- -------
Net cash provided by (used in) investing activities (59) (6)
Financing activities:
Repayment of notes payable (14) (11)
--------- -------
Net cash provided by financing activities (14) (11)
--------- -------
Net increase (decrease) in cash (517) (389)
Cash and cash equivalents, beginning of period 5,321 916
--------- -------
Cash and cash equivalents, end of period $ 4,804 $ 527
========= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MANSUR INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
AND MARCH 31, 1997 (UNAUDITED)
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mansur Industries Inc. (the "Company") is primarily engaged in 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 interim financial statements have been prepared
pusuant 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
interim statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Form 10-KSB filed with the
Securities and Exchange Commission for the year ended December 31, 1996.
Interim statements are subject to possible adjustments in connection with the
annual audit of the Company's accounts for the full year 1997; in the Company's
opinion, all adjustments necessary for a fair presentation of these interim
statements have been included and are of a normal and recurring nature.
<PAGE>
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
10-QSB and the Company's Form 10-KSB filed with the Securities and Exchange
Commission for the fiscal 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 planned 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 makes its SystemOne/Registered trademark/ Washer and services
available to the public through a 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. A portion of the revenue (currently estimated at 10% of the sale price
per machine) will be accounted for as deferred revenue, and recognized as
revenue in respect of the service portion of the agreement over the term of the
underlying lease.
In January 1997, the Company entered into an agreement with the Valvoline
Company and First Recovery, both affiliates of Ashland, Inc., pursuant to which
such companies agreed 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 written
notice. Pursuant to the terms of the agreement, Ashland receives a commission on
all units sold.
The marketing program replaced the Company's limited original pilot program with
Valvoline and First Recovery covering the Dallas and Houston 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 this
program to date is proceeding as planned, there can be no assurance of the
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 new lease with respect to a 30,000
square foot facility located in Miami, Florida which will become the Company's
primary manufacturing facility commencing on or about June 1, 1997.
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.
Revenues for the three month period ended March 31, 1997 were $1,152,606. The
Company commenced its principal operations in July, 1996, and it had no revenues
prior to July 1996.
<PAGE>
Cost of sales, as a percentage of net sales, were 64.9% for the three month
period ended March 31, 1997. Cost of sales is comprised of direct material cost,
direct labor cost, and manufacturing overhead expenses. As the number of units
produced increase, the Company anticipates that the cost of sales as a
percentage of sales should decrease as the fixed costs of production are spread
over a higher volume of sales.
The Company's research and product development expenses for the three month
period ended March 31, 1997 decreased by 20% to $153,174 from $190,307 for the
comparable period in 1996. The research and product development expense for the
three month period ended March 31, 1996 related primarily to the accelerated
development of the Company's prototype SystemOne/registered trademark/ washer.
The research and product development expense for the three month period ended
March 31, 1997 related to basic and applied research developed during the prior
period.
The Company's selling, general and administrative expenses for the three month
period ended March 31, 1997 increased by 202% to $555,000 from $183,388 for the
comparable period in 1996. The increase is primarily attributable to the
Company's hiring of additional management and other personnel 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 anticipated growth in accordance with the Company's
business plan. However, because a portion of the selling, general and
administrative expenses are considered fixed, 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
March 31, 1997 and 1996 was $58,948 and $(77,317), respectively. The Company's
interest income (expense), net for the period ended March 31, 1997 increased as
a result of a decrease in the indebtedness of the Company 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
IPO are used in the Company's business operations.
As a result of the foregoing, the Company's net losses to common shares for the
three month period ended March 31, 1997 and 1996 were $243,659 and $451,011,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had working capital of $5,782,850 and cash and
cash equivalents of $4,803,509.
The 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 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 as part of its 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 this program Oakmont has agreed to
provide third party leasing services to customers leasing the Company's
SystemOne/Registered trademark/ Washers. If the Company's third party leasing
arrangement 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
proceeds of the IPO to execute its proposed plan of operations over the
remainder of 1997. In order to reduce certain of the Company's up-front capital
requirements associated with service center and service fleet development, the
Company intends to lease service
<PAGE>
center sites and may seek, to the extent possible, to lease rather than purchase
certain equipment and vehicles necessary for service center development. 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.
Aside from meeting SystemOne/Registered trademark/ Washer purchase and lease
orders, the Company's material commitments principally relate to its obligations
to make lease payments pursuant to certain real property and equipment leases
(currently approximately $11,979 per month), and make installment payments
pursuant to an equipment purchase finance agreement (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.
In August 1994, the Company acquired a Trumpf Model 200 TC Computer Numerical
Controlled Punch Press (the "Punch Press"). The Company financed the acquisition
of the Punch Press pursuant to a finance and security agreement with The CIT
Group/Equipment Financing, Inc. ("CIT"). Pursuant to the terms of the finance
agreement and security agreement, the Company has agreed to pay CIT an aggregate
of $341,397 in equal monthly payments of $5,690 over five years. The Company's
obligations to CIT are secured by a security interest in the Punch Press.
As indicated in the accompanying financial statements, as of March 31, 1997, the
Company's accumulated deficit totalled $4,973,524.
The Company's cash and cash equivalents balance decreased $517,000 during the
three month period ended March 31, 1997 to an ending balance of $4,803,509
primarily due to net cash used in operating activities of $444,000.
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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
<PAGE>
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: May 15, 1997 /s/ PAUL I. MANSUR
--------------------
PAUL I. MANSUR
Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 1997 /s/ RICHARD P. SMITH
--------------------
RICHARD P. SMITH
Vice President of Finance and Chief Financial Officer
(Principal Financial Accounting Officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
- ------- ----
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,804
<SECURITIES> 0
<RECEIVABLES> 663
<ALLOWANCES> 0
<INVENTORY> 939
<CURRENT-ASSETS> 6,449
<PP&E> 542
<DEPRECIATION> 126
<TOTAL-ASSETS> 6,917
<CURRENT-LIABILITIES> 666
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 6,142
<TOTAL-LIABILITY-AND-EQUITY> 6,917
<SALES> 1,153
<TOTAL-REVENUES> 1,153
<CGS> 748
<TOTAL-COSTS> 1,456
<OTHER-EXPENSES> (59)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (244)
<INCOME-TAX> 0
<INCOME-CONTINUING> (244)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (244)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
