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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, 2000
COMMISSION FILE NO. 000-21325
SYSTEMONE TECHNOLOGIES INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-0226813
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8305 N.W. 27th Street, Suite 107
Miami, Florida 33122
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(Address of Principal Executive Offices)
(305) 593-8015
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(Issuer's Telephone Number, Including Area Code)
Mansur Industries Inc.
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(Former Name)
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:
The registrant had an aggregate of 4,742,923 shares of its Common Stock, par
value $.001 per share, outstanding as of the close of business on August 13,
2000.
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SYSTEMONE TECHNOLOGIES INC.
INDEX TO FORM 10-QSB
QUARTER ENDED JUNE 30, 2000
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets-
As of June 30, 2000 (unaudited) and December 31, 1999
Condensed Statements of Operations-
For the three and six months ended June 30, 2000 and 1999 (unaudited)
Condensed Statements of Cash Flows-
For the six months ended June 30, 2000 and 1999 (unaudited)
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
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
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SYSTEMONE TECHNOLOGIES INC.
CONDENSED BALANCE SHEETS
As at June 30, 2000 and December 31, 1999
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13 $ 912
Accounts receivable, net 1,806 2,748
Inventories, net 4,087 4,962
Prepaid assets 542 585
-------- --------
Total current assets 6,448 9,207
Property and equipment, net 2,653 2,866
Other assets 761 907
-------- --------
Total assets $ 9,862 $ 12,980
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses 3,662 3,721
Deferred revenue 213 160
Line of credit 1,879 957
Current installments of obligations under capital leases 297 319
-------- --------
Total current liabilities 6,051 5,157
Long-term debt, excluding current installments 18,890 18,263
-------- --------
Total liabilities 24,941 23,420
Stockholders' deficit:
Preferred stock, Series B 55 53
Preferred stock, Series C 74 71
Preferred stock, Series D 20 --
Common stock 5 5
Additional paid-in capital 27,187 24,687
Accumulated deficit (42,420) (35,256)
-------- --------
Total stockholders' deficit (15,079) (10,440)
-------- --------
Total liabilities and stockholders' deficit $ 9,862 $ 12,980
======== ========
</TABLE>
See accompanying notes to condensed financial statements which
are an integral part thereof.
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SYSTEMONE TECHNOLOGIES INC.
CONDENSED STATEMENTS OF OPERATIONS
For the three and six months ended June 30, 2000 and 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------- -----------------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 5,010 $ 5,202 $ 9,296 $ 9,215
Cost of sales 2,020 2,191 3,792 4,074
----------- ----------- ----------- -----------
Gross margin 2,990 3,011 5,504 5,141
Operating expenses:
Research and product development 77 73 243 246
Sales, general and administrative 5,037 5,688 10,848 11,195
----------- ----------- ----------- -----------
5,114 5,761 11,091 11,441
----------- ----------- ----------- -----------
Loss from operations (2,124) (2,750) (5,587) (6,300)
Interest expense, net (520) (477) (1,043) (925)
----------- ----------- ----------- -----------
Net loss (2,644) (3,227) (6,630) (7,225)
=========== =========== =========== ===========
Dividends on convertible
preferred stock (278) (59) (534) (59)
----------- ----------- ----------- -----------
Net loss to common shares $ (2,922) $ (3,286) $ (7,164) $ (7,284)
=========== =========== =========== ===========
Basic and diluted net loss
per common share $ (0.62) $ (0.71) $ (1.51) $ (1.58)
=========== =========== =========== ===========
Weighted-average of common shares
outstanding 4,742,923 4,601,309 4,742,923 4,601,309
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed financial statements which
are an integral part thereof.
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SYSTEMONE TECHNOLOGIES INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2000 and 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
------- -------
<S> <C> <C>
Cash used in operating activities:
Net loss $(6,630) $(7,225)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 396 185
Provision for bad debts -- 105
Provision for obsolete inventory -- 210
Non cash interest payments on convertible debt 750 782
Changes in operating assets and liabilities:
Inventory 840 (1,171)
Accounts receivable 942 (298)
Other assets 44 (371)
Deferred revenue 53 (127)
Accounts payable and accrued expenses (59) 930
------- -------
Net cash used in operating activities (3,664) (6,980)
------- -------
Cash used in investing activities:
Purchase of equipment (3) (116)
------- -------
Net cash used in investing activities (3) (116)
Cash provided from financing activities:
Proceeds from issuance of convertible preferred stock 2,000 5,050
Proceeds from line of credit 922 496
Repayments of capital lease obligations (154) (165)
------- -------
Net cash provided from financing activities 2,768 5,381
------- -------
Net decrease in cash and cash equivalents (899) (1,715)
Cash and cash equivalents, beginning of period 912 3,199
------- -------
Cash and cash equivalents, end of period $ 13 $ 1,484
======= =======
</TABLE>
See accompanying notes to condensed financial statements which
are an integral part thereof.
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SYSTEMONE TECHNOLOGIES INC.
(FORMERLY KNOWN AS MANSUR INDUSTRIES INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)
AND DECEMBER 31, 1999
THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING
PRONOUNCEMENTS
SystemOne Technologies Inc. (formerly known as Mansur Industries Inc.) (the
"Company") is primarily engaged in the manufacture, marketing and sale of
industrial parts cleaning equipment for use in the automotive, marine, aviation
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,
reducing the need to replace and dispose of contaminants.
(1) BASIS OF PRESENTATION
The accompanying unaudited interim 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 interim condensed statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB as filed with the Securities and Exchange Commission for the year
ended December 31, 1999.
Interim condensed statements are subject to possible adjustments in connection
with the annual audit of the Company's accounts for the full year 2000. In the
Company's opinion, all adjustments necessary for a fair presentation of these
interim condensed statements have been included and are of a normal and
recurring nature.
(2) CONVERTIBLE PREFERRED STOCK AND WARRANTS
On May 2, 2000, the Company sold an aggregate of 20,000 shares (the "Shares") of
newly created Series D Convertible Preferred Stock (the "Series D Preferred
Stock") to three institutional investors for an aggregate purchase price of
$2,000,000. In addition, the purchasers received warrants (the "May Warrants"),
which expire in April 2005, to acquire an aggregate of 363,636 shares of the
Company's common stock at an exercise price of $5.50 per share. Each share of
Series D Preferred Stock has a liquidation value of $100. The dividend rate
payable on the outstanding shares of Series D Preferred Stock is 8.25% of the
liquidation value of each share per annum. Through the second anniversary of the
issuance of the Series D Preferred Stock, all dividends are payable by the
issuance of additional shares of Series D Preferred Stock valued at the
liquidation
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value. Thereafter, all such dividends may, at the option of the Company, be paid
either through the issuance of additional shares of Series D Preferred Stock,
cash or any combination of Series D Preferred Stock and cash. Each holder of
shares of Series D Preferred Stock has the right, at any time or from time to
time prior to May 17, 2004 (the "Redemption Date") to convert its shares of
Series D Preferred Stock into shares of the Company's Common Stock at a
conversion price of $5.50 per share, subject to adjustment in certain
circumstances. Subject to earlier conversion, commencing on May 17, 2002, the
Company shall have the right to redeem outstanding shares of Series D Preferred
Stock at a redemption price of 104% (if redemption occurs during 2002) or 102%
(if redemption occurs during 2003) of the liquidation value of the redeemed
shares. The holders of Series D Preferred Stock will vote together with the
holders of the Company's Common Stock, Series B 8.25% Convertible Preferred
Stock ("Series B Preferred Stock"), and Series C 8.00% Convertible Preferred
Stock ("Series C Preferred Stock") as a single class on all matters to come
before a vote of the shareholders of the Company, with each share of Series D
Preferred Stock entitled to a number of votes equal to the number of shares of
Common Stock into which it is then convertible. The Company is also required to
register the shares of common stock underlying the Series D Preferred Stock for
resale under the Securities Act of 1933, as amended (the "Securities Act").
(3) SUBSEQUENT EVENTS
On August 7, 2000, the Company entered into a Loan Agreement (the "Loan
Agreement") with Environmental Opportunities Fund II, L.P., Environmental
Opportunities Fund II (Institutional), L.P. and Hanseatic Americas LDC under
which it borrowed an aggregate of $2,500,000, evidenced by promissory notes (the
"Subordinated Promissory Notes"), maturing February 7, 2002, subject to
mandatory prepayment to the extent of any proceeds received by the Company from
the sale of any new securities of the Company or the borrowing of any additional
money (other than purchase money debt). The Subordinated Promissory Notes
initially bear interest at the rate of 12% per annum until the six month
anniversary of the Issuance Date, 14% until the nine month anniversary of the
Issuance Date and 16% thereafter until repaid in full. The Company's obligations
under the Loan Agreement are secured by a lien on substantially all of its
assets other than its intellectual property although such obligations have been
subordinated to the Revolver. Each of the Environmental Funds and Hanseatic are
shareholders of the Company and Mr. Paul A. Biddelman, President of Hanseatic,
and Mr. Kenneth Ch'uan-K'ai Leung, Chief Investment Officer of the Environmental
Funds, are directors of the Company. Pursuant to the Loan Agreement, the Company
issued warrants (the "August Warrants") to purchase an aggregate of 714,286
shares of its common stock at $3.50 per share and the Company is required to
register such shares of common stock for resale under the Securities Act. The
August Warrants may only be exercised for 50% and 75% of the common stock
underlying the August Warrants prior to May 7, 2001 and August 7, 2001,
respectively. In addition, if the loan is repaid prior to May 7, 2001, then 50%
of the August Warrants will terminate, and, thereafter, if the loan is repaid
prior to August 7, 2001, then 25% of the August Warrants will terminate.
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In accordance with its terms, the conversion price of the Series B Preferred
Stock was reduced to $4.81 and in accordance with their respective terms, the
conversion prices of the Series C and Series D Preferred Stock as well as the
exercise price of the May Warrants were reset to $3.50 as a result of the
issuance of the August Warrants. In addition, each share of the Series B, Series
C and Series D Preferred Stock is now convertible into 20.79, 28.57 and 28.57
shares of the Company's common stock respectively and the May Warrants are now
exercisable for 571,428 shares of the Company's common stock.
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
condensed 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, 1999.
GENERAL
The Company was incorporated in November 1990 under the name Mansur Industries
Inc. and, as a development stage company, devoted substantially all of its
resources to research and development programs related to its full line of self
contained, recycling industrial parts washers until June 1996. The Company
commenced its planned principal operations in July 1996.
Since July 1996, the Company has made its SystemOne(R) Washers and services
available to the public through a third party leasing program and through direct
sales. Under the third party leasing program, the Company recognizes revenue
from the sale of parts washers at the time the equipment is delivered by the
Company to the customer and the customer accepts such equipment. In general, the
revenue recognized approximates the discounted present value of the payment
stream related to the underlying lease.
Commencing in January 1997 and continuing until June 1998, the Company
maintained a distribution agreement with First Recovery, an affiliate of
Ashland, Inc., whereby First Recovery served as the Company's exclusive
distributor of the SystemOne(R) Washers. In an effort to accelerate market
penetration and provide new opportunities for recurring service revenues, the
Company completed the development of a direct marketing and distribution
organization for its SystemOne(R) product line in 1998 and launched a new
full-service program ("TotalCare") in the fourth quarter of 1999 to transition
the Company from a pure equipment and manufacturing company into a full-service
organization. This strategy was designed to allow the Company to offer
aggressive factory direct pricing on sales of its products and realize recurring
service revenues on its increasing customer base. In addition, commencing in the
first quarter of 2000, the Company consolidated its nationwide distribution and
service infrastructure, eliminating
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redundant or nonproductive resources in the field and at its corporate office,
and also restructured the direct sales and service organization in order to
significantly cut operating expenses while enhancing efficiency and
productivity. No assurance, however, can be given that the Company's direct
marketing and distribution infrastructure, TotalCare service program, and
restructuring of the sales and service organization will be successful.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Sales revenues decreased by $192,000, or 3.7%, to $5,010,000 for the three
months ended June 30, 2000 from $5,202,000 for the comparable period of 1999
because of a reduction in the size of the Company's sales force in an effort by
the Company to reduce its selling costs. As a percentage of sales, gross margin
represented 59.7% and 57.9% for the three months ended June 30, 2000 and 1999,
respectively. The increase in gross margin as a percentage of sales for the
three months ended June 30, 2000 is primarily the result of reduced per unit
manufacturing costs achieved through increased efficiencies in production.
Selling, general and administrative expenses for the three months ended June 30,
2000 were $5,037,000, a decrease of $651,000, or 11.4%, compared to selling,
general and administrative expenses of $5,688,000 for the three months ended
June 30, 1999. The decrease for the three months ended June 30, 2000 was
primarily the result of the consolidation of the Company's nationwide
distribution and service infrastructure, commencing in the first quarter of
2000, which eliminated redundant or nonproductive resources in the field and at
its corporate office.
The Company's research and development expenses increased by $4,000, from
$73,000 for the three months ended June 30, 1999 to $77,000 for the three months
ended June 30, 2000.
The Company recognized net interest expense of $520,000 for the three months
ended June 30, 2000, an increase of $43,000 compared to net interest expense of
$477,000 for the three months ended June 30, 1999. This increase was primarily
the result of the higher outstanding balance of the Company's line of credit in
the current period compared to the comparable period of the prior year.
As a result of the foregoing, the Company incurred a net loss of $2,644,000 for
the three months ended June 30, 2000 compared to a net loss of $3,227,000 for
the three months ended June 30, 1999.
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SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Sales revenues increased by $81,000 to $9,296,000 for the six months ended June
30, 2000 from $9,215,000 for the comparable period of 1999. During the current
period, gross margin increased by $363,000, or 7.0%, to $5,504,000 for the six
months ended June 30, 2000 from $5,141,000 for the six months ended June 30,
1999. As a percentage of sales, gross margin represented 59.2% and 55.8% for the
six months ended June 30, 2000 and 1999, respectively. The increase in gross
margin as a percentage of sales for the six months ended June 30, 2000 compared
to the comparable period of 1999 is primarily the result of reduced per unit
manufacturing costs achieved through increased efficiencies in production.
Selling, general and administrative expenses for the six months ended June 30,
2000 were $10,848,000, a decrease of $347,000, or 3.1%, compared to selling,
general and administrative expenses of $11,195,000 for the six months ended June
30, 1999. The decrease for the six months ended June 30, 2000 was primarily the
result of the consolidation of the Company's nationwide distribution and service
infrastructure, commencing in the first quarter of 2000, which eliminated
redundant or nonproductive resources in the field and at its corporate office.
The Company's research and development expenses decreased by $3,000 from
$246,000 during the six months ended June 30, 1999 to $243,000 for the six
months ended June 30, 2000.
The Company recognized net interest expense of $1,043,000 for the six months
ended June 30, 2000, an increase of $118,000 compared to net interest expense of
$925,000 for the six months ended June 30, 1999. This increase was primarily the
result of the higher outstanding balance of the Company's line of credit in the
current period compared to the comparable period of the prior year.
As a result of the foregoing, the Company incurred a net loss of $6,630,000 for
the six months ended June 30, 2000 compared to a net loss of $7,225,000 for the
six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the six months ended June 30, 2000
decreased by $3,316,000 to $3,664,000, compared to net cash used in operating
activities of $6,980,000 for the comparable six month period of the prior year.
The decrease for the current period is primarily attributable to a decrease of
approximately $595,000 in the net loss, from $7,225,000 to $6,630,000, a
decrease of $942,000 in accounts receivable and a decrease of $875,000 in
inventory.
Net cash used in investing activities for the six months ended June 30, 2000 was
$3,000, a decrease of $113,000, compared to $116,000 during the comparable
period of the prior
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year. This decrease was a result of decreased purchases of equipment during the
six months ended June 30, 2000.
Net cash provided from financing activities for the six months ended June 30,
2000 decreased by $2,613,000 to $2,768,000, from net cash provided from
financing activities of $5,381,000 for the six months ended June 30, 1999. The
decrease is primarily attributable to the proceeds of $2,000,000 from the
issuance of convertible preferred stock in the current period compared to
proceeds of $5,050,000 in the comparable period, offset by an increase of
$426,000 in amounts advanced under the Company's revolving line of credit in the
current period.
At June 30, 2000, the Company had working capital of $397,000 and cash and cash
equivalents of $13,000.
On May 2, 2000, the Company sold an aggregate of 20,000 shares of new Series D
Preferred Stock for an aggregate purchase price of $2,000,000. For a description
of this transaction, see Note 2 to the Condensed Financial Statements included
herein and Part II - Item 2 - Changes in Securities and Use of Proceeds,
incorporated herein by reference.
The Company's primary sources of working capital have been the net proceeds from
sale of the Series D Preferred Stock, the net proceeds of the Series B and
Series C Preferred Stock sold in 1999, the Company's lease financing arrangement
with SierraCities.com, the revolving line of credit (the "Revolver") and direct
sales to customers. The Revolver provides for a maximum credit line of
$5,000,000 and amounts advanced under the Revolver accrue interest at a rate of
prime plus 2.5%. At June 30, 2000, amounts totaling $1,879,000 had been advanced
to the Company under the Revolver. Pursuant to certain borrowing criteria
contained in the Revolver, the Company may not draw any advances beyond the
$1,879,000 already advanced under the Revolver.
The Company's material financial commitments relate primarily to its obligations
to make lease payments with respect to the Company's principal executive and
manufacturing facility in Miami, Florida and its nationwide direct distribution
centers and equipment leases (approximately $184,000 per month), installment
payments for financed manufacturing equipment (approximately $33,000 per month),
non-cash interest payments on the Company's 8.25% Subordinated Convertible
Notes (the "Notes") (approximately $148,000 per month), and non-cash dividends
on the Company's Series B, Series C, and Series D Convertible Preferred Stock
(approximately $95,000 per month).
On August 2, 2000, the Company entered into an Addendum to that certain Vendor
Lease Plan Agreement dated November 15, 1998 by and between SierraCities.com,
Inc. (f/k/a First Sierra Financial, Inc., "SierraCities.com") (the "Lease Plan
Agreement"). Pursuant to the Lease Plan Agreement, SierraCities.com will
purchase for cash the revenue streams of lease payments for the initial term of
leases of the Company's SystemOne(R) Washers.
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After the initial term of the leases, the revenue streams from the leases will
revert back to the Company.
On August 7, 2000, the Company entered into a Loan Agreement (the "Bridge Loan")
with Environmental Opportunities Fund II, L.P., Environmental Opportunities Fund
II (Institutional), L.P. and Hanseatic Americas LDC under which it borrowed
$2,500,000. For a description of this transaction see Part II - Items 2. Changes
in Securities and Use of Proceeds, incorporated herein by reference.
Capital requirements relating to the implementation of the Company's business
plan have been significant. The Company believes that its ability to generate
cash from operations is dependent upon, among other things, the demand for its
products and services and the success of its direct marketing and distribution
capabilities. In order to reduce certain of the Company's up-front capital
requirements associated with manufacturing operations, as well as distribution
center and service fleet development, the Company leases, and plans to continue
to lease rather than purchase, to the extent possible, equipment and vehicles.
Although the Company believes that the Lease Plan Agreement should result in
improved operating results and cash flow, the Company currently anticipates that
it will require additional equity or debt financing in order for it to meet its
cash needs, including to execute its direct marketing program and for the
payment of preferred stock dividends and the repayment of the Bridge Loan. There
can be no assurance that such financing will be available on terms acceptable to
the Company or at all. Any such financing could cause further dilution of
existing shareholders. In addition, the Company's ability to draw advances under
its Revolver is currently limited by its available borrowing base and the
Company is in discussions with the lender to expand its ability to access this
facility, although there can be no assurance that a substantial increase in
availability will be achieved. A failure to significantly improve the Company's
financial performance or obtain necessary financing could require the Company to
materially curtail or cease its operations.
As indicated in the accompanying financial statements, as of June 30, 2000 the
Company's accumulated deficit totaled $42,420,000.
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
1933, 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.
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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, the effects of governmental regulation and the ability of the Company
to obtain adequate financing to support its operational and marketing plans, the
expansion of its services network and future product development. 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 AND USE OF PROCEEDS
See Note 2 to the Company's Condensed Financial Statements included herein for
information regarding the issuance and sale by the Company of shares of its
Series D Preferred Stock, the May Warrants and the August Warrants, and certain
changes to the Company's Series B and Series C Preferred Stock, which is
incorporated herein by reference.
In connection with the issuance of the Series D Preferred Stock, the Company
entered into a Shareholders Agreement dated May 2, 2000 with Environmental
Opportunities Fund, L.P., Environmental Opportunities Fund II, L.P.,
Environmental Opportunities Fund II (Institutional), L.P., Environmental
Opportunities Fund (Cayman), L.P, Hanseatic Americas LDC and Pierre Mansur (the
"Shareholders Agreement"). Pursuant to the Shareholders Agreement, Messrs. Paul
A. Biddelman and Kenneth Ch'uan-k'ai Leung were appointed to the Board of
Directors on May 29, 2000. Also, if the Company does not meet certain targeted
results of operations during the third quarter of 2000, either (i) one of its
independent directors must resign or (ii) the Board of Directors will be
expanded by two. The holders of Series D Preferred Stock will then be entitled
to nominate one or more individuals for any resulting vacancies on the board. In
addition, among other things, the Shareholders Agreement provides that certain
decisions to be made by the board, including authorization of any merger or
similar transaction or material acquisition, the issuance of certain securities
or the employment of senior management, require concurrence of the directors
designated by the holders of the Series D Convertible Preferred Stock.
The Company also amended its 1998 Common Stock Purchase Rights Agreement to
allow Hanseatic and the Environmental Funds to acquire the Series D Preferred
Stock and the shares of common stock issuable upon conversion thereof without
triggering the issuance of rights certificates.
On August 7, 2000 (the "Issuance Date"), the Company entered into a Loan
Agreement
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with Environmental Opportunities Fund II, L.P., Environmental Opportunities Fund
II (Institutional), L.P. and Hanseatic Americas LDC under which it borrowed an
aggregate of $2,500,000, evidenced by promissory notes (the "Subordinated
Promissory Notes"), maturing February 7, 2002, subject to mandatory prepayment
to the extent of any proceeds received by the Company from the sale of any new
securities of the Company or the borrowing of any additional money (other than
purchase money debt). The Subordinated Promissory Notes initially bear interest
at the rate of 12% per annum until the six month anniversary of the Issuance
Date, 14% until the nine month anniversary of the Issuance Date and 16%
thereafter until repaid in full. The Company's obligations under the Loan
Agreement are secured by a lien on substantially all of its assets other than
its intellectual property although such obligations have been subordinated to
the Revolver. Each of the Environmental Funds and Hanseatic are shareholders of
the Company and Mr. Paul A. Biddelman, President of Hanseatic, and Mr. Kenneth
Ch'uan-K'ai Leung, Chief Investment Officer of the Environmental Funds, are
directors of the Company. Also pursuant to the Loan Agreement the Company issued
the August Warrants. If the Company is unable to repay the Subordinated
Promissory Notes at maturity, it will have to issue, subject to shareholder
approval, additional warrants to the lenders that will be exercisable for
714,286 shares of the Company's common stock at $3.50 per share. Messrs. Paul
and Pierre Mansur and Hanseatic and the Environmental Funds have agreed to vote
any shares of Company voting stock owned by them in favor of such issuance.
The Company also amended its 1998 Common Stock Purchase Rights Agreement to
allow Hanseatic and the Environmental Funds to acquire the August Warrants and
the shares of common stock issuable upon exercise thereof without triggering the
issuance of rights certificates.
The Series D Preferred Stock, the May Warrants, the August Warrants and the
Subordinated Promissory Notes were issued in offerings exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(2) based upon the nature and number of offerees.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 2000 Annual Meeting of Shareholders on June 29, 2000; three
items were submitted to a vote of security holders at that time:
- The election of five members to the Company's Board of Directors to hold
office until the Company's 2001 Annual Meeting of Shareholders or until their
successors are duly elected and qualified. Pierre G. Mansur, Paul I. Mansur, and
Ronald J. Korn were re-elected as Directors of the Company. Paul A. Biddelman
and Kenneth Ch'uan-k'ai
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Leung were elected as new Directors of the Company. Including shares of Series B
Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, voting
with the holders of Common Stock on an as-converted basis, 4,726,488 votes were
cast in favor of the election of each of Pierre G. Mansur, Paul I. Mansur,
Ronald J. Korn, Paul A. Biddelman and Kenneth Ch'uan-k'ai Leung and 5,500 votes
were withheld for voting for each such director nominee.
- Consideration of a proposal to approve and ratify the amendment of the
Company's 1996 Executive Incentive Compensation Plan to increase the number of
shares of common stock reserved for issuance pursuant to grants of awards under
such plan from 475,000 shares to 750,000 shares. Including shares of Series B
Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, voting
with the holders of Common Stock on an as-converted basis, 4,722,088 votes were
cast in favor of the proposal, 9,800 were cast against the proposal, and 100
votes were withheld for voting for such proposal.
- Consideration of a proposal to amend Article I of the Company's Articles of
Incorporation to change the name of the Company from Mansur Industries Inc. to
SystemOne Technologies Inc. Including shares of Series B Preferred Stock, Series
C Preferred Stock, and Series D Preferred Stock, voting with the holders of
Common Stock on an as-converted basis, 4,731,188 votes were cast in favor of the
proposal, 400 were cast against the proposal, and 400 votes were withheld for
voting for such proposal.
ITEM 5. OTHER INFORMATION.
On July 12, 2000, the Company filed Articles of Merger with the Secretary of
State for the State of Florida merging its wholly owned subsidiary, SystemOne
Technologies Inc. with and into itself (the "Merger"). In connection with the
Merger, on July 12, 2000, the Company filed Articles of Amendment to the
Company's Amended and Restated Articles of Incorporation, filed on July 25, 1996
which changed the name of the Company from Mansur Industries Inc. to SystemOne
Technologies Inc. In addition, the Company's trading symbol was changed to
"STEK".
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following Exhibits are provided in accordance with the provisions
of Item 601 of Regulation S-B and are filed herewith unless otherwise noted.
EXHIBIT INDEX
3(i) Amended and Restated Articles of Incorporation dated July 25,
1996, as amended by Articles of Amendment dated May 17, 1999,
Articles of Amendment dated August 24, 1999, Articles of
Amendment dated May 2,
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2000 and Articles of Amendment dated July 12, 2000.
4.1 Form of Warrant dated August 7, 2000.
4.2 First Amendment to Rights Agreement, dated as of May 2, 2000,
by and between the Company and Continental Stock Transfer and
Trust Company.
4.3 Second Amendment to Rights Agreement, dated as of August 7,
2000, by and between the Company and Continental Stock
Transfer and Trust Company.
10.1 Loan Agreement, dated August 7, 2000, by and among the
Company, Environmental Opportunities Fund II, L.P.,
Environmental Opportunities Fund II (Institutional), L.P. and
Hanseatic Americas LDC.
10.2 Form of Subordinated Promissory Note.
10.3 Letter Agreement amending the Loan Agreement, dated August 7,
2000, by and among the Company, Environmental Opportunities
Fund II, L.P., Environmental Opportunities Fund II
(Institutional), L.P., Environmental Opportunities Fund
(Cayman), L.P., Hanseatic Americas LDC, Paul Mansur and Pierre
Mansur.
10.4 Security Agreement, dated August 7, 2000, by and among the
Company, Environmental Opportunities Fund II, L.P.,
Environmental Opportunities Fund II (Institutional), L.P. and
Hanseatic Americas LDC.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K dated May 12, 2000, filed with the Commission on May 15, 2000,
reporting Item 5, Other Event, relating to the Company's sale of Series D
Convertible Preferred Stock and Warrants on May 2, 2000.
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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.
SYSTEMONE TECHNOLOGIES INC.
Date: August 14, 2000 /s/ Paul I. Mansur
----------------------------------------
PAUL I. MANSUR
Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 2000 /s/ Steven M. Healy
----------------------------------------
STEVEN M. HEALY
Director of Finance and Controller
(Principal Financial Accounting Officer)
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EXHIBITS
3(i) Amended and Restated Articles of Incorporation dated July 25,
1996, as amended by Articles of Amendment dated May 17, 1999,
Articles of Amendment dated August 24, 1999, Articles of
Amendment dated May 2, 2000 and Articles of Amendment dated
July 12, 2000.
4.1 Form of Warrant dated August 7, 2000.
4.2 First Amendment to Rights Agreement, dated as of May 2, 2000,
by and between the Company and Continental Stock Transfer and
Trust Company.
4.3 Second Amendment to Rights Agreement, dated as of August 7,
2000, by and between the Company and Continental Stock
Transfer and Trust Company.
10.1 Loan Agreement, dated August 7, 2000, by and among the
Company, Environmental Opportunities Fund II, L.P.,
Environmental Opportunities Fund II (Institutional), L.P. and
Hanseatic Americas LDC.
10.2 Form of Subordinated Promissory Note.
10.3 Letter Agreement amending the Loan Agreement, dated August 7,
2000, by and among the Company, Environmental Opportunities
Fund II, L.P., Environmental Opportunities Fund II
(Institutional), L.P., Environmental Opportunities Fund
(Cayman), L.P., Hanseatic Americas LDC, Paul Mansur and Pierre
Mansur.
10.4 Security Agreement, dated August 7, 2000, by and among the
Company, Environmental Opportunities Fund II, L.P.,
Environmental Opportunities Fund II (Institutional), L.P. and
Hanseatic Americas LDC.
27.1 Financial Data Schedule
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