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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-KSB/A AMENDMENT NO. 1 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 Commission File No. 000-21325 SYSTEMONE TECHNOLOGIES INC.   Florida
    
    65-0226813(State of Incorporation)
    
    (I.R.S. Employer Identification No.)8305 N.W. 27th Street, Suite 107, Miami, Florida
    
    33122(Address of Registrants Principal Executive Offices)
    
    (Zip Code)
 305-593-8015




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TABLE OF CONTENTS  PART IIIITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM 10. EXECUTIVE COMPENSATIONITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.SECTION 302 CERTIFICATION OF CEOSECTION 302 CERTIFICATION OF PFOSECTION 906 CERTIFICATION OF CEO & PFO    Table of Contents  Explanatory Note This amendment to the Companys Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2003 is being filed to add Items 9 through 12
and 14 of Part III of the Annual Report on Form 10-KSB, which were omitted in
reliance on General Instruction E(3) thereto. 
 PART III 
 ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Companys directors and executive officers and their ages as of April
15, 2004 are as follows: Name
    
    Age
    
    PositionPierre G. Mansur
    
    
    52
    
    
    Chairman of the Board, President and
Executive DirectorPaul I. Mansur
    
    
    53
    
    
    Chief Executive Officer and Executive DirectorPaul A. Biddelman
    
    
    58
    
    
    DirectorKenneth C. Leung
    
    
    59
    
    
    DirectorJohn W. Poling
    
    
    58
    
    
    DirectorSteven M. Healy
    
    
    41
    
    
    Director of Finance and AdministrationJon A. Clawson
    
    
    60
    
    
    Director of Sales and Service
 Pierre G. Mansurfounded SystemOne Technologies Inc. Mr. Mansur has
served as the Companys Chairman and President since the Companys inception in
November 1990. From June 1973 to August 1990, Mr. Mansur served as President
of Mansur Industries Inc., a privately held New York corporation, that operated
a professional race engine machine shop. Mr. Mansur has over 25 years of
advanced automotive and machinery operations experience, including developing
innovative automotive machine shop applications; designing, manufacturing,
customizing, modifying and retooling high performance engines and component
parts; developing state of the art automotive and powerboat race engines which
have consistently achieved world championship status; and, providing consulting
services and publishing articles with respect to automotive technical research
data. Mr. Mansur has conducted extensive research and development projects for
several companies, including testing and evaluating engine parts and equipment
for Direct Connection, a high performance racing division of the Chrysler
Corporation; researching and developing specialized engine piston rings and
coatings for Seal Power Corporation; researching high-tech plastic polymers for
internal combustion engines for ICI Americas; and, designing and developing
specialized high performance engine oil pan applications. Pierre Mansur is the
brother of Paul I. Mansur. Pierre Mansur is a graduate of the City University
of New York. Paul I. Mansurhas been a Director and the Companys Chief Executive
Officer since September 1993. From September 1986 to July 1993, Mr. Mansur
served as Chief Executive Officer of Atlantic Entertainment Inc., a privately
held regional retail chain of video superstores. From March 1981 to September
1986, Mr. Mansur served as the Chief Executive Officer and President of
Ameritrade Corporation, a privately held international distributor of factory
direct duty free products. From June 1972 to March 1981, Mr. Mansur held
various finance and operation positions, including Assistant Vice President
Finance and Operations for Motts USA, Inc., a division of American Brands.
Paul Mansur is the brother of Pierre G. Mansur. Paul Mansur is a graduate of
the City University of New York. 1




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Paul A. Biddelmanhas been a Director of the Company since May 2000. Mr.
Biddelman is President of Hanseatic Corporation, a private investment company
and a significant shareholder of the Company. Mr. Biddelman joined Hanseatic
early in 1992 from a merchant banking firm, which he co-founded in 1991. Prior
to joining Hanseatic, he was a Managing Director in Corporate Finance at Drexel
Burnham Lambert Incorporated where he was active primarily in financing
middle-market industrial companies. He holds an MBA from Harvard Business
School, a JD from Columbia Law School, and a BS from Lehigh University. Mr.
Biddelman serves on the Board of Directors of Celadon Group, Inc., Instituform
Technologies, Inc., Six Flags, Inc., and Star Gas LLC (the general partner of
Star Gas L.P.). Kenneth C. Leunghas been a Director of the Company since May 2000. Mr.
Leung is a Managing Director of Sanders Morris Harris in New York City and is
the Chief Investment Officer of Environmental Opportunities Fund, L.P. and
Environmental Opportunities Fund II, L.P., each a significant shareholder of
the Company. Prior to joining Sanders Morris Harris in 1995, Mr. Leung was a
Managing Director at Salomon Smith Barney Inc. Mr. Leung holds an MBA in
Finance from Columbia University and a BA in History from Fordham College. He
serves on the Board of Directors of Avista Resources, Inc., Synagro
Technologies, Inc., U.S. Plastic Lumber Corporation, U.S. Energy Corporation
and Waterlink, Inc. John W. Polinghas been a Director of the Company since June 2003. Mr.
Poling is a Partner at Tatum Partners, LLP. Mr. Poling joined Tatum in 2002.
Tatum has over 450 partners providing experienced financial services on a
permanent, interim or project basis to emerging growth, middle market and large
multinational companies. Mr. Polings professional experience includes over 30
years as a senior financial executive with manufacturing, industrial services,
environmental construction, consulting and engineering companies. Prior to
joining Tatum, Mr. Poling worked in both public and private companies serving
as Chief Financial Officer of U.S. Plastic Lumber Corp. from 1999 to 2002.
From 1996 to 1999, Mr. Poling served as Vice President of Finance of Eastern
Environmental Services, Inc. Additionally, Mr. Poling serves on the Board of
Directors of Kreisler Manufacturing Corporation and National Earth Services,
Inc. Mr. Poling also served on the Board of Directors for Cypher Entertainment
Inc. from 1995 to 1997. Mr. Poling attended Rutgers University and received a
BS in Accounting. Mr. Poling qualifies as an audit committee financial expert under the
applicable rules of the Securities and Exchange Commission. In making the
determination as to Mr. Polings status as an audit committee financial expert,
the Companys board of directors determined he has accounting and related
financial management expertise within the meaning of the aforementioned rules. Steven M. Healyhas been the Companys Director of Finance and
Administration since January 2002. Mr. Healy served as the Companys Director
of Finance and Controller from July 2000 to December 2001. From March 1997 up
to the date Mr. Healy joined the Company, Mr. Healy served as Director of
Finance for Radiant Oil Company, Inc., a privately held fuel distributor,
convenience store operator and real estate company. From January 1993 to March
1997, he served as Controller of United Leisure Industries, Inc., a privately
held vertically integrated manufacturer, distributor and retailer for sport and
recreational equipment. From January 1987 to December 1992, Mr. Healy served
as an auditor for Deloitte & Touche LLP. Mr. Healy is a CPA and a graduate of
the University of Florida. Jon A. Clawsonjoined the Company in August 1996 and has held the position
of Director of Sales and Service since July 2001. Prior to August 1996, Mr.
Clawson served as the Companys Regional Marketing Manager, Product Support
Manager, and Manager Sales Support. From September 1983 to June 1996, he
served as Marketing Director at Automotive One Parts Stores, a chain of
automotive parts and performance equipment stores. Mr. Clawson was elected to
the Automotive Parts Rebuilders Association Board of Directors in 1971. Mr.
Clawson attended Santa Monica College and UCLA. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Companys directors and executive officers, and persons who own more than
10% of the Companys outstanding Common Stock, to file with the SEC, initial
reports of ownership and reports of changes in ownership of equity securities
of the Company. Such persons are required by SEC regulations to furnish the
Company with copies of all such reports they file. 2




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To the Companys knowledge, based solely on a review of the copies of such
reports furnished to the Company and written or oral representations that no
other reports were required for such persons during the year ended December 31,
2003, the Company believes that all of the Companys officers, directors and
greater than 10% beneficial owners complied with the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as amended. Code of Ethics The Company is in the process of adopting a code of ethics that will apply
to all of the Companys directors, officers, employees and independent
contractors. The code of ethics will also have specific provisions applicable
to all employees with access to, and responsibility for, matters of finance and
financial management, including the Companys chief executive officer and
director of finance and administration. Once adopted by the Companys Board of
Directors, the full text of the code of ethics will be available at, and the
Company intends to disclose any amendments to, or waivers from, any provision
of the code of ethics that applies to any of the Companys executive officers
or directors by posting such information on the Companys website at
www.systemonetechnologies.com. or provide a copy of the code of ethics, free of
charge, to those persons that make a request in writing (Attn: Steven M. Healy,
Director of Finance and Administration) or by e-mail
(shealy@systemonetechnologies.com). 3




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ITEM 10. EXECUTIVE COMPENSATION The following table sets forth, for the years ended December 31, 2003,
2002 and 2001, the aggregate compensation awarded to, earned by or paid to
Pierre G. Mansur, the Companys Chairman, Executive Director and President,
Paul I. Mansur, the Companys Executive Director and Chief Executive Officer,
Steven M. Healy, the Companys Director of Finance and Administration, and Jon
A. Clawson, the Companys Director of Sales and Service (collectively, the
named executive officers). None of the Companys other officers earned
compensation in excess of $100,000 during 2003. The Company did not grant any
restricted stock awards or stock appreciation rights under the Companys
Executive Incentive Plan, as amended, or make any long-term payouts under such
plan during these three fiscal years. Long TermAnnual Compensation
    
    CompensationSecuritiesName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Annual
    
    UnderlyingPrincipal Position
    
    Year
    
    Salary
    
    Bonus
    
    Compensation
    
    OptionsPierre G. Mansur
    
    
    2003
    
    
    $
    200,000
    
    
    
    
    
    
    
    *
    
    
    
    90,620Chairman and President
    
    
    2002
    
    
    $
    175,000
    
    
    
    
    
    
    
    *
    
    
    
    21,0002001
    
    
    $
    160,000
    
    
    
    
    
    
    
    *
    
    
    
    33,333Paul I. Mansur
    
    
    2003
    
    
    $
    200,000
    
    
    
    
    
    
    
    *
    
    
    
    81,521Chief Executive Officer
    
    
    2002
    
    
    $
    175,000
    
    
    
    
    
    
    
    *
    
    
    
    17,5002001
    
    
    $
    160,000
    
    
    
    
    
    
    
    *
    
    
    
    33,000Steven M. Healy
    
    
    2003
    
    
    $
    129,000
    
    
    
    
    
    
    
    *
    
    
    
    33,363Director of Finance and
    
    
    2002
    
    
    $
    120,000
    
    
    
    
    
    
    
    *
    
    
    
    12,000Administration
    
    
    2001
    
    
    $
    100,000
    
    
    
    
    
    
    
    *
    
    
    
    5,908Jon A. Clawson
    
    
    2003
    
    
    $
    102,000
    
    
    
    
    
    
    
    *
    
    
    
    27,450Director of Sales and Service
    
    
    2002
    
    
    $
    95,000
    
    
    
    
    
    
    
    *
    
    
    
    9,5002001
    
    
    $
    82,000
    
    
    
    
    
    
    
    *
    
    
    
    4,417
   *
    
    The aggregate amount of the perquisites and other personal benefits,
securities or property earned by the named executive officer during the
applicable fiscal year, if any, did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus of the named executive officer. Employment Contracts and Termination of Employment Arrangements On January 1, 2003, the Company entered into a 24-month employment
agreement with Pierre G. Mansur, the Companys Executive Director and
President, which employment agreement superseded and replaced Mr. Mansurs
previous employment agreement with the Company. The employment agreement
provides that Mr. Mansurs base salary shall be $200,000 per annum through
December 31, 2004 and any renewal period thereafter. In the event that Mr.
Mansur is terminated for any reason other than for cause or total and permanent
disability prior to the end of the agreements term, Mr. Mansur is entitled to
receive (i) his salary payments for the remaining term of the agreement and
(ii) continued benefit coverage for the remaining term of the agreement.
During the term of the employment agreement and for three years following the
termination of his employment, Mr. Mansur is prohibited from disclosing any
confidential information, including without limitation, information regarding
the Companys patents, research and development, manufacturing processes or
knowledge or information with respect to the Companys confidential trade
secrets. In addition, Mr. Mansur is prohibited from, directly or indirectly,
engaging in any business in substantial competition with the Companys or any
of its affiliates business of automotive and industrial parts washers and from
becoming an officer, director or employee of any corporation, partnership or
any other business in substantial competition with the Company or any of the
Companys affiliates for three years following such termination. 4




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On January 1, 2003, the Company also entered into a 24-month employment
agreement with Paul I. Mansur, the Companys Executive Director and Chief
Executive Officer, which employment agreement superseded and replaced Mr.
Mansurs previous employment agreement with the Company. The employment
agreement provides that Mr. Mansurs base salary shall be $200,000 per annum
through December 31, 2004 and any renewal period thereafter. In the event that
Mr. Mansur is terminated for any reason other than for cause or total and
permanent disability prior to the end of the agreements term, Mr. Mansur is
entitled to receive (i) his salary payments for the remaining term of the
agreement and (ii) continued benefit coverage for the remaining term of the
agreement. During the term of the employment agreement and for three years
following the termination of his employment, Mr. Mansur is prohibited from
disclosing any confidential information, including without limitation,
information regarding the Companys patents, research and development,
manufacturing processes or knowledge or information with respect to the
Companys confidential trade secrets. In addition, Mr. Mansur is prohibited
from, directly or indirectly, engaging in any business in substantial
competition with the Companys or any of the Companys affiliates business of
automotive and industrial parts washers and from becoming an officer, director
or employee of any corporation, partnership or any other business in
substantial competition with the Company or any of the Companys affiliates for
three years following such termination. Executive Incentive Plan The Company adopted its Executive Incentive Plan, as amended (the Plan),
in September 1996 in connection with the Companys initial public offering of
Common Stock. The Plan provides for grants of stock options, stock
appreciation rights, restricted stock, deferred stock, other stock-related
awards and performance or annual incentive awards that may be settled in cash,
stock or other property. A total of 750,000 shares of the Companys Common
Stock have been reserved for the grant of awards under the Plan. The purpose
of the Plan is to advance the Companys interests by providing an additional
incentive in attracting, motivating and retaining qualified executives and
other employees, officers, directors and independent contractors by enabling
plan participants to acquire or increase a proprietary interest in the
Companys Common Stock in order to strengthen the mutuality of interests
between plan participants and the Companys shareholders, and providing plan
participants with annual and long-term performance incentives to expend their
maximum efforts in the creation of shareholder value. The persons eligible to receive awards under the Plan are the Companys
officers, directors, employees and independent contractors. Under the Plan, the
Companys non-employee directors are only eligible to receive automatic formula
grants of stock options and restricted stock as described below and the
independent contractors the Company engaged are only eligible to receive stock
options. The Plan is administered by the Companys compensation committee. Subject
to the terms of the Plan, the Companys compensation committee is authorized to
(i) select eligible persons to receive awards, (ii) determine the type and
number of awards to be granted and the number of shares of Common Stock to
which awards will relate, (iii) specify times at which awards will be
exercisable or settleable (including performance conditions that may be
required as a condition thereof), (iv) set other terms and conditions of
awards, prescribe forms of award agreements, (v) interpret and specify rules
and regulations relating to the Plan and (vi) make any other determinations
that may be necessary or advisable for the administration of the Plan. In addition, the Plan imposes individual limitations on the amount of
certain awards in part to comply with Section 162(m) of the Internal Revenue
Code of 1986, as amended. Under these limitations, during any fiscal year the
number of options, stock appreciation rights, restricted shares of Common
Stock, deferred shares of Common Stock, shares granted as a bonus or in lieu of
other obligations owed by the Company, and other stock-based awards granted to
any one participant may not exceed 250,000 for each type of such award, subject
to adjustment in certain circumstances. The maximum amount that may be paid
out as a final annual incentive award or other cash award in any fiscal year to
any one participant is $1,000,000 and the maximum amount that may be earned as
a final performance award or other cash award in respect of a performance
period by any one participant is $5,000,000. The Plan provides that each non-employee director shall receive (i) on the
date of his or her appointment as a director of the Company an automatic grant
of an option to purchase 3,500 shares of the Companys Common Stock and (ii)
each year, on the day the Company issued its earnings release for the prior
fiscal year, an automatic 5




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grant of an option to purchase 3,500 shares of Common Stock. Such options
will have a term of seven years and become exercisable at the rate of one-third
per year commencing on the first anniversary of the date of grant; provided,
however, that the options become fully exercisable in the event that, while
serving as a director of the Company, the non-employee director dies, or
suffers a disability, or retires, as such terms are defined in the Plan.
The per share exercise price of all options granted to non-employee directors
will be equal to the fair market value of a share of Common Stock on the date
such option is granted, subject to certain minimum exercise prices as may be
defined by the Companys compensation committee. Option/SAR Grants in Last Fiscal Year The table below sets forth the following information with respect to
options granted to the named executive officers during 2003:  
    
    the number of shares of Common Stock underlying options granted during the year;  
    
    the percentage that such options represent of all options granted to employees during the year;  
    
    the exercise price; and  
    
    the expiration date. Individual GrantsPercent of TotalNumber of
    
    Options/Securities
    
    SARsUnderlying
    
    Granted toOptions/SARs
    
    Employees in
    
    Exercise
    
    ExpirationName
    
    Granted
    
    Fiscal Year
    
    Price ($/Sh)
    
    DatePierre G. Mansur
    
    
    21,000
    (1)
    
    
    6.7
    %
    
    $
    1.00
    
    
    March 31, 2010Chairman and President
    
    
    69,620
    (2)
    
    
    22.2
    %
    
    $
    1.00
    
    
    Dec. 31, 2010Paul I. Mansur
    
    
    17,500
    (1)
    
    
    5.6
    %
    
    $
    1.00
    
    
    March 31, 2010Chief Executive Officer
    
    
    64,021
    (2)
    
    
    20.4
    %
    
    $
    1.00
    
    
    Dec. 31, 2010Steven M. Healy
    
    
    12,500
    (1)
    
    
    4.0
    %
    
    $
    1.00
    
    
    March 31, 2010Director of Finance and Administration
    
    
    20,863
    (2)
    
    
    6.6
    %
    
    $
    1.00
    
    
    Dec. 31, 2010Jon A. Clawson
    
    
    10,000
    (1)
    
    
    3.2
    %
    
    $
    1.00
    
    
    March 31, 2010Director of Sales and Service
    
    
    17,450
    (2)
    
    
    5.6
    %
    
    $
    1.00
    
    
    Dec. 31, 2010
   (1)
    
    Grant date: March 31, 2003.(2)
    
    Grant date: December 30, 2003. Aggregated Fiscal Year-End Option Value Table The following table sets forth certain information concerning unexercised
stock options held by the Companys named executive officers as of December 31,
2003. No stock options were exercised by the named executive officers during
2003. No stock appreciation rights have been granted or are outstanding. 6




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Number of Securities UnderlyingUnexercised Options at FY-End
    
    Value of Unexercised In-The-Shares
    
    
    
    
    
    December 31, 2003
    
    Money Options at FY-End(1)Acquired on
    
    ValueName
    
    Exercise
    
    Realized
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisablePierre G. Mansur
    
    
    0
    
    
    $
    0
    
    
    
    7,000
    
    
    
    83,620
    
    
    
    (2
    )
    
    
    (2
    )Paul I. Mansur
    
    
    0
    
    
    $
    0
    
    
    
    5,833
    
    
    
    75,688
    
    
    
    (2
    )
    
    
    (2
    )Steven M. Healy
    
    
    0
    
    
    $
    0
    
    
    
    4,167
    
    
    
    29,196
    
    
    
    (2
    )
    
    
    (2
    )Jon A. Clawson
    
    
    0
    
    
    $
    0
    
    
    
    3,333
    
    
    
    24,117
    
    
    
    (2
    )
    
    
    (2
    )
   (1)
    
    The closing price of the Common Stock as reported on the Over-the-Counter
Bulletin Board on December 31, 2003, the last trading day for such year,
was $0.25.(2)
    
    The option exercise prices exceed $0.25 and accordingly, such options are
not in-the-money. Compensation of Directors Compensation. Non-affiliated directors receive annual compensation in the
amount of $10,000 for attendance at meetings of the Board of Directors or
committees thereof. However, neither affiliated directors nor directors who
are also employed by the Company receive any fee or compensation for their
services as directors. All members of the Board of Directors receive
reimbursement for actual travel-related expenses incurred in connection with
their attendance at meetings of the Board of Directors. Options. Directors are eligible to receive options under the Companys
Executive Incentive Plan, as amended. This plan provides for an automatic grant
of an option to purchase 3,500 shares of the Companys Common Stock upon a
persons election as a non-employee director, as well as an automatic annual
grant of an option to purchase 3,500 shares of Common Stock on the day the
Company issues its earnings release for the prior fiscal year. Report on Repricing of Options/SARs Pursuant to a stock option replacement program approved by the Companys
Board of Directors, on June 28, 2003 the Company cancelled options to purchase
424,716 shares of Common Stock issued pursuant to the Companys Executive
Incentive Plan, as amended, prior to March 31, 2003, at various exercise prices
between $2.50 and $19.50 per share (the Cancelled Options). Among the
holders of the Cancelled Options were certain directors and officers of the
Company. On December 30, 2003 the Cancelled Options were replaced with options
to purchase 235,828 shares of Common Stock at an exercise price of $1.00 per
share (the December Options). In addition, on March 31, 2003 the Company
issued options to purchase 107,000 shares of Common Stock at an exercise price
of $1.00 per share (the March Options). When the December Options and March
Options were issued, the new exercise price exceeded the market price of the
Common Stock, with the new exercise prices representing approximately a 300%
and 54% premium, respectively, over the then market prices of $0.25 and $0.65
per share of Common Stock, respectively. Each replaced stock option has terms
and conditions substantially similar to the terms of the original grant. The Companys Board of Directors approved the stock option replacement
program as a result of the significant reduction in the price of the Common
Stock subsequent to the original grant of the Cancelled Options. The Board of
Directors determined that the Cancelled Options neither provided a meaningful
incentive to the option holders to remain in the Companys employ nor continued
to maximize shareholder value. The Board of Directors believed that the grant
of new stock options with a lower exercise price in replacement for the
Cancelled Options would once again provide incentive to the Companys
directors, officers and employees to continue to provide services to the
Company as well as maximize shareholder value. 7




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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Companys voting securities outstanding on April 11, 2004 consisted of
4,960,087 shares of Common Stock, 73,380 shares of Series B Convertible
Preferred Stock, 97,102 shares of Series C Convertible Preferred Stock and
26,894 shares of Series D Convertible Preferred Stock. The following table
shows as of April 11, 2004, the amount of voting securities beneficially owned
by (i) each of the Companys directors, (ii) each of the Companys executive
officers named in the Summary Compensation Table below, (iii) all of the
Companys directors and executive officers as a group and (iv) each person
known by the Company to beneficially own more than 5% of any class of the
Companys outstanding voting securities. Unless otherwise provided, the
address of each holder listed under the heading Common Stock is c/o SystemOne
Technologies Inc., 8305 N.W. 27th Street, Suite 107, Miami, Florida 33122. Aggregate Number
    
    Acquirable
    
    Total Numberof Shares
    
    Within
    
    of Shares of Class
    
    PercentageBeneficially Owned
    
    60 Days
    
    Beneficially Owned
    
    of Shares of ClassName
    
    (a)
    
    (b)
    
    (columns (a)+(b))
    
    OutstandingCommon StockPierre G. Mansur
    
    
    1,961,750
    
    
    
    7,000
    (1)
    
    
    1,968,750
    
    
    
    39.6
    %Paul I. Mansur
    
    
    
    
    
    
    5,833
    (1)
    
    
    5,833
    
    
    
    *Steven M. Healy
    
    
    5,000
    
    
    
    4,167
    (1)
    
    
    9,167
    
    
    
    *Jon A. Clawson
    
    
    
    
    
    
    4,167
    (1)
    
    
    4,167
    
    
    
    *Paul A. Biddelman(2)
    
    
    
    
    
    
    1,167
    (1)
    
    
    1,167
    
    
    
    *Kenneth C. Leung(3)
    
    
    24,750
    (4)
    
    
    1,167
    (1)
    
    
    25,917
    
    
    
    *John W. Poling
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    *All directors and
executive officers as a
group (7 persons)
    
    
    1,991,500
    
    
    
    23,501
    (1)
    
    
    2,015,001
    
    
    
    40.4
    %Environmental
Opportunities Fund II
(Institutional), L.P.(5)
    
    
    
    
    
    
    1,735,480
    (6)
    
    
    1,735,480
    (6)
    
    
    25.9
    %Environmental
Opportunities Fund II,
L.P.(5)
    
    
    
    
    
    
    471,722
    (7)
    
    
    471,722
    (7)
    
    
    8.7
    %Environmental
Opportunities Fund,
L.P.(5)
    
    
    
    
    
    
    627,252
    (8)
    
    
    627,252
    (8)
    
    
    11.2
    %Hanseatic Americas LDC
    
    
    
    
    
    
    4,040,528
    (9)
    
    
    4,040,528
    (9)
    
    
    44.9
    %Gerlach & Co.(10)(11)
    
    
    
    
    
    
    563,224
    (12)
    
    
    563,224
    (12)
    
    
    10.2
    %Series B Convertible
Preferred StockEnvironmental
Opportunities Fund II
(Institutional), L.P.(5)
    
    
    34,635
    
    
    
    
    
    
    
    34,635
    
    
    
    47.2
    %Environmental
Opportunities Fund II,
L.P.(5)
    
    
    9,393
    
    
    
    
    
    
    
    9,393
    
    
    
    12.8
    %Environmental
Opportunities Fund,
L.P.(5)
    
    
    29,352
    
    
    
    
    
    
    
    29,352
    
    
    
    40.0
    %Series C Convertible
Preferred StockHanseatic Americas LDC (13)
    
    
    97,102
    
    
    
    
    
    
    
    97,102
    
    
    
    100.0
    %Series D Convertible
Preferred StockEnvironmental
Opportunities Fund II
(Institutional), L.P.(5)
    
    
    10,569
    
    
    
    
    
    
    
    10,569
    
    
    
    39.3
    %Environmental
Opportunities Fund II,
L.P.(5)
    
    
    2,878
    
    
    
    
    
    
    
    2,878
    
    
    
    10.7
    %Hanseatic Americas LDC(13).
    
    
    13,447
    
    
    
    
    
    
    
    13,447
    
    
    
    50.0
    %
 8




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##### Table of Contents



*
    
    Represents less than 1% of the outstanding stock of the class.(1)
    
    Reflects the number of shares that could be purchased by the holder by
exercise of options granted under the Companys Executive Incentive Plan,
as amended, as of April 11, 2004, or within 60 days thereafter.(2)
    
    Mr. Biddelman is the President of Hanseatic Corporation (Corporation)
and he disclaims beneficial ownership as to any securities held by
Hanseatic Americas LDC (Americas), Hansabel Partners LLC (Partners) or
Corporation.(3)
    
    Mr. Leung is the Chief Investment Officer of Environmental Opportunities
Fund, L.P. (Fund I), Environmental Opportunities Fund II, L.P. (Fund
II), Environmental Opportunities Fund II (Institutional), L.P.
(Institutional and collectively, the Environmental Funds) and he
disclaims beneficial ownership as to any securities held by the
Environmental Funds.(4)
    
    Reflects 24,750 shares of Common Stock registered in the name of Mr.
Leungs 401(k) retirement savings plan.(5)
    
    The address for each of the Environmental Funds is c/o Sanders Morris
Harris, 3100 Chase Tower, Houston, Texas 77002.(6)
    
    Reflects 34,635 shares of Series B Convertible Preferred Stock that are
immediately convertible into 740,150 shares of Common Stock at a
conversion price of $4.68 per share; 10,569 shares of Series D Convertible
Preferred Stock that are immediately convertible into 301,966 shares of
Common Stock at a conversion price of $3.50 per share; a Warrant to
purchase 224,571 shares of Common Stock that is immediately exercisable at
an exercise price of $3.50 per share; a Warrant to purchase 370,543 shares
of Common Stock that is immediately exercisable at an exercise price of
$3.50 per share; and a Warrant to purchase 98,250 shares of Common Stock
that is immediately exercisable at an exercise price of $.01 per share.(7)
    
    Reflects 9,393 shares of Series B Convertible Preferred Stock that are
immediately convertible into 200,728 shares of Common Stock at a
conversion price of $4.68 per share; 2,878 shares of Series D Convertible
Preferred Stock that are immediately convertible into 82,215 shares of
Common Stock at a conversion price of $3.50 per share; a Warrant to
purchase 61,143 shares of Common Stock that is immediately exercisable at
an exercise price of $3.50 per share; a Warrant to purchase 100,886 shares
of Common Stock that is immediately exercisable at an exercise price of
$3.50 per share; and a Warrant to purchase 26,750 shares of Common Stock
that is immediately exercisable at an exercise price of $.01 per share.(8)
    
    Reflects 29,352 shares of Series B Convertible Preferred Stock that are
immediately convertible into 627,252 shares of Common Stock at a
conversion price of $4.68 per share.(9)
    
    Reflects 97,102 shares of Series C Convertible Preferred Stock that are
immediately convertible into 2,774,204 shares of Common Stock at a
conversion price of $3.50 per share; 13,447 shares of Series D Convertible
Preferred Stock that are immediately convertible into 384,181 shares of
Common Stock at a conversion price of $3.50 per share; a Warrant to
purchase 285,714 shares of Common Stock that is immediately exercisable at
an exercise price of $3.50 per share; a Warrant to purchase 471,429 shares
of Common Stock that is immediately exercisable at an exercise price of
$3.50 per share; and a Warrant to purchase 125,000 shares of Common Stock
that is immediately exercisable at an exercise price of $.01 per share.(10)
    
    The address of Gerlach & Co., is c/o Citibank, N.A., 333 West 34th
Street, 3rd Floor, New York, New York 10001.(11)
    
    Per a Schedule 13G filed thereby, OppenheimerFunds, Inc. (Oppenheimer)
and Oppenheimer Convertible Securities Fund, Inc., a series of Bond Fund
Series (Oppenheimer Convertible), claim shared voting and dispositive
power of the securities held by Gerlach & Co. The address for each of
Oppenheimer and Oppenheimer Convertible is c/o Howard Kailes, Esq.,
 McCarter & English, LLP, Four Gateway Center, 100 Mulberry Street, Newark, New Jersey 07101.(12)
    
    Reflects shares issuable upon conversion of 8 1/4% Subordinated
Convertible Notes due 2005 and a Warrant to purchase 200,000 shares of
Common Stock that is immediately exercisable at an exercise price of $.01
per share.(13)
    
    Per a Schedule 13D filed thereby, Americas, Partners, Corporation and Mr.
Wolfgang Traber claim shared voting and dispositive power of the
securities held by Americas. The address for each of Americas, Partners,
Corporation and Mr. Traber is c/o Howard Kailes, Esq., McCarter & English, LLP, Four Gateway Center, 100 Mulberry Street, Newark, New Jersey 07101. 9




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##### Table of Contents



Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of December 31, 2003 with
respect to compensation plans under which the Companys equity securities are
authorized for issuance.  
    
    The number of securities to be issued upon exercise of
outstanding options, warrants and rights (Column (a));  
    
    The weighted-average exercise price of the outstanding
options, warrants and rights disclosed (Column (b)); and  
    
    Other than securities to be issued upon exercise of the outstanding
options, warrants and rights disclosed in column (a), the number of securities
remaining available for future issuance under the plan (Column (c)). Number of sharesremaining availableNumber of shares to
    
    
    
    
    
    for future issuancebe issued upon
    
    Weighted average
    
    under equityexercise of
    
    exercise price of
    
    compensation plansoutstanding
    
    outstanding
    
    (excluding sharesoptions, warrants
    
    options, warrants
    
    reflected in Columnand rights
    
    and rights
    
    (a))Column (a)
    
    Column (b)
    
    Column (c)Equity compensation plans:Approved by Shareholders
    
    
    421,328
    
    
    $
    3.45
    
    
    
    328,672Not approved by Shareholders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    421,328
    
    
    $
    3.45
    
    
    
    328,672
 Pursuant to an amendment approved by the Companys shareholders during
2000, stock options to purchase up to 750,000 shares of common stock may be
granted under the Plan. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In May 1999, the Company issued an aggregate of 50,500 shares of Series B
Convertible Preferred Stock, $1.00 par value per share, to Environmental
Opportunities Fund, L.P., Environmental Opportunities Fund (Cayman), L.P.,
Environmental Opportunities Fund II, L.P. and Environmental Opportunities Fund
II (Institutional), L.P. for an aggregate purchase price of $5,050,000.
Subsequent to such date the Company issued an additional 22,880 shares of
Series B Convertible Preferred Stock as paid-in-kind dividends. Also
subsequent to such date, all shares held by Environmental Opportunities Fund
(Cayman), L.P. were transferred to Environmental Opportunities Fund, L.P. Mr.
Kenneth C. Leung, one of the Companys directors, is the Chief Investment
Officer of each of the aforementioned funds. In August 1999, the Company issued 69,000 shares of Series C Convertible
Preferred Stock, $1.00 par value per share, to Hanseatic Americas LDC for an
aggregate purchase price of $6,900,000. Subsequent to such date the Company
issued an additional 28,102 shares of Series C Convertible Preferred Stock as
paid-in-kind dividends. Mr. Paul A. Biddelman, one of the Companys directors,
is the President of Hanseatic Corporation, which controls Hanseatic Americas
LDC. In May 2000, the Company issued an aggregate of 20,000 shares of Series D
convertible preferred stock, par value $1.00 per share, and warrants (the May
Warrants) to purchase an aggregate of 363,636 shares of Common Stock, to
Hanseatic Americas LDC, Environmental Opportunities Fund II, L.P. and
Environmental Opportunities Fund (Institutional), L.P. for an aggregate
purchase price of $2,000,000. Subsequent to such date the Company issued an
additional 6,894 shares of Series D Convertible Preferred Stock as paid-in-kind
dividends. In connection with the execution of the Subordinated Loan Agreement
and the issuance of the Lender Warrants (each as described below), the May
Warrants were adjusted to be exercisable for an aggregate of 571,428 shares of
Common Stock. 10




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##### Table of Contents



The Company is also party to a Shareholders Agreement dated May 2, 2000
with the holders of the Companys preferred stock and Pierre Mansur, pursuant
to which, Messrs. Paul A. Biddelman and Kenneth C. Leung were appointed to the
Companys Board of Directors on May 29, 2000. The holders of the Companys
preferred stock are also entitled to nominate one or more additional
individuals to establish a controlling majority on the Companys Board. In
addition, among other things, the Shareholders Agreement provides that certain
decisions to be made by the Companys 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 Companys preferred stock. On August 7, 2000 (the Issuance Date), the Company entered into a Loan
Agreement with Environmental Opportunities Fund II, L.P., Environmental
Opportunities Fund II (Institutional), L.P. and Hanseatic Americas LDC
(collectively, the Lenders), as amended on November 10, 2000, November 30,
2000, February 27, 2002, September 30, 2002 and December 9, 2002 (collectively
the Subordinated Loan Agreement), under which the Company borrowed an
aggregate principal amount of $3,300,000. These borrowings are evidenced by
promissory notes (the Subordinated Promissory Notes), maturing December 31,
2005 (extended from February 23, 2003 in connection with the Companys 2002
debt restructuring described briefly in this Annual Report
(the Restructuring)),
subject to prepayment at any time at the Companys option and mandatory
prepayment to the extent of any proceeds received by the Company from the sale
of any new securities or the borrowing of any additional money (other than
purchase money debt and borrowings under the Senior Revolver (as defined below)). The
Subordinated Promissory Notes bear interest at the rate of 10% per annum
(reduced from 16% in connection with the Restructuring) until final repayment
in full of such Subordinated Promissory Notes. The Companys obligations under
the Subordinated Loan Agreement are secured by a lien on substantially all of
the Companys assets other than the Companys intellectual property although
such obligations have been subordinated to the Senior Revolver. Pursuant to
the Subordinated Loan Agreement the Company issued warrants to purchase an
aggregate of up to 942,858 shares of the Companys Common Stock at $3.50 per
share (the August Warrants). Interest accrued under the Subordinated
Promissory Notes during 2003 amounted to $447,974. The Company is required to issue an additional 942,858 warrants to the
holders of its Subordinated Promissory Notes if the Company (i) sells debt or
equity securities, or debt securities convertible into equity securities, or
incurs debt with a final scheduled maturity date more than twelve months after
issuance providing gross cash proceeds to the Company in an amount equal to or
greater than the outstanding principal amount of the Subordinated Promissory
Notes or (ii) enters into a merger, consolidation, sale of all or substantially
all of its assets or other business combination transaction with a party that
prior to such transaction owns less than 25 percent of the voting power of the
Companys outstanding equity securities. The fair market value of the warrants
would be charged to operations should the warrants become issuable. The Company is party to a Revolving Credit Loan Agreement (the Senior
Revolver) with Hansa Finance Limited Liability Company (Hansa), which
provides the Company with a revolving line of credit. In connection with the
Senior Revolver, the Company granted the lender a security interest in
substantially all of the Companys assets, including its intellectual property.
Pursuant to the Senior Revolver, the Company may borrow twice a month up to
the Advance Limit. Effective prior to November 24, 2003, the Advance Limit was
the lesser of $5,000,000 or the sum of the Advance Supplement (as defined) plus
an amount based on the Companys receivables and inventory. The Advance
Supplement was $2,500,000 for the period from April 1, 2001 until maturity.
Effective November 24, 2003, the Advance Limit is the lesser of $3,000,000 or
an amount based on the Companys receivables and inventory and there is no
longer an Advance Supplement. In addition, Hansa agreed to reduce the annual
interest rate under the Senior Revolver to 13 percent. At December 31, 2003,
the Company exceeded its lending limits and, as a result thereof, the Company
has repaid the outstanding balance of the Senior Revolver of approximately $1.4
million in January 2004. Interest paid to Hansa during 2003 amounted to
$522,139. The Company and Hansa entered into an agreement on February 15, 2003
to extend the maturity of the Senior Revolver from May 30, 2003 to May 30,
2005. Hansa is controlled indirectly by Hanseatic Corporation and Paul
Biddelman, one of the Companys directors, who is the President of Hanseatic
Corporation. On February 27, 2002, the Company and Lenders, Hanseatic Americas LDC,
Environmental Fund II, L.P. and Environmental Opportunities Fund II
(Institutional), L.P. (collectively, with the Lenders, the Investors),
entered into a Letter Agreement suspending the Companys registration
obligations for shares of Common Stock 11




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##### Table of Contents



issuable upon conversion of shares of Series B, C and D Preferred Stock
which the Company issued to the Investors until the Company received
notification from the Investors holding shares with a current market value of
at least $1,000,000 requesting that the Company registered such shares. In connection with the Companys Restructuring on December 9, 2002, the
Company issued 750,000 warrants to the holders of the Companys 8 1/4%
Subordinated Convertible Notes that would have triggered certain anti-dilution
rights pursuant to the Companys outstanding (i) shares of Series D Preferred
Stock, $1.00 per share, (ii) the May Warrants and (iii) the August Warrants
(collectively, the Outstanding Warrants). The holders of the Series D
Preferred Stock and Outstanding Warrants waived their anti-dilution rights in
exchange for warrants for the purchase of an aggregate of 250,000 shares of
Common Stock at an exercise price of $.01 per share expiring on December 31,
2005. Also in connection with the Restructuring, the holders of the Companys
outstanding shares of Preferred Stock agreed to extend the date upon which the
Company must redeem such shares from May 17, 2004 to the earlier of the 90th
day after all of the Subordinated Convertible Notes are paid in full or March
31, 2006. Additionally, pursuant to the Restructuring, Gerlach & Co. (named
in the table of beneficial owners set forth in Item 11) exchanged then
outstanding 8 1/4% Subordinated Convertible Notes due February 23, 2003 (Old
Notes) in the aggregate principal amounts together with accrued interest of
$5,895,618 for (i) 8 1/4% Subordinated Convertible Notes due December 31, 2005
in the aggregate principal amount of $2,962,467 bearing interest which when due
was added at the Companys option to the principal amount of such notes through
December 31, 2002 and thereafter shall be paid in cash, plus (ii) 8 1/4%
Subordinated Convertible Notes due December 31, 2005 in the aggregate principal
amount of $2,962,467 bearing interest which when due may be added to the
principal amount for the life of such notes and (iii) warrants for the purchase
of an aggregate of 200,000 shares of the Companys Common Stock at an exercise
price of $.01 per share expiring on December 31, 2005. During March 2004, the Company repurchased and retired $13.5 million
principal amount of its 8 1/4% Subordinated Convertible Notes (the Notes) for
an aggregate purchase price of $2.9 million. The Company expects to recognize a
pre-tax gain of approximately $10.4 million in the first quarter of 2004 on the
repurchase and retirement of the Notes. Whiting & Co., previously a 5% or more
beneficial owner of the Companys securities, sold its Notes to the Company as
part of this repurchase and retirement. To the Companys knowledge Whiting &
Co. no longer owns any securities of the Company. 12




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##### Table of Contents



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. In addition to the Exhibits and Current Reports on Form 8-K listed in the
Companys Annual Report on Form 10-KSB for the year ended December 31, 2003,
the following exhibits are filed herewith: (A) Exhibits 31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) under the Exchange Act.31.2
    
    
    Certification of Director of Finance and Administration
(Principal Financial Accounting Officer) pursuant to Rule 13a-14(a)
under the Exchange Act.32.1
    
    
    Certification of Chief Executive Officer and Director of
Finance and Administration (Principal Financial Accounting Officer)
pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C.
Section 1350.
 (B) Current Reports on Form 8-K Form 8-K filed with the Securities and Exchange Commission on March 31, 2004. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Audit Fees The aggregate fees billed by BDO Seidman, LLP (BDO Seidman) for
professional services rendered for the audit of the Companys annual financial
statements for the fiscal year ended December 31, 2003 and for the reviews of
the interim financial statements included in the Companys Quarterly Report on
Form 10-QSB for such fiscal year were approximately $120,000. The aggregate
fees billed by BDO Seidman for professional services rendered for the audit of
the Companys annual financial statements for the fiscal year ended December
31, 2002 and for the reviews of the interim financial statements included in
the Companys Quarterly Report on Form 10-QSB for such fiscal year were
approximately $145,000. Audit-Related Fees The aggregate fees billed by BDO Seidman for audit-related services
rendered for accounting consultations for the fiscal year ended December 31,
2003 were approximately $13,000. The aggregate fees billed by BDO Seidman for
audit-related services rendered for accounting consultations for the fiscal
year ended December 31, 2002 were approximately $11,000. Tax Fees The aggregate fees billed by BDO Seidman for tax services rendered for the
fiscal year ended December 31, 2003 were approximately $28,000 for federal and
state tax reviews and consulting services. The aggregate fees billed by BDO
Seidman for tax services rendered for the fiscal year ended December 31, 2002
were approximately $71,000 for federal and state tax reviews and consulting
services. All Other Fees BDO Seidman did not render any other services, other than the services
described above under Audit Fees, Audit-Related Fees and Tax Fees for the
fiscal year ended December 31, 2003 or for the fiscal year ended December 31,
2002. The Companys audit committee has established a policy requiring its
pre-approval of all audit services and permissible non-audit services provided
by the independent auditors, along with the associated fees for those 13




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##### Table of Contents



services. The policy requires the specific pre-approval of all permitted
services. When considering the pre-approval of non-audit services, the audit
committee considers whether the provision of such non-audit service is
consistent with the auditors independence and the Securities and Exchange
Commission rules regarding auditor independence. Additionally, the audit
committee considers whether the independent auditors are best positioned and
qualified to provide the most effective and efficient service, based on factors
such as the independent auditors familiarity with the Companys business,
personnel, systems or risk profile and whether provision of the service by the
independent auditors would enhance the Companys ability to manage or control
risk or improve audit quality or would otherwise be beneficial to the Company. 14




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SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Company has caused this report to be signed on the
Companys behalf by the undersigned, thereunto duly authorized. SYSTEMONE TECHNOLOGIES INC.Dated: April 29, 2004
    By:
    /s/ PAUL I. MANSURChief Executive Officer(Principal Executive Officer) By:
    /s/ STEVEN M. HEALYDirector of Finance and Administration 15