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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB/A
                                       No. 1
       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                          COMMISSION FILE NO. 000-21325


           SYSTEMONE TECHNOLOGIES INC. (F/K/A MANSUR INDUSTRIES INC.)
        -----------------------------------------------------------------
        (Exact name of Small Business Issuer as Specified in its Charter)

                      Florida                                   65-0226813
 ---------------------------------------------               ----------------
 (State or Other Jurisdiction Of Incorporation               (I.R.S. Employer
                or Organization)                            Identification No.)

                              8305 N.W. 27th Street
                                    Suite 107
                              Miami, Florida 33122
                                 (305) 593-8015
    ------------------------------------------------------------------------
    (Address, Including Zip Code, and Telephone Number, Including Area Code,
                  of Registrant's Principal Executive Offices)


      SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:

                                      None

      SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:

                          Common Stock, $.001 par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in PART III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

State the issuer's revenues for its most recent fiscal year:       $17,524,059.

The aggregate market value of the Registrant's Common Stock held by
non-affiliates as of March 29, 2001 was $5,335,788 computed by reference to
the closing bid price of the Common Stock as reported on the NASDAQ SmallCap
Market on such date.

As of March 29, 2001, there were 4,742,923 shares of the Registrant's Common
Stock issued and outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

              The information required by Part III, Items 9-12, is incorporated
by reference from the Registrant's definitive proxy statement (to be filed
within 120 days after the end of the Registrant's fiscal year).


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         The Annual Report on Form 10-KSB of SystemOne Technologies Inc. (the
"Company") filed on April 2, 2001 is hereby amended and restated in its entirety
to read as follows:

              Preliminary Note Regarding Forward Looking Statements

         The following items contain certain "forward-looking statements" within
the meaning of section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), which represents the expectations or beliefs of the
Company, including, but not limited to, statements concerning (i) trends
affecting the Company's financial condition or results of operations; (ii) the
Company's continued growth and operating strategy; and (iii) trends in
governmental regulation. For this purpose, any statements contained herein that
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
"may," "will," "expect," "believe," "anticipate," "intend," "could," "should,"
"estimate," "continue," "project," "target," or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, certain of which are beyond the Company's control. Readers are
cautioned that any such forward looking statements are not guarantees of future
performance, and that actual results may differ materially from those projected
in the forward looking statements as a result of various factors. The
accompanying information contained herein including without limitation the
information set forth under the headings "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and "Business," identifies
important factors that could cause such differences. In particular, the
Company's performance for the foreseeable future will be dependent almost
completely on the performance of Safety-Kleen Systems, Inc., a wholly owned
subsidiary of Safety-Kleen Corp. (collectively, "Safety-Kleen"), under the
Marketing and Distribution Agreement, that the Company entered into with
Safety-Kleen on November 14th, 2000, as amended and restated as of March 8, 2001
(the "Exclusive Marketing Agreement"), the acceptance by Safety-Kleen's
customers of the Company's products, the ability of Safety-Kleen to resell or
rent the Company's products at attractive price levels, the ability of
Safety-Kleen to properly service the Company's products as well as other
factors. In addition, Safety Kleen is currently under reorganization pursuant to
Chapter 11 of the federal Bankruptcy Code and there can be no assurance that
Safety-Kleen will be able to continue its operations as currently conducted or
otherwise be in a position to perform under the Exclusive Marketing Agreement.


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ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS OVERVIEW

              The Company designs, manufactures and sells a full line of
patented, self-contained, recycling industrial parts washers, marketed as the
SystemOne(R) Washers (the "SystemOne(R) Washers"), for use in the automotive,
aviation, marine and general industrial repair markets. The Company has been
awarded ten patents for its products, which incorporate innovative, proprietary
resource recovery and waste minimization technologies to distill contaminated
solvent and yield pure solvent and a by-product comparable to used motor oil.
The SystemOne(R) Washer integrates a distillation and recovery process which
allows the solvent to be used, treated and re-used on demand, without requiring
off-site processing. The Company was incorporated in November 1990, commenced
the sale of SystemOne(R) Washers in July 1996 and has sold approximately 20,000
total SystemOne(R) units through December 31st, 2000. During 2000, the Company's
operating subsidiary was merged with and into the Company and the Company
changed its name to SystemOne(R) Technologies Inc.

              The Company estimates that domestic expenditures in connection
with industrial parts cleaning machines and services exceed $1.0 billion
annually. Industrial parts cleaning machines are used by automotive, aviation
and marine service, repair and rebuilding facilities, gas stations, transmission
shops, parts remanufacturers, machine shops, and general manufacturing
operations of every size and category requiring parts cleaning. Industrial parts
cleaning machines typically remove lubrication oils from tools and parts through
the use of mineral spirit solvents that become progressively more contaminated
and less effective in the cleaning process. Eventually, the solvent becomes
saturated with oil, sludge and other contaminants, and is typically classified
as a hazardous waste under federal and state regulations. Under the most common
current practice, the contaminated solvent must be stored until pick-up, when
pure solvent is delivered and the contaminated solvent is transported to
regional refining facilities. This delivery and off-site recycling program is
typically scheduled on four to sixteen week cycles. In contrast, the
distillation process used in the Company's SystemOne(R) Washers removes all the
contaminants from the solvent within the cleaning unit itself, minimizing the
volume of waste by-product and providing pure solvent to the customer "on
demand", eliminating the need for the costly and potentially dangerous storage
and transportation of hazardous waste. Moreover, the small amount of waste
by-product yielded in the distillation process used in the SystemOne(R) Washers
can typically be recycled or disposed of together with the customer's used motor
oil, which is generally not classified as hazardous waste. Based on these
factors, the Company believes that its product line presents an attractive and
economical alternative to users of other technologically outdated, non-recycling
parts cleaning machines, facilitates efficient and economical compliance with
environmental regulations, minimizes waste disposal requirements, reduces
insurance costs and increases worker productivity as a result of enhanced
cleaning solution utilization.

RECENT DEVELOPMENTS -- EXCLUSIVE MARKETING AGREEMENT WITH SAFETY-KLEEN

              On November 14, 2000, the Company entered into the Exclusive
Marketing Agreement with industry leader Safety-Kleen representing a major
strategic shift in direction and focus for the Company. The Company anticipates
that this new relationship will greatly enhance its financial and operating
performance and substantially accelerate market penetration. By joining with
Safety-Kleen, the Company has united its proprietary breakthrough technologies
with the industry market leader for the past thirty years, providing both
companies with unparalleled competitive advantages.

              Under the Exclusive Marketing Agreement, Safety-Kleen has been
appointed the exclusive distributor of SystemOne(R) parts washer equipment in
the United States, Puerto Rico, Canada and Mexico (the "Territory").
Safety-Kleen is currently commencing marketing the Company's products throughout
Safety Kleen's 173 branch locations across North America. The Company has
retained the right to distribute its equipment outside of these markets as well
as the right, subject to a right of first offer for Safety-Kleen in certain
circumstances, to market newly developed industrial and commercial parts washers
through other distribution channels.

              The Exclusive Marketing Agreement provides for minimum annual
purchases escalating from 10,000 units during each of the first two years to
18,000 units during the fifth year for specified prices plus deferred payments
on each unit purchased payable in 36 equal monthly installments.



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              Safety-Kleen has taken over all service, maintenance and repair
responsibilities for previously sold SystemOne(R) parts washers, allowing the
Company to dismantle its entire national sales and service infrastructure,
resulting in estimated annual cost savings in 2001 of approximately $20 million
compared to 1999 and $17 million compared to 2000. The Company will incur
one-time charges of approximately $6 million as a result of the restructuring
required in its transition from direct distribution to distribution through
Safety-Kleen, including a non-cash charge related to a warrant issued to
Safety-Kleen to purchase up to 1,134,615 shares of the Company's Common Stock at
$3.50 per share. See Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A")--Restructuring and Other Charges". The
Exclusive Marketing Agreement has an initial term of five years plus two
additional five-year renewal options and a termination right exercisable by
Safety-Kleen 180 days prior to the third year of the initial term.

STRATEGY

              The Company's strategy is to continue its focus on the research,
design, development, manufacture and sale of its SystemOne(R) Washers. The
Company believes that its products have achieved significant market penetration
because of the technological, economic and environmental advantages of the
Company's products over competitive equipment. The Company plans to place strong
emphasis on the following initiatives:

              ACCELERATE SALES AND MARKET PENETRATION THROUGH ITS NEW MARKETING
AND DISTRIBUTION STRATEGY WITH INDUSTRY LEADER SAFETY-KLEEN. The Company's
products are currently being distributed by Safety-Kleen in the Territory. The
Company now has the potential to access over 400,000 customers currently being
serviced by Safety-Kleen through its sales and service representatives in the
Territory.

              COMMERCIALIZE ADDITIONAL PARTS WASHING EQUIPMENT. The Company
expects to broaden its industrial parts cleaning product line with the
commercial launch in the fourth quarter of 2001 of new automated products
including: immersion washers, power spray washers and spray gun washers. See
"Products". The Company has obtained patent protection, developed prototypes and
conducted extensive testing of each of these new products.

              EXPAND PRODUCT LINE. Through its ongoing research and development
initiatives, the Company has identified a number of potential applications of
its core technologies, including commercial applications in the printing and dry
cleaning industries. The Company believes that these applications could be
developed without significant additional research expense.

              EXPAND TO INTERNATIONAL MARKETS. The Company believes that
significant opportunities exist for international sales of the SystemOne(R)
product line. The Company is currently exploring distribution opportunities in
international markets through distribution agreements, licensing, strategic
alliances and/or joint ventures. The Company's current plans call for launching
sales in certain international markets during 2001.

PRODUCTS

              The Company's product line includes the following self-contained
recycling industrial cleaning equipment. These products incorporate proprietary
waste minimization technology for which the Company has obtained patent
protection. Except as stated below, all of these products are available for
commercial sale. All of the Company's products utilize technology that (i)
provide continuously recycled cleaning solution during the cleaning process,
(ii) eliminate the necessity for continual replacement and disposal of
contaminated cleaning solution and (iii) facilitate practical and cost effective
compliance with demanding environmental laws and regulations.

              SYSTEMONE(R) GENERAL PARTS WASHER, was the first of the Company's
products to be available in commercial quantities. The SystemOne(R) General
Parts Washer provides users with pure mineral spirit solvent "on demand" for
parts and tools cleaning purposes, utilizing a low-temperature vacuum
distillation process to recycle the used solvent within the unit. This process
allows the solvent to be perpetually used and reused without the need for
off-site processing, minimizes the volume of waste by-product and eliminates the


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need for storage and disposal of the hazardous waste solvent. The markets for
SystemOne(R) General Parts Washers are automotive, aviation and marine service,
repair and rebuilding facilities, gas stations, transmission shops, parts
remanufacturers, machine shops, and general manufacturing operations of every
size and category requiring small parts cleaning.

              SYSTEMONE(R) INDUSTRIAL PARTS WASHER, is scheduled for commercial
introduction in the third quarter of 2001, and is an industrial grade version of
our SystemOne(R) General Parts Washer, manufactured to withstand corrosive
chemicals utilized in certain industrial environments.

              SYSTEMONE(R) MOBILE WASHER, is a mobile telescoping mini-parts
washer designed specifically for the automotive brake industry to meet
Occupational Safety and Health Act standards for the containment of airborne
asbestos particles during automobile brake repair operations. As an auxiliary
unit to the SystemOne(R) General Parts Washer, the SystemOne(R) Mobile Washer
may be placed directly under the automobile being serviced and provides clean
solvent on demand to the user by utilizing the SystemOne(R) General Parts Washer
to distill the contaminated solvents.

              SYSTEMONE(R) SPRAY GUN WASHER, scheduled for commercial
introduction in the fourth quarter of 2001, incorporates the Company's
recycling/reclamation capabilities for paint thinner recovery. The target
markets for spray gun washers consist of automotive, aviation and marine paint
shops and all general manufacturing operations that maintain painting
operations. The Company anticipates that the auto paint industry will represent
a substantial market. The SystemOne(R) Spray Gun Washer facilitates compliance
with rigorous environmental disposal regulations for the paint industry.

              SYSTEMONE(R) POWER SPRAY WASHER is currently being field tested on
a limited basis and is scheduled for commercial introduction in the fourth
quarter of 2001. The Power Spray Washer integrates three processes in one
self-contained machine; a power spray wash process, a recycling/reclamation
process and a thermal oxidation process. The Power Spray Washer is able to
accommodate large and bulky parts or units that are too large for the
SystemOne(R) General Parts Washers. The target markets for Power Spray Washers
consist of automotive, aviation and marine maintenance, repair and rebuilding
facilities, parts remanufacturers, machine shops, transmission shops, and all
facets of general manufacturing requiring maintenance and repair of mechanical
equipment.

              SYSTEMONE(R) IMMERSION WASHER, scheduled for commercial
introduction in the fourth quarter of 2001, integrates an immersion wash process
and a recycling/reclamation process in one self-contained machine. The Immersion
Washer is designed to clean complex parts containing substantial integral and
highly inaccessible passages requiring a total immersion washing. The primary
target markets for immersion washers consist of automotive, aviation and
maritime maintenance, repair and rebuilding facilities, parts remanufacturers,
machine shops, transmission shops, and all facets of general manufacturing
requiring maintenance and repair of mechanical equipment.

MANUFACTURING AND SUPPLY OF RAW MATERIALS

              The Company leases a 75,000 square foot facility located in Miami,
Florida which serves as the Company's executive office, manufacturing and
research facility. All of the Company's manufacturing operations, including
design, fabrication, painting and assembly are performed at this facility.
Annual manufacturing capacity of SystemOne(R) Washers at this facility is
approximately 25,000 units on two full shifts, more than sufficient to meet the
Safety-Kleen minimum volume of 18,000 units in the fifth year of the initial
term of the Exclusive Marketing Agreement. The Company currently manufactures
its other products in amounts required for testing, test marketing and/or
commercial production in these manufacturing facilities.

              The SystemOne(R) Washers are assembled from raw materials and
components all of which the Company believes are readily obtainable in the
United States. The Company does not believe that it is dependent upon any of its
current suppliers to obtain the raw materials and components necessary to
assemble and manufacture SystemOne(R) Washers. The Company currently procures
raw materials and components for its SystemOne(R) Washers from approximately 40
sources.



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MARKETING AND DISTRIBUTION

              See "Item 1 Description of Business -- Recent Developments --
Exclusive Marketing Agreement with Safety-Kleen" which is incorporated herein by
reference.

DIRECT SALES FINANCING

              For the past three years through December 2000, the Company
offered a lease option to its SystemOne(R) customers through a third party
leasing program. The Company is a party to an agreement (the "Product Finance
Agreement") with SierraCities.com ("SierraCities.com") formerly known as First
Sierra, pursuant to which SierraCities.com provides third party leasing services
to customers of the Company. Under the Product Finance Agreement,
SierraCities.com does not have recourse against the Company for a customer's
failure to discharge its obligations to SierraCities.com unless the Company has
breached certain representations and warranties made by the Company to
SierraCities.com in connection with the sale of its SystemOne(R) products.

              The Product Finance Agreement has a term of one year with
automatic renewals until either the Company or SierraCities.com terminates the
agreement with or without cause upon 60 days prior written notice. The Company
does not anticipate that it will require the services of SierraCities.com or any
third party leasing company as a result of its entering into the Exclusive
Marketing Agreement. See "Item 1 Description of Business -- Recent
Developments".

PATENTS, TRADEMARKS AND PROPRIETARY TECHNOLOGY

              The Company has been awarded ten United States patents for its
product line including its SystemOne(R) General Parts Washer (four patents),
Power Spray Washer, Spray Gun Washer, Immersion Washer, Floor Washer,
MiniDisposer (thermal oxidizer) and Vapor Recovery System. The Company intends
to apply for additional patents as appropriate. The Company's patents on its
principal product, the SystemOne(R) general parts washer, have terms commencing
September 1994 and continue through September 2015. The Company currently has a
patent pending relating to an advanced vapor recovery system. The Company also
holds eight foreign patents in Canada, Mexico and Japan relating to its
SystemOne(R) technologies and has nine additional foreign patents pending in
Europe, Canada, Mexico and Japan.

              The Company believes that patent protection is important to its
business. There can be no assurance as to the breadth or degree of protection
which existing or future patents, if any, may afford the Company, that any
patent applications will result in issued patents, that patents will not be
circumvented or invalidated or that the Company's competitors will not commence
marketing self-contained washers with similar technology. In addition, it is
costly to enforce patent and other intellectual property rights against
infringing parties. In the event the Company's products or processes infringe
patents or proprietary rights of others, the Company may be required to incur
costs to defend such claims, modify the design of its products or obtain a
license, any of which could harm the Company's results of operations.

              The Company has received a federal trademark registration with
respect to the mark " SystemOne(R)" and design.

              The Company also relies on trade secrets and proprietary know-how
and employs various methods to protect the concepts, ideas and documentation of
its proprietary information. However, such methods may not afford complete
protection and there can be no assurance that others will not independently
develop such know-how or obtain access to the Company's know-how, concepts,
ideas and documentation. Although the Company has and expects to continue to
have confidentiality agreements with its employees, suppliers and appropriate
vendors, there can be no assurance that such arrangements will adequately
protect the Company's trade secrets. Because the Company believes that its
proprietary information is important to its business, failure to protect such
information could have a material adverse effect on the Company.



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RESEARCH AND DEVELOPMENT

              The Company plans to continue to focus significant resources on
the development of additional products utilizing the Company's core recycling
technologies. The Company recognizes that the industrial parts cleaning industry
may be entering a phase of rapid technological change and progress and the
Company will seek to retain what it perceives as its technological superiority
over competitors' products. In this regard, the Company intends to continue to
seek means of refining and improving its SystemOne(R) Washers. In order to keep
pace with the rate of technological change, the Company also intends to devote
considerable resources in time, personnel and funds on research and development
for future products. The Company recognizes that many of its competitors have
far greater financial and personnel resources than the Company which may be
devoted to research and development and there can be no assurance that the
Company will maintain a technological advantage over its competitors.
Additionally, although there can be no assurance that the Company will develop
new products capable of commercialization, the Company intends to continue its
programs to develop new products, some of which may utilize the Company's
patented products and processes.

              During 2000, research and development expenses increased by
$31,962 or 7.5% from $427,666 for the year ended December 31, 1999 to $459,628
for the year ended December 31, 2000. The increase is due to the development of
the new 2001 model SystemOne(R) Parts Washer which will be in production in the
fourth quarter of 2001 as well as continued development of the SystemOne(R)
Paint Gun Washer, SystemOne(R) Immersion Washer and the SystemOne(R) Industrial
Parts Washer.

COMPETITION

              Industrial parts cleaning machines are used by automotive,
aviation and marine service, repair and rebuilding facilities, gas stations,
transmission shops, parts remanufacturers, machine shops, as well as general
manufacturing operations of every size and category requiring machinery
maintenance, service and repair The Company estimates that businesses in the
United States incur more than $1 billion in expenses annually for commercial and
industrial parts cleaning using chemical cleaning techniques.

              The industrial parts cleaning industry is highly competitive and
dominated by industry leader Safety-Kleen. The Company believes that
Safety-Kleen services a dominant portion of the parts washing machines currently
in use and that no other competitor accounts for more than 2% of the parts
washer market in the United States. While historically Safety-Kleen has been the
Company's primary competitor, by entering into the Exclusive Marketing
Agreement, the Company's products will now be marketed through Safety-Kleen's
industry leading marketing system. Although the Company anticipates that
Safety-Kleen will make all appropriate efforts to market the Company's products,
there can be no assurance that ultimate customers will select SystemOne(R)
Washers over Safety-Kleen's traditional "closed-loop" recycling system.

              To the best of the Company's knowledge, no other company is
currently commercially marketing a recycling parts washer with characteristics
comparable to the Company's SystemOne(R) products. See "--Patents, Trademarks
and Proprietary Technology." Certain of the Company's target customers have
attempted to enhance the capabilities of their existing industrial parts washers
by acquiring stand alone machines capable of distilling solvent. Although there
is a wide variety of such machinery currently available to the public, the
Company believes that the SystemOne(R) Washers compare favorably with the
technologically outdated, non-recycling products of its competitors on the basis
of, among other things: (i) delivery of pure solvent "on demand" without
frequent solvent replacement; (ii) lower overall cost; (iii) reduced time and
cost associated with documenting compliance with applicable environmental and
other laws; (iv) reduced safety and environmental risks associated with
competitive machines and services; (v) customer service; and (vi) difficulty in
handling the regulated substances used and/or generated by competitive machines.

GOVERNMENT REGULATION

              The Company believes that federal and state laws and regulations
have been instrumental in shaping the industrial parts washing industry. Federal
and state regulations dictate and restrict to varying degrees what types of



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cleaning solvents may be utilized, how a solvent may be stored, and the manner
in which contaminated solvents may be generated, handled, transported, recycled
and disposed.

              The Company believes that customer demand for its SystemOne(R)
Washers is partially a function of the legal environment in which customers for
the Company's products conduct business; accordingly, the federal and state laws
and regulations discussed below regulate the behavior of the Company's
customers. The Company's SystemOne(R) Washers were designed to help minimize the
cost of complying with existing federal and state environmental laws and
regulations. Any changes, relaxation or repeal of the federal or state laws and
regulations which have shaped the parts washing industry may significantly
affect demand for the Company's products and the Company's competitive position.

              REGULATION OF HANDLING AND USE OF SOLVENTS. Federal and state
regulations have restricted the types of solvents that may be utilized in
industrial parts cleaning machines. Stoddard solvents, more commonly known as
mineral spirits and solvent naphtha, are the cleaning solvents typically used in
industrial parts washers. The Company uses mineral spirits with a minimum of 140
degrees Fahrenheit ignitable limits in its SystemOne(R) Washers. Such mineral
spirits do not exhibit the ignitability characteristic for liquid hazardous
wastes as defined in the Resource Conservation and Recovery Act of 1976, as
amended (the "RCRA"), and the regulations under that statute adopted by the
United States Environmental Protection Agency (the "EPA"). Certain machines sold
by the Company's competitors use mineral spirits with lower ignitable limits,
which may, after use, render such mineral spirits subject to regulation as a
hazardous waste. The Company believes that the ability to recycle the mineral
spirits used in its SystemOne(R) Washers provide a significant economic benefit
to the Company's customers by allowing them to avoid the expenses and potential
liability associated with the disposal of such solvent as a hazardous waste.

              Federal, state and many local governments have adopted regulations
governing the handling, transportation and disposal of mineral spirit solvents.
On the federal level, under the Hazardous Materials Transportation Act ("HMTA"),
the United States Department of Transportation has promulgated requirements for
the packaging, labeling and transportation of mineral spirits in excess of
specified quantities. Relative to the handling and disposal of mineral spirits,
many states and local governments have established programs requiring the
assessment and remediation of hazardous materials that have been improperly
discharged into the environment. Liability under such programs is possible for
unauthorized release of mineral spirits in violation of applicable standards.
Civil penalties and administrative costs may also be imposed for such
violations. The Company's products do not require the transportation of mineral
spirits that necessitate compliance with HMTA requirements providing significant
economic benefits.

              REGULATION OF GENERATION, TRANSPORTATION, TREATMENT, STORAGE AND
DISPOSAL OF CONTAMINATED SOLVENTS. The generation, transportation, treatment,
storage and disposal of contaminated solvents is regulated by the federal and
state governments. At the federal level, the RCRA authorized the EPA to develop
specific rules and regulations governing the generation, transportation,
treatment, storage and disposal of hazardous solvent wastes as defined by the
EPA. The Company believes that none of the solvent recycled in SystemOne(R)
Washers when used in accordance with its intended purpose and instructions is
subject to regulation as a "hazardous waste." In contrast, the Company believes
that the mixture of solvent and contaminants which is periodically recovered
from the machines of many of its competitors is subject to regulation as
"hazardous waste."

              The Company believes that the ability to manage its residue
by-product as used oil rather than as a hazardous waste is economically
attractive to the Company's customers for a number of reasons. The Company
believes that substantially all of its target customers currently have
established systems for the handling, transportation, recycling and/or disposal
of used oil. Accordingly, the classification of the residue as used oil would
enable the Company's customers to dispose of or recycle the residue at no
significant additional cost and avoid certain costs associated with establishing
and disposing of wastes in compliance with a hazardous waste disposal system.
Even if the residue by-product was required to be handled, transported, recycled
and/or disposed of as a hazardous waste, the fact that the SystemOne(R) Washers
effect a substantial reduction in the volume of waste product requiring disposal
would still serve to significantly minimize disposal costs.



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PRODUCT LIABILITY AND INSURANCE

              The Company is subject to potential product liability risks
through the use of its industrial parts cleaning machines. The Company has
implemented strict quality control measures and currently maintains product
liability insurance with respect to such potential liabilities although there
can be no assurance that such insurance would be adequate to cover any
particular claim or that insurance will continue to be available on acceptable
terms.

EMPLOYEES

              As of March 12, 2001, the Company had a total of 71 employees.
This represents a significant reduction in staff from the same date a year ago
when the Company had a total of 305 employees. This reduction is the direct
consequence of a major corporate wide restructuring resulting from the Exclusive
Marketing Agreement that included the elimination of the Company's entire field
sales and service infrastructure. The Company plans to maintain its current
corporate staff of approximately 28 personnel including corporate management,
research and development and field product support and a manufacturing staff of
approximately 43 employees.

ITEM 2. PROPERTIES

              The Company maintains its executive offices and its manufacturing
and research and development facilities in a 75,000 square foot building located
in Miami, Florida. The initial term of the lease for this facility expires
September 30, 2002. This lease provides for a renewal term of five years and is
exercisable at the Company's option upon six months' prior written notice. The
Company's annual lease payments are approximately $580,000, subject to an annual
4.5% increase, plus the Company must pay all utilities charges and the Company's
proportionate share of the facilities maintenance and operating expenses. The
Company has the right to cancel this lease upon three months' prior written
notice, subject to certain conditions. The Company has also been granted a right
of first refusal with respect to vacant space adjoining these facilities.

              The Company has closed all 56 service centers that supported its
previous direct marketing and distribution efforts.

ITEM 3. LEGAL PROCEEDINGS

              The Company is not presently involved in any material legal
proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              No matters were submitted to a vote of the Company's security
holders during the three months ended December 31, 2000.



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                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

              The Company's Common Stock is traded in the Nasdaq SmallCap Market
("Nasdaq") under the symbol "STEK". The Company received a Nasdaq Staff
Determination letter on March 2, 2001 advising the Company of the Staff's view
that it is not in compliance with the net tangible assets, net income and
capitalization requirements for continued listing. Because the Company believes
that the Exclusive Marketing Agreement should result in enhanced operating and
financial performance, it has requested a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff determination although there can be no
assurance that these enhanced results will be achieved. If the Company does not
prevail at the hearing, its securities will be subject to delisting from the
Nasdaq SmallCap Market but should continue to be listed on the OTC Electronic
Bulletin Board. There can be no assurance that the Company will maintain its
burden of demonstrating to the Panel that it can attain and sustain compliance
with Nasdaq's listing requirements.

              The following table sets forth, for the periods indicated, the
high and low closing bid quotations for the Common Stock as reported by Nasdaq.
The Nasdaq quotations represent quotations between dealers without adjustment
for retail markups, markdowns or commissions and may not necessarily represent
actual transactions.

                                      HIGH BID PRICE           LOW BID PRICE
                                      --------------           -------------
               1999
               Fourth Quarter           $  9.000                 $4.125
               Third Quarter             $12.250                 $6.000
               Second Quarter            $11.625                 $6.750
               First Quarter             $12.625                 $6.750

               2000
               Fourth Quarter             $3.375                 $1.344
               Third Quarter              $3.750                 $2.125
               Second Quarter             $6.000                 $2.563
               First Quarter              $9.125                 $4.625


              As of March 27, 2001, there were 37 holders of record of the
Company's Common Stock. The Company believes that there are in excess of 500
beneficial owners of the Common Stock. On March 27, 2001, the closing bid price
of the Common Stock was $1.031 per share.

              To date, the Company has not declared or paid any dividends on its
Common Stock. Pursuant to the terms of the Company's outstanding Convertible
Subordinated Notes, its Senior Revolver (as defined below) and the Subordinated
Loan Agreement (as defined below), the Company may not declare or pay any
dividends or make any other distributions, except dividends or distributions
payable in equity securities. The payment of dividends, if any, is within the
discretion of the Board of Directors and will depend upon the Company's
earnings, its capital requirements and financial condition, contractual
restrictions and other relevant factors. Also, payment of dividends are limited
by the terms of the outstanding series of preferred stock. The Board does not
intend to declare any dividends on its common stock in the foreseeable future,
but instead intends to retain future earnings, if any, for use in the Company's
business operations.



                                       10
<PAGE>   11


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

              The following discussion and analysis should be read in
conjunction with the financial statements, including the notes thereto,
contained elsewhere in this report.

GENERAL

              The Company was incorporated in November 1990 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. The Company began to generate
significant revenue from product sales in 1997 and since its inception has had
only one quarter of profitability. The Company's operating expenses increased
significantly between 1997 and 2000 in connection with the development of a
direct marketing and distribution organization, including the establishment of
regional distribution centers and a service fleet. Unfortunately, despite the
unparalleled economic, technological and environmental advantages offered by the
Company's SystemOne(R) products, the market demand for a capital purchase or
capital lease of parts washer equipment proved to be less than projected as
there remained a strong preference in the parts washer market for the
traditional month-to-month service charge or equipment rental. Consequently,
revenues did not increase commensurately with the expenses of a direct marketing
and distribution organization and the Company did not have the required large
amounts of capital to finance rental inventory necessary to support a
month-to-month rental program.

              The Company made a strategic shift by entering into the Exclusive
Marketing Agreement with industry leader Safety-Kleen and, as a result, has
eliminated its entire national direct sales and service infrastructure. Under
the Exclusive Marketing Agreement, Safety-Kleen has been appointed the exclusive
distributor of SystemOne(R) parts washer equipment in the United States, Puerto
Rico, Canada and Mexico (the "Territory") and will take over service,
maintenance and repair responsibility for previously sold SystemOne(R) Parts
Washers. See "Item 1. Description of Business -- Recent Developments --
Exclusive Marketing Agreement with Safety-Kleen".

              The Company believes that the appointment of Safety-Kleen will
substantially accelerate market penetration of its products, permit a reduction
in annual operating expenses in 2001 of approximately $20 million compared to
1999 and $17 million compared to 2000 and should allow the Company to achieve
positive earnings before interest, taxes, depreciation and amortization
("EBITDA"), a measure of operating cash flow, by the second quarter 2001,
although there can be no assurance.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

RESULTS OF OPERATIONS

              As a result of the Company entering into the Exclusive Marketing
Agreement, the Company committed to a plan in November 2000 to restructure its
operations with the major focus on its distribution network. The plan consisted
of the following strategy: Suspend sales activities on November 30, 2000;
terminate all field sales and service personnel; terminate office personnel as
appropriate in areas including sales and service support, marketing, and product
leasing; close all service centers and terminate leases; terminate leases for
service fleet; return all inventory to the Miami warehouse; re-manufacture all
used or demo inventory to a "new condition" standard; and sell all new and
re-manufactured inventories to Safety-Kleen as well as the Company's small
rental inventories. As a result of the Exclusive Marketing Agreement and the
related restructuring efforts, the following one time, non-recurring
restructuring and other charges, aggregating $5,992,968 were taken:

                  (1) The Company has issued Safety-Kleen a warrant, exercisable
for five years, to purchase up to 1,134,615 shares of the Company's Common Stock
at $3.50 per share, resulting in a charge of $2,072,146.

                  (2) The Company terminated approximately 200 employees and
closed 56 service centers as part of its restructuring plan resulting in a
charge of $1,020,635.



                                       11
<PAGE>   12
                  (3) Pursuant to the Exclusive Marketing Agreement,
Safety-Kleen will take over all service, maintenance and repair responsibilities
for previously sold SystemOne(R) Parts Washers. The Company has agreed to pay
Safety-Kleen a service fee of $50.00 per warranty service issue on all
previously sold SystemOne(R) Parts Washers still under warranty. In addition,
the Company will maintain a call center to receive and track all warranty calls.
A warranty charge in the amount of $1,570,508 was taken to cover projected
additional warranty expenses over the remaining warranty period for all
equipment delivered prior to the Company's entering into the Exclusive Marketing
Agreement.

                  (4) The Exclusive Marketing Agreement requires that machines
in the Company's inventory to be sold to Safety-Kleen must be new, or if not
new, marketable as new. Used machines that could not be economically
re-manufactured or upgraded to a new condition standard, were scrapped. These
units included either extensively used older demo models, units that
malfunctioned and were contaminated in inappropriate industrial environments or
units not economically re-manufacturable. As a result, the Company took a charge
of $661,467 related to scrapped units and inventory reserves.

                  (5) During much of the fourth quarter of 2000, the
manufacturing facilities were under-utilized. Manufacturing personnel spent most
of their time receiving, evaluating and re-manufacturing inventories or
re-tooling the plant for the model 2001 introduction. The unabsorbed overhead of
$362,073 and other miscellaneous items resulted in a charge of $668,212.

              The Company sold 6,862 SystemOne(R) units during 2000 compared to
7,389 units in 1999. During 2000, all units were sold through the Company's
direct distribution infrastructure. Sales revenues decreased by $1,309,266, or
7%, to $17,524,059 for the year ended December 31, 2000 from $18,833,325 for the
year ended December 31, 1999. The decrease in sales was due primarily to the
Company's discontinuance of all field sales and service activities as of
November 30, 2000 as a result of its entering into the Exclusive Marketing
Agreement.

              Gross profit decreased by $752,548, or 7.2%, to $9,672,481 for the
year ended December 31, 2000 from $10,425,029 for the year ended December 31,
1999. The decrease in gross profit is primarily volume related inasmuch as the
55.2% gross profit percentage in 2000 is relatively consistent with the 1999
gross profit percentage of 55.4%.

              Selling, general and administrative expenses incurred in 2000 were
$20,682,467, which is a decrease of $3,274,435 or 13.7% from selling, general
and administrative expenses in 1999 of $23,956,902. The decrease is the result
of several factors: First, the Company continued to recognize reduced selling,
general and administrative expenses from the consolidation of the Company's
nationwide distribution and service infrastructure commenced in the first
quarter of 2000. Second, the Company terminated approximately 90 sales people
and sales managers effective November 30, 2000. Third, the Company suspended all
sales activities in December 2000 resulting in no commissions or other expenses
relating to selling and delivering products.

              Research and development increased by $31,962 or 7.5% from
$427,666 for the year ended December 31, 1999 to $459,628 for the year ended
December 31, 2000. The increase is due to the on-going development of the new
2001 model SystemOne(R) Parts Washer which will be in production in the fourth
quarter of 2001 as well as continued development of the SystemOne(R) Paint Gun
Washer, SystemOne(R) Immersion Washer and the SystemOne(R) Industrial Parts
Washer.

              The Company recognized net interest expense of $2,914,897 during
2000, compared to net interest expense of $1,878,452 during 1999. The increase
in net interest expense was primarily the result of increased amounts of debt at
higher interest rates, including the amortization of debt discount associated
with common stock warrants issued to lenders. See note 7 of notes to financial
statements.

              As a result of the foregoing, the Company incurred a net loss of
$20,377,479 for the year ended December 31, 2000 which is an increase of
$4,539,488 from a net loss of $15,837,991 for the year ended December 31, 1999.
Dividends on redeemable preferred stock increased by $1,168,691 or 257.8% as a
result of a full year's dividends on the Series B and Series C Convertible
Preferred Stock and the issuance of the Series D Convertible Preferred Stock in



                                       12
<PAGE>   13

May 2000. Dividends also include the amortization of preferred stock discounts
associated with common stock warrants issued to investors. The Company's basic
and diluted net loss to common shares increased $5,708,179 to $21,999,545 at
December 31, 2000 from $16,291,366 at December 31, 1999, or a loss per common
share of $4.64 for 2000 and $3.54 for 1999.

              Accounts receivable decreased $1,180,717 or 43% from $2,748,383 at
December 31, 1999 to $1,567,666 at December 31, 2000 consistent with the
decrease in sales noted above.

              Inventory decreased $3,088,936 or 62% from $4,961,991 at December
31, 1999 to $1,873,055 at December 31, 2000. The decrease is due to scrapping
and reserving for approximately $900,000 of inventory as discussed above and to
stopping production of units for most of November and December. There was an
effort to sell inventory on hand and minimize raw materials in an effort to
conserve cash.

              Accounts payable and accrued expenses decreased $220,338 or 7%
from $3,321,122 at December 31, 1999 to $3,100,784 at December 31, 2000. The
decrease is due to reductions in accruals relating to wages, commissions,
vacation and related taxes. These reductions are due to both changes in company
policies and termination of employees relating to the restructuring plan.

              The Company's senior line of credit is classified as a long-term
debt at December 31, 2000 and as current liability at December 31, 1999. The
classification changed as a result of the entry into the Senior Revolver, as
more fully discussed in "-- Liquidity and Capital Resources" below, which has a
maturity date of May 30, 2003. The borrowings under the Senior Revolver
increased $3,243,107 from $956,893 at December 31, 1999 to $4,200,000 at
December 31, 2000 to cover working capital requirements.

LIQUIDITY AND CAPITAL RESOURCES

              Net cash used in operating activities for year ended December 31,
2000 decreased by $5,000,703 to $8,600,524, compared to net cash used in
operating activities of $13,601,227 for the prior year. The decrease is
primarily attributable to: (i) a decrease of $1,180,717 in accounts receivable,
(ii) a decrease of $3,088,936 in inventory, (iii) a decrease of $699,448 in
other assets, and (iv) an increase of $1,352,545 in accounts payable and accrued
expenses including the warranty accrual discussed above. These sources of cash
were offset by the $4,539,488 increase in the net loss for the year ended
December 31, 2000 over the net loss for the year ended December 31, 1999.

              Net cash used in investing activities for the year ended December
31, 2000 was $9,224, a decrease of $373,910, compared to $383,134 used during
the prior year. This decrease was a result of decreased purchases of machinery
and equipment during the year ended December 31, 2000.

                  Net cash provided from financing activities for the year ended
December 31, 2000 decreased by $3,512,248 to $8,185,295 from net cash provided
from financing activities of $11,697,543 for the year ended December 31, 1999.
The decrease is primarily attributable to net proceeds of $786,663 from the
issuance of convertible preferred stock for the year ended December 31, 2000
compared to $10,999,983 for the year ended December 31, 1999, partially offset
by net proceeds of $4,906,558 from the Senior Revolver and the Subordinated Loan
Agreement described below, and proceeds of $3,698,786 for the issuance of common
stock warrants.

              At December 31, 2000, the Company had negative net working capital
of $848,165 and cash and cash equivalents totaling $487,784, compared to net
working capital of $4,049,833 and cash and cash equivalents of $912,237 at
December 31, 1999.

              On May 2, 2000, the Company sold an aggregate of 20,000 shares of
new Series D Convertible Preferred Stock (the "Series D Preferred Stock") and
issued warrants (the "May Warrants") to purchase up to 363,636 shares of Common
Stock at a price of $5.50 per share for an aggregate purchase price of
$2,000,000 to the Environmental Funds and Hanseatic (collectively, the
"Investors"). See Note 8 of notes to financial statements 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
the Investors, Environmental Opportunities Fund (Cayman) L.P. and Pierre G.
Mansur, the Company's President and a director (the "Shareholders Agreement").



                                       13
<PAGE>   14

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, because the Company did not meet certain targeted results of operations
during the third quarter of 2000, the holders of Series D Preferred Stock are
entitled to nominate up to two additional individuals for 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 Preferred Stock.

              In accordance with its terms, as a result of the issuance of the
Series D Preferred Stock the May Warrants and the Lender Warrants (as defined
below), the conversion price of the Series B Convertible Preferred Stock was
reduced to $4.68 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. In addition, each share of the
Series B, C and Series D Preferred Stock is now convertible into 21.37, 28.57
and 28.57 shares of the Company's common stock, respectively, and the May
Warrants are exercisable for 571,428 shares of the Company's common stock.

              The Company also amended its 1998 Common Stock Purchase Rights
Agreement to allow the Investors to acquire the Series D Preferred Stock and the
shares of common stock issuable upon conversion thereof and the exercise of the
warrants described above without triggering the issuance of rights certificates.

              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. (collectively, the "Environmental
Funds") and Hanseatic Americas, LDC ("Hanseatic"), as amended on November 10,
2000 and November 30, 2000 (collectively the "Subordinated Loan Agreement"),
under which it borrowed an aggregate principal amount of $3,300,000. These
borrowings are evidenced by promissory notes (the "Subordinated Promissory
Notes"), maturing February 7, 2002, 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 of the Company or the
borrowing of any additional money (other than purchase money debt and borrowings
under the Senior Revolver). The Subordinated Promissory Notes initially bear
interest at the rate of 12% per annum until the six month anniversary of the
Issuance Date, 14% from the six month anniversary 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 Senior Revolver. Each of the
Environmental Funds and Hanseatic are shareholders of the Company and Mr. Paul
A. Biddelman, President of Hanseatic Corporation, 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 to purchase
an aggregate of up to 942,858 shares of its common stock at $3.50 per share (the
"Lender Warrants") and the Company is required to register such shares of common
stock for resale under the Securities Act of 1933, as amended. The Company
assigned a fair value of $2,513,142 to the Lender Warrants and has recorded this
amount as a discount to the Subordinated Promissory Notes with a corresponding
increase in Additional Paid In Capital. This discount is being amortized into
interest expense over the term of the Subordinated Promissory Notes. The Lender
Warrants may only be exercised for 50% and 75% of the common stock underlying
the Lender Warrants prior to May 7, 2001 and August 7, 2001, respectively. In
addition, if the Subordinated Promissory Notes are repaid prior to May 7, 2001,
then 50% of the Lender Warrants will terminate, and, thereafter, if the loan is
repaid prior to August 7, 2001, then 25% of the Lender Warrants will terminate.

              On November 30, 2000, the Company entered into a revolving credit
loan agreement (the "Senior Revolver") with Hansa Finance Limited Liability
Company ("Hansa") that provides the Company with a revolving line of credit for
up to $5 million with a scheduled maturity of May 30, 2003. In connection with
the Senior Revolver, the Company granted Hansa a security interest in
substantially all of its assets including its intellectual properties. Pursuant
to the Senior Revolver, the Company may borrow twice a month up to the Advance
Limit. The Advance Limit is the lesser of $5,000,000 or the sum of the Advance
Supplement plus an amount based on the Company's accounts receivable and
inventory. The Advance Supplement was $3,000,000 through March 31, 2001 and
$2,500,000 for the period April 1 2001 until maturity. Amounts advanced under
the Senior Revolver accrue interest at the rate of 14% per annum payable monthly
in arrears commencing December 31, 2000. As of December 31, 2000, amounts


                                       14
<PAGE>   15

advanced under the Senior Revolver totaled $4,200,000. Hansa is controlled
indirectly by Hanseatic Corporation and Paul Biddelman, one of the Company's
directors, is the President of Hanseatic Corporation.

              Proceeds from the Senior Revolver were used to satisfy the Loan
and Security Agreement with Guarantee Business Credit Corporation, as assignee
of Capital Business Credit, a division of Capital Factors, Inc., which has been
terminated.

              The Company's primary sources of cash have been the net proceeds
from sales of Preferred Stock, the Company's lease financing arrangement with
SierraCities.Com, the Senior Revolver, the Subordinated Loan Agreement and
direct sales to customers.

              The Company's material financial commitments are obligations to
make lease payments on the Company's principal executive and manufacturing
facility in Miami, Florida and equipment leases (approximately $85,000 per
month), installment payments for financed manufacturing equipment (approximately
$28,000 per month), noncash interest payments on the Company's 8.25%
Subordinated Convertible Notes (the "Notes") (approximately $132,000 per month),
noncash dividends on the Company's Series B, Series C, and Series D Convertible
Preferred Stock (approximately $97,000 per month), interest payments on its
Senior Revolver (up to approximately $58,000 per month) and Subordinated Loan
Agreement (approximately $38,000 per month).

              Since the Exclusive Marketing Agreement with Safety-Kleen became
effective, the Company has commenced shipping machines to Safety-Kleen and
Safety-Kleen has commenced paying the Company according to the terms of the
agreement. Assuming Safety-Kleen's continued performance, the Company currently
anticipates that for 2001 it will not require additional equity or debt
financing in excess of that available under the Senior Revolver, although there
can be no assurance. However, as described in notes 7 and 8 of notes to the
financial statements, if none of the outstanding convertible debt and
convertible preferred stock is converted to common stock, significant amounts of
cash would be required commencing in 2002 to repay long-term debt and the
redeemable preferred stock as follows:

                       DEBT       PREFERRED STOCK       TOTAL
                    -----------   ---------------     -----------

2002                $ 4,292,199      $        --      $ 4,292,199
2003                 27,191,022               --       27,191,022
2004                         --       20,326,215       20,326,215
                    -----------      -----------      -----------
    Total           $31,483,221      $20,326,215      $51,809,436
                    ===========      ===========      ===========

              The Company believes that it may need to obtain new debt or equity
capital to fund all or part of the required payments. There is no certainty that
the Company would be able to obtain the required funds on acceptable terms.

              The Company has suffered recurring losses from operations,
primarily resulting from the significant expenses incurred in the establishment
of its direct national marketing and distribution organization, and has a net
capital deficiency. As of December 31, 2000, the Company's accumulated deficit
totaled $57,255,636. The Company's independent auditors have included an
explanatory paragraph in their report on the Company's financial statements for
the year ended December 31, 2000 because of the Company's recurring losses from
operations; its accumulated capital deficit; and the uncertainties associated
with (a) the Exclusive Marketing Agreement, including the fact that Safety-Kleen
has not yet emerged from bankruptcy proceedings, and (b) the Company's ability
to raise additional capital that may be required to meet maturities of long-term
debt and redeemable preferred stock, commencing in 2002.

YEAR 2000

              The Company's computer operating systems, and those of its
vendors, customers and key suppliers are compliant with Year 2000 standards and
the Company did not experience any adverse effects on its business operations as
result of the Year 2000 issue.


                                       15
<PAGE>   16


NEW ACCOUNTING STANDARD

              In June, 1998 the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), as amended, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The Company will adopt SFAS No. 133, as
amended, during the three months ending March 31, 2001 and anticipates that
there will be no material impact to the Company's financial statements and notes
thereto.

ITEM 7. FINANCIAL STATEMENTS

              The Financial Statements of the Company required by Form 10-KSB
are attached hereto following Part III of this report commencing on page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

              None.



                                       16
<PAGE>   17




ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

              Incorporated by reference from the Company's definitive proxy
statement to be filed within 120 days after the end of the Registrant's fiscal
year.

ITEM 10. EXECUTIVE COMPENSATION

              Incorporated by reference from the Company's definitive proxy
statement to be filed within 120 days after the end of the Registrant's fiscal
year.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

              Incorporated by reference from the Company's definitive proxy
statement to be filed within 120 days after the end of the Registrant's fiscal
year.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

              Incorporated by reference from the Company's definitive proxy
statement to be filed within 120 days after the end of the Registrant's fiscal
year.





                                       17
<PAGE>   18


ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

        (A) Exhibits

            EXHIBIT  DESCRIPTION

             *3.1   Amended and Restated Articles of Incorporation of the
                    Company, as amended to date (incorporated by reference to
                    Exhibit 3.1 of the Company's Quarterly Report on Form 10-QSB
                    for the quarter ended June 30, 2000 (Commission File Number:
                    000-21325)).

             *3.2   Bylaws of the Company (incorporated  by reference to
                    Exhibit 3.2 of the Company's Registration Statement on Form
                    S-1, as amended (No. 333-08657)).

             *4.1   The rights of holders of shares of the Company's Common
                    Stock, par value $.001, Series B Preferred Stock, $1.00 par
                    value per share, Series C Preferred Stock, $1.00 par value
                    per share and Series D Preferred Stock, $1.00 par value per
                    share are set forth in the Company's Amended and Restated
                    Articles of Incorporation as referenced in Exhibits 3.1 and
                    3.2 hereto.

             *4.2   Certificate for Shares of Common Stock, $.001 par value per
                    share (incorporated by reference to Exhibit 4.1 of the
                    Company's Registration Statement on Form S-1, as amended
                    (No. 333-08657)).

             *4.3   Certificate for Shares of Series B Preferred Stock, $1.00
                    par value per share (incorporated by reference to Exhibit
                    4.2 of the Company's Current Report on Form 8-K filed with
                    the Commission on May 27, 1999 (Commission File Number:
                    000-21325)).

             *4.4   Certificate for Shares of Series C Preferred Stock, $1.00
                    par value per share (incorporated by reference to Exhibit
                    4.2 of the Company's Current Report on Form 8-K filed with
                    the Commission on August 31, 1999 (Commission File Number:
                    000-21325)).

             *4.5   Certificate for Shares of Series D Preferred Stock, $1.00
                    par value per share (incorporated by reference to Exhibit
                    4.2 of the Company's Current Report on Form 8-K filed with
                    the Commission on May 15, 2000 (Commission File Number:
                    000-21325)).

             *4.6   Representatives' Warrant Agreement between the Company and
                    the Underwriter (incorporated by reference to Exhibit 4.3 of
                    the Company's Registration Statement on Form S-1, as amended
                    (No. 333-08657)).

            **4.7   Form of Warrant dated November 10, 2000

             *4.8   Form of Warrant dated May 2, 2000 (incorporated by reference
                    to Exhibit 4.1 of the Company's Quarterly Report on Form
                    10-QSB for the quarter ended June 30, 2000 (Commission File
                    Number 000-21325)).



                                       18
<PAGE>   19

            EXHIBIT  DESCRIPTION

             *4.9   1998 Common Stock Purchase Rights Agreement,  dated as of
                    October 1, 1998, between the Company and Continental Stock
                    Transfer & Trust Company (incorporated by reference to
                    Exhibit 4.1 of the Company's Form 8-A12G filed with the
                    Commission on October 6, 1998 (Commission File Number:
                    000-21325)), as amended by (i) First Amendment to Rights
                    Agreement, dated as of May 2, 2000, by and between the
                    Company and Continental Stock Transfer and Trust Company.
                    (incorporated by reference to Exhibit 4.2 of the Company's
                    Quarterly Report on Form 10-QSB for the quarter ended June
                    30, 2000 (Commission File Number: 000-21325)), (ii) Second
                    Amendment to Rights Agreement, dated as of August 7, 2000,
                    by and between the Company and Continental Stock Transfer
                    and Trust Company. (incorporated by reference to Exhibit 4.3
                    of the Company's Quarterly Report on Form 10-QSB for the
                    quarter ended June 30, 2000 (Commission File Number:
                    000-21325)), and (iii) Third Amendment to Rights Agreement,
                    dated as of November 7, 2000, by and between the Company and
                    Continental Stock Transfer and Trust Company. (incorporated
                    by reference to Exhibit 4.1 of the Company's Form 8-A12G/A
                    filed with the Commission on December 28, 2000 (Commission
                    File Number: 000-21325)).

             *4.10  Subordinated Convertible Note Purchase Agreement, dated
                    February 23, 1998 between the Company and the Investors
                    party thereto (incorporated by reference to Exhibit 4.1 of
                    the Company's Current Report on Form 8-K filed with the
                    Commission on March 3, 1998 (Commission File Number:
                    000-21325)).

             *4.11  Form of 8 1/4% Subordinated Convertible Note dated February
                    23, 1998 (incorporated by reference to Exhibit 4.2 of the
                    Company's Current Report on Form 8-K filed with the
                    Commission on March 3, 1998 (Commission File Number:
                    000-21325)).

            **4.12  First Amendment to 8 1/4% Subordinated Convertible Notes,
                    dated July 31, 2000.

            *10.1   Shareholders Agreement, dated May 2, 2000 by and among the
                    Company and the other parties thereto (incorporated by
                    reference to Exhibit 10.1 of the Company's Current Report on
                    Form 8-K filed with the Commission on May 15, 2000
                    (Commission File Number: 000-21325)).

            *10.2   The Company's Executive Incentive Plan, as amended to date
                    (incorporated by reference to Annex A of the Company's
                    Definitive Schedule 14A, filed with the Commission on June
                    14, 2000 (Commission File Number: 000-21325)).

            *10.3   Form of Indemnification Agreement between the Company and
                    each of its directors and executive officers (incorporated
                    by reference to Exhibit 10.3 of the Company's Registration
                    Statement on Form S-1, as amended (No. 333-08657)).





                                       19
<PAGE>   20

            EXHIBIT  DESCRIPTION

            *10.4   Intertek Testing Services Listing, Labeling, and Follow-up
                    Service Agreement (incorporated by reference to Exhibit
                    10.32 of the Company's Quarterly Report on Form 10-QSB for
                    the quarter ended June 30, 1997 (Commission File Number
                    000-21325)).

            *10.5   Vendor Lease Plan Agreement between the Company and First
                    Sierra Financial, Inc. dated as of November 15, 1998
                    (incorporated by reference to Exhibit 10.39 of the Company's
                    Annual Report on Form 10-KSB for the year ended December 31,
                    1998 (Commission File Number 000-21325)).

            *10.6   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 (incorporated by reference to
                    Exhibit 10.1 of the Company's Quarterly Report on Form
                    10-QSB for the quarter ended June 30, 2000 (Commission File
                    Number: 000-21325)).

           **10.7   First Amendment to Loan Agreement, dated November 10, 2000,
                    by and among the Company, Environmental Opportunities Fund
                    II, L.P., Environmental Opportunities Fund II
                    (Institutional), L.P. and Hanseatic Americas LDC.

           **10.8   Second Amendment to Loan Agreement, dated November 30, 2000,
                    by and among the Company, Environmental Opportunities Fund
                    II, L.P., Environmental Opportunities Fund II
                    (Institutional), L.P. and Hanseatic Americas LDC.

            *10.9   Letter Agreement regarding 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 (incorporated by reference to Exhibit 10.3 of
                    the Company's Quarterly Report on Form 10-QSB for the
                    quarter ended June 30, 2000 (Commission File Number:
                    000-21325)).

          **10.10   Form of Subordinated Promissory Note dated November 30,
                    2000.

           *10.11   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 (incorporated by reference to
                    Exhibit 10.4 of the Company's Quarterly Report on Form
                    10-QSB for the quarter ended June 30, 2000 (Commission File
                    Number: 000-21325)).

          **10.12   First Amendment to Security Agreement, dated November 10,
                    2000, by and among the Company, Environmental Opportunities
                    Fund II, L.P., Environmental Opportunities Fund II
                    (Institutional), L.P. and Hanseatic Americas LDC.

          **10.13   Second Amendment to Security Agreement, dated November 30,
                    2000, by and among the Company, Environmental Opportunities
                    Fund II, L.P., Environmental Opportunities Fund II
                    (Institutional), L.P. and Hanseatic Americas LDC.



                                       20
<PAGE>   21
            EXHIBIT  DESCRIPTION

          **10.14   Employment Agreement between Pierre G. Mansur and the
                    Company dated July 1, 2000

          **10.15   Employment Agreement between Paul I. Mansur and the Company
                    dated July 1, 2000

          **10.16   Second Amended and Restated Marketing and Distribution
                    Agreement, dated as of March 8, 2001 by and between the
                    Company and Safety-Kleen Systems, Inc.

          **10.17   Revolving Credit Loan Agreement by and between the Company
                    and Hansa Finance Limited Liability Company, dated as of
                    November 30, 2000.

          **10.18   Revolving Credit Note, dated as of November 30, 2000.

          **10.19   Security Agreement by and between the Company and Hansa
                    Finance Limited Liability Company, dated as of November 30,
                    2000.

          **10.20   Master Lease Agreement, dated as of December 14, 1997
                    between the CIT Group/Equipment Financing, Inc. and the
                    Company.

          23.1      Consent of KPMG LLP

          *  Previously Filed

          **  Incorporated by reference to the exhibit of the same number to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2000
(Commission File Number: 000-21325)).

     (B) Reports of Form 8-K

         On December 28, 2000 the Company filed a Current Report on Form 8-K
disclosing that the Exclusive Marketing Agreement with Safety-Kleen became
fully effective.





                                       21
<PAGE>   22


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the Company has caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                          SYSTEMONE TECHNOLOGIES INC.


Dated: April 3, 2001                      By: /s/ PAUL I. MANSUR
                                              -----------------------------
                                              Chief Executive Officer
                                              (Principal Executive Officer)









                                       22
<PAGE>   23



                          INDEX TO FINANCIAL STATEMENTS

                                                       PAGE
                                                       ----

Independent Auditors' Report                            F-2

Balance Sheets as of December 31, 2000 and 1999         F-3

Statements of Operations for the years ended
    December 31, 2000 and 1999                          F-4

Statements of Stockholders' Deficit for the
    years ended December 31, 2000 and 1999              F-5

Statements of Cash Flows for the years ended
    December 31, 2000 and 1999                          F-6

Notes to Financial Statements                           F-7


                                      F-1
<PAGE>   24





                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
SystemOne Technologies Inc.

         We have audited the accompanying balance sheets of SystemOne
Technologies Inc., formerly known as Mansur Industries Inc. (the "Company"), as
of December 31, 2000 and 1999, and the related statements of operations,
stockholders' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
primarily resulting from the significant expenses incurred in the establishment
of its national direct marketing and distribution organization and has a net
capital deficiency. The Company may also need to raise additional capital that
may be required to pay maturing issues of long term debt and redeemable
convertible preferred stock. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans to address
these matters, relating principally to a recently executed marketing and
distribution agreement with Safety-Kleen Services, Inc. are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

/s/ KPMG LLP


Miami, Florida
March 2, 2001



                                      F-2
<PAGE>   25


                           SYSTEMONE TECHNOLOGIES INC.

                                 BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>

                                                                           2000               1999
                                                                      ------------       ------------

<S>                                                                   <C>                <C>
                               ASSETS
Current assets:
    Cash and cash equivalents                                         $    487,784       $    912,237
    Accounts receivable, net                                             1,567,666          2,748,383
    Inventory, net                                                       1,873,055          4,961,991
    Other assets                                                           124,463            584,461
                                                                      ------------       ------------
        Total current assets                                             4,052,968          9,207,072

Property and equipment, net                                              2,228,778          2,866,114
Other assets                                                               666,950            906,400
                                                                      ------------       ------------
        Total assets                                                  $  6,948,696       $ 12,979,586
                                                                      ============       ============

                LIABILITIES, REDEEMABLE CONVERTIBLE
             PREFERRED STOCK AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable and accrued expenses                             $  3,100,784       $  3,321,122
    Restructuring accrual                                                  300,936                 --
    Warranty accrual                                                     1,029,553            400,174
    Deferred revenue                                                       188,914            159,826
    Line of credit                                                              --            956,893
    Current installments of obligations under capital leases               280,946            319,224
                                                                      ------------       ------------
        Total current liabilities                                        4,901,133          5,157,239
                                                                      ------------       ------------

Long-term debt                                                          25,363,958         18,262,362
Other long-term liabilities                                                943,504                 --
                                                                      ------------       ------------
        Total liabilities                                               31,208,595         23,419,601
                                                                      ------------       ------------
Redeemable convertible preferred stock, at redemption value             15,542,400         12,403,200
    Less unamortized discount                                           (1,680,313)          (949,842)
                                                                      ------------       ------------
        Net redeemable convertible preferred stock                      13,862,087         11,453,358
                                                                      ------------       ------------

Stockholders' deficit:
    Preferred stock, $1.00 par value per share. Authorized
        1,500,000 shares, 155,424 issued and outstanding
        (124,032 in 1999), at redemption value                          15,542,400         12,403,200
         Less redeemable preferred stock                               (15,542,400)       (12,403,200)
    Common stock, $0.001 par value per share. Authorized
        25,000,000 shares, issued and outstanding 4,742,923                  4,743              4,743
    Additional paid-in capital                                          19,128,907         13,357,975
    Accumulated deficit                                                (57,255,636)       (35,256,091)
                                                                      ------------       ------------
             Total stockholders' deficit                               (38,121,986)       (21,893,373)
                                                                      ------------       ------------
             Total liabilities, redeemable convertible preferred
                  stock and stockholders' deficit                     $  6,948,696       $ 12,979,586
                                                                      ============       ============
</TABLE>


See accompanying notes to financial statements.



                                      F-3
<PAGE>   26


                           SYSTEMONE TECHNOLOGIES INC.

                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>

                                                                      2000               1999
                                                                   ------------       ------------
<S>                                                                <C>                <C>
Revenue                                                            $ 17,524,059       $ 18,833,325
Costs of goods sold                                                  (7,851,578)        (8,408,296)
                                                                   ------------       ------------
                   Gross profit                                       9,672,481         10,425,029
                                                                   ------------       ------------

Operating expenses:
     Selling, general and administrative                             20,682,467         23,956,902
     Research and development                                           459,628            427,666
     Restructuring and other charges                                  5,992,968                 --
                                                                   ------------       ------------
                   Total operating expenses                          27,135,063         24,384,568
                                                                   ------------       ------------
                   Loss from operations                             (17,462,582)       (13,959,539)

Interest expense                                                     (2,952,775)        (1,967,830)
Interest income                                                          37,878             89,378
                                                                   ------------       ------------
                   Net loss                                         (20,377,479)       (15,837,991)

Dividends and accretion of discount on redeemable convertible
    preferred stock                                                  (1,622,066)          (453,375)
                                                                   ------------       ------------
Net loss to common shares                                           (21,999,545)      $(16,291,366)
                                                                   ============       ============
Basic loss per common share                                        $      (4.64)      $      (3.54)
                                                                   ============       ============
Weighted average shares outstanding                                   4,742,923          4,605,708
                                                                   ============       ============
</TABLE>


See accompanying notes to financial statements.



                                      F-4
<PAGE>   27


                           SYSTEMONE TECHNOLOGIES INC.

                      STATEMENTS OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


<TABLE>
<CAPTION>

                                                     COMMON STOCK            ADDITIONAL                          TOTAL
                                                 ------------------------      PAID-IN       ACCUMULATED       STOCKHOLDERS'
                                                  SHARES           PAR          CAPITAL         DEFICIT          DEFICIT
                                                 ---------    ------------    ------------    ------------     ------------
<S>                                              <C>          <C>             <C>             <C>              <C>
Balance,  December 31, 1998                      4,601,309    $      4,601    $ 11,115,858    $(18,964,725)    $ (7,844,266)

Shares issued for advisory fees                      6,060               6          43,171                           43,177

Conversion of notes into common stock              135,554             136       2,198,946                        2,199,082

Net loss                                                                                       (15,837,991)     (15,837,991)

Payment of in-kind dividends on preferred
   stock                                                                                          (453,375)        (453,375)
                                                 ---------    ------------    ------------    ------------     ------------
Balance,  December 31, 1999                      4,742,923           4,743      13,357,975     (35,256,091)     (21,893,373)
Warrants issued                                                                  5,770,932                        5,770,932

Net loss                                                                                       (20,377,479)     (20,377,479)

Payment of in-kind dividends and accretion
   of discount on preferred stock                                                               (1,622,066)      (1,622,066)
                                                 ---------    ------------    ------------    ------------     ------------
Balance,  December 31, 2000                      4,742,923    $      4,743    $ 19,128,907    $(57,255,636)    $(38,121,986)
                                                 =========    ============    ============    ============     ============
</TABLE>


See accompanying notes to financial statements.


                                      F-5
<PAGE>   28


                           SYSTEMONE TECHNOLOGIES INC.

                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>

                                                                              2000             1999
                                                                         ------------     ------------
<S>                                                                      <C>              <C>
Cash flows from operating activities:
     Net loss                                                            $(20,377,479)    $(15,837,991)
     Adjustments to reconcile net loss to net cash used
      in operating activities
      Depreciation                                                            811,952          699,027
      Amortization                                                            947,546               --
      Payment-in-kind of interest on convertible debt                       1,708,484        1,595,687
      Restructuring and other charges                                       2,373,082               --
      Other                                                                   404,547           74,000
      Changes in operating assets and liabilities:
         Accounts receivable                                                1,026,590         (567,329)
         Inventories                                                        2,673,124         (884,843)
         Other assets                                                         449,997            2,552
         Accounts payable and accrued expenses                              1,352,545        1,331,632
         Deferred revenue                                                      29,088          (13,962)
                                                                         ------------     ------------
         Net cash used in operating activities                             (8,600,524)     (13,601,227)
                                                                         ------------     ------------
Cash flows used in investing activities:
   Purchase of equipment                                                       (9,224)        (383,134)
                                                                         ------------     ------------
Cash flows from financing activities:
   Proceeds from issuance of long-term debt                                 4,986,858               --
   Proceeds from issuance of common stock warrants                          3,698,786               --
   Proceeds from line of credit                                             1,209,284          956,893
   Proceeds from issuance of preferred stock                                  786,663       10,999,983
   Repayment of line of credit                                             (2,166,177)              --
   Repayments of capital lease obligations                                   (330,119)        (259,333)
                                                                         ------------     ------------
                  Net cash provided by financing activities                 8,185,295       11,697,543
                                                                         ------------     ------------
                  Net decrease in cash and equivalents                       (424,453)      (2,286,818)
Cash and equivalents at beginning of year                                     912,237        3,199,055
                                                                         ------------     ------------
Cash and equivalents at end of year                                      $    487,784     $    912,237
                                                                         ============     ============
Supplemental disclosures:
   Interest paid                                                         $    294,774     $     98,871
   Taxes paid                                                            $         --     $         --
   Noncash financing and investing activities:
         Value of common stock purchase warrants issued in connection
           with the Safety-Kleen agreement                               $  2,072,146     $         --

         New capital lease obligations                                   $         --     $      8,875
         Payment of in-kind interest on convertible debt                 $  1,708,484     $  1,595,687
         Payment of in-kind dividends on redeemable preferred stock      $  1,622,066     $    453,375
</TABLE>

See accompanying notes to financial statements.



                                      F-6
<PAGE>   29


                           SYSTEMONE TECHNOLOGIES INC.

                          NOTES TO FINANCIAL STATEMENTS

(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) THE COMPANY

During 2000, the Company changed its name from Mansur Industries Inc. to
SystemOne Technologies Inc.

The Company designs, manufactures and sells a full line of patented,
self-contained, recycling industrial parts washers for use in the automotive,
aviation, marine and general industrial repair markets. The Company has been
awarded ten patents for its products, which incorporate innovative, proprietary
resource recovery and waste minimization technologies to distill contaminated
solvent and yield pure solvent and a by-product comparable to used motor oil.
The Company was incorporated in November 1990, commenced the sale of SystemOne
washers in July 1996 and sold approximately 20,000 total SystemOne units through
December 31, 2000.

On November 14, 2000, the Company entered into an exclusive Marketing and
Distribution Agreement, as amended (the "Exclusive Marketing Agreement") with
industry leader Safety-Kleen Systems, Inc., a wholly-owned subsidiary of
Safety-Kleen Corp. (collectively, "Safety-Kleen") representing a major strategic
shift in direction and focus for the Company. The Company anticipates that this
relationship will greatly enhance its financial and operating performance and
substantially accelerate market penetration. By joining with Safety-Kleen, the
Company has united its proprietary breakthrough technologies with the industry
market leader for the past thirty years, providing both companies with
unparalleled competitive advantages.

Under the Exclusive Marketing Agreement, Safety-Kleen has been appointed the
exclusive distributor of SystemOne parts washer equipment in the United States,
Canada, Mexico and Puerto Rico (the "Territory"). Safety-Kleen commenced
marketing the Company's products throughout Safety-Kleen's 173 branch locations
across North America during early 2001. The Company has retained the right to
distribute its equipment outside of these markets as well as the right, subject
to a right of first offer for Safety-Kleen, to market newly developed industrial
and commercial parts washers through other distribution channels.

As a result of the Exclusive Marketing Agreement, the Company committed to a
plan in November 2000 to restructure its operations. The plan consisted of the
following strategy: Suspend sales activities on November 30, 2000; terminate all
field sales and service personnel; terminate office personnel as appropriate in
areas including sales and service support, marketing, and product leasing; close
all service centers and terminate leases; terminate leases for the service
fleet; return all equipment inventory to the Miami warehouse and classify as
new, demo, requiring re-manufacturing or to be scrapped; re-manufacture all used
or demo inventory to a "New Condition" standard; and sell all new,
re-manufactured and rental equipment inventories to Safety-Kleen. See note 10
for a summary of restructuring and other charges relating to restructuring of
the Company's operations.

(b) BASIS OF PRESENTATION

The balance sheet for December 31, 1999 has been restated to classify
convertible preferred stock with mandatory redemption provisions outside of
stockholders' equity. Certain other amounts in the 1999 financial statements
have been reclassified to conform with the 2000 presentation.

(c) CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, demand deposits, and short-term
investments with original maturities of three months or less.

(d) INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method.



                                      F-7
<PAGE>   30


(e) PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost. Equipment under capital leases is
stated at the present value of minimum lease payments.

Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets. Equipment held under capital leases and leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful life of the asset.

(f) OTHER ASSETS

Debt issue costs associated with the Company's 8.25% Subordinated Convertible
Notes due 2003 are being amortized using the effective interest method over the
term of the notes. Amortization expense, included in interest expense, for the
year ended December 31, 2000 and 1999 was $245,284 and $273,272, respectively.
The balance of unamortized debt issue costs at December 31, 2000 was $546,116.

(g) WARRANTY ACCRUAL

The Company warrants that its products will be free of material defects during
the warranty period and, if properly used in accordance with the operator
manual, will not generate hazardous waste under current interpretations of
applicable federal and state regulations. For sales prior to May 1999, the
standard warranty period on all products of the Company was five years.
Commencing in May, 1999, the standard warranty was reduced to three years and,
for an additional fee, customers could purchase an extended two-year warranty
contract. The Company accrues estimated standard warranty costs at the time
parts washers are sold to customers. Revenue received for extended warranty
contracts is deferred and amortized over the extended warranty period. See note
(h) below.

As part of the Exclusive Marketing Agreement, Safety-Kleen assumed all service,
maintenance and repair responsibilities for the Company's installed base of
SystemOne parts washers. The Company is obligated to pay Safety-Kleen for each
service issue associated with warranty matters. As a result of eliminating its
service infrastructure and the need to maintain a call center for warranty
calls, the Company accrued additional warranty costs of $1,570,508.

(h) DEFERRED REVENUE

Deferred revenue relates to (a) extended two-year warranty contracts purchased
by customers, and (b) amounts received in advance from customers who have
enrolled in the Company's "Total Care Program", an agreement to provide solvent
replenishment and maintenance services for a one-year term. Deferred revenue is
recognized in income on the straight-line basis over the terms of each contract.

(i) FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of the Company's long term debt and redeemable convertible
preferred stock has been estimated by discounting the future cash flows at rates
currently offered to the Company for similar securities of comparable
maturities. The fair values of all other financial instruments approximate their
carrying amounts.

(j) REDEEMABLE CONVERTIBLE PREFERRED STOCK

The shares of each series of redeemable convertible preferred stock were issued
at discounts from their mandatory redemption values. The carrying amounts of the
preferred stocks are being accreted to their mandatory Liquidation Values using
the straight-line method, from the date of issuance of each series to the date
of mandatory redemption.

(k) REVENUE RECOGNITION

The Company recognizes revenue at the time equipment is delivered to and
accepted by its customers.



                                      F-8
<PAGE>   31

(l) RESEARCH AND DEVELOPMENT

Research and development expenses incurred in connection with engineering
activities related to the development of industrial parts cleaning machinery are
expensed as incurred.

(m) INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
For the years ended December 31, 2000 and 1999, a valuation allowance has been
recorded to reduce the net deferred tax assets to the estimated recoverable
amounts.

(n) BASIC AND DILUTED NET LOSS PER SHARE

For the years ended December 31, 2000 and 1999, basic and diluted net loss per
share is computed based on a weighted-average number of common shares
outstanding of 4,742,923 and 4,605,708, respectively. Diluted loss per share has
not been presented separately, because the effect of the additional shares
issuable for convertible debt, convertible preferred stock and the outstanding
common stock options and warrants are anti-dilutive for each year. Common shares
issuable in connection with convertible debt, convertible preferred stock and
common stock options and warrants total 8,080,667 and 2,788,652 shares,
respectively, at December 31, 2000 and 1999.

(o) USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

(2) LIQUIDITY

As indicated in the accompanying financial statements, the Company's accumulated
deficit totaled $57,255,636 and $35,256,091 at December 31, 2000 and 1999,
respectively. Through November of 2000, such deficits have primarily resulted
from expenses incurred to establish a national direct marketing, distribution
and support organization. As described in note 1(a) above, in November 2000, the
Company entered into the Exclusive Marketing Agreement with Safety-Kleen. The
Company has incurred significant costs and expenses related to the Exclusive
Marketing Agreement and in connection with restructuring its operations. See
note 10 for additional information.

Safety-Kleen is currently operating under Chapter 11 of the US Bankruptcy code.
The Exclusive Marketing Agreement, which has been approved by the Bankruptcy
Court, (a) makes Safety-Kleen the exclusive marketer, distributor and service
provider for certain models of the Company's parts washing equipment within the
Territory, and (b) obligates Safety-Kleen to purchase minimum quantities of the
Company's parts washing equipment for each contract year within the Exclusive
Marketing Agreement. The initial term of the Exclusive Marketing Agreement is
five years and the Exclusive Marketing Agreement may be automatically extended
for two additional five-year terms. However, with 180 days prior notice,
Safety-Kleen may terminate the Exclusive Marketing Agreement after the second
contract year. Also, the automatic extensions are dependent upon the parties
reaching an agreement in writing as to Safety-Kleen's minimum purchase
commitments for each contract year during any renewal term. Outside the
Territory, the Company retains the rights to sell, lease, rent and service all
of its parts washing equipment directly, or through other distributors or
agents.

The minimum annual sales escalate from 10,000 equivalent units during each of
the first two contract years to 18,000 equivalent units during the fifth



                                      F-9
<PAGE>   32

contract year at specified prices, including deferred payments on each unit sold
payable in 36 equal monthly installments. At prices currently in effect, the
minimum revenue from the Exclusive Marketing Agreement is estimated to be
$17,000,000 for 2001. Also, Safety-Kleen has taken over all service, maintenance
and warranty responsibilities for the installed base of SystemOne(R) Parts
Washers, allowing the Company to dismantle its entire national sales and service
infrastructure. As a result of the Exclusive Marketing Agreement, management
estimates annual selling, general and administrative cost savings in 2001 of
approximately $20 million compared to 1999 and $17 million compared to 2000.

Primarily as a result of the Exclusive Marketing Agreement, management estimates
that no additional financing will be required in 2001 and that cash provided by
operating activities will be positive. However, as described in notes 7 and 8,
if the convertible debt and redeemable convertible preferred stock are not
converted to common stock, significant amounts of cash would be required
commencing in 2002 as follows:

                       DEBT              PREFERRED STOCK             TOTAL
                    -----------          ----------------         -----------

2002                $ 4,292,199            $        --            $ 4,292,199
2003                 27,191,022                     --             27,191,022
2004                         --             20,326,215             20,326,215
                    -----------            -----------            -----------
    Total           $31,483,221            $20,326,215            $51,809,436
                    ===========            ===========            ===========

The Company may need to obtain new debt or equity capital to fund all or part of
the required cash payments. There is no certainty that the Company would be able
to obtain the required funds on acceptable terms.

(3) ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consist of the following at December 31, 2000 and 1999:

                                                      2000             1999
                                                   ----------       ----------

         Trade receivables                         $1,836,636       $2,863,225
         Less: allowance for doubtful accounts        268,970          114,842
                                                   ----------       ----------
                                                   $1,567,666       $2,748,383
                                                   ==========       ==========

(4) INVENTORY, NET


Inventories consist of the following at December 31, 2000 and 1999:

                                                       2000         1999
                                                    ----------   ----------
         Raw materials                              $1,326,588   $1,667,674
         Work in process and finished goods            733,160    3,346,422
                                                    ----------   ----------
                                                     2,059,748    5,014,096

         Less: allowance for obsolete inventories      186,693       52,105
                                                    ----------   ----------
                                                    $1,873,055   $4,961,991
                                                    ==========   ==========



                                      F-10
<PAGE>   33

(5) PROPERTY AND EQUIPMENT, NET

Property and equipment, net as of December 31, 2000 and 1999 consist of the
following:
<TABLE>
<CAPTION>

                                                                                                     USEFUL
                                                                   2000                1999           LIVES
                                                                   ----                ----           -----
<S>                                                            <C>                 <C>               <C>
                 Furniture and equipment                       $    607,083        $    672,657      5 years
                 Machinery and equipment                          2,768,038           2,775,989      5 years
                 Leasehold improvements                             294,825             294,825      5 years
                                                               ------------        ------------
                                                                  3,669,946           3,743,471
                 Less accumulated depreciation and
                      amortization                                1,441,168             877,357
                                                               ------------        ------------
                                                               $  2,228,778        $  2,866,114
                                                               ============        ============
</TABLE>


(6) LEASE AGREEMENTS

The Company has a lease obligation for its corporate headquarters that expires
on September 30, 2002. This lease provides for a renewal term of five years
exercisable at the Company's option upon six months prior written notice. The
Company's annual lease payments under this lease are approximately $580,000
subject to an annual increase of 4.5 percent, which does not include utilities
and the Company's proportionate share of the facilities maintenance and
operating expenses.

The Company has closed all 56 service centers that supported its previous direct
marketing and distribution efforts.

The Company also leased approximately 57 service fleet vehicles under various
operating leases expiring in twelve to twenty-four months. These leases are in
the process of being assigned to or subleased by Safety-Kleen.

Total rent expense was $2,500,851 and $2,295,890 for the years ended December
31, 2000 and 1999, respectively.

The Company is obligated under capital leases for certain machinery and
equipment that expire at various dates during the next five years. At December
31, 2000 and 1999, the gross amount of property and equipment and related
accumulated amortization recorded under capital leases were as follows:

                                              2000         1999
                                          ----------   ----------

         Machinery and equipment          $1,298,853   $1,582,629
         Less  accumulated amortization      292,309      258,683
                                          ----------   ----------
                                          $1,006,544   $1,323,946
                                          ==========   ==========


Amortization of assets held under capital leases is included with depreciation
expense.



                                      F-11
<PAGE>   34

Future minimum lease payments under noncancelable operating leases (with initial
or remaining lease terms in excess of one year) and future minimum capital lease
payments as of December 31, 2000 are as follows:
<TABLE>
<CAPTION>

                                                                                  CAPITAL           OPERATING
                 YEAR ENDING DECEMBER 31,                                         LEASES             LEASES
                 ------------------------                                         ------             ------
<S>                                                                               <C>                 <C>
                 2001                                                             $318,043            $928,515
                 2002                                                              314,699             533,525
                 2003                                                              154,916
                                                                                 ---------          ----------
                 Total minimum lease payments                                      787,658          $1,462,040
                                                                                                    ==========

                 Less amount representing interest (at rates ranging
                 from 6.35% to 8.25%)                                               77,014
                                                                                 ---------
                 Present value of net minimum capital lease payments               710,644

                 Less current installments of obligations under capital
                 leases                                                            280,946
                                                                                 ---------
                 Obligations under capital leases,
                 excluding current installments                                   $429,698
                                                                                 =========
</TABLE>


(7) LONG TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                 2000          1999
                                                             -----------   -----------
<S>                                                          <C>           <C>
         Subordinated  Convertible Notes, with interest at
            8.25%, due February 23, 2003                     $19,070,969   $17,540,823
         Revolving  credit loan, with interest at 14%, due
            May 30, 2003                                       4,200,000            --
         Subordinated promissory notes payable, with
            interest  at  rates  ranging  from 12% to 16%,
            due February 7, 2002                               3,300,000            --
         Capital leases (note 6)                                 429,698       721,539
         Accrued interest                                        178,338            --
                                                             -----------   -----------
                                                              27,179,005    18,262,362
         Less unamortized note discount                        1,815,047            --
                                                             -----------   -----------
                                                             $25,363,958   $18,262,362
                                                             ===========   ===========
</TABLE>

The Subordinated Convertible Notes are unsecured and are subordinate and junior
to all indebtedness of the Company. Pursuant to these notes, the Company is not
permitted to incur, create, assume or guarantee, or otherwise become liable in
any manner with respect to any indebtedness (the "Incurrence") unless, after
giving pro forma effect to the Incurrence, the ratio of total debt, as defined,
to income before (i) interest, (ii) income taxes, and (iii) depreciation and
amortization, is less than 6.0:1.0; provided, however, the Company may incur up
to $10 million of total debt, excluding the notes, at any time.

Through February 2000, interest is payable semi-annually on the Company's
Subordinated Convertible Notes through the issuance of additional such notes and
thereafter, at the election of the Company, is payable either in cash or through
the issuance of additional such notes. The Subordinated Convertible Notes are
convertible by the holders thereof into shares of the Company's common stock at
a conversion price equal to $17.00 per share.




                                      F-12
<PAGE>   35

The Subordinated Convertible Notes may be redeemed by the Company at a
redemption price of 104% of the principal amount plus any accrued but unpaid
interest commencing February 24, 2001. After February 23, 2002 the redemption
price is 102% of the principal amount plus any accrued but unpaid interest.

The Revolving Credit Loan Agreement (the "Senior Revolver") provides the Company
with a $5 million 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 properties. Pursuant to
the Senior Revolver, the Company may borrow twice a month up to the Advance
Limit. The Advance Limit is the lesser of $5,000,000 or the sum of the Advance
Supplement plus an amount based on the Company's accounts receivable and
inventory. The Advanced Supplement was $3,000,000 through March 31, 2001 and
$2,500,000 for the period April 1, 2001 until maturity.

Interest on the Subordinated Promissory Notes increased from 12% to 14% on
February 7, 2001 and then increases to 16% on May 7, 2001. Interest is due and
payable on maturity of the Subordinated Promissory Notes, which is February 7,
2002. In connection with the Subordinated Promissory Notes, the Company granted
the lenders a security interest in substantially all of the Company's assets
other than its intellectual property. The security interest is subordinated to
the Senior Revolver.

The Company issued warrants to the lenders under the Subordinated Promissory
Notes expiring in August 2005, to purchase an aggregate of up to 942,858 shares
of the Company's common stock at an exercise price of $3.50 per share. The
warrants may be exercised for 50% and 75% of the common stock underlying the
warrants prior to May 7, 2001 and August 7, 2001, respectively. If the
Subordinated Promissory Notes are paid prior to May 7, 2001, 50% of the warrants
will terminate. If the Subordinated Promissory Notes are paid after May 7, 2001
and prior to August 7, 2001, 25% of the warrants will terminate. The fair value
of the warrants, based on the Black-Scholes option pricing model, of $2,513,442
was charged to unamortized note discount and credited to additional paid-in
capital. The discount is being amortized to interest expense over the term of
the Subordinated Promissory Notes.

The Senior Revolver and the Subordinated Promissory Notes may be prepaid without
penalty. Any cash proceeds from any new financing or the issuance of stock must
be used for the payment of interest and principal on the Senior Revolver and the
Subordinated Promissory Notes.

Long-term debt matures as follows:

                 2001                      $        --
                 2002                        3,623,601
                 2003                       23,555,404
                                           -----------
                                           $27,179,005
                                           ===========


Assuming the Company (a) continues to pay in-kind interest on the Subordinated
Convertible Notes, and (b) pays interest currently on the Senior Revolver, the
aggregate amounts payable on the scheduled maturities would be as follows:

                 2002                      $ 4,292,199
                 2003                       27,191,022
                                           -----------
                                           $31,483,221
                                           ===========

The carrying amount of debt, excluding capital leases, was approximately $24.9
million and $17.5 million at December 31, 2000 and 1999, respectively.
Management estimates the fair value of the debt to be $15.9 million and $15.5
million at December 31, 2000 and 1999, respectively.



                                      F-13
<PAGE>   36

(8) REDEEMABLE CONVERTIBLE PREFERRED STOCK

Shares of redeemable convertible preferred stock (the "Preferred Stock"), stated
at redemption values of $100 per share net of unamortized discount, are
outstanding as follows:
<TABLE>
<CAPTION>

                                                                     2000            1999
                                                                 ------------    ------------
<S>                                                                <C>               <C>
         8.25% Series B. Authorized 150,000 shares, issued and
            outstanding 57,590 shares (53,085 in 1999)           $  5,759,000    $  5,308,500
         8.00% Series C. Authorized 150,000 shares, issued and
            outstanding 76,735 shares (70,947 in 1999)              7,673,500       7,094,700
         8.25% Series D. Authorized 150,000 shares, issued and
            outstanding 21,099 shares                               2,109,900             --
                                                                 ------------    ------------
                                                                   15,542,400      12,403,200
         Less unamortized discount                                 (1,680,313)       (949,842)
                                                                 ------------    ------------
                                                                 $ 13,862,087    $ 11,453,358
                                                                 ============    ============
</TABLE>

Each series of the Preferred Stock has a Liquidation Value of $100 per share.
The dividend rate payable on all outstanding shares is applied to the
Liquidation Value of each share per annum. Through the second anniversary of the
issuance of each series of the Preferred Stock, all dividends are payable by the
issuance of additional shares of the applicable Preferred Stock valued at the
Liquidation Value. Thereafter, all dividends may, at the option of the Company,
be paid either through the issuance of additional shares of the applicable
Preferred Stock, cash or any combination of such Preferred Stock or cash.

At any time prior to May 7, 2004 (the "Mandatory Redemption Date"), each holder
of Preferred Stock may convert all or part of their shares of Preferred Stock
into shares of the Company's common stock at the following conversion prices (in
each case subject to adjustment in certain circumstances):

         $4.68 per share for the Series B Preferred Stock
         $3.50 per share for the Series C Preferred Stock
         $3.50 per share for the Series D Preferred Stock

Commencing on May 17, 2002, the Company shall have the right to redeem any
outstanding shares of each series of Preferred Stock at a redemption price of
104% of the Liquidation Value of the redeemed shares, if redemption occurs
during 2002 or 102%, if redemption occurs during 2003. The holders of the
Preferred Stock are entitled to vote together with the holders of the Company's
Common Stock as a single class on all matters to come before a vote of the
shareholders of the Company. Each share of Preferred Stock is entitled to the
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 each series of Preferred Stock for resale under the Securities
Act of 1933, as amended.

On the Mandatory Redemption Date, the Company is required to redeem each series
of Preferred Stock outstanding at a redemption price per share equal to the
Liquidation Value plus accrued and unpaid dividends. Assuming the Company
continues to issue dividends on each series of Preferred Stock by issuing
additional shares of Preferred Stock, the aggregate amount redeemable on May 17,
2004 would be $20,326,215. If on the Mandatory Redemption Date, funds legally
available are insufficient to redeem all shares, any available funds will be
used to redeem shares of Preferred Stock on a proportionate basis. If all
outstanding shares of Preferred Stock are not redeemed, the then current
conversion price with respect to any shares not redeemed will be reduced (but
not increased) to the greater of (a) 50% of the then current conversion price,
and (b) the closing price of the Company's common stock as reported by Nasdaq on
the Mandatory Redemption Date.


                                      F-14
<PAGE>   37


The purchasers of the Series D Preferred Stock received warrants which expire in
April 2005, to acquire an aggregate of 571,428 shares of the Company's common
stock at an exercise price of $3.50 per share. The fair value of the warrants,
based on the Black-Scholes option pricing model, of $1,185,644 was charged to
unamortized discount and credited to additional paid-in capital. The discount is
being accreted to dividends on the Preferred Stock over the period through to
the Mandatory Redemption Date.

The carrying amount of the Preferred Stock was approximately $13.9 million and
$11.5 million at December 31, 2000 and 1999, respectively. Management estimates
the fair value of the Company's Preferred Stock to be $9.9 million and $11.5
million at December 31, 2000 and 1999, respectively.

(9) STOCKHOLDERS' DEFICIT

In connection with the initial public offering in October 1996, the Company
agreed to sell to the underwriters, for nominal consideration, warrants to
purchase from the Company 100,000 shares of common stock at a price of $9.00 per
share. The warrants are initially exercisable for a period of four years ending
September 27, 2001.

In connection with the Safety-Kleen Agreement, the Company issued to
Safety-Kleen a five-year warrant to purchase up to 1,134,615 shares of the
Company's common stock at $3.50 per share. The fair value of the warrant, based
on the Black-Scholes option pricing model, of $2,072,146 was charged to expense
and credited to additional paid-in-capital.

At December 31, 2000, an aggregate of 7,688,743 shares of common stock could
potentially be issued pursuant to provisions of warrants and conversion
privileges at amounts per share ranging from $3.50 to $17.00. At December 31,
1999, an aggregate of 2,420,240 shares of common stock could potentially be
issued pursuant to provisions of warrants and conversion privileges at amounts
per share ranging from $8.25 to $17.00.

In December 1999, a holder of an aggregate $2,000,000 in principal amount of the
Company's outstanding 8.25% Subordinated Convertible Notes due 2003, converted
such notes into the Company's Common Stock, par value $.001 per share, in
accordance with the terms thereof. Including accrued and unpaid interest, a
total of $2,304,418 was converted into the Company's Common Stock, at a
conversion price of $17.00 per share, resulting in an aggregate of 135,554
shares of Common Stock being issued, and unamortized debt issue costs totaling
$105,336 were charged to Additional Paid-In Capital.

At December 31, 2000 the Company had 4,742,923 Common Stock purchase rights (the
"Rights") outstanding which expire on September 30, 2008. The Rights contain
provisions to protect shareholders in the event of an unsolicited attempt to
acquire the Company that is not believed by the board of directors to be in the
best interest of shareholders. The Rights are evidenced by the certificates for
common stock, are subject to anti-dilution provisions and are not exercisable,
transferable or exchangeable apart from the Common Stock until 10 days after an
Acquiring Person, as defined, acquires beneficial ownership of 15% or more, or,
in the case of an Adverse Person, as defined, 10% or more of the Company's
Common Stock. The Rights entitle the holder, except such an Acquiring Person or
Adverse Person to buy that number of shares of Common Stock of the Company which
at the time of such acquisition would have a market value of two times the
exercise price of the Right. The Rights have no voting rights and are
redeemable, at the option of the Company, at a price of $0.001 per Right prior
to the acquisition by an Acquiring Person of 15% or more of the Company's Common
Stock.

The holders of the Company's Preferred Stock, at the time of any such
unsolicited acquisition, are entitled to buy that number of shares of common
stock of the Company that would have a market value of two times the exercise
price of the Rights that Preferred Stock holders would have received if the
Preferred Stock had been converted to common stock immediately prior to such
consolidation, merger, sale or transfer.

STOCK-BASED COMPENSATION

The Company has an executive incentive compensation plan (the "Plan") pursuant
to which the Company's board of directors may grant stock options to officers
and key employees. Pursuant to an amendment approved by the Company's
shareholders during 2000, stock options to purchase up to 750,000 shares of



                                      F-15
<PAGE>   38

common stock may be granted under the Plan. Stock options are granted with an
exercise price equal to the stock's fair market value at the date of grant. All
stock options have seven-year terms and vest and become exercisable over a three
year period from the date of grant.

At December 31, 2000 and 1999, there were 358,076 and 106,588 additional shares,
respectively, available for grant under the Plan. Per share weighted-average
fair value on the date of grant of stock options granted during 2000 and 1999
was $4.02 and $7.78, respectively, using the Black-Scholes option-pricing model
with the following weighted-average assumptions: 2000-expected dividend yield of
zero percent, risk-free interest rate of 5.46 percent, expected life of seven
years and a volatility rate of 161.1 percent; 1999-expected dividend yield of
zero percent, risk-free interest rate of 6.48 percent, expected life of seven
years and a volatility rate of 118.19 percent.

The Company accounts for stock options issued using the intrinsic value method
and, accordingly, no compensation cost has been recognized for stock options
granted. If the Company determined compensation cost based on the fair value of
the options at the grant date, the Company's net loss to common shares and basic
and diluted net loss per common share would have reflected the pro forma amounts
shown below:

                                                      2000             1999
      Net loss to common shares    As reported   $(21,999,545)    $(16,291,366)
                                   Pro forma      (21,173,244)     (16,929,591)


      Basic loss per common share  As reported   $      (4.64)    $      (3.54)
                                   Pro forma            (4.68)           (3.68)

Stock-option activity during the periods indicated is as follows:

                                                                   WEIGHTED
                                                                   AVERAGE
                                             NUMBER OF SHARES   EXERCISE PRICE
                                             ----------------   --------------

         Balance at December 31, 1998             196,222             $15.32
              Granted                             216,677               8.81
              Exercised                                --                 --
              Forfeited                           (44,487)              9.34
              Expired                                  --                 --
                                                  -------             ------
         Balance at December 31, 1999             368,412               8.29
              Granted                             394,701               6.11
              Exercised                                --                 --
              Forfeited                          (371,189)              7.99
              Expired                                  --                 --
                                                  -------             ------
         Balance at December 31, 2000             391,924             $10.01
                                                  =======             ======


At December 31, 2000, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $3.50 -- $19.50 and 3.82
years, respectively. At December 31, 1999, the range of exercise prices and
weighted-average remaining contractual life of outstanding options was $7.50 -
$19.50 and 5.35 years, respectively.

At December 31, 2000 and 1999, the number of options exercisable was 155,563 and
105,300, respectively, and the weighted-average exercise prices of those options
were $14.29 and $14.21, respectively.



                                      F-16
<PAGE>   39

(10) RESTRUCTURING AND OTHER CHARGES

As described in note 1(a), the Company initiated a significant restructuring
program in connection with the Exclusive Marketing Agreement. A summary of
restructuring and other non-recurring charges is as follows:

                                                                       2000
                                                                    ----------

         Common stock purchase warrant issued to Safety-Kleen      $2,072,146
         Additional warranty costs for outsourcing services to
            Safety-Kleen                                             1,570,508

         Inventory write-downs                                         661,467
         Employee severance and facility closing                     1,020,635
         Idle capacity and other                                       668,212
                                                                    ----------
                                                                    $5,992,968
                                                                    ==========

The remaining accrual for restructuring charges as of December 31, 2000 is
$300,936, relating to employee severance, stock options and facility closure
costs.

(11) INCOME TAXES

There is no current or deferred tax expense for the years ended December 31,
2000 and 1999.

The actual income tax expense differs from the expected income tax effect
(computed by applying the U.S. federal corporate tax rate of 34 percent to loss
before income taxes) for the years ended December 31, 2000 and 1999 as follows:

                                                      2000              1999
                                                  -----------       -----------
   Computed "expected" income tax benefit         $(6,928,343)      $(5,384,917)
   State income tax benefit, net of U.S. federal
      income tax benefit                           (1,187,324)         (460,702)
   Change in deferred taxes due to difference
      in rates                                       (139,606)          (14,540)
   Change in valuation allowance                    8,529,191         5,771,008
   Other                                             (273,918)           89,151
                                                  -----------       -----------
   Income tax expense                             $        --       $        --
                                                  ===========       ===========


                                      F-17
<PAGE>   40

Temporary differences between financial statement carrying amounts and tax basis
of assets and liabilities that give rise to significant portions of the deferred
tax assets and liabilities as of December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>

                                                               2000             1999
                                                           -----------      -----------
<S>                                                        <C>              <C>
         Deferred tax assets:
              Net operating loss                           $20,805,493      $11,944,971
              Deferred revenue                                  74,443           62,984
              Warranty                                         402,108          157,700
              Start-up costs                                    21,492          107,464
              Research and development                         487,214          534,919
              Severance and restructuring reserve               34,547
              Inventory reserve                                 88,477           20,533
              Inventory                                        288,398          613,771
              Bad debt reserve                                 105,989           42,354
              Accrued expenses                                 184,697           95,328
              Patent                                           391,155          375,936
                                                           -----------      -----------
         Total gross deferred tax assets                    22,884,013       13,955,960
                                                           ===========      ===========

              Less valuation allowance                      22,390,505       13,861,314
                                                           -----------      -----------
              Net deferred tax asset                           493,508           94,646
                                                           -----------      -----------
         Deferred tax liabilities:
              Debt issue cost                                  114,677            5,193
              Depreciation                                     246,572           57,018
              Original issue discount                          132,259           32,435

                 Total gross deferred tax liabilities          493,508           94,646
                                                           -----------      -----------
              Deferred tax assets, net                     $        --      $        --
                                                           ===========      ===========
</TABLE>

At December 31, 2000, the Company had net operating loss carryforwards of
$53,152,162 which expire beginning in the year 2012 through 2020.

In addition, if certain substantial changes in ownership should occur there
would be an annual limitation on the amount of tax attribute carryforwards which
can be utilized in the future.

(12) COMMITMENTS AND CONTINGENCIES

The Exclusive Marketing Agreement obligates the Company to produce minimum
quantities of equivalent units of its industrial parts washers over a five-year
term. See notes 1(a) and 2 for additional information about the Exclusive
Marketing Agreement, including termination provisions, the fact that
Safety-Kleen is operating under Chapter 11 of the U.S. Bankruptcy code, and that
the Company has dismantled its sales and distribution network in reliance upon
the Exclusive Marketing Agreement.

As described in note 2, the Company may need to raise additional capital that
may be required to pay, at maturity, estimated aggregate long-term debt and
redeemable convertible preferred stock of approximately $51.8 million. There can
be no assurance that the Company would be able to obtain the required funds on
acceptable terms.



                                      F-18
<PAGE>   41
The Company has received a Nasdaq Staff Determination letter advising the
Company of the Staffs' view that the Company is not in compliance with the net
tangible assets, net income and market capitalization requirements for continued
listing. Management believes the Exclusive Marketing Agreement with Safety-Kleen
will greatly enhance the Company's operating and financial performance.
Therefore management has requested a hearing to review the Staff determination.
If it does not prevail at the hearing, the Company's securities will be subject
to delisting from the Nasdaq Small Cap Market but should continue to be quoted
on the OTC Electronic Bulletin Board. There is no assurance that the Company
will prevail at the hearing.



                                      F-19
<PAGE>   42


                                    EXHIBITS

    EXHIBIT       DESCRIPTION
    -------       -----------

       23.1       Consent of KPMG LLP










                                      F-20