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As Filed with the Securities Exchange Commission on January 13, 2004

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended September 30, 2003

OR

Commission File Number: 000-21956

EVANS SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

1625 Hwy 60 North, Bay City, Texas 77414    (979) 245-2424

(Address including zip code and telephone number, including area code, of registrant’s principal executive offices)

Blair R. Couey, President

102 South Mechanic, P.O. Box 550, El Campo, Texas 77437

(979) 245-2424

(Name, address, including zip code, and telephone number, including area code, of agent for service)

1625 Highway 60, Bay City, Texas 77414

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None

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-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

On January 7, 2004, the aggregate market value of the Registrant’s voting stock held by non-affiliates was approximately $689,278.

On January 7, 2004, there were 9,846,831 shares of Common Stock outstanding, exclusive of treasury shares or shares held by subsidiaries of the Registrant.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

PART I

This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the ability of the Company to successfully implement its turnaround strategy, changes in costs of raw materials, labor, and employee benefits, as well as general market conditions, competition and pricing. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this Annual Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as representation by the Company or any other person that the objectives and plans of the Company will be achieved. In assessing forward-looking statements included herein, readers are urged to carefully read those statements. When used in the Annual Report on Form 10-K, the words “estimate,” “anticipate,” “expect,” “believe,” and similar expressions are intended to be forward-looking statements.

Item 1. Business

Evans Systems Inc. and its subsidiaries, (dba MC Star and collectively referred to herein as the “Company”) distributes motor fuels and lubricants to branded retail accounts and commercial industrial users as well as provides environmental remediation services in southern Texas.

On November 18, 2002, the Company sold its fuel and retail inventory in its three remaining operating convenience stores and leased the stores and store equipment to outside operators, effectively discontinuing its Texas Convenience Store Segment operations. Two lease agreements for two stores to an outside operator call for lease payments of $2,800 and $3,200 per month for 5 years with payments beginning December 1, 2002. Each lease maintains one 10-year extension option. One lease agreement for a store to an outside operator calls for lease payments of $2,400 per month for 5 years beginning December 1, 2002, with two 5-year extension options. Under the lease agreements, the Company, through its Texas Petroleum Marketing Segment, executed fuel contracts with these outside operators, thereby maintaining the fuel volumes. Accordingly, the results of operations of the Texas Convenience Store segment have been classified as discontinued operations and prior periods have been restated. The Company has not allocated interest expense or general corporate overhead to discontinued operations.

Operating results for each of the Company’s segments follow (in thousands).

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Texas Petroleum Marketing

The following table sets forth the revenues of the Texas Petroleum Marketing segment (in thousands):

The Texas Petroleum Marketing segment’s revenues are primarily derived from the sale of motor fuels to the public through retail outlets:

The Texas Petroleum Marketing segment also supplies lubricants to commercial and industrial customers.

The Texas Petroleum Marketing segment distributes to its motor fuel customers both directly from refinery racks, and through the Company’s bulk plant facilities.

During fiscal 2003, the Texas Petroleum Marketing Segment sold various equipment, vehicles and a leased store with an aggregate net book value of $270,000 for total proceeds of $105,000. The Texas Petroleum Marketing Segment also sold a note receivable with a principle balance of approximately $83,000 and various vehicles and equipment with a net book value of $1,500 to Mauritz & Couey for relief of amounts owed to Mauritz & Couey for fuel purchases of approximately $203,500. The assets conveyed to Mauritz & Couey were appraised at approximately $100,000 at the date of conveyance. The Texas Petroleum Marketing Segment recorded a loss of $48,000 on these transactions during the year ended September 30, 2003.

On January 13, 2003, the Company assigned its ground lease with the Port of Bay City for the fuel terminal to CSS as well as conveyed the terminal facility assets, including all the tanks and structures at the Port of Bay City, to CSS for certain concessions by CSS. Those concessions included the agreement of CSS to waive interest on the Company’s note payable to CSS until June 1, 2003, the agreement of CSS to reduce the principal amount due under the note payable by $1,900,000 from $4,500,000 to $2,600,000, the agreement of CSS to assume all property taxes on the terminal facility assets, and the agreement of CSS to timely perform all obligations of payment and performance of the Port of Bay City lease agreement. The Company had been obligated for monthly payments of $108 until September 2006 under the ground lease. The terminal facility had not been in operation since fiscal 1997 and the Company had been unsuccessful in reopening the terminal due to working capital deficiencies.

The aggregate net book value of the terminal facility assets at the date of conveyance was approximately $365,000 and the Company’s last independent appraisal of the terminal facility, dated July 2001, estimated the fair market value of the terminal facility at approximately $2,000,000. The Company also had recorded property taxes payable of approximately $118,000 on the terminal facility assets. Accordingly, in January 2003, the Company recorded the reduction of the note payable to CSS by $1,900,000, the reduction of property taxes payable by $118,000, the conveyance of the terminal facility assets of approximately $365,000, net, and a noncash gain on the sale of non-operating assets of $1,653,000.

During the first quarter of fiscal 2002, the Texas Petroleum Marketing segment sold various station and store equipment for total proceeds of $263,000. The net book value of the assets sold aggregated $283,000 and the segment recorded a net loss on the sales of $20,000. During the second quarter of fiscal 2002, the Texas Petroleum Marketing segment sold/retired various obsolete equipment and vehicles for total proceeds of $18,000. The net book value of the equipment sold/retired was approximately $41,000 and the segment recorded a loss of $23,000.

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In February 2002, the lien holder of an Affiliated Resources note secured by a warehouse and land the Company received from Affiliated Resources by the Deed in Lieu of Foreclosure notified the Company that the land and warehouse would be foreclosed on and auctioned in March 2002. As previously reported, the Company had recorded, in accordance with SAB Topic 5:E, the debt as long-term debt payable. Accordingly, to record the effects of the foreclosure, the Company removed the net book value of the land and warehouse of approximately $471,000 from property and equipment, removed the remaining principle book balance of $501,000 from debt payable and recorded a noncash gain of approximately $30,000 during the second quarter of fiscal 2002.

During the third quarter of fiscal 2002, the Texas Petroleum Marketing segment sold/retired various obsolete equipment and vehicles for total proceeds of $47,000. The net book value of the equipment sold/retired was approximately $49,000 and the Company recorded a loss of $2,000.

During the fourth quarter of fiscal 2002, the Texas Petroleum Marketing segment sold/retired various obsolete equipment and vehicles for total proceeds of $47,000. The net book value of the equipment sold/retired was $49,252 and the Company recorded a loss of $2,252.

During the first quarter of 2001, the Texas Petroleum Marketing segment closed on the sale of some of its Citgo, Texaco (Motiva) and Diamond Shamrock dealer and consignment accounts. Net proceeds from the sale of the Citgo, Texaco and Diamond Shamrock dealer and consignment accounts approximated $194,000, $642,000 and $450,000, respectively, which were used for working capital and to reduce the Company’s outstanding debt. The Company recorded a net gain on the sales of approximately $587,000, inclusive of a $159,000 net gain on the sales of the distribution contracts. The net book value of the assets sold approximated $699,000, which consisted primarily of fuel dispensing equipment and tanks at the respective dealer and consignment locations.

During the second quarter of 2001, the Texas Petroleum Marketing segment closed on the sale of its Phillips 66 dealer and consignment accounts. Net proceeds from the sale of the Phillips 66 dealer and consignment accounts approximated $556,000, which was used for working capital and to reduce the Company’s outstanding debt. The Company recorded a net gain on the sale of approximately $238,000, inclusive of a $75,000 gain on the sale of the distribution contract. The net book value of the assets sold approximated $318,000, which consisted primarily of fuel dispensing equipment and tanks.

The Texas Petroleum Marketing segment also closed on the sale of three independent dealer and consignment accounts during the second quarter of 2001. Net proceeds from the sale of the independent dealer and consignment accounts approximated $178,000, which was used for working capital and to reduce the Company’s outstanding debt. The Company recorded a net gain on the sale of approximately $8,000. The net book value of the assets sold approximated $170,000, which consisted primarily of fuel dispensing equipment and tanks at the dealer and consignment locations.

Environmental Operations

EDCO Environmental (dba Star Co.) provides environmental assessment and remediation services for the petroleum distribution industry in the southeast Texas market area. Star Co. currently focuses its efforts on the following activities:

Star Co. has provided environmental remediation services to approximately 100 customers ranging from gasoline stations, convenience stores, public utilities, banks, major oil companies, large industrial corporations, various small local enterprises and a variety of governmental institutions and enterprises. The environmental protection business is primarily the result of government mandate. In the mid-1980’s, the EPA initiated a program for the management of USTs throughout the U.S.

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The EPA now requires stage II vapor recovery improvements at fuel facilities rather than through on-board canisters in new motor vehicles. The deadline for compliance with the UST improvement guidelines was December 1998.

A number of states, including Texas, have established remediation funds to assist owners/operators in the clean up of leaking USTs. In Texas, this was accomplished through the Groundwater Protection Act (“GPA”), which became effective on September 1, 1989. The GPA, as amended, provides clean-up funds for eligible expenses, less applicable deductibles. The fund is continually financed by a fee assessed on motor fuels sold in the state. Financing programs secured by assignments of rights to reimbursement by the Texas Commission on Environmental Quality (“TCEQ”) can be obtained for leaking petroleum storage tank sites impacted by releases from USTs. For locations where contamination already exists, the UST owner/operator must comply with TCEQ clean-up regulations or risk fines of up to $10,000 per day and disqualification from the benefits and funding of the GPA.

Star Co. reported revenues of $1,457,000, $1,124,000 and $962,000 in 2003, 2002 and 2001, respectively. The TCEQ is continuing to provide reimbursements for clean up of those contaminated locations which were registered with the TCEQ on or before December 22, 1998. Cleanup of locations that became known after December 22, 1998 are generally funded by private insurance or by the location owner.

Discontinued Operations

Texas Convenience Store Segment

On November 18, 2002, the Company sold its fuel and retail inventory in its three remaining operating convenience stores and leased the stores and store equipment to outside operators, effectively discontinuing its Texas Convenience Store Segment operations. Two lease agreements for two stores to an outside operator call for lease payments of $2,800 and $3,200 per month for 5 years with payments beginning December 1, 2002. Each lease maintains one 10-year extension option. One lease agreement for a store to an outside operator calls for lease payments of $2,400 per month for 5 years beginning December 1, 2002, with two 5-year extension options. Under the lease agreements, the Company, through its Texas Petroleum Marketing Segment, executed fuel contracts with these outside operators, thereby maintaining the fuel volumes. Accordingly, the results of operations of the Texas Convenience Store segment have been classified as discontinued operations and prior periods have been restated. The Company has not allocated interest expense or general corporate overhead to discontinued operations.

Evans Oil of Louisiana

On May 17, 2001, the Company closed on the sale of substantially all the assets and inventory of Evans Oil of Louisiana (EOLA) for total cash, net of closing costs, of $1,152,000 and discontinued its Louisiana operations. The assets and inventory sold had a net book value of approximately $806,000 and $259,000, respectively, on May 17, 2001. The Company recorded a net loss from discontinued operations of $733,000, which was comprised of a gain on the sale of assets of approximately $87,000, offset by a loss from discontinued operations to May 17, 2001 of $820,000. The proceeds of the sale were used to reduce outstanding debt. The results of operations of EOLA have been classified as discontinued operations and prior periods have been restated. The Company has not allocated interest expense or general corporate overhead to discontinued operations. The otherwise tax liability from this transaction is offset by net operating loss carryforwards of the Company generated from previous years losses. Accordingly, no provision has been recorded.

Employee Relations

At September 30, 2003, the Company employed 25 people, none of whom are represented by any collective bargaining organizations. The Company has had no work stoppages, slow downs or strikes.

Management considers its employee relations to be satisfactory.

Competition

All of the Company’s business segments operate in a highly competitive environment. The Company competes on the basis of price, service, and quality. In addition, each of the respective business systems faces special competitive

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factors. In all phases of operations, the Company encounters strong competition from a number of companies, including some companies with significantly greater resources than the Company. Many of these larger competitors employ financial and personnel resources substantially in excess of those that are available to the Company. The Company’s Texas Petroleum Marketing Segment also competes with integrated oil companies, which, in some cases, own or control a majority of their Petroleum Marketing facilities or convenience store locations. These major oil companies may offer their products to the Company’s competitors on more favorable terms than those available to the Company from its suppliers. A significant number of companies, including integrated oil companies and petroleum products distribution companies, distribute petroleum products through a larger number of facilities than the Company.

Star Co. is a full service environmental company. In the past, the remediation industry was not highly competitive, but increasingly companies are entering the environmental business. Management of Star Co. anticipates that the business will become increasingly competitive in the years ahead.

The remediation industry is characterized by a few large companies, some medium sized companies such as Star Co., and many small independent companies. Some competitors are larger and have greater resources than Star Co. Star Co. competes primarily with engineering firms and private contractors in addition to other environmental remediation companies.

The continued growth in the remediation service is dependent upon market penetration, customer base, government regulations, funding, and legislative changes. Star Co.’s growth in underground storage tank upgrading depends upon its ability to work efficiently, meet price competition, and will be adversely affected by restrictions upon reimbursements by the TCEQ.

Item 2. Properties

The Company owns 25 commercial parcels of real estate in Texas. The properties are comprised of convenience stores, service stations, plants and unimproved sites suitable for retail development. It also leases another 3 retail locations under operating lease agreements with varying terms and lives.

The Company’s general offices are located on 3 acres of land on Highway 60 in Bay City Texas in a 13,475 square foot building. Adjacent to the offices are 14,784 square feet of additional warehouse buildings together with bulk storage equipment, including 14 fuel storage tanks and 20 lube oil and antifreeze tanks.

Item 3. Legal Proceedings

The Company is subject to litigation, primarily as a result of customer and vendor claims, in the ordinary conduct of its operations. Except as described below, as of September 30, 2003, the Company had no knowledge of any legal proceedings, which, by themselves, or in the aggregate, would not be covered by insurance or could be expected to have a material adverse effect on the Company.

During fiscal 2003, Matagorda County, Victoria County, Jackson County and Brazoria County filed tax suits against the Company for failure to pay prior years ad valorem taxes. The Company has accrued all prior years ad valorem taxes not under note agreements and has reflected the Matagorda, Victoria and Jackson County notes payable as currently due at September 30, 2003.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

Stock Information

Traded On the NASDAQ Over The Counter Bulletin Board (OTCBB) Quotation System — The Company’s Common Stock, $.01 par value, is listed on the OTCBB exchange under the Symbol “EVSI.” At September 30, 2003, there were approximately 1,281 shareholders of record. The Company has not paid any cash dividends, and the Company currently has no plans to adopt a regular cash dividend.

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The aggregate market value of the Company’s voting stock held by non-affiliates was approximately $492,342 on September 30, 2003.

The high and low price range for the last two years, based on the closing sales price as reported by NASDAQ\OTCBB, are below:

Item 6. Selected Financial Data

The following table sets forth certain selected financial data which should be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein. Amounts are in thousands, except per-share data.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the Company’s financial condition and results of operations should be read in conjunction with the historical financial statements and notes thereto appearing elsewhere in this document.

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During the three years in the period ended September 30, 2003, the Company has recorded operating losses from continuing operations aggregating $1.93 million and net losses aggregating $2.65 million. At September 30, 2003, the Company has a working capital deficit of $631,000 and a stockholders’ deficit of $593,000.

In December 1999, the Company received notification from NASDAQ stock exchange that the Company was not in compliance with two requirements for continued listing on the NASDAQ NMS: the Company did not hold an annual stockholders meeting in 1998 and the market value of the public float in the Company’s common stock did not meet or exceed a minimum level of $5 million. The Company was subsequently delisted by NASDAQ on February 17, 2000. The Company’s common stock is now traded on the over-the-counter bulletin board system maintained by NASDAQ. The Company’s ability to raise additional equity capital in the future could be adversely affected with the Company’s common stock no longer listed on a national exchange.

New management and directors were appointed on June 24, 2002. During the fifteen months ended September 30, 2003 an extensive analysis of the Company operations was performed to determine an achievable growth and liquidity plan. Management came to the conclusion that a conservative and cost effective plan should concentrate in areas that management has maintained a successful record of accomplishments. The Company’s future focus will be on developing its Petroleum Marketing Segment through utilization of new marketing personnel to solicit new customers and existing personnel to contact and regain customers that were lost in the prior years. This plan does not require capital intensive expenditures and should increase revenues and accompanied with the cost reductions in personnel and overhead that have been accomplished restore the company to profitability.

Consistent with this plan the Company sold its inventory in the four remaining Diamond Mini Mart stores in November 2002 and leased the locations to outside operators. The Petroleum Marketing Segment executed fuel contracts with these locations maintaining the fuel volumes. The second phase of managements plan is to open the Fuel Terminal utilizing a joint venture, thru-put partner, or supplier to begin operations. The Fuel Terminal operation will reduce overall product cost and freight expense, adding additional revenues to the Petroleum Marketing Segment.

The Environmental Segment has made a marginal profit over the years and maintained a positive cash flow. Management intends to expand the Environmental Segment by creating a Testing Division. The Company is currently exploring the feasibility of acquiring through merger a company currently performing line, tank, and soil testing. Financial institutions have become increasingly aware of potential environmental hazards and the cost associated there with, on properties they finance. The need for testing to determine if any pollution exist on properties will continue for an unforeseeable time into the future. For this reason management believes adding a testing segment will increase the revenues and profitability of the Environmental Segment.

Management will continue to reduce debt and provide working capital through the sale of non-income producing assets. There can be no assurance that any of management’s plans as described above will be successfully implemented or that the Company will continue as a going concern.

There can be no assurance that any of management’s plans as described above will be successfully implemented or that the Company will continue as a going concern, meeting current obligations as they become due.

Application of Critical Accounting Policies

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results.

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

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Revenue Recognition

The Company’s policy is to prepare its financial statements on the accrual basis of accounting in accordance with generally accepted accounting principles. Revenues from motor fuel sales to open dealer accounts are recognized when delivered. Revenues from motor fuel sales and retail sales at convenience stores are recognized when sold at the store. Expenses are recognized in the period in which they are incurred.

Environmental segment revenue from fixed-price contracts is recognized using the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost at completion for each contract. Profit recognition is deferred on each contract until progress reaches a level of completion sufficient to establish the probable outcome. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability that result in revisions to costs are recognized in the period in which the changes are determined. Because of the inherent uncertainties in estimating, it is at least reasonably possible that such changes will occur within the near term.

Inventories

Substantially all inventories are products held for sale. Inventories of gas, diesel and other fuels, oil and grease, automotive products and accessories, chemical products and convenience store products utilize the first-in, first-out (FIFO) method of accounting and are stated at the lower of cost or market.

For a more comprehensive list of our accounting policies, including those that involve varying degrees of judgment, see Note 1 of Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

2003 Compared With 2002

Consolidated revenues from continuing operations decreased $1,789,000, or approximately 9%, to $18,993,000 in the year ended September 30, 2003. The decrease is primarily attributable to fluctuations in sales prices and sales volumes between periods in the Texas Petroleum Marketing Segment offset by increased revenues from the Environmental segment.

Consolidated gross profit from continuing operations increased $199,000, or approximately 12%, to $1,880,000 in the year ended September 30, 2003. Gross profit expressed as a percentage of revenues (“Gross Margin”) increased to approximately 10% of sales in 2003 from approximately 8% of sales in 2002. The increase in gross margin in 2003 is mainly attributable to margin an increase in the Environmental segment slightly offset by a decrease in the Texas Petroleum Marketing segment. See segment discussions below.

Consolidated operating expenses declined $1,277,000, or approximately 38%, in 2002 to $5,087,000. The decrease in operating expenses were mainly attributable to savings related to personnel reductions of $600,000, general, administrative and other operating expense cost cuts of $351,000 and reduced depreciation expense of $169,000. The effects of those reductions was enhanced by a decrease on the loss on asset sales of $48,000 in 2003, as compared to a loss of $205,000 in 2002.

Consolidated operating losses decreased $1,476,000 to $276,000 in 2003 as compared with a loss of $1,752,000 in 2002. Excluding the effect of gain (loss) of assets sales on operating losses in 2003 and 2002, consolidated operating losses decrease $1,319,000 to $228,000 in 2003 compared to $1,547,000 in 2002.

Consolidated income from continuing operations increased to $1,317,000 in 2003 as compared to a consolidated loss from continuing operations of $1,8121,000 in 2002. Income from continuing operations in 2003 includes a gain on the sales of non-operating assets of $16,53,000 and other income of $74,000 offset by $134,000 in interest expense. Loss from continuing operations in 2002 includes $67,000 in interest expense and $9,000 in other losses offset by interest income of $7,000.

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