<PAGE>

    AS FILED WITH THE SECURITIES EXCHANGE COMMISSION ON  DECEMBER 27, 2001

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------

                                  FORM 10-K/A
(Mark One)                      (Amendment No. 1)
[X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934

                 For the fiscal year ended SEPTEMBER 30, 2000
                                      OR
[_]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                       Commission File Number: 000-21956

                              EVANS SYSTEMS, INC.
            (Exact name of registrant as specified in its charter)

                   TEXAS                                74-1613155
       (State or other jurisdiction                  (I.R.S. Employer
     of incorporation or organization)           (Identification number)

           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)

                       JERRIEL L. EVANS, SR., PRESIDENT
Mailing Address:   P.O. Box 2480, Bay City, Texas 77404-2480     (979) 245-2424
Physical Address:  1625 Hwy 60 North, Bay City, Texas 77414      (979) 245-2424
                    (Name, address, including zip code, and
         telephone number, including area code, of agent for service)

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

                                   --------

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

          Title of each class          Name of each exchange on which registered
Common Stock, par value $.01 per share              NASDAQ-OTCBB Exchange

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 10, 2001, the aggregate market value of the Registrant's voting stock
held by non-affiliates was approximately $720,516.

On January 10, 2001, there were 5,542,429 shares of Common Stock outstanding,
exclusive of treasury shares or shares held by subsidiaries of the Registrant.

DOCUMENTS INCORPORATED BY REFERENCE: None.
<PAGE>

                                EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this Amendment) is being filed in order to
amend the Registrant's Annual Report on Form 10-K filed with the Securities and
Exchange Commission on January 12, 2001 to amend Items 1,6, 7, 8 and 14.


                                     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
consummate the sale of its operations or to close on its proposed refinancing,
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. ("ESI"), through its wholly-owned subsidiaries, collectively
referred to herein as the "Company," is a vertically integrated company which
has historically been engaged in the following business segments:

    .   Texas petroleum marketing operations;
    .   Texas convenience store operations;
    .   Environmental remediation services;
    .   Louisiana operations; and
    .   Packaging and marketing of automotive after-market chemical products.

The Company began in 1968 with a single gasoline station in Bay City, Texas,
emphasizing service and careful attention to customers' preferences and needs.
The Company has expanded over the years, and now distributes the products of
seven major oil companies, and operates a chain of convenience stores throughout
southeast Texas and southern Louisiana.

After sustaining losses during 1997, in early fiscal 1998 the management of ESI
developed and began to implement its turnaround strategy.  Among other things,
the strategy included a decision to refocus the Company on its "core" business
segments: petroleum marketing and convenience store operations.  Within these
"core" segments, the Company sold or closed lower-volume outlets.  The Company
also took actions, including the elimination of nonessential corporate staff, to
reduce overhead expenses.  See "Texas Petroleum Marketing" and "Texas
Convenience Store" segment discussions, below.

In February 1998, ESI discontinued operations in the packaging and marketing of
automotive after-market chemical products, previously operated through its
wholly owned subsidiary, ChemWay Systems, Inc. ("ChemWay").  ChemWay's financial
results have been reclassified as a "discontinued operation" for financial
reporting purposes.  In December 1998, the Company sold ChemWay in a stock-for-
stock transaction to Affiliated Resources Corporation ("Affiliated").  See
"ChemWay" below.

In December 1999, the Company reached an agreement to sell its Texas petroleum
marketing and convenience store assets (the "TSC Transaction") to TSC Services,
Inc. ("TSC").  Under the terms of the agreement, TSC would make a cash payment
to the Company of $12.7 million for substantially all of the fixed assets of the
Texas petroleum marketing and convenience store segments, having a net book
value of $13.0 million at March 31, 2000.  In addition, TSC agreed to assume
certain capital lease obligations of approximately $0.6 million, and agreed to
purchase the segments' inventories at the Company's cost, estimated by
management at $2.4 million.  The sale was approved by the Board of Directors and
subject to approval by the Company's shareholders.  Terms of the agreement
called for the sale of substantially all of the property and equipment and
inventories in the Texas petroleum marketing and Texas convenience store
segments. On August 17, 2000, the Company terminated the TSC Agreement pursuant
to TSC's failure to perform certain obligations as defined within the agreement.

On January 23, 2000, the Company executed an Amended and Restated Agreement and
Plan of Merger, (as amended the "Merger Agreement") with I-Net Holdings Inc., a
Delaware Corporation ("I-Net"), pursuant to which a wholly owned subsidiary of
the

                                     Page 2
<PAGE>

Company would have been merged with and into I-Net (the "Merger").  The
principal shareholder of I-Net, Richard Dix, is a former officer of the Company.
The Company, I-Net, and the principal shareholder of I-Net agreed to terminate
the Merger Agreement on May 19, 2000, and release each other from any and all
claims arising under the Merger Agreement.  To induce I-Net to agree to the
immediate termination of the Merger Agreement, the Company has agreed to pay
$50,000 to I-Net as partial reimbursement of the expenses incurred by it in
conjunction with the Merger Agreement upon consummation of the TSC Transaction
or a similar sale of substantially all of the Company's assets.

During the year ended September 30, 1999, the Company adopted SFAS 131,
"Disclosure About Segments of an Enterprise and Related Information."  Prior
year segment information presented below has been restated to conform to the
current year presentation.

Operating results for each of the Company's segments follow (in thousands):

<TABLE>
<CAPTION>
                                      Year Ended        Year Ended       Year Ended
                                    Sept. 30, 2000    Sept. 30, 1999   Sept. 30, 1998
<S>                                 <C>               <C>              <C>
TEXAS PETROLEUM MARKETING
Revenue from External
 Customers                             $54,810           $50,164          $ 64,458
Operating Loss                            (601)           (1,335)             (987)

TEXAS CONVENIENCE STORES
Revenue                                $25,262           $22,873          $ 25,626
Operating Loss                            (742)              (34)             (543)

LOUISIANA OPERATIONS
Revenue                                $13,796           $12,694          $ 12,878
Operating Loss                            (676)             (334)              (88)

EDCO ENVIRONMENTAL
Revenue                                $ 1,461           $ 1,542          $  1,152
Operating Income (Loss)                    262               177               (81)

UNALLOCATED GENERAL AND
 ADMINISTRATIVE EXPENSES                (1,682)           (1,854)           (2,295)

TOTAL CONTINUING OPERATIONS
Revenue                                $95,329           $87,273          $104,114
Operating Loss                          (3,439)           (3,380)           (3,994)

CHEMWAY/1/
Revenue                                                  $    75           $ 2,268
Operating Income (Loss)                                     (317)           (1,697)

TOTAL
Revenue                                $95,329           $87,348           106,382
Operating income (Loss)                 (3,439)           (3,697)           (5,688)
</TABLE>
-----------
/1/ ChemWay was sold on December 30, 1998.


TEXAS PETROLEUM MARKETING

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

<TABLE>
<CAPTION>
                                      Fiscal Year Ended September 30
                                      ------------------------------
                                         2000                 1999          1998
                                      ---------             --------
<S>                                    <C>                  <C>            <C>

Refined petroleum product sales        $54,414              $49,143        $63,077
Non-petroleum product sales                396                1,021          1,381
                                       -------              -------        -------
Total sales                            $54,810              $50,164        $64,458
</TABLE>

                                     Page 3
<PAGE>

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

   .  Gasoline retail facilities with Company-supplied equipment consisting of
      pumps, lights, canopies and in many cases underground storage tanks, at
      independently owned convenience stores. Under the terms of the Company's
      agreements with such independent store operators ("Special Purpose
      Leases"), the Company receives 40 percent or 50 percent of the gasoline
      gross profit, depending upon who owns the underground gasoline equipment.

   .  Independently owned gasoline stations and convenience stores ("Open
      Dealers") to which the Company provides major oil company brand names,
      credit card processing and signs and, without further investment, receives
      its customary markup on fuel deliveries.

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.  The Company also has a 110,000 barrel terminal facility, located in
Bay City, Texas, from which it has historically distributed motor fuels to the
southeast Texas market.  During the first fiscal quarter of 1998, the Company's
supply agreement with the primary fuel supplier to the Bay City terminal
facility was terminated. The terminal facility has remained closed since then
and has adversely affected the Texas Petroleum Marketing segment's performance
during 1998, 1999, and 2000.

Under regulations issued by the U.S. Environmental Protection Agency ("EPA"),
all underground storage tanks in the State of Texas were required to meet
certain standards of protection as of December 22, 1998.  During 1998, the
Company evaluated the revenues generated by its Special Purpose Lease accounts,
and determined that it could not justify further investment at approximately 46
of such locations.  Accordingly, management decided to either sell or close
those identified lower-volume Special Purpose Lease facilities.  As of September
30, 1998, the Company sold its investment at 23 of the lower-volume Special
Purpose Lease accounts, and has subsequently sold the equipment at seven
additional sites.  Additionally, the Company has discontinued the delivery of
motor fuels, and has removed the underground storage tanks at 16 Special Purpose
Lease sites.  The Special Purpose Lease locations, were the Company sold its
investment in equipment, are now served by the Company as Open Dealers.  See
"Environmental Issues," below.

The effect of the conversion of Special Purpose Lease customers into Open
Dealers is reduced gross margin, working capital requirements, and capital
investment, resulting in an improved return on investment.  Since the Company's
margins on Open Dealer accounts are contractually fixed, however, the Texas
Petroleum Marketing Segment's gross margins may be less volatile in the future,
as a larger percentage of the segment's business will be at fixed margins.

On May 21, 1999, the company closed its bulk storage facility and office in El
Campo, Texas and eliminated 35% of its staff in the Texas Petroleum Marketing
segment.  The company also sold its Bay City Tire Store on  May 3, 1999.  On
June 30, 1999, the Company sold its Fuelman fleet card franchise to a
competitor.

TEXAS CONVENIENCE STORES

The following table sets forth the revenues of the Texas Convenience Store
segment (in thousands):

<TABLE>
<CAPTION>
                                    Fiscal Year Ended September 30
                                -------------------------------------
                                  2000           1999          1998
                                --------       --------      --------
<S>                             <C>            <C>           <C>
Refined petroleum product
sales                           $15,361        $12,705        $14,069
Merchandise sales                 9,543          9,599         10,783
Other income                        358            569            774
                                -------        -------        -------
Total Sales                     $25,262        $22,873        $25,626

Number of operating stores
at year-end                          17             17             19
</TABLE>


At September 30, 2000, the Company operated 17 convenience stores, featuring
self-service motor fuels and a variety of food and non-food merchandise.  Eight
of the Company's convenience stores are co-branded with nationally recognized
fast food franchises or food service operations.

                                     Page 4
<PAGE>

The Company's stores are located in smaller communities throughout the gulf
coast region of Texas.

During fiscal 1998, the Company discontinued operations at seven underperforming
convenience stores, and sold the equipment and business to independent
convenience store operators.  In each of these transactions, the Company
retained the wholesale gasoline business through an Open Dealer contract.

The Company closed two underperforming Texas convenience stores during 1999, one
of which was subsequently leased to an independent operator who also agreed to
purchase fuel from the Company as an Open Dealer.

LOUISIANA OPERATIONS

The following table sets forth the revenues of the Louisiana Operations segment
(in thousands):

<TABLE>
<CAPTION>

                                         Fiscal Year Ended September 30
                                     -------------------------------------
                                       2000          1999            1998
                                     -------      --------         -------
<S>                                  <C>           <C>             <C>
Refined petroleum product sales      $10,042       $ 9,671         $10,014
Merchandise sales                      3,694         2,882           2,706
Other income                              60           141             158
                                     -------       -------         -------
Total Sales                          $13,796       $12,694         $12,878

Number of operating stores
at year-end                                8             7               7
</TABLE>

At September 30, 2000 Louisiana operations are comprised of a fuel bulk storage
facility and distribution center, one full-service station without a convenience
store, and eight convenience stores, located in and around Lake Charles,
Louisiana.  The Company has previously announced its intention to sell its
Louisiana operations; however there can be no assurance that a sale on terms
satisfactory to the Company will be completed.

EDCO ENVIRONMENTAL

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

     Underground storage tank ("UST") removal    UST regulator upgrades
     Site assessments for regulatory agencies    UST repairs and maintenance
     Site clean up reimbursement

EDCO Environmental 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.

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 Natural Resource
Conservation Commission ("TNRCC") 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 TNRCC clean-up
regulations or risk fines of up to $10,000 per day and disqualification from the
benefits and funding of the GPA.

EDCO Environmental reported revenues of $1,461,000, $1,542,000 and $1,152,000 in
2000, 1999 and 1998, respectively.

                                     Page 5
<PAGE>

The TNRCC is continuing to provide reimbursements for clean up of those
contaminated locations which were registered with the TNRCC on or before
December 28, 1998.  Cleanup of locations that became known after December 28,
1998 is generally funded by private insurance or by the location owner.

CHEMWAY (DISCONTINUED MARCH 31, 1998; SOLD DECEMBER 30, 1998)

ChemWay packages aerosol and liquid chemical products for the aftermarket
automotive industry.  In February 1998, the Company suspended production and, in
March 1998, announced plans to sell its investment in ChemWay.  On December 30,
1998, the Company completed the sale of ChemWay to an unrelated third party,
Affiliated Resources Corporation (Affiliated).

The Company received 1,500,000 shares of common stock of Affiliated,
representing approximately nine percent of the outstanding common stock of
Affiliated, in exchange for all of the common stock of ChemWay.  See Note 3 to
the Consolidated Financial Statements, included herein.  The number of shares of
Affiliated common stock became subject to a "make whole" provision whereby the
Company became entitled to receive an additional 1,000,000 shares of Affiliated
common stock at December 30, 1999.  The Affiliated common stock is unregistered,
however the Company has demand registration rights with respect to such stock.
Further, under the Purchase Agreement, the Company maintained the right to Put
the 1,500,000 shares at $4 per share if Affiliated did not perform certain
obligations under the Purchase Agreement.

EMPLOYEE RELATIONS

The Company employs 197 people, none of whom are represented by any collective
bargaining organizations.  The Company has had no work stoppages, slow downs or
strikes.  On July 1, 1997, the Company implemented an employee directed 401-K
plan.

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
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 possess and employ
financial and personnel resources substantially in excess of those which are
available to the Company. The Company's Texas Petroleum Marketing Segment, Texas
Convenience Store Segment and Louisiana Operations Segment also compete 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.

The convenience store industry is a retail service-oriented industry.  It is
distinguished from other retail businesses by its emphasis on location and
convenience rather than price, and a commitment to customers who need to
purchase items quickly at extended hours.  Convenience stores feature a wide
variety of items including groceries, dairy products, tobacco products,
beverages, and health and beauty aids.  Many sell petroleum on a self-service
basis.  Stores are generally designed with ample customer parking and quick
checkout procedures to maximize convenience as well as encourage impulse buying
of high margin items.

The convenience store industry is highly competitive, fragmented, and
regionalized. It is characterized by a few large companies and many small
independent companies. Several competitors are substantially larger and have
greater resources than the Company. The Company's primary competitors include
Diamond Shamrock, RaceTrac, Thomas Petroleum, and E-Z Mart. The Company also
competes with other convenience stores, small supermarkets, grocery stores, and
major and independent gasoline distributors who have converted units to
convenience stores.

EDCO Environmental 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 EDCO Environmental
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 EDCO Environmental, and many small independent
companies.  Some competitors are larger and have greater resources than EDCO
Environmental.  EDCO Environmental competes primarily with engineering firms and
private contractors in addition to other environmental remediation companies.

                                     Page 6
<PAGE>

The continued growth in the remediation service is dependent upon market
penetration, customer base, government regulations, funding, and legislative
changes.  EDCO Environmental'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 Texas Natural
Resource Conservation Commission (See "Business," "EDCO Environmental Systems,
Inc.").

ITEM 2.   PROPERTIES

The Company has extensive real estate interests in Texas and Louisiana.  The
Company owns 42 commercial parcels of real estate in Texas and 2 in Louisiana.
The properties are comprised of convenience stores, service stations, plants and
unimproved sites suitable for retail development. It also leases another 25
convenience store locations and 4 other facilities under operating lease
agreements with varying terms and lives.

In July 1999, The Company vacated its former general office facility, which was
located in a 10,300 square foot, free-standing building located on a 15-acre
tract with 400 feet of frontage along Highway 60 North in Bay City, Texas.  The
former general office facility has been listed for sale.  EDCO Environmental's
facilities include a 19,200 square foot shop, fabrication, and maintenance
building adjacent to the administration building. Subsequent to September 30,
2000 the company closed on the sale of EDCO Environmental's facilities on
November 21, 2000 and the former general office portion on December 29, 2000.

The Company relocated its general offices into space in its additional office
and administrative operations (5,985 square feet) and 7,490 square foot
warehouse together with 14,784 square feet of additional warehouse buildings,
located on 3 acres of land on Highway 60.  Bulk storage equipment, including 14
fuel storage tanks and 20 lube oil and antifreeze tanks, are located adjacent to
the warehouses.

ITEM 3.  LEGAL PROCEEDINGS

A purported class action lawsuit has been filed in the Southern District of
Texas against the Company and several of its current and former officers and
directors on behalf of purchasers of the Company's common stock.  The lawsuit
asserts that the defendants violated federal securities laws by issuing
allegedly false and misleading statements in 1997, 1998 and 1999 about the
Company's financial condition and results of operations.  The lawsuit demands,
among other relief, unspecified compensatory damages, attorney's fees and costs
of conducting the litigation. On May 31,2000, the lawsuit was dismissed with
prejudice in the United States District Court for the Southern District of
Texas.

The Company is also subject to litigation, primarily as a result of customer
claims, in the ordinary conduct of its operations.  In the opinion of
management, there are no legal proceedings other than discussed above which, by
themselves or in the aggregate could be expected to have a material adverse
effect on the consolidated financial position of the Company.

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 Quotation System -- The
Company's Common Stock, $.01 par value, is listed on the OTCBB exchange under
the Symbol "EVSI."  At September 30, 2000, there were approximately 1,046
shareholders of record. The Company has not paid any cash dividends, and the
Company currently has no plans to adopt a regular cash dividend.

The aggregate market value of the Company's voting stock held by non-affiliates
was approximately $720 thousand on September 30, 2000.

                                     Page 7
<PAGE>

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

<TABLE>
<CAPTION>

Dates                                           High         Low
-----                                          ------      ------
<S>                                            <C>         <C>
October 1, 1998 through December 31, 1998      15 5/8       6 7/16
January 1, 1999 through March 31, 1999         18 3/4      15 1/4
April 1, 1999 through June 30, 1999            32           3 5/8
July 1, 1999 through September 30, 1999         2 1/8       1 3/8
October 1,1999 through December 31,1999         2 7/16        1/2
January 1,2000 through March 31, 2000           9 3/4       1 3/8
April 1,2000 through June 30, 2000              2 7/16        3/8
July 1, 2000 through September 30, 2000         1 1/2         3/8
</TABLE>

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.

<TABLE>
<CAPTION>

                                                                                 Year Ended September 30,
Income Statement Data:                                            2000       1999        1998        1997        1996
----------------------                                          -------    -------    --------    --------    --------
<S>                                                             <C>        <C>        <C>         <C>         <C>
Revenues                                                        $95,329    $87,273    $104,114    $137,996    $133,007
Gross Profit                                                     10,141     11,854      13,868      14,765      17,266
Operating Income (Loss)                                          (3,439)    (3,380)     (3,994)     (3,682)        359
Income (Loss) from Continuing Operations                         (6,002)    (7,301)     (4,605)     (3,458)       (185)
Net Income (Loss)                                                (6,002)    (7,301)     (5,453)     (4,804)      1,119
Basic Income (loss) from continuing
operations per common share/1/                                    (1.41)     (1.90)      (1.48)      (1.12)       (.06)
Basic earnings (loss) per common share/1/                         (1.41)     (1.90)      (1.75)      (1.56)        .37
Basic weighted average number of common
shares outstanding/1/                                             4,263      3,846       3,116       3,075       3,010
Diluted earnings (loss) from continuing
operations per common share/1/                                    (1.41)     (1.90)      (1.48)      (1.12)       (.06)
Diluted earnings (loss) per common share/1/                       (1.41)     (1.90)      (1.75)      (1.56)        .37
Weighted average number of common and
common equivalent shares outstanding/1/                           4,263      3,846       3,116       3,075       3,010
-------------
/1/ Adjusted for 5% stock dividend paid on January 20, 1997.

                                                                  2000       1999        1998        1997        1996
                                                                -------    -------    --------    --------    --------
Balance Sheet Data:
-------------------
Current Assets                                                  $ 6,148    $ 6,729    $  9,914    $ 14,962    $ 18,726
Current Liabilities                                              19,301     16,452       9,751      17,333       9,724
Current Ratio                                                     .32:1      .41:1      1.02:1       .86:1      1.93:1
Total Assets                                                     21,321     24,374      32,448      38,218      41,073
Long-Term Debt                                                      716      1,634      11,151       5,401      10,400
Total Stockholders' Equity                                        1,304      6,128      11,546      15,484      19,748
</TABLE>

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.

In December 1999, the Company signed an agreement to sell its Texas petroleum
marketing and convenience store operations to TSC Services, Inc., ("TSC") for
cash consideration of $12.7 million (the "TSC Transaction".  TSC also agreed to
assume certain capital lease obligations that the Company estimated would total
approximately $0.9 million at the time of closing.  In addition, TSC would
acquire the Company's inventories in the Texas petroleum marketing and Texas
convenience store segments at the Company's cost, estimated by management at
approximately $2.4 million. The sale was approved by the Board of Directors and
subject to approval by the Company's shareholders.  Terms of the agreement
called for the sale of substantially all of the property and equipment and

                                     Page 8
<PAGE>

inventories in the Texas petroleum marketing and Texas convenience store
segments. On August 17, 2000, the Company terminated the TSC Agreement pursuant
to TSC's failure to perform certain obligations as defined within the agreement.

On January 23, 2000, the Company executed an Amended and Restated Agreement and
Plan of Merger, (as amended the "Merger Agreement") with I-Net Holdings Inc., a
Delaware Corporation ("I-Net"), pursuant to which a wholly owned subsidiary of
the Company would have been merged with and into I-Net (the "Merger").  The
principal shareholder of I-Net, Richard Dix, is a former officer of the Company.
The Company, I-Net, and the principal shareholder of I-Net agreed to terminate
the Merger Agreement on May 19, 2000, and release each other from any and all
claims arising under the Merger Agreement. The Company has agreed to pay $50,000
to I-Net as partial reimbursement of the expenses incurred by it in conjunction
with the Merger Agreement upon consummation of the TSC Transaction or a similar
sale of substantially all of the Company's assets.

In the Fourth Quarter of 2000, The company began implementation of a strategy to
reduce debt by selling certain identified assets aligned along brand
representation in an effort to concentrate on fewer brands which management
feels have the most future profit potential. As a part of this strategy,
management implemented an additional 22% staff reduction in early October.  By
the end of the First fiscal quarter of 2001, the company had closed on the sale
of some its Citgo, Texaco (Motiva) and Diamond Shamrock dealer and consignment
accounts. The company has Phillips 66 accounts under earnest money contract,
with closing expected in January 2001.  Management plans to continue its Chevron
and Exxon branded company operated and dealer locations. The company also closed
on the sale of its Corporate Office and warehouse facility in Bay City and has
placed for sale other properties. Proceeds from the sale are being used towards
the reduction of debt. The Company has reached an agreement in principle with
its primary lender, which could lead to a significant reduction in debt.

The Company is also evaluating a strategic partnership that will allow the
Company to reinstitute a supply of petroleum products at its terminal facility.
Management anticipates that should the strategic partnership be successful, that
its terminal can return to operations by the end of 2001. The Company is
actively pursuing the refinance of several unencumbered assets, which, if
successful, will allow for the upgrade of several of the Company's retail
facilities.

                             RESULTS OF OPERATIONS

2000 COMPARED WITH 1999

Consolidated revenues from continuing operations increased $8,056,000 or
approximately 9.2% to $95,329,000 in the year ended September 30, 2000. The
increase, primarily in the Texas Petroleum Marketing segment, is primarily due
to the increased selling price per gallon of fuel in 2000 compared to 1999.
Consolidated gross profit from continuing operations declined $1,713,000 or
approximately 14.5% to $10,141,000 in the year ended September 30, 2000. Gross
profit expressed as a percentage of revenues ("Gross Margin") decreased to
approximately 10.6% of sales in 2000 from approximately 13.6% of sales in 1999.
Gross Margin declined in all segments. The decline in gross profit in 2000 is
mainly due to competitive gasoline pricing on rising fuel cost. See segment
discussions below.

Consolidated operating expenses of continuing operations declined $1,654,000 or
approximately 10.9% in 2000 to $13,580,000. The decrease in operating expenses
were mainly attributable to savings related to personnel reductions $1,137,000,
general and administrative expense cost cuts of $435,000 and depreciation of
$76,000.

Consolidated operating losses increased $59,000 to $3,439,000 in 2000 as
compared with a loss of $3,380,000 in 1999. The company made significant expense
reductions in 2000; however, the decline in margins resulted in a virtually
unchanged operating loss.

Consolidated loss from continuing operations decreased to $6,002,000 in 2000 as
compared to $7,301,000 in 1999.  Loss from continuing operations in 2000
includes an $802,000 valuation allowance on ChemWay net assets transferred and
$1,725,000 in interest expense.  Loss from continuing operations in 1999
includes a $784,000 valuation allowance on ChemWay net assets transferred and
$1,802,000 in interest expense.

Consolidated net loss decreased $1,299,000 to $6,002,000 in 2000 as compared to
a net loss of $7,301,000 in 1999.

TEXAS PETROLEUM MARKETING SEGMENT

Revenues in the Texas Petroleum Marketing Segment increased $4,646,000 or
approximately 9.3% to $54,810,000 in 2000, as compared with $50,164,000 in 1999.
Sales in gallons declined to 40,158,000 gallons in 2000 from 44,441,000 gallons
in 1999, a decline of approximately 9.6%.  Average selling price per gallon
increased in 2000 to approximately $1.34 per gallon, as compared with $1.13 per
gallon in 1999.  The increase is due to nation wide cost increases in 2000 that
pressured higher selling prices per gallon.

                                     Page 9
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Gross Profit in 2000 declined to $3,747,000 from $4,401,000 in 1999, a decline
of $654,000 or approximately 14.9%.  Gross Margin decreased to approximately
6.8% of sales in 2000 from approximately 8.8% of sales in 1999.

Operating expenses in 2000 declined to $4,373,000 from $5,736,000 in 1999, a
decline of $1,363,000 or approximately 23.8%. The reduced expenses resulted from
the company's implementation of programs started in 1999 to reduce staff, a
$1,086,000 savings, cut overhead, a $97,000 savings, other expense reductions of
$73,000 and decreased depreciation expense of $107,000.

Operating loss in 2000 decreased to $601,000 from $1,335,000 in 1999, a decrease
of $734,000 or approximately a 53.1% improvement, as a result of expense
reductions.

TEXAS CONVENIENCE STORE SEGMENT

At September 30, 2000, the Company operated 17 convenience stores, featuring
self-service motor fuels and a variety of food and non-food merchandise.  Eight
of the Company's convenience stores are co-branded with a nationally recognized
fast food franchises or food service operations.  The Company's stores are
located in smaller communities throughout the gulf coast region of Texas.

Total sales increased $2,389,000 or approximately 10.4% in 2000 to $25,262,000
from $22,873,000 in 1999.  Fuel sales in 2000 were $15,361,000 as compared with
$12,659,000 in 1999; fuel sales in gallons declined in 2000 to 10,869,000
gallons as compared with 12,753,000 gallons in 1999. Merchandise sales decreased
$56,000 to $9,543,000 as compared with $9,599,000 in 1999. Average selling price
per gallon increased in 2000 to approximately $1.41 per gallon, as compared with
$.99 per gallon in 1999.  The increase is due to nation wide cost increases in
2000 that pressured higher selling prices per gallon.

Gross profit declined to $4,080,000 in 2000 as compared with $4,768,000 in 1999.
Gross Margin in the Texas Convenience Store segment declined in 2000 to
approximately 16.1% as compared with approximately 20.9% in 1999.  Merchandise
Gross Margin decreased in 2000, to approximately 28.4% of sales, as compared to
approximately 32.1% of sales in 1999.  Fuel Gross Margin decreased to
approximately 6.6% during 2000, as compared with approximately 8.7% during 1999.

Operating expenses during 2000 in the Texas Convenience Store segment was
$4,822,000 as compared with $4,802,000 in 1999, an increase of $20,000 or
approximately .4%.

The Convenience Store segment incurred an operating loss of $742,000 in 2000, as
compared with a loss of $34,000 in 1999.  The increased loss is due to declining
margins in fuel and merchandise sales created by a highly competitive market.

LOUISIANA OPERATIONS SEGMENT

At September 30, 2000 Louisiana operations are comprised of a fuel bulk storage
facility and distribution center, one full-service station without a convenience
store, and eight convenience stores, located in and around Lake Charles,
Louisiana.

Sales increased $1,102,000 or approximately 8.7% to $13,796,000 in 2000 from
$12,694,000 in 1999.  Sales of fuels and other refined petroleum products
increased $290,000 or approximately 3.8% to $10,102,000 in 2000 as compared with
$9,671,000 in 1999.  Convenience store merchandise sales increased $812,000 in
2000, or approximately 22.0%, to $3,694,000 as compared with $2,882,000 in 1999.

Gross profits declined $264,000 or approximately 14.8% in 2000, to $1,514,000 as
compared with $1,778,000 in 1999.  Gross Margin declined to approximately 11.0%
of sales in 2000, as compared with approximately 14.0% of sales in 1999.  Gross
Margin on fuel sales declined to approximately 6.6% of sales in 2000, as
compared with approximately 9.3% of sales in 1999, primarily due to the
competitive retail fuel pricing which prevailed in 2000.  Merchandise Gross
Margin in 2000 declined to approximately 19.7% of sales, as compared to
approximately 23.5% of sales in 1999.  The Company generally reduced its
merchandise retail pricing in 2000 in an attempt to increase sales.

Operating expenses in 2000 were $2,191,000, an increase of $79,000 or
approximately 3.7% as compared to 1999.

Operating loss in 2000 increased to $676,000, as compared with a loss of
$334,000 in 1999.  The increased loss in 2000 is attributable to lower gross
profit margins in 2000, and increased operating expenses.

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EDCO ENVIRONMENTAL SEGMENT

EDCO Environmental reported an operating profit of $262,000 in the year ended
September 30, 2000, as compared with $177,000 in 1999. The increase is primarily
attributable to a $193,000 reduction in operating expenses. EDCO Environmental
will continue to focus its attention on environmental remediation projects that
have been pre-approved for reimbursement by the Texas Natural Resource
Conservation Commissions' ("TNRCC") fund, or by private insurers. Management
believes that such opportunities will continue to exist; however there can be no
assurance that they will do so.

UNALLOCATED GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses declined $172,000 in 2000, to $1,682,000 as
compared with $1,854,000 in 1999. Corporate expenses in 2000 included a non-cash
charge of $247,000 to compensation expense, as a result of the application of
Accounting Principles Board Option No. 25, "Accounting for Stock Issued to
Employees," with respect to the vesting of certain incentive stock options that
had previously been awarded to employees. 2000 expenses also include
nonrecurring legal and professional charges of $224,000 arising from the
proposed merger with I-Net Holdings Inc. and the proposed sale of substantially
all of its fixed assets to TSC Services Inc. and $157,000 in penalties for late
payment of motor fuels taxes.

General and administrative expenses in 1999 included a non-cash charge of
$404,000 to compensation expense, as a result of the application of Accounting
Principles Board Option No. 25, "Accounting for Stock Issued to Employees," with
respect to the vesting of certain incentive stock options, which had previously
been awarded to employees. 1999 expenses also includes a noncash charge of
$61,000, representing the market value of the Company's common stock contributed
to the Company's 401-K employee benefit plan, nonrecurring legal and
professional fees of $480,000 arising from the proposed merger with Duke & Long
Distributing Company, and legal and professional fees of $339,000 arising from a
number of matters, including the restatement of the Company's previously
reported financial statements, the negotiation of the purchase agreement with
A-Free-Gift.Com, and the refinancing of the Company's senior debt.

1999 COMPARED WITH 1998

Consolidated revenues from continuing operations declined $16,841,000 or
approximately 16.18% to $87,273,000 in the year ended September 30, 1999. The
decline, primarily in the Texas Petroleum Marketing segment, is primarily due to
the closing of underperforming or low volume locations and to the lower fuel
prices that prevailed during the current year period. See segment discussions,
below.

Consolidated gross profit from continuing operations declined $2,014,000 or
approximately 14.5% to $11,854,000 in the year ended September 30, 1999.  Gross
profit expressed as a percentage of revenues ("Gross Margin") increased to
approximately 13.6% of sales in 1999 from approximately 13.3% of sales in 1998.
Gross Margin improved in the Texas Petroleum Marketing and EDCO Environmental
segments, and declined in the Texas Convenience Stores and Louisiana Operations
segments in 1999, as compared with 1998.  The decline in gross profit in 1999 is
due to reduced revenues in the current year, partially offset by higher Gross
Margins that prevailed in 1999. See segment discussions, below.

Consolidated operating expenses of continuing operations declined $2,628,000 or
approximately 14.7% in 1999 to $15,234,000.  Operating expenses declined in each
of the Company's segments in 1999, as compared with 1998.  The decline in
operating expenses is due to the closing of underperforming locations and to a
general reduction in staff that occurred in 1999.

General and administrative expenses in 1999 included a non-cash charge of
$404,000 to compensation expense, as a result of the application of Accounting
Principles Board Option No. 25, "Accounting for Stock Issued to Employees," with
respect to the vesting of certain incentive stock options that had previously
been awarded to employees. 1999 expenses also includes a noncash charge of
$61,000, representing the market value of the Company's common stock contributed
to the Company's 401-K employee benefit plan, nonrecurring legal and
professional fees of $480,000 arising from the proposed merger with Duke & Long
Distributing Company, and legal and professional fees of $339,000 arising from a
number of matters, including the restatement of the Company's previously
reported financial statements, the negotiation of the purchase agreement with
A-Free-Gift.Com, and the refinancing of the Company's senior debt.

General and administrative expenses in 1998 included non-cash compensation
expense of $1,133,000 arising from the vesting of certain incentive stock
options that had previously been awarded to employees. Adjusting 1999 and 1998
for the $1,284,000 and $1,133,000 in non-cash and nonrecurring expenses,
respectively, and adjusting for the non-cash gain on sale of ChemWay and
subsequent loss on impairment in marketable securities, adjusted net loss in
1999 of $3,420,000 declined $900,000 from an adjusted net loss of $4,320,000 in
1998.

                                    Page 11
<PAGE>

Consolidated operating losses of continuing operations declined $614,000 or
approximately 15.4% to $3,380,000 in 1999 as compared with a loss of $3,994,000
in 1998.  The reduced operating loss is due to reduced operating expenses in
1999, partially offset by reduced gross profits.

Consolidated loss from continuing operations increased to $7,301,000 in 1999 as
compared to $4,605,000 in 1998.  Loss from continuing operations in 1999
includes a $784,000 valuation allowance on ChemWay net assets transferred, a
$415,000 increase in interest expense, other expense increases of $247,000 and a
provision for income taxes on the sale of ChemWay of $1,203,000.  The loss from
continuing operations in 1998 included a $708,000 income tax benefit from the
Company's losses.  The $2,696,000 increase in loss from continuing operations is
comprised of a $614,000 decrease in the Company's operating loss and the
$3,310,000 increase in non-operating expenses discussed above.

Consolidated net loss increased to $7,301,000 compared to $5,453,000 in 1998, a
$1,848,000 increase.

TEXAS PETROLEUM MARKETING SEGMENT

Under regulations issued by the U.S. Environmental Protection Agency ("EPA"),
all underground storage tanks in the State of Texas were required to meet
certain standards of protection as of December 22, 1998.  During 1998, the
Company evaluated the revenues generated by its Special Purpose Lease accounts,
and determined that it could not justify further investment at approximately 46
of such locations.  Accordingly, management decided to either sell or close
those identified lower-volume Special Purpose Lease facilities.  As of September
30, 1998, the Company sold its investment at 23 of the lower-volume Special
Purpose Lease accounts, and has subsequently sold the equipment at seven
additional sites.  Additionally, the Company has discontinued the delivery of
motor fuels, and has removed the underground storage tanks at 16 Special Purpose
Lease sites.  The Special Purpose Lease locations where the Company sold its
investment in equipment are now served by the Company as Open Dealers.

The effect of the conversion of Special Purpose Lease customers into Open
Dealers is to increase the Company's sales revenues with reduced gross margin,
working capital requirements, and capital investment, resulting in an improved
return on investment.  Since the Company's margins on Open Dealer accounts are
contractually fixed, however, the Texas Petroleum Marketing Segment's gross
margins may be less volatile in the future, as a larger percentage of the
segment's business will be at fixed margins.

On May 21, 1999, the company closed its bulk storage facility and office in El
Campo, Texas and eliminated 35% of its staff in the Texas Petroleum Marketing
segment.  The company also sold its Bay City Tire Store on May 3, 1999.  On June
30, 1999, the Company sold its Fuelman fleet card franchise to a competitor.

Sales in the Texas Petroleum Marketing Segment declined $14,294,000 or
approximately 22.2% to $50,164,000 in 1999, as compared with $64,458,000 in
1998.  Sales in gallons declined to 44,441,000 gallons in 1999 from 60,158,000
gallons in 1998, a decline of approximately 26.13%.  Average selling price per
gallon increased in 1999 to approximately $1.13 per gallon, as compared with
$1.07 per gallon in 1998.  The increase is due to the conversion of Special
Purpose Lease customers into Open Dealers during late 1998 and early 1999.
Although the Company realizes a higher average selling price per gallon, the
Company's gross profit per gallon on sales to Open Dealers can be significantly
lower than on sales to Special Purpose Lease customers.

Gross Profit in 1999 declined to $4,401,000 from $5,461,000 in 1998, a decline
of $1,060,000 or approximately 19.4%.  Gross Margin increased to approximately
8.77% of sales in 1999 from approximately 8.47% of sales in 1998.

Operating expenses in 1999 declined to $5,736,000 from $6,448,000 in 1998, a
decline of $712,000 or approximately 11.0%, primarily as a result of a general
reduction in staff.

Operating loss in 1999 increased to $1,335,000 from $987,000 in 1998, an
increase of $348,000 or approximately 35.3%, as a result of lower revenues and
gross profits in 1999, partially offset by reduced operating expenses in 1999.

TEXAS CONVENIENCE STORE SEGMENT

At September 30, 1999, the Company operated 17 convenience stores, featuring
self-service motor fuels and a variety of food and non-food merchandise.  Eight
of the Company's convenience stores are co-branded with a nationally recognized
fast food franchised or licensed food service operation.  The Company's stores
are located in smaller communities throughout the gulf coast region of Texas.

The Company closed two underperforming Texas convenience stores during 1999, one
of which was subsequently leased to an independent operator who also agreed to
purchase fuel from the Company as an Open Dealer.

                                    Page 12
<PAGE>

Total sales declined $2,753,000 or approximately 10.7% in 1999 to $22,873,000
from $25,626,000 in 1998.  Fuel sales in 1999 were $12,659,000 as compared with
$13,965,000 in 1997; fuel sales in gallons also declined in 1999, to 12,753,000
gallons as compared with 13,131,000 gallons in 1998.  The decrease in fuel sales
revenues is due to the lower retail selling prices for fuels that prevailed
during 1999, and to fewer operating stores during the current year.  Merchandise
sales decreased $1,184,000 to $9,599,000 as compared with $10,783,000 in 1998.
The decline in merchandise sales is primarily due to fewer operating stores
during 1999.

Gross profit declined to $4,768,000 in 1999 as compared with $5,615,000 in 1998.
Gross Margin in the Texas Convenience Store segment declined in 1999 to
approximately 20.85% as compared with approximately 21.91% in 1998.  Merchandise
Gross Margin increased in 1999, to approximately 32.08% of sales, as compared to
approximately 31.18% of sales in 1998.  Fuel Gross Margin, however, decreased to
approximately 8.74% during 1999, as compared with approximately 10.0% during
1998.

Operating expenses during 1999 in the Texas Convenience Store segment was
$4,802,000 as compared with $6,158,000 in 1998, a decrease of $1,356,000 or
approximately 22.0%.  The decline in operating expenses is principally
attributable to the closing of 2 underperforming stores during 1999, and to an
overall reduction in staff during late 1998.

The Convenience Store segment incurred an operating loss of $34,000 in 1999, as
compared with a loss of $543,000 in 1998.  The reduced loss is due to reduced
operating expenses during the current year, partially offset by reduced sales
and resulting gross profits.

LOUISIANA OPERATIONS SEGMENT

At September 30, 1999 Louisiana operations are comprised of a fuel bulk storage
facility and distribution center, one full-service station without a convenience
store, and seven convenience stores, located in and around Lake Charles,
Louisiana.

Sales declined $184,000 or approximately 1.4% to $12,694,000 in 1999 from
$12,878,000 in 1998.  Sales of fuels and other refined petroleum products
declined $343,000 or approximately 3.4% to $9,671,000 in 1999 as compared with
$10,014,000 in 1998.  Convenience store merchandise sales increased $176,000 in
1999, or approximately 6.5%, to $2,882,000 as compared with $2,706,000 in 1998.

Gross profits declined $387,000 or approximately 17.9% in 1999, to $1,778,000 as
compared with $2,165,000 in 1998.  Gross Margin declined to approximately 14.0%
of sales in 1999, as compared with approximately 16.8% of sales in 1998.  Gross
Margin on fuel sales declined to approximately 9.3% of sales in 1999, as
compared with approximately 11.8% of sales in 1998, primarily due to the
competitive retail fuel pricing which prevailed in the Louisiana market area in
1999.  Merchandise Gross Margin in 1999 declined to approximately 23.5% of
sales, as compared to approximately 27.3% of sales in 1998.  The Company
generally reduced its merchandise retail pricing in 1999 to meet competition.

Operating expenses in 1999 were $2,112,000, a reduction of $141,000 or
approximately 6.3% as compared to 1998.  The reduction in operating expenses
primarily reflects a reduction in staff that was implemented in 1999.

Operating loss in 1999 increased to $334,000, as compared with a loss of $88,000
in 1998.  The increased loss in 1999 is attributable to lower sales and
resultant gross profits in 1999, partially offset by reduced operating expenses.

EDCO ENVIRONMENTAL SEGMENT

EDCO Environmental reported an operating profit of $177,000 in the year ended
September 30, 1999, as compared with an operating loss of $81,000, primarily due
to increased sales revenues and resultant gross profits. The work performed in
conjunction with bringing sites into compliance with the December 22, 1998 EPA
requirements is substantially complete. EDCO Environmental will continue to
focus its attention on environmental remediation projects that have been pre-
approved for reimbursement by the Texas Natural Resource Conservation
Commissions' ("TNRCC") fund, or by private insurers. Management believes that
such opportunities will continue to exist; however there can be no assurance
that they will do so.

UNALLOCATED GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses declined $441,000 in 1999, to $1,854,000 as
compared with $2,295,000 in 1998.  Corporate expenses in 1999 included a non-
cash charge of $404,000 to compensation expense, as a result of the application
of Accounting Principles Board Option No. 25, "Accounting for Stock Issued to
Employees," with respect to the vesting of certain incentive stock options that
had previously been awarded to employees.  1999 expenses also includes a noncash
charge of $61,000, representing the market value of the Company's common stock
contributed to the Company's 401-K employee benefit plan, nonrecurring legal and
professional fees of $480,000 arising from the proposed merger with Duke & Long
Distributing Company, and legal and professional

                                    Page 13
<PAGE>

fees of $339,000 arising from a number of matters, including the restatement of
the Company's previously reported financial statements, the negotiation of the
purchase agreement with A-Free-Gift.Com, and the refinancing of the Company's
senior debt.

General and administrative expenses in 1998 included non-cash compensation
expense of $1,133,000 arising from the vesting of certain incentive stock
options that had previously been awarded to employees.  Adjusting 1999 and 1998
for the $1,284,000 and $1,133,000 in non-cash and nonrecurring expenses,
respectively, adjusted corporate expenses in 1999 of $570,000 declined $592,000
or approximately 51.0% as compared with adjusted expenses of $1,162,000 in 1998.

                        CAPITAL RESOURCES AND LIQUIDITY

Cash and cash equivalents were $725,000 and $992,000 at September 30, 2000 and
1999, respectively. The Company had a net working capital deficit of
$13,153,000, as compared with a deficit of $9,723,000 at September 30, 1999. The
working capital deficit is primarily the result of $9,153,000 in secured debt,
and $704,000 in capital lease obligations being classified as current
liabilities in 2000. At 9/30/1999 $8,712,000 in secured debt and $293,000 in
capital lease obligations were classified as current liabilities. The notes
payable on the secured debt totaling $9,153,000 mature January 31,2001. The
capital lease obligations were in default at September 30,2000. The Company has
placed for sale certain properties with the proceeds from the sales intended to
reduce debt. The Company has reached an agreement in principle with its primary
lender that could lead to a significant reduction in debt. Management is also
evaluating a strategic partnership that will allow the Company to reinstitute a
supply of petroleum products at its terminal facility.  Management anticipates
that should the strategic partnership be successful, that its terminal can
return to operations by the end of the second quarter of 2001. Management is
actively pursuing the refinance of its existing bank debt with several potential
lenders. The new financing would be amortized over a longer period more
reflective of the lives of the collateral. The new financing in conjunction with
the planed debt reduction from asset sales would have the effect of increasing
the availability of working capital.  However, there can be no assurance that
management's plans described above will be successful.

Cash used by operating activities was $671,000 and $618,000 in the years ended
September 30, 2000 and 1999, respectively.

During the year ended September 30, 2000, the Company received proceeds of
$575,000, arising from the issuance of common stock in a private placement
transaction.

The Company's common stock was 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 as a result of the Company's
common stock no longer being listed on a national exchange.

As a result of matters discussed above, there is substantial doubt about the
Company's ability to continue as a going concern.

                        RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes new accounting and
reporting standards for derivative instruments.  In June 1999, the FASB issued
SFAS No. 137, "Accounting For Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133", which defers the
effective date of SFAS No. 133 for one year to be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000.  In June 2000, the
FASB issued SFAS No. 138, "Accounting For Certain Derivative Instruments and
Certain Hedging Activities-an amendment to FASB Statement No. 133", which amends
the accounting and reporting standards of Statement 133 for certain derivative
instruments and certain hedging activities.  The Company has not entered into,
and is not expected to enter into, any material transactions involving
derivative instruments or hedging activities.  Therefore, management believes
there would be no material effect to the Company's financial statements as a
result of implementation of these statements.

                                 RECENT EVENTS

On December 4, 2000 the company entered into a stipulated judgment against
Affiliated Resources Corp, and ChemWay pertaining to the company's sale of
ChemWay to Affiliated in December 1998. The judgment granted by the 130th
Judicial District Court of Texas was for $6,000,000 arising from Affiliated's
failure to fund the put right at $4.00 per share on the 1,500,000 shares of
Affiliated stock that the company had received as consideration for the 1998
transaction. As stipulated in the judgment, the Company received a deed in lieu
of foreclosure for the ChemWay assets and improvements as sole payment of the
judgment (see Note 13-B). Management is presently evaluating all strategic
alternatives relating to the recently reclaimed assets

                                    Page 14
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of the Company included in this annual
report on Form 10-K are listed under Item 14, Exhibits, Financial Statement
Schedules and Reports on Form 8-K.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

The Company has restated previously reported financial results for fiscal year
2000 and 1999 to give effect to the application of Securities and Exchange
Commission (SEC) Staff Accounting Bulletin (SAB) Topic 5:E, Accounting for
Divestiture of a Subsidiary or Other Business Operation, for the sale of ChemWay
to Affiliated Resources Corporation (Note 3).  After reviewing the guidance the
Company realized that the sale of ChemWay, although a divestiture for legal
purposes, was not a divestiture for accounting purposes. The financial
statements of the Company as of September 30, 1999 were originally audited by
PricewaterhouseCoopers LLP.  Their report on the 1999 financial statements was
before the restatement and included uncertainty language concerning the
Company's ability to continue as a going concern. PricewaterhouseCoopers LLP has
declined to audit the 1999 restated financial statements after the effects of
the application of SAB Topic 5:E were recorded. To meet the disclosure
requirements and avoid the cost of reauditing the 1999 financial statements the
Company has elected to present the 1999 restated financial statements as
unaudited in the accompanying consolidated financial statements. Since
PricewaterhouseCoopers LLP has declined to reissue their reports the 1998
financial statements, although they have not been revised are also labeled as
unaudited. The Company's decision to engage Stephenson & Trlicek, P. C. to audit
the 2000 financial statements preceded the change in accounting for the sale of
ChemWay and was approved by the Audit Committee and Board of Directors. We have
discussed the restatement of the financial statements with our prior auditors,
Audit Committee and the Board of Directors. The Company's current auditor's have
issued an audit report on the 2000 restated financial statements.

                                    PART III

ITEMS 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information with respect to the current
directors and executive officers of the Company.

<TABLE>
<CAPTION>

      NAME                                      POSITION                                               AGE
<S>                                             <C>                                                    <C>
Jerriel L. Evans, Sr.                           Chairman of the Board, President and Chief              61
                                                Executive Officer

Peter J. Losavio, Jr.                           Vice Chairman of the Board                              59

Maybell H. Evans                                Secretary                                               61

Darlene N. Jones                                Director, Treasurer and Administrative Manager          42

Charles N. Way                                  Director, and Controller                                58

Richard A. Goeggel                              Director, Vice President and Chief Financial Officer    49

Julie H. Edwards                                Director                                                42

Matt Hessions                                   Director                                                49

Carl W. Schafer                                 Director                                                64

Jerry L. Evans, Jr.                             Vice President of Corporate Relations and               35
                                                Human Resources
</TABLE>

The principal occupation of each director and executive officer for at least the
last five years is set forth below:

JERRIEL L. EVANS, SR. has been a member of the Company's Board of Directors
since August 1968.  Mr. Evans founded the Company in 1968.  Mr. Evans founded
the Company in 1968 and has served as its Chairman of the Board, President and
Chief Executive Officer since that time.  Mr. Evans was born in Flint, Texas, in
1939 and subsequently moved to Woodsboro, Texas, where he graduated from
Woodsboro High School in 1957.  Mr. Evans attended San Antonio Community College
where he majored in Business Administration.  From 1954 to 1960, Mr. Evans owned
and operated a gasoline service station.  From 1960 to 1968, Mr. Evans was
employed by

                                    Page 15
<PAGE>

Amoco Oil Company where he held various sales and managerial positions. In 1985,
he was awarded top salesman for the Kansas City Region. Because the region
comprised several states, the honor bestowed upon Mr. Evans was very
prestigious. Additionally, in 1992, Mr. Evans was selected as a Regional
Finalist for the Entrepreneur of the year Award granted annually by Ernst &
Young and Merrill Lynch.

PETER J. LOSAVIO, JR. has been a member of the Company's Board of Directors
since May 1993.  Mr. Losavio was born in Baton Rouge, Louisiana in 1949 and
graduated from Baton Rouge High School in 1967.  He received his Bachelor of
Science degree in chemistry from Tulane University in 1970, and his Masters
degree in chemistry from Tulane University in 1973.  He graduated from Louisiana
State University Law School in Baton Rouge, Louisiana in 1975 and received a
masters of laws in taxation from the University of Florida in 1976.  Mr. Losavio
is a Board Certified Tax Attorney.  He became a licensed and certified
accountant in Louisiana in 1979.  He completed the certified financial planning
program offered by the College for Financial Planning in Denver, Colorado in
1987.  From 1980 to present, Mr. Losavio has been an instructor in the College
of Business Administration at Louisiana State University, teaching corporate
tax, partnership taxation, Sub S, estate planning, and tax practices and
procedures.  Mr. Losavio has been a co-author and lecturer for various
continuing education programs sponsored by the Society of Louisiana Certified
Public Accountants and National Business Institute.  He was a speaker at the
1990 Louisiana Advanced Tax Workshop.  From 1990 to present, he has been a
member of the Ad Hoc Advisory Committee to the Commissioner of Securities for
the State of Louisiana.  From 1980 to present, he has been as assistant bar
examiner.  In 1980, he was Chairman of the Tax Committee for the Society of
Louisiana Certified Public Accountants.

MATT HESSION is a 1976 graduate of Nicholls State in Louisiana and a veteran of
the United States Marine Corp. Mr. Hession has founded (10) ten companies over
his professional career. He was most recently CEO of Key Medical Services of
Baton Rouge, LA and is currently on the Board of Directors of Amedisys (AMED).
Matt is also a member of the National Management Turnaround Association. He
presently does turnaround management work as owner of his private consulting
firm.

MAYBELL H. EVANS was a member of the Company's Board of Directors from August
1968 to June 1999.  Ms. Evans has also served as the Company's Secretary since
its inception.  Ms. Evans was born in Holliday, Texas in 1939 and graduated from
Sweeny High School, Sweeny, Texas, in 1957.  She joined the Company full time in
1968, managing accounts receivable, collections, and corporate affairs.

DARLENE E. JONES has been a member of the Company's Board of Directors since
December 1992.  Ms. Jones is also Treasurer and serves as the Administrative
Manager for the Company.  She has held these positions since 1993.  Ms. Jones
was born in San Antonio, Texas, in 1958, and graduated from Bay City High School
in 1976.  She then attended and graduated in 1980 from Southwestern University
where she received a Bachelor of Science degree in Biology/Chemistry.
Subsequently, Ms. Jones complete course work involving computer systems
technology.  She joined the Company in 1980.

CHARLES N. WAY has been a member of the Company's Board of Directors since March
1982.  Mr. Way also serves as Controller of the Company.  He has held these
positions since June 1980 and March 1982, respectively.  Mr. Way previously
served as the Company's Chief Financial Officer from June 1980 until June 1997.
Mr. Way joined the Company in June of 1979.  He was born in Houston, Texas, in
1942 and graduated from Jessie H. Jones High School in 1961.  He received a
B.B.A. degree in Accounting from Texas A&M University in 1966.  He was employed
with Texaco, Inc. from 1966 to 1968 where he served as an accountant.  From 1968
to 1973, Mr. Way served as an Accounting Division Manager with Tenneco Oil
Company.  From 1973 to 1976, he was employed as a Controller with News, Inc. And
Subsidiaries.  From 1976 to 1979, Mr. Way owned and operated All-Ways Automotive
& Tire Service in Houston, Texas.

RICHARD A. GOEGGEL has been a member of the Company's Board of Directors since
December 1998.  Mr. Goeggel was born in St. Louis, Missouri in 1951 and earned
his A.B. degree in Economics and M.B.A. in Finance & Accounting from Cornell
University in 1974 and 1976 respectively.  Until 1997, Mr. Goeggel was employed
as Vice President and CFO of Truck Accessories Group, Inc.  From 1995 to 1996 he
served as financial advisor to the Board of Directors of Stanley Stores, Inc.;
and from 1989 to 1995 he was employed with AppleTree Markets, Inc. as Vice
President, treasurer and director.  Mr. Goeggel joined the Company in January
1998 as financial advisor and was hired as Vice President and Chief Financial
Officer in June 1998. Mr. Goeggel resigned as Chief Financial Officer and from
the Board of Directors on August 1, 2000.

JULIE H. EDWARDS has been a member of the Company's Board of Directors since
December 1997.  Ms. Edwards was born in Charleston, West Virginia in 1959 and
earned her Bachelor of Science degree in geology and geophysics from Yale
University in 1980.  Ms. Edwards earned her Masters degree in Business
Administration/Finance from Wharton Graduate School in 1985.  Ms. Edwards was
employed with Smith Barney, Harris Upham & Co. from 1984 to 1991 and served as
Vice President of Corporate Finance with Smith Barney, Harris Upham & Co., from
1988 to 1991.  Since 1991, Mrs. Edwards has been employed with Frontier Oil
Corporation as Senior Vice President of Finance and Chief Financial Officer.
Mrs. Edwards resigned from the company's' Board of Directors in July 2000.

                                    Page 16
<PAGE>

CARL W. SCHAFER has been a member of the Company's Board of Directors since
December 1992.  Mr. Schafer was born in Chicago, Illinois in 1936 and obtained
his primary and secondary education in Illinois.  He received his Bachelor of
Arts with distinction from the University of Rochester in 1958.  He served with
the U. S. Bureau of the Budget as a budget examiner (1961-1964), a legislative
analyst (1964-1966), deputy director of budget preparation (1966-1968), director
of budget preparation (1968-1969), and as staff assistant to the U. S. House of
Representative Appropriations Committee (1969).  He served with Princeton
University as director of the budget (1969), treasurer (1972-1976), financial
vice president, and treasurer and chief financial officer (1976-1987).  He
served as a principal of Rockefeller and Company, Inc., from 1987 to 1990.  He
is currently president of the Atlantic Foundation, Princeton, New Jersey.  He
served as co-chairman of the New Jersey Governor's Task Force on improving New
Jersey's Economic and Regulatory Climate from 1982 to 1983, and is currently a
trustee or director of Roadway Express, Inc., Wainoco Oil Corporation,
Nutraceutix, Inc., Electronic Clearing House, Inc., the Paine Webber and
Guardian Groups of Mutual Funds, Harbor Branch Institution, Inc., the Jewish
Guild for the Blind, the Johnson Atelier and School of Sculpture, and Hidden
Lakes Gold Mines, Ltd.  He is a member of the advisory council of Domain
Partners and a member of the International Advisory Council of William Sword and
Company, Inc.  Mr. Schafer resigned from the Company's Board of Directors in
July 2000.

JERRY L. EVANS, JR. has been with the Company for the past fifteen years having
started with the Company as a Store Associate in 1983.  Mr. Evans graduated from
Bay City High School in 1983 and attended both Wharton County Junior College and
Southwest Texas State, where he focused on Communications and Political Science.
Mr. Evans served as Vice President of Investor Relations from 1993 to 1998 when
he was appointed Vice President of Corporate and Investor Relations and Human
Resources in April 1998.  Mr. Evans is active on several organization and
community committees having served as Chairman of the Matagorda County
Republican Party, City Councilman for Bay City, Chairman of the Home Rule
Charter Commission and the Board of Directors of the Texas Petroleum Marketers
and Convenience Store Association.

There are no family relationships between any directors and executive officers
of the Company except that Jerriel L. Evans, Sr. and Maybell H. Evans are
husband and wife and Jerry L. Evans, Jr. and Darlene E. Jones are their son and
daughter, respectively.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

During the fiscal year ended September 30, 2000 ("Fiscal 2000"), the Company's
Board of Directors formally met on eight occasions.  Each of the directors
attended (or participated by telephone) more than 75% of such meetings of the
Board of Directors and Committees on which he served during Fiscal 2000.  The
Board of Directors has no committees other than the Compensation Committee and
the Audit Committee.

The Company's Compensation Committee, which is comprised of Peter J. Lasavio
(Chairman), Carl W. Schafer, and Julie H. Edwards, reviews and approves the
compensation of the Company's executive officers and administers and interprets
the Company's stock option plans.  The Compensation Committee met or took action
on one occasion during Fiscal 2000.

The Company's Audit Committee, which is comprised of Carl W. Schafer (Chairman),
Peter J. Losavio, and Julie H. Edwards recommends the Company's independent
auditors, reviews the scope of their engagement, consults with the auditors,
reviews the results of their examination, acts as liaison between the Board of
Directors and the auditors and reviews various Company policies, including those
relating to accounting and internal controls.  The Audit Committee met or took
action on one occasion during Fiscal 2000. The board appointed Mr. Matt Hession
chairman of the Audit Committee upon the acceptance of Mr. Carl Schafer's
resignation.

COMPENSATION OF DIRECTORS

During Fiscal 2000, each director, who is not an employee of the Company
receives a monthly retainer fee of $500.  Employees of the Company receive no
additional compensation for service as a director.  All directors are reimbursed
for their reasonable out-of-pocket expenses incurred in connection with their
duties to the Company.

In December 1999, the Company granted certain members of the Board of Directors
options to acquire an aggregate of 7,500 shares at $.8125 per share.

ITEM 11.  EXECUTIVE COMPENSATION

The following table sets forth, for the fiscal years ended September 30,
2000,1999,and 1998, certain summary information concerning annual and long-term
compensation paid by the Company for services in all capacities to the company
of the Chief Executive Officer, and the other most highly compensated executive
officers of the Company at September 30, 2000 who received compensation of at
least $100,000 during the Fiscal 2000 (collectively, the "Named Officers").

                                    Page 17
<PAGE>

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                Annual Compensation                         Long-Term Compensation Awards
                                   -------------------------------------------        -------------------------------------------
    Name and                        Year   Salary($)   Bonus($)   Other Annual          Restricted    Options(#)     All Other
Principal Position                                                Compensation             Stock                    Compensation
                                                                     ($)(1)              Awards($)
<S>                                <C>    <C>         <C>        <C>                   <C>           <C>          <C>
Jerriel L. Evans, Sr. (2)
          Chairman of the Board,    2000    140,000      -0-          51,600                              -0-             (2)
          President and             1999     96,250      -0-          54,300                --         75,000             (2)
          Chief Executive Officer   1998    125,093      -0-         111,600                           91,500             (2)

Richard A. Goeggel (3)
          Vice-President and        2000     77,077      -0-             ---                              -0-             --
          Chief Financial           1999    120,000      -0-             ---                              -0-             --
          Officer                   1998     85,000      -0-              --                           50,000             --

Richard B. Dix (4)
          Executive                 2000        -0-      -0-             ---                --            -0-             --
          Vice-President            1999     51,508      -0-             ---                --             --             --
                                    1998    108,000      -0-             ---                --         35,000             --
</TABLE>
----------
I.   Although the officers receive certain perquisites, the value of such
     perquisites did not exceed for any officer the lesser of $50,000 or 10% of
     the officer's salary and bonus.

II.  In addition to the compensation for Mr. Evans set forth above, he also
     receives lease income for the rental of various properties used by the
     Company. See Note 10 to the Consolidated Financial Statements, included
     herein.

III. Mr. Goeggel's employment with the Company (including time spent as a
     consultant) began in January 1998. Mr. Goeggel resigned from the Company on
     August 1,2000.

IV.  Mr. Dix's employment with the Company began in April 1998.  Mr. Dix left
     the Company on June 11, 1999 to pursue other business interests.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information concerning Options/SARs
granted during Fiscal 2000 to the Named Officers.

<TABLE>
<CAPTION>
                                                                                Potential Realizable Value of Assumed
                                                                                      Annual Rates of Stock Price
                             Shares         % of Total                              Appreciation for Option Term (2)
                           Underlying       Granted to                          -------------------------------------
                          Options/SARs      Employees       Exercise or Base       Expiration
Name                      Granted (#)     in Fiscal 2000      ($/Share)(1)            Date          5%($)     10%($)
----                      ------------    --------------    -----------------   --------------    --------    --------
<S>                       <C>             <C>               <C>                    <C>             <C>        <C>
Jerriel L. Evans, Sr.        75,000             76%               5.00               4/16/03       214,996    342,244
</TABLE>
----------
I.   The exercise price of the options granted is equal to the market value of
     the Company's Common Stock on the date of grant.

Potential realizable value of each grant assumes that the market prices of the
underlying security appreciates at annualized rates of 5% and 10% over the term
of the award.  Actual gains, if any, on stock option exercises are dependent on
the future performance of common stock.  There can be no assurance that the
amounts reflected on this table will be achieved.

EMPLOYMENT AGREEMENTS

J. L. Evans, Sr. and the Company entered into an employment agreement, dated
October 1, 1998, for Mr. Evans to serve as President and Chief Executive Officer
of the Company through September 30, 2001. The agreement provides for an annual
base salary of $120,000 during the first year of its term, $140,000 during the
second year of its term, $150,000 during the third year of its term and

                                    Page 18
<PAGE>

for annual increases in each of the remaining years to be determined by the
Board of Directors. The agreement also provides for an annual bonus in an amount
equal to 7 1/2% of the net consolidated after-tax profits of the Company. The
agreement provides that certain options granted to Mr. Evans will vest upon a
change of control of the Company. During the term of his employment with the
Company, Mr. Evans is also entitled to participation in all other benefit plans
provided by the Company to its executives, four weeks paid vacation per year and
a $500 per month car allowance. The agreement also restricts Mr. Evans from
competing with the Company or soliciting customers or other business for any
entity other than the Company during the term of the agreement and from
disclosing certain confidential information with respect to the Company.

Richard A. Goeggel and the Company entered into an employment agreement, dated
June 22, 1998, for Mr. Goeggel to serve as Vice President and Chief Financial
Officer of the Company through June 15, 2000.  The agreement provides for an
annual base salary of $120,000 during the first year of its term and for annual
increases in each of the remaining years to be determined by the Board of
Directors.  The agreement provides that certain options granted to Mr. Goeggel
will vest upon a change of control of the Company. During the term of his
employment with the Company, Mr. Goeggel is also entitled to (i) participation
in all other benefit plans provided by the Company to its executives, and (ii)
two weeks paid vacation per year.  Upon a change of control of the Company that
results in Mr. Goeggel's removal as Vice-President or Chief Financial Officer, a
significant change in the conditions of his employment or other breach of the
agreement, Mr. Goeggel has the right to elect to deem his employment to have
been terminated by the Company and receive a lump sum payment equal to the
remaining term of the agreement (which amount shall be reduced such that all
payments will be deductible to the Company and not subject to the excise tax
imposed by the United States Internal Revenue Code of 1986, as amended).  Except
as expressly permitted in the agreement, Mr. Goeggel is also restricted from
competing with the Company or soliciting customers or other business for any
entity other than the Company during the term of the agreement and from
disclosing certain confidential information with respect to the Company.  Mr.
Goeggel resigned as Chief Financial Officer on August 1, 2000.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information concerning ownership of the Company's
Common Stock, as of December 31, 2000, by (i) each person who is known by the
Company to be the beneficial owner of more than five percent of the Common
Stock, (ii) each of the Company's directors, (iii) each Named Officer, and (iv)
all current directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
                                                                         Amount and
                                                                         Nature of                 Percent of
                          Name and Address (1)                    Beneficial Ownership (2)          Class (3)
                          --------------------                    ------------------------         -----------
<S>                                                               <C>                              <C>
J. L. Evans Systems, Ltd., a Texas Limited Partnership                   752,000(4)                   13.6%
J. L. Evans, Sr.                                                         939,460(5)                   16.9%
Maybell H. Evans                                                         775,300(6)                   13.9%
Charles N. Way                                                            20,342(7)                     *
Richard A. Goeggel                                                        50,000(8)                     *
Darlene E. Jones                                                          15,000(9)                     *
J. L. Evans, Jr.                                                          11,420(10)                    *
Carl W. Schafer                                                           10,750(11)                    *
     c/o The Atlantic Foundation
     16 Faber Road
     Princeton, NJ 08540
Peter J. Losavio, Jr.                                                     15,900(12)                    *
     8414 Bluebonnet Blvd., Suite 110
     Baton Rouge, LA 70810
Julie H. Edwards                                                           7,500(13)                    *
     3826 Coleridge
     Houston, TX 77005
All executive officers and Directors as a group (10 persons)           1,079,922                      19.4%
</TABLE>
----------
   *   less than 1%
   I.  Unless otherwise indicated, the address of each beneficial owner is c/o
       the Company, Post Office Box 2480, Bay City, Texas 77404-2480.
  II.  Beneficial ownership has been determined in accordance with Rule 13d-3
       under the Exchange Act ("Rule 13d-3") and unless otherwise indicated,
       represents shares of which the beneficial owner has sole voting and
       investment power.
 III.  The percentage of class is calculated in accordance with Rule 13d-3 and
       assumes that the beneficial owner has exercised any

                                    Page 19
<PAGE>

       options or other rights to subscribe which are execrable within sixty
       (60) days and that no other options or rights to subscribe have been
       exercised by anyone else .
  IV.  The general partner is J.L. Evans Management, Inc. (controlled by J.L.
       Evans, Sr. and Maybell H. Evans) and the limited partners are Jerriel L.
       Evans, Sr., Maybell H. Evans, and their children, Darlene E. Jones,
       Jerriel L. Evans, Jr., and Terry W. Evans.
   V.  Includes 752,000 shares held by J.L. Evans Systems, Ltd., of which Mr.
       Evans claims beneficial ownership. Includes 75,000 shares issuable upon
       the exercise of options.
  VI.  Includes 752,000 shares held by J.L. Evans Systems, Ltd., of which Mrs.
       Evans claims beneficial ownership.
 VII.  Includes 7,000 shares issuable to Mr. Way upon the exercise of options.
VIII.  Includes 50,000 shares issuable to Mr. Goeggel upon the exercise of
       options.
  IX.  Includes 5,000 shares issuable to Mrs. Jones upon the exercise of
       options.
 (10)  Includes 9,000 shares issuable to Mr. Evans, Jr. upon the exercise of
       options.
 (11)  Includes 10,000 shares issuable to Mr. Schafer upon the exercise of
       options.
 (12)  Includes 5,000 shares issuable to Mr. Losavio upon the exercise of
       options.
 (13)  Includes 7,500 shares issuable to Mrs. Edwards upon the exercise of
       options.

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission").  Officers, directors and greater than ten percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file.

The Company believes, based solely on review of copies of such forms furnished
to the Company, or written representations that no Form 5's were required, that
all Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with during Fiscal
2000, except that J. L. Evans Systems, Ltd. inadvertently filed a Form 5 late.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 2000, the Company leased two convenience store locations from Mr. J.L.
Evans, Sr., the largest shareholder of the Company. One ten-year lease commenced
in June 1987 with monthly lease payments of $2,500, which was renewed for one
additional five-year period. One five-year lease commenced in March 1995 with
monthly lease payments of $1,800 and allows for two five-year automatic renewals
at the Company's option, which were not exercised by the Company. The amounts
paid under these leases were $51,600, $54,300, and $76,800 for the years ended
September 30, 2000, 1999 and 1998, respectively. Future minimum lease
commitments as of September 30, 2000 are $52,500.

From time to time, the Company makes advances to individuals who are
shareholders, directors, officers and/or employees.  Such advances are usually
unsecured and accrue interest at 9%.  There were no advances outstanding at
September 30, 2000 and 1999.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

I.   The following financial statements, schedules and exhibits are filed as
     part of this report:

     (1) and (2) Financial Statements and Financial Statement Schedules.
          See Index to Consolidated Financial Statements on Page F-1.
     (3) Exhibits.
          See Index to Exhibits on sequential page 25.

II.  Reports on Form 8-K:
     No Reports on Form 8-K were filed during the quarter ended September 30,
     2000.

                                    Page 20
<PAGE>

EVANS SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

<S>                                                                        <C>
                                                                        PAGE NO.
                                                                        --------

Independent Auditor's Report                                               F-2

Consolidated Balance Sheets at September 30, 2000 and 1999                 F-3

Consolidated Statements of Operations for the Years Ended September 30,
 2000, 1999 and 1998                                                       F-4

Consolidated Statements of Cash Flows for the Years Ended September 30,
 2000, 1999 and 1998                                                       F-5

Consolidated Statements of Stockholders' Equity and Comprehensive
 Income for the Years Ended September 30, 2000, 1999 and 1998              F-6

Notes to Consolidated Financial Statements                                 F-7
</TABLE>

                                      F-1
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders of
Evans Systems, Inc.

We have audited the accompanying consolidated balance sheet of Evans Systems,
Inc. and its subsidiaries at September 30, 2000 and the related consolidated
statement of operations, stockholders' equity and comprehensive income, and cash
flows for the year 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 audit. The financial statements of Evans
Systems, Inc. as of September 30, 1999 and 1998 are unaudited.

We conducted our audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the 2000 financial statements referred to above present fairly,
in all material respects, the financial position of Evans Systems, Inc. at
September 30, 2000 and the results of its operations and its cash flows for the
year 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 13-C to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding these
matters are described in Note 13-C. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

As discussed in Note 13-A, the Company has restated its financial statements for
fiscal year 2000 and 1999.



/s/ Stephenson & Trlicek, P. C.

Wharton, Texas
January 5, 2001, except for paragraphs 5-7 of Note 3 and Note 13 of which the
date is October 18, 2001

                                      F-2
<PAGE>

EVANS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000, 1999
--------------------------------------------------------------------------------
<TABLE>

                                                                                          2000                     1999
                                                                                        --------                 -------
                                                                                      (AS RESTATED)             (UNAUDITED)
<S>                                                                          <C>                      <C>
                                ASSETS

Current assets:
 Cash and cash equivalents                                                              $    725                 $   992
 Trade receivables, net of allowance for doubtful receivables of                           2,536                   2,411
  $285,000 and $290,000 respectively
 Inventory                                                                                 2,717                   2,984
 Prepaid expenses and other current assets                                                   170                     342
                                                                                        --------                 -------
  Total current assets                                                                     6,148                   6,729
 Property and equipment, net                                                              13,409                  14,896

 Net assets transferred under contractual agreement, net of a                              1,628                   2,430
  valuation allowance of $1,586,000 and $784,000, respectively
 Other assets                                                                                136                     319
                                                                                        --------                 -------
  Total assets                                                                          $ 21,321                 $24,374
                                                                                        ========                 =======

            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
 Accounts payable and accrued expenses                                                  $  7,575                 $ 5,920
 Current portion of long-term debt                                                         9,910                   9,521
 Current portion of obligations under capital leases                                         744                     323
 Accrued interest                                                                          1,072                     688
                                                                                        --------                 -------
  Total current liabilities                                                               19,301                  16,452
 Long-term debt, net of current maturities                                                   630                   1,088
 Obligations under capital leases, net of current maturities                                  86                     546
                                                                                        --------                 -------
  Total liabilities                                                                       20,017                  18,086
 Commitments and contingencies
  Redeemable common stock, -0- and 40,000 shares issued and
  outstanding, respectively                                                                    -                     160


 Stockholders' equity
  Common stock, $0.01 par value, 15,000,000 shares
  authorized,5,542,331 and 4,064,831 shares issued, respectively                              55                      41
 Additional paid-in capital                                                               16,850                  15,686
 Accumulated deficit                                                                     (15,167)                 (9,165)
 Treasury stock, 72,589 shares, at cost                                                     (434)                   (434)
                                                                                        --------                 -------
  Total stockholders' equity                                                               1,304                   6,128
                                                                                        --------                 -------
  Total liabilities and stockholders' equity                                            $ 21,321                 $24,374
                                                                                        ========                 =======
</TABLE>
  The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>

EVANS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(in thousands, except per share amounts)                   2000              1999              1998
                                                         -------           -------           --------
                                                      (AS RESTATED)      (UNAUDITED)       (UNAUDITED)
<S>                                                   <C>               <C>               <C>
Revenue:
 Motor fuel sales (including consumer excise
  and state fuel taxes of $22,721, $20,000
  and $20,391, respectively                              $79,054           $70,243           $ 83,830
 Other sales and services                                 16,275            17,030             20,284
                                                         -------           -------           --------
  Total revenues                                          95,329            87,273            104,114
Cost of sales
 Motor fuels                                              73,803            64,580             77,276
 Other sales and services                                 11,385            10,839             12,970
                                                         -------           -------           --------
  Total cost of sales                                     85,188            75,419             90,246
                                                         -------           -------           --------
Gross profit                                              10,141            11,854             13,868
Operating expenses
 Employment expenses                                       5,727             6,864              8,881
 Other operating expenses                                  3,552             3,558              3,998
 Other general and administrative expenses                 2,788             3,223              3,088
 Depreciation and amortization                             1,513             1,589              1,895
                                                         -------           -------           --------
  Total operating expenses                                13,580            15,234             17,862
                                                         -------           -------           --------
Operating loss                                            (3,439)           (3,380)            (3,994)
Other income (expense)
 Valuation allowance on net assets
  transferred (Note 3)                                      (802)             (784)                 -
 Gain (loss) on sale of assets                               (37)              381                 46
 Interest income                                              16                94                 22
 Interest expense                                         (1,725)           (1,802)            (1,387)
 Other income (expense)                                      (15)             (654)                 -
                                                         -------           -------           --------
  Total other income (expense)                            (2,563)           (2,765)            (1,319)
                                                         -------           -------           --------
Loss from continuing operations before
 income taxes                                             (6,002)           (6,145)            (5,313)
Provision (benefit) from income taxes                          -             1,156               (708)
                                                         -------           -------           --------
Loss from continuing operations                           (6,002)           (7,301)            (4,605)
Discontinued operations
 Loss from discontinued operations of
  ChemWay to March 31, 1998, less applicable
  income taxes (Note 3)                                        -                 -               (848)
                                                         -------           -------           --------
Net loss                                                 $(6,002)          $(7,301)          $ (5,453)
                                                         =======           =======           ========
Basic and diluted earnings (loss) per
 common share:
 Continuing operations                                   $ (1.41)          $ (1.90)          $  (1.48)
 Discontinued operations                                       -                 -              (0.27)
                                                         -------           -------           --------
  Earnings (loss) per common share                       $ (1.41)          $ (1.90)          $ (1.75)
                                                         =======           =======           ========
Basic and diluted weighted average common
 shares outstanding                                        4,263             3,846              3,116
                                                         =======           =======           ========
</TABLE>

  The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>

EVANS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(in thousands)                                                  2000                  1999                1998
                                                               -------               -------             -------
                                                            (AS RESTATED)         (UNAUDITED)         (UNAUDITED)
<S>                                                         <C>                 <C>                   <C>
Cash flows from operating activities
 Net loss                                                      $(6,002)              $(7,301)            $(5,453)
 Adjustments:
  Depreciation and amortization                                  1,513                 1,589               2,105
  Stock option compensation expense                                247                   404               1,401
  Deferred operating loss of ChemWay                                 -                     -                (644)
  Valuation allowance on net assets transferred                    802                   784                   -
  (Note 3)
  Loss (gain) on sale of assets                                     37                  (381)                (46)
  Deferred income taxes                                              -                 1,203              (1,452)
  Loss on settlement of financial advisor claim                      -                   610                   -
  Changes in assets and liabilities:
   Receivables                                                    (125)                  340               1,817
   Inventory                                                       267                   730               3,092
   Prepaid expenses and other                                      355                   883                  71
   Accounts payable and accrued expenses                         2,235                   393              (1,684)
   Income taxes receivable/payable                                   -                   128                 182
                                                               -------               -------             -------
    Net cash used by operating activities                         (671)                 (618)               (611)
Cash flows from investing activities:
 Capital expenditures                                             (467)                 (641)             (1,386)
 Proceeds from sale of property and equipment                      404                 1,606               1,610
 Other                                                               -                     -                 (45)
                                                               -------               -------             -------
    Net cash provided by investing activities                      (63)                  965                 179
Cash flows from financing activities
 New borrowings                                                  1,000                   322               1,715
 Reduction of long-term debt                                    (1,069)               (1,607)             (1,607)
 Reduction of capital lease obligations                            (39)                  (86)               (256)
 Net proceeds from stock issuance                                  575                 1,185                 114
                                                               -------               -------             -------
    Net cash provided (used) by financing activities               467                  (186)                (34)
                                                               -------               -------             -------
Net increase (decrease) in cash and cash
 equivalents                                                      (267)                  161                (466)
Cash and cash equivalents, beginning of year                       992                   831               1,297
                                                               -------               -------             -------
Cash and cash equivalents, end of year                         $   725               $   992             $   831
                                                               =======               =======             =======
Supplemental disclosure of cash flow
 information:
 Cash paid for interest                                        $ 1,341               $ 1,320             $ 1,169
                                                               =======               =======             =======
 Cash paid for taxes                                           $     -               $    47             $    58
                                                               =======               =======             =======
</TABLE>

  The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>

EVANS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(in thousands, except common
 share amounts)

                                                                                     RETAINED
                                           COMMON STOCK           ADDITIONAL         EARNINGS
                                        ------------------         PAID-IN         (ACCUMULATED          TREASURY
                                        SHARES      AMOUNT         CAPITAL            DEFICIT)            STOCK     TOTAL
                                        ---------   ------         -------            --------            -----    -------
<S>                                  <C>            <C>      <C>             <C>                  <C>              <C>
Balance - September 30, 1997            3,163,573      $32         $12,297            $  3,589            $(434)   $15,484

Warrants exercised                        104,725        1             152                                             153
Compensation expense
 recognized in connection
 with options granted                                                1,362                                           1,362
Net loss and comprehensive
 loss for 1998                                                                          (5,453)                     (5,453)
                                        ---------      ---         -------            --------            -----    -------
Balance - September 30, 1998
 (Unaudited)                            3,268,298       33          13,811              (1,864)            (434)    11,546

Stock options exercised                   383,818        4             711                                             715
Warrants exercised                         62,715        1             187                                             188
Issuance of common stock                  350,000        3             729                                             732
Compensation expense
 recognized in connection
 with options granted                                                  248                                             248
Net loss for 1999                                                                       (7,301)                     (7,301)
                                        ---------      ---         -------            --------            -----    -------
Balance - September 30, 1999
 (Unaudited)                            4,064,831       41          15,686              (9,165)            (434)     6,128

Stock options exercised
Warrants exercised
Issuance of common stock                1,437,500       14             561                                             575
Expiration of redeemable
 common stock                              40,000        -             160                                             160
Compensation expense
 recognized in connection
 with options granted                                                  443                                             443
Net loss for 2000                                                                       (6,002)                     (6,002)
                                        ---------      ---         -------            --------            -----    -------
Balance - September 30, 2000
 (As Restated)                          5,542,331      $55         $16,850            $(15,167)           $(434)   $ 1,304
                                        =========      ===         =======            ========            =====    =======
</TABLE>
  The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

1.DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  BUSINESS OPERATIONS
  Evans Systems, Inc. and its subsidiaries (the Company) are engaged in
  petroleum marketing, convenience store operations and environmental
  remediation services.  The Company operates primarily along the Gulf Coast
  Regions of Texas and Louisiana.

  PRINCIPLES OF CONSOLIDATION
  The consolidated financial statements include the accounts of Evans Systems,
  Inc. and its subsidiaries.  All significant intercompany transactions have
  been eliminated.

  BASIS OF ACCOUNTING
  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. Environmental
  segment revenues are recognized on the percentage of completion method.  There
  was no material work in process at September 30, 2000, 1999 and 1998.
  Expenses are recognized in the period in which they are incurred.

  CASH AND CASH EQUIVALENTS
  For purposes of the statements of cash flows, the Company considers all highly
  liquid investments with original maturities of three months or less to be cash
  equivalents.  Cash and cash equivalents are stated at cost which approximates
  fair market value.

  INVENTORIES
  Substantially all inventories are products held for sale.  Inventories of 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.  Gas and diesel
  fuels inventory is valued using the last-in, first-out (LIFO) method which
  resulted in inventory being $368,000 and $100,000 less at September 30, 2000
  and 1999 than replacement cost.  During 1999, fuel inventory quantities were
  reduced.  The reduction resulted in a liquidation of LIFO inventory quantities
  carried at lower costs prevailing in prior years, the effect of which
  decreased cost of sales by $77,000.

  PROPERTY AND EQUIPMENT
  Property and equipment is stated at cost and is depreciated utilizing the
  straight-line method of computing depreciation over their estimated useful
  lives.  The cost of assets retired and the related accumulated depreciation
  are removed from the accounts and any gain or loss is included in the results
  of operations when incurred.  Repairs and maintenance are charged to expense
  as incurred.  Expenditures for major additions and replacements that extend
  the lives of assets are capitalized and depreciated over their remaining
  estimated useful lives.  The Company depreciates assets over the following
  estimated useful lives:

          Buildings                     15-41 years
          Leasehold improvements        Life of lease, up to 31 years
          Equipment                     15 years
          Transportation equipment      5 years
          Office equipment              5-7 years


                                      F-7
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

  IMPAIRMENT OF LONG-LIVED ASSETS
  The Company periodically assesses the realizability of its long-lived assets
  and evaluates such assets for impairment whenever events or changes in
  circumstances indicate that the carrying amount of an asset may not be
  recoverable.  Asset impairment is determined to exist if estimated future cash
  flows, undiscounted and without interest charges, are less than the carrying
  amount.

  MARKETABLE SECURITIES
  The Company's investments classified as marketable securities are considered
  as "available for sale".  Such securities are recorded at market value with
  unrealized gains and losses being recognized as a separate component of
  shareholders' equity.  Any "other than temporary" impairments to the market
  value of the securities are recognized as expense during the period in which
  the impairment incurs.

  STOCK-BASED COMPENSATION PLANS
  The Company applies Accounting Principles Board Opinion No. 25, "Accounting
  for Stock Issued to Employees" (APB 25) and related interpretations in
  accounting for its plans.

  INCOME TAXES
  The Company and its subsidiaries file a consolidated federal income tax
  return.

  The Company recognizes income tax expense based on the liability method of
  accounting for income taxes.  Deferred tax assets and liabilities are
  recognized for the income tax effect of temporary differences between the tax
  basis of assets and liabilities and their carrying values for financial
  reporting purposes.  Deferred tax expense or benefit is the result of changes
  in deferred tax assets and liabilities during the period.  The Company has
  recorded a valuation allowance to reflect the estimated amount of deferred tax
  assets that more likely than not will be realized.

  EARNINGS (LOSS) PER SHARE
  The Company reports both basic earnings per share, which is based on the
  weighted average number of common shares outstanding, and diluted earnings per
  share, which is based on the weighted average number of common shares as well
  as all potentially dilutive common shares outstanding.  Stock options and
  warrants are the only potentially dilutive shares the Company has outstanding
  for the periods presented.  Stock options and warrants were not included in
  the computation of diluted loss per share for 2000, 1999 and 1998 since they
  would have resulted in a antidilutive effect on loss from continuing
  operations.

  FAIR VALUE OF FINANCIAL INSTRUMENTS
  The Company has various financial instruments, including cash, trade
  receivables, marketable securities, accounts payable, accrued expenses,
  revolving credit facilities and notes payable.  The carrying values of cash,
  trade receivables, accounts payable, accrued expenses and notes payable
  approximate current fair value.  Revolving credit facilities are at variable
  market rates.

  USE OF ESTIMATES
  The preparation of financial statements in conformity with generally accepted
  accounting principles requires management to make estimates and assumptions
  that affect the reported amounts of assets and liabilities at the date of the
  financial statements and reported amounts of revenues and expenses during the
  reporting period.  Actual results could differ from those estimates.
  Management believes that the estimates are reasonable.

                                      F-8
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

   CONCENTRATION OF CREDIT RISK
   The Company performs periodic evaluations of the relative credit standing of
   the financial institutions and investment funds that are considered in the
   Company's investment strategy. A majority of the Company's trade receivables
   are from retail gasoline stations and convenience stores. Management believes
   that its credit and collection policies mitigate the potential effect of a
   concentration of credit risk in its accounts receivable.

   ACCOUNTING PRONOUNCEMENTS
   In June 1998, the Financial Accounting Standards Board (FASB) issued
   Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
   Derivative Instruments and Hedging Activities" which establishes new
   accounting and reporting standards for derivative instruments. In June 1999,
   the FASB issued SFAS No. 137, "Accounting For Derivative Instruments and
   Hedging Activities - Deferral of the Effective Date of FASB Statement No.
   133", which defers the effective date of SFAS No. 133 for one year to be
   effective for all fiscal quarters of all fiscal years beginning after June
   15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting For Certain
   Derivative Instruments and Certain Hedging Activities - an amendment to FASB
   Statement No. 133", which amends the accounting and reporting standards of
   Statement 133 for certain derivative instruments and certain hedging
   activities. The Company has not entered into, and is not expected to enter
   into, any material transactions involving derivative instruments or hedging
   activities. Therefore, management believes there would be no material effect
   to the Company's financial statements as a result of implementation of these
   statements.

   RECLASSIFICATIONS AND FINANCIAL STATEMENTS PRESENTED
   Certain reclassifications have been made to the 1998 and 1999 financial
   statements to conform to the 2000 financial statement presentation. Such
   reclassifications had no effect on net loss as previously reported.
   Disclosures herein relating to the 1998 and 1999 financial statements are
   unaudited.

2. AGREEMENT TO SELL OPERATIONS AND PLAN OF MERGER

   The Company agreed in December 1999 to sell its Texas petroleum marketing and
   convenience store operations to TSC Services, Inc. (TSC) for cash of $12.7
   million for substantially all the assets of the Texas petroleum marketing and
   Texas convenience store segments, plus the assumption of capital lease
   obligations and the cost of inventory on hand at the closing date, also to be
   received in cash.  On August 17, 2000, the Company terminated the agreement
   pursuant to TSC's failure to obtain adequate financing in order to close the
   sale, as defined by the purchase agreement.  In August 2000, the Company
   received the TSC escrow deposit of $203,865, which was recorded as other
   income (expense) in the accompanying consolidated statements of operations.

   On January 23, 2000, the Company executed Agreement and Plan of Merger, which
   was amended on March 1, 2000 (as amended the Merger Agreement), with I-Net
   Holdings, Inc. (I-Net), a Delaware Corporation, pursuant to which a wholly
   owned subsidiary of the Company would have been merged with and into I-Net.
   The principal shareholder of I-Net was a former officer of the Company. The
   Company and I-Net mutually agreed to terminate the Merger Agreement on May
   19, 2000 due to I-Net's inability to timely raise sufficient capital and the
   Company's need to focus on closing the TSC transaction. Further, both I-Net
   and the Company mutually agreed to release each other from any and all claims
   arising under the Merger Agreement. The Company has agreed to pay $50,000 to
   I-Net as partial reimbursement of the expenses incurred in conjunction with
   the Merger Agreement upon consummation of the TSC transaction or a similar
   sale of substantially all of the Company's assets.

                                      F-9
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

3. DISCONTINUED OPERATION AND NET ASSETS TRANSFERRED UNDER CONTRACTUAL
   AGREEMENT

   In February 1998, the Company suspended the production activities of its
   ChemWay operation, which was engaged in the packaging and marketing of
   automotive after-market chemical products. In March 1998, the Company made
   the decision to sell ChemWay and recorded an estimated loss of $705,000 (net
   of applicable income tax benefit of $395,000), which included a provision for
   losses of $200,000 during the phase-out period. The results of operations of
   ChemWay have been classified as discontinued operations and prior periods
   have been restated. Summary of operating results are as follows (in
   thousands):

<TABLE>
<CAPTION>
                                                            YEAR ENDED
                                                           SEPTEMBER 30,
                                                    1999(i)             1998
                                                    -------           -------
<S>                                                   <C>                 <C>
   Revenues                                          $ 75             $ 2,268
   Earnings (loss) from operations                    (32)             (1,694)
   Income tax expense (benefit)                         -                (593)
   Income (loss) of ChemWay                           (32)             (1,262)
   Loss deferred by the Company pending
    the sale of ChemWay                                32                 414
                                                     ----             -------
   Loss from discontinued operations as reported     $  -             $  (848)
                                                     ====             =======
   (i) Through December 30, 1998.
</TABLE>

   On December 30, 1998, the Company completed the sale of ChemWay to Affiliated
   Resources Corporation (Affiliated), an unrelated party with respect to the
   Company; however, the Chairman and CEO of Affiliated and one of his legal
   advisors were shareholders of the Company, having purchased 350,000 common
   shares of the Company for $0.75 per share in a private placement transaction
   on October 27, 1998 (Note 9). At the time of the sale, management believed
   that the sale to Affiliated had strategic merit in that Affiliated
   represented to the Company that it was prepared to contribute sufficient cash
   into ChemWay to satisfy ChemWay's trade creditors and to resume production.
   In retaining an ownership interest in Affiliated, management believed that
   the Company would share in any future earnings of ChemWay should ChemWay
   return to profitability. However, there can be no assurance that ChemWay will
   return to profitability or that the market value of Affiliated common stock
   will increase in the future.

   Affiliated was a shell company at the time of this transaction, and had no
   operations or experience in packaging and marketing automotive chemical
   products.  At December 31, 1999, Affiliated reported, in its Annual Report on
   Form 10-KSB, an accumulated deficit of $10,031,466 and a negative working
   capital balance of $1,769,064.  Affiliated reported revenues from operations
   of $519,374 and a loss from operations of $2,524,088 during 1999.  In its
   September 30, 2000 quarterly report on         , Form 10-QSB, Affiliated
   reported a loss from operations of $4,475,670, a net loss of $11,675,314, a
   negative working capital balance of $1,502,593 and an accumulated deficit of
   $20,355,020. Affiliated common stock is quoted on the Nasdaq Over-the-Counter
   Bulletin Board.

   The Company received 1.5 million shares of common stock of Affiliated,
   representing approximately 9% of the outstanding Affiliated common stock at
   December 31, 1998, in exchange for all the outstanding common stock of
   ChemWay.  As a result of the sale, the estimated loss on disposal and

                                     F-10
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

  the related provision for losses during the phase-out period recorded in the
  second and third quarters of 1998 were reversed during the fourth quarter of
  1998. As a provision of the Purchase Agreement, the Company maintained the
  right to Put the 1.5 million shares at $4 per share if Affiliated did not pay
  off certain ChemWay indebtedness, or obtain the Company's release from its
  guarantee of that indebtedness, secure financing in the amount of $1,500,000
  and perform its other obligations under the Purchase Agreement. Due to
  Affiliated's inability to comply with all the conditions set forth in the
  Purchase Agreement and their further inability to achieve viability or
  sufficient independent financing, the Company's most substantive right was
  its security interest in the ChemWay assets and all accretions. Further,
  under the terms of the Purchase Agreement, the Company became entitled to
  receive an additional one million shares of common stock of Affiliated on
  December 30, 1999 since the average closing price of Affiliated common stock
  fell below an agreed-upon price. In December 1999, the Company received the
  additional one million shares.

  Subsequent to initially reporting this transaction  the Company realized that
  although a legal transfer of business ownership of ChemWay to Affiliated had
  occurred, divestiture for accounting purposes should not be recognized.  Under
  the guidance in SAB Topic 5:E, the existence of the put agreement precluded
  sale accounting due to the contingent nature of the consideration received, as
  the value of the Affiliated common shares received was essentially secured
  with the ChemWay assets.  Had the put agreement been relinquished, sale
  accounting would have applied to this transaction. If the put was exercised by
  the Company and Affiliated was unable to satisfy its obligations under the
  put, the assets would likely be relinquished to the Company.  Accordingly, the
  assets and liabilities of ChemWay have been segregated in the consolidated
  balance sheet as "Net assets transferred under contractual agreement".
  Accounting for this transaction is similar to the equity method of accounting
  prescribed under APB No. 18, in that the net assets of ChemWay are accounted
  for as a single line item and impairment is recognized based on the results of
  its operations. Accordingly, the Company has recorded a valuation allowance of
  $802,000 and $784,000 during 2000 and 1999 based on management's analysis of
  internal reports of ChemWay's operating performance by Affiliated during those
  respective years. Although the Company was legally released from liabilities
  of ChemWay totaling $1,997,000, gain recognition was not appropriate because
  although the rewards of ownership had transferred the risk had not as
  evidenced by the put agreement. The following summarizes the net assets
  transferred and valuation allowance charges (in thousands):


<TABLE>
<CAPTION>
                                                           2000         1999
                                                          -------      -------
<S>                                                     <C>            <C>
Assets transferred under contractual agreements           $ 5,211      $ 5,211
Liabilities transferred under contractual agreements       (1,997)      (1,997)
                                                          -------      -------
  Net assets transferred under contractual agreements       3,214        3,214
Valuation allowance on net assets transferred              (1,586)        (784)
                                                          -------      -------
  Net assets transferred, net of valuation allowance      $ 1,628      $ 2,430
                                                          =======      =======
Valuation allowance on net assets transferred

  Balance - beginning of year                             $   784      $     -
   Charge to valuation allowance                              802          784
                                                          -------      -------
  Balance - end of year                                   $ 1,586      $   784
                                                          =======      =======
</TABLE>
                                     F-11
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

   In addition, the 1.5 million shares of Affiliated common stock and the
   additional 1 million shares received in December 1999 are not reflected on
   the Company's financial statements as they are effectively collateral held
   for payment under SAB Topic 5:E. Accordingly, the Company has not reflected
   the investment in or changes in market value of the Affiliated common stock.
   The closing price of Affiliated common stock was $0.406, $0.266, $0.265 and
   $6.00 at September 30, 2000, December 30, 1999, September 30, 1999 and
   December 31, 1998, respectively.

4. PROPERTY AND EQUIPMENT

   Property and equipment consisted of the following at September 30 (in
   thousands):

<TABLE>
<CAPTION>
                                                      2000             1999
                                                    -------          -------
<S>                                                 <C>              <C>
   Land                                             $ 2,648          $ 2,582
   Buildings                                          6,003            6,028
   Leasehold improvements                               756              795
   Equipment                                         13,362           13,979
   Transportation equipment                           1,458            1,639
   Office equipment                                   2,475            2,475
                                                    -------          -------
                                                     26,702           27,498
   Less - accumulated depreciation                   13,293           12,602
                                                    -------          -------
   Property and equipment, net                      $13,409          $14,896
                                                    =======          =======
</TABLE>

5. LONG-TERM DEBT

   Long-term debt is summarized as follows at September 30 (in thousands):

<TABLE>
<CAPTION>

                                                               2000                1999
                                                              -------            -------
<S>                                                           <C>            <C>
Notes payable to a bank, at prime plus 2%, payable on
 January 31, 2001, secured by property and
 equipment,receivables, inventory and common stock of
 subsidiaries.                                                $ 9,153            $ 8,712
Notes payable to banks, at prime to 12%, payable to
 2004,secured by property and equipment,
 improvements,receivables, inventory and common stock
 of subsidiaries.                                                 591              1,022
Notes payable to a financial institution, 8% to 11%,
 payable to 2005, secured by property, equipment,
 improvements,inventory, accounts receivable and
 20,000 treasury shares                                           320                342
Notes payable to a financial institution, 9.26% to
 10.75%,payable to 2005, secured by property and
 equipment                                                        199                224
Other                                                             277                309
                                                              -------            -------
Total long-term debt                                           10,540             10,609
Less - current maturities                                       9,910              9,521
                                                              -------            -------
  Total long-term debt, net of current maturities             $   630            $ 1,088
                                                              =======            =======
</TABLE>
                                     F-12
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

  As of September 30, 2000 (after consideration of the debt refinancing
  described below), scheduled principal maturities of long-term debt are as
  follows (in thousands):

<TABLE>
<CAPTION>
        YEAR ENDING SEPTEMBER 30,
        -------------------------
<C>     <S>                                            <C>
        2001                                            $ 9,910
        2002                                                206
        2003                                                154
        2004                                                 99
        2005                                                 71
        Thereafter                                          100
                                                        -------
                  Total                                 $10,540
                                                        =======
</TABLE>

  On March 31, 1999, the Company amended its credit agreement with one of its
  bank lenders (the Refinancing), pursuant to which the bank (i) waived all
  previous and continuing covenant defaults; (ii) extended the maturity of its
  loan balance to January 31, 2001; and (iii) assumed the amounts outstanding
  under the other bank lender's loans under their current terms and conditions.
  Under the terms of the Refinancing, such bank lender received a first-lien
  position on all the assets of the Company.  The refinancing contains certain
  financial covenant obligations, including minimum net worth, minimum earnings
  before interest, taxes and depreciation, working capital ratio and fixed
  charge coverage ratio.  Further, the Company is prohibited by its bank
  agreement from payment of any cash dividends and from obtaining additional
  debt without the bank's consent.

  At September 30, 2000 and 1999, the Company was in violation of substantially
  all of these covenants; however, the bank has waived such covenant defaults
  through January 31, 2001.  Since there can be no assurance that the Company
  can comply with the financial covenants subsequent to January 31, 2001, nor
  has the bank waived or amended such covenants or the final maturity date past
  January 31, 2001, all of the debt due to this bank approximating $9,153,000,
  including the additional $1,000,000 credit facility discussed below, has been
  classified as current at September 30, 2000.  Further, as the loan was not
  repaid prior to June 30, 1999, the Company became subject to a fee of
  $250,000.  The Company also incurred additional fees of $250,000 on August 31,
  1999 and December 31, 1999, as the loan obligations were not repaid by those
  respective dates.  The loan fees aggregating $750,000 and $500,000 at
  September 30, 2000 and 1999, respectively, are included in accrued interest on
  the accompanying consolidated balance sheets.  Accordingly, interest expense
  includes $250,000 and $500,000, reflecting the fiscal year 2000 and 1999 fees
  incurred, respectively.

  On January 26, 2000, the Company closed on an additional $1,000,000 credit
  facility with its principal bank lender.  The new credit facility is secured
  by the Company's general offices, three acres of land and a 7,490 square foot
  warehouse together with 14,784 square feet of additional warehouse buildings.
  The credit facility is further secured by a pledge of the Company's rights and
  interests in funds held by an escrow agent, which would be due to the Company
  as a result of a breach by TSC of its obligations under the purchase
  agreement.  Proceeds of the new credit facility were used for working capital
  and to fund expenses necessary to obtain new financing.  Interest on the
  credit facility will accrue at an annual rate of 2% above the bank's
  established prime lending rate, payable monthly.  The note became payable on
  May 1, 2000; however, the bank has extended the maturity of its loan balance
  to January 31, 2001.

  At September 30, 2000, the Company was in default with two notes payable to a
  financial institution, and accordingly, all debt due to this financial
  institution aggregating $320,000 has been classified as current at September
  30, 2000.  Subsequently, one of these notes payable totaling $256,000 was

                                     F-13
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

   repaid from proceeds on the sale of the Company's former corporate office
   building.  The Company is currently negotiating an amended repayment plan for
   the remaining note payable to this financial institution. There can be no
   assurance that management's plans described above will be successful.

6. CAPITAL LEASES

   The Company leases its information systems and trucks under capital lease
   obligations due to two financial institutions expiring through 2002.
   Amortization of assets under capital leases is over the life of the lease and
   is included in depreciation and amortization expense. The cost of the
   information systems and trucks acquired under capital leases was $1,436,000.
   Accumulated amortization was $1,098,000 and $878,000 at September 30, 2000
   and 1999, respectively.

   Future minimum lease payments under capital lease obligations as of September
   30, 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
        YEAR ENDING SEPTEMBER 30,
        -------------------------
        <S>                                               <C>
        2001                                               $833
        2002                                                 91
                                                           ----
        Total minimum lease payments                       $924
        Less: Amount representing interest                  (94)
                                                           ----
        Present value of minimum lease payments            $830
                                                           ====
</TABLE>

   The Company currently is in default with its capital lease obligations due to
   a financial institution for the information systems assets.  Accordingly, the
   capital lease obligation of approximately $704,000 at September 30, 2000 has
   been classified as current portion of obligations under capital leases on the
   accompanying consolidated balance sheet at September 30, 2000.

7. INCOME TAXES

   Income taxes are attributable to the following (in thousands):

<TABLE>
<CAPTION>
                                  YEAR ENDED SEPTEMBER 30,
                           --------------------------------------
                            2000           1999             1998
                           ------         ------          -------
<S>                        <C>              <C>              <C>
   Current:
    Federal                $   -          $  (79)         $    43
    State                      -              32              108
                           ------         ------          -------
                               -             (47)             151
                           ------         ------          -------
   Deferred
    Federal                    -           1,056           (1,085)
    State                      -             147             (137)
                           ------         ------          -------
                               -           1,203           (1,222)
                           ------         ------          -------
     Total                 $   -          $1,156          $(1,071)
                           ======         ======          =======
</TABLE>

                                     F-14
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

  The difference between income taxes at the statutory federal and effective
  income tax rates is as follows (in thousands):

<TABLE>
<CAPTION>
                                                YEAR ENDED SEPTEMBER 30,
                                           ---------------------------------
                                             2000        1999          1998
                                           -------     -------       -------
<S>                                      <C>           <C>           <C>
Taxes computed by applying federal         $(1,678)    $(2,780)      $(2,279)
 statutory rate
State taxes, net of federal benefit              -         118          (120)
Stock option compensation expenses              84         150           518

Change in deferred tax asset                 1,580       3,900           782
 valuation allowance
Other, net                                      14        (232)           28
                                           -------     -------       -------
   Total                                   $    -      $ 1,156       $(1,071)
                                           =======     =======       =======
</TABLE>

  The provision for (benefit from) income taxes consists of the following (in
  thousands):

<TABLE>
<CAPTION>
                                                YEAR ENDED SEPTEMBER 30,
                                           ---------------------------------
                                             2000        1999          1998
                                           -------     -------       -------
<S>                                         <C>         <C>           <C>
Continuing operations                      $    -      $  (47)       $  (708)
Discontinued operations                         -       1,203           (363)
                                           -------     -------       -------
   Total                                   $    -      $1,156        $(1,071)
                                           =======     =======       =======
</TABLE>

  Deferred tax assets (liabilities) are comprised of the following (in
  thousands) at September 30:

<TABLE>
<CAPTION>
                                            2000          1999
                                           -------       -------
<S>                                       <C>            <C>
Deferred tax liabilities
  Book/tax depreciation differences        $   715       $(2,520)
  Other                                         (1)          (16)
                                           -------       -------
    Total                                      714        (2,536)
Deferred tax assets
  Net operating loss carryforward              866         5,307
  Marketable securities                          -         1,266
  Alternative minimum tax credit                 -           454
  Net capital loss carryforwards                 -           211
  Allowance for doubtful accounts                -           107
  Investment tax credit                          -            26
  Section 263A inventory adjustment              -            16
  Other                                          -            62
                                           -------       -------
    Total                                      866         7,449
  Valuation allowance                       (1,580)       (4,913)
                                           -------       -------
  Net deferred tax assets                  $     -       $     -
                                           =======       =======
</TABLE>

                                     F-15
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

   At September 30, 2000, the Company had regular tax net operating loss
   carryforwards from continuing operations of $16.7 million available for
   federal income tax purposes that expire through 2020 and capital loss
   carryforwards of $9.2 million. Changes in the Company's ownership, as defined
   1bunder Section 382 of the Internal Revenue Code, could result in certain
   limitations on the annual amount of net operating losses that may be
   utilized.

8. OPERATING LEASES

   The Company leases twenty-five convenience store locations and four other
   facilities under operating lease agreements with varying lives and terms. Two
   of these leases are with related parties (Note 10).

   At September 30, 2000, the scheduled future minimum lease payments required
   under the terms of the operating leases in effect are (in thousands):

<TABLE>
<CAPTION>
        YEAR ENDED SEPTEMBER 30,
        ------------------------
        <S>                                            <C>
        2001                                           $  422
        2002                                              317
        2003                                              231
        2004                                              136
        2005                                               69
        Thereafter                                        244
                                                       ------
                   Total                               $1,419
                                                       ======
</TABLE>

   The Company also rented one facility on a month-to-month basis from an
   unrelated party, which was terminated in January 2000.  Rent paid for this
   facility totaled $2,000 as of September 30, 2000.

   The Company has 10 subleases. Minimum rentals to be received in the future
   under these noncancelable subleases totaled $185,700 as of September 30,
   2000.

9. COMMON STOCK

   In August 1992, the Company issued warrants to purchase shares of the
   Company's common stock at an exercise price of $2.86 per share. In June 1997,
   the Company extended the expiration date of the remaining warrants to August
   1, 2002 and recorded compensation expense of $38,000. In 2000, 1999 and
   1998,-0-, 62,813 and 4,725, respectively, of such warrants were exercised. At
   September 30, 2000, there were no warrants outstanding to purchase shares.

   In December 1994 and May 1995, the Company issued warrants to purchase
   262,500 shares of the Company's common stock at an exercise price of $4.76
   per share. These warrants expired in May 1997 and December 1999.

   In May 1998, the Company issued warrants to purchase 100,000 shares of the
   Company's common stock at an exercise price of $1.00 per share in exchange
   for certain consulting services and recorded compensation expense of $38,500.
   The warrants were exercised in July 1998.

   In December 1994, the Company adopted the ESI Stock Benefit Plan. Up to
   420,000 shares of the Company's common stock may be purchased or granted
   under the plan, and provision has been made for automatic increases in such
   amount of shares in the event the number of common shares issued by the
   Company increases to specified levels. An option granted under the plan by
   the Board of Directors to a key employee may be an incentive stock option or
   a nonqualified option and may be

                                     F-16
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

  accompanied by stock appreciation rights or limited rights. Incentive stock
  options must be granted at an exercise price of not less than 100% of the then
  fair market value of the stock. Nonqualified stock options must be granted at
  an exercise price of not less than 90% of the then fair market value of the
  stock. All options shall expire upon termination of employment or within five
  or ten years of the date of grant. Nonemployee directors shall be
  automatically granted nonqualified options to purchase 2,500 shares of common
  stock annually. Vesting is to be determined by the Board of Directors.

  In August 1995, the Company granted contingent stock awards to two
  individuals.  The individuals were granted an aggregate of 105,000 shares of
  restricted common stock that vested in fiscal 1998, 1997 and 1996, subject to
  achievements of certain profitability levels.  In 1998, 1997 and 1996, such
  provisions were not met and all grants were cancelled.

  In May and December 1997, the Company granted certain employees options to
  purchase an aggregate of 330,600 shares of common stock at exercise prices
  ranging from $1.31 to $4.00.  The options vested upon the Company's common
  stock reaching a market value of $6.50 per share for five consecutive days as
  specified in the agreements.  The grants would be canceled if such provisions
  were not met.  The provisions were met in November 1998.  The Company recorded
  compensation expense of $1.1 million and $229,000 for continuing and
  discontinued operations, respectively, in the fourth quarter of 1998 for the
  difference in the exercise prices of the options and the market price of the
  Company's stock at September 30, 1998.  Additional compensation expense of
  $208,000 and $40,000 for continuing and discontinued operations, respectively,
  was recorded in the first quarter of 1999 for the difference in the market
  price of the Company's stock at September 30, 1998 and $6.50 per share.

  On June 1, 1998, the Company agreed to issue 350,000 common shares for total
  consideration of $262,500 in a private placement to accredited investors (Note
  3).  Such shares were issued on October 27, 1998.  On January 4, 1999, the
  Company issued 40,000 common shares valued at $15.25 per share to an
  investment advisor for investment advisory services rendered.  The investment
  advisor has the right to sell the shares back to the Company at $4 per share
  until ninety days following the registration of the shares.  During fiscal
  2000, the redemption provision on those shares expired.  Accordingly, the
  Company recorded the reclassification of those shares into stockholder's
  equity as "Expiration of redeemable common stock" on the accompanying
  statement of stockholder's equity.

  In December 1998, the Company granted certain members of the Board of
  Directors options to acquire an aggregate of 7,500 shares at $11.63 per share.

  In December 1998, the Board of Directors agreed to grant a five-year option to
  acquire 75,000 shares at $11.63 per share to the chief executive officer,
  vesting over three years.

  In May 1999, the Company granted certain employees options to receive an
  aggregate of 24,000 shares of common stock, of which 9,500 have subsequently
  expired.  The shares vest one year from the date of grant and may be exercised
  180 days thereafter.  The closing price of the Company's common stock was
  $30.56 per share and $196,000 was recorded as compensation expense in fiscal
  1999.  Additional compensation expense of $247,000 was recorded through the
  third quarter of fiscal year 2000.

  In December 1999, the Company granted certain members of the Board of
  Directors options to acquire an aggregate of 7,500 shares at $0.81 per share.

                                      F-17
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

  In January 2000, the Board of Directors agreed to issue five-year options to
  various officers and key employees of the Company aggregating 45,000 shares of
  common stock at $3.31 per share, with 30,500 shares vesting immediately.  All
  options granted in 2000 are nonqualifying options and are not covered by the
  current stock option plan.

  A summary of the option activity under the various plans follows:

<TABLE>
<CAPTION>
                                                                            WEIGHTED-
                                                       NUMBER OF             AVERAGE
                                                        SHARES            OPTION PRICE

<S>                                                    <C>                  <C>
Outstanding at September 30, 1997                        89,206              $5.42

Granted in 1998                                         403,800               1.67
Expired in 1998                                         (54,149)              5.00
                                                       --------

Outstanding at September 30, 1998                       438,857               1.43

Granted in 1999                                          31,500               1.85
Exercised in 1999                                      (383,818)              1.77
Expired in 1999                                          (7,539)              0.03
                                                       --------

Outstanding at September 30, 1999                        79,000

Granted in 2000                                         127,500               8.05
Expired in 2000                                          (2,000)                 -
                                                       --------

Outstanding at September 30, 2000                       204,500
                                                       ========
</TABLE>

  Although 204,500 options are outstanding at September 30, 2000, only 34,500
  underlying common shares are registered under a plan.  A summary of options
  outstanding and options exercisable at September 30, 2000 is as follows:

<TABLE>
<CAPTION>
                                                WEIGHTED
                                                AVERAGE                WEIGHTED                                   WEIGHTED
     OPTIONS              EXERCISE             REMAINING                AVERAGE              OPTIONS              AVERAGE
   OUTSTANDING             PRICE            CONTRACTUAL LIFE         OPTION PRICE          EXERCISABLE          OPTION PRICE
-----------------    ---------------    ---------------------    ------------------    ----------------    -------------------
<S>                     <C>                <C>                      <C>                   <C>                 <C>
      14,500            $          0           8.7 years                     $    -              12,700                 $    -
      15,000            $.81 - $1.63           3.4 years                       1.11              15,000                   1.11
      95,000            $       3.31           4.3 years                       3.31              77,000                   3.31
      80,000            $      11.63           3.2 years                      11.63              30,000                  11.63
-----------------    ---------------    ---------------------    ------------------    ----------------    -------------------
      204,500           $       6.17           6.31 years                    $ 6.17             134,700                 $ 4.61
=================    ===============    =====================    ==================    ================    ===================
</TABLE>
                                     F-18
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

    The weighted average fair value at date of grant for options granted during
    2000, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                              2000         1999          1998
                                             -----        -----         -----
<S>                                          <C>          <C>           <C>
Exercise price equals market price           $8.05        $7.59         $1.32
Exercise price exceeds market price              -            -          1.59
Exercise price is less than market price         -        30.55          1.82
</TABLE>

    The Company applied APB 25 and related interpretations in accounting for its
    plans. The following unaudited pro forma data is calculated as if
    compensation cost for the Company's stock option plans were determined based
    upon the fair value at the grant date for awards under these plans
    consistent with the methodology prescribed under the Statement of Financial
    Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (in
    thousands):

<TABLE>
<CAPTION>
                                                    YEAR ENDED SEPTEMBER 30,
                                                 ----------------------------
<S>                                              <C>                 <C>
                                                    2000                1999
                                                  -------             -------
        Net loss:
          As reported                             $(6,002)            $(7,301)
          Pro forma                                (6,032)             (7,380)

        Basic and diluted loss per share
          As reported                             $ (1.41)            $ (1.90)
          Pro forma                                 (1.42)              (1.92)
</TABLE>

    The fair value of the options granted is estimated using the Black-Scholes
    option-pricing model with the following assumptions for 2000: no dividend
    yield, volatility of 92%, risk-free interest rate of 4.5% to 4.8% and an
    expected life of 4 to 6 years. For 1999, the following assumptions were
    used: no dividend yield, volatility of 92%, risk-free interest rate of 4.5%
    to 4.9% and an expected life of 3.7 to 5 years.

    On June 6, 2000, the Company executed an offering memorandum with Comsight
    Holdings, Inc. (Comsight) whereby Comsight agreed to act as a placement
    agent for accredited investors to purchase a minimum of 1,250,000 and a
    maximum of 3,750,000 shares of the Company's common stock in a private
    placement to accredited investors at $0.40 per share. The Company also
    retained Comsight as its financial advisor for a period of two years. On
    August 17, 2000, the Company issued 1,437,500 shares of common stock for
    total consideration of $575,000.

10. RELATED PARTY TRANSACTIONS

    During 2000, the Company leased two convenience store locations from Mr.
    J.L. Evans, the largest shareholder of the Company. One ten-year lease
    commenced in June 1987 with monthly payments of $2,500, which was renewed
    for one additional five-year period. One five-year lease commenced in March
    1995 with monthly lease payments of $1,800 and allows for two five-year
    automatic renewals at the Company's option, which were not exercised by the
    Company. The amounts paid under these leases were $51,600, $54,300 and
    $76,800 for the years ended September 30, 2000, 1999 and 1998, respectively.
    Future minimum lease commitments as of September 30, 2000 are $52,500.

                                     F-19
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

    From time to time the Company makes advances to individuals who are
    shareholders, directors, officers and/or employees. Such advances are
    usually unsecured and accrue interest at 9%. There were no advances
    outstanding at September 30, 2000 and 1999.

11. CONTINGENT LIABILITIES

    During 1999, a purported class action lawsuit was filed against the Company
    and several of its current and former officers and directors on behalf of
    purchasers of the Company's common stock. The lawsuit asserted that the
    defendants violated federal securities laws by issuing allegedly false and
    misleading financial statements in 1997, 1998 and 1999 about the Company's
    financial condition and results of operations. The lawsuit demanded, among
    other things, unspecified compensatory damages, attorney's fees and the
    costs of conducting the litigation. On May 31, 2000, the lawsuit was
    dismissed with prejudice in the United States District Court for the
    Southern District of Texas.

    The Company is subject to litigation, primarily as a result of customer
    claims, in the ordinary conduct of its operations. As of September 30, 2000,
    the Company had no knowledge of any legal proceedings, other than as
    described above, which, by themselves, or in the aggregate, could be
    expected to have a material adverse effect on the Company.

12. EMPLOYEE BENEFIT PLANS

    The Company established the ESI Employee Retirement Plan, a defined
    contribution benefit plan, effective July 1, 1997. Employees are eligible
    for participation in the plan upon attaining the age of 21 and completion of
    1 year of service and 1,000 hours or more of service. The Company
    contributes an amount equal to 50% of employee voluntary contributions up to
    a maximum of 5% of the employee's compensation. Such contributions may be
    made in the common stock of the Company. The Company recorded contributions
    of $28,000, $61,000 and $45,000 during fiscal 2000, 1999 and 1998,
    respectively.

13. SUBSEQUENT EVENTS

    A. RESTATEMENT OF FINANCIAL STATEMENTS

       The Company has restated previously reported financial results for fiscal
       year 2000 and 1999 to give effect to the application of Securities and
       Exchange Commission (SEC) Staff Accounting Bulletin (SAB) Topic 5:E,
       Accounting for Divestiture of a Subsidiary or Other Business Operation,
       for the sale of ChemWay to Affiliated Resources Corporation (Note 3).
       After reviewing this guidance the Company realized that the sale of
       ChemWay, although a divestiture for legal purposes, was not a divestiture
       for accounting purposes. The financial statements as of September 30,
       2000 and 1999 have been restated to report this transaction as a
       contingent sale. The 1999 and 1998 financial statements have been
       presented as unaudited because our prior auditors have declined to
       reissue their audit report. No other restatements were made to the 2000
       and 1999 financial statements.

       All notes and disclosures included herein have been amended, as
       appropriate, to reflect the restatement. The operating losses as
       previously reported by the Company have not been affected. However,
       previously reported net loss and net loss per share in each quarterly and
       annual report covering periods between December 30, 1998 and December 31,
       2000 have changed. The effects on previously reported quarterly data is
       reflected in Note 15.

                                     F-20
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

     The effect of the restatement discussed above on the statement of
     operations is as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
                                                                   YEAR ENDED SEPTEMBER 30,
                                                   --------------------------------------------------------
                                                             2000                            1999
                                                   ------------------------        ------------------------
                                                  PREVIOUSLY           AS         PREVIOUSLY           AS
                                                   REPORTED         RESTATED       REPORTED         RESTATED
                                                   -------          -------        --------         -------
                                                                                                  (UNAUDITED)
<S>                                        <C>             <C>              <C>             <C>
Revenues                                           $95,329          $95,329        $ 87,273         $87,273
Cost of sales                                       85,188           85,188          75,419          75,419
                                                   -------          -------        --------         -------
Gross profit                                        10,141           10,141          11,854          11,854
Operating expenses                                  13,580           13,580          15,234          15,234
                                                   -------          -------        --------         -------
Operating loss                                      (3,439)          (3,439)         (3,380)         (3,380)
Other income (expense)
 Loss on impairment of
  marketable securities                                  -                -          (8,602)              -
 Valuation allowance on net
  assets transferred                                     -             (802)              -            (784)
 Gain (loss) on sale of assets                         (37)             (37)            381             381
 Interest income                                        16               16              94              94
 Interest expense                                   (1,725)          (1,725)         (1,802)         (1,802)
 Other income (expense)                                (15)             (15)            (44)           (654)
                                                   -------          -------        --------         -------
   Total other income (expense)                     (1,761)          (2,563)         (9,973)         (2,765)
                                                   -------          -------        --------         -------
Loss from continuing operations
 before income taxes                                (5,200)          (6,002)        (13,353)         (6,145)
Provision (benefit) from income
 taxes                                                   -                -             (47)          1,156
                                                   -------          -------        --------         -------
Loss from continuing operations                     (5,200)          (6,002)        (13,306)         (7,301)
Discontinued operations
 Gain on disposal of ChemWay                           266                -           3,973               -
                                                   -------          -------        --------         -------
Net loss                                            (4,934)         $(6,002)         (9,333)        $(7,301)
                                                                    =======                         =======
Unrealized gain on marketable
 securities                                            352                                -
                                                   -------                         --------
Comprehensive loss                                 $(4,582)                        $ (9,333)
                                                   =======                         ========
Basic and diluted earnings (loss)
 per common share:
 Continuing operations                             $ (1.22)         $ (1.41)       $  (3.46)        $ (1.90)
 Discontinued operations                              0.06                -            1.03               -
                                                   -------          -------        --------         -------
 Earnings (loss) per common
  share                                            $ (1.16)         $ (1.41)       $  (2.43)        $ (1.90)
                                                   =======          =======        ========         =======
</TABLE>
                                     F-21
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

  B. NET ASSETS TRANSFERRED UNDER CONTRACTUAL AGREEMENT

     On December 4, 2000, the Company entered into a stipulated judgment against
     Affiliated Resources Corp. (Affiliated) and ChemWay pertaining to the
     Company's sale of ChemWay to Affiliated in December 1998 (Note 3).  The
     judgment granted by the 130th Judicial District Court of Texas was for
     $6,000,000, arising from Affiliated's failure to fund the put right at
     $4.00 per share of the 1,500,000 shares of Affiliated common stock the
     Company had received as consideration for the sale.  As stipulated in the
     judgment, the Company received a deed in lieu of foreclosure for certain
     ChemWay assets as sole payment for the $6,000,000 judgment.  Management is
     presently evaluating all strategic alternatives relating to the assets
     received by deed in lieu of foreclosure.

     In connection with this transaction and to protect the assets received, the
     Company assumed the outstanding debt of $506,860 on a warehouse building
     received under the Stipulated Judgment and Deed in Lieu of Foreclosure.
     The note bears interest at 14.9% for 15 years and calls for monthly
     principal and interest payments of $7,103.  The note is secured by the
     warehouse building.

     In accordance with SAB Topic 5:E, the ChemWay assets returned on December
     4, 2000 are reflected as a reclassification of net assets transferred under
     contractual agreements of $1,628,000 ($2,134,860 in net property and
     equipment less $506,860 in notes payable) to their respective financial
     statement captions.  Accordingly, the $506,860 note payable assumed by the
     Company was reclassified as long-term debt payable and the remaining net
     asset value of $2,134,860 was reclassified to property and equipment.  No
     gain or loss was recognized on the exchange of certain ChemWay assets for
     the Affiliated common stock held by the Company.  No other liabilities of
     ChemWay or Affiliated were assumed or are the responsibility of the
     Company.

  C. LONG TERM DEBT

     In December 2000, the Company and its primary lender reached an agreement
     (the Agreement) whereby the total debt due to this bank at December 31,
     2000 of approximately $8,970,700 plus accrued interest and penalties of
     $1,113,600 would be restructured to terms that call for the payment of $7.5
     million on or before June 15, 2001 in full satisfaction of all amounts due
     to this bank.  Under the terms of the Agreement, sales of Company assets,
     including the sales of Evans Oil of Louisiana, certain Texas C-stores and
     sales of certain Texas Petroleum Marketing Supply contracts, will be used
     to pay the $7.5 million.  The Agreement further states that should the June
     15, 2001 deadline not be met, $8.5 million will be due on or before August
     15, 2001.  The Agreement also provides that should the August 15, 2001
     deadline not be met, all outstanding principal, accrued interest and
     penalties due to this lender will become due.  However, as the Company has
     no assurance that it can fulfill the terms of the Agreement by the
     specified deadlines and in accordance with SFAS No. 5, Accounting for
     Contingencies, the Company has not reflected the modified terms in the
     accompanying condensed consolidated financial statements and has not
     recorded any potential gain on the Agreement.

     On May 16, 2001, the Company accepted a commitment from Advisco Capital
     Corp. (ACC) to make available to the Company an $8.8 million secured term
     loan and secured revolving credit facility (the Financing).  The Financing
     would bear an interest rate of 1.25%, payable monthly for a term of two
     years, with an option to renew for an additional 1 year.  Proceeds of the
     Financing will be used to settle remaining amounts owed to the Company's
     primary lender under the Agreement (Note B), purchase of capital assets and
     inventory, and provide additional working capital. Funding of the loan is
     subject to the completion and satisfaction, to ACC's approval, of

                                     F-22
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

     certain requirements and covenants of the Financing. Those requirements and
     covenants include, but are not limited to, the submission of a Business
     Plan by the Company, evidence of compliance with all government agencies
     having jurisdiction, and submission of a workout plan with the Company's
     unsecured creditors, requiring such unsecured creditors to agree to have
     their claims paid in accordance with terms and conditions satisfactory to
     ACC and forbear from taking any action against the Company provided their
     obligations are paid as agreed. Accordingly, the Company has no assurance
     that the Financing will be closed.

     Management is currently holding talks with several potential lending
     institutions to replace its existing bank debt with new financing to meet
     the terms of the Agreement.  Management believes that the sales of certain
     assets of the Company as well as the effects of potential new financing
     could provide sufficient cash to meet the terms of the Agreement as well as
     provide additional working capital.

     However, there can be no assurance that such agreements or new financing
     will be realized or successful.

  D. AGREEMENT TO SALE CERTAIN ASSETS

     During the first quarter of 2001, the Company 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 store equipment
     and fuel dispensing equipment and tanks at the respective dealer and
     consignment locations.

     During February 2001, the Company 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 store equipment and fuel dispensing equipment and tanks at the
     dealer and consignment locations.

     During the second quarter of 2001, the Company closed on the sale of three
     independent dealer and consignment accounts.  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 store equipment and fuel dispensing equipment and
     tanks at the dealer and consignment locations.

     During the second quarter of 2001, the Company also closed on the sale of
     six company operated stores for total net proceeds of approximately
     $2,574,000, which were used for working capital and to reduce the Company's
     outstanding debt.  The Company recorded a net gain on the sale of
     approximately $201,000.  The net book value of the assets sold approximated
     $2,373,000, inclusive of $225,000 in fuel and retail inventory.

                                     F-23
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

     During the third quarter of 2001, the Company closed on the sale of one
     company operated store and one store previously leased to others for total
     proceeds, net of closing costs, of approximately $1,063,000, which was used
     for working capital and to reduce the Company's outstanding debt.  The
     Company recorded a net gain on the sales of approximately $22,000 during
     the third quarter of 2001.  The net book value of the assets sold
     approximated $1,041,000, inclusive of $76,000 in fuel and retail inventory.

     The following summarizes the Company's various sales of assets during the
     nine months ended June 30, 2001 (in thousands):
<TABLE>
<CAPTION>
<S>                                                 <C>
        Net proceeds:
          Citgo, Texaco and Diamond Shamrock accounts           $1,286
          Phillip 66 accounts                                      556
          Other independent dealer accounts                        178
          Sale of company operated stores and equipment          3,637
          Other                                                    115
                                                                ------
            Total net proceeds                                  $5,772
        Net book value of assets sold:
          Citgo, Texaco and Diamond Shamrock accounts           $  699
          Phillip 66 accounts                                      318
          Other independent dealer accounts                        170
          Sale of company operated stores and equipment          3,414
          Other                                                    205
                                                                ------
            Total net book value of assets sold                  4,806
                                                                ------
          Net gain on sale of assets for the nine months
           ended June 30, 2001                                  $  966
                                                                ======
</TABLE>

     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 $1,078,000 and discontinued its Louisiana operations.
     The assets and inventory sold had a net book value of approximately
     $723,000 and $268,000, respectively, on May 17, 2001.  The Company recorded
     a net gain on the sale of discontinued operations of approximately $87,000.

  E. RESULTS OF OPERATIONS, LIQUIDITY AND MANAGEMENT'S PLANS

     During the three years in the period ended September 30, 2000, the Company
     has recorded operating losses from continuing operations aggregating $10.8
     million and net losses aggregating $18.8 million.  At September 30, 2000,
     the Company has a working capital deficit of $13.2 million and
     stockholders' equity of $1,304,000.  In addition, the Company is in
     violation of various debt covenants, which default has been waived by the
     bank through January 31, 2001 (Note 5).

     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.

                                     F-24
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

     During the fourth quarter of 2000, the Company implemented a strategy to
     reduce outstanding debt by the selling of certain identified assets aligned
     along brand representation in an effort to concentrate on fewer brands,
     which management believes have the most profit potential.  As a phase of
     this strategy, management implemented a 22% staff reduction in early
     October 2000.  Management plans to continue its Chevron, Texaco and Exxon
     branded company operated stores and dealer locations.

     The Company is also evaluating a strategic partnership that would allow the
     Company to reinstitute a supply of petroleum products to its terminal
     facility.  Management believes that should the strategic partnership be
     successful, the terminal can return to operations by the end of fiscal year
     2001.

     The Company has determined, based upon review of the Company's historical
     operating performance, that it is unlikely that the Company's revenues will
     increase in the foreseeable future in an amount sufficient to offset its
     operating expenses without continued downsizing and a capital infusion.  In
     order to continue as a going concern, management believes the Company must
     continue to sell its assets and obtain a capital infusion of either equity
     or debt in amounts sufficient to reduce its current outstanding debts and
     provide additional working capital.  There can be no assurance that
     management's plans as described above will be successful.

14. SEGMENT REPORTING

  During the year ended September 30, 1999, the Company adopted SFAS 131,
  "Disclosure About Segments of an Enterprise and Related Information".  Prior
  years' segment information has been restated to conform to the current-year
  presentation.  The Company has four reportable segments: Texas Petroleum
  marketing, Texas convenience stores, Louisiana petroleum marketing and
  convenience store operations, and environmental remediation services.  The
  Texas petroleum marketing segment sell motor fuels to the public through
  retail outlets in southeast Texas and supplies the Company's Texas convenience
  stores with motor fuels.  The Texas convenience stores feature self-service
  motor fuels and a variety of food and nonfood merchandise in southeast Texas.
  The Louisiana operations sell motor fuels to the public through retail outlets
  and through convenience stores that feature self-service motor fuels and a
  variety of food and nonfood merchandise in Louisiana.  The environmental
  remediation services segments serves the petroleum industry in the southeast
  Texas market area.

  The accounting policies of the segments are the same as those described in the
  summary of significant accounting policies.  The Company evaluates performance
  based on operating income (loss).  Intersegment sales and transfers are
  accounted for as if such sales or transfers wee to third parties, that is, at
  current market prices.

                                     F-25
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

  Information concerning the Company's business activities is summarized as
  follows (in thousands):

<TABLE>
<CAPTION>
                                           TEXAS         TEXAS                      ENVIRONMENTAL       OTHER
                                         PETROLEUM     CONVENIENCE    LOUISIANA      REMEDIATION     RECONCILING   CONSOLIDATED
YEAR ENDED                               MARKETING       STORES       OPERATIONS       SERVICES       ITEMS (1)       TOTAL
                                          -------        -------        -------         ------        --------       --------
<S>                                       <C>            <C>          <C>              <C>            <C>             <C>
September 30, 2000:
 Revenues from external
  customer
  Motor fuel sales                        $53,772        $15,361        $ 9,921         $    -        $      -       $ 79,054
  Convenience store sales                       -          9,543          3,694              -               -         13,237
  Other                                     1,038            358            181          1,461               -          3,038
 Intersegment revenues                     17,309              -              -              -         (17,309)             -
                                          -------        -------        -------         ------        --------       --------
    Total revenues                        $72,119        $25,262        $13,796         $1,461        $(17,309)      $ 95,329
                                          =======        =======        =======         ======        ========       ========
 Depreciation and amortization                990            328            126             51              18          1,513
 Operating income (loss)                     (601)          (742)          (676)           262          (1,682)        (3,439)
 Segment assets                            12,017          6,043          2,072          1,189               -         21,321
 Expenditures for property
  and equipment                               402             46             13              6               -            467

September 30, 1999: (Unaudited)
 Revenues from external
  customer
  Motor fuel sales                        $47,913        $12,659        $ 9,671         $    -        $      -       $ 70,243
  Convenience store sales                       -          9,599          2,882              -               -         12,481
  Other                                     2,251            615            141          1,542               -          4,549
 Intersegment revenues                     14,239              -              -              -         (14,239)             -
                                          -------        -------        -------         ------        --------       --------
    Total revenues                        $64,403        $22,873        $12,694         $1,542        $(14,239)      $ 87,273
                                          =======        =======        =======         ======        ========       ========
 Depreciation and amortization              1,097            286            130             58              18          1,589
 Operating income (loss)                   (1,335)           (34)          (334)           177          (1,854)        (3,380)
 Segment assets                            14,128          6,360          2,115          1,284             885         24,374
 Expenditures for property
  and equipment                               354             81            133              -              73            641

September 30, 1998:
 Revenues from external
  customer
  Motor fuel sales                        $60,146        $13,965        $ 9,719         $    -        $      -       $ 83,830
  Convenience store sales                       -         10,783          2,706              -               -         13,489
  Other                                     4,312            878            453          1,152               -          6,795
 Intersegment revenues                     15,074              -              -              -         (15,074)             -
                                          -------        -------        -------         ------        --------       --------
    Total revenues                        $79,532        $25,626        $12,878         $1,152        $(15,074)      $104,114
                                          =======        =======        =======         ======        ========       ========
 Depreciation and amortization              1,250            369            147            112              17          1,895
 Operating income (loss)                     (987)          (543)           (88)           (81)         (2,295)        (3,994)
 Segment assets                            16,654          6,657          1,953            957           1,055         27,276
 Expenditures for property
  and equipment                               655          1,188             52              5            (514)         1,386
</TABLE>

(1) Consists primarily of corporate overhead expenses and unallocated corporate
    assets. Corporate assets include corporate property and equipment,
    discontinued operations, income tax assets and other unallocated corporate
    assets.

                                     F-26
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

  A reconciliation of the Company's segment operating information to
  consolidated loss from continuing operations before income taxes is as follows
  (in thousands):

<TABLE>
<CAPTION>
                                                                               YEAR ENDED SEPTEMBER 30,
                                                                ----------------------------------------------------
                                                                 2000                   1999                  1998
                                                                -------                -------               -------
                                                                                      (UNAUDITED)          (UNAUDITED)
<S>                                                             <C>                    <C>                   <C>
Total operating loss for reportable segments                    $(1,757)               $(1,526)              $(1,699)
Valuation allowance on net assets transferred                      (802)                  (784)                    -
Interest income                                                      16                     94                    22
Interest expense                                                 (1,725)                (1,802)               (1,387)
Unallocated corporate expenses                                   (1,682)                (1,854)               (2,295)
Other, net                                                          (52)                  (273)                   46
                                                                -------                -------               -------

Total consolidated loss from continuing
 operations before income taxes                                 $(6,002)               $(6,145)              $(5,313)
                                                                =======                =======               =======
</TABLE>

15. QUARTERLY FINANCIAL DATA (UNAUDITED)

    Unaudited quarterly financial data is summarized as follows (in thousands,
    except for per share amounts):

<TABLE>
<CAPTION>
                                                                          YEAR ENDED SEPTEMBER 30, 2000
                                                          ---------------------------------------------------------
                                                                      Q1                              Q2
                                                          -------------------------       -------------------------
                                                          PREVIOUSLY          AS          PREVIOUSLY          AS
                                                           REPORTED        RESTATED        REPORTED        RESTATED
                                                          -------------------------       -------------------------
<S>                                                        <C>              <C>            <C>              <C>
Revenue                                                    $22,012          $22,012        $23,150          $23,150
Gross profit                                                 2,585            2,585          2,570            2,570
Operating income (loss)                                       (667)            (667)        (1,082)          (1,082)
Valuation allowance on net assets transferred                    -             (286)             -             (239)
Income (loss) from continuing operations                    (1,214)          (1,500)        (1,430)          (1,673)
Gain from sale of discontinued operations                      266                -              -                -
Net income (loss)                                             (948)          (1,500)        (1,434)          (1,673)

Basic and diluted loss per common share:
  Income (loss) per common share:
   Continuing operations                                   $ (0.30)         $ (0.37)       $ (0.36)         $ (0.41)
   Discontinued operations                                    0.06                -              -                -
                                                           -------          -------        -------          -------
    Total                                                  $ (0.24)         $ (0.37)       $ (0.36)         $ (0.41)
                                                           =======          =======        =======          =======
<CAPTION>

                                                                          YEAR ENDED SEPTEMBER 30, 2000
                                                          ---------------------------------------------------------
                                                                      Q3                              Q4
                                                          -------------------------       -------------------------
                                                          PREVIOUSLY          AS          PREVIOUSLY          AS
                                                           REPORTED        RESTATED        REPORTED        RESTATED
                                                          -------------------------       -------------------------
<S>                                                        <C>              <C>            <C>              <C>
Revenue                                                    $24,878        $24,878          $25,289        $25,289
Gross profit                                                 2,328          2,328            2,658          2,658
Operating income (loss)                                       (834)          (834)            (856)          (856)
Valuation allowance on net assets transferred                    -           (130)               -           (147)
Income (loss) from continuing operations                    (1,211)        (1,344)          (1,345)        (1,485)
Gain from sale of discontinued operations                        -              -                -              -
Net income (loss)                                           (1,214)        (1,344)          (1,338)        (1,485)

Basic and diluted loss per common share:
  Income (loss) per common share:
   Continuing operations                                   $ (0.30)       $ (0.33)         $ (0.31)       $ (0.35)
   Discontinued operations                                       -              -                -              -
                                                           -------        -------          -------        -------
    Total                                                  $ (0.30)       $ (0.33)         $ (0.31)       $ (0.35)
                                                           =======        =======          =======        =======
</TABLE>
                                     F-27
<PAGE>

EVANS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      YEAR ENDED SEPTEMBER 30, 1999
                                                    ---------------------------------------------------------------
                                                                         Q1                           Q2
                                                    ----------------------------         --------------------------
                                                     PREVIOUSLY            AS            PREVIOUSLY           AS
                                                      REPORTED          RESTATED          REPORTED         RESTATED
                                                    -----------         --------         ----------        --------
                                                                       (UNAUDITED)                        (UNAUDITED
<S>                                                  <C>                <C>               <C>             <C>
Revenue                                                 $20,998           $20,998           $19,159          $19,159
Gross profit                                              3,393             3,393             2,816            2,816
Operating income (loss)                                    (695)             (695)           (1,013)          (1,013)
Valuation allowance on net assets transferred                 -                 -                 -             (305)
Loss on impairment of marketable securities                   -                 -                 -                -
Income (loss) from continuing operations                   (778)           (2,591)           (1,689)          (1,994)
Gain from sale of discontinued operations                 3,973                 -                 -                -
Net income (loss)                                         3,195            (2,591)           (1,689)          (1,994)

Basic and diluted loss per common share:
  Income (loss) per common share:
   Continuing operations                                $ (0.22)          $ (0.74)          $ (0.44)         $ (0.52)
   Discontinued operations                                 1.13                 -                 -                -
                                                        -------           -------           -------          -------
    Total                                               $  0.91           $ (0.74)          $ (0.44)         $ (0.52)
                                                        =======           =======           =======          =======
<CAPTION>
                                                                         YEAR ENDED SEPTEMBER 30, 1999
                                                       ------------------------------------------------------------
                                                                    Q3                                Q4
                                                       --------------------------        --------------------------
                                                       PREVIOUSLY           AS           PREVIOUSLY           AS
                                                        REPORTED         RESTATED         REPORTED         RESTATED
                                                       ----------        --------        ----------        --------
                                                                        (UNAUDITED                        (UNAUDITED)
<S>                                                    <C>              <C>              <C>              <C>
Revenue                                                   $24,258          $24,258          $22,858          $22,858
Gross profit                                                3,176            3,176            2,469            2,469
Operating income (loss)                                      (337)            (337)          (1,335)          (1,335)
Valuation allowance on net assets transferred                   -             (248)               -             (231)
Loss on impairment of marketable securities                (8,063)               -             (539)               -
Income (loss) from continuing operations                   (8,720)            (905)          (2,119)          (1,811)
Gain from sale of discontinued operations                       -                -                -                -
Net income (loss)                                          (8,720)            (905)          (2,119)          (1,811)

Basic and diluted loss per common share:
Income (loss) per common share:
Continuing operations                                     $ (2.13)         $ (0.22)         $ (0.55)         $ (0.42)
Discontinued operations                                         -                -                -                -
                                                          -------          -------          -------          -------
Total                                                     $ (2.13)         $ (0.22)         $ (0.55)         $ (0.42)
                                                          =======          =======          =======          =======
</TABLE>
                                     F-28
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                              EVANS SYSTEMS, INC.


                                              /s/ J.L. Evans, Sr.
                                              -------------------------------
                                              Jerriel L. Evans, Sr.
                                              Chairman of the Board and Chief
                                              Executive Officer

December 27, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date(s) indicated:

<TABLE>
<S>                                                 <C>

/s/ J.L. Evans, Sr.                                 /s/ Peter J. Losavio, Jr.
-------------------------------------------------   -----------------------------------------
Jerriel L. Evans, Sr., December 26, 2001            Peter J. Losavio, Jr., December 26, 2001
Chairman of the Board and Chief Executive Officer   Director

/s/ Darlene E. Jones                                /s/ Matt Hessions
-------------------------------------------------   ------------------------------------------
Darlene E. Jones, December 26, 2001                 Matt Hessions, December 26, 2001
Treasurer and Director                              Director
</TABLE>


                                    Page 21
<PAGE>

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT                                                                           SEQUENTIAL PAGE
NUMBER                         DESCRIPTION OF DOCUMENT                                NUMBER
-----------------------------------------------------------------------------------------------
<S>     <C>                                                                        <C>
  3.1   Articles of Incorporation of the Company filed with the Texas Secretary
        of State on October 22, 19681.  Filed with May 11, 1993 filing of Form
        S-1 Registration #33-62684.
  3.2   Certificate of Amendment to Articles of Incorporation of Evans Systems,
        Inc., filed with the Texas Secretary of State on September 21, 1992.
        Filed with May 11, 1993 filing of Form S-1 Registration #33-62684.
  3.3   Certificate Amendment of Articles of Incorporation of Evans Systems,
        Inc., filed with the Texas Secretary of State on April 9, 1993. Filed
        with May 11, 1993 filing of Form S-1 Registration #33-62684.
  3.4   By-Laws of the Company. Filed with May 11, 1993 filing of Form S-1
        Registration #33-62684.
 10.1   Phillips "66" Marketing Agreement dated October 21, 1986.  Filed with
        May 11, 1993 filing of Form S-1 Registration #33-62684.
 10.2   Amoco Lubricants Distributor Agreement dated June 21, 1990 and Schedule
        dated January 2, 1992. Filed with May 11, 1993 filing of Form S-1
        Registration #33-62684.
 10.3   Diamond Shamrock Storage Lease dated July 12, 1985.  Filed with May 11,
        1993 filing of Form S-1 Registration #33-62684.
 10.4   Star Enterprise "Texaco" Marketing Agreement effective July 1, 1993.
        Filed with May 11, 1993 filing of Form S-1 Registration #33-62684.
 10.5   Shell Lubricants Reseller Agreement effective January 1, 1992. Filed
        with May 11, 1993 filing of Form S-1 Registration #33-62684.
 10.6   Texaco Lubricants agreement effective July 1, 1990. Filed with May 11,
        1993 filing of Form S-1 Registration #33-62684.
 10.7   Conoco Jobber Franchise Agreement effective April 1, 1990. Filed with
        May 11, 1993 filing of Form S-1 Registration #33-62684.
 10.8   Mobil Marine Distributor Agreement effective June 3, 1992. Filed with
        May 11, 1993 filing of Form S-1 Registration #33-62684.
 10.9   Form of Series B Warrants to Purchase Common Stock of Registrant.
        Filed with May 11, 1993 filing of Form S-1 Registration #33-62684.
 10.10  Coastal Refinery & Marketing, Inc. Facilities Access Agreement,
        effective September 5, 1989. Filed with May 11, 1993 filing of Form S-1
        Registration #33-62684.
 10.11  FINA Lubricants Marketing Agreement dated February 1, 1989. Filed with
        May 11, 1993 filing of Form S-1 Registration #33-62684.
 10.12  Texaco Terminating Agreement dated April 30, 1986. Filed with May 11,
        1993 filing of Form S-1 Registration #33-62684.
 10.13  Citgo Petroleum Distributor Franchise Agreement effective August 1,
        1992. Filed with May 11, 1993 filing of Form S-1 Registration #33-62684.
 10.14  Incentive Stock Option Plan. Filed with May 11, 1993 filing of Form S-1
        Registration #33-62684.
 10.15  Form of Incentive Stock Option Agreement. Filed with May 11, 1993 filing
        of Form S-1 Registration #33-62684.
 10.16  Summary Plan Description of E.S.O.P. Filed with May 11, 1993 filing of
        Form S-1 Registration #33-62684.
 10.17  Employment Contract with Bill R. Kincer, incorporated by reference
        from Exhibit 10.28 to the Company's Annual Report on Form 10-K for the
        year ended September 30, 1994.
 10.18  Pruett Petroleum, Inc. and Koonce Petroleum Company, Inc. agreement
        dated October 4, 1994, incorporated by reference from Exhibit 10.29 to
        the Company's Annual Report on Form 10-K for the year ended September
        30, 1994.
 10.19  Employment Agreement with Richard A. Goeggel, effective June 16,
        1998, incorporated by reference from Exhibit 10.19 to the Company's
        Annual Report on Form 10-K for the year ended September 30, 1998.
 10.20  Omitted.
 10.21  Employment Agreement with J.L. Evans, Sr., effective April 6, 1998,
        incorporated by reference from Exhibit 10.21 to the Company's Annual
        Report on Form 10-K for the year ended September 30, 1998.
 </TABLE>

                                    Page 22
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                                                           SEQUENTIAL PAGE
NUMBER                          DESCRIPTION OF DOCUMENT                                NUMBER
------------------------------------------------------------------------------------------------
<S>     <C>                                                                        <C>
 10.22  Stock Purchase Agreement dated as of October 30, 1998 by and among the
        Company, Synaptix Systems Corporation, a Colorado corporation, d.b.a.
        Affiliated Resources Corporation, and Way Energy, Inc., a Delaware
        corporation, incorporated by reference from Exhibit 10.22 to the
        Company's Annual Report on Form 10-K for the year ended September 30,
        1998.
 10.23  Amendment No. 1 to Stock Purchase Agreement, dated December 29, 1998 by
        and among the Company, Synaptix Systems Corporation, a Colorado
        corporation, d.b.a. Affiliated Resources Corporation, and Way Energy, Inc.,
        a Delaware corporation, incorporated by reference from Exhibit 10.23 to
        the Company's Annual Report on Form 10-K for the year ended September 30,
        1998.
 10.24  Loan Agreement between the Company and Texas Commerce Bank National
        Association, dated as of August 30, 1996, incorporated by reference from
        Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the three
        months ended March 31, 1999.
 10.25  Amendment to Loan Agreement dated August 4, 1997, incorporated by reference
        from Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
        three months ended March 31, 1999.
 10.26  Amendment to Loan Agreement dated December 24, 1997, incorporated by
        reference from Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
        for the three months ended March 31, 1999.
 10.27  Amendment to Loan Agreement dated April 23, 1998, incorporated by reference
        from Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the
        three months ended March 31, 1999.
 10.28  Amendment to Loan Agreement dated March 31, 1999, incorporated by reference
        from Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the
        three months ended March 31, 1999.
 10.29  Asset Purchase Agreement dated December 3, 1999, by and between TSC
        Services, Inc., Evans Systems, Inc., Diamond Mini Mart, Inc., Evans Oil Co.,
        EDCO, Inc., and Way Energy Systems, Inc. incorporated by reference from
        Exhibit 2.1 to the Company's Current Report on Form 8-K dated December 9, 1999.
 10.30  Amendment to Loan Agreement dated June 30, 1999
 10.31  Amendment to Loan Agreement dated August 31, 1999
 10.32  Amendment to Loan Agreement dated November 30, 1999
*10.33  Stipulated Judgment dated December 1, 2000 in the District Court of Matagorda,
        Texas, 130th Judicial District
*10.34  Deed in Lieu of Foreclosure dated September 26, 2000 by and between ChemWay, Inc.,
        Way Energy, Inc. and Evans Systems, Inc.
*21.0   Subsidiaries of Registrant
*23.0   Consent to the incorporation by reference in the Company's Registration
        Statements on Forms S-8 of the report of Stephenson & Trilicek, P. C. included
        herein.
</TABLE>
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*Filed herewith.

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