SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended SEPTEMBER 30, 1997

                                       OR

[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR 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)

                    720 AVENUE F NORTH, BAY CITY, TEXAS 77414
            (409) 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 (409) 245-2424
   Physical Address: 720 Avenue F North, Bay City, Texas 77414 (409) 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:

       TITLE OF EACH CLASS             NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $.01 per share             NASDAQ-NMS Exchange

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

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

On December 23, 1997, the aggregate market value of the Registrant's voting
stock held by non-affiliates was approximately $1,862,538.

On December 23, 1997, there were 3,163,573 shares of Common Stock outstanding,
exclusive of treasury shares or shares held by subsidiaries of the Registrant.
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

Evans Systems, Inc. (ESI) is a vertically  integrated,  growth-oriented  company
engaged in:

o     Petroleum Marketing;

o     Convenience store operations;

o     The packaging and marketing of automotive after-market chemical products;
      and

o     Environmental remediation services.

History

The company began in 1968 with a single gas station in Bay City, Texas,
emphasizing service and careful attention to customers' preferences and needs.
The Company has expanded since then to 176 stations and 33 convenience stores
throughout Southeast Texas and Louisiana.

The Company believes that convenience stores provide a more efficient method of
utilizing personnel and distributing products to the customer. In the late
1980's, management shifted the Company's emphasis from company-owned stores to
independent ownerships operated in conjunction with the Company's growing fuel
distribution operations.

The Company also owns a petroleum terminal and several bulk plants through which
it supplies motor fuel to other wholesalers and retailers. The operations of
these facilities were subsequently strengthened with the addition of fuel
exchange agreements with major petroleum companies. The Company also distributes
lubricants, specialty petroleum products, tires and certain automotive
accessories in Texas and Louisiana.

Since 1980, the Company has provided environmental services for its own
facilities and its customers. The Company maintains the necessary licenses and
facilities to provide environmental services to a variety of customers ranging
from small operations to banks, utilities, major petroleum companies and large
industrial plants. In 1990, ChemWay Systems, Inc. (ChemWay) was incorporated to
package and market aerosol and liquid automotive chemical products.

In mid 1995, the Company began reviewing its operating structure. The results
were approved by the Board of Directors on December 18, 1995, included the
realignment of its Way Segment into two segments, Petroleum Marketing and
Convenience Stores, to provide efficiency and accountability. The Company
believes this realignment will also provide more meaningful reporting of
operating results. In 1997 with the changing petroleum industry being driven by
consolidation and lower margins, the Company put together a five year plan to
sell marginal operations and focus on growth of its retail convenience store
segment. (See Management's Discussion & Analysis)

                                       2
<PAGE>
The company had the following operating results during the past three years.

                                       YEAR ENDED     YEAR ENDED      YEAR ENDED
                                        SEPTEMBER      SEPTEMBER       SEPTEMBER
                                         30, 1997       30, 1996        30, 1995
                                       -----------    ----------      ----------
                                                 ---(In Thousands)---
PETROLEUM MARKETING[1]                                                    
Revenue ...........................     $  98,376      $  91,374      $  93,963
Operating Income (Loss) ...........        (1,369)           644            252

CONVENIENCE STORES
Revenue                                    38,300         39,602         39,538
Operating Income (Loss)                    (1,208)           171            245

CHEMWAY                                    
Revenue ...........................        10,967         25,773         22,853
Operating Income (Loss) ...........        (1,831)         2,179            692

EDCO ENVIRONMENTAL
Revenue ...........................         1,320          2,031          1,841
Operating Income (Loss) ...........          (399)          (456)          (271)

TOTAL:
Revenue ...........................     $ 148,963      $ 158,780      $ 158,195
Operating Income (Loss) ...........        (4,807)         2,538            918

[1]   Includes the parent company.

PETROLEUM MARKETING

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

                                                        FISCAL YEAR ENDED
                                                           SEPTEMBER 30
                                                 -------------------------------
                                                  1997        1996        1995
                                                 -------     -------     -------
Refined Petroleum Product Sales ............     $96,714     $89,717     $91,909
Non-Petroleum Product Sales ................       1,662       1,657       2,054
Total Sales ................................     $98,376     $91,374     $93,963

The Petroleum Marketing segment includes the sale of motor fuels, lubricants,
tires and accessories items to commercial and industrial accounts, and the sale
of motor fuels to the public through the following retail outlets:

       o  100 gasoline retail facilities with Company-supplied equipment
          consisting of pumps, lights, and canopies and at certain locations
          provide tanks, at independently owned and operated convenience stores
          (the Company receives 40 percent or 50 percent of the gasoline
          margins, depending on who owns the underground equipment.)

       o  76 stations and convenience stores to which the Company provides major
          oil company brand names, credit cards, and signs, without further
          investment, and receives its customary markups on fuel deliveries.

The Company's business strategy for its Petroleum Marketing segment is (1) to
continue upgrading its profitable facilities, including installation of
automated tank monitoring equipment; (2) to increase sales volume through
increased brand representation and by acquisition; (3) to market in a variety of
local areas; and, (4) to expand in other markets.

CONVENIENCE STORE

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

                                               1997          1996          1995
                                             -------       -------       -------
Refined Petroleum Sales ..............       $22,525       $22,993       $23,667
Merchandise Sales ....................        15,089        15,996        15,466
Other Income .........................           686           613           405
                                             -------       -------       -------
Total Sales ..........................       $38,300       $39,602       $39,538

The Company operates 33 convenience stores with self-serve motor fuels and a
variety of food and non-food merchandise. One company operated full service
station without a convenience store is included in this segment. Other income is
mainly lottery commissions and lease income. Convenience Stores business
strategy is (1) to continue upgrading its facilities to meet modern images; (2)
examine and reduce operating and overhead expenses to improve efficiency and
financial position; (3) to increase sales and profits through the addition of
Taco Bell(R) , Blimpie(R), Pizza Inn's(R) and Hardee's(R) franchises to its
existing locations; (4) to lease or sell to others marginal locations
maintaining fuel profits through contracts tied to leases; (5) to sell marginal
stores; and (6) to provide a clean, friendly, and safe store with the
merchandise customers desire.

CHEMWAY SYSTEMS

ChemWay blends and packages chemicals for the automotive aftermarket in aerosol
and liquid containers, from 4 ounce containers to 55 gallon drums. The plant is
located eight miles south of Bay City, Texas, on the Colorado River, in an
industrial park on a 13 acre site. ChemWay also added a 55,000 square foot
distribution facility in early 1997 to centralize the distribution of its
products. Aerosol packaging constitutes the largest share of production, with
the liquid line growing in proportion to general company growth. The major
aerosol products are refrigerants packaged in 12 ounce high pressure cans and 30
pound disposable cylinders.

The following branded products are currently offered by ChemWay:
<TABLE>
<CAPTION>
      AEROSOL                                          LIQUID
      -------                                          ------
<S>   <C>                                              <C>
      R-12                                             Engine Flush
      Carb & Choke Cleaner                             A/C Purge & Flush
      Engine Cleaner and Degreaser                     Power Steering Fluid
      Penetrating Oil Spray                            Octane Boost
      Refrigerant Oil Charge                           Refrigerant Oil
      Brake Parts Cleaner                              Five Minute Engine Flush
      Tar & Bug Remover                                Carb & Fuel Injector Cleaner
      HFC-134A                                         Tire & Wheel Cleaner
      Starting Fluid                                   Engine Degreaser & Cleaner
      Premium Starting Fluid                           Super Heavy Duty Brake Fluid
      Windshield D-Icer                                Antifreeze and Summer Coolant
      R-22                                             Two Cycle Engine Oil
      Tire Inflator with Cone                          Gas Treatment
      Tire Inflator with Hose                          Diesel Treatment
      134-A Oil Charge                                 Windshield Washer Concentrate
      Super Concentrate Carb/Injector Cleaner          Vinyl Cleaner and Protector
                                                       Motor Oil
                                                       A.T.F. Type A
                                                       Rain Guard
                                                       K-1 Kerosene
                                                       Petroleum Solvent - Metal Parts Cleaner 
                                                       DOT 3 Brake Fluid
                                                       DOT 4 Brake Fluid 
                                                       Lead Substitute
                                                       134-A Ester Oil 
                                                       134-A A/C Flush 
                                                       Emission Reducer 
                                                       Fog Guard 
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                    <C>
                                                       Diesel Conditioner              
                                                       Gas Line Anti-Freeze            
                                                       134-A Pag Oils                  
                                                       Fuel System Water Remover       
                                                       TC-W3 2 Cycle Oil               
                                                       10w30 Motor Oil                 
                                                       10w40 Motor Oil                 
                                                       Mercron III/ Mercron A.T.F.     
                                                       Engine Oil Treatment            
                                                       Engine Oil Stop Leak            
                                                       Engine Oil No Smoke             
                                                       Automatic Transmission Stop Leak
                                                       B.F. Dot 5 with Silicone        
                                                       P.S.F. Stop Leak                
                                                       P.S.F. for Honda Cars           
                                                       Manual Clutch Fluid             
                                                       Gas Tank Treatment with ISD     
</TABLE>
ChemWay is also involved in reclamation of refrigerants, which the company
believes will enhance its position relative to regulatory limits on the
production of refrigerants. With the implementation of the high speed fill-line,
ChemWay is now positioned to target high volume contract packaging with
automotive aftermarket products of third parties.

EDCO ENVIRONMENTAL SYSTEMS, INC.

EDCO Environmental currently focuses on the following:

      o     Underground Storage Tank (UST) Removal

      o     UST Regulator Upgrades

      o     Site Assessments for Regulatory Agencies

      o     UST Repairs and Maintenance

      o     Site Clean Up Reimbursement

EDCO Environmental has provided environmental remediation services to one
hundred customers ranging from gasoline stations, convenience stores, and other
small local enterprises, to public utilities, banks, major oil companies, large
industrial corporations, and a variety of governmental institutions and
enterprises. Environmental protection work has been largely government mandated.
In the mid 1980s, the Environmental Protection Agency (EPA) initiated a program
for the management of Underground Storage Tanks (UST's) throughout the country.

The EPA has recently required Stage II vapor recovery improvements at fuel
facilities rather than through on-board canisters in new automobiles. This
decision will affect retail gasoline facilities in the cities and surrounding
counties of Houston, Galveston, Dallas/Fort Worth, El Paso and Port
Arthur/Beaumont. The EPA phase-in of UST improvement deadlines is December,

1998.

A number of states have established remediation funds to assist owners/operators
in clean-up activities. In Texas, this was done through the Groundwater
Protection Act approved by the Texas Legislature effective September 1, 1989.
The Act, as amended, provides clean-up funds for eligible expenses, less
applicable deductibles. The fund is continually financed by a fee assessed on
motor fuel sold in the state. Financing programs secured by assignments of
rights to TNRCC reimbursements can be obtained for leaking petroleum storage
tank sites impacted by releases from UST's. For locations where contamination
already exists, the UST owner/operator must comply with TNRCC clean-up
regulations or risk fines up to $10,000 per day and disqualification from the
benefits and funding of the Groundwater Protection Act.

The Texas Natural Resource Conservation Commission is continuing to provide
reimbursements for clean-up of contaminated locations.

<PAGE>
EMPLOYEE RELATIONS

The Company employs 486 people, none of whom are represented by any collective
bargaining organizations. The Company has had no work stoppages, slow downs, or
strikes, and is not engaged in any litigation with regards to employment rights
and practices or other social or civil rights. On July 1, 1997 the Company
implemented an employee directed 401K 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 Petroleum Marketing division also
competes with integrated oil companies which, in some cases, own or control a
majority of their Petroleum Marketing facilities. 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 Company, however, is one of the leading independent suppliers of refined
petroleum products within a 250 mile radius surrounding Houston, Texas and
Southwest Louisiana. Being a multi-brand distributor gives the Company a
competitive advantage of flexibility in placing the proper brand for the
location. The Company sells to the smaller retail consumer and to the high
volume industrial customer. The Company sells in excess of 100 million gallons
per year, which places it in the top 1% of all independent marketers of refined
petroleum products in the United States. The Company markets approximately 20%
of its volume to the greater Houston metropolitan area where major oil companies
are the primary existing competitors. On occasion, the major oil companies cut
prices to increase their market position.

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.

The Company also encounters competition in attempting to acquire sites for new
stores and existing groups of convenience stores. The Company's continued growth
in this business depends upon its ability to identify acquisition candidates
that can be obtained and operated profitably and to find suitable locations for
new stores.

The development, production, and marketing of chemical products for use with
automotive vehicles is also very competitive. The packaging of chemical products
will be subject to continuing changes in ingredients, product requirements,
government regulations, and legislative changes which could increase research,
production, and competitive burdens in future years.

ChemWay sells automotive after-market products in all fifty states. ChemWay
primarily has four competitors in the combination aerosol and liquid packaging
business. All four competitors are better capitalized and larger. There are
numerous other competitors who can do either aerosol or liquid packaging. The
principal competitive factors are product formulations and performance,
packaging, price, and service.
<PAGE>
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.

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 twenty-four (24) convenience stores with gasoline installations in
Texas and Louisiana, and rents or leases another thirty-nine (32) convenience
stores under varying terms.

The Company's general offices are 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. EDCO Environmental's facilities include a 19,200
square foot shop, fabrication, and maintenance building adjacent to the
administration building.

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, are located on 3 acres of land approximately 1/2 mile north of the
general offices on Highway 60. Bulk storage equipment, including 14 fuel storage
tanks and 20 lube oil and antifreeze tanks, are located adjacent to the
warehouses.

ChemWay's offices, together with 29,680 square feet of manufacturing and
warehouse space, are located adjacent to the offices and petroleum terminal of
Way Energy, situated on a 13-acre tract leased from the Port of Bay City for an
annual rental of $1,293. ChemWay also owns a 55,000 square foot finished goods
warehouse in Bay City, Texas. Way Energy has a warehouse, dock, and fuel tanks
with 110,000 barrel storage capacity as well as loading and unloading facilities
on the premises leased from the Port of Bay City. The Company also owns an
unimproved tract of approximately 333 feet of dock frontage located along
navigable waters suitable for future intercoastal and intracoastal shipment of
Company products.

ChemWay has two (2) additional  sites.  One site has office and warehouse  space
(6,650  sq.  ft.)  situated  on 1.3 acres of land with 195 feet of  frontage  on
Highway  60. The other site is a 55,000 sq. ft.  warehouse  and office  building
located  on 3.2  acres in a  residential/industrial  section  of the City of Bay
City.

ITEM 3.  LEGAL PROCEEDINGS

During fiscal 1997, the Company was a defendant in the following:

1.     No.  44,136;  JAMES TODACK AND KATRINA A. CRONE V. EVANS  SYSTEMS,  INC.,
       Probate and County Court, Galveston County, Texas.

         This case was filed May 21, 1997 over an alleged breach of contract and
accounting over the purchase of assets by Evans Systems, Inc. from Todack, Crone
and others on July 25, 1995. Currently the Court has taken under advisement our
request for change of venue to Matagorda County, Texas. Upon that decision,
Evans Systems, Inc. will file defenses of lack of consideration, and breach of
contract. No formal monetary demand has been made at this time.

2.       No. 97-2924;  AIR  REFRIGERANTS,  L.L.C. V. REFRIGERANT  GASES INC.; In
         the U.S. District Court, E.E. Louisiana. COMPANY.

         This case was filed by Air Refrigerants to collect on its contract with
Refrigerant Gases (RGI) and RGI has counterclaimed against Air Refrigerants for
alleged breach of contract and has threatened to take legal action to attempt to
terminate ChemWay Systems, Inc.'s distribution and marketing agreement with Air
Refrigerants. Although RGI has named ChemWay Systems, Inc. in its counterclaim,
it has chosen not to serve ChemWay Systems, Inc. nor have they asked for legal
or equitable relief against ChemWay Systems, Inc. It is management's decision
that based on the available facts and law, it will vigorously defend any
attempts by RGI in this matter.

3.       No. 95-6-11, 567; COUNTY OF VICTORIA, ET. AL. VS. DIAMOND MINI-MART,
         INC., A TEXAS CORPORATION D/B/A KINCER FOOD STORE #8; in the 135th
         Judicial District Court of Victoria County, Texas.

         This is an IN REM action filed in June, 1995. Plaintiff alleges that
taxes are due on personal property for the years 1992 and 1993. Defendant
obtained said property in August 1994 and is relying upon the Seller's attorney
opinion statement and bills of sale which recite Defendant received said
personality free of all liens including tax liens. Management is contesting the
amount alleged ($9,338.25) and has demanded that Seller and/or its attorney pay
any past due taxes. Currently, the trial setting has been dropped and
negotiations continue with both the taxing authority and the Seller/Seller's
attorney.

4.       COUNTY  OF  VICTORIA,   ET.  AL.  VS.  EVANS  SYSTEMS,  INC.,  A  TEXAS
         CORPORATION  D/B/A KINCER OIL COMPANY;  in the 24th  Judicial  District

         Court of Victoria County.

         This is an IN REM action filed in June, 1995. Plaintiff alleges taxes
are due on personal property for the years 1992 and 1993. Defendant received
said personality free of all liens including tax liens. Management is contesting
the amount alleged ($13,943.53) and has demanded that Seller and/or Seller's
attorney pay any past due taxes. Currently, the trial setting has been dropped
and negotiations continue with both the taxing authority and the Seller/Seller's
attorney.

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

None.
<PAGE>
                                     PART II

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

STOCK INFORMATION

Traded On the National Market System -- NASDAQ Symbol "EVSI." Common Stock, $.01
par value 3,163,573 shares outstanding at the close of business on December 24,
1997. Number of stockholders: approximately 1,350. The Company has not paid any
cash dividends, and the Company currently has no plans to adopt a regular cash
dividend.

On January 20, 1997, the Company paid a 5% stock dividend to shareholders of
record on December 31, 1996. In lieu of the issuance of fractional shares,
$148.31 of cash was paid.

The high and low price range for the last two years, which has not been adjusted
for the stock dividend noted above, is listed below:

DATES                                                         HIGH         LOW
--------------------------------------------------------------------------------
October 1, 1995 through December 31, 1995 ..............      6 3/16      3 1/2
January 1, 1996 through March 31, 1996 .................      5 5/8       3 3/16
April 1, 1996 through June 30, 1996 ....................      6 3/4       4 5/8
July 1, 1996 through September 30, 1996 ................      6 7/8       4 5/8
October 1, 1996 through December 31, 1996 ..............      6 0/0       4 1/32
January 1, 1997 through March 31, 1997 .................      5 3/4       3 7/8
April 1, 1997 through June 30, 1997 ....................      4 1/4       3 1/8
July 1, 1997 through September 30, 1997 ................      3 3/4       2 3/8

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.
<TABLE>
<CAPTION>
                                                          YEAR ENDED SEPTEMBER 30
                                              ---------------------------------------------
INCOME STATEMENT DATA:                        1997       1996      1995      1994      1993
----------------------                        ----       ----      ----      ----      ----
                                       ----- Dollars in thousands, except per share data -----
<S>                                      <C>         <C>       <C>       <C>       <C>     
Revenues ..............................  $ 148,963   $158,780  $158,195  $109,866  $105,338
Gross Profit ..........................     16,522     21,685    19,282    14,302    13,927
Operating Income (Loss) ...............     (4,807)     2,538       918     1,107     2,291
Net Income (Loss) .....................     (4,339)     1,119       335       740     1,308
Earnings (Loss) per share(1) ..........      (1.41)       .36       .11       .23       .67
Weighted average number of common and
common equivalent shares outstanding(1)      3,075      3,067     3,088     3,152     1,958
</TABLE>
(1)  Adjusted for 5% stock dividend as discussed in Item 5.
<PAGE>
                                             SEPTEMBER 30
                               ----------------------------------------
BALANCE SHEET DATA:            1997     1996     1995     1994     1993
-------------------            ----     ----     ----     ----     ----
                                      ---Dollars in thousands---

Current Assets ...........  $14,962  $18,726  $21,566  $18,250  $22,294
Current Liabilities ......   16,654    9,724   16,698   11,938   10,300
Current Ratio ............    .90:1   1.93:1   1.29:1   1.53:1   2.16:1
Total Assets .............   38,004   41,073   40,609   33,164   30,535
Long-term Debt ...........    5,401   10,400    4,663    2,168    1,913
Total Stockholders' Equity   15,949   19,748   18,534   18,327   18,218


ITEM  7.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated
Financial Statements and notes thereto.

                              RESULTS OF OPERATIONS

1997 VS 1996

The Company's (ESI's) after-tax profits (losses) for the years ended 1997 and
1996 respectively were ($4,339,000) and $1,119,000. Management attributes the
after-tax profit decrease of $5,458,000 in 1997 over 1996 mainly to a decrease
in revenues, gross profit margins and an increase in expenses. Included in these
losses were the security trading loss of $497,000 and asset, inventory, and
accounts receivable write-downs of approximately $818,000. ESI's revenues for
1997 decreased $9,817,000 (6.2%) to $148,963,000 compared to $158,780,000 in
1996. ChemWay's sales of R-12 decreased from $13,669,000 in 1996 to $1,400,000
in 1997. Fuel sales gallonage increased to 106,907,000 gallons compared to
105,357,000 in 1996; a 1,550,000 (1.5%) increase. ESI's gross profit for 1997
was $16,522,000 (11.1%) compared to $21,685,000 (13.7%) in 1996. Management
attributes the decline in profit margins to competitive pricing in Petroleum
Marketing, ChemWay, and EDCO Environmental and to the decline of ChemWay's R-12
sales.

Operating expenses in 1997 increased to $21,329,000 compared to $19,147,000 in
1996. Operating expenses were 14.3% of revenues in 1997, and 12.1% in 1996.
Management attributes the increase in expenses primarily to Petroleum Marketing
and Convenience Stores and, to a lesser extent, increases in the other business
segments. (Refer to the discussion of each business segment for additional
detail in this section).

                              PETROLEUM MARKETING

The Petroleum Marketing segment had sales of $98,376,000 in 1997 compared to
$91,374,000 in 1996, a $7,002,000 (7.7%) increase. Fuel sales gallonage
increased to 88,448,000 gallons compared to 85,845,000 in 1996, a 2,603,000
(3.0%) increase. Gross profits for 1997 and 1996 were $7,676,000 and $8,810,000
respectively. Gross profit margins decreased to 7.8% compared to 9.6% in 1996.
Operating expenses increased $879,000 in 1997. Operating expenses were 9.1% of
revenues in 1997, and 8.9% in 1996 primarily due to the transfer of EDCO
Environmental's service department into Petroleum Marketing and the related
increase in employment expenses, a $111,000 increase in allowance for doubtful
accounts in general and administrative expenses and a $100,000 write-down in
software costs. ESI, the parent company, is included in the Petroleum Marketing
results. Operating income (loss) decreased to ($1,369,000) compared to $644,000
in 1996.
<PAGE>
                               CONVENIENCE STORES

The Convenience Store segment had sales of $38,300,000 in 1997 compared to
$39,602,000 in 1996; a $1,302,000 (3.3%) decrease. Fuel sales decreased to
$22,525,000 in 1997 compared to $22,993,000 in 1996; a $468,000 (2.0%) decrease.
Fuel sales gallonage decreased to 18,459,000 gallons compared to 19,512,000 in
1996; a 1,053,000 (5.4%) decrease. Merchandise sales decreased to $15,089,000 in
1997 compared to $15,996,000 and other income increased to $686,000 compared to
$613,000. Management attributes the declines to operating 6 fewer stores for
part of 1997. Gross profit margins decreased to 19.3% in 1997 compared to 20.0%
in 1996. Gross profit margins on fuel sales decreased to 9.4% compared to 10.6%;
merchandise margins decreased to 30.4% compared to 30.6% in 1996.

Operating expenses increased $837,000 in 1997. Operating expenses were 22.5% of
revenues in 1997 and 19.6% in 1996. Increases in operating expenses were
centered in employment $202,000, other operating $407,000, and general
administration $113,000. Operating income (loss) decreased to ($1,208,000)
compared to $171,000 in 1996.

                                     CHEMWAY

ChemWay had sales of $10,967,000 in 1997 compared to $25,773,000 in 1996; a
$14,806,000 (57.4%) decrease. The decrease was mainly attributable to a decrease
in R-12 sales of $12,269,000. Gross profit for 1997 and 1996 was $1,078,000 and
$4,422,000, respectively. Gross profit margins declined to 9.8% in 1997 compared
to 17.2% in 1996. Management attributes the decline in gross profit margins to
the loss of sales of R-12. Operating expenses increased $667,000 in 1997
compared to 1996. Included in these increases were asset, inventory, and
accounts receivable write-downs of approximately $398,000. Operating income
(loss) decreased to ($1,831,000) compared to $2,179,000 in 1996.

                               EDCO ENVIRONMENTAL

EDCO Environmental sales were $1,320,000 in 1997 compared to $2,031,000 in 1996;
a $711,000 (35.0%) decrease. Gross profit for 1997 and 1996 was $366,000 and
$510,000 respectively. Gross profit margins increased to 27.7% compared to 25.1%
in 1996. Operating expenses decreased $201,000 in 1997 compared to 1996. The
$201,000 decrease was mainly attributable to the transfer of EDCO's service
department to Petroleum Marketing offset by asset write-downs of approximately
$209,000. Operating loss was ($399,000) compared to ($456,000) in 1996.

1996 VS 1995

The Company's (ESI's) after-tax profits for the years ended 1996 and 1995
respectively were $1,119,000 and $335,000. Management attributes the after-tax
profit increase of $784,000 in 1996 over 1995 mainly to an increase in gross
profit margins in ChemWay on higher revenues and a decrease in expenses in the
Petroleum Marketing segment. ESI's revenues for 1996 increased $585,000 to
$158,780,000 compared to $158,195,000 in 1995. Fuel sales gallonage decreased to
105,357,000 gallons compared to 114,398,000 in 1995; a 9,041,000 (7.9%)
decrease. ESI's gross profits for 1996 were $21,686,000 (13.7%) compared to
$19,282,000 (12.2%) in 1995. Management attributes the increase in gross profit
margins to the fast food conversions began in 1996 and to ChemWay refrigerant
margins.

Operating expenses in 1996 increased to $19,147,000 compared to $18,364,000 in
1995. Operating expenses were 12.1% of revenues in 1996, and 11.6 % in 1995.
Management attributes the increase in expenses primarily to the cost of volume
increases in ChemWay, the preparation to expand the Convenience Store segment,
and increased depreciation in all segments related to expansion in equipment to
provide for future growth. (Refer to the discussion of each business segment for
additional detail in this section.)

                              PETROLEUM MARKETING

The Petroleum Marketing segment had sales of $91,374,000 in 1996 compared to
$93,963,000 in 1995, a $2,589,000 (2.8%) decrease. Fuel sales gallonage
decreased to 85,845,000 gallons compared to 94,513,000 in 1995, a 8,668,000
(9.2%) decrease. Gross profits for 1996 and 1995 were $8,810,000 and $9,181,000,
respectively. Gross profit margins 
<PAGE>
decreased to 9.6% compared to 9.8% in 1995. Operating expenses decreased
$762,000 in 1996. Operating expenses were 8.9% of revenues in 1996, and 9.4% in
1995. Management attributes the decrease to decreases in employment expenses of
$364,000; transportation of $205,000; general administrative expense of
$412,000; and to increases in repairs to buildings and fuel dispensing equipment
of $51,000 and depreciation of $168,000. These changes were mainly attributable
to the corporate restructuring made during the year. ESI, the parent company, is
included in the Petroleum Marketing results. Operating income increased to
$644,000 compared to $252,000 in 1995.

                               CONVENIENCE STORES

The Convenience Store segment had sales of $39,602,000 in 1996 compared to
$39,538,000 in 1995; a $64,000 (0.2%) increase. Fuel sales decreased to
$22,993,000 in 1996 compared to $23,667,000 in 1995. Fuel sales gallonage
decreased to 19,512,000 gallons compared to 20,425,000 in 1995; a 913,000 (4.5%)
decrease. Merchandise sales increased to $15,996,000 in 1996, compared to
$15,466,000 in 1995, and other income increased to $613,000 compared to
$405,000. Management attributes the $64,000 increase in sales to merchandise
$530,000; other income of $208,000; and a decrease in fuel of $674,000.

Gross profit margins increased to 20.0% in 1996 compared to 19.2%. Gross profit
margins on fuel sales decreased to 10.6% compared to 12.5%; merchandise margins
increased to 30.6% compared to 27.4% in 1995.

Operating expenses increased $421,000 in 1996. Operating expenses were 19.6% of
revenues in 1996 and 18.6% in 1995. Increases in operating expenses were
centered in employment $453,000; transportation $30,000; depreciation $166,000
and decreases in building/equipment repairs and leases $83,000 and general
administration $145,000. These increases were mainly attributable to the
additional employees required in its fast food outlets, management restructuring
for growth, and increased depreciation on rebuilds or store remodeling.
Operating income decreased to $171,000 compared to $245,000 in 1995.

                                    CHEMWAY

ChemWay sales were $25,773,000 in 1996 compared to $22,853,000 in 1995; a
$2,920,000 (12.8%) increase. The increase was mainly attributable to an increase
in R-12 sales. Gross profits for 1996 and 1995 were $4,422,000 and $1,937,000,
respectively. Gross profit margins increased to 17.2% in 1996 compared to 8.5%
in 1995. Management attributes the increase in gross profit margins mainly to
improved margins on refrigerant products. Operating expenses increased $998,000
in 1996 compared to 1995. Increases in operating expenses were centered in
employment $628,000; freight $135,000; repairs, maintenance and equipment
$94,000; general administrative $78,000; and depreciation $63,000. Management
attributes these increases to production costs related to volume increases and
the expansion of its market area to 50 states in 1996. Operating income
increased to $2,179,000 compared to $692,000 in 1995, a $1,487,000 increase.

                               EDCO ENVIRONMENTAL

EDCO Environmental sales were $2,031,000 in 1996 compared to $1,841,000 in 1995;
a $190,000 (10.3%) increase. Gross profits for 1996 and 1995 were $510,000 and
$568,000, respectively. Gross profit margins declined to 25.1% compared to 30.9%
in 1995. The decrease in gross profit margins were due to competitive
construction contracts and lower margin equipment sales in 1996. Operating
expenses increased $127,000 in 1996 compared to 1995. The $127,000 increase was
mainly attributable to increases in employment expenses $37,000; repairs
maintenance $38,000; general administrative expenses $8,000; depreciation
$48,000; and a decrease in transportation costs of $4,000. A portion of the
increase in expenses were attributable to costs incurred on its first
application of the Matrix process. Operating loss was ($456,000) compared to
($271,000) in 1995. The $185,000 additional loss was due to a $58,000 decrease
in gross profit and a $127,000 increase in expenses.

                        CAPITAL RESOURCES AND LIQUIDITY

Cash, cash equivalents and marketable securities were $1,297,000 at September
30, 1997 compared to $4,392,000 at September 30, 1996. Working capital deficit
was $1,692,000 at September 30, 1997, a $10,694,000 decrease from working
capital of $9,002,000 at September 30, 1996. The net decrease resulted primarily
<PAGE>
from the operating loss of $4,339,000 and the reclassification of long-term debt
to short-term debt at September 30, 1997 of $6,400,000. The decrease in
long-term debt was primarily due to the change in maturity of certain bank debt
with one of the Company's lenders.

Cash used by operations was $1,398,000 for the year ended September 30, 1997
compared to cash provided by operations of $1,180,000 for the year ended
September 30, 1996. The decrease was mainly attributable to the 1997 net loss of
$4,339,000 offset by depreciation and amortization of $2,129,000.

ESI's current ratio, the ratio of current assets to current liability, was .90
for 1997 and 1.93 for 1996. This decrease is primarily attributable to the
reclassification of $6,400,000 of long-term debt to current debt.

Certain of the Company's notes payable to banks require maintenance of financial
covenants, including current, debt to equity, tangible net worth and debt
service coverage ratios. At September 30, 1997, the Company was in violation of
certain of these covenants. In addition, the Company was out of compliance with
the borrowing base limits with one bank. The bank has waived these covenant
defaults and has agreed to a standstill of the breach of the borrowing base
limits. In exchange for these waivers and the standstill agreement, the Company
has pledged the stock of its subsidiaries, pledged the proceeds of the sale of
non-income producing assets, provided the bank a second lien on its office
facility and agreed to a maturity date of April 30, 1998. As of September 30,
1997, ESI had $ 2,563,000 available in unused lines of credit, however, due to
borrowing base limits these unused lines of credit were not currently available
for use.

The Company is in the process of seeking long-term senior debt and replacement
for the current lines of credit. The Company has hired an investment banking
firm to work with management to obtain this senior debt financing. The
investment banker and management believe this financing can be obtained prior to
the current credit lines expiring. The Company has also identified various
non-income producing assets and non-strategic properties which it intends to
sell.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of the Company included in this Form 10-K
are listed under Item 14.

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

None.
                                    PART III

ITEMS  10 AND  11.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF THE  REGISTRANT  AND
EXECUTIVE COMPENSATION

As permitted by General Instruction G, the information called for by these items
with respect to the Company's directors and executive compensation is
incorporated by reference from the Company's definitive proxy statement to be
filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to be
filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
<PAGE>
As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to be
filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.

                                     PART IV

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

 (a)     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 16.

(b)      Reports on Form 8-K:

         None.
<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/ JERRIEL L. EVANS, SR.
                                            Jerriel L. Evans, Sr.
                                            Chairman of the Board and 
                                            Chief Executive Officer

December 24, 1997

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:

/s/ JERRIEL L. EVANS, SR.
    Jerriel L. Evans, Sr., December 24, 1997
    Chairman of the Board and Chief Executive Officer

/s/ LARRY N. MILLER
    Larry N. Miller, December 24, 1997
    Chief Financial Officer

/s/ MAYBELL H. EVANS
    Maybell H. Evans, December 24, 1997
    Secretary and Director

/s/ DARLENE E. JONES
    Darlene E. Jones, December 24, 1997
    Treasurer and Director

/s/ CHARLES N. WAY
    Charles N. Way,  December 24, 1997
    Corporate Controller and Director

/s/ CARL W. SCHAFER
    Carl  W. Schafer, December 24, 1997
    Director

/s/ DAVID L. DEERMAN
    David L. Deerman, December 24, 1997
    Director

/s/ PETER J. LOSAVIO, JR.
    Peter J. Losavio, Jr., December 24, 1997
    Director
<PAGE>
EVANS SYSTEMS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, 1996 AND 1995
<PAGE>
EVANS SYSTEMS, INC.
FORM 10-K
INDEX TO FINANCIAL STATEMENTS
------------------------------------------------------------------------------

Report of Independent Accountants.......................................  F-2

Consolidated Balance Sheet at September 30, 1997 and 1996...............  F-3

Consolidated Statement of Operations for the Years Ended
  September 30, 1997, 1996 and 1995.....................................  F-4

Consolidated Statement of Cash Flows for the Years Ended
  September 30, 1997, 1996 and 1995.....................................  F-5

Consolidated Statement of Stockholders' Equity for the
  Years Ended September 30, 1997, 1996 and 1995.........................  F-6

Notes to Consolidated Financial Statements..............................  F-7

                                     F-1
<PAGE>
                  REPORT OF INDEPENDENT ACCOUNTANTS

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


In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, cash flows and stockholders' equity
present fairly, in all material respects, the financial position of Evans
Systems, Inc. and its subsidiaries at September 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Houston, Texas
December 23, 1997

                                 F-2
<PAGE>
EVANS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997 AND 1996
--------------------------------------------------------------------------------

(IN THOUSANDS)                                              1997         1996
                               ASSETS
Current assets:
   Cash and cash equivalents                              $  1,297     $  2,793
   Marketable equity securities                                           1,599
   Trade receivables, net of allowance for
     doubtful receivables of $340,000
     and $50,000                                             4,584        5,160
   Inventory                                                 7,962        8,182
   Income taxes receivable                                     310           37
   Prepaid expenses and other current assets                   618          955
   Deferred income taxes                                       191
                                                          --------     --------
      Total current assets                                  14,962       18,726
Property, plant and equipment, net                          21,610       20,848
Other assets                                                 1,035        1,499
Deferred income taxes                                          397
                                                          --------     --------
      Total assets                                        $ 38,004     $ 41,073
                                                          ========     ========
        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued expenses                  $  8,474     $  6,051
   Accrued excise and other taxes payable                      343        1,511
   Current portion of long-term debt                         7,837        2,145
   Deferred income taxes                                                     17
                                                          --------     --------
      Total current liabilities                             16,654        9,724
Long-term debt                                               5,401       10,400
Deferred income taxes                                                     1,201
                                                          --------     --------
      Total liabilities                                     22,055       21,325
                                                          --------     --------
Commitments and contingencies
Stockholders' equity:
   Common stock, $0.01 par value, 15,000,000
     shares authorized, 3,163,573 and
     3,105,590 shares issued                                    32           31
   Additional paid-in capital                               12,297       12,133
   Retained earnings                                         4,054        8,393
   Net unrealized loss on marketable
     equity securities                                                     (375)
   Treasury stock, 72,589 shares, at cost                     (434)        (434)
                                                          --------     --------
      Total stockholders' equity                            15,949       19,748
                                                          --------     --------
      Total liabilities and stockholders' equity          $ 38,004     $ 41,073
                                                          ========     ========

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

                                     F-3
<PAGE>
EVANS SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
--------------------------------------------------------------------------------

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)      1997          1996         1995

Revenue:
   Refined product sales (including
     consumer excise and state fuel
     taxes of $20,391, $17,514 and
     $18,649, respectively)                 $ 119,364    $ 112,790    $ 115,677
   Other sales and services                    29,599       45,990       42,518
                                            ---------    ---------    ---------
      Total revenue                           148,963      158,780      158,195
Cost of sales                                 132,441      137,095      138,913
                                            ---------    ---------    ---------
Gross profit                                   16,522       21,685       19,282
                                            ---------    ---------    ---------
Operating expenses:
   Employment expenses                         10,098       10,072        9,318
   Other operating expenses                     4,847        4,061        4,007
   Other general and administrative
     expenses                                   4,255        3,387        3,857
   Depreciation and amortization                2,129        1,627        1,182
                                            ---------    ---------    ---------
      Total operating expenses                 21,329       19,147       18,364
                                            ---------    ---------    ---------
Operating income (loss)                        (4,807)       2,538          918
                                            ---------    ---------    ---------
Other income (expense):
   Gain on sale of assets                          17          125           81
   Interest income                                 78          165          190
   Interest expense                            (1,178)      (1,005)        (836)
   Other                                         (487)        (104)         135
                                            ---------    ---------    ---------
      Total other income (expense)             (1,570)        (819)        (430)
                                            ---------    ---------    ---------
Income (loss) before provision for
  income taxes                                 (6,377)       1,719          488
Provision for (benefit from)
  income taxes                                 (2,038)         600          153
                                            ---------    ---------    ---------
Net income (loss)                           $  (4,339)   $   1,119    $     335
                                            =========    =========    =========
Earnings (loss) per share                   $   (1.41)   $     .36    $     .11
                                            =========    =========    =========

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

                                     F-4
<PAGE>
EVANS SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS)                                              1997       1996      1995

<S>                                                       <C>        <C>        <C>    
Cash flows from operating activities:-
   Net income (loss)                                      $(4,339)   $ 1,119    $   335
   Adjustments:
    Depreciation and amortization                           2,129      1,627      1,182
    Gain on sale of assets                                    (17)      (125)       (81)
    Deferred income taxes                                  (1,806)       479        226
    Loss on marketable securities                             498        106        (19)
    Changes in assets and liabilities:
      Receivables                                             576      1,207     (1,689)
      Inventory                                               220        (32)    (2,104)
      Prepaid expenses and other                              359        432        285
      Accounts payable and accrued expenses                 2,423     (3,461)     4,011
      Accrued excise and other taxes payable               (1,168)      (227)       144
      Income taxes receivable/payable                        (273)        55       (181)
                                                          -------    -------    -------
       Net cash provided (used) by operating activities    (1,398)     1,180      2,109
                                                          -------    -------    -------
Cash flows from investing activities:
   Capital expenditures                                    (3,052)    (3,712)    (5,577)
   Proceeds from sale of marketable equity securities       1,454        346
   Proceeds from sale of property and equipment               667        460        195
   Purchase of marketable equity securities                                        (923)
   Purchase of treasury stock                                                      (153)
   Other                                                      184       (246)       203
                                                          -------    -------    -------
       Net cash used by investing activities                 (747)    (3,152)    (6,255)
                                                          -------    -------    -------
Cash flows from financing activities:
   New borrowings                                           3,962      8,515      7,714
   Reduction of long-term debt                             (3,478)    (7,364)    (4,550)
   Net proceeds from stock issuance                           165         70
                                                          -------    -------    -------
       Net cash provided by financing activities              649      1,221      3,164
                                                          -------    -------    -------
Net decrease in cash and cash equivalents                  (1,496)      (751)      (982)
Cash and cash equivalents, beginning of year                2,793      3,544      4,526
                                                          -------    -------    -------
Cash and cash equivalents, end of year                    $ 1,297    $ 2,793    $ 3,544
                                                          =======    =======    =======
Supplemental disclosure of cash flow information:
   Cash paid for income taxes                                                   $   108
   Cash paid for interest                                 $ 1,178    $   997    $   812

Supplemental disclosure of noncash transactions:
   Acquisition of property by capital lease and
     issuance of debt                                     $   209    $ 1,308
</TABLE>
  The accompanying notes are an integral part of these financial statements.

                                     F-5
<PAGE>
EVANS SYSTEMS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                COMMON STOCK          ADDITIONAL                UNREALIZED   
(IN THOUSANDS)                               ---------------------     PAID-IN       RETAINED    LOSS ON       TREASURY
                                             SHARES        AMOUNT      CAPITAL       EARNINGS   SECURITIES       STOCK        TOTAL
<S>                                         <C>             <C>        <C>           <C>         <C>           <C>         <C>     
Balance - September 30, 1994                2,934,205       $29        $11,381       $7,623      $ (425)       $  (281)    $ 18,327

Purchase of 27,700 treasury
  shares                                                                                                          (153)        (153)

Decrease in marketable equity
  securities valuation allowance                                                                     25                          25

Net income for 1995                                                                     335                                     335
                                        --------------    ------    -----------   ----------   ---------     ----------  -----------
Balance - September 30, 1995                2,934,205        29         11,381        7,958        (400)          (434)      18,534

Decrease in marketable equity
  security valuation allowance                                                                       25                          25

Warrants exercised by
  employees and stock award                    23,500         1             69                                                   70

Net income for 1996                                                                   1,119                                   1,119

5% common stock dividend                      147,885         1            683         (684)
                                        --------------    ------    -----------   ----------   ---------     ----------  -----------
Balance - September 30, 1996                3,105,590        31         12,133        8,393        (375)          (434)      19,748

Warrants exercised by employees                57,983         1            164                                                  165

Decrease in marketable equity
  securities valuation allowance                                                                    375                         375

Net loss for 1997                                                                    (4,339)                                 (4,339)
                                        --------------    ------    -----------   ----------   ---------     ----------  -----------
Balance - September 30, 1997                3,163,573       $32        $12,297       $4,054                    $  (434)    $ 15,949
                                        ==============    =====     ===========   ==========   =========     ==========  ===========
</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, 1997, 1996 AND 1995
--------------------------------------------------------------------------------

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, the packaging and
      marketing of automotive after-market chemical products and environmental
      remediation services.

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

      CASH AND CASH EQUIVALENTS
      For purposes of the statement 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.

      MARKETABLE EQUITY SECURITIES
      Marketable equity securities available for sale are carried at market. The
      cost of available for sale securities at September 30, 1996 was $1,500,000
      resulting in a net unrealized loss of $375,000. Such securities were sold
      in 1997 and a loss of $335,000 is included in other expense for 1997.

      Marketable equity securities classified as trading securities are also
      carried at market. The market value of trading securities at September 30,
      1996 was $474,000. Realized losses of $163,000 are included in other
      expense for 1997. Realized and unrealized losses of $12,000 and $94,000,
      respectively, are included in other expense for 1996. Realized and
      unrealized gains of $115,000 and $20,000, respectively, are included in
      other income for 1995.

      INVENTORIES
      Substantially all inventories are products held for sale. Inventories of
      oil and grease, automotive/chemical products, tire and automotive
      accessories 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 $189,000 and $177,000 less
      at September 30, 1997 and 1996, respectively, than it would have been if
      the FIFO method had been used.

      PROPERTY, PLANT AND EQUIPMENT
      Property, plant and equipment is stated at cost and is depreciated
      utilizing the straight-line method of computing depreciation over their
      estimated useful lives. Repairs and maintenance are charged to expense as
      incurred. Expenditures for major additions and replacements which extend
      the lives of assets are capitalized and depreciated over their estimated
      useful lives. The Company depreciates assets over the following estimated
      useful lives:

       Buildings and plant                  15-39 years
       Leasehold improvements               Life of lease up to 39 years
       Equipment                            15 years
       Transportation equipment             5 years
       Office equipment                     5-7 years

                                      F-7
<PAGE>
      IMPAIRMENT OF LONG-LIVED ASSETS
      The Company implemented Statement of Financial Accounting Standards No.
      121, "Accounting for the Impairment of Long-Lived Assets and for
      Long-Lived Assets to Be Disposed Of " (SFAS 121) in fiscal 1997. This
      statement establishes accounting standards for determining 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. The adoption of SFAS 121 did not have a
      material impact on the Company's financial position or results of
      operations.

      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.

      RECENT ACCOUNTING PRONOUNCEMENTS
      In February 1997, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards No. 128, "Earnings per Share"
      (SFAS 128), which establishes standards for computing and presenting
      earnings per share. This statement simplifies the standards for computing
      earnings per share (EPS) previously found in APB Opinion No. 15, "Earnings
      per Share." The new standard replaces the presentation of primary EPS with
      a presentation of basic EPS. It also requires dual presentation of basic
      and diluted EPS on the face of the income statement for all entities with
      complex capital structures and requires a reconciliation of the numerator
      and denominator of the basic EPS computation to the numerator and
      denominator of the diluted EPS computation. Basic EPS excludes dilution
      and is computed by dividing income available to common stockholders by the
      weighted-average number of common shares outstanding for the period.
      Diluted EPS reflects the potential dilution that could occur if securities
      or other contracts to issue common stock were exercised or converted into
      common stock or resulted in the issuance of common stock that then shared
      in the earnings of the Company. This statement is effective for financial
      statements issued for interim periods and annual periods ending after
      December 15, 1997. Earlier application is not permitted. The Company will
      adopt the provisions of this statement in the quarter ending December 31,
      1997. Management believes the provisions of this statement will not have a
      material effect on EPS.

      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 the deferred tax assets and liabilities during the
      period.

                                      F-8
<PAGE>
      EARNINGS (LOSS) PER SHARE
      Earnings (loss) per share is computed by using the weighted-average number
      of common and dilutive common equivalent shares outstanding each period.
      The weighted-average number of shares used in the calculation of earnings
      (loss) per share was 3,075,000, 3,067,000 and 3,088,000 shares for 1997,
      1996 and 1995, respectively.

      FAIR VALUE OF FINANCIAL INSTRUMENTS
      The Company has various financial instruments, including cash, marketable
      equity securities, trade receivables, accounts payable, accrued expenses,
      revolving credit facilities and notes payable. The carrying values of
      cash, trade receivables, accounts payable, accrued expenses and notes
      payable approximates current fair value. Marketable equity securities are
      carried at their 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.

      CONCENTRATIONS OF CREDIT RISK
      The Company performs periodic evaluations of the relative credit standing
      of the financial institutions and investment funds which are considered in
      the Company's investment strategy. As of the date of the financial
      statements, the Company has no concentration of customers engaged in
      similar activities for which a failure to perform up to the terms of their
      obligations due to shared activities, regions or economic characteristics
      would result in a material credit risk to the Company. Management believes
      that its credit and collection policies mitigate the potential effect of a
      concentration of credit risk in its accounts receivable.

2.    PROPERTY, PLANT AND EQUIPMENT

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

                                                           1997         1996

Land                                                     $ 2,950      $  2,955
Building and plant                                         6,809         6,132
Leasehold improvements                                       935           730
Equipment                                                 18,470        17,622
Transportation equipment                                   2,895         3,021
Office equipment                                           2,955         2,478
                                                      -----------  ------------
                                                          35,014        32,938
Less - accumulated depreciation and amortization          13,404        12,090
                                                      -----------  ------------
Property, plant and equipment, net                       $21,610      $ 20,848
                                                      -----------  ------------

                                      F-9
<PAGE>

3.    LONG-TERM DEBT

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

                                                              1997         1996
Notes payable to banks, at prime to prime
  plus 1%, payable to 2003, secured by
  property and equipment, accounts
  receivable, inventory and cash surrender
  value of life insurance                                   $11,135      $ 9,769

Capital lease liability                                       1,209        1,217

Notes payable, 7.2% to 11.5%, payable to
  2005, secured by property, equipment,
  improvements, inventory, accounts
  receivable and cash surrender value of
  life insurance                                                625          731

Notes payable, 7.75%, secured by  marketable
  equity securities, repaid in 1997                                          658

Other                                                           269          170
                                                            -------      -------
                                                             13,238       12,545
Less - current maturities                                     7,837        2,145
                                                            -------      -------
      Total                                                 $ 5,401      $10,400
                                                            =======      =======

      Notes payable to banks include $6,637,000 owed pursuant to short-term
      lines of credit. At September 30, 1997, the Company had $2,563,000
      available in unused lines of credit. However, due to the covenant defaults
      and borrowing base limits discussed below, these unused lines of credit
      are not available for use and their maturity dates have been accelerated
      to April 1998.

      Certain of the Company's notes payable to banks require maintenance of
      financial covenants, including current, debt to equity, tangible net worth
      and debt service coverage ratios. At September 30, 1997, the Company was
      in violation of certain of these covenants. The banks have waived these
      violations at September 30, 1997. In addition, the Company was out of
      compliance with the borrowing base limits with one bank.

      The Company is in the process of seeking long-term senior debt and
      replacement for the current lines of credit. The Company has hired an
      investment banking firm to work with management to obtain this senior debt
      financing. Management believes this financing can be obtained prior to the
      current credit lines expiring. The Company has also identified various
      nonincome producing assets and nonstrategic properties which it intends to
      sell.

      The Company is prohibited by its bank agreement from payment of any cash
      dividends and from obtaining additional debt without the bank's consent.

                                      F-10
<PAGE>
      The Company's capital lease liability relates to the lease of the
      Company's information system and trucks which were capitalized using
      effective interest rates of 9.3% and 9%, respectively. At September 30,
      1997 and 1996, the gross amount of assets recorded under capital leases
      was $1,436,000 and $1,308,000, respectively, and the related accumulated
      amortization was $299,000 and $32,000, respectively. Total future capital
      lease payments are $1,461,000 and include unearned interest of $244,000.

      As of September 30, 1997, principal maturities of long-term debt are as
      follows (in thousands):

           1998                                       $  7,837
           1999                                          2,648
           2000                                            989
           2001                                            763
           2002                                            297
           Thereafter                                      704
                                                   ------------
                Total                                 $ 13,238
                                                   ------------

4.    INCOME TAXES

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

                                            YEAR ENDED SEPTEMBER 30,
                                      -------------------------------------
                                         1997         1996          1995
Current:
   Federal                              $  (201)      $ (25)        $  (87)
   State                                    (31)        146             14
                                      ----------    --------     ----------
                                           (232)        121            (73)
                                      ----------    --------     ----------
Deferred:
   Federal                               (1,628)        421            207
   State                                   (178)         58             19
                                      ----------    --------     ----------
                                         (1,806)        479            226
                                      ----------    --------     ----------
      Total                             $(2,038)      $ 600         $  153
                                      ==========    ========     ==========

                                      F-11
<PAGE>
      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,
                                                      --------------------------------------
                                                          1997          1996         1995

<S>                                                      <C>            <C>          <C>   
Taxes computed by applying federal statutory rate        $(2,169)       $ 584        $  166
State taxes, net of federal benefit                         (137)         135            22
Change in deferred tax asset valuation allowance             231
Other, net                                                    37         (119)          (35)
                                                      -----------     --------    ----------
                                                         $(2,038)       $ 600        $  153
                                                      -----------     --------    ----------
</TABLE>
      Deferred tax assets (liabilities) are comprised of the following (in
      thousands)

                                                               SEPTEMBER 30,
                                                         ----------------------
                                                            1997           1996
Deferred tax liabilities:
   Book/tax depreciation differences                     $(2,446)       $(2,072)
   Prepaid expenses                                                         (78)
   Other                                                     (37)           (81)
                                                         -------        -------
      Total                                               (2,483)        (2,231)
                                                         -------        -------
Deferred tax assets:
   Net operating loss carryforward                         2,296            807
   Alternative minimum tax credit                            454             86
   Net capital loss carryforwards                            205
   Allowance for doubtful receivables                        167
   Expense accruals                                          103
   Investment tax credit                                      26             26
   Unrealized loss on marketable
     equity securities                                                       35
   Section 263A inventory adjustment                          38             26
   Other                                                      13             33
                                                         -------        -------
      Total                                                3,302          1,013
                                                         -------        -------
Deferred tax asset valuation allowance                      (231)
                                                         -------        -------
Net deferred tax asset (liabilities)                     $   588        $(1,218)
                                                         =======        =======

      At September 30, 1997, the Company had regular tax net operating loss
      carryforwards of $6,204,000 available for federal income tax purposes
      which expire through 2012.

      Changes in the Company's ownership, as defined under Section 382 of the
      Internal Revenue Code, could result in certain limitations on the annual
      amount of net operating losses that may be utilized.

                                      F-12
<PAGE>
5.    OPERATING LEASES

      The Company leases 26 convenience store locations and 5 other facilities
      under operating lease agreements with varying lives and terms. Three of
      these leases are with related parties (see Note 7). At September 30, 1997,
      the scheduled future minimum lease payments required under the terms of
      the operating leases in effect are (in thousands):

           YEAR ENDED SEPTEMBER 30,

           1998                                          $      453
           1999                                                 368
           2000                                                 296
           2001                                                 236
           2002                                                 204
           Thereafter                                           373
                                                        ------------
                Total                                    $    1,930
                                                        ============

      In addition, the Company rents 14 convenience store locations and other
      facilities on a month-to-month basis from various parties, including 7
      from a related party (see Note 7). Rent paid for these facilities totaled
      $180,000, $174,000 and $258,000 for the years ended September 30, 1997,
      1996 and 1995.

      The Company has nine subleases. Minimum rentals to be received in the
      future under noncancelable subleases totaled $502,000 as of September 30,
      1997.

6.    COMMON STOCK

      On December 16, 1996, the Company declared a five percent stock dividend
      to stockholders of record on December 31, 1996 to be paid on January 20,
      1997. All earnings per share information included in the accompanying
      financial statements has been adjusted to give retroactive effect to the
      stock dividend for all periods presented. Additionally, all share
      information shown below has been adjusted to give retroactive effect to
      the stock dividend.

      In August 1992, the Company issued warrants to purchase 141,750 shares of
      the Company's common stock at an exercise price of $2.86 per share. In
      1997 and 1996, 57,938 and 24,150 of such warrants were exercised. 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 May 1994, the Company issued warrants to purchase 105,000 shares of the
      Company's common stock at an exercise price of $7.86 per share as part of
      an agreement with a consultant. These warrants expired in May 1997.

      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. Of these warrants, 52,500 expired in May 1997. The remaining
      warrants expire in 1999.

                                      F-13
<PAGE>
      The following common stock purchase warrants are outstanding as of
      September 30, 1997:

                   WARRANT    NUMBER OF       EXPIRATION
                    PRICE     WARRANTS           DATE

                    $ 7.62       7,875      December 29, 2002
                     16.50     126,000      July 15, 1999
                      4.76     210,000      December 1, 1999
                      2.86      59,662      August 1, 2002
                            -----------
                               403,537
                            -----------

      In November 1992, the Company adopted the Evans Systems, Inc. Incentive
      Stock Option Plan. Up to 420,000 shares of the Company's common stock may
      be purchased under the plan. The Company's Board of Directors may issue
      options to one or more persons who are full-time employees of the Company
      and/or its subsidiaries. Options granted under the plan must be granted
      within ten years from the date of the plan. Under the plan, no eligible
      employee shall be granted options during any one calendar year to the
      extent that the fair market value of such shares (determined at the time
      the option is granted) exceeds $100,000. If an employee, who is granted
      options under the plan, owns more than 10% of the outstanding voting stock
      of the Company, the options expire five years from the date of grant;
      otherwise, the expiration date is ten years from the date of grant. The
      options are nontransferable except upon death of the optionee. The option
      price of the stock shall not be less than the fair market value of the
      stock on the date of the grant, except in the case of an employee owning
      more than 10% of the outstanding voting stock when the exercise price
      shall be 110% of the fair market value of the stock at the date of grant.

      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 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
      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 which vest in fiscal 1996, 1997 and 1998
      subject to achievements of certain profitability levels. The grants will
      be canceled if such provisions are not met. In 1997 and 1996, such
      provisions were not met and grants for 32,500 and 31,500 shares,
      respectively, were canceled.

      In June 1996, an officer of the company was awarded 525 shares of
      restricted common stock.

                                      F-14
<PAGE>
A summary of the option activity under the various plans follows:

                                                                    WEIGHTED-
                                                 NUMBER OF           AVERAGE
                                                  SHARES           OPTION PRICE

Outstanding at September 30, 1994                   81,900          $    7.13

Granted in 1995                                    282,713               5.32
Expired in 1995                                    (96,338)              5.22
                                              -------------
Outstanding at September 30, 1995                  268,275               6.04

Granted in 1996                                     98,700               5.53
Expired in 1996                                   (194,933)              5.81
                                              -------------
Outstanding at September 30, 1996                  172,042               6.01

Granted in 1997                                     55,650               3.35
Expired in 1997                                   (138,550)              5.32
                                              -------------
Outstanding at September 30, 1997                   89,142               5.42
                                              -------------

      The weighted average fair value at date of grant for options granted
      during 1997 and 1996 was $1.89 and $3.31 per option, respectively.

      As of September 30, 1997, 89,142 options were outstanding with exercise
      prices ranging from $3.25 to $7.62, a weighted average remaining
      contractual life of 3.5 years and a weighted average option price of
      $5.42. Of these options outstanding, 53,142 were exercisable with a
      weighted average exercise price of $6.07.

      The Company applies 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 Statement of Financial
      Accounting Standards No. 123, "Accounting for Stock-Based Compensation":

                                           YEAR ENDED
                                          SEPTEMBER 30,
                                        1997          1996

Net income (loss):
   As reported                         $(4,339)       $1,119
   Pro forma                            (4,396)        1,084
Earnings (loss) per share:
   As reported                         $ (1.41)       $  .36
   Pro forma                             (1.43)          .35

                                      F-15
<PAGE>
      The fair value of the options granted is estimated using the Black-Scholes
      option-pricing model with the following assumptions: no dividend yield,
      volatility of 50 - 52%, risk-free interest rate of 6.4% and an expected
      life of five years.

7.    RELATED PARTY TRANSACTIONS

      The Company leases three convenience store locations from the majority
      shareholder of the Company. One ten-year lease commenced in June 1987 with
      monthly lease payments of $2,500 and allows for one five-year automatic
      renewal at the Company's option. The other two leases are for terms of
      five years and commenced in April 1990. Each provides for a monthly lease
      payment of $1,800 with one automatic five-year renewal at the Company's
      option. The amounts paid under these leases were $73,000 for the years
      ended September 30, 1997, 1996 and 1995. Future minimum lease commitments
      as of September 30, 1997 are $251,000.

      As of September 30, 1997, the Company rents, on a month-to-month basis,
      six convenience store locations and an office facility from the majority
      shareholder. Previously, the Company rented additional locations which
      were sold by the shareholder to unrelated parties. The total
      month-to-month rents paid for the years ended September 30 were: 1997 -
      $104,000, 1996 - $104,000, and 1995 - $93,000. If all locations continue
      to be rented under similar terms for the fiscal year ending September 30,
      1998, the Company would pay approximately $104,000.

      Other current assets include a note receivable from a former director
      which was refinanced from an earlier note and is due in quarterly
      instalments. The note receivable is secured by 13,567 shares of the
      Company's common stock. The balance of the note receivable was
      approximately $111,000, $116,000 and $140,000 at September 30, 1997, 1996
      and 1995, respectively. Interest accrues at 8.5%. An allowance of $111,000
      has been provided against the note receivable at September 30, 1997 based
      on the potential uncollectibility of the balance.

      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, 1997 and 1996.

8.    CONTINGENT LIABILITIES

      From time to time the Company exchanges refined products with suppliers by
      agreeing to purchase or sell refined products at a future date. Such
      activity could adversely affect the results of operations and financial
      condition of the Company if the market prices of such products were to
      fluctuate significantly. As of September 30, 1997, management believes the
      Company had no material risk related to such activities.

9.    EMPLOYEE BENEFIT PLANS

      In 1992, the Company adopted an employee stock ownership plan to provide
      retirement benefits to eligible employees. Employees must have attained
      the age of 18 and have completed six months of service with the Company.
      Contributions to the plan may be made annually at the discretion of the
      Company's management. The Company recorded contributions to the plan of
      $40,000, $117,000 and $44,000 during fiscal 1997, 1996 and 1995.

                                      F-16
<PAGE>
      The Company established a defined contribution benefit plan, the ESI
      Employee Retirement Plan, effective July 1, 1997. Employees become
      eligible for participation in the plan upon attaining the age of 21 and
      completion of 12 consecutive months of employment 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 to the plan of $40,000 during
      fiscal 1997. The company has approved the merger of the employee stock
      ownership plan into the retirement plan effective January 1, 1998.

10.   SEGMENT REPORTING

      The Company is primarily engaged in the following industry segments:
      marketing and distribution of wholesale petroleum products; retail
      convenience store and gasoline station operations; producing, marketing
      and distribution of automotive after-market chemical products (Chem-Way);
      and providing environmental remediation services and installing and
      maintaining underground storage tanks (EDCO Environ). Information
      concerning the Company's business activities is summarized as follows (in
      thousands):
<TABLE>
<CAPTION>
                                                                             PROPERTY
                                               EARNINGS       DEPRECIATION      AND          IDENTI-
                                             (LOSS) FROM          AND        EQUIPMENT       FIABLE
       YEAR ENDED              REVENUES       OPERATIONS     AMORTIZATION    ADDITIONS       ASSETS

<S>                           <C>               <C>             <C>           <C>            <C>    
SEPTEMBER 30, 1997
   Petroleum marketing        $  98,376         $(1,369)        $1,379        $ 1,559        $19,643
   Convenience stores            38,300          (1,208)           393            903          8,324
   Chem-Way                      10,967          (1,831)           192            796          6,419
   EDCO Environ                   1,320            (399)           165              3          1,277
                              ---------         -------         ------        -------        -------
                              $ 148,963         $(4,807)        $2,129        $ 3,261        $35,663
                              =========         =======         ======        =======        =======
SEPTEMBER 30, 1996
   Petroleum marketing        $  91,374         $   644         $  956        $ 3,067        $22,872
   Convenience stores            39,602             171            408          1,059          8,912
   Chem-Way                      25,773           2,179            143            680          6,533
   EDCO Environ                   2,031            (456)           120            214            957
                              ---------         -------         ------        -------        -------
                              $ 158,780         $ 2,538         $1,627        $ 5,020        $39,274
                              =========         =======         ======        =======        =======
SEPTEMBER 30, 1995
   Petroleum marketing        $  93,963         $   252         $  788        $ 3,081        $21,401
   Convenience stores            39,538             245            242          1,299          8,942
   Chem-Way                      22,853             692             80            758          7,800
   EDCO Environ                   1,841            (271)            72            158            708
                              ---------         -------         ------        -------        -------
                              $ 158,195         $   918         $1,182        $ 5,296        $38,851
                              =========         =======         ======        =======        =======
</TABLE>
                                      F-17
<PAGE>
      Earnings (loss) from operations by segment represent revenues less
      operating costs, expenses and depreciation. Identifiable assets are
      primarily cash, accounts receivable, inventory, property, equipment and
      cash value of life insurance. All sales by the Company occur in the United
      States.

      During each of the years ending September 30, 1997, 1996 and 1995, no
      single customer represented 10% or more of the Company's revenues.

11.   QUARTERLY FINANCIAL DATA (UNAUDITED)

      Quarterly operating results for the years ended September 30, 1997 and
      1996 are summarized as follows:

                                            OPERATING      NET         EARNINGS
                                             INCOME       INCOME      (LOSS) PER
QUARTER ENDED                     REVENUE    (LOSS)       (LOSS)         SHARE

Year ended September 30, 1997:
   September 30, 1997             $38,451   $(3,331)     $(2,598)       $(.84)
   June 30, 1997                   38,136      (594)        (533)        (.17)
   March 31, 1997                  34,702      (355)        (433)        (.14)
   December 31, 1996               37,674      (527)        (775)        (.26)
Year ended September 30, 1996:
   September 30, 1996              38,748       297          (66)        (.02)
   June 30, 1996                   43,474     1,828        1,097          .37
   March 31, 1996                  37,431        86           50          .02
   December 31, 1995               39,127       327           38          .01

                                      F-18

<PAGE>
                                INDEX TO EXHIBITS
EXHIBIT
NUMBER                       DESCRIPTION OF DOCUMENT

3.1   Articles of Incorporation of the Company filed with the Texas Secretary of
      State on October 22, 1968[1]. - 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[1]. -
      Filed with May 11, 1993 filing of Form S-1 Registration # 33-62684

3.3   Certificate of 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  ChemWay--LaRoche Chemical Supply Agreement and amendment dated September
      19, 1991. - Filed with May 11, 1993 filing of Form S-1 Registration #
      33-62684

10.2  DISC-Callahan Oil Company Licensed Program Agreement and addendum dated
      December 9, 1988. - Filed with May 11, 1993 filing of Form S-1
      Registration # 33-62684

10.3  Phillips "66" Marketing Agreement dated October 21, 1986. - Filed with May
      11, 1993 filing of Form S-1 Registration # 33-62684

10.4  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

10.5  Diamond Shamrock Storage Lease dated July 12, 1985. - Filed with May 11,
      1993 filing of Form S-1 Registration # 33-62684 

10.6  Star enterprise "Texaco" Marketing Agreement effective July 1, 1993. -
      Filed with May 11, 1993 filing of Form S-1 Registration # 33-62684

10.7  Shell Lubricants Reseller Agreement effective January 1, 1992. - Filed
      with May 11, 1993 filing of Form S-1 Registration # 33-62684 

10.8  Texaco Lubricants agreement effective July 1, 1990. - Filed with May 11,
      1993 filing of Form S-1 Registration # 33-62684 

10.9  Conoco Jobber Franchise Agreement effective April 1, 1990. - Filed with
      May 11, 1993 filing of Form S-1 Registration # 33-62684 

10.10 Mobil Marine Distributor Agreement effective June 3, 1992. - Filed with
      May 11, 1993 filing of Form S-1 Registration # 33-62684 

10.11 Form of Series B Warrants to Purchase Common Stock of Registrant. - Filed
      with May 11, 1993 filing of Form S-1 Registration # 33-62684

10.12 Coastal Refinery & Marketing, Inc. Facilities Access Agreement effective
      September 5, 1989. - Filed with May 11, 1993 filing of Form S-1
      Registration # 33-62684

10.13 FINA Lubricants Marketing Agreement dated February 1, 1989. - Filed with
      May 11, 1993 filing of Form S-1 Registration # 33-62684 

10.14 Texaco Terminating Agreement dated April 30, 1986. - Filed with May 11,
      1993 filing of Form S-1 Registration # 33-62684 

10.15 Citgo Petroleum Distributor Franchise Agreement effective August 1, 1992.
      - Filed with May 11, 1993 filing of Form S-1 Registration # 33-62684

10.16 Citgo Petroleum Exchange Agreement dated April 24, 1985. - Filed with May
      11, 1993 filing of Form S-1 Registration # 33-62684 

10.17 Phillips "66" Petroleum Exchange agreement dated March 1, 1992 and
      amendment dated October 13, 1992. - Filed with May 11, 1993 filing of Form
      S-1 Registration # 33-62684

10.18 Employment Contracts - David L. Deerman - Filed with May 11, 1993 filing
      of Form S-1 Registration # 33-62684 

10.19 Employment Contracts - James Bruce Grover - Filed with May 11, 1993 filing
      of Form S-1 Registration # 33-62684 

10.20 Employment Contract - J.L. Evans, Sr. - Filed with May 11, 1993 filing of
      Form S-1 Registration # 33-62684 

10.21 Employment Contract - Edward D. Meadows - Filed with May 11, 1993 filing
      of Form S-1 Registration # 33-62684 

10.22 Incentive Stock Option Plan - Filed with May 11, 1993 filing of Form S-1
      Registration # 33-62684 

10.23 Form of Incentive Stock Option Agreement - Filed with May 11, 1993 filing
      of Form S-1 Registration # 33-62684 

10.24 Summary Plan Description of E.S.O.P. - Filed with May 11, 1993 filing of
      Form S-1 Registration # 33-62684
<PAGE>
                          INDEX TO EXHIBITS (continued)

EXHIBIT
NUMBER        DESCRIPTION OF DOCUMENT

10.25 Amendment to Employment Agreements - Filed with July 14, 1993 Form S-1,
      Amendment #2 Registration # 33-62684

10.26 Sales Agreement between ChemWay Systems, Inc. and Hi-Lo Auto Supply,
      Inc.-by reference from Exhibit 10.26 to the Company's Annual Report on
      Form 10-K for the year ended September 30, 1993

10.27 Cyndel & Company, Inc. consulting agreement dated May 15, 1994 - by
      reference from Exhibit 10.27 to the Company's Annual Report on Form 10-K
      for the year ended September 30, 1994

10.28 Employment Contract - Bill R. Kincer - by reference from Exhibit 10.28 to
      the Company's Annual Report on Form 10-K for the year ended September 30,
      1994 10.29 Pruett Petroleum, Inc. and Koonce Petroleum Company, Inc.
      agreement dated October 4, 1994 - by reference from Exhibit 10.29 to the
      Company's Annual Report on Form 10-K for the year ended September 30, 1994

10.30 Clean-Age Minerals, Inc. agreement dated December 1, 1994 - by reference
      from Exhibit 10.30 to the Company's Annual Report on Form 10-K for the
      year ended September 30, 1994

22.0  Subsidiaries of Registrant 

23.0  Consent to the Incorporation by reference of the report of independent
      accountants in the Prospectus constituting part of the Registration
      Statement on Form S-3 (No. 333-08197).

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<PAGE>