SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                   FORM 10-QSB


                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934



     For the Quarter ended                         Commission File No. 0-22185
     November 31, 1997


                                EXPROFUELS, INC.
             (Exact Name of Registrant as Specified in its Charter)



            DELAWARE                                   74-2727901

(State or other jurisdiction of                  (I.R.S. Employer I.D. No.)
incorporation or organization)


 500 NORTH LOOP 1604 E., SUITE 250                    78232
 (Address of principal executive offices)           (Zip Code)


 Registrant's telephone number, including area code:   (210) 490-9400



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 the number of shares outstanding of each of the issuer's classes of 
common stock as of January 9, 1997.


Common Stock $0.01 par value                               4,000,000
         (Class of Stock)                              (Number of Shares)

                          Total number of pages is 12 

PAGE>

                         PART I - FINANCIAL INFORMATION


ITEM 1.           FINANCIAL STATEMENTS.


                                EXPROFUELS, INC.
                                 BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>
<CAPTION>


ASSETS                                                                NOVEMBER  30, 1997                  AUGUST 31, 1997
------                                                                --------  --------                  ---------------
<S>                                                                   <C>                                 <C>   

CURRENT ASSETS
    Cash and equivalents                                                   $      53,445                     $     31,647
    Accounts receivable, net                                                     228,811                          141,754
    Inventories                                                                  358,408                          400,517
    Prepaid expenses and other                                                    26,122                           34,159
           Total Current Assets                                                  666,786                          608,077


PROPERTY  AND EQUIPMENT
    Transportation and other equipment                                           134,396                          133,883
    Equipment under capital leases                                                93,326                           93,326
    Fuel stations                                                                284,292                          280,889
    Less accumulated depreciation and amortization                             (291,436)                        (270,436)
           Net property and equipment                                            220,578                          237,662

OTHER ASSETS
    Investment in and advances to CNG International                                  -0-                              -0-
    Other assets                                                                  42,075                           45,099
                                                                                  42,075                           45,099



                  TOTAL ASSETS                                               $   929,439                      $   890,838



</TABLE>













See notes to financial statements.

PAGE>

                                EXPROFUELS, INC.
                                 BALANCE SHEETS
                                   (UNAUDITED)




<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS EQUITY                                        NOVEMBER 30, 1997               AUGUST 31, 1997
<S>                                                                        <C>                              <C>   

CURRENT LIABILITIES
    Accounts payable and accrued expenses                                 $      703,335                 $      495,468
    Current portion of long-term debt                                              8,485                          8,945
    Current portion of long-term debt-affiliates                                 752,342                        561,225
    Current portion of capital lease obligations                                  20,677                         21,062
           Total Current Liabilities                                           1,484,839                      1,086,700
 

LONG TERM LIABILITIES
    Long-term debt                                                               506,183                        507,946
    Long-term capital lease obligations                                            3,003                          8,656
           Total Long-term Liabilities                                           509,186                        516,602


STOCKHOLDERS EQUITY
    Common stock, par value $.01 per share; authorized
        50,000,000 shares; issued and outstanding
        4,000,000 shares                                                          40,000                         40,000
    Additional paid-in capital                                                 3,486,136                      3,486,136
    Accumulated deficit                                                      (4,590,722)                    (4,238,600)
           Total Stockholders Equity                                        (1,064,586)                      (712,464)


           TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                     $      929,439                  $     890,838
                                                                         ==============                  =============



</TABLE>













See notes to financial statements.
<PAGE>


                                EXPROFUELS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                       THREE MONTHS                   THREE MONTHS
                                                                           ENDED                          ENDED
                                                                     NOVEMBER 30, 1997             NOVEMBER 30, 1996
                                                                     -----------------             -----------------
<S>                                                                  <C>                           <C>    


REVENUES:
    Conversion sales                                                   $     117,923                 $   157,333
    Fuel station construction sales                                          169,722                      19,453
    Alternative fuel sales                                                    72,736                      85,694
                                                                             360,381                     262,480
COSTS AND EXPENSES:
    Cost of sales                                                            419,931                     203,988
    Shop general and administrative                                           97,142                     116,000
    Depreciation and amortization                                             24,073                      21,833
    General and  administrative                                              157,626                     138,925
            Total costs and expenses                                         698,772                     480,746
 

Loss from operations                                                       (338,391)                   (218,266)

OTHER INCOME (EXPENSE):
    Sublease rental income                                                       -0-                      13,500
    Interest income                                                              228                         208
    Interest expense                                                        (13,959)                     (5,992)
                                                                            (13,731)                       7,716

Net loss                                                               $   (352,122)                 $ (210,550)


AMOUNTS PER COMMON SHARE:

Net loss                                                               $      (0.09)                 $   (0.05)
                                                                       ============                  ========== 



</TABLE>












See notes to financial statements.


<PAGE>

                                                     EXPROFUELS, INC.
                                                 STATEMENTS OF CASH FLOWS
                                                        (UNAUDITED)
<TABLE>
<CAPTION>


                                                                           THREE MONTHS                 THREE MONTHS
                                                                               ENDED                        ENDED
                                                                         NOVEMBER 30, 1997            NOVEMBER 30, 1996
                                                                         -----------------            -----------------
<S>                                                                     <C>                           <C>   

OPERATING ACTIVITIES:
Net Loss                                                                    $ (352,122)                  $  (210,550)
Adjustments to reconcile net loss to net cash
   used by operating activities:
      Depreciation, depletion and amortization                                   24,073                        21,833
Changes in operating assets and liabilities:
     Receivables                                                               (87,057)                       (5,255)
     Inventory                                                                   42,109                      (68,533)
     Prepaid expenses and other                                                   8,037                         5,020
     Accounts payable and accrued expenses                                      207,867                        73,548
Net cash (used) in operating activities                                       (157,093)                     (183,937)

INVESTING ACTIVITIES:
     Purchases of property and equipment                                        (3,916)                       (1,986)
     Investments in and advances to venture                                         -0-                      (31,798)
     Other assets                                                                  (49)                       (6,389)
Net cash (used) in investing activities                                         (3,965)                      (40,173)

FINANCING ACTIVITIES:
     Advances from former parent company                                        191,117                        40,000
     Proceeds from long-term debt obligations                                       -0-                       200,000
     Payments on long-term obligations                                          (8,261)                       (7,823)
Net cash provided by financing activities                                       182,856                       232,177

INCREASE IN CASH AND EQUIVALENTS                                                 21,798                         8,067

Cash and equivalents at beginning of period                                      31,647                        20,871

CASH AND EQUIVALENTS AT END OF PERIOD                                     $      53,445                 $      28,938
                                                                          =============                 =============



</TABLE>








See notes to financial statements.

<PAGE>



                                EXPROFUELS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   PERIODS ENDED MAY 31, 1997 AND MAY 31, 1996
                                   (UNAUDITED)


1. BASIS OF PRESENTATION

The  accompanying  unaudited  financial  statements  of  ExproFuels,  Inc.  (the
Company) have been prepared in accordance  with  generally  accepted  accounting
principles for interim  financial  information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.  Accordingly,  they do not include all of
the  information  and  footnotes  required  by  generally  accepted   accounting
principles for complete financial  statements.  The accounting policies followed
by the  Company  are set  forth in Note A to the  audited  financial  statements
contained in the Companys annual report filed on Form 10-KSB. In the opinion of
management,   all  adjustments  (consisting  of  normal  recurring  adjustments)
considered  necessary for a fair  presentation  have been included.  For further
information,  refer to the audited  financial  statements and footnotes  thereto
included in the Registrant  Companys  annual report on Form 10-KSB for the year
ended August 31, 1997 and its Registration  Statement on Form 10-SB, as amended,
filed on August 27, 1997 for the three  years and the fiscal  year ended  August
31, 1996, which are incorporated herein by reference.

2. COMMON STOCK AND LOSS PER SHARE 

The Companys 1996 Flexible  Incentive Plan (the Plan) provides  incentive stock
options for granting to its  officers,  directors  and  management,  under which
options for the purchase of 400,000 shares of common stock have been reserved.

As of November 30, 1997, the Company had outstanding options for the purchase of
300,000 shares of common stock granted under the terms of the Plan, all of which
vest 50% in one year and 100% in two years.  The options are exercisable at 110%
of appraised fair market value of the common stock, which was $0.13 per share on
the date of the grant and expire  ten years from the date of the grant,  or upon
termination of employment, if earlier.

In February,  1997 the Financial Accounting Standards Board issued Statement No.
128,  Earnings Per Share,  effective for interim or annual  periods ending after
December 15, 1997.  Implementation  of this  Statement is not expected to have a
significant impact on the earnings per share calculation of the Company.
 
Loss per share is computed based on the weighted average number of common shares
outstanding during the periods presented as follows:
<TABLE>
<CAPTION>

                                                      THREE MONTHS
                                                      ------------
<S>                                                   <C>  
                         November 30, 1997             4,000,000
                         November 30, 1996             4,000,000
</TABLE>

Common stock  equivalents  are not considered in the computation of net loss per
common share as their effect is anti-dilutive.




3. LONG TERM DEBT

At November 30, 1997, the Company had an  outstanding  balance of $500,000 under
the  terms of its  four  separate  unsecured  convertible  debentures,  all with
identical  terms,  except for the due date,  if not  converted.  Each  debenture
requires  quarterly interest payments computed at 6%, and are convertible at the
payees  option into common  stock of the Company at the rate of $1 of debt to 1
share of common stock.  At November 30, 1997, the Company had accrued and unpaid
interest  due of $6,049.  As of January 1, 1998,  the  Company  had not made the
quarterly interest payment due and was technically in default under the terms of
the agreements.  Subsequently, on January 20, 1998, the Company paid all accrued
interest due on its debt,  had obtained  waivers on the default  pertaining to a
$200,000 portion of the outstanding debentures,  and was in process of obtaining
waivers on the remaining portion.


ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

The  following  discussion  should  be read in  conjunction  with the  unaudited
financial statements and notes thereto, and with the Companys audited financial
statements and notes thereto for the fiscal year ended August 31, 1997, included
in the Companys Form 10-KSB.

FINANCIAL CONDITION AND CAPITAL RESOURCES

At August 31, 1997, the Company had cash on hand of $31,647,  a working  capital
deficiency  of  $478,623  based  on  current  assets  of  $608,077  and  current
liabilities  of  $1,086,700,  and a  stockholders  deficit  of  $712,464.  This
compared  to cash on hand of $53,445 at November  30,  1997,  a working  capital
deficiency  of  $818,053  based  on  current  assets  of  $666,786  and  current
liabilities of $1,484,839 resulting in a stockholders deficit of $1,064,586.

Through the three  months ended  November 30, 1997 the Company  raised cash from
its net operating  activities of $21,798,  while its principal source of working
capital came in the form of advances  from its former  parent,  The  Exploration
Company  (TXCO),  totaling  $191,117 for the period.  The Company used available
capital to fund its net loss of $352,122 and capital investments totaling $3,965
for purchases of property and equipment during the period.

In order to meet the  Companys  obligations,  ExproFuels  must continue to seek
additional  sources  of  operating  capital  through  additional  debt or equity
financing.   Further,   until  such  time  as  the  Company  attains  profitable
operations,  additional  capital will be required to fund  recurring cash losses
from operations. The Company anticipates returning to the same financiers of its
Convertible  Debt for funding its  additional  debt or equity  financing  needs;
however,  the Company has secured no commitment for such additional financing as
of the date hereof, nor has it obtained firm commitments from any of its lenders
or creditors to refinance its  outstanding  debt when it comes due. In addition,
while the Companys  former Parent,  had committed  additional  working  capital
funds through December 31, 1997, TXCO has advised the Company that no additional
funds will be available  from this source after that date.  All of these factors
raise  substantial  doubt as to the  Companys  ability to  continue  as a going
concern.

The Companys  financial  position poses certain risks,  including the risk that
(i) cash flow from operations  will be  insufficient to maintain  operations or;
(ii) it will be unable to obtain  financing  in the future for working  capital,
debt service, capital expenditures and general corporate purposes; and (iii) the
Company  will be more  vulnerable  to  economic  downturns  and may be unable to
withstand  competitive  pressures.  If Managements  efforts to raise additional
capital are not successful,  the Companys financial condition and liquidity and
its ongoing  ability to maintain  its  operations  as a going  concern,  will be
materially adversely affected.

RESULTS OF OPERATIONS

ExproFuels total revenues for the three months ended November 30, 1997 increased
by 37.3% to $360,381  compared to the same  quarter of 1996.  Contributing  most
significantly was an increase of $150,269 in fuel station construction  revenues
increasing  from  $19,453  for the first  quarter  of 1996 to  $169,722  for the
current  quarter.  This  increase was due to five new fuel station  construction
contracts in the San Antonio area.  This increase was partially  offset by a 25%
decrease  in  conversion  sales of $39,410,  from  $157,333 in the prior year to
$117,923 during the current quarter due to the completion of existing  contracts
during  the period  while less new  contracts  were  added  during the  quarter.
Additionally  offsetting  the increase was a 15%  decrease in  alternative  fuel
sales of $12,958  from  $85,694  last year to $72,736 for the same  quarter this
year primarily due to the expiration of fleet fueling contracts with the City of
Plano and the Texas Department of Criminal  Justice facility at Beeville,  Texas
during the current quarter.

Costs and expenses  increased  $218,026 to $698,772 in the current  quarter from
$480,746  for the same  quarter  last year.  Costs of sales  increased  $215,943
primarily due to inventory  adjustments  resulting  from the physical  inventory
taken  at  November  30,  1997  and  costs  associated  with  new  fuel  station
construction projects during the period.

Sublease rental income  decreased to $0 in the first quarter compared to $13,500
in the same period of 1997 due to the expiration of the Companys original lease
of its old Louisiana shop facility which had been subleased on a breakeven basis
since 1995.  Interest  expense for the current quarter  increased by $7,967 as a
result of borrowings under its working capital credit agreement  provided by the
Companys former parent.

Subsequent to the end of the current  quarter,  the Company has continued in its
efforts to  identify  new  opportunities  to install  additional  fuel  stations
domestically,  and to  obtain  additional  conversion  contracts  in  Texas  and
Arizona.  Management continues to reevaluate operating activities in each of the
Companys markets, with the immediate goal of reducing ongoing operating losses.
By  strenghtening  its affiliate shop  relationships  in selected  markets,  the
Company intends to maintain  adequate  service levels for its existing  customer
base,  while reducing  operating  overhead levels  associated with company owned
facilities.
<PAGE>

                          PART II - OTHER INFORMATION


ITEM 1.           LEGAL PROCEEDINGS

The Company is not involved in any significant matters of litigation  incidental
to its business, except for the following:

Disputes between ExproFuels and CNG  International,  AEI and ATI resulted in the
filing of two lawsuits in July,  1997, one by ExproFuels in federal court in San
Antonio,  Texas,  and the  other  by ATI  and AEI in  state  court  in  Memphis,
Tennessee. In its lawsuit,  ExproFuels claims breach of contract and is seeking,
among other things,  (i) damages in the amount of ExproFuels'  investment in CNG
International   (approximately  $381,000),   ExproFuels'  unreimbursed  expenses
advanced to CNG  International  (approximately  $239,000) and  ExproFuels'  lost
profits or (ii) recision of ExproFuels' arrangement with CNG International and a
refund of all monies invested in or advanced to CNG International.  ATI and AEI,
in their  lawsuit,  have  sued  ExproFuels  for  breach  of  contract,  tortious
interference with contract,  libel, slander,  defamation and unfair competition.
ATI and AEI are seeking a declaratory  judgment that ExproFuels' interest in CNG
International is null and void as well as unspecified compensatory and exemplary
damages.  Recent actions have resulted in the  consolidation  of the lawsuits in
federal court in Memphis,  Tennessee  with the parties  being  directed to enter
into arbitration.  ExproFuels intends to pursue its claims and vigorously defend
itself against ATIs and AEIs claims.  While the Company and its counsel remain
optimistic  ExproFuels  will  prevail in the matter,  it is difficult to predict
with any certainty the likelihood of an unfavorable  outcome of such  litigation
as of the date of this writing.


ITEM 2.           CHANGES IN SECURITIES

         None


ITEM 3.           DEFAULTS UPON SENIOR SECURITIES

At November 30, 1997, the Company had accrued and unpaid interest due of $6,049.
As of the  January  1, 1998 due date,  the  Company  had not made its  quarterly
interest  payment  and  was  technically  in  default  under  the  terms  of the
agreements.  Subsequently,  on January 20,  1998,  the Company  paid all accrued
interest due, had obtained  waivers on the default for a $200,000 portion of the
outstanding  debentures,  and was in process of obtaining waivers of its default
on the remaining portion.

Management  is  confident  that it will obtain  waivers of its default  from its
remaining  debenture  holders as provided for under the terms of the  agreements
and further expect to restructure  the remaining debt with more favorable  terms
during the second quarter of Fiscal 1998.


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

         None
ITEM 5.           OTHER INFORMATION

         None

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

         None

<PAGE>









                                   SIGNATURES



Pursuant  to the  requirements  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.



                                        EXPROFUELS, INC.
                                       (Registrant)






                                        /s/ Roberto R. Thomae           
                                        Roberto R. Thomae,
                                        Chief Financial Officer
                                        (Signing on behalf of the Registrant and
                                         as chief accounting officer)






Date:  January 20, 1998