<PAGE>
                                       1











                       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
     February 28, 1998


                                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 April 20, 1998:


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

                           Total number of pages is 11

<PAGE>
                                       2





                         PART I - FINANCIAL INFORMATION


ITEM 1.           FINANCIAL STATEMENTS.


                                EXPROFUELS, INC.
                                 BALANCE SHEETS
                                   (UNAUDITED)


Assets                                                 Feb 28, 1998 Aug 31, 1997
------                                                 ------------  -----------


Current Assets
    Cash and equivalents .............................   $  21,898    $  31,647
    Accounts receivable, net .........................     119,764      141,754
    Inventories ......................................     276,737      400,517
    Prepaid expenses and other .......................      26,874       34,159
                                                         ---------    ---------
           Total Current Assets ......................     445,273      608,077


Property  and Equipment
    Transportation and other equipment ...............     128,611      133,883
    Equipment under capital leases ...................      93,326       93,326
    Fuel stations         ............................     284,292      280,889
    Less accumulated depreciation and amortization ...    (307,490)    (270,436)
                                                         ---------    ---------
           Net property and equipment ................     198,739      237,662

Other Assets
    Investment in and advances to CNG International ..         -0-          -0-
    Other assets .....................................      33,991       45,099
                                                         ---------    ---------
                                                            33,991       45,099
                                                         ---------    ---------



                  Total Assets .......................   $ 678,003    $ 890,838
                                                         =========    =========
















See notes to financial statements.

<PAGE>
                                       3





                                EXPROFUELS, INC.
                                 BALANCE SHEETS
                                   (UNAUDITED)



<TABLE>
<CAPTION>


Liabilities and Stockholders' Equity                                        February 28, 1998               August 31, 1997
------------------------------------                                        -----------------               ---------------
<S>                                                                         <C>                            <C>


Current Liabilities
    Accounts payable and accrued expenses                                 $      535,310                 $      495,468
    Current portion of long-term debt-others                                       1,761                          8,945
    Current portion of long-term debt-affiliates                                 877,342                        561,225
    Current portion of capital lease obligations                                  15,453                         21,062
                                                                            ------------                 --------------
           Total Current Liabilities                                           1,429,866                      1,086,700


Long-term Liabilities
    Long-term debt-others                                                        500,000                        507,946
    Long-term capital lease obligations                                            2,418                          8,656
                                                                            ------------                ---------------
           Total Long-term Liabilities                                           502,418                        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                                                       (4,780,417)                    (4,238,600)
                                                                           -------------                     ----------
           Total Stockholders' Equity                                         (1,254,281)                      (712,464)
                                                                           -------------                    -----------


           Total Liabilities and Stockholders' Equity                     $      678,003                  $     890,838
                                                                           =============                   ============





</TABLE>












See notes to financial statements.
<PAGE>
                                       4




                                EXPROFUELS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                    Three Months    Three Months
                                                        Ended           Ended
                                                    Feb 28, 1998    Feb 28, 1997


Revenues:
    Conversion sales .........................       $ 302,542        $ 108,175
    Fuel station construction sales ..........           5,789           77,400
    Alternative fuel sales ...................          60,974           99,330
                                                     ---------        ---------
                                                       369,305          284,905

Costs and Expenses:
    Cost of sales ............................         300,536          227,439
    Shop general and administrative ..........         106,940          102,779
    Depreciation and amortization ............          24,084           21,834
    General and  administrative ..............         118,392          149,359
                                                     ---------        ---------
            Total Costs and Expenses .........         549,952          501,411
                                                     ---------        ---------


Loss from operations .........................        (180,647)        (216,506)

Other Income (Expense):
    Sublease rental income ...................             -0-              -0-
    Interest income ..........................             370              163
    Interest expense .........................          (9,418)          (7,891)
                                                     ---------        --------- 
                                                        (9,048)          (7,728)
                                                     ---------        ---------

Net loss .....................................       $(189,695)       $(224,234)
                                                     =========        =========


Amounts Per Common Share:

Basic loss per common share ..................       $   (0.05)       $   (0.06)
                                                     =========        =========















See notes to financial statements.

<PAGE>
                                       5



                                EXPROFUELS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                     Six Months      Six Months
                                                       Ended           Ended
                                                    Feb 28, 1998    Feb 28, 1997
                                                    ------------    ------------


Revenues:
    Conversion sales .........................     $   420,465      $   265,508
    Fuel station construction sales ..........         175,511           96,854
    Alternative fuel sales ...................         133,710          185,024
                                                   -----------      -----------
                                                       729,686          547,386

Costs and Expenses:
    Cost of sales ............................         720,467          431,428
    Shop general and administrative ..........         204,082          218,779
    Depreciation and amortization ............          48,157           43,667
    General and  administrative ..............         276,018          288,284
                                                   -----------      -----------
            Total Costs and Expenses .........       1,248,724          982,158
                                                   -----------      -----------


Loss from operations .........................        (519,038)        (434,772)

Other Income (Expense):
    Sublease rental income ...................             -0-           13,500
    Interest income ..........................             598              371
    Interest expense .........................         (23,377)         (13,883)
                                                   -----------      -----------
                                                       (22,779)             (12)
                                                   -----------      -----------

Net loss .....................................     $  (541,817)     $  (434,784)
                                                   ===========      ===========


Amounts Per Common Share:

Basic loss per common share ..................     $     (0.14)     $     (0.11)
                                                   ===========      ===========















See notes to financial statements.


<PAGE>
                                       6




                                EXPROFUELS, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


                                                      Six Months     Six Months
                                                        Ended          Ended
                                                     Feb 28, 1998   Feb 28, 1997
                                                     ------------   ------------


Operating Activities:
Net Loss ...........................................    $(541,817)    $(434,784)
Adjustments to reconcile net loss to net cash
   used by operating activities:
      Depreciation, depletion and amortization .....       48,157        43,667
Changes in operating assets and liabilities:
     Receivables ...................................       21,990        48,094
     Inventory .....................................      123,780      (158,600)
     Prepaid expenses and other ....................        7,285         1,573
     Accounts payable and accrued expenses .........       39,842         6,745
                                                        ---------     ---------
Net cash (used) in operating activities ............     (300,763)     (493,305)

Investing Activities:
     Purchases of property and equipment ...........      (14,122)       (4,546)
     Proceeds from sale of equipment ...............       11,045           -0-
     Investments in and advances to venture ........          -0-       (31,798)
     Other assets ..................................        4,951         1,432
                                                        ---------     ---------
Net cash provided (used) in investing activities ...        1,874       (34,912)

Financing Activities:
     Advances from affiliates ......................      316,117       148,405
     Proceeds from long-term debt obligations ......          -0-       400,000
     Payments on long-term obligations .............      (26,977)      (17,505)
                                                        ---------     ---------
Net cash provided by financing activities ..........      289,140       530,900
                                                        ---------     ---------

Increase (Decrease) in cash and equivalents ........       (9,749)        2,683

Cash and equivalents at beginning of period ........       31,647        20,781
                                                        ---------     ---------

Cash and equivalents at end of period ..............    $  21,898     $  23,464
                                                        =========     =========












See notes to financial statements.

<PAGE>
                                       7




                                EXPROFUELS, INC.
                          NOTES TO FINANCIAL STATEMENTS
              PERIODS ENDED FEBRUARY 28, 1998 AND FEBRUARY 28, 1997
                                   (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-QSB  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  Company's  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  Company's  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  ended
             August 31, 1996, which are incorporated herein by reference.


2.        Common Stock and Basic Loss Per Share

             As of February 28,  1998,  the Company had  outstanding  options to
             purchase  300,000  shares of common stock at a price of 110% of the
             share's  appraised fair market value,  which was $0.13 per share on
             the date of grant and which expire through September 2006.

             Basic  loss per share is  computed  based on the  weighted  average
             number of common shares outstanding during the periods presented as
             follows:

                                                       Three Months   Six Months
                                                       ------------   ----------
               February 28, 1998 ...................     4,000,000     4,000,000
               February 28, 1997 ...................     4,000,000     4,000,000

             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 the  beginning  of  the  current  quarter,  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
             required  quarterly  interest  payments  computed  at 6%,  and  was
             convertible  at the payee's option into common stock of the Company
             at the rate of $1 of debt to 1 share of common stock.

             At January  1,  1998,  the  Company  had not made the  quarterly
             interest  payments  due and was  technically  in default  under the
             terms of the agreements.  Prior to the end of the current  quarter,
             the Company paid all accrued  interest due on its debt and obtained
             waivers  on the  default  from  all  debenture  holders.  Effective
             January 19, 1998,  the Company  restructured  the interest  payment
             terms of two of the debentures, each with a face amount of $100,000
             and both originally  issued to parties related to the Company.  The
             modifications  deferred  all future  payments  of accrued  interest
             until the maturity dates of said notes on February 12 and April 11,
             2000, respectively.
<PAGE>
                                       8



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 Company's audited financial
statements and notes thereto for the fiscal year ended August 31, 1997, included
in the Company's Form 10-KSB.

Financial Condition and Capital Resources

During the six months ended February 28, 1998. The Company's principal source of
working  capital came in the form of advances under existing  credit  agreements
from its former parent, The Exploration  Company, totaling  $241,117, including
$50,000  advanced during the current  quarter.  Also during the current quarter,
new unsecured  borrowings  of $75,000 were obtained from an affiliated  company,
with an additional $25,000 advanced during March 1998. Uses of available capital
for the six month period included  funding cash used in operating  activities of
$300,763,  capital  investments  totaling  $14,122 for purchases of property and
equipment and payments on long term  obligations  of $26,977.  Capital uses were
offset by $11,045 realized from the sale of a company vehicle during the period.

As a result of these activities,  the Company ended the second quarter of fiscal
1998 with negative  working capital of $984,593 and a current ratio of .31 to 1.
This compares to a negative  working  capital of $478,623 and a current ratio of
 .56 to 1 at August 31, 1997.

In order to meet the  Company's  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  has  returned  to the  same  financiers  of its
Convertible  Debt for funding of its additional debt or equity  financing needs,
however,  the Company has secured only limited  commitment  for such  additional
financing as of the date hereof,  and has obtained no firm  commitments from its
unaffiliated  lenders or  creditors to refinance  its  outstanding  debt when it
comes due. In addition,  while the Company's  former Parent provided  additional
working  capital  funds through  December 31, 1997, no additional  funds will be
available from this source in the future. All of these factors raise substantial
doubt as to the Company's ability to continue as a going concern.

The Company's  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 Management's  efforts to raise additional
capital are not successful,  the Company's financial condition and liquidity and
its ongoing  ability to maintain  its  operations  as a going  concern,  will be
materially adversely affected.

Forward-looking  statements  in this 10-Q are made  pursuant  to the safe harbor
provisions of the Private  Securities  Litigation Reform Act of 1995.  Investors
are   cautioned   that  all   forward-looking   statements   involve  risks  and
uncertainties.  Among the  factors  that could  cause  actual  results to differ
materially are environmental,  tax or other regulatory developments,  as well as
general market conditions, competition, pricing and ongoing availability of debt
or  equity  capital.   Please  refer  to  ExproFuels'  Securities  and  Exchange
Commission  filings,  copies of which are  available  from the  Company  without
charge, for additional information.
<PAGE>
                                       9


Results of Operations

ExproFuels  total  revenues  for the second  quarter  and the six  months  ended
February,  1998 increased by  approximately  30% over the same periods of fiscal
1997.   Contributing  most  significantly  was  the  increase  in  fuel  station
construction  revenues to $169,722 during the first quarter of 1998 from $19,454
in the first  quarter of 1997.  This  increase  was due to five new fuel station
construction  contracts in the San Antonio area subsequent to the same period of
fiscal 1997. This increase was further due to a 58% increase in conversion sales
for the six month period  reflecting  new,  higher value CNG and LNG  conversion
contracts  in  Arizona  and  continued  propane  conversion  demand in the Texas
market.  Offsetting  the increase  somewhat was the 39% decrease in  alternative
fuel sales for the second quarter of fiscal 1998 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, as well as the unseasonably  mild
winter, during the current period.

Current  costs and expenses  increased  10% and 27% from the  respective  second
quarter and six months of fiscal 1997.  Contributing most  significantly for the
six month period was the increase in costs of sales of $289,039 which increased 
in part due to higher sales, as well as inventory adjustments during the period.
30, 1997. Reductions in general and administrative  expenses reflect the results
of ongoing,  company-wide cost cutting efforts,  including reduced  advertising,
promotion and outside  consulting  services expenses during the current quarter.
Subsequent  to the end of the current  quarter,  ongoing  monthly  savings  from
reduced  operating and staffing  levels in the Dallas and Tucson markets and the
elimination  of  associated  office and shop  overhead  expenses  should  exceed
$16,000.  The reduction in shop and overall general and  administrative  expense
for the six month  period was offset  somewhat  by the  opening of a new company
owned conversion facility in Mesa, Arizona, during the current quarter.  Located
in the Phoenix  metropolitan  area,  the 7,400 square foot facility will provide
full  service and  warranty  support for  existing  customers  and  provides the
company with additional growth capacity as that local market develops.

Sublease  rental income  decreased to $0 for the current six month period due to
the  expiration  of the  Company's  former  Louisiana  shop  facility  sublease.
Interest  expense  increased over the previous  fiscal periods due to the higher
level of debt outstanding for the entire current period of fiscal 1998.

Throughout fiscal 1998, 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  Company's  markets,  with the
immediate  goal of reducing  ongoing  operating  losses.  By  strengthening  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. Accordingly,
the Company has  completed the  restructuring  of its presence in the Dallas and
Tucson  markets to  affiliate  shop  status,  insuring  ongoing  support for its
customer base, existing service contracts and warranty obligations.
<PAGE>
                                       10



                           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.  During January 1998,  both cases were  consolidated  into one
         case, to be  adjudicated  in federal  court in the Western  District of
         Tennessee.  Both parties have reached a preliminary  agreement to enter
         into court-annexed non-binding mediation proceedings.  A non-jury trial
         date of March 22, 1999 has now been set. Should  mediation  efforts not
         be successful,  ExproFuels  intends to pursue its claims and vigorously
         defend itself against ATI's and AEI's 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.  Prior to the end of the current quarter,  the
         Company paid all accrued  interest due on its debt and obtained waivers
         on the default from all debenture holders.

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>
                                       11

                                   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:  April 20, 1998

                                       

<PAGE>
                                       12





                             INDEX TO EXHIBITS


<TABLE>
<CAPTION>
EXHIBIT 
NUMBER                DESCRIPTION
---------           ---------------
<S>                  <C>   
      
 27                 FINANCIAL DATA SCHEDULE
</TABLE>