**UNITED
      STATES**


**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: **June
      30, 2005**


**OR**


o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





For
      the
      transition period from ____________________ to ____________________





Commission
      file number: **0-21825**





**STREICHER
      MOBILE FUELING, INC.**


(Exact
      name of registrant as specified in its charter)


**Florida**
            **65-0707824**(State
                or other jurisdiction
            (I.R.S.
                Employerof
                incorporation or organization)
            Identification
                No.)





**800
      West Cypress Creek Road, Suite 580, Fort Lauderdale, Florida
      33309**


(Address
      of principal executive offices) (Zip Code)





**(954)
      308-4200**


(Registrant’s
      telephone number, including area code)





Securities
      registered pursuant to Section 12(b) of the Act:


**None**





Securities
      registered pursuant to Section 12(g) of the Act:


**Common
      Stock, $.01 Par Value**


**Redeemable
      Common Stock Purchase Warrants**





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 o





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 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. o





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act). Yes o No x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x




The
      aggregate market value of the voting stock held by non-affiliates was
      $34,963,957. The aggregate market value was computed by reference to the last
      sale price of the registrant’s Common Stock on the NASDAQ Stock Market on
      September 23, 2005.





As
      of
      September 23, 2005 there were 9,691,762 shares of the Registrant’s Common Stock
      outstanding.




**DOCUMENTS
      INCORPORATED BY REFERENCE:**





Certain
      Portions of Registrant’s Proxy Statement relating to the 2005 Annual Meeting of
      Shareholders are incorporated by reference into Part III.










Table
          of Contents





**TABLE
      OF CONTENTS**


**PAGE**PART
                I.Item
                1. Description of Business
            1Item
                2. Description of Property
            12Item
                3. Legal Proceedings
            12Item
                4. Submission of Matters to a Vote of Security
                Holders
            12PART
                II.Item
                5. Market for Common Equity and Related Shareholder
                Matters
            13Item
                6. Selected Financial Data
            13Item
                7. Management’s Discussion and Analysis of Financial
                Condition and Results of Operations
            16Item
                7A. Quantitative and Qualitative Disclosures About
                Market Risk
            30Item
                8. Financial Statements and Supplementary
                Data
            31Item
                9. Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure
            31Item
                9A. Controls and Procedures
            31Item
                9B. Other Information
            31PART
                III.Item
                10. Directors, Executive Officers, Promoters and
                Control Persons; Compliance with Section 16(a) of the Exchange
                Act
            32Item
                11. Executive Compensation
            32Item
                12. Security Ownership of Certain Beneficial Owners
                and Management
            32Item
                13. Certain Relationships and Related
                Transactions
            32Item
                14. Principal Accounting Fees and
                Services
            32Item
                15. Exhibits, Financial Statement Schedules and
                Reports on Form 8-K
            33











Table
          of Contents





**PART
      I**






**Item
              1.**
            **Description
                of Business**




**OVERVIEW**




Streicher
      Mobile Fueling, Inc., a Florida corporation formed in 1996, and its subsidiaries
      (together the “Company” or the “SMF Group”) provides petroleum product
      distribution services, transportation logistics and emergency response services
      to the trucking, construction, utility, energy, chemical, and government
      services industries.




The
      broad range of services we offer our customers includes commercial mobile and
      bulk fueling; the packaging, distribution and sale of lubricants; integrated
      out-sourced fuel management; transportation logistics and emergency response
      services. Our fleet of custom specialized tank
      wagons, tractor-trailer transports, box trucks and customized flatbed vehicles
      deliver diesel
      fuel and gasoline to customers’ locations on a regularly scheduled or as needed
      basis, refueling vehicles and equipment, re-supplying fixed-site and
      temporary bulk storage tanks, and emergency power generation systems ;
      and
      distribute a wide variety of specialized petroleum products, lubricants and
      chemicals to refineries, manufacturers and other industrial customers. In
      addition, our fleet of  special
      duty tractor-trailer units provides heavy and ultra-heavy haul transportation
      services over short and long distances to customers requiring the movement
      of
      over-sized or over-weight equipment
      and manufactured products.




Our
      sophisticated fueling solutions include the use of the Company’s patented
      proprietary electronic fuel tracking control system to
      measure, record and track fuel dispensed to each vehicle and tank fueled at
      a
      customer location. This system allows customer verification of the amount and
      type of fuel delivered and provides customers with customized fleet fuel data,
      which data can be used for various types of management analysis as well as
      tax
      reporting. The commercial mobile
      fueling services we provide offer numerous advantages to customers, including
      lower labor and administrative costs associated with fueling vehicles;
      centralized control over fuel inventories and usage; tax reporting benefits;
      elimination of costs and the risk of environmental liabilities associated with
      on-site fuel storage and dispensing facilities; lower risk of employee theft
      of
      fuel; and elimination of security risks associated with off-site fueling by
      employees.




The
      Company also provides emergency service and fuel delivery services in response
      to natural disasters and other widespread emergency conditions, including
      hurricanes, tropical storms, ice and snow storms, forest fires and earthquakes.
      We are currently conducting extensive operations supporting the storm relief
      work in the aftermath of the September 2005 Hurricane Katrina and Rita
      disasters.





We
      presently operate 192 specialized commercial vehicles
      from 27 operating locations serving major metropolitan markets in California, District of Columbia, Florida, Georgia,
      Maryland, North Carolina, Pennsylvania, Tennessee, Texas and Virginia. The
      Company will continue to pursue measured and profitable growth in these markets
      by selling existing services to new clients, and cross selling new services
      to
      existing clients or new services to new clients. In addition, the Company will
      continue to pursue expansion through the strategic acquisition of similar or
      complementary businesses that meet the Company’s criteria for growth and
      profitability.





We
      also own over 800 fuel and lubricant storage tanks with over 1,700,000 gallons
      of capacity. These tanks include bulk storage tanks located at our facilities
      and portable tanks used for the temporary storage and dispensing of fuels and
      lubricants at a customer’s job site. Our portable tanks are delivered to the
      customer by the Company’s fleet of specialized flatbed trucks. In addition, the
      Company provides bulk fueling and lubricant services to customers who own their
      own storage facilities. The Company transports and delivers fuel and other
      petroleum products to these customers on a scheduled, or as needed, basis
      utilizing its fleet of customized tank wagons and transports.




Our
      operations were expanded in February
      2005 when the
      Company acquired
      substantially all of the assets and business operations of Shank C&E
      Investment s ,
      L.L.C.
      (“Shank Services”) a Houston, Texas based provider of commercial mobile
      and bulk fueling services ,
      petroleum lubricants packaging
      and distribution  and
      heavy
      and ultra-heavy haul transportation services serving
      the important Houston, Dallas/Fort Worth, Austin and San Antonio
      markets.




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On
      October 1, 2005, the
      Company acquired
      all of the stock of H & W Petroleum Company, Inc. (“H & W”), a
      Houston, Texas based marketer and distributor of lubricants, commercial fuels
      and petroleum products. Immediately prior to the consummation of this
      transaction , H &
      W acquired the operating assets of Harkrider Distributing Company, Incorporated
      (“Harkrider”), a Houston based marketer and distributor of dry cleaning
      solvents, chemicals and petroleum products, which is related to H & W
      through some common shareholder ownership (together
      with the acquisition of the shares of H & W, the “H & W
      Acquisition”) .
      In
      addition to providing service to the greater Houston metropolitan area, the
      combined H & W and Harkrider operations also serve the Dallas/Fort Worth,
      Freeport, Longview, Lufkin, San Antonio, and Waco markets in Texas.




**PRODUCTS
      AND SERVICES**




**Commercial
      Mobile** **and
      Bulk** **Fueling** **and Fuel Management Services**




Traditionally,
      businesses and other entities that operate fleets of vehicles and equipment
      have
      met their fueling requirements by either maintaining their own supply of fuel
      in
      on-site storage tanks or fueling vehicles at retail stations and other third
      party facilities.




On-site
      storage tanks and fueling facilities can be expensive to construct and maintain,
      and expose the property owner and operator to potential liability associated
      with fuel leaks or spills. In addition, increasingly stringent federal and
      state
      environmental regulation of underground storage tanks may require businesses
      that maintain their own fuel supplies to spend significant amounts to remove,
      retrofit and/or to maintain underground and aboveground storage tanks to meet
      regulatory standards. We believe that many fleet operators currently utilizing
      on-site storage tanks will choose to meet their fueling requirements by other
      means, including commercial mobile fueling, instead of investing in upgrading
      and/or maintaining existing facilities.




The
      fueling of vehicles at retail stations and other third party facilities by
      fleet
      operators can result in a higher cost of operations due to inefficient use
      of
      employee time, the creation of significant unnecessary paperwork and employee
      fraud. While large users may be able to negotiate favorable fuel pricing from
      retail stations or other fuel suppliers, the labor cost incurred in connection
      with employee fueling of vehicles and the costs associated with management
      and
      administration of fuel purchases, can exceed the benefits associated with price
      discounts.




Specifically,
      commercial mobile fueling and out-sourced fuel management services offer
      numerous benefits over traditional fueling methods:




·
            *Reduces
                Operating Costs and Increases Labor Productivity*.
                Fleet operators are able to reduce operating costs and lower payroll
                hours
                by eliminating the need for their employees to fuel vehicles either
                on-site or at local retail stations and other third party facilities.
                Overnight fueling prepares fleet vehicles for operation at the beginning
                of each workday and increases labor productivity by allowing employees
                to
                use their vehicles during time that would otherwise be spent fueling
                while
                maximizing vehicle use since fueling is conducted during non-operating
                hours. The fuel necessary to operate vehicles is reduced since fueling
                takes place at customer locations. The administrative burden required
                to
                manage fuel programs and monitor vehicle utilization is also reduced.




·
            *Provides
                Centralized Inventory Control and Management*.
                Our fuel management system provides fleet operators with a central
                management data source. Web-based comprehensive reports detail, among
                other things, the location, description, fuel type and daily and
                weekly
                fuel consumption of each vehicle or piece of equipment that we fuel.
                This
                eliminates customers’ need to invest working capital to carry fuel
                supplies and allows customers to centralize fuel inventory controls
                as
                well as track and analyze vehicle movements and fuel consumption
                for
                management and fuel tax reporting
                purposes.




·
            *Provides
                Tax Reporting Benefits*.
                Our fuel management system can track fuel consumption to specific
                vehicles
                and fuel tanks providing tax benefits to customers consuming fuel
                in uses
                that are tax-exempt, such as for off-road vehicles, government-owned
                vehicles and fuel used to operate refrigerator units on vehicles.
                For
                these uses, the customers receive reports which provide them with
                the
                information required to substantiate tax
                exemptions.




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·
            *Eliminates
                Expenses and Liabilities of On-site Storage*.
                Fleet operators who previously satisfied their fuel requirements
                using
                on-site storage tanks can eliminate the capital and costs relating
                to
                installing, equipping and maintaining fuel storage and dispensing
                facilities, including the cost and price volatility associated with
                fuel
                inventories; complying with escalating environmental government
                regulations; and carrying increasingly expensive insurance. By removing
                on-site storage tanks and relying on commercial mobile fueling, customers
                are able to avoid potential liabilities related to both employees
                and
                equipment in connection with fuel storage and handling. Customers’
                expensive and inefficient use of business space and the diminution
                of
                property values associated with environmental concerns is also eliminated.




·
            *Prevents
                Fuel Theft*.
                Fleet operators relying on employees to fuel vehicles, whether at
                on-site
                facilities or at retail stations, often experience shrinkage of fuel
                inventories or excess fuel purchases due to employee fraud. Our fuel
                management system prevents the risk of employee theft by dispensing
                fuel
                only to authorized vehicles. Utilizing our fueling services, rather
                than
                allowing employees to purchase fuel at local retail stations, also
                eliminates employee fraud due to credit card
                abuse.




·
            *Provides
                Emergency Fuel Supplies and Security*.
                Emergency preparedness, including fuel availability, is critical
                to the
                operation of governmental agencies, utilities, delivery services
                and
                numerous other fleet operators. We provide access to emergency fuel
                supplies at times and locations chosen by our customers, allowing
                them to
                react more quickly and effectively to emergency situations, such
                as severe
                weather conditions and related disasters. SMF Groupresponded
                to Hurricanes Katrina and Rita by mobilizing personnel and a significant
                fleet of trucks and equipment to provide emergency fuel supply and
                support
                services following the devastation caused by those storm systems.
                Fueling
                by fleet operators at their own on-site storage facilities, and/or
                at
                retail and other third party locations may be limited due to power
                interruptions, supply outages or access and other natural limitations.
                In
                addition, since security concerns of fleet operators to terrorism,
                hijacking and sabotage are increasing, fueling vehicles at customers’
                facilities eliminates security risks to the fleet operators’ employees and
                equipment rather than fueling at retail service stations and other
                third
                party facilities.




Historically,
      we have generated substantially all of our revenues from commercial mobile
      and
      bulk fueling and integrated out-sourced fuel management services. With the
      recent acquisitions of Shank Services and H & W, we have substantially
      increased the size of our commercial mobile fueling operations and expanded
      our
      market area for those operations (see “RECENT DEVELOPMENTS” below).




We
      provide bulk fueling and lubricant services to customers requiring the use
      of
      one or more of our portable storage tanks. These tanks are delivered to the
      customer’s job-site, repositioned as required, maintained and re-supplied on a
      scheduled or as needed basis. In addition, the Company provides bulk fueling
      services to its customers who maintain their own above or below ground storage
      facilities. Utilizing its fleet of tank wagons and transports, the Company
      delivers bulk quantities of fuel on a scheduled or as needed basis. The Company
      also works with a number of nationwide fuel and card lock networks to provide
      an
      all-inclusive transportation fueling and fleet optimization solution for its
      customers.




Our
        emergency response generator services program provides customers with ongoing
        fuel testing, treatment, filtration and top-off services to ensure that
        generators and other emergency power supply systems are fully fueled and
        that
        the fuel is in optimal condition for use at the onset of power outages. We
        then
        provide emergency fuel supplies to these customers for their generators and
        emergency power supply systems in a series of scheduled deliveries for the
        duration of power outages based on the consumption and utilization requirements
        of these systems.


**Packaging,
      Distribution and Sale of Lubricants, Other Petroleum Products and
      Chemicals**




As
      a
      result of its acquisition of substantially all of the assets of Shank Services
      (see “RECENT DEVELOPMENTS” below), SMF Group now packages and distributes
      petroleum based lubricants to various customers from its Texas facilities.
      The
      acquisition of H & W on October 1, 2005 (see “RECENT DEVELOPMENTS” below)
      has significantly increased the size of the Company’s lubricant packaging and
      distribution operations. The H & W Acquisition has also broadened the range
      of products distributed by the Company, including but not limited to the dry
      cleaning solvents and chemicals distributed by Harkrider, the assets of which
      were acquired by H & W immediately prior to the Company’s acquisition of H
& W.




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**Transportation
      Logistics Services**




As
      a
      result of its acquisition of Shank Services (see “RECENT DEVELOPMENTS” below”),
      the Company provides specialized transportation and logistics services utilizing
      its fleet of re-configurable tractor-trailer units to provide the delivery
      of
      specialized commodities, including heavy or ultra-heavy haul over-size and/or
      over-weight machinery and equipment throughout the U.S. and Canada.




SMF
      Group’s heavy haul and ultra heavy haul customers range from construction
      companies, for whom we handle the movement of “yellow iron”, such as cranes,
      bulldozers, and road grading equipment, as well as prefabricated concrete and
      metal building materials, to petroleum refiners and chemical plant operators,
      for whom we transport large vessels, processing equipment and other equipment
      used in the construction or “turnaround” maintenance of their
      facilities.




We
      also
      provide customized fuel delivery solutions using our commercial mobile fueling
      services, and third-party nationwide fuel and card lock networks for companies
      requiring heavy haul over-the-road capabilities, such as utility companies
      constructing power transmission systems.




**RECENT
      DEVELOPMENTS**




**Shank
      Services Acquisition and Financing**




**Acquisition.** On
      February 18, 2005, SMF Group acquired substantially all of the assets and
      related business of Shank
      C&E Investment s ,
      L.L.C.
      (“Shank Services”) a Houston, Texas based provider
      of commercial fueling and heavy and ultra-heavy haul transportation services
      for
      $8.3 million, including a $1.9 million performance based contingency and $0.6
      million in acquisition costs. We acquired a fleet of 24 commercial fueling
      vehicles, including specialized fuel delivery, transport, oil and lubricant
      flatbed and tanker trucks and related support equipment; over 600 portable
      fuel
      and lubricant tanks with more than 500,000 gallons of capacity used by customers
      to store products provided by Shank Services; 15 heavy and ultra-heavy haul
      tractor-trailer units designed to transport heavy construction equipment and
      other over-sized and/or over weight loads weighing up to 250,000 pounds; a
      limited quantity of fuel and lubricant inventories; office and computer
      equipment and related specialized software technology; customer lists and
      agreements; certain other intangible assets; and outstanding customer accounts
      receivable. We did not assume any material Shank Services’ liabilities or debt.
      Shank Services employs approximately 80 personnel. The SMF Group continues
      to
      operate the acquired assets and business under the trade name Shank Services;
      and we are integrating the existing Houston and Dallas/Fort Worth commercial
      mobile and bulk fueling operations of the Company with those of Shank
      Services.




Of
      the
      $8.3 million purchase price for the acquired assets and related business, $5.8
      million was paid in cash, $1.9 million was paid with a contingent two-year
      deferred payment promissory note, and $0.6 million was incurred in acquisition
      costs. The payment of the promissory note is dependent on Shank Services meeting
      a specific target performance objective. Some or all of the $1.9 million
      principal amount and accrued interest due under the note will not be payable
      if
      the performance target which covers an operating period commencing prior to
      the
      acquisition date is not achieved.




We
      believe that Shank Services should provide us with significant cost reductions
      as a result of more effective bulk fuel purchasing; lower insurance premiums;
      improved delivery scheduling; decreased equipment rentals; better utilization
      of
      operations personnel and equipment; and reduced administrative expenses. These
      savings, together with increasing sales volumes and improved margins from a
      consolidation of our Texas based commercial fueling operations and Shank
      Services concentrated marketing and sales program, are expected to provide
      a
      positive impact on our future cash flows and earnings.




**Financing.** On
      January 25, 2005, in anticipation of the February closing of the Shank Services
      acquisition, we completed a $6.1 million private placement with a small group
      of
      institutions and other accredited investors to fund the acquisition, to develop
      its operations and for other general corporate purposes. We issued $6.1 million
      in 10%, five-year Senior Secured Notes (the “January 2005 Notes”) that require
      six semi-annual principal payments commencing January 24, 2007 and a 40% balloon
      payment on January 24, 2010. The investors also received four year warrants
      to
      purchase 866,200 shares of our common stock at an exercise price of $1.60 per
      share, including customary redemption and registration rights. In addition,
      140,300 warrants with substantially similar terms were issued to Philadelphia
      Brokerage Corporation, the financing placement agent. Results of Shank Services’
      operations have been included in our consolidated financial statements since
      the
      February 18, 2005 acquisition date.




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The
      January 2005 Notes are secured by a first priority security interest in the
      tangible assets acquired from Shank Services. In connection with the issuance
      of
      the January 2005 Notes and related security agreement, the Company entered
      into
      an indenture with a third party trustee for payment of the January 2005
      Notes.




The
      Shank
      Services’ assets and related operations, when fully integrated with our present
      Texas based business in Houston and Dallas/Fort Worth, will materially extend
      the SMF Group’s footprint in major Texas markets and should provide a solid
      platform for further growth in the Southwest. We expect to offer commercial
      mobile fueling services to over 400 active Shank customers, particularly those
      in the construction, agriculture, energy, manufacturing and marine industries
      with large local and regional fleets. The acquisition will also expand our
      business into related bulk commercial fueling operations, generator services
      and
      the marketing and distribution of lubricants and related petroleum
      products.




The
      Shank
      Services heavy and ultra-heavy haul transportation operations offer us a new
      and
      growing opportunity to provide this specialized logistical service to numerous
      businesses that regularly transport heavy construction, refinery and chemical
      equipment, and other unusually large payloads, locally, regionally and
      nationally. It also gives us the opportunity to provide our other products
      and
      services to these new customers, including commercial mobile and bulk fueling,
      fuel management and the sale and distribution of lubricants.




While
      the
      Shank Services operating, marketing, sales and administrative functions have
      not
      yet been fully integrated into the SMF Group’s pre-existing operations and our
      present organizational structure, when this integration is complete, it will
      create efficiencies and cost-reductions from cross-utilization of personnel
      in
      multiple geographic operating locations as well as from combining other
      commercial fueling functions and responsibilities. Because Shank Services is
      experienced in delivering emergency response fueling services in disaster relief
      situations, the acquisition has also increased our capability to provide this
      vital support, regionally and nationally. By establishing a greater operating
      presence in the Texas market, together with continued growth in the Southeast
      and Mid-Atlantic states, the Shank Services acquisition should facilitate
      further acquisitions by the Company of businesses in petroleum product
      distribution and sales, out-sourced fuel management services and transportation
      logistics.




**Acquisition
      of H & W Petroleum and Related Financing**




On
      October 1, 2005, the Company acquired all of the outstanding shares of
      Houston-based H &
      W Petroleum Company, Inc. (“H & W”) which is
      engaged in the marketing and distribution of lubricants, fuels and other
      petroleum products in Texas. Immediately prior to the acquisition by the
      Company, H & W purchased the operating assets and limited inventory of Harkrider
      Distributing Company, Incorporated (“Harkrider”), also based in Houston,
      w hich
      is
      related to H & W through some common shareholder ownership and is engaged in
      the marketing and distribution of dry cleaning solvents, chemicals and petroleum
      products (together with the acquisition of the shares of H & W, the “H &
      W Acquisition”). In addition to providing
      service to the greater Houston metropolitan area, H & W and Harkrider also
      service the Dallas/Fort Worth, Freeport, Longview, Lufkin, San Antonio and
      Waco
      markets.




H
&
        W
        provides lubricants and fueling services to over 3,800 customers, with its
        primary emphasis on those companies requiring large volumes of specialty
        industrial oils, motor and gear lubricants and greases subject to rigid
        technical and performance specifications. Harkrider has distributed solvents
        and
        specialty petroleum products to dry cleaners and industrial customers in
        the
        Houston, Beaumont and San Antonio areas since 1946. Today, it is one of the
        largest dry cleaning solvents distributors in those Texas markets with over
        800
        customers. Together, H & W and Harkrider operate a combined fleet of 52
        specialized lubricant, fuel and chemical delivery “bobtail” trucks; oil and
        lubricant flatbed and box trucks; tanker transports; and related support
        equipment, including approximately 200 storage tanks with over 1,200,000
        gallons
        of capacity. The H & W and Harkrider operations currently employ
        approximately 75 personnel.




The
      purchase price of approximately $6.3 million, which was based on a multiple
      of
      4.5 times a projected annualized EBITDA *(earnings
      before interest, taxes, depreciation and amortization - a non-GAAP financial
      measure)* of
      approximately $1.4 million, was adjusted to $5.964 million at closing by working
      capital and other closing adjustments. The purchase price was paid with a
      combination of cash, the assumption of specified liabilities and the issuance
      of
      two year 10% promissory notes totaling $2.463 million, which are subject to
      an
      earn out provision based on the performance of H & W and Harkrider after the
      Acquisition.




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On
      September 1, 2005, in contemplation of the then pending H & W Acquisition ,
      the Company issued $3.0 million in five-year 10% redeemable promissory notes
      (the “September 2005 Notes”) to a small group of institutions and other
      accredited lenders. Installment payments of six (6) equal semi-annual principal
      payments of ten percent (10%) of the principal amount of the September 2005
      Notes will commence on August 31, 2007 and continue on February 28 and August
      31
      of each year thereafter, with the remaining balance of forty percent (40%),
      a
      $1.2 million balloon payment, due at maturity on August 31, 2010. The
      amounts due under the September 2005 Notes will become due and payable
      immediately upon the occurrence of customary events of default. The September
      2005 Notes are redeemable by the Company, in whole or in part, by payment of
      a
      percentage of the principal amount of the note, together with accrued but unpaid
      interest, if any, as follows: September 1, 2005 - August 31, 2006, 102%;
      September 1, 2006 - August 31, 2007, 101%; and September 1, 2007 - August 31,
      2010, 100%. A portion of the proceeds of the September 2005 Notes were used
      by
      the Company to fund the approximately $1.5 million of the H & W Acquisition
      purchase price that was paid in cash at closing. The balance of the proceeds
      will be used to develop the combined operations of H & W and Harkrider,
      including the integration of the lubricant distribution operations of Shank
      Services and H & W, and for other general working capital purposes. In
      connection with the issuance of the September 2005 Notes and related security
      agreement, the Company entered into an indenture with a third party trustee
      for
      the payment of the September 2005 Notes.




The
      September 2005 Notes are secured by a first priority security interest in the
      vehicles, equipment and other physical assets, other than inventory, of H &
      W. The H & W inventory is subject to the first priority security interest on
      the Company’s assets held by its primary lender.




In
      connection with the September 2005 Notes, the Company also issued 360,000
      four-year warrants to purchase shares of common stock at $2.28 per share to
      the
      purchasers of the Notes and to the Company’s placement agent for the financing
      transaction.




**ACQUISITION
      AND DIVERSIFICATION STRATEGY**




Shank
      Services and the H & W Acquisition were the initial acquisition undertaken
      in our previously announced strategy to grow and diversify through acquisitions.
      During the quarters ended March 31 and June 30, 2005, we incurred incremental
      costs in connection with the development of the infrastructure to support this
      acquisition and diversity strategy. These incremental costs will continue over
      the next several quarters as we implement our infrastructure development as
      well
      as evaluate, negotiate and complete prospective acquisitions. We expect to
      incur
      additional costs to retain and expand our senior and line management team;
      undertake new sales and marketing initiatives; introduce new and expected new
      services and products; evaluate and optimize our specialized routing equipment
      to achieve more efficiencies in our fuel delivery system; and redesign our
      accounting and information technology systems to reduce operating costs and
      improve our ability to rapidly integrate acquisitions.




We
      anticipate that our interest costs will continue to increase as a result of
      additional borrowings required to finance our acquisition growth strategy and
      that as we execute this strategy, there may also be disruptions in our existing
      core business, causing possible higher costs, lower volumes and/or, lower
      margins. These types of disruptions, coupled with the infrastructure development
      costs needed to support our acquisition strategy, could lead to significant
      fluctuations in our results of operations in future reporting periods. During
      the next twelve months, we expect expenditures of $1.0 to $1.5 million to
      further develop the infrastructure for our multi-acquisition growth plan, not
      including the funds required to finance acquisitions and related interest
      expense and other costs likely to be incurred in obtaining those funds.




**MARKETING
      AND CUSTOMERS**




The
      SMF
      Group markets its commercial mobile and bulk fueling services and its lubricant
      sales and distribution services to customers operating all size fleets of
      vehicles and equipment, including governmental agencies, utilities, trucking
      companies, bus lines, hauling and delivery services, courier services,
      construction companies and others. While large fleet operators offer immediate
      market penetration on a regional basis, small fleet operators are equally
      important customers since they provide geographic density which optimizes
      delivery efficiency and minimizes cost. Once engaged to provide commercial
      mobile fueling services, we are usually the exclusive service provider for
      the
      fueling of a customer’s entire fleet or of a particular location of vehicles and
      equipment in a market.




We
      focus
      our marketing efforts on fleet operators within established service areas.
      Fleet
      size and type, fuel requirements, fueling logistics and credit worthiness are
      factors in identifying potential new customers for our services. Direct
      marketing is our primary method of developing new business. Referrals from
      existing customers and our personnel are also important sources of potential
      business. In addition, we are actively developing new service markets. A minimum
      level of business commitments in both volumes and margins is required prior
      to
      our entry into a new market. The ability to provide service to an existing
      customer in a new market and the prior identification of local new customers
      meeting our operating criteria are important considerations in a decision to
      enter a market.




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As
      of
      June 30, 2005, SMF Group distributed diesel, gasoline, alternative fuels and
      lubricants to approximately 1,200 customers. Revenue from one large customer,
      the United States Postal Service, totaled $11.4 million (8.4% of total revenue),
      $9.5 million (14% of total revenue) and $8.5 million (16% of total revenue)
      in
      the fiscal years ended June 30, 2005, 2004 and 2003, respectively. Our current
      agreements with the United States Postal Service expires in August 2006.
      Although we have formal, length of service written contracts with certain larger
      customers, these types of agreements are not customary in the commercial mobile
      fueling business and we do not have them with the majority of our customers.
      Most customers can terminate our services at any time and for any reason, and
      we
      can similarly discontinue service to any customer. SMF Group will discontinue
      service to a customer if changes in service conditions or other factors cause
      us
      not to meet our minimum level of volumes and margins, and we are unable to
      re-negotiate a satisfactory arrangement with the customer.




**COMPETITION**




SMF
      Group
      competes with other distributors of fuels, lubricants and other petroleum
      products including several large regional distributors and numerous small
      independent local operators. We also compete with retail marketing where fleet
      operators have the option of fueling their own equipment at retail stations
      and
      other third-party service locations. In addition, our heavy and ultra-heavy
      haul
      transportation operations compete with other local, regional and national
      providers of these services. Our ability to compete effectively is dependent
      on
      numerous factors, including price, complexity and technical nature of the
      services required, delivery dependability, credit terms, service locations,
      as
      well as the type of reporting and invoicing services provided.




**OPERATIONS**




**Truck
      Fleet and Equipment**




SMF
      Group
      currently provides commercial
      mobile and bulk fueling; packaging, distribution and lubricants sales;
      integrated out-sourced fuel management; heavy
      and
      ultra heavy haul transportation logistics and emergency response services from 27
      locations serving California, District of Columbia, Florida, Georgia, Maryland,
      North Carolina, Pennsylvania, Tennessee, Texas and Virginia.




Our
      fleet of 174 custom specialized commercial mobile fueling tank
      wagons, tractor-trailer transports, box trucks and customized flatbed vehicles
      deliver diesel
      fuel and gasoline to customers’ locations on a regularly scheduled or as needed
      basis, refueling vehicles and equipment, re-supplying fixed-site and
      temporary bulk storage tanks, as well as, emergency power generation
      systems ;
      and
      distribute a wide variety of specialized petroleum products and lubricants
      to
      refineries, manufacturers and other heavy industry customers. Our
      custom commercial mobile fueling trucks have multi-compartmented tanks with
      fuel
      carrying capacities ranging from 2,800 to 4,500 gallons. Generally, each truck
      services between five and fifteen customer locations per night or day, on
      specified delivery routes, depending on customer size and fueling logistics.
      The
      fuel supply to be delivered is acquired daily at local third-party terminal
      storage facilities. Each truck is operated by a “fueler/operator” driver who
      also handles the actual fueling of the customers’ vehicles.




After
      the H & W Acquisition, we now own over 800 fuel and lubricant storage tanks
      with over 1,700,000 gallons of capacity. These tanks include bulk storage tanks
      located at our facilities and portable tanks used for the temporary storage
      and
      dispensing of fuels and lubricants at a customer’s job site. Our portable tanks
      are delivered to the customer by the Company’s fleet of specialized flatbed
      trucks. In addition, the Company provides bulk fueling and lubricant services
      to
      its customers who own their own storage facilities. The Company transports
      and
      delivers fuel and other petroleum products to these customers on a scheduled,
      or
      as needed, basis utilizing its fleet of customized tank wagons and transports.




Our
      fleet
      of 18 special
      duty tractor-trailer units provides specialized logistical heavy and ultra-heavy
      haul transportation services over short and long distances to customers
      requiring the movement of over-sized /over-weight loads
      of
      equipment and heavy manufactured products. These units consist of tractor and
      trailer combinations which can be reconfigured to meet the specific load and
      routing requirements.




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**Fuel
      Tracking and Reporting System**




The
      Company’s patented
      proprietary fuel tracking and reporting management system is widely used in
      our
      commercial mobile fueling operations. We own all patents covering the system,
      the rights to which are registered with the United States Patent and Trademark
      Office. We believe our system to be the first and only one specifically designed
      to meet the demands and rigors of commercial mobile fueling, and the only one
      certified for accuracy by The National Conference on Weights and Measures.
      Data
      is derived from the Fuel Tracking Controller (“FTC”) Computer which is installed
      on each truck and is linked to the fueler/operator by a hand-held radio
      controlled scanning and transmitting device. The FTC Computer is programmed
      to
      control any variety of truck configurations, including single or multiple
      products and any number of pumps and hoses attached to the truck. The FTC fuel
      management system electronically records date, time, customer vehicle
      identification number, product type and volume of fuel delivered by SMF Group’s
      trucks into each customer vehicle. For security and tracking purposes, the
      FTC
      Computer will not permit fuel to be dispensed from our truck unless both the
      customer’s fleet yard and the individual vehicle or piece of equipment to be
      fueled are electronically verified by the FTC Computer registration. All fueling
      transactions are recorded on the truck’s FTC Computer, downloaded at our service
      locations and transmitted to our corporate headquarters where the data is
      assimilated into detailed service reports and invoices for the customer. This
      information can be delivered to the customer by a number of methods, including
      the internet, and data may also be delivered to the customer at his vehicle
      location at the time of fueling.




Because
      some service applications require both commercial mobile fueling and the use
      by
      the customer of his own on-site storage tanks, we have adapted the FTC Computer
      to track the use by the customer of its own fixed-site tanks. Upon installation
      of an FTC Computer, we service and manage fuel delivery to a customer’s on-site
      storage tank, providing reports detailing fuel dispensed from the tank into
      each
      of the customer’s vehicles, either alone or in combination with the customer’s
      mobile fueling use. The SMF Group also utilizes third party systems as required
      for certain of its operations and applications.




**Fuel
      and Lubricant Supply**




Diesel
      fuel and gasoline are commodities which are refined and distributed by numerous
      sources. SMF Group purchases the fuel delivered to its customers from multiple
      suppliers at daily market prices and in some cases qualifies for discounts.
      We
      monitor fuel prices and trends in each of our service markets on a daily basis
      and seek to purchase our supply at the lowest prices and under the most
      favorable terms. Commodity price risk is mitigated since we purchase and deliver
      fuel supplies daily and generally utilize cost-plus pricing when billing
      customers. We also deliver customer and third-party supplied fuel.




SMF
      Group
      purchases lubricants from branded and unbranded suppliers in bulk and in
      prepackaged containers. Lubricants are distributed and sold to our customers
      in
      bulk, prepackaged or repackaged by us to meet customer needs. The pricing of
      lubricants to our customers is on a cost plus basis. Lubricants inventory
      generally turns every 15 days and is not subject to significant market price
      volatility.




**MANAGEMENT
      TEAM**




In
      order
      to successfully implement its acquisition and corporate development strategy
      (see “ACQUISITION AND DEVELOPMENT STRATEGY”), SMF Group has significantly
      increased the depth and breadth of its management team in the last
      18 months. The Company has augmented the existing core of Richard
      Gathright, Chief Executive Officer; Michael Shore, Chief Financial Officer;
      Paul
      Vinger, Senior Vice President of Fleet Operations and Corporate Planning; Gary
      Williams, Senior Vice President of Commercial Operations; Robert E. Creasman,
      Vice President of ESOH and Fleet Maintenance; and Tim Koshollek, Vice President
      of Marketing and Sales, with five new executives. Robert W. Beard was
      named
      Vice President, Corporate Development in July 2005, and is now responsible
      for
      product line strategy and development as well as vendor, investor and public
      relations. Sharon M. Glickman was named Vice President of Accounting,
      Controller and Chief Accounting Officer in August 2005. William R.
      Rominger, Jr. became the Company’s Vice President, Information Systems and
      Services and Chief Information in July 2005 and is responsible for upgrading
      the
      Company’s information management systems and technology, including active
      participation in the process of preparing the Company for compliance with the
      internal control systems and assessment requirements of Section 404
      of the
      Sarbanes-Oxley Act of 2002. As a result of the Company’s February 2005
      acquisition of Shank Services, Stephen M. Skidmore, Vice President,
      Marketing and Sales, of SMF Services, Inc. d/b/a Shank Services, was added
      to
      the SMF Group management team. In connection with the October 1, 2005 H & W
      Acquisition, the President of H & W, E. Wayne Wetzel, also became the
      Company’s Senior Vice President, Lubricants.




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The
      Company believes that, with these new executives, it has substantially improved
      its ability to manage and operate the Company. The Company believes that its
      expanded management team will help the Company to achieve its plan for future
      growth.




**EMPLOYEES**




At
      June
      30, 2005, SMF Group had 250 full-time employees.




**AVAILABLE
      INFORMATION**




SMF
      Group
      maintains a website at www.mobilefueling.com. Our annual report on Form 10-K,
      quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments
      to those reports filed with the Securities Exchange Commission pursuant to
      Section 13(a) of the Securities Exchange Act of 1934 are available on the
“Investor Relations” section of our website shortly after we electronically file
      the reports with the Commission. Also available on our website is our Code
      of
      Business Conduct. All of these documents are available in print without charge
      to our shareholders who request them. Information on our website is not
      incorporated into this report.




**EFFECT
      OF GOVERNMENTAL REGULATION**




SMF
      Group’s operations are affected by numerous federal, state and local laws,
      regulations and ordinances, including those relating to protection of the
      environment and worker safety. Various federal, state and local agencies have
      broad powers under these laws, regulations and ordinances. In particular, the
      operation of our commercial mobile fueling fleet and its transportation of
      diesel fuel and gasoline are subject to extensive regulation by the U.S.
      Department of Transportation (“DOT”) under the Federal Motor Carrier Safety Act
      (“FMCSA”) and the Hazardous Materials Transportation Act (“HMTA”). We are
      subject to regulatory and legislative changes that can affect the economics
      of
      the industry by requiring changes in operating practices or influencing the
      demand for, and the cost of providing, its services. In addition, we depend
      on
      the supply of diesel fuel and gasoline from the oil and gas industry and,
      therefore, we are affected by changing taxes, price controls and other laws
      and
      regulations generally relating to the oil and gas industry. We cannot determine
      the extent to which our future operations and earnings may be affected by new
      legislation, new regulations or changes in existing regulations.




The
      technical requirements of these laws and regulations are becoming increasingly
      expensive, complex and stringent. These laws may impose penalties or sanctions
      for damages to natural resources or threats to public health and safety. Such
      laws and regulations may also expose us to liability for the conduct of or
      conditions caused by others, or for acts of which we were in compliance with
      all
      applicable laws at the time such acts were performed. Sanctions for
      noncompliance may include revocation of permits, corrective action orders,
      administrative or civil penalties and criminal prosecution. Certain
      environmental laws provide for joint and several liability for remediation
      of
      spills and releases of hazardous substances. In addition, we may be subject
      to
      claims alleging personal injury or property damage as a result of alleged
      exposure to hazardous substances, as well as damage to natural
      resources.




Although
      we believe that we are in substantial compliance with existing laws and
      regulations, there can be no assurance that substantial costs for compliance
      will not be incurred in the future. There could be an adverse affect upon our
      operations if there were any substantial violations of these rules and
      regulations. Moreover, it is possible that other developments, such as stricter
      environmental laws, regulations and enforcement policies thereunder, could
      result in additional, presently unquantifiable, costs or liabilities to
      us.




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**CERTAIN
      FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS**




The
      following important factors have affected, and may in the future continue to
      affect, our business results of operations and financial condition, and could
      cause operating results to differ materially from those expressed in any
      forward-looking statements made by or on behalf of us elsewhere in this report.




***No
      Assurances of Future Profitability; Losses from Operations; Need for
      Capital.*** SMF
      Group incurred net losses for the fiscal years ended June 30, 2005, 2004 and
      2003. In order to earn profits in the future, we need to increase volumes at
      profitable margins, control costs and generate sufficient cash flow to support
      working capital and debt service requirements. There is no assurance that our
      management will be able to accomplish our business plan or continue to raise
      capital at terms which are acceptable to us in order to support working capital
      requirements or debt service shortfalls during any business downturns. At June
      30, 2005, our working capital was $5.9 million compared to $2.5 million on
      June
      30, 2004. The $3.4 million increase principally relates to an increase in net
      margin per gallon of 2.2 cents per gallon and the increase in gallons sold
      of
      11.8 million for the year ended June 30, 2005 compared to the year ended June
      30, 2004. There can be no assurance that this trend will continue in the future.
      In the event of adverse market conditions, negative customer reactions to new
      or
      existing marketing strategies, or depressed economic conditions generally,
      margins may not improve further or even diminish.




***Trading
      Market for SMF Group’s Common Stock.*** During
      the year ended June 30, 2005, our common stock frequently traded in large daily
      volumes and at wide price variances which could make it difficult for
      shareholders to sell shares at a predictable price or at specific times. In
      addition, there may be volatility in the market price of the common stock due
      to
      factors beyond our control. Quarterly operating results, changes in general
      conditions in the economy, the financial markets or other developments affecting
      us could cause the market price of our common stock to fluctuate.




***Growth
      Dependent Upon Future Expansion; Risks Associated With Expansion into New
      Markets.*** We
      intend
      to continue to expand through the acquisition of existing companies or their
      operations and customer bases. Our growth will also depend upon the ability
      to
      achieve greater penetration in existing markets and to successfully enter new
      markets in both additional major and secondary metropolitan areas. Expansion
      will largely be dependent on our ability to demonstrate the benefits of our
      services and products to potential new customers; successfully establish and
      operate new locations; hire, train and retain qualified management, operating,
      marketing and sales personnel; finance capital expenditures and working capital
      requirements; secure reliable sources of product supply on a timely basis and
      on
      commercially acceptable credit terms; and successfully manage growth by
      effectively supervising operations, controlling costs and maintaining
      appropriate quality controls. There can be no assurance that we will be able
      to
      successfully expand our operations into new markets.




***Acquisition
      Availability; Integrating Acquisitions.*** ** SMF
      Group’s future growth strategy involves the acquisition of wholesale fuel or
      petroleum lubricants marketers and distributors; wholesale fuel and other
      commercial mobile fueling companies; and transportation logistics services
      businesses in existing and new markets. There can be no assurance that we will
      be able to identify or make suitable acquisitions on acceptable terms or that
      any future acquisitions will be effectively and profitably integrated into
      our
      operations. Acquisitions involve risks that could adversely affect our operating
      results, including management commitment; integration of the operations and
      personnel of the acquired business; future write downs of acquired intangible
      assets; and the failure to retain key personnel of the acquired business.




In
      February 2005, SMF Group acquired substantially all of the assets and business
      operations of Shank Services, a Houston, Texas based provider of commercial
      fuel, petroleum lubricants distribution and sales, and heavy and ultra-heavy
      haul transportation services. On October 1, 2005, SMF Group acquired the stock
      of H & W, a Houston based distributor of lubricants, fuels, other petroleum
      products and chemicals. There can be no assurance that we will be able to fully
      integrate these operations with our pre-existing operations or that we will
      be
      in a position to make additional acquisitions or obtain acceptable financing
      for
      such acquisitions in the future.




***Dependence
      on Key Personnel*** *.* The
      future success of SMF Group will be largely dependent on the continued services
      and efforts of Richard E. Gathright, our President and Chief Executive Officer,
      and on other key executive personnel. The loss of the services of Mr. Gathright
      or other executive personnel could have a material adverse effect on our
      business and prospects. Our success and plans for future growth will also depend
      on our ability to attract and retain additional qualified management, operating,
      marketing, sales and financial personnel. There can be no assurance that we
      will
      be able to hire or retain such personnel on terms satisfactory to us. Mr.
      Gathright and the Company have recently extended his existing employment
      agreement so that it now expires February 28, 2006. We have also entered into
      written employment agreements with certain other key executive
      personnel.




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          of Contents




***Fuel
      Pricing and Supply Availability; Effect on
      Profitability*** *.* Diesel
      fuel and gasoline are commodities which are refined and distributed by numerous
      sources. SMF Group purchases the fuel delivered to our customers from multiple
      suppliers at daily market prices and in some cases qualifies for certain
      discounts. We monitor fuel prices and trends in each of our service markets
      on a
      daily basis and seek to purchase our supply at the lowest prices and under
      the
      most favorable terms. Commodity price risk is mitigated since we purchase and
      deliver our fuel supply daily and generally utilize cost-plus pricing when
      billing our customers. If we cannot continue to utilize cost-plus pricing when
      billing our customers, margins would likely decrease and a loss could be
      incurred. ** We have
      not engaged in derivatives or futures trading to hedge fuel price movements.
      In
      addition, diesel fuel and gasoline may be subject to supply interruption due
      to
      a number of factors, including natural disasters, refinery and/or pipeline
      outages and labor disruptions. The reduction of available supplies could impact
      our ability to provide commercial mobile and bulk fueling, and emergency
      response services and impact profitability.




***Risks
      Associated with Customer Concentration; Absence of Written Agreements.*** Although
      SMF Group provides services to a substantial number of customers, a significant
      portion of our revenues are generated from a few of our larger customers. While
      we have formal, length of service written contracts with some larger customers,
      these types of agreements are not customary and we do not have them with the
      majority of our customers. As a result, most of our customers can terminate
      our
      services at any time and for any reason, and we can similarly discontinue
      service to any customer. SMF Group may discontinue service to a customer if
      changes in the service conditions or other factors cause us not to meet our
      minimum level of margins and rates, and the pricing or delivery arrangements
      cannot be re-negotiated. As a result of this customer concentration and absence
      of written agreements, our business, results of operations and financial
      condition could be materially adversely affected if one or more of our large
      customers were lost or if we were to experience a high rate of service
      terminations.




***Management
      of Growth; Accounting and Information Technology Systems Implementation.*** SMF
      Group’s future growth strategy is dependent on effective operational, financial
      and other internal systems, and the ability to attract, train, motivate, manage
      and retain our employees. If we are unable to manage growth effectively, results
      of operations will be adversely affected. In particular, the results of
      operations will be influenced by the redesign and implementation of our
      accounting and information technology systems to reduce operating costs and
      improve our ability to effectively manage our business and integrate
      acquisitions. There can be no assurance that such redesign and implementation
      will be completed as planned, or that it will have the intended
      results.




***Competition.*** SMF
      Group competes with other service providers, including several large regional,
      and numerous small, local independent operators who provide services similar
      to
      those which we offer to our customers. We also compete with retail marketing
      where fleet operators have the option of fueling their own equipment at retail
      stations and other third-party service locations such as cardlock facilities.
      Our ability to compete is dependent on numerous factors, including price,
      complexity and technical nature of the services required, delivery
      dependability, credit terms, service locations, as well as the type of reporting
      and invoicing services provided. There can be no assurance that we will be
      able
      to continue to compete successfully as a result of these or other
      factors.




***Operating
      Risks May Not Be Covered by Insurance.*** SMF
      Group’s operations are subject to the operating hazards and risks normally
      incidental to handling, storing and transporting diesel fuel and gasoline,
      which
      are classified as hazardous materials. We maintain insurance policies in amounts
      and with coverages and deductibles we believe are reasonable and prudent.
      However, there can be no assurance that our insurance will be adequate to
      protect us from liabilities and expenses that may arise from claims for personal
      and property damage arising in the ordinary course of business, that we will
      be
      able to maintain acceptable levels of insurance or that insurance will be
      available at economical prices.




***Governmental
      Regulation.*** See
      the
      discussion of governmental regulations and their impact on the Company in the
      “Governmental Regulation” section above.




***Changes
      in Environmental Requirements*** *.* SMF
      Group expects to generate future business by converting certain fleet operators,
      currently utilizing underground fuel storage tanks for their fueling needs,
      to
      commercial mobile fueling. The owners of underground storage tanks have been
      required to remove or retrofit those tanks to comply with technical regulatory
      requirements pertaining to their construction and operation. If other more
      economical means of compliance are developed or adopted by owners of underground
      storage tanks, the opportunity to market our services to these owners may be
      adversely affected.







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**Item
              2.**
            **Description
                of Property**





The
      following table sets forth certain information concerning significant property
      and facilities we own or lease for use in our operations as of June 30,
      2005 **:**





**Description**
            
            **Location**
            
            **Lease
                Expiration**
              **With
                All Options**Truck
                yard and office
            
            
            Gardena,
                California
            
            
            7/15/07Corporate
                office
            
            
            Ft.
                Lauderdale, Florida
            
            
            2/28/06Corporate
                office
            
            
            Ft.
                Lauderdale, Florida
            
            
            5/31/11Truck
                yard and office
            
            
            Port
                Everglades, Florida
            
            
            2/28/06Truck
                yard and office
            
            
            Orlando,
                Florida
            
            
            11/30/09Truck
                yard and office
            
            
            Tampa,
                Florida
            
            
            OwnedTruck
                yard and office
            
            
            Doraville,
                Georgia
            
            
            1/1/08Truck
                yard and office
            
            
            Houston,
                Texas
            
            
            10/31/05Truck
                yard and office
            
            
            Ft.
                Worth, Texas
            
            
            12/31/05






**Item
              3.**
            **Legal
                Proceedings**




The
      National Relations Board previously filed an application with the United States
      Court of Appeals for enforcement of its October 31, 2003 order requiring
      the Company to bargain with the International Brotherhood of Teamsters, Local
      385, AFL-CIO as the exclusive bargaining representative of the 14 full-time
      and
      regular part-time truck drivers employed by the Company at its Orlando, Florida
      facility, and alleging unfair labor practices in connection with that refusal
      to
      bargain [NLRB v. Streicher Mobile Fueling, Inc., No. 03-16340-AA, U.S. Court
      of
      Appeals (11th Cir.)] On April 18, 2005, the Court of Appeals upheld the decision
      of the Board. Since that time, the Company had some preliminary discussions
      with
      representatives of the union but, to date, the union has not initiated
      negotiations for a labor agreement at the Orlando facility and may not do so
      in
      the foreseeable future.






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




No
      matters were submitted to a vote of the security holders, through the
      solicitation of proxies or otherwise, during the three months ended June 30,
      2005.






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**PART
      II**




**Item
              5.**
            **Market
                for Common Equity, Related Shareholder Matters and Issuer Purchases
                of
                Equity Securities**




Streicher
      Mobile Fueling, Inc. common stock, par value $.01 (“common stock”) and
      Redeemable Common Stock Purchase Warrants (“warrants”) have traded in the
      National Association of Securities Dealers Automated Quotation System (“NASDAQ”)
      Small-Cap Market under the symbols “FUEL” and “FUELW”, respectively, since
      December 11, 1996, the date of the Company’s initial public offering. The
      following table sets forth, for the periods indicated, the high and low bid
      prices for the common stock and warrants, as reported by NASDAQ.





**Common
                Stock**
            
            **Warrants****High**
            
            **Low**
            
            **High**
            
            **Low****Year
                Ended June 30, 2005**1st
                quarter
            
            $
            1.83
            
            $
            1.01
            
            $
            0.18
            
            $
            0.012nd
                quarter
            
            $
            2.86
            
            $
            1.08
            
            $
            0.25
            
            $
            0.013rd
                quarter
            
            $
            4.06
            
            $
            1.50
            
            $
            0.55
            
            $
            0.014th
                quarter
            
            $
            3.36
            
            $
            1.35
            
            $
            0.34
            
            $
            0.01**Year
                Ended June 30, 2004**1st
                quarter
            
            $
            1.36
            
            $
            0.80
            
            $
            0.19
            
            $
            0.082nd
                quarter
            
            $
            1.55
            
            $
            1.01
            
            $
            0.29
            
            $
            0.033rd
                quarter
            
            $
            3.30
            
            $
            1.03
            
            $
            0.35
            
            $
            0.154th
                quarter
            
            $
            2.40
            
            $
            1.20
            
            $
            0.26
            
            $
            0.01**Year
                Ended June 30, 2003**1st
                quarter
            
            $
            1.33
            
            $
            0.80
            
            $
            0.08
            
            $
            0.062nd
                quarter
            
            $
            1.40
            
            $
            0.72
            
            $
            0.13
            
            $
            0.013rd
                quarter
            
            $
            1.09
            
            $
            0.73
            
            $
            0.11
            
            $
            0.024th
                quarter
            
            $
            1.07
            
            $
            0.62
            
            $
            0.27
            
            $
            0.04





On
      June
      30, 2005, the closing bid price of the common stock was $2.17 per share and
      the
      closing bid price of the warrants was $0.25 per warrant. As of September 23,
      2005, there were approximately 63 holders of record of our common stock and
      over
      1,000 beneficial owners of our common stock.




We
      have
      never declared or paid any dividends on our common stock. The payment of
      dividends, if any, is within the discretion of the Board of Directors and will
      depend upon our earnings, our capital requirements and financial condition
      and
      other relevant factors. The Board of Directors does not intend to declare
      dividends in the foreseeable future and intends to retain any future earnings
      for use in our business operations.






**Item
              6.**
            **Selected
                Financial Data**




The
      following selected financial data of SMF Group and our consolidated subsidiaries
      are qualified in their entirety by, and should be read in conjunction with,
      the
      Consolidated Financial Statements and related notes and “Management’s Discussion
      and Analysis of Financial Condition and Results of Operations.” The selected
      financial table below is for each of the fiscal years ended June 30, 2005,
      2004,
      2003 and 2002, the transition period ended June 30, 2001, and the fiscal year
      ended January 31, 2001. Except for the unaudited financial and statistical
      information section, and the unaudited selected financial data for the fiscal
      year ended June 30, 2001 which is presented for 12-month comparison information
      only, the selected financial data is derived from our audited Consolidated
      Financial Statements for the fiscal years ended June 30, 2005, 2004, 2003 and
      2002, the transition period ended June 30, 2001, and the fiscal year ended
      January 31, 2001.





-13-
 Table
          of Contents





*(in
      thousands, except net margin per gallon and per share data)*


**Fiscal
                    Years Ended June 30,**
                
                **Five-monthTransitionPeriod**
                    **Ended**
                    **June
                      30,**
                
                **FiscalYear**
                  **Ended**
                  **January
                    31,****2005**
                
                **2004
                    (5)**
                
                **2003**
                
                **2002**
                
                **2001**
                
                **2001**
                
                **2001*****Selected
                    Income Statement Data:***
                
                
                
                
                
                
                
                
                
                **(unaudited****)**Total
                    revenue
                
                
                135,166
                
                
                89,997
                
                
                72,194
                
                
                60,849
                
                
                79,486
                
                
                29,510
                
                
                86,457Gross
                    profit
                
                
                6,588
                
                
                4,298
                
                
                4,023
                
                
                4,591
                
                
                2,520
                
                
                740
                
                
                3,093Operating income
                    (loss)
                
                
                443
                
                
                661
                
                
                (693
                )
                
                209
                
                
                (1,273
                )
                
                (1,386
                )
                
                241Beneficial
                    conversion of debt to equity interest expense
                
                
                –
                
                
                –
                
                
                –
                
                
                (241
                )
                
                –
                
                
                –
                
                
                –Net
                    loss
                
                
                (1,460
                )
                
                (698
                )
                
                (1,581
                )
                
                (1,162
                )
                
                (2,774
                )
                
                (1,951
                )
                
                (1,335
                )
 ***Share
                        Data:***Basic
                        net loss per share
                    
                    
                    (0.19
                    )
                    
                    (0.10
                    )
                    
                    (0.22
                    )
                    
                    (0.20
                    )
                    
                    (0.84
                    )
                    
                    (0.47
                    )
                    
                    (0.49
                    )Diluted
                        net loss per share
                    
                    
                    (0.19
                    )
                    
                    (0.10
                    )
                    
                    (0.22
                    )
                    
                    (0.20
                    )
                    
                    (0.84
                    )
                    
                    (0.47
                    )
                    
                    (0.49
                    )Basic
                        weighted average common shares outstanding (‘000)
                    
                    
                    7,857
                    
                    
                    7,261
                    
                    
                    7,221
                    
                    
                    5,698
                    
                    
                    3,315
                    
                    
                    4,194
                    
                    
                    2,717Diluted
                        weighted average common shares outstanding (‘000)
                    
                    
                    7,857
                    
                    
                    7,261
                    
                    
                    7,221
                    
                    
                    5,698
                    
                    
                    3,315
                    
                    
                    4,194
                    
                    
                    2,717
 ***Selected
                          Balance Sheet
                          Data:***Cash
                          and cash equivalents
                      
                      
                      4,108
                      
                      
                      2,708
                      
                      
                      211
                      
                      
                      815
                      
                      
                      6
                      
                      
                      6
                      
                      
                      447Accounts
                          receivable, net
                      
                      
                      14,129
                      
                      
                      8,280
                      
                      
                      6,113
                      
                      
                      6,382
                      
                      
                      8,669
                      
                      
                      8,669
                      
                      
                      9,638Bank
                          line of credit payable
                      
                      
                      4,801
                      
                      
                      4,919
                      
                      
                      4,410
                      
                      
                      4,680
                      
                      
                      6,905
                      
                      
                      6,905
                      
                      
                      7,286Long-term
                          debt (including current portion)
                      
                      
                      11,141
                      
                      
                      5,558
                      
                      
                      4,478
                      
                      
                      5,152
                      
                      
                      8,182
                      
                      
                      8,182
                      
                      
                      8,173Shareholders’
                          equity
                      
                      
                      6,838
                      
                      
                      5,348
                      
                      
                      4,111
                      
                      
                      5,676
                      
                      
                      3,332
                      
                      
                      3,332
                      
                      
                      5,218Total
                          Assets
                      
                      
                      30,125
                      
                      
                      20,018
                      
                      
                      16,011
                      
                      
                      18,560
                      
                      
                      22,194
                      
                      
                      22,194
                      
                      
                      24,645
 EBITDA
                          (1)
                      
                      
                      2,278
                      
                      
                      1,983
                      
                      
                      737
                      
                      
                      1,712
                      
                      
                      223
                      
                      
                      (748
                      )
                      
                      1,659Working
                          Capital (deficit) (4)
                      
                      
                      5,861
                      
                      
                      2,472
                      
                      
                      (2,430
                      )
                      
                      (1,576
                      )
                      
                      (3,093
                      )
                      
                      (3,093
                      )
                      
                      (1,891
                      )Net
                          Margin (2)
                      
                      
                      8,055
                      
                      
                      5,428
                      
                      
                      5,426
                      
                      
                      6,049
                      
                      
                      3,946
                      
                      
                      1,354
                      
                      
                      4,442Net
                          Margin per gallon (in dollars) (3)
                      
                      
                      0.121
                      
                      
                      0.099
                      
                      
                      0.115
                      
                      
                      0.122
                      
                      
                      0.073
                      
                      
                      0.062
                      
                      
                      0.077Total
                          Gallons (000’s)
                      
                      
                      66,427
                      
                      
                      54,594
                      
                      
                      47,294
                      
                      
                      49,500
                      
                      
                      54,102
                      
                      
                      21,800
                      
                      
                      57,600
 ***Non-GAAP
                      Measure Reconciliation EBITDA
                      Calculation:***Net
                      loss
                  
                  
                  (1,460
                  )
                  
                  (698
                  )
                  
                  (1,581
                  )
                  
                  (1,162
                  )
                  
                  (2,774
                  )
                  
                  (1,951
                  )
                  
                  (1,335
                  )Add
                      back:Interest
                      expense, net of interest income
                  
                  
                  1,903
                  
                  
                  1,361
                  
                  
                  915
                  
                  
                  1,175
                  
                  
                  1,571
                  
                  
                  590
                  
                  
                  1,645Beneficial
                      conversion of debt to equity interest expense
                  
                  
                  –
                  
                  
                  –
                  
                  
                  –
                  
                  
                  241
                  
                  
                  –
                  
                  
                  –
                  
                  
                  –Depreciation
                      and amortization expense
                  
                  
                  1,835
                  
                  
                  1,320
                  
                  
                  1,403
                  
                  
                  1,458
                  
                  
                  1,426
                  
                  
                  613
                  
                  
                  1,349EBITDA
                  
                  
                  2,278
                  
                  
                  1,983
                  
                  
                  737
                  
                  
                  1,712
                  
                  
                  223
                  
                  
                  (748
                  )
                  
                  1,659


(1)
              EBITDA
                  = Earnings before interest, taxes, depreciation and
                  amortization.


(2)
            Net
                Margin = Gross profit plus cost of sales
                depreciation


(3)
            Net
                margin per gallon = Net Margin / Total
                Gallons


(4)
            Working
                Capital (deficit)= current assets - current
                liabilities


(5)
            Operating
                income, net income and EBITDA for fiscal year ended June 30, 2004,
                includes a $757,000 gain on extinguishment of
                debt








-14-
 Table
          of Contents





**Unaudited
      Quarterly Selected Financial Data for Fiscal Year Ended June 30, 2005 and
      2004**





*(in
      thousands, except net margin per gallon and per share data)*


**June
                30, 2005**
            
            **June
                30, 2004*****Selected
                Income Statement Data:***
            
            **Q1**
            
            **Q2**
            
            **Q3**
            
            **Q4**
            
            **YTD**
              **2005**
            
            **Q1
                (5)**
            
            **Q2**
            
            **Q3**
            
            **Q4**
            
            **YTD**
              **2004**Total
                revenue
            
            
            28,909
            
            
            29,647
            
            
            33,083
            
            
            43,527
            
            
            135,166
            
            
            19,417
            
            
            21,136
            
            
            22,906
            
            
            26,539
            
            
            89,997Gross
                profit
            
            
            1,800
            
            
            1,444
            
            
            1,042
            
            
            2,302
            
            
            6,588
            
            
            822
            
            
            1,074
            
            
            976
            
            
            1,426
            
            
            4,298Operating income
                (loss)
            
            
            677
            
            
            212
            
            
            (830
            )
            
            384
            
            
            443
            
            
            487
            
            
            (20
            )
            
            (120
            )
            
            314
            
            
            661Net
                income (loss)
            
            
            295
            
            
            (181
            )
            
            (1,349
            )
            
            (225
            )
            
            (1,460
            )
            
            206
            
            
            (382
            )
            
            (465
            )
            
            (57
            )
            
            (698
            )***Per
                Share Data:***Basic
                net income (loss) per share
            
            
            0.04
            
            
            (0.02
            )
            
            (0.17
            )
            
            (0.03
            )
            
            (0.19
            )
            
            0.03
            
            
            (0.05
            )
            
            (0.06
            )
            
            (0.01
            )
            
            (0.10
            )Diluted
                net income (loss) per share
            
            
            0.04
            
            
            (0.02
            )
            
            (0.17
            )
            
            (0.03
            )
            
            (0.19
            )
            
            0.03
            
            
            (0.05
            )
            
            (0.06
            )
            
            (0.01
            )
            
            (0.10
            )Basic
                weighted average common shares outstanding (‘000)
            
            
            7,332
            
            
            7,436
            
            
            7,813
            
            
            8,859
            
            
            7,857
            
            
            7,248
            
            
            7,248
            
            
            7,248
            
            
            7,301
            
            
            7,261Diluted
                weighted average common shares outstanding (‘000)
            
            
            7,870
            
            
            7,436
            
            
            7,813
            
            
            8,859
            
            
            7,857
            
            
            7,505
            
            
            7,248
            
            
            7,248
            
            
            7,301
            
            
            7,261***Selected
                Balance Sheets Data:***Cash
                and cash equivalents
            
            
            3,213
            
            
            4,463
            
            
            3,759
            
            
            4,108
            
            
            4,108
            
            
            2,086
            
            
            2,037
            
            
            2,454
            
            
            2,708
            
            
            2,708Accounts
                receivable, net
            
            
            10,654
            
            
            8,290
            
            
            12,705
            
            
            14,129
            
            
            14,129
            
            
            6,119
            
            
            6,997
            
            
            7,657
            
            
            8,280
            
            
            8,280Bank
                line of credit payable
            
            
            6,278
            
            
            5,316
            
            
            3,707
            
            
            4,801
            
            
            4,801
            
            
            3,541
            
            
            4,412
            
            
            4,855
            
            
            4,919
            
            
            4,919Long-term
                debt (including current portion)
            
            
            5,639
            
            
            5,726
            
            
            11,057
            
            
            11,141
            
            
            11,141
            
            
            5,344
            
            
            5,424
            
            
            5,481
            
            
            5,558
            
            
            5,558Shareholders’
                equity
            
            
            5,738
            
            
            5,620
            
            
            6,887
            
            
            6,838
            
            
            6,838
            
            
            6,200
            
            
            5,815
            
            
            5,336
            
            
            5,348
            
            
            5,348Total
                Assets
            
            
            22,459
            
            
            21,537
            
            
            28,278
            
            
            30,125
            
            
            30,125
            
            
            17,932
            
            
            18,796
            
            
            19,725
            
            
            20,018
            
            
            20,018***Financial
                and Statistical Information:***EBITDA
                (1)
            
            
            992
            
            
            522
            
            
            (2
            )
            
            766
            
            
            2,278
            
            
            824
            
            
            313
            
            
            211
            
            
            635
            
            
            1,983Working
                Capital (Deficit) (4)
            
            
            2,563
            
            
            2,792
            
            
            5,830
            
            
            5,861
            
            
            5,861
            
            
            2,155
            
            
            2,157
            
            
            2,053
            
            
            2,472
            
            
            2,472Net
                Margin (2)
            
            
            2,071
            
            
            1,706
            
            
            1,653
            
            
            2,625
            
            
            8,055
            
            
            1,107
            
            
            1,359
            
            
            1,259
            
            
            1,703
            
            
            5,428Net
                Margin per gallon (in dollars) (3)
            
            
            0.137
            
            
            0.115
            
            
            0.101
            
            
            0.131
            
            
            0.121
            
            
            0.083
            
            
            0.099
            
            
            0.095
            
            
            0.119
            
            
            0.099Total
                Gallons (000’s)
            
            
            15,153
            
            
            14,795
            
            
            16,402
            
            
            20,077
            
            
            66,427
            
            
            13,273
            
            
            13,746
            
            
            13,314
            
            
            14,261
            
            
            54,594


***Non-GAAP
                Measure Reconciliation EBITDA
                Calculation:***Net
                income/(loss)
            
            
            295
            
            
            (181
            )
            
            (1,349
            )
            
            (225
            )
            
            (1,460
            )
            
            206
            
            
            (382
            )
            
            (465
            )
            
            (57
            )
            
            (698
            )Add
                back:Interest
                expense, net of interest income
            
            
            382
            
            
            393
            
            
            519
            
            
            609
            
            
            1,903
            
            
            284
            
            
            362
            
            
            345
            
            
            370
            
            
            1,361Depreciation
                and amortization:*Cost
                of sales*
            
            
            271
            
            
            262
            
            
            611
            
            
            323
            
            
            1,467
            
            
            285
            
            
            285
            
            
            283
            
            
            277
            
            
            1,130*Sales,
                general, and administrative*
            
            
            44
            
            
            48
            
            
            217
            
            
            59
            
            
            368
            
            
            49
            
            
            48
            
            
            48
            
            
            45
            
            
            190EBITDA
            
            
            992
            
            
            522
            
            
            (2
            )
            
            766
            
            
            2,278
            
            
            824
            
            
            313
            
            
            211
            
            
            635
            
            
            1,983


(1)
              EBITDA
                  = Earnings before interest, taxes, depreciation and
                  amortization.


(2)
            Net
                Margin = Gross profit plus cost of sales
                depreciation


(3)
            Net
                margin per gallon = Net Margin / Total
                Gallons


(4)
            Working
                Capital (deficit)= current assets - current
                liabilities


(5)
            June
                30, 2004, first quarter operating income, net income and EBITDA includes
                a
                $757,000 gain on extinguishment of
                debt







-15-
 Table
          of Contents





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




The
      following discussion should be read in conjunction with SMF Group’s audited
      consolidated financial statements and related notes included elsewhere in this
      Form 10-K.




**FORWARD
      LOOKING STATEMENTS**




This
      report on Form 10-K, including but not limited to this Item 7 and the
      footnotes to the financial statements found in Section F, contains “forward
      looking statements” within the meaning of Section 21E of the Securities Exchange
      Act of 1934, as amended (the “Exchange Act”). These statements concern
      expectations, beliefs, projections, future plans and strategies, anticipated
      events or trends and similar expressions concerning matters that are not
      historical facts. Statements preceded by, followed by, or that include the
      words
“believes,”“expects,”“anticipates,” or similar expressions are generally
      considered to be forward-looking statements.




The
      forward-looking statements include, but are not limited, to the
      following:




·
            Our
                beliefs regarding our position in the commercial mobile fueling;
                bulk
                fueling; lubricant packaging, distribution and sales; integrated
                out-sourced fuel management services; and transportation logistics
                markets




·
            Our
                strategies, plan, objectives and expectations concerning our future
                operations, cash flow, margins, revenue, profitability, liquidity
                and
                capital resources




·
            Our
                efforts to improve operational, financial and management controls
                and
                reporting systems and procedures




·
            Our
                plans to expand and diversify our business through acquisitions of
                existing companies or their operations and customer
                bases




The
      forward-looking statements reflect our current view about future events and
      are
      subject to risks, uncertainties and assumptions. We caution readers of this
      report that certain important factors may have affected, and could in the future
      affect, its actual results and could cause actual results to differ
      significantly from those expressed in any forward-looking statement. The
      following important factors, in addition to factors discussed elsewhere in
      this
      report and in Item 1 under the caption “Certain Risk Factors Affecting Future
      Operating Results,” could prevent us from achieving our goals, and cause the
      assumptions underlying the forward-looking statements and the actual results
      to
      differ materially from those expressed in or implied by those forward-looking
      statements:




·
            future
                net losses




·
            adverse
                consequences relating to our outstanding
                debt




·
            ability
                to pay interest and principal on our bank line of credit; the $6.925
                million of August 2003 Notes; the $6.1 million of January 2005 Notes;
                and
                the $3.0 million of September 2005 Notes and to pay our accounts
                payable
                and other liabilities when due




·
            ability
                to comply with financial covenants contained in our credit
                agreements




·
            ability
                to obtain, if necessary, waivers of covenant violations of our debt
                agreements




·
            significant
                provisions for bad debt reserves on our accounts
                receivable




·
            declines
                in demand for our services and the margins generated resulting from
                adverse market conditions; negative customer reactions to new or
                existing
                marketing strategies; or depressed economic conditions
                generally




·
            ability
                to acquire sufficient trade credit from fuel and lubricants suppliers
                and
                other vendors




-16-
 Table
          of Contents




**·**
            ability
                to maintain competitive pricing for our services at acceptable
                margins




**·**
            ability
                to integrate Shank Services’ and H & W’s operations into our existing
                operations and to enhance the profitability of the integrated businesses
                through joint operating efficiencies and improved
                management




**·**
            ability
                to execute our acquisition and diversification strategy and obtain
                sufficient capital to acquire additional businesses and support the
                infrastructure requirements of a larger combined
                company




**·**
            competition
                from other providers of similar
                services




**OVERVIEW**




Historically,
      SMF Group has generated substantially all of its revenues from commercial mobile
      and bulk fueling and integrated out-sourced fuel management services. As a
      result of the acquisitions of Shank Services and H & W, including
      the assets of Harkrider, we now generate revenues from the packaging,
      distribution and sales of lubricants, other petroleum products and chemicals
      and
      transportation logistic services in addition to a substantially greater volume
      of commercial mobile and bulk fueling and fuel management services. Revenues
      are
      comprised primarily of delivery service charges; the related sale of diesel
      fuel, gasoline and lubricants products; and charges for heavy haul and
      ultra-heavy haul transportation logistics services. Cost of sales is comprised
      primarily of the cost of fuel and lubricants and direct operating expenses.
      Included in both revenues and cost of sales are federal and state fuel taxes,
      which are collected by us from customers, when required, and then remitted
      to
      the appropriate taxing authorities.




We
      generally provide our commercial mobile fueling and other services at a
      competitive rate for those services plus the cost of products and procurement
      based on market prices of fuels and lubricants. As a result, revenue levels
      for
      much of the SMF Group are largely dependent on the upward or downward movement
      of petroleum product prices in each market and are not as significantly
      influenced by the revenues derived from the service component of our fuel and
      lubricant based business. Although dramatic fuel price volatility can affect
      customers’ demand for fuel and increase the fuel costs of operating our fleet of
      trucks and equipment, our gross profit on sales is generally not directly
      affected by fuel price fluctuations since we pass on fuel price changes to
      our
      customers and charge for our services on a per gallon basis based on a targeted
      rate per hour. While there may be a perceived correlation between customer
      resistance to payment of higher service charges, or margin, to us when fuel
      prices rise sharply, as they have recently, we believe that we are marketing
      labor savings, fuel theft reduction and other services which reduce or limit
      the
      overall cost of our customers’ fuel supply. We also believe that higher fuel
      prices should not have a long-term effect on our margins. During the fiscal
      year
      ended June 30, 2005, market prices for fuel were significantly higher than
      the
      two prior fiscal years. Delivered volumes in the current twelve-month period
      increased primarily due to the addition of new accounts, market expansion and
      the acquisition of Shank Services. The increase in revenues, while significantly
      greater, is not as meaningful as the increase in volume because we pass through
      price increases to our customers.




We
      believe that significant opportunities exist to expand our services business,
      including: commercial mobile and bulk fueling; integrated out-sourced fuel management; the packaging,
      distribution and sale of lubricants; emergency response services; and
      transportation logistics. The growth of our petroleum related services would
      result in increased volumes
      of fuel and lubricants sold and delivered. Our marketing and sales function
      is
      responsible for growing our business. This growth is dependent upon a number
      of
      business and economic factors, including the success of our sales and marketing
      and other business strategies; availability of sufficient acceptable margin
      business in new and existing markets; retention of qualified personnel to
      provide the level of service required by customers; generation of acceptable
      cash flow from operating activities; sufficiency of debt or equity capital
      to
      meet our financing requirements; and changes in market conditions in the related
      transportation or petroleum industries, some of which factors are beyond our
      control.




-17-
 Table
          of Contents




**(All
                amounts in thousands of dollars, except share and volume
                data)****3
                Months Ended (Unaudited)**
            
            **12
                Months Ended****Increase**
            
            **Increase**
            
            
            
            
            
            **Increase**
            
            **Increase****6/30/2005**
            
            **6/30/2004**
            
            **(Decrease)**
            
            **(Decrease)**
            
            **6/30/2005**
            
            **6/30/2004**
            
            **(Decrease)**
            
            **(Decrease)**Total
                revenues
            
            
            43,527
            
            
            26,539
            
            
            16,988
            
            
            64
            %
            
            135,166
            
            
            89,997
            
            
            45,169
            
            
            50
            %Gross
                profit
            
            
            2,302
            
            
            1,426
            
            
            876
            
            
            61
            %
            
            6,588
            
            
            4,298
            
            
            2,290
            
            
            53
            %Operating
                income1
            
            
            384
            
            
            314
            
            
            70
            
            
            22
            %
            
            443
            
            
            661
            
            
            (218
            )
            
            (33)
            %Net
                loss1
            
            
            (225
            )
            
            (57
            )
            
            (168
            )
            
            (295)
            %
            
            (1,460
            )
            
            (698
            )
            
            (762
            )
            
            (109)
            %EBITDA1,2
            
            
            766
            
            
            635
            
            
            131
            
            
            21
            %
            
            2,278
            
            
            1,983
            
            
            295
            
            
            15
            %Basic
                and diluted net loss per share
            
            
            (0.03
            )
            
            (0.01
            )
            
            (0.02
            )
            
            (200)
            %
            
            (0.19
            )
            
            (0.10
            )
            
            (0.09
            )
            
            (90)
            %Weighted
                avg shares outstanding
            
            
            8,859,375
            
            
            7,300,548
            
            
            1,558,827
            
            
            21
            %
            
            7,857,434
            
            
            7,261,372
            
            
            596,062
            
            
            8
            %Depreciation
                and amortization3
            
            
            382
            
            
            322
            
            
            60
            
            
            19
            %
            
            1,835
            
            
            1,320
            
            
            515
            
            
            39
            %Total
                assets
            
            
            30,125
            
            
            20,018
            
            
            10,107
            
            
            50
            %
            
            30,125
            
            
            20,018
            
            
            10,107
            
            
            50
            %Shareholders’
                equity
            
            
            6,838
            
            
            5,348
            
            
            1,490
            
            
            28
            %
            
            6,838
            
            
            5,348
            
            
            1,490
            
            
            28
            %Volume
                (gallons in thousands)
            
            
            20,077
            
            
            14,261
            
            
            5,816
            
            
            41
            %
            
            66,427
            
            
            54,594
            
            
            11,833
            
            
            22
            %Avg
                net margin per gallon (in cents)4
            
            
            13.1
            
            
            11.9
            
            
            1.2
            
            
            10
            %
            
            12.1
            
            
            9.9
            
            
            2.2
            
            
            22
            %





1 Includes
      $757,000 gain on extinguishment of debt during the first quarter ended September
      30, 2003


2 EBITDA
      is
      defined as earnings before interest, taxes, depreciation and amortization and
      is
      a non-GAAP measure


3 Depreciation and amortization included in cost of sales was $323,000, $277,000,
      $1,467,000 and $1,130,000 for the respective periods noted


4 Net
      margin per gallon equals Gross profit plus cost of sales depreciation and
      amortization divided by number of gallons





Non-GAAP
      Measure Reconciliation - EBITDA Reconciliation Table:





**3
                Months Ended**
            
            **12
                Months Ended****6/30/2005**
            
            **6/30/2004**
            
            **Increase**
              **(Decrease)**
            
            **Increase**
              **(Decrease)**
            
            **6/30/2005**
            
            **6/30/2004**
            
            **Increase**
              **(Decrease)**
            
            **Increase**
              **(Decrease)**Net
                loss
            
            
            (225
            )
            
            (57
            )
            
            (168
            )
            
            (295
            )%
            
            (1,460
            )
            
            (698
            )
            
            (762
            )
            
            (109
            )%Add
                back:Interest,
                net
            
            
            609
            
            
            370
            
            
            239
            
            
            65
            %
            
            1,903
            
            
            1,361
            
            
            542
            
            
            40
            %Depreciation
                and amortization:*Cost
                of sales*
            
            
            323
            
            
            277
            
            
            46
            
            
            17
            %
            
            1,467
            
            
            1,130
            
            
            337
            
            
            30
            %*Sales,
                general, and*
              *administrative*
            
            
            59
            
            
            45
            
            
            14
            
            
            31
            %
            
            368
            
            
            190
            
            
            178
            
            
            94
            %EBITDA
            
            
            766
            
            
            635
            
            
            131
            
            
            21
            %
            
            2,278
            
            
            1,983
            
            
            295
            
            
            15
            %





The
      $45.2
      million, or 50.2%, increase in revenues in the year ended June 30, 2005 compared
      to the year ended June 30, 2004 was primarily due to higher fuel prices per
      gallon and higher volume of gallons delivered as well as to our acquisition
      of
      Shank Services in February 2005 which contributed to $20.6 million of the
      increase. The increase in gross profit of $2.3 million, or 53.3%, was primarily
      due to higher margins generated from services provided and an increase in
      gallons sold as well as the acquisition of Shank Services, which accounted
      for
      $0.8 million of the increase. These increases were slightly offset by an
      acceleration of depreciation of $0.3 million due to the write-down of 12 units
      of excess equipment abandoned after the reevaluation of the fleet routing
      schedules following the Shank Services acquisition. The $1.460 million net
      loss
      for the year ended June 30, 2005 was $0.76 million higher than the $0.7 million
      net loss for the year ended June 30, 2004. Included in the prior year net loss
      was a gain of $0.757 million on the extinguishment of equipment debt in
      connection with our August 2003 financing.




During
      the fiscal year ending June 30, 2005, we added approximately 11.8 million
      gallons of net new commercial mobile and bulk fueling business, representing
      an
      increase of 21.7% over the fiscal year ending June 30, 2004, of which Shank
      Services contributed 9.0 million gallons, or 16.5%. Our net margin per gallon
      increased by 2.2 cents, from 9.9 cents in fiscal year 2004 to 12.1 cents in
      fiscal year 2005. This higher annual net margin per gallon primarily resulted
      from 2.8 million incremental gallons delivered, excluding the additional Shank
      Services gallons.




-18-
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          of Contents




In
      the
      fourth quarter ending June 30, 2005, net margin per gallon of services and
      products sold improved to 13.1 cents per gallon, representing an 8.3% increase
      over the fiscal year ending 2005 annual average net margin per gallon of 12.1
      cents. This fourth quarter increase was due primarily to the effect on the
      annual average net margin of the third quarter write-down amounting to
      approximately $0.3 million or 1.8 cents per gallon for equipment abandoned
      after
      the reevaluation of fleet routing schedules following the Shank Services
      acquisition in February 2005. Although this recent trend in net margin per
      gallon increase is positive, there is no assurance that net margin improvement
      will continue in the future and margins may even decrease.




Earnings
      before interest, taxes, depreciation and amortization, “EBITDA”, a non-GAAP
      measure, improved $0.3 million and $0.1 million respectively, in both the
      comparable fiscal years and fourth quarters ending June 30, 2005 and 2004.
      The
      current fiscal year increase related primarily to the higher net margin per
      gallon of 2.2 cents as well as depreciation and interest expense comprising
      a
      larger proportion of the net loss. In addition, fiscal year 2004 EBITDA included
      the $0.757 million gain on extinguishment of equipment debt. The current fourth
      quarter increase was attributable to a higher net margin per gallon of 1.2
      cents.




EBITDA
      is
      determined before providing for debt service payments and capital expenditures.
      EBITDA, while a non-GAAP measure, is a key indicator used by management and
      the
      financial community to gauge financial performance of the actual operations
      of a
      business without considering the impact of non-cash charges for equipment aging,
      debt financing expenses and income taxes. EBITDA isolates actual financial
      performance of operations independent of the utilization of capital resources,
      level of debt financing and the tax position of the business owning those
      operations.




We
      believe that pricing for commercial mobile fueling and fuel management services
      will continue to increase as below cost pricing by competitors for these
      services declines and existing and new customers recognize that the services
      represent a net cost savings when compared to other refueling
      alternatives.




**CAPITAL
      RESOURCES AND LIQUIDITY**




***General***




At
      June
      30, 2005 and 2004, SMF Group had total cash and cash availability on its bank
      line of credit of $9.3 million and $3.8 million, respectively. The $5.5 million
      increase in our cash and cash availability was due to an increase in net cash
      and cash equivalents of $1.4 million and a $4.1 million increase in the bank
      line of credit availability.




In
      January 2005, SMF Group raised $6.1 million from the issuance of five-year
      10%
      promissory notes (the “January 2005 Notes”) and 1,006,500 four-year warrants to
      purchase our common stock at $1.60 per share (the “January 2005 Warrants”). The
      funding provided by the January 2005 Notes was used for the Shank Services
      acquisition and for other general corporate purposes. The January 2005 Notes
      are
      secured by a first priority security interest in the Shank Services assets.




In
      August
      2003, SMF Group raised $6.925 million from the issuance of five-year 10%
      promissory notes (the “August 2003 Notes”) and 2,008,250 five-year warrants to
      purchase our common stock at $1.00 per share (the “August 2003 Warrants”). The
      August 2003 Notes are collateralized by a first priority security interest
      in
      our specialized fueling truck fleet and related equipment and by the patents
      on
      our proprietary fuel management system. The liquidity impact of this financing
      transaction was the repayment of all outstanding equipment and subordinated
      debt; the generation of $2.8 million of additional working capital for business
      expansion; and a $2.8 million improvement in cash flow resulting from a
      moratorium of principal payments during the first two years of the five-year
      term of the August 2003 Notes.




The
      August 2003 and January 2005 financings significantly strengthened our financial
      position, enabling us to achieve a stronger balance sheet as well as to improve
      cash flow as a result of the two-year moratorium on principal payments under
      both the August 2003 Notes and January 2005 Notes. We believe that this has
      enhanced our business credibility with present and prospective customers, fuel
      suppliers, trade creditors, other lenders and the investment community, and
      our
      ability to compete more effectively.




-19-
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          of Contents




During
      the year ended June 30, 2004, SMF Group recorded a pre-tax gain of $0.757
      million from the prepayment of the outstanding balance owed to our former
      principal equipment lender. In addition, we recorded an increase in
      shareholders’ equity of $1.87 million for the value of the 2,008,250 warrants
      issued in connection with our August 2003 financing. Also, during the year
      ended
      June 30, 2004, 112,500 of these warrants were exercised resulting in $0.1
      million increase in both cash and stockholders’ equity. During the year ended
      June 30, 2005, 1,565,684 of the detachable common stock warrants issued in
      connection with the August 2003 Notes and other previously issued and repaid
      notes were exercised at prices ranging from $0.86 to $1.00 for approximately
      $1.6 million in cash proceeds. Further, during the year ended June 30, 2005,
      69,800 employee stock options were exercised, resulting in approximately $0.1
      million in both cash proceeds and additional stockholders’ equity. Also, during
      the year ended June 30, 2005, SMF Group issued 1,006,500 four-year warrants
      to
      purchase shares of common stock at $1.60 per share to the purchasers of the
      January 2005 Notes, recording an increase to stockholders’ equity of
      approximately $1.3 million.




Our
      debt
      agreements have covenants establishing certain financial requirements and
      operating restrictions. Failure to comply with any covenant or material
      obligation contained in these debt agreements, absent a waiver or forbearance
      from the lenders, would result in an event of default which could accelerate
      debt repayment terms under the debt agreements. Due to cross-default provisions
      contained in the debt agreements, an event of default under one agreement could
      accelerate repayment terms under the other agreements, which would have a
      material adverse effect on our liquidity and capital resources.




Our
      business requires us to use substantial working capital for fuel, labor and
      equipment costs prior to receiving payments from customers. The fuel we purchase
      for resale to customers generally must be paid for within 10 to 15 days of
      purchase, with labor costs and taxes paid bi-weekly and equipment related costs
      generally paid within 30 days. We invoice customers both daily and weekly and
      generally collect on our accounts within 30 to 45 days. Days of sales
      outstanding at June 30, 2005 and 2004 were 30 days and 28 days,
      respectively.




Net
      cash
      provided by operating activities was $1.3 million for fiscal year ending June
      30, 2005, an increase of $2.0 million over the prior year. Net cash used in
      operating activities was $0.7 million for fiscal year end June 30, 2004 and
      net
      cash provided by operating activities was $0.4 million for fiscal year ending
      June 30, 2003. The increase in cash provided by operations in the current fiscal
      year resulted primarily from the net effect of an increase in accounts payable,
      accrued liabilities and inventory and the non-cash expense components of
      depreciation and amortization representing a larger component of net loss,
      offset by the gain on extinguishment of debt recorded in the prior year.
      Depreciation of fixed assets and amortization of debt related costs and
      discounts totaled $2.5 million and $1.8 million for the fiscal year ended June
      30, 2005 and 2004, respectively. EBITDA (a non-GAAP measure) was $2.3 million
      and $2.0 million for the fiscal year ended June 30, 2005 and 2004,
      respectively.




During
      the fiscal year ended June 30, 2005, SMF Group’s material financial commitments,
      other than fuel purchases, payroll and general expenses, primarily related
      to
      maintaining its bank line of credit and servicing the August 2003 and January
      2005 Notes. We are required to make semi-annual interest payments at a rate
      of
      10% per annum on our August 2003 Notes which began December 31, 2003 and
      beginning August 28, 2005, we are required to make six $692,500 semi-annual
      principal payments, with a balloon payment of $2,770,000 due August 28, 2008.
      On
      August 28, 2005, we made our first principal payment of $692,500. We
      are
      required to make semi-annual interest payments at a rate of 10% per annum on
      the
      January 2005 Notes beginning July 24, 2005; and beginning January 24, 2007;
      we
      will be required to make six $610,000 semi-annual principal payments, with
      a
      balloon payment of $2,440,000 due January 24, 2010.




In
      September 2005, we closed a $3.0 million private debt placement with
      institutional and other accredited investors to fund the H & W Acquisition,
      develop our operations, including the integration of the lubricants distribution
      operations of Shank Services and H & W, and for other general working
      capital purposes. We issued $3.0 million in 10% five-year Senior Secured Notes
      (the “September 2005 Notes”) that require six semi-annual payments commencing on
      August 31, 2007 and a 40% balloon payment on August 31, 2010. In connection
      with
      the September 2005 Notes, we issued 360,000 four year warrants to purchase
      shares of common stock at $2.28 per share to the purchasers of Notes and to
      the
      Company’s placement agent.




Our
      liquidity and ability to meet our financial obligations is dependent on, among
      other things, the generation of cash flow from operating activities; obtaining
      or maintaining sufficient trade credit from vendors; complying with debt
      covenants; and/or raising any required additional capital through the issuance
      of debt or equity securities or additional borrowings.




-20-
 Table
          of Contents




We
      believe the additional liquidity derived from the January 2005 Notes and the
      August 2003 Notes and the two-year principal payment moratorium on the January
      2005 Notes and September 2005 Notes will satisfy our anticipated liquidity
      requirements for the foreseeable future, although we may seek additional sources
      of financing if a cash flow deficiency were to arise in the future. There is
      no
      assurance that additional financing would be available to us on acceptable
      terms, or at all. If we do not comply with the covenants in our debt agreements,
      or if adequate funds are not available to finance operations or to pay debt
      service obligations as they become due, we may be required to significantly
      alter our operations *.*




At
      June
      30, 2005, we had cash and cash equivalents of $4.1 million as compared to $2.7
      million at June 30, 2004. We also had $5.2 million available on our bank line
      of
      credit as of June 30, 2005.




***Contractual
      Obligations and Commitments***




The
      following table summarizes our contractual obligations and commitments as of
      June 30, 2005.




**PAYMENTS
                DUE BY PERIOD (in 000’s)****Contractual
                Obligations**
            
            **Total**
            
            **Less
                than**
              **1
                Year**
            
            **2-3
                Years**
            
            **4-5
                Years**
            
            **More
                than 5 Years**Long-term
                debt
            
            $
            13,025
            
            $
            1,385
            
            $
            4,600
            
            $
            7,040
            
            $
            --Operating
                leases for realestate
                and equipment
            
            
            2,435
            
            
            728
            
            
            992
            
            
            639
            
            
            76Employment
                Agreement
            
            
            337
            
            
            226
            
            
            111
            
            
            --
            
            
            --Bank
                line of credit
            
            
            4,801
            
            
            4,801
            
            
            --
            
            
            --
            
            
            --**Total**
            
            $
            20,598
            
            $
            7,140
            
            $
            5,703
            
            $
            7,679
            
            $
            76





The
      contractual obligations and commitments should be read in conjunction with
      the
      notes to our consolidated financial statements. To highlight the table
      above:


·
              Long-term
                  debt principal payments are described above. Anticipated interest
                  payments
                  associated with long-term debt obligations are not included in
                  the table
                  above.




·
            The
                payment obligations shown in the table for real estate and equipment
                operating leases are lower in future years due to the short-term
                nature of
                the current contracted operating leases. The largest operating lease
                payment is for the new corporate office located in Fort Lauderdale,
                Florida, which has a lease term of 42 months and begins in November
                2005.




·**
            We
                have a $10,000,000 bank line of credit security agreement until September
                25, 2006 with a financial institution that is collateralized by accounts
                receivable. The line of credit balance fluctuates daily and can differ
                significantly from the June 30, 2005 balance shown above. The line
                of
                credit bears interest at variable interest rates although the table
                above
                does not reflect any anticipated future payments of interest. We
                anticipate renewing the bank line of credit with the same or an
                alternative financial institution under similar terms and conditions.
                While there can be no assurance that we will be able to renew this
                bank
                line of credit or that any renewal will be on terms acceptable to
                us, any
                new bank line of credit will likely extend past the present termination
                date when it is renewed. Although the line of credit expires on September
                25, 2006, the amount outstanding as of June 30, 2005 is shown as
                due in
                less than one year due to certain provisions within the agreement
                related
                to subjective acceleration clauses and due to the agreement requiring
                the
                Company to maintain a lockbox arrangement whereby cash deposits are
                automatically utilized to reduce amounts outstanding under the line
                of
                credit.




· **
            The
                employment agreement anticipates the compensation payable to our
                Chief
                Executive Officer, including $14,000 of payroll taxes and health
                insurance
                costs.




-21-
 Table
          of Contents




With
      the
      acquisition of H & W, the Company has incurred additional contractual
      obligations and commitments, including operating leases for real estate and
      equipment and other customary liabilities.




***$10
      Million Credit Facility***




As
      of
      June 30, 2005, we had a three-year $10 million credit facility with a national
      financial institution, which permitted us to borrow up to 85% of the total
      amount of eligible accounts receivable. Interest is payable monthly (at an
      annual rate of 8.0 % at June 30, 2005) and outstanding borrowings under the
      line
      of credit are secured by substantially all of our assets other than its truck
      fleet and related equipment. As of June 30, 2005, the maturity date of the
      line
      of credit was September 25, 2006.




In
      August
      2003, the loan and security agreement for the credit facility was amended in
      connection with the August 2003 financing which (1) released the lender’s lien
      on patents, patent rights and patent applications; (2) increased the unused
      line
      of credit fee by .50%; (3) revised the effective book net worth covenant to
      include the August 2003 promissory notes in its calculation; (4) established
      a
      covenant to maintain a minimum cumulative quarterly fixed charge coverage ratio
      as defined in the amended loan agreement; (5) established a covenant for us
      to
      maintain a minimum excess availability of $500,000; and (6) eliminated the
      loan
      prepayment fee. We utilized a portion of the proceeds of the August 2003
      financing to pay down the line of credit. The proceeds that were used to pay
      down the outstanding line of credit balance are available to us for future
      working capital purposes.




On
      February 18, 2005, the credit facility was again amended in connection with
      the
      issuance of the January 2005 Notes and the Shank Services acquisition. This
      amendment (1) lowered the requirements on the fixed charge covering ratio;
      (2)
      eliminated the effective net worth requirement except when availability is
      below
      $1.0 million;( 3) extended the term to September 25, 2006; (4) after September
      25, 2005, reduces the unused line fee from .75% to .25%; and (5) if we terminate
      the line of credit after September 26, 2005, but prior to September 26, 2006,
      imposes a .50% fee.




As
      of
      June 30, 2005 and 2004, we had outstanding borrowings of $4.8 and $4.9 million,
      respectively, under our $10 million bank line of credit. Based on eligible
      receivables outstanding at June 30, 2005, we had $5.2 million of cash
      availability on the line of credit, and we were in compliance with all financial
      covenants required by the loan and security agreement.




Concurrently
      with the October 1, 2005 H & W Acquisition, in order to finance the acquired
      accounts receivable and inventory, the Company and its primary lender amended
      the credit facility. Among other changes, the amendment (1) added H & W as a
      borrower; (2) increased the facility to $20 million; (3) provided financing
      for
      the newly acquired and ongoing accounts receivable and inventory resulting
      from
      the H & W Acquisition; (4) extended the term of the original loan and
      security agreement to September 26, 2007; (5) reduced the interest rate to
      prime
      plus 0.75% per annum; (6) replaced the effective net worth covenant with a
      maximum capital expenditures covenant; and (7) lowered the fixed charge coverage
      ratio covenant to 1.0 to 1.0 and made such covenant effective only when there
      is
      less than $3 million available on the facility.




Management
      believes, although there can be no assurance, that our line of credit and cash
      on hand should provide the working capital needed to maintain and grow our
      business and to accomplish our business plan. If additional financing is
      required, there can be no assurance that we will be able to obtain such
      financing from our present line of credit or another lender at acceptable terms,
      or at all. Since borrowings under the line of credit bear interest at variable
      interest rates and represent a large portion of outstanding debt, our financial
      results could be materially affected by significant increases or decreases
      in
      interest rates.




**DEBT
      SECURITIES**




***January
      2005 Notes***




On
      January 25, 2005, we closed an offering of $6.1 million five year 10% promissory
      notes (the “January 2005 Notes”) and four-year warrants to purchase 1,006,500
      shares our common stock at $1.60 to a limited group of institutions and other
      accredited investors in connection with the acquisition of the assets and
      business of Shank Services. The January 2005 Notes provide for (1) no principal
      payments until January 24, 2007; (2) six $610,000 semi-annual principal payments
      commencing on January 24, 2007 through July 24, 2009; (3) a balloon payment
      of
      $2,440,000 at maturity on January 24, 2010; and (4) semi-annual interest
      payments on June 30, and December 31, commencing on June 30, 2005. The funding
      provided by the January 2005 Notes was used for the Shank Services acquisition
      and for other general corporate purposes. The net cash proceeds from the
      financing were $5.8 million, after payment of related fees and expenses,
      professional fees and other costs totaling $282,000. The total transaction
      costs
      were $471,000, inclusive of the $291,000 cash costs and non-cash broker
      commission warrants valued at $180,000, which are being amortized over the
      five-year term of the notes. The January 2005 Notes are secured by a first
      priority security interest in the Shank Services assets.




-22-
 Table
          of Contents




The
      issuance of the approximately one million warrants in connection with the
      January 2005 notes resulted in our recording an increase to shareholders’ equity
      of $1.3 million; a $1.1 million debt discount; and an increase to deferred
      debt
      costs of $0.2 million for the warrants related to the broker commissions. The
      debt discount and the deferred debt costs are being amortized as interest
      expense over the five-year term of the notes.




The
      $1.1
      million debt discount is a non-cash discount related to the issuance of the
      warrants and does not reduce the amount of cash payments we are required to
      make
      on the outstanding balance of $6.1 million owed at June 30, 2005.




***August
      2003 Promissory Notes***




On
      August
      29, 2003, we closed a $6.925 million offering to institutions and other
      accredited lenders consisting of five-year 10% promissory notes ( the “August
      2003 Notes”) and five-year warrants to purchase a total of 2,008,250 shares of
      our common stock at $1.00 per share. The August 2003 Notes are collateralized
      by
      a first priority security interest in our specialized fueling truck fleet and
      related equipment and by patents on our proprietary fuel management system.
      The
      August 2003 Notes provide for (1) no principal payments until August 28, 2005;
      (2) six $692,500 semi-annual principal payments commencing on August 28, 2005
      through February 28, 2008; (3) a balloon payment of $2,770,000 at maturity
      on
      August 28, 2008; (4) semi-annual interest payments on June 30 and December
      31,  which
      payments commenced on December 31, 2003; and (5) a right to call after August
      1,
      2005 at 105% of par plus accrued but unpaid interest. The net cash proceeds
      from
      the financing was $2.8 million, after payment of related fees and expenses
      and
      repayment of all outstanding equipment and subordinated debt. In connection
      with
      the issuance of the August 2003 Notes, we negotiated a settlement with our
      former primary equipment lender and received a $757,000 cash discount by
      prepaying the $2,204,800 outstanding balance on August 29, 2003. The transaction
      costs, including commissions, professional fees and other costs, totaled
      $824,000 and are being amortized over the five-year term of the notes. The
      $757,000 cash discount was accounted for as a gain on extinguishment of debt
      in
      the first quarter of the fiscal year ended June 30, 2004.




The
      issuance of the approximately two million warrants from the August 2003
      financing resulted in our recording an increase to shareholders’ equity of $1.87
      million; a $1.61 million debt discount; and an increase in deferred debt costs
      of $0.3 million for the warrants related to the broker commissions. The debt
      discount and deferred debt costs are being amortized as interest expense over
      the five-year term of the notes.




The
      $1.61
      million debt discount is a non-cash discount related to the issuance of the
      warrants and does not reduce the amount of cash payments we are required to
      make
      for the outstanding balance of $6.925 million owed at June 30,
      2005.




***Repayment
      of Debt Securities***




We
      also
      used a portion of the proceeds of the August 2003 financing to repay outstanding
      subordinated convertible and non-convertible promissory notes totaling
      $1,033,600 as indicated below:




**January
      2002 Conversion of Subordinated Debt -** total
      outstanding and repaid $283,600




·
            In
                January 2002, certain holders of the convertible subordinated promissory
                notes converted an aggregate of $2.617 million to unregistered shares
                of
                our common stock at a conversion price of $1.24 per share, for a
                total of
                2,110,322 shares of common stock. The notes converted contained conversion
                rates ranging from $1.35 to $1.50 per share. The holders of the remaining
                $283,600 of convertible subordinated promissory notes we issued and
                who
                did not convert their notes in January 2002 waived any conversion
                price
                adjustment.With
                the consent of the holder, interest on two of these notes could be
                paid in
                our common stock, with the stock value based on the average closing
                price
                of the stock during the most recent quarter.In
                September 2002, the maturity dates of these non-converted notes were
                extended to August 31, 2004.




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**Subordinated
      Promissory Notes -** total
      outstanding and repaid $750,000




·
            On
                December 23, 2002, we issued a $150,000 short-term promissory note
                to a
                shareholder. The note was due on January 31, 2003, with interest
                at 5%
                over the prime interest rate. On January 21, 2003 we and the holder
                of the
                note substituted the note for a $150,000 subordinated promissory
                note due
                on January 31, 2005, with an annual interest rate of 9%. With the
                consent
                of the holder, interest on the note could be paid in unregistered
                shares
                of our common stock, with the stock value based on theclosing
                bid price of the stock for the five trading days before the last
                day of
                the quarter in which the interest was due but in no event less than
                the
                closing bid price at the time of issuance or the average of the closing
                bid prices for the five trading days prior to such time, whichever
                was
                lower.




·
            On
                January 21, 2003, we issued $300,000 of subordinated promissory notes
                to
                two shareholders. The notes were due on January 31, 2005, with an
                annual
                interest rate of 9%. With the consent of the holders, interest on
                the
                notes could be paid in our common stock, with the stock value based
                on the
                closing bid price of the stock for the five trading days before the
                last
                day of the quarter in which the interest was due but in no event
                less than
                the closing bid price at the time of issuance or the average of the
                closing bid prices for the five trading days prior to such time,
                whichever
                was lower.




·
            On
                May 12, 2003, we issued $300,000 of subordinated promissory notes
                to
                certain shareholders. The notes had an annual interest rate of 14%
                and
                were payable on demand. We repaid $235,500 of these notes with the
                proceeds of the May 20, 2003 private placement issuance of subordinated
                promissory notes and common stock purchase warrants. The exercise
                price of
                the warrants was $0.86 per share.




·
            On
                May 20, 2003, we issued $235,500 of subordinated promissory notes
                to
                officers, directors and certain shareholders. The notes were due
                on
                November 19, 2003, with an annual interest rate of 14%. With the
                consent
                of the holders, we could elect to pay interest on the notes in shares
                of
                our common stock, with the stock value based on the most recent closing
                bid price of the stock at the time the notes were executed or for
                the five
                trading days before such date, whichever was lower. We also issued
                warrants to purchase 82,425 shares of common stock exercisable at
                $0.86
                per share in connection with the notes. The warrants issued are
                exercisable for a period of three (3) years from and after the date
                on
                which the notes are repaid or otherwise surrendered to us, but in
                no event
                later than November 19, 2006.




***Warrants
      Exercised***




During
      the fiscal year ended June 30, 2005, 1,565,684 of the detachable common stock
      warrants issued in connection with the August 2003 Notes and other previously
      issued and repaid notes were exercised at prices ranging from $0.86 to $1.00
      for
      approximately $1,560,000 in gross cash proceeds. Between July 1, 2005 and
      October 1, 2005 approximately 243,000 warrants issued in connection
      with
      the August 2003 promissory notes were exercised at an exercise price of $1.00
      per share, resulting in cash proceeds of approximately $243,000. Additionally,
      between July 1, 2005 and October 1, 2005, approximately 569,000 warrants issued
      in connection with the January 2005 notes were exercised at a price of $1.60
      per
      share, resulting in cash proceeds of approximately $911,000.




During
      the fiscal year ended June 30, 2004, certain note holders of the May 20, 2003
      and August 2003 debt issuances exercised 69,500 warrants for $68,520, of which
      62,500 warrants were related to the $1.00 warrants issued in conjunction with
      the August 2003 refinancing and 7,000 warrants related to the $0.86 warrants
      issued in the May 20, 2003 debt issuance.




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***Recent
      Developments -- September 2005 H & W Financing***




On
      October 1, 2005, the Company acquired all of the outstanding shares of H & W
      Petroleum Company, Inc., a Texas corporation (“H & W”). H & W, based in
      Houston, is engaged in the marketing and distribution of lubricants, fuels
      and
      other petroleum products in Texas. Immediately prior to the acquisition by
      the
      Company, H & W purchased the operating assets and limited inventory of Harkrider
      Distributing Company, Incorporated (“Harkrider”) ,
      also a
      Houston-based company and related to H & W through some common shareholder
      ownership, that is engaged in the marketing and distribution of dry cleaning
      solvents, chemicals and petroleum products (together with the acquisition of
      the
      shares of H & W, the “H & W Acquisition”).




The
      purchase price of approximately $6.3 million, which was based on a multiple
      of
      4.5 times a projected annualized EBITDA *(earnings
      before interest, taxes, depreciation and amortization - a non-GAAP financial
      measure)* of
      approximately $1.4 million, was adjusted to $5.964 million at closing by working
      capital and other closing adjustments. The purchase price was paid with a
      combination of cash, the assumption of specified liabilities and the issuance
      of
      two year 10% promissory notes totaling $2.463 million, which are subject to
      an
      earn out provision based on the performance of the H & W and Harkrider
      operations after the acquisition.




On
      September 1, 2005, in contemplation of the then pending H & W Acquisition,
      the Company issued $3.0 million in five-year 10% redeemable promissory notes
      (the “September 2005 Notes”) to a small group of institutions and other
      accredited lenders. Installment payments of six (6) equal semi-annual principal
      payments of ten percent (10%) of the principal amount of the September 2005
      Notes will commence on August 31, 2007 and continue on February 28 and August
      31
      of each year thereafter, with the remaining balance of forty percent (40%),
      a
      $1.2 million balloon payment, due at maturity on August 31, 2010. The
      amounts due under the September 2005 Notes will become due and payable
      immediately upon the occurrence of customary events of default. The September
      2005 Notes are redeemable by the Company, in whole or in part, by payment of
      a
      percentage of the principal amount of the note, together with accrued but unpaid
      interest, if any, as follows: September 1, 2005 - August 31, 2006, 102%;
      September 1, 2006 - August 31, 2007, 101%; and September 1, 2007 - August 31,
      2010, 100%.




A
      portion
      of the proceeds of the September 2005 Notes were used by the Company to fund
      the
      approximately $1.5 million of the H & W Acquisition purchase price that was
      paid in cash at closing. The balance of the proceeds will be used to develop
      the
      combined operations of H & W and Harkrider, including the integration of the
      lubricant distribution operations of Shank Services and H & W, and for other
      general working capital purposes. In connection with the issuance of the
      September 2005 Notes and related security agreement, the Company entered into
      an
      indenture with a third party trustee for the payment of the September 2005
      Notes.




The
      September 2005 Notes are secured by a first priority security interest in the
      vehicles, equipment and other physical assets, except for inventory, of H &
      W. The H & W inventory is subject to the first priority security interest on
      the Company’s assets held by its primary lender.




In
      connection with the September 2005 Notes, the Company also issued 360,000
      four-year warrants to purchase shares of common stock at $2.28 per share to
      the
      purchasers of the Notes and to the Company’s placement agent for the financing
      transaction.




**NEW
      ACCOUNTING STANDARDS AND CRITICAL ACCOUNTING POLICIES AND
      ESTIMATES**




***Recent
      Accounting Pronouncements***




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      SFAS 123R, “Share-Based Payment,” a revision of SFAS 123. In March 2005,
      the SEC issued Staff Bulletin No. 107 (SAB 107) regarding its
      interpretation of SFAS 123R. The standard requires companies to expense the
      grant-date fair value of stock options and other equity-based compensation
      issued to employees. In accordance with the revised statement, we will be
      required to recognize the expense attributable to stock options granted or
      vested subsequent to June 30, 2005. We adopted SFAS 123R on July 1, 2005 using
      the modified prospective method in which compensation cost is recognized
      beginning with the effective date (a) based on the requirements of SFAS 123R
      for
      all share-based payments granted after July 1, 2005 and (b) based on the
      requirements of SFAS 123R for all awards granted to employees prior to July
      1,
      2005 that remain unvested on July 1, 2005. For the year ended June 30, 2006,
      we
      are estimating that the cost relating to this pronouncement will be
      approximately $275,000 or $0.03 per basic share; however, due to the uncertainty
      of the level of share-based payments to be granted in the future, these amounts
      are estimates and may be subject to change.




-25-
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***Critical
      Accounting Policies and Estimates***




We
      have
      identified the policies outlined below as critical to our business operations
      and an understanding of the results of operations. The listing is not intended
      to be a comprehensive list of all accounting policies. In many cases, the
      accounting treatment of a particular transaction is specifically dictated by
      accounting principles generally accepted in the United States, with no need
      for
      management's judgment in their application. The impact and any associated risks
      related to these policies on business operations are discussed throughout
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations where such policies affect reported and expected financial results.
      For a detailed discussion on the application of these and other accounting
      policies, see Note 2 in the Notes to the Consolidated Financial Statements
      in
      Item 8 on Form 10-K. Note that the preparation of this Form 10-K requires
      management to make estimates and assumptions that affect the reported amount
      of
      assets and liabilities, disclosure of contingent assets and liabilities at
      the
      date of the financial statements, and the reported amounts of revenue and
      expenses during the reporting period. There can be no assurance that actual
      results will not differ from those estimates.




Revenue
      Recognition





We
      recognize revenue when fuel and other products are delivered and the customer
      takes ownership and assumes risk of loss or when services are performed.
      Collections are reasonably assured at the time of delivery.





Accounts
      Receivable and Allowance for Doubtful Accounts





We
      perform ongoing credit evaluations of our customers and adjust credit limits
      based upon payment history and the customers' current credit worthiness, as
      determined by a review of their current credit information. Management
      continuously monitors collections and payments from customers and maintains
      a
      provision for estimated credit losses based upon historical experience and
      any
      specific customer collection issues that are identified. While such credit
      losses have historically been within expectations and the provisions
      established, we cannot assure that we will continue to experience the same
      credit loss rates that have occurred in the past. Our accounts receivable as
      of
      June 30, 2005 and 2004 were $14.1 and $8.3 million, respectively, net of an
      allowance for doubtful accounts of $1.8 million and $0.4 million. The increase
      in accounts receivable relates to higher prices and more volume being
      delivered.





Property
      and Equipment




We
      record
      property and equipment at cost and depreciate that cost over the estimated
      useful life of the asset on a straight-line basis. Ordinary maintenance and
      repairs are expensed as incurred and improvements that significantly increase
      the useful life of property and equipment are capitalized.




Impairment
      of Long-lived Assets




We
      test
      property and equipment for impairment whenever events or changes in
      circumstances indicate that the carrying value of an asset may not be
      recoverable. The conditions that would trigger an impairment assessment of
      property, plant and equipment would include, but not be limited to, a
      significant, sustained negative trend in operating results or cash flows; a
      decrease in demand for our services; a change in the competitive environment;
      and other industry and economic factors. Recoverability of assets to be held
      and
      used is measured by a comparison of the carrying amount of the asset to future
      net cash flows expected to be generated by the asset. If such assets are deemed
      to be impaired, the impairment to be recognized is measured by the amount by
      which the carrying amount of the assets exceeds the fair value of the assets
      based on the projected net cash flows discounted at a rate commensurate with
      the
      risk of the assets.




-26-
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Income
      Taxes




In
      connection with the preparation of our financial statements, income taxes are
      required to be estimated. This process involves estimating actual current tax
      exposure together with assessing temporary differences resulting from differing
      treatment of items for tax and accounting purposes. These differences result
      in
      deferred tax assets and liabilities, which are included on the balance sheet.
      The likelihood that deferred tax assets will be recovered from future taxable
      income is assessed and to the extent that recovery is not likely, a valuation
      allowance is established. To the extent a valuation allowance is established
      or
      an increase in the allowance is recorded in a period, a tax is provided in
      the
      statement of operations. Management judgment is required in determining the
      provision for income taxes, the deferred tax assets and liabilities and any
      valuation allowance recorded against net deferred tax assets. A valuation
      allowance of approximately $4.0 million was recorded as of June 30, 2005, due
      to
      uncertainties related to utilizing some of the deferred tax assets, primarily
      consisting of certain net operating losses carried forward, before they expire.
      The valuation allowance is based on estimates of taxable income and the period
      over which deferred tax assets will be recoverable. In the event that actual
      results differ from these estimates, or these estimates are adjusted in future
      periods, it may be necessary to establish an additional valuation allowance
      which could materially impact the Company’s financial position and results of
      operations. The net deferred tax asset as of June 30, 2005 was zero, net of
      the
      valuation allowance.





**RESULTS
      OF OPERATIONS:**





**Comparison
      of Year Ended June 30, 2005 to Year Ended June 30, 2004**




***Revenues***





Revenues
      increased $45.2 million, or 50.2%, in the year ended June 30, 2005 compared
      to
      the year ended June 30, 2004. This increase was primarily due to: (1) the
      acquisition of Shank Services in February 2005; (2) higher average fuel price
      per gallon; and (3) greater number of gallons of fuel sold. Revenues were $135.2
      million and $90.0 million for the year ended June 30, 2005 and 2004,
      respectively. The acquisition of Shank Services in February 2005 contributed
      $20.6 million of the increase in revenues, as well as an additional 9.0 million
      gallons of fuel sold. Not including the effect of the Shank Services
      acquisition, we sold fuel at a 35 cent per gallon higher average price which
      resulted in an approximately $18.8 million increase in revenues. The increase
      in
      fuel prices was directly attributable to the volatility of the world fuel market
      and economic conditions, including higher crude oil prices, greater global
      fuel
      demand and refiner fuel supply limitations. Not including the gallons from
      the
      Shank Services acquisition, we sold 2.8 million more gallons of fuel in the
      current year representing a 5.2% increase in net new business. Not including
      the
      gallons from the Shank Services acquisition, we sold 57.4 million gallons of
      fuel in the current year compared to 54.6 million gallons sold in the prior
      year
      accounting for approximately $5.7 million additional revenues.




***Gross
      Profit***





Gross
      profit was $6.6 million for the year ended June 30, 2005 compared to $4.3
      million for the year ended June 30, 2004, an increase of $2.3 million or 53.4%.
      The acquisition of Shank Services in February 2005 contributed approximately
      $0.8 million of the increase. Gross profit increased $1.8 million due to higher
      margins generated from services provided including emergency response services
      related to the four hurricanes impacting parts of Florida and the
      southeastern United States during August and September 2004. The increase in
      gross profit was reduced by increased depreciation expense of $0.3 million
      due
      to the write-down of excess equipment abandoned after reevaluating fleet
      utilization requirements following the Shank Services acquisition. Net margin
      per gallon during the current year was 12.1 cents per gallon compared to 9.9
      cents per gallon for the prior year, an increase of 2.2 cents or 22.2%.





***Selling,
      General and Administrative Expense***




Selling,
      general and administrative expenses were $6.1 million for the year ended June
      30, 2005 compared to $4.4 million for the year ended June 30, 2004, an increase
      of $1.7 million or 38.6%. The acquisition of Shank Services in February 2005
      caused approximately $0.7 million of the increase. In addition, credit card
      fees
      increased approximately $0.4 million due to a major customer’s switch to a
      credit card method of payment. We also incurred higher accounting and legal
      fees
      of approximately $0.2 million due to increased costs related to public company
      reporting requirements. Further, $0.2 million of the increase was due to the
      write-down and acceleration of depreciation for the shortened useful lives
      of
      computer software.




-27-
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          of Contents




***Interest
      Expense***




As
      a
      result of the issuance of the January 2005 Notes, interest expense increased
      by
      approximately $0.550 million for the year ended June 30, 2005 compared to the
      year ended June 30, 2004. The components of interest expense are as follows
      (in
      thousands):





**Year
                Ended**
              **June
                30,****2005**
            
            **2004****Stated
                Rate Interest Expense**:Bank
                line of credit
            
            $
            239
            
            $
            246Long
                term debt
            
            
            959
            
            
            623Subordinated
                debt
            
            
            --
            
            
            20Other
            
            
            18
            
            
            44**Total
                stated rate interest expense**
            
            
            **1,216**
            
            
            **933****Non-Cash
                Interest Amortization:**Amortization
                of deferred debt costs
            
            
            270
            
            
            187Amortization
                of debt discount
            
            
            425
            
            
            241**Total
                amortization of interest expense**
            
            
            **695**
            
            
            **428****Total
                interest expense**
            
            $
            1,911
            
            $
            1,361


***Income
      Taxes***




No
      income
      tax expense was recorded for the year ended June 30, 2005 or for the year ended
      June 30, 2004. The net operating loss carryforward at June 30, 2005 was $15.1
      million.




***Net
      Loss***




The
      $1.460 million net loss for the year ended June 30, 2005 was $0.762 higher
      than
      the $0.698 million net loss for the year ended June 30, 2004. During the year
      ended June 30, 2004 we recorded a gain of $0.757 million for the extinguishment
      of debt in connection with our August 2003 financing; the absence of that gain
      in the year ended June 30, 2005 was a primary reason for the increase in the
      net
      loss. While we also experienced increases in selling, general and administrative
      expense, as well as interest expense, in the current year, these increases
      were
      offset by the increase in our gross profit.




***EBITDA
      - Non-GAAP Measure***




Earnings
      before interest, taxes, depreciation, and amortization (“EBITDA”) was $2.278
      million for the year ended June 30, 2005 compared to $1.983 million the year
      ended June 30, 2004, an increase of $0.295 million or 14.9%. Although the
      current year net loss increased by $0.762 million, a larger component of the
      net
      loss was interest expense and depreciation and amortization expense, which
      increased by $0.550 million and $0.515 million, respectively. These expenses
      are
      add backs to the net loss in determining EBITDA. The components of EBITDA are
      as
      follows (in thousands):




**Year
                  ended**
                **June
                  30,****2005**
              
              **2004**Net
                  loss
              
              $
              (1,460
              )
              $
              (698
              )Add
                  back:
                Interest
                  expense, net of interest income
              
              
              1,208
              
              
              933Non-cash
                  interest expense
              
              
              695
              
              
              428Depreciation
                  and amortization expense (*):Cost
                  of sales
              
              
              1,467
              
              
              1,130Selling,
                  general and administrative expenses
              
              
              368
              
              
              190EBITDA
              
              $
              2,278
              
              $
              1,983
 
 (*)
                  For the year ended June 30, 2005, includes $461 of depreciation
                  expense of
                  excess equipment abandoned after fleet rerouting following the
                  Shank
                  Services acquisition and accelerated depreciation expense of computer
                  software for changes in infrastructure
                  technology.





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          of Contents




**Comparison
      of Year Ended June 30, 2004 to Year Ended June 30, 2003**





***Revenues***





Revenues
      increased $17.8 million, or 24.7%, in the year ended June 30, 2004 compared
      to
      the year ended June 30, 2003. This increase was principally due to a 15.4 %
      increase in net new business and a 12-cent per gallon higher average product
      fuel price. We sold 54.6 million gallons of fuel in the year ended June 30,
      2004, compared to the 47.3 million gallons in the year ended June 30, 2003,
      a
      7.3 million gallon increase of net new business. The increase in fuel product
      prices was directly attributable to the volatility of world fuel market and
      economic conditions, including higher crude oil prices and greater global fuel
      demand.




***Gross
      Profit***





The
      increase in gross profit was principally due to the $173,000 net impact of
      the
      15% increase in net new business offset by a lower net margin per gallon of
      1.6
      cents per gallon. The remaining increase related to an $102,000 reduction in
      depreciation included in cost of sales attributable to our specialized equipment
      fleet. Net margin per gallon was 9.9 cents for the year ended June 30, 2004
      compared to 11.5 cents for the prior year. The decrease in net margin per gallon
      related to the residual effect of the aggressive price-cutting of our former
      competitor which has ceased operations.





***Selling,
      General and Administrative Expenses***




Selling,
      general and administrative expenses decreased approximately $321,000, or 6.8%,
      in the year ended June 30, 2004 compared to the year ended June 30, 2003. This
      decrease primarily resulted from a reduction in the provision for bad debt
      expense of $317,000; lower insurance expense of $68,000; and a decrease in
      sales
      and marketing payroll costs of $40,000; which were offset by increases in
      financial consulting, audit and tax preparation fees of $91,000.







-29-
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          of Contents





***Interest
      Expense***




As
      a
      result of the August 2003 financing, the components of interest expense changed.
      The table below shows the interest expense (in thousands) recorded for the
      twelve months ending June 30, 2004 and 2003:




**Year
                Ended June 30,****2004**
            
            **2003****Stated
                Rate Interest Expense**:Bank
                line of credit
            
            $
            246
            
            $
            389Long
                term debt
            
            
            623
            
            
            428Subordinated
                debt
            
            
            20
            
            
            47Other
            
            
            44
            
            
            —**Total
                stated rate interest expense**
            
            
            **933**
            
            
            **864****Non-Cash
                Interest Amortization:**Amortization
                of deferred debt costs
            
            
            187
            
            
            51Amortization
                of debt discount
            
            
            241
            
            
            —**Total
                amortization of interest expense**
            
            
            **428**
            
            
            **51****Total
                interest expense**
            
            $
            1,361
            
            $
            915





The
      interest expense increase of $446,000 for the year ended June 30, 2004 was
      primarily due to the non-cash interest amortization related to the August 2003
      financing as well as the increase in long term debt outstanding offset by the
      lower average balance on our bank line of credit during the year.





***Income
      Taxes***




No
      income
      tax expense was recorded for the years ended June 30, 2004. The net operating
      loss carryforward at June 30, 2004 was $14.3 million.




***Net
      Loss***




The
      $698,000 net loss for the year ended June 30, 2004 was $883,000 lower than
      the
      $1,581,000 net loss for the year ended June 30, 2003, primarily as a result
      of
      the gain of $757,000 for extinguishment of debt in connection with the August
      2003 financing as well as a $173,000 improvement in gross profit and a $321,000
      reduction in sales, general and administrative expense, offset by an increase
      of
      $446,000 in additional interest expense.




***EBITDA
      - Non-GAAP Measure***




Earnings
      before interest, taxes, depreciation, and amortization (“EBITDA”) was $1,983,000
      for the year ended June 30, 2004 compared to $737,000 for the year ended June
      30, 2003, an increase of $1,246,000. The increase was primarily due to the
      $757,000 gain on extinguishment of debt included in the current year’s net loss
      and the $377,000 increase in non-cash interest expense related to the
      amortization of debt discount and deferred debt costs associated with the August
      2003 financing. The components of EBITDA for the years ended June 30, 2004
      and
      2003 are as follows (in thousands):




**2004**
            
            **2003**Net
                loss
            
            $
            (698
            )
            $
            (1,581
            )Add
                back:
              Interest
                expense
            
            
            1,361
            
            
            915Depreciation
                and amortization expense
            
            
            1,320
            
            
            1,403EBITDA
            
            $
            1,983
            
            $
            737


**Item
              7A.**
            **Quantitative
                and Qualitative Disclosures About Market
                Risk**





Our
      exposure to market risk is limited primarily to the fluctuating interest rates
      associated with variable rate debt outstanding to finance working requirements.
      This debt bears interest at the United States prime interest rate plus a fixed
      markup and is subject to change based upon interest rate changes in the United
      States. We do not currently use, and have not historically used, derivative
      instruments to hedge against such market interest rate risk. Increases or
      decreases in market interest rates could have a material impact on our financial
      condition, results of operations and cash flows. The interest on both our $6.1
      million January 2005 promissory notes and our August 2003 $6.925 subordinated
      convertible promissory notes are fixed for the life of the notes at 10% per
      annum. The interest on our bank line of credit of up to $10,000,000 is variable
      and may increase or decrease with future changes in interest rates but interest
      rates are not the only factor which could affect interest expense on the bank
      line of credit. For example, interest expense on the bank line of credit for
      fiscal 2005 was $236,000, $10,000 lower than the $246,000 in fiscal 2004, due
      to
      the pay down of the line with the proceeds of the August 2003 financing and
      improved collections offset by an increase in the average fuel prices and
      gallons sold. If our bank line of credit average outstanding balance were $2.5
      million, an increase of 1% in the variable interest rate would result in
      additional interest expense of $25,000 per annum.




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**Item
              8.**
            **Financial
                Statements and Supplementary
                Data**





Our
      financial statements required by Form 10-K are attached following Part III
      of
      this report, commencing on page F-1.





**Item
              9.**
            **Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure**





On
      June
      16, 2005, the Audit Committee of our Board of Directors approved the termination
      of KPMG LLP (“KPMG”) as our principal independent registered public accounting
      firm and the appointment of Grant Thornton LLP (“Grant Thornton”) to serve as
      the Company’s principal independent registered public accounting firm for the
      year ending June 30, 2005. We filed a current report on Form 8-K with the SEC
      on
      June 22, 2005 to report the change.




During
      our two most recent fiscal years ended June 30, 2004 and the subsequent interim
      periods through June 16, 2005, there were no disagreements between the Company
      and KPMG on any matter of accounting principles or practices, financial
      statement disclosure, or auditing scope or procedures, which disagreements,
      if
      not resolved to KPMG’s satisfaction, would have caused KPMG to make reference to
      the subject matter of the disagreement in connection with its reports; and
      there
      were no reportable events described under Item 304(a)(1)(v) of Regulation
      S-K.




The
      audit
      reports of KPMG on the consolidated financial statements of the Company as
      of
      June 30, 2004, and for the fiscal years ended June 30, 2004 and 2003, as
      included elsewhere herein, did not contain any adverse opinion or disclaimer
      of
      opinion, nor were they qualified or modified as to uncertainty, audit scope
      or
      accounting principles.




**Item
      9A. Controls and Procedures**





As
      of the
      end of the period reported on in this report, we have undertaken an evaluation
      under the supervision and with the participation of our management, including
      the Chief Executive Office and Chief Financial Officer, of the effectiveness
      of
      the design and operation of disclosure controls and procedures pursuant to
      Rule
      13a-15 of the Securities Exchange Act of 1934. Based upon that evaluation,
      the
      Chief Executive Officer and Chief Financial Officer concluded that our
      disclosure controls and procedures were effective, in all material respects,
      with respect to the recording, processing, summarizing and reporting, within
      the
      time periods specified in the SEC’s rules and forms, of information required to
      be disclosed in the reports that are filed or submitted under the Exchange
      Act.





There
      have been no significant changes in our internal controls during the quarter
      ended June 30, 2005, or in other factors that could significantly affect
      internal controls subsequent to the date of the evaluation described
      above.





**Item
      9B. Other Information**





None








-31-
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**PART
      III**




**Item
              10.**
            **Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act**





The
      information required by this item is incorporated by reference from our
      Definitive Proxy Statement in connection with its 2005 Annual Meeting of
      Shareholders to be filed with the Commission pursuant to Regulation 14A not
      later than 120 days after the end of the fiscal year covered by this
      report.





**Item
              11.**
            **Executive
                Compensation**





The
      information required by this item is incorporated by reference from our
      Definitive Proxy Statement in connection with its 2005 Annual Meeting of
      Shareholders to be filed with the Commission pursuant to Regulation 14A not
      later than 120 days after the end of the fiscal year covered by this
      report.





**Item
              12.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters**





The
      information required by this item is incorporated by reference from our
      Definitive Proxy Statement in connection with its 2005 Annual Meeting of
      Shareholders to be filed with the Commission pursuant to Regulation 14A not
      later than 120 days after the end of the fiscal year covered by this
      report.





**Item
              13.**
            **Certain
                Relationships and Related
                Transactions**





The
      information required by this item is incorporated by reference from our
      Definitive Proxy Statement in connection with its 2005 Annual Meeting of
      Shareholders to be filed with the Commission pursuant to Regulation 14A not
      later than 120 days after the end of the fiscal year covered by this
      report.





**Item
              14.**
            **Principal
                Accounting Fees and
                Services**





The
      information required by this item is incorporated by reference from our
      Definitive Proxy Statement in connection with its 2005 Annual Meeting of
      Shareholders to be filed with the Commission pursuant to Regulation 14A not
      later than 120 days after the end of the fiscal year covered by this
      report.








-32-
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          of Contents





**Item
              15.**
            **Exhibits
                and Financial Statement
                Schedules.**




**(a)**
            **Exhibits**




**Exhibits**
              
              **Description**2.1
              
              Asset
                  Purchase Agreement by and among Streicher Mobile Fueling, Inc.,
                  SMF
                  Services, Inc., Shank C&E Investments, L.L.C., Jerry C. Shanklin and
                  Claudette Shanklin dated January 25, 2005 filed as Exhibit 2.1
                  to the
                  Company’s Form 8-K dated January 25, 2005 and incorporated by reference
                  herein.2.2
              
              Supplemental
                  Agreement dated February 18, 2005 to the Asset Purchase Agreement
                  by and
                  among Streicher Mobile Fueling, Inc., SMF Services, Inc., Shank
                  C&E
                  Investments, L.L.C., Jerry C. Shanklin and Claudette Shanklin dated
                  January 25, 2005 filed as Exhibit 2.1 to the Company’s Form 8-K dated
                  February 18, 2005 and incorporated by reference herein.2.3
              
              Stock
                  Purchase Agreement by and among Streicher Mobile Fueling, Inc.,
                  H & W
                  Petroleum Co., Inc., Eugene Wayne Wetzel, Mary Kay Wetzel, Sharon
                  Harkrider, William M. Harkrider II, W. M. Harkrider Testamentary
                  Trust,
                  Harkrider Distributing Company, Inc. and W & H Interests dated
                  September 7, 2005 filed as Exhibit 2.1 to the Company’s Form 8-K dated
                  September 1, 2005 and incorporated by reference herein.3.1
              
              Restated
                  Articles of Incorporation filed as Exhibit 3.1 to the Company’s Form 10-K
                  for the fiscal year ended June 30, 2003 and incorporated by reference
                  herein.3.2
              
              Amended
                  and Restated Bylaws filed as Exhibit 3.2 to the Company’s Form 10-Q for
                  the quarter ended December 31, 2003 and incorporated by reference
                  herein.4.1
              
              Form
                  of Common Stock Certificate filed as Exhibit 4.1 to the Company’s
                  Registration Statement on Form SB-2 (No. 333-11541) and incorporated
                  by
                  reference herein.4.2
              
              Form
                  of Redeemable Common Stock Purchase Warrant filed as Exhibit 4.2
                  to the
                  Company’s Registration Statement on Form SB-2 (No. 333-11541) and
                  incorporated by reference herein.4.3
              
              Underwriters’
                  Purchase Option Agreement between the Company and Argent Securities,
                  Inc.
                  filed as Exhibit 4.3 to the Company’s Registration Statement on Form SB-2
                  (No. 333-11541) and incorporated by reference herein.4.4
              
              Warrant
                  Agreement between the Company and American Stock Transfer & Trust
                  Company filed as Exhibit 4.4 to the Company’s Registration Statement on
                  Form SB-2 (No. 333-11541) and incorporated by reference herein.
  -33-
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            of Contents
  10.1
                
                Registrant’s
                    1996 Stock Option Plan filed as Exhibit 10.2 to the Company’s Registration
                    Statement on Form SB-2 (No. 333-1154) and incorporated by reference
                    herein.10.2
                
                2000
                    Stock Option Plan filed as Exhibit 10.6 to the Company’s Form 10-K for the
                    fiscal year ended January 31, 2001 and incorporated by reference
                    herein.10.3
                
                Promissory
                    Note, dated July 7, 2000, between the Registrant and C. Rodney
                    O’Connor
                    filed as Exhibit 10.8 to the Company’s Form 10-K for the fiscal year ended
                    January 31, 2001 and incorporated by reference herein.10.4
                
                Form
                    of Convertible Subordinated Promissory Note filed as Exhibit
                    10.9 to the
                    Company’s Form 10-K for the fiscal year ended January 31, 2001 and
                    incorporated by reference herein.10.5
                
                2001
                    Directors Stock Option Plan filed as Exhibit A of the Company’s Proxy
                    Statement for the Annual Meeting of Shareholders on July 19,
                    2001 and
                    incorporated by reference herein.10.6
                
                Loan
                    and Security Agreement with Congress Financial Corporation dated
                    September
                    26, 2002 filed as Exhibit 99.1 to the Company’s Form 8-K dated September
                    30, 2002 and incorporated by reference herein.10.7
                
                First
                    Amendment to Loan and Security Agreement with Congress Financial
                    Corporation dated March 31, 2003 filed as Exhibit 10.13 to the
                    Company’s
                    Form 10-K for the fiscal year ended June 30, 2003 and incorporated
                    by
                    reference herein.10.8
                
                Indenture
                    with The Bank of Cherry Creek dated August 29, 2003 filed as
                    Exhibit 10.14
                    to the Company’s Form 10-K for the fiscal year ended June 30, 2003 and
                    incorporated by reference herein.10.9
                
                Security
                    Agreement with The Bank of Cherry Creek dated August 29, 2003
                    filed as
                    Exhibit 10.14 to the Company’s Form 10-K for the fiscal year ended June
                    30, 2003 and incorporated by reference herein.10.10
                
                Second
                    Amendment to Loan and Security Agreement with Congress Financial
                    Corporation dated August 29, 2003 filed as Exhibit 10.1 to the
                    Company’s
                    Form 10-Q for the quarter ended September 30, 2003 and incorporated
                    by
                    reference herein.10.11
                
                Third
                    Amendment to Loan and Security Agreement with Congress Financial
                    Corporation dated August 3, 2003 filed as Exhibit 10.1 to the
                    Company’s
                    Form 10-Q for the quarter ended December 31, 2004 and incorporated
                    by
                    reference herein.10.12
                
                Form
                    of Securities Purchase Agreement dated January 25, 2005 filed
                    as Exhibit
                    10.1 to the Company’s Form 8-K dated January 25, 2005 and incorporated by
                    reference herein.10.13
                
                Form
                    of 10% Promissory Note dated January 25, 2005 filed as Exhibit
                    10.2 to the
                    Company’s Form 8-K dated January 25, 2005 and incorporated by reference
                    herein.
  -34-
 Table
              of Contents
  10.14
                
                Form
                    of Investor Warrant dated January 25, 2005 filed as Exhibit 10.3
                    to the
                    Company’s Form 8-K dated January 25, 2005 and incorporated by reference
                    herein.10.15
                
                Indenture
                    Agreement with American National Bank dated January 25, 2005
                    filed as
                    Exhibit 10.4 to the Company’s Form 8-K dated January 25, 2005 and
                    incorporated by reference herein.10.16
                
                Form
                    of Placement Agent Warrants dated January 25, 2005 filed as Exhibit
                    10.5
                    to the Company’s Form 8-K dated January 25, 2005 and incorporated by
                    reference herein.10.17
                
                Fourth
                    Amendment to Loan and Security Agreement by and among Streicher
                    Mobile
                    Fueling, Inc., SMF Services, Inc. and Wachovia Bank, National
                    Association,
                    successor by merger to Congress Financial Corporation (Florida)
                    dated
                    February 18, 2005 filed as Exhibit 10.1 to the Company’s Form 8-K dated
                    February 18, 2005 and incorporated by reference herein.10.18
                
                Subordination
                    Agreement by, between and among Shank C&E Investments, L.L.C.,
                    Wachovia Bank, National Association, successor by merger to Congress
                    Financial Corporation (Florida), SMF Services, Inc. and Streicher
                    Mobile
                    Fueling, Inc. dated February 18, 2005 filed as Exhibit 10.2 to
                    the
                    Company’s Form 8-K dated February 18, 2005 and incorporated by reference
                    herein.10.19
                
                Amended
                    and Restated Employment Agreement by and between Streicher Mobile
                    Fueling,
                    Inc. and Richard E. Gathright executed May 14, 2005, effective
                    as of March
                    1, 2005 filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter
                    ended March 31, 2005, and incorporated by reference
                    herein.10.20
                
                Form
                    of Note for Stock Purchase Agreement in Exhibit 2.3 herein filed
                    as
                    Exhibit 10.1 to the Company’s Form 8-K dated September 1, 2005 and
                    incorporated by reference herein.10.21
                
                Form
                    of Note Purchase Agreement filed as Exhibit 10.2 to the Company’s Form 8-K
                    dated September 1, 2005 and incorporated by reference
                    herein.10.22
                
                Form
                    of 10% Promissory Note filed as Exhibit 10.3 to the Company’s Form 8-K
                    dated September 1, 2005 and incorporated by reference
                    herein.10.23
                
                Form
                    of Investor Warrant filed as Exhibit 10.4 to the Company’s Form 8-K dated
                    September 1, 2005 and incorporated by reference herein.10.24
                
                Form
                    of Indenture Agreement filed as Exhibit 10.5 to the Company’s Form 8-K
                    dated September 1, 2005 and incorporated by reference
                    herein.10.25
                
                Form
                    of Security Agreement filed as Exhibit 10.6 to the Company’s Form 8-K
                    dated September 1, 2005 and incorporated by reference
                    herein.





-35-
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10.26
            
            Fifth
                Amendment to Loan and Security Agreement by among Streicher Mobile
                Fueling, Inc., SMF Services, Inc. and Wachovia Bank, National Association,
                successor by merger to Congress Financial Corporation (Florida) dated
                October 1, 2005. Filed as Exhibit 10.1 to the Company’s Form 8-K
                dated October 1, 2005 and incorporated by reference
                herein.10.27
            
            Subordination
                Agreement executed effective as of the 1st day of October, 2005,
                by,
                between and among Eugene Wayne Wetzel, Mary Kay Wetzel, Sharon Harkrider,
                William M. Harkrider II, W. M. Harkrider Testamentary Trust, Harkrider
                Distributing Company, Inc. and W & H Interests, Wachovia Bank,
                National Association, successor by merger to Congress Financial
                Corporation (FLORIDA), and Streicher Mobile Fueling, Inc. Filed as
                Exhibit
                10.2 to the Company’s Form 8-K dated October 1, 2005 and incorporated by
                reference herein.21.1
            
            Subsidiaries
                of the Company.23.1
            
            Consent
                of KPMG LLP23.2
            
            Consent
                of Grant Thornton LLP31.1
            
            Certificate
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certificate
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1
            
            Certificate
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of The Sarbanes-Oxley Act of
                2002




**(b)**
            **Financial
                Statements and Schedule**




Our
      financial statements are attached following Part III of this report, commencing
      on page F-1. Financial statement schedules have been omitted since they are
      not
      required, not applicable, or the information is otherwise included.







-36-
 Table
          of Contents





**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
      registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




**STREICHER
              MOBILE FUELING, INC.**Date: October
              10, 2005
            By:
            /s/ Richard
              E. GathrightRichard
              E. Gathright, Chief Executive Officer and President


In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.




**Name**
            
            **Title**
            
            **Date**By:/s/
                Richard E. Gathright
            
            Chairman
                of the Board, Chief Executive Officer and President
            
            October
                10, 2005Richard
                E. Gathright
            
            (Principal
              Executive
              Officer)By:/s/
                Michael S. Shore
            
            Senior
                Vice President - Chief Financial Officer
            
            October
                10, 2005Michael
                S. Shore
            
            (Principal
              Financial and Accounting Officer)By:/s/
                Wendell R. Beard
            
            Director
            
            October
                10, 2005Wendell
                R. BeardBy:/s/
                Steven R. Goldberg
            
            Director
            
            October
                10, 2005Steven
                R. GoldbergBy:/s/
                Larry S. Mulkey
            
            Director
            
            October
                10, 2005Larry
                S. MulkeyBy:/s/
                C. Rodney O’Connor
            
            Director
            
            October
                10, 2005C.
                Rodney O’ConnorBy:/s/
                Robert S. Picow
            
            Director
            
            October
                10, 2005Robert
                S. PicowBy:/s/
                W. Greg Ryberg
            
            Director
            
            October
                10, 2005W.
                Greg Ryberg











-37-
 Table
          of Contents


**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**Page**Reports
                of Independent Registered Public Accounting
                Firms
            F-2Consolidated
                Balance Sheets as of June 30, 2005 and
                2004
            F-4Consolidated
                Statements of Operations for the Years
                Ended June 30, 2005, 2004 and 2003
            F-5Consolidated
                Statements of Shareholders’ Equity
                for the Years Ended June 30, 2005, 2004 and 2003
            F-6Consolidated
                Statements of Cash Flows for the Years Ended
                June 30, 2005, 2004 and 2003
            F-7Notes
                to Consolidated Financial
                Statements
            F-9











F-1
 Table
          of Contents





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM**




Board
      of
      Directors and


Shareholders
      of Streicher Mobile Fueling, Inc.




We
      have
      audited the accompanying consolidated balance sheet of Streicher Mobile Fueling,
      Inc. and subsidiaries as of June 30, 2005, and the related consolidated
      statements of operations, stockholders' equity, and cash flows for the year
      then
      ended.  These consolidated financial statements are the responsibility
      of
      the Company's management.  Our responsibility is to express an opinion
      on
      these consolidated financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





I n
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Streicher Mobile Fueling,
      Inc. and subsidiaries as of June 30, 2005, and the results of their operations
      and their cash flows for the year then ended in conformity with accounting
      principles generally accepted in the United States of America.





Grant
      Thornton LLP







Fort
      Lauderdale, Florida


September
      14, 2005 (except for Note 11, as to


which
      the
      date is October 1, 2005)










F-2
 Table
          of Contents





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM**









The
      Board
      of Directors and Shareholders


Streicher
      Mobile Fueling, Inc.:





We
      have
      audited the accompanying consolidated balance sheets of Streicher Mobile
      Fueling, Inc. and subsidiaries as of June 30, 2004, and the related consolidated
      statements of operations, shareholders’ equity, and cash flows for each of the
      years in the two-year period ended June 30, 2004. These consolidated financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audit.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Streicher Mobile Fueling,
      Inc. and subsidiaries as of June 30, 2004 and 2003, and the results of its
      operations and its cash flows for each of the years in the two-year period
      ended
      June 30, 2004 in conformity with U.S. generally accepted accounting principles.





KPMG
      LLP





Fort
      Lauderdale, Florida


September
      13, 2004














F-3
 Table
          of Contents





**STREICHER
      MOBILE FUELING, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**JUNE
      30, 2005 AND 2004**


***(
      in 000’s, except share and per share data)***


**ASSETS**
              
              **June
                  30, 2005**
              
              **June
                  30, 2004**Current
                  assets:Cash
                  and cash equivalents
              
              $
              4,108
              
              $
              2,708Restricted
                  cash
              
              
              –
              
              
              13Accounts
                  receivable, less allowances of $1,806 and $426
              
              
              14,129
              
              
              8,280Inventories
              
              
              495
              
              
              183Prepaid
                  expenses and other current assets
              
              
              660
              
              
              400Total
                  current assets
              
              
              19,392
              
              
              11,584Property
                  and equipment, net
              
              
              9,555
              
              
              7,602Deferred
                  debt costs, net
              
              
              991
              
              
              770Other
                  assets
              
              
              187
              
              
              62Total
                  assets
              
              $
              30,125
              
              $
              20,018


**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY**Current
                  liabilities:Bank
                  line of credit payable
              
              $
              4,801
              
              $
              4,919Accounts
                  payable and other liabilities
              
              
              7,345
              
              
              4,193Current
                  portion of long-term debt
              
              
              1,385
              
              
              –Total
                  current liabilities
              
              
              13,531
              
              
              9,112Long-term
                  liabilities:Promissory
                  notes, net of unamortized debt discount of $2,056and
                  $1,367
              
              
              9,584
              
              
              5,558Note
                  payable
              
              
              172
              
              
              –Long-term
                  debt, net
              
              
              9,756
              
              
              5,558Total
                  liabilities
              
              
              23,287
              
              
              14,670Shareholders’
                  equity:Common
                  stock, par value $.01 per share; 50,000,000 shares
                  authorized;
                8,953,444
                  and 7,317,960 issued and outstanding at June 30, 2005and
                  2004, respectively
              
              
              90
              
              
              73Additional
                  paid-in capital
              
              
              16,325
              
              
              13,392Accumulated
                  deficit
              
              
              (9,577
              )
              
              (8,117
              )Total
                  shareholders’ equity
              
              
              6,838
              
              
              5,348Total
                  liabilities and shareholders’ equity
              
              $
              30,125
              
              $
              20,018


**See
      accompanying notes to consolidated financial statements.**






F-4
 Table
          of Contents




**STREICHER
      MOBILE FUELING, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE YEARS ENDED JUNE 30, 2005, 2004 AND 2003**


*(in
      000’s, except share and per share data)*


**Fiscal
                Year**
              **June
                30, 2005**
            
            **Fiscal
                Year**
              **June
                30, 2004**
            
            **Fiscal
                Year**
              **June
                30, 2003**Fuel
                sales and service revenues
            
            $
            109,207
            
            $
            67,663
            
            $
            53,579Fuel
                taxes
            
            
            25,959
            
            
            22,334
            
            
            18,615Total
                revenues
            
            
            135,166
            
            
            89,997
            
            
            72,194Cost
                of fuel sales and service
            
            
            102,619
            
            
            63,365
            
            
            49,556Fuel
                taxes
            
            
            25,959
            
            
            22,334
            
            
            18,615Total
                cost of sales
            
            
            128,578
            
            
            85,699
            
            
            68,171Gross
                profit
            
            
            6,588
            
            
            4,298
            
            
            4,023Selling,
                general and administrative expenses
            
            
            6,145
            
            
            4,394
            
            
            4,716Gain
                on extinguishment of debt
            
            
            —
            
            
            757
            
            
            —Operating
                income (loss)
            
            
            443
            
            
            661
            
            
            (693
            )Interest
                expense
            
            
            (1,911
            )
            
            (1,361
            )
            
            (915
            )Interest
                and other income
            
            
            8
            
            
            2
            
            
            27Loss
                before income taxes
            
            
            (1,460
            )
            
            (698
            )
            
            (1,581
            )Income
                tax expense
            
            
            —
            
            
            —
            
            
            —Net
                loss
            
            $
            (1,460
            )
            $
            (698
            )
            $
            (1,581
            )Basic
                and diluted net loss per share
            
            $
            (0.19
            )
            $
            (0.10
            )
            $
            (0.22
            )Basic
                and diluted weighted average common shares outstanding
            
            
            7,857,434
            
            
            7,261,372
            
            
            7,221,070


**See
      accompanying notes to consolidated financial statements.**








F-5
 Table
          of Contents


**STREICHER
      MOBILE FUELING, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS'
      EQUITY**


**FOR
      THE YEARS ENDED JUNE 30, 2005, 2004 AND 2003**


***(in
      000’s, except share data)***


**Common
                Stock**
            
            **Additional**
              **Paid-in**
            
            **Accumulated****Shares**
            
            **Amount**
            
            **Capital**
            
            **Deficit**
            
            **Total****BALANCE,
                June 30, 2002**
            
            
            7,211,751
            
            
            72
            
            
            11,442
            
            
            (5,838
            )
            
            5,676Net
                loss
            
            
            --
            
            
            --
            
            
            --
            
            
            (1,581
            )
            
            (1,581
            )Cost
                associated with extension of warrants
            
            
            --
            
            
            --
            
            
            (9
            )
            
            --
            
            
            (9
            )Issuance
                of stock in lieu of debt
            
            
            22,417
            
            
            --
            
            
            25
            
            
            --
            
            
            25**BALANCE,
                June 30, 2003**
            
            
            7,234,168
            
            $
            72
            
            $
            11,458
            
            $
            (7,419
            )
            $
            4,111Net
                loss
            
            
            --
            
            
            --
            
            
            --
            
            
            (698
            )
            
            (698
            )Issuance
                of stock in lieu of debt
            
            
            14,292
            
            
            --
            
            
            14
            
            
            --
            
            
            14Exercise
                of warrants
            
            
            69,500
            
            
            1
            
            
            68
            
            
            --
            
            
            69Issuance
                of warrants
            
            
            --
            
            
            --
            
            
            1,866
            
            
            --
            
            
            1,866Cost
                associated with registration of shares
            
            
            --
            
            
            --
            
            
            (14
            )
            
            --
            
            
            (14
            )**BALANCE,
                June 30, 2004**
            
            
            7,317,960
            
            $
            73
            
            $
            13,392
            
            $
            (8,117
            )
            $
            5,348Net
                loss
            
            
            --
            
            
            --
            
            
            --
            
            
            (1,460
            )
            
            (1,460
            )Exercise
                of warrants and stock options
            
            
            1,635,484
            
            
            17
            
            
            1,640
            
            
            --
            
            
            1,657Issuance
                of warrants
            
            
            --
            
            
            --
            
            
            1,293
            
            
            --
            
            
            1,293**BALANCE,
                June 30, 2005**
            
            
            8,953,444
            
            $
            90
            
            $
            16,325
            
            $
            (9,577
            )
            $
            6,838


**See
      accompanying notes to consolidated financial statements.**





F-6
 Table
          of Contents




STREICHER
      MOBILE FUELING, INC. AND
      SUBSIDIARIES


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED JUNE 30, 2005, 2004 AND 2003**


***(in
      000’s, except supplemental disclosure and share data)***


**Fiscal
                Year**
              **June
                30,**
              **2005**
            
            **Fiscal
                Year**
              **June
                30,**
              **2004**
            
            **Fiscal
                Year**
              **June
                30,**
              **2003****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            
            $
            (1,460
            )
            $
            (698
            )
            $
            (1,581
            )Adjustments
                to reconcile net loss to netcash
                provided by (used in) operatingactivities:Depreciation
                and amortization:Cost
                of sales
            
            
            1,467
            
            
            1,130
            
            
            1,232Selling,
                general and administrative
            
            
            368
            
            
            190
            
            
            171Amortization
                of deferred debt cost
            
            
            270
            
            
            195
            
            
            47Amortization
                of debt discount
            
            
            425
            
            
            241
            
            
            –Gain
                on extinguishment of debt
            
            
            –
            
            
            (757
            )
            
            –(Decrease)
                increase in allowance for doubtful accounts
            
            
            (59
            )
            
            (54
            )
            
            263Changes
                in operating assets and liabilities (excludingthe
                effect of the acquisition of Shank Services):Decrease
                in restricted cash
            
            
            13
            
            
            65
            
            
            167(Increase)
                decrease in accountsreceivable
            
            
            (2,454
            )
            
            (2,225
            )
            
            118(Increase)
                decrease in inventories, prepaid expenses and other assets
            
            
            (430
            )
            
            (21
            )
            
            43Increase
                (decrease) in accounts payable and other liabilities
            
            
            3,152
            
            
            1,196
            
            
            (15
            )Net
                cash provided by (used in) operating activities
            
            
            1,292
            
            
            (738
            )
            
            445**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Cash
                used in acquisition of Shank Services
            
            
            (6,436
            )
            
            –
            
            
            –Purchases
                of property and equipment
            
            
            (811
            )
            
            (175
            )
            
            (248
            )Proceeds
                from disposal of equipment
            
            
            28
            
            
            112
            
            
            4Decrease
                note receivablefrom
                related party
            
            
            –
            
            
            52
            
            
            148Net
                cash used in investing activities
            
            
            (7,219
            )
            
            (11
            )
            
            (96
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from issuance of promissory notes
            
            
            6,100
            
            
            6,925
            
            
            –Net
                proceeds (costs) from issuance of common stock
            
            
            1,656
            
            
            55
            
            
            (9
            )Net
                (repayments) increase on bank line of credit payable
            
            
            (118
            )
            
            509
            
            
            (270
            )Payments
                of debt issuance costs
            
            
            (311
            )
            
            –
            
            
            –Repayments
                on subordinated promissory notes
            
            
            –
            
            
            (522
            )
            
            (155
            )Repayment
                of subordinated debt
            
            
            –
            
            
            (1,034
            )
            
            –Principal
                payments on long-term debt
            
            
            –
            
            
            (2,687
            )
            
            (1,424
            )Proceeds
                from the issuance of subordinatedpromissory
                notes
            
            
            –
            
            
            –
            
            
            905Net
                cash provided by (used in) financing activities
            
            
            7,327
            
            
            3,246
            
            
            (953
            )NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            1,400
            
            
            2,497
            
            
            (604
            )CASH
                AND CASH EQUIVALENTS,beginning
                of period
            
            
            2,708
            
            
            211
            
            
            815CASH
                AND CASH EQUIVALENTS,end
                of period
            
            $
            4,108
            
            $
            2,708
            
            $
            211


**See
      accompanying notes to consolidated financial statements.**








F-7
 Table
          of Contents


STREICHER
        MOBILE FUELING, INC. AND
        SUBSIDIARIES
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED JUNE 30, 2005, 2004 AND 2003**
 ***(in
        000’s, except supplemental disclosure and share
        data)***





**(Continued)**
            
            **Fiscal
                Year**
              **June
                30,**
              **2005**
            
            **Fiscal
                Year**
              **June
                30,**
              **2004**
            
            **Fiscal
                Year**
              **June
                30,**
              **2003****SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid for:Interest
            
            $
            876
            
            $
            826
            
            $
            880Income
                taxes
            
            $
            —
            
            $
            —
            
            $
            —


**SUPPLEMENTAL
      DISCLOSURE OF NON-CASH ACTIVITIES:**





**Fiscal
      Year ended June 30, 2005:**





In
      connection with the issuance of the January 2005 promissory notes, the Company
      issued warrants resulting in $1.113 million of non-cash debt discount costs
      and
      $180,000 non-cash deferred debt costs.





**Fiscal
      Year ended June 30, 2004:**





In
      connection with the August 2003 refinancing, the Company issued warrants
      resulting in $1.61 million of non-cash debt discount costs and $257,000 non-cash
      deferred debt costs. The Company also issued 14,292 shares of common stock
      in
      lieu of payments on convertible promissory notes.





**Fiscal
      Year ended June 30, 2003:**





Issuance
      of $25,000 of common stock in lieu of payment of interest on subordinated
      convertible promissory notes


Transfer
      of $112,000 of fixed assets to account receivable from third party relating
      to
      disposal of vehicle


















**See
      accompanying notes to consolidated financial statements.**







F-8
 Table
          of Contents




**STREICHER
      MOBILE FUELING, INC. AND SUBSIDIARIES**




**NOTES
      TO CONSOLIDATED FINANCIAL
      STATEMENTS**


**(1)**
            **NATURE
                OF OPERATIONS**




Streicher
      Mobile Fueling, Inc., a Florida corporation (the “Company”) was formed in
      1996.




The
      Company provides commercial mobile and bulk fueling; integrated out-sourced
      fuel
      management; the packaging, distribution and sale of lubricants; transportation
      logistics and emergency response services. The Company’s fleet of custom
      specialized tank
      wagons, tractor-trailer transports, box trucks and customized flatbed vehicles
      deliver diesel
      fuel and gasoline to customers’ locations on a regularly scheduled or as needed
      basis, refueling vehicles and equipment, re-supplying fixed-site and
      temporary bulk storage tanks, and emergency power generation systems ;
      and
      distribute a wide variety of specialized petroleum products and lubricants
      to
      refineries, manufacturers and other industrial customers. In addition, the
      Company’s fleet of  special
      duty tractor-trailer units provides heavy and ultra-heavy haul transportation
      services over short and long distances to customers requiring the movement
      of
      over-sized and/or over-weight equipment
      and heavy manufactured products. The Company’s commercial mobile fueling
      operations include the use of its patented
      proprietary electronic fuel tracking control system to
      measure, record and track fuel dispensed to each vehicle and tank fueled at
      a
      customer location, allowing verification of the amount and type of fuel
      delivered and providing customers with customized fleet fuel data for management
      analysis and tax reporting. At June 30, 2005, the Company was conducting
      operations in California, Florida, Georgia, Maryland, North Carolina,
      Pennsylvania, Tennessee, Texas, Virginia and Washington, D.C.




The
      Company has historically generated substantially all of its revenues from
      commercial mobile and bulk fueling and integrated out-sourced fuel management
      services. As a result of the Shank Services acquisition, as discussed below,
      the
      Company now generates revenues from lubricant packaging, distribution and sales
      and transportation logistic services in addition to commercial mobile and bulk
      fueling and fuel management services. Revenues are comprised primarily of
      delivery service charges; the related sale of diesel fuel, gasoline and
      lubricants products; and charges for transportation logistics services. Cost
      of
      sales is comprised primarily of the cost of fuel and lubricants and direct
      operating expenses. Included in both revenues and cost of sales are federal
      and
      state fuel taxes, which are collected by the Company from customers, when
      required, and then remitted to the appropriate taxing authorities.





The
      Company makes a majority of the commercial mobile and bulk fueling service
      deliveries on workdays, Monday through Friday, to coincide with customers’ fuel
      service requirements. Thus, the number of workdays in any given month will
      impact the quarterly financial performance of the Company. In addition, a
      downturn in customer demand generally takes place on and/or in conjunction
      with
      national holidays, resulting in decreased volumes of fuel delivered. This
      downturn may be offset during the fiscal year by emergency mobile fueling
      services and fuel deliveries resulting from impending or actual severe
      meteorological or geological events, including hurricanes, tropical storms,
      ice
      and snow storms, forest fires and earthquakes.





In
      February 2005 the Company acquired substantially all of the assets and business
      operations of Shank C&E Investments, L.L.C. (“Shank Services”) a Houston,
      Texas based provider of commercial fuel, petroleum lubricants distribution
      and
      sales and heavy haul transportation services. Shank Services, which conducts
      its
      operations in the Company’s subsidiary, SMF Services, Inc., generates revenues
      from the sale of commercial fuel, petroleum lubricants and heavy haul
      operations. See Note (7) for additional information regarding the Shank Services
      acquisition.




F-9
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


(2)
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING
                    POLICIES**





(a)
            Basis
                of Presentation





The
                consolidated financial statements include the accounts of Streicher
                Mobile
                Fueling, Inc. and its wholly owned subsidiaries, SMF Services, Inc.
                and
                Streicher Realty, Inc. All significant intercompany balances and
                transactions have been eliminated in
                consolidation.





(b)
            Cash
                and Cash Equivalents




The
      Company considers all highly liquid investments with original maturities of
      three months or less to be cash equivalents. Cash and cash equivalents in the
      accompanying consolidated balance sheets are $4,108,000 and $2,708,000 as of
      June 30, 2005 and 2004, respectively. The Company has cash deposited with a
      financial institution above the FDIC insurance coverage limit.




(c)
              Restricted
                  Cash




The
      Company does not have any restricted cash at June 30, 2005. At June 30, 2004
      restricted cash consisted of $13,000 in collections on customer accounts
      receivable, which were deposited in a restricted account and used to repay
      advances made to the Company on its bank line of credit.




(d)
            Accounts
                Receivable




Accounts
      receivable are due from customers within a broad range of industries and are
      generally unsecured. Additionally, accounts receivable are composed of refunds
      due from state and federal governments for fuel taxes which are not billable
      to
      certain customers, yet have been paid to vendors by the Company. The Company
      provides for credit losses based on management's evaluation of collectibility
      using current and historical performance of each customer and from state and
      federal governments from whom refunds are expected.




A
      roll-forward of the activity in the allowance for doubtful accounts for the
      indicated periods is as follows (in thousands):





**Fiscal
                Year**
              **June
                30,****2005**
            
            **Fiscal
                Year**
              **June
                30,****2004**
            
            **Fiscal
                Year**
              **June
                30,****2003**Balance
                - beginning of period
            
            $
            426
            
            $
            530
            
            $
            509Acquisition
                of Shank Services
            
            
            1,877
            
            
            --
            
            
            --(Decrease)
                increase in provisionfor
                bad debts
            
            
            (59
            )
            
            (54
            )
            
            263Write-offs,
                net of recoveries
            
            
            (438
            )
            
            (50
            )
            
            (242
            )Balance
                - end of period
            
            $
            1,806
            
            $
            426
            
            $
            530





(e)
            Inventories




Inventories,
      consisting primarily of diesel fuel, gasoline and lubricants, are stated at
      the
      lower of cost or market and include federal and state fuel taxes payable to
      vendors. Cost is determined using the first-in, first-out method.




F-10
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


(f)
            Property
                and Equipment




Property
      and equipment are stated at cost less accumulated depreciation and amortization.
      Ordinary maintenance and repairs are expensed as incurred. Improvements which
      significantly increase the value or useful life of property and equipment are
      capitalized. Property and equipment are depreciated or amortized using the
      straight-line method over the asset’s estimated useful lives. Depreciation
      expense was $1,835,000, $1,320,000 and $1,403,000 for the years ended June
      30,
      2005, 2004 and 2003, respectively. Property and equipment balances and the
      estimated useful lives were as follows at the indicated dates (in thousands):




**June
                30,**
            
            **Estimated
                Useful****2005**
            
            **2004**
            
            **Life**Fuel
                trucks, tanks and vehicles
            
            $
            16,747
            
            $
            14,395
            
            
            5
                -
                25 yearsMachinery
                and equipment
            
            
            443
            
            
            346
            
            
            3
                -
                5 yearsFurniture
                and fixtures
            
            
            274
            
            
            262
            
            
            5
                -
                10 yearsLeasehold
                improvements
            
            
            30
            
            
            22
            
            
            Lesser
                of lease term or useful lifeSoftware
            
            
            276
            
            
            351
            
            
            3
                yearsLand
            
            
            67
            
            
            67
            
            
            –17,837
            
            
            15,443Less:
                Accumulated depreciationand
                amortization
            
            
            (8,282
            )
            
            (7,841
            )Property
                and equipment, net
            
            $
            9,555
            
            $
            7,602







In
      accordance with Statement of Position 98-1, “Accounting for the Costs of
      Computer Software Developed or Obtained for Internal Use,” the Company
      capitalizes certain costs used in the development of internal use software.
      These costs include the costs associated with coding, software configuration,
      upgrades and enhancements. At June 30, 2005 and 2004 the cost relating to
      internal use software is $276,000 and $343,000, respectively. At June 30, 2005
      and 2004 the accumulated depreciation relating to internal use software is
      $71,000 and $137,000 respectively. These amounts are included in the property
      and equipment balances above.




(g)
            Income
                Taxes




Income
      taxes are accounted for under the asset and liability method, in accordance
      with
      Statement of Financial Accounting Standards No. 109, “Accounting for Income
      Taxes” (SFAS 109). Deferred tax assets and liabilities are recognized for the
      future tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases and operating loss and tax credit carryforwards. Deferred
      tax liabilities are measured using enacted tax rates expected to apply to
      taxable income in the years in which those temporary differences are expected
      to
      be recovered or settled. The effect on deferred tax assets and liabilities
      of a
      change in tax rates is recognized in income in the period that includes the
      enactment date.




(h)
            Revenue
                Recognition




The
      Company recognizes revenues at the time services are performed which is when
      the
      fuel and other products are delivered and the customer takes ownership and
      assumes risk of loss. Collections are reasonably assured at the time of
      delivery.




F-11
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


(i)
            Use
                of Estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions. These assumptions, if not realized, could affect
      the
      reported amounts of assets and liabilities and disclosure of contingent assets
      and liabilities at the date of the financial statements and the reported amounts
      of revenue and expenses during the reporting period. Actual results could differ
      from those estimates.




(j)
            Fair
                Value of Financial Instruments




The
      Company's financial instruments, primarily consisting of cash and cash
      equivalents, accounts receivable, accounts payable, bank line of credit payable,
      promissory notes, equipment debt and long-term debt, approximate fair value
      due
      to their short-term nature or interest rates that approximate current market
      rates.




(k)
            Deferred
                Debt Cost and Debt Discount




The
                Company is amortizing as interest expense its deferred debt costs
                and debt
                discount over the respective term of the debt issued under the effective
                interest method. Amounts related to the deferred debt costs and debt
                discount are as follows (in
                thousands):




**June
                30, 2005**
            
            **June
                30, 2004**Deferred
                debt costs:Cost
            
            $
            1,481
            
            $
            990Accumulated
                amortization
            
            
            490
            
            
            220Interest
                expense
            
            
            270
            
            
            187Debt
                discount:Cost
            
            $
            2,722
            
            $
            1,608Accumulated
                amortization
            
            
            666
            
            
            241Interest
                expense
            
            
            425
            
            
            241


(l)
              Net
                  Loss Per Share





Net
      loss
      per share is determined by dividing net loss by the weighted average common
      shares outstanding. Common stock equivalents, consisting of employee stock
      options and common stock warrants, in the amount of 4,251,793, 4,675,402 and
      2,604,477 for the years ended June 30, 2005, 2004 and 2003, respectively, were
      antidilutive and were not included in the computation of net loss per share
      in
      those fiscal years.




(m)
            Impairment
                or Disposal of Long-Lived Assets




The
      Company accounts for long-lived assets in accordance with the provisions of
      SFAS
      No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This
      Statement requires that long-lived assets be reviewed for impairment whenever
      events or changes in circumstances indicate that the carrying amount of an
      asset
      may not be recoverable. Recoverability of assets to be held and used is measured
      by a comparison of the carrying amount of an asset to future net cash flows
      expected to be generated by the asset. If the carrying amount of an asset
      exceeds its estimated future cash flows, an impairment charge is recognized
      by
      the amount by which the carrying amount of the asset exceeds the fair value
      of
      the asset based on the projected net cash flows discounted at a rate
      commensurate with the risk of the asset. Assets to be disposed of are reported
      at the lower of their carrying amount or fair value less costs to
      sell.




F-12
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


(n)
            Stock
                Options




SFAS
      123,
“Accounting for Stock-Based Compensation,” as amended by SFAS 148, “Accounting
      for Stock-Based Compensation-Transition and Disclosure,” allows entities to
      choose between a fair value based method of accounting for employee stock
      options or similar equity instruments and the intrinsic value based method
      of
      accounting prescribed by Accounting Principles Board Opinion 25 (“APB 25”),
“Accounting for Stock Issued to Employees.” Entities electing to account for
      employee stock options or similar equity instruments under APB 25 must make
      pro
      forma disclosures of net income and earnings per share as if the fair value
      method of accounting had been applied. The Company has elected to apply the
      provisions of APB 25 in the preparation of its consolidated financial statements
      and provide pro forma disclosure of net income and earnings per share as
      required under SFAS 123 (dollars in thousands, except share data).




**Fiscal
                Year Ended June 30,****2005**
            
            **2004**
            
            **2003**Net
                loss, as reported
            
            $
            (1,460
            )
            $
            (698
            )
            $
            (1,581
            )Stock-based
                employee compensationexpense
                not included in reported netloss,
                net of tax
            
            $
            (107
            )
            $
            (194
            )
            $
            (556
            )Net
                loss - pro forma
            
            $
            (1,567
            )
            $
            (892
            )
            $
            (2,137
            )Basic
                and diluted net loss per share - asReported
            
            $
            (0.19
            )
            $
            (0.10
            )
            $
            (0.22
            )Basic
                and diluted net loss per share -Proforma
            
            $
            (0.20
            )
            $
            (0.12
            )
            $
            (0.30
            )Risk
                free interest rate
            
            
            4.3
            %
            
            3
            %
            
            3
            %Dividend
                yield
            
            
            0
            %
            
            0
            %
            
            0
            %Expected
                volatility
            
            
            107.6
            %
            
            100
            %
            
            100
            %Expected
                life
            
            
            8.6
                years
            
            
            10
                years
            
            
            10
                years





The
      above
      pro forma disclosures may not be representative of the effects on reported
      net
      earnings (loss) for future years as options vest over several years and the
      Company may continue to grant options to employees.





(o)
              Recent
                  Accounting Pronouncements





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      SFAS 123R, “Share-Based Payment,” a revision of SFAS 123. In March 2005,
      the SEC issued Staff Bulletin No. 107 (SAB 107) regarding its
      interpretation of SFAS 123R. The standard requires companies to expense the
      grant-date fair value of stock options and other equity-based compensation
      issued to employees. In accordance with the revised statement, the Company
      will
      be required to recognize the expense attributable to stock options granted
      or
      vested subsequent to June 30, 2005. The Company adopted SFAS 123R on July 1,
      2005 using the modified prospective method in which compensation cost is
      recognized beginning with the effective date (a) based on the requirements
      of
      SFAS 123R for all share-based payments granted after July 1, 2005 and (b) based
      on the requirements of SFAS 123R for all awards granted to employees prior
      to
      July 1, 2005 that remain unvested on July 1, 2005. For the year ended June
      30,
      2006, the Company is estimating that the cost relating to this pronouncement
      will be approximately $275,000 or $0.03 per basic share; however, due to the
      uncertainty of the level of share-based payments to be granted in the future,
      these amounts are estimates and may be subject to change.




F-13
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


(3)
            **BANK
                LINE OF CREDIT PAYABLE**




The
      Company has a three-year $10 million credit facility with a national financial
      institution, which permits the Company to borrow up to 85% of the total amount
      of eligible accounts receivable. Interest is payable monthly (8.0% at June
      30,
      2005) and outstanding borrowings under the line are secured by substantially
      all
      Company assets other than its truck fleet and related equipment. The credit
      facility maturity has been extended by mutual consent of the Company and the
      financial institution from September 25, 2005 to September 25, 2006. Although
      the line of credit expires on September 25, 2006, it is classified as a current
      liability due to certain provisions within the agreement related to subjective
      acceleration clauses and due to the agreement requiring the Company to maintain
      a lockbox arrangement whereby cash deposits are automatically utilized to reduce
      amounts outstanding under the line of credit.





In
      February 2005, the Company and its bank line of credit lender amended the loan
      and security agreement for the credit facility in connection with the Company’s
      issuance of the 2005 Notes and the Shank Services acquisition. This amendment
      1)
      lowered the requirements on the fixed charge covering ratio; 2) eliminated
      the
      effective net worth requirement except when availability is below $1.0 million;
      3) extended the term to September 25, 2006; 4) after September 25, 2005, reduces
      the unused line fee from .75% to .25%; and 5) if the Company terminates the
      line
      of credit after September 26, 2005, but prior to September 26, 2006, imposes
      a
      .50% fee.





As
      of
      June 30, 2005 and 2004, the Company had outstanding borrowings of $4.8 and
      $4.9
      million, respectively, under its $10 million bank line of credit. Based on
      eligible receivables outstanding at June 30, 2005, the Company had $5.2 million
      of cash availability on the bank line of credit, and was in compliance with
      all
      financial covenants required by the loan and security agreement.





**(4)**
            **LONG-TERM
                DEBT**





Long-term
      debt consists of the following (in thousands):





**June
                30,****2005**
            
            **2004**Promissory
                Notes (10% interest due semi-annually, December 31 and
              June 30);
                principal payments of $692,500 due beginning August 28, 2005,
                semi-annually on August 28 and February 28; balloon payment
                of
                $2,770,000 due at maturity on August 28, 2008; effective interest
                rate of
                23.7% includes cost of warrants and other debt issue costs
            
            $
            6,925
            
            $
            6,925Promissory
                Notes (10% interest due semi-annually, July 24 and January 24); principal
                payments of $610,000 due beginning January 24, 2007, semi-annually
                on
                January 24 and July 24; balloon payment of $2,440,000 due at maturity
                on
                January 24, 2010; effective interest rate of 19.6% includes cost
                of
                warrants and other debt issue costs
            
            
            6,100
            
            
            —Note
                Payable (contingent deferred promissory note subject to earn-out
                provisions related to Shank Services acquisition if payable, due
                March 31,
                2007)
            
            
            172
            
            
            —Unamortized
                debt discount, net of amortization
            
            
            (2,056
            )
            
            (1,367
            )Less:
                current portion
            
            
            (1,385
            )
            
            —Long-term
                debt, net
            
            $
            9,756
            
            $
            5,558






F-14
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


Future
      principal payments on long-term debt are due as follows as of June 30, 2005
      (in
      thousands):




**Year
                Ended**
              **June
                30,**2006
            
            $
            1,3852007
            
            
            1,9952008
            
            
            2,6052009
            
            
            3,9902010
            
            
            3,050**Total**
            
            $
            13,025





During
      August and September 2003, the Company repaid all the remaining long-term and
      current portions of equipment debt, convertible subordinated debt and promissory
      notes outstanding at June 30, 2003 from the proceeds of the August 2003
      financing. The former equipment lender was repaid in full. The Company received
      a $757,000 cash discount from the lender in consideration of the prepayment
      of
      the equipment debt. The current notes are collateralized by a first priority
      security interest in the Company’s specialized fueling truck fleet and related
      equipment and by the patents on its proprietary fuel management system.





***January
      2005 Promissory Notes***





On
      January 25, 2005, the Company closed an offering of $6.1 million five year
      10%
      promissory notes (the “January 2005 Notes”) and four-year warrants to purchase
      1,006,500 shares of the Company’s common stock at $1.60 to a limited group of
      institutions and other accredited investors in connection with the acquisition
      of the assets and business of Shank Services. The January 2005 Notes provide
      for
      (1) no principal payments until January 24, 2007; (2) six $610,000 semi-annual
      principal payments commencing on January 24, 2007 through July 24, 2009; (3)
      a
      balloon payment of $2,440,000 at maturity on January 24, 2010; and (4)
      semi-annual interest payments on July 24, and January 24, commencing on July
      24,
      2005. The funding provided by the January 2005 Notes was used for the Shank
      Services acquisition and for other general corporate purposes. The net cash
      proceeds from the financing were $5.8 million, after payment of related fees
      and
      expenses, professional fees and other costs totaling $282,000. The total
      transaction costs were $471,000, inclusive of the $291,000 cash costs and
      non-cash broker commission warrants valued at $180,000, which are being
      amortized over the five-year term of the notes. The January 2005 Notes are
      secured by a first priority security interest in the Shank Services assets.





***August
      2003 Promissory Notes***




On
      August
      29, 2003, the Company closed a $6.925 million offering to institutions and
      other
      accredited lenders consisting of five-year 10% promissory notes and five-year
      warrants to purchase a total 2,008,250 shares of the Company’s common stock at
      $1.00 per share (the “August 2003 Notes”). The August 2003 Notes are
      collateralized by a first priority security interest in its specialized fueling
      truck fleet and related equipment and by patents on its proprietary fuel
      management system. The August 2003 Notes provide for (1) no principal payments
      until August 28, 2005; (2) six $692,500 semi-annual principal payments
      commencing on August 28, 2005 through February 28, 2008; (3) a balloon payment
      of $2,770,000 at maturity on August 28, 2008; (4) semi-annual interest payments
      on June 30 and December 31  which
      commenced on December 31, 2003; and (5) the Company’s right to call after August
      1, 2005 at 105% of par plus accrued but unpaid interest. The net cash proceeds
      from the financing was $2.8 million, after payment of related fees and expenses
      and repayment of all outstanding equipment and subordinated debt. In connection
      with the issuance of the August 2003 Notes, the Company negotiated a settlement
      with its former primary equipment lender and received a $757,000 cash discount
      by prepaying the $2,204,800 outstanding balance on August 29, 2003. The
      transaction costs related to these promissory notes included commissions,
      professional fees and other costs, totaling $824,000 and are being amortized
      over the five-year term of the notes. The Company made its first semi-annual
      principal payment on August 28, 2005.




F-15
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


During
      the year ended June 30, 2005, 1,566,000 of detachable common stock warrants
      issued in connection with the 2003 Notes and other previously issued and repaid
      notes were exercised at prices ranging from $0.86 to $1.00, resulting in an
      aggregate of $1,560,000 in cash proceeds to the Company.





***Note
      Payable***





In
      connection with the Shank Services acquisition on February 18, 2005, the Company
      issued a contingent two-year deferred payment promissory note due March 31,
      2007, in the amount of $1,913,000. As of June 30, 2005, this contingent
      liability has been recorded under purchase accounting only to the extent of
      negative goodwill of $172,000 associated with the acquisition. See Note 7 for
      additional information.





***Other***





Unamortized
      debt discounts of $2,056,000 and $1,367,000 in 2005 and 2004, respectively,
      were
      recorded in connection with the August 2003 Notes and January 2005 Notes and
      are
      being amortized as interest expense over the respective term of the debt issued
      under the effective interest method. These are non-cash discounts related to
      the
      valuation of the common stock warrants issued to the note holders and the
      placement agent in the financing transactions that do not reduce the amount
      of
      principal cash repayments required to be made by the Company for the outstanding
      balance of $11.640 million and $6.925 million of the notes at June 30, 2005
      and
      June 30, 2004, respectively. The common stock warrants were valued using the
      Black-Scholes option pricing model and recorded as an increase to additional
      paid in capital.





The
      Company’s debt agreements for its line of credit facility and for the August
      2003 Notes and January 2005 Notes have covenants establishing certain financial
      requirements and operating restrictions. The Company’s failure to comply with
      any covenant or material obligation contained in these debt agreements, absent
      a
      waiver or forbearance from the lenders, would result in an event of default
      which could accelerate the Company’s debt repayment obligations under the debt
      agreements. Due to cross-default provisions contained in its debt agreements,
      an
      event of default under one agreement could accelerate repayment terms under
      the
      other agreements. A default under any of the debt agreements would have a
      material adverse effect on the Company’s liquidity and capital resources. At
      June 30, 2005 the Company was in compliance with all covenants required by
      the
      debt agreements.





**(5)**
            **WARRANTS
                AND UNDERWRITER’S OPTION**





(a)
            Public
                Offering Warrants




The
      Company issued 1,150,000 common stock warrants in conjunction with its initial
      public offering in December 1996. Each warrant entitles the holder to purchase
      one share of common stock at a exercise price of $6.90 per share. In October
      2003, the Company extended the expiration date of the warrants from December
      11,
      2003 to December 11, 2004. In November 2004, the Company extended the expiration
      date of the warrants to December 11, 2005. The common stock underlying the
      warrants has been registered with the Securities and Exchange Commission. As
      of
      June 30, 2005, 100 of these warrants have been exercised.




The
      number of shares of common stock that may be purchased upon exercise of the
      warrants will be adjusted if the Company makes a dividend distribution to its
      shareholders or subdivides, combines or reclassifies its outstanding shares
      of
      common stock. In addition, the exercise price of the warrants will be adjusted,
      subject to certain exceptions, if the Company issues additional common stock
      or
      rights to acquire common stock at a price per share that is less than the
      current market price per share of common stock. For this purpose, the term
      "current market price" means the average of the daily closing prices for the
      twenty consecutive trading days ending three days prior to the issuance or
      record date. The exercise price of the warrants will also be adjusted if the
      Company consolidates or merges and make a distribution to its shareholders
      of
      assets or evidences of indebtedness (other than cash or stock
      dividends).




F-16
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


The
      Company may redeem the warrants, at a redemption price of $0.01 per warrant,
      at
      any time upon thirty days' prior written notice, if the average closing bid
      price of its common stock equals or exceeds $10.50 per share for twenty
      consecutive trading days.




The
      Company may further extend the exercise period of the warrants at any time.
      If
      the Company does so, it will give written notice of the extension to the warrant
      holders prior to the expiration date in effect at the time of the extension.
      Also, the Company may reduce the exercise price of the warrants for limited
      periods or through the end of the exercise period if its Board of Directors
      deems it appropriate. The Company has not made any determination at this time
      as
      to a further extension of the exercise period or a reduction in the exercise
      price of the warrants.




(b)
            Underwriter’s
                Option




In
      connection with the initial public offering the Company sold the underwriter
      an
      option to purchase up to 100,000 shares of common stock at $9.30 per share
      and
      warrants at an exercise price of $.19375 to purchase an additional 100,000
      shares, at an exercise price of $9.30 per share. The underwriter's option was
      extended concurrent with the warrants and currently expires on December 11,
      2005. The exercise price of the warrants subject to the underwriter's option
      and
      the number of shares of common stock covered by these warrants, are subject
      to
      adjustment on similar terms as the Company’s other outstanding warrants. As of
      June 30, 2005 none of these warrants have been exercised.




(c)
            May
                2003 Warrants





On
      May
      20, 2003, the Company issued $235,500 of subordinated promissory notes to
      officers, directors and certain shareholders. The notes were due on November
      19,
      2003 and bore interest at an annual rate of 14%. The Company also issued
      non-detachable warrants to purchase 82,425 shares of common stock exercisable
      at
      $0.86 per share in connection with the notes. The Company repaid these notes
      in
      September 2003 with the proceeds of the August 2003 refinancing. As of June
      30,
      2005, 47,425 of these warrants were exercised, of which 40,425 were exercised
      during the year ended June 30, 2005 and the remaining 35,000 are
      exercisable.





The
      number of shares of common stock that may be purchased upon exercise of the
      warrants will be adjusted if the Company makes a dividend distribution to its
      shareholders or subdivides, combines or reclassifies its outstanding shares
      of
      common stock. The exercise price of the warrants will also be adjusted if the
      Company consolidates or merges.





(d)
              August
                  2003 Warrants





As
      a
      result of the August 2003 refinancing, the Company raised $6.925 million and
      issued 2,008,250 five-year warrants to purchase the Company’s common stock at
      $1.00 per share. As of June 30, 2005, 1,587,759 warrants were exercised, of
      which 1,525,259 were exercised during the year ended June 30, 2005.





(e)
              January
                  2005 Warrants





On
      January 25, 2005, the Company raised $6.1 million and issued 1,006,500 four-year
      warrants to purchase the Company’s common stock at an exercise price of $1.60
      per share. As of June 30, 2005, none of these warrants had been exercised.








F-17
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


(6)
            **STOCK
                OPTIONS**





(a)
            Employee
                Stock Options





The
      Company has adopted two stock option plans (the “1996 Plan” and the “2000 Plan”)
      under which options to purchase shares of the Company’s common stock may be
      granted to employees. The purpose of the 1996 Plan and the 2000 Plan is to
      provide an incentive to attract, motivate and retain qualified competent
      employees whose efforts and judgment are important to the Company’s success
      through the encouragement of the ownership of stock by such
      persons.





Under
      the
      1996 Plan 500,000 shares of common stock are reserved for issuance upon exercise
      of options granted. Under the 2000 Plan, 1,000,000 shares of common stock are
      reserved for issuance upon the exercise of options, with the amount reserved
      being increased each year by ten percent of the total shares subject to the
      2000
      Plan at the end of the previous calendar year. Options to purchase 0 shares
      of
      stock are outstanding under the 1996 Plan and options to purchase 171,000 shares
      of stock are available to be granted under the 2000 Plan. The Board of Directors
      has determined that no additional options will be granted under the 1996 Plan.




Options
      granted under the 1996 Plan and the 2000 Plan expire no later than ten years
      from the date of grant. Options granted under the 1996 Plan and the 2000 Plan
      are not exercisable after the period or periods provided in the respective
      option agreements. The following table summarizes stock option activity for
      both
      plans for the periods indicated:




**1996
                and**
              **2000
                Plans**
            
            **Weighted
                Average**
              **Exercise
                Price**Options
                outstanding as of June 30, 2002
            
            
            1,014,452
            
            $
            1.89Granted
            
            
            —
            
            $
            —Cancelled
            
            
            (27,000
            )
            $
            2.08Exercised
            
            
            —
            
            $
            —Options
                outstanding as of June 30, 2003
            
            
            987,452
            
            $
            1.88Granted
            
            
            120,000
            
            $
            1.30Cancelled
            
            
            (22,500
            )
            $
            3.95Exercised
            
            
            —
            
            $
            —Options
                outstanding as of June 30, 2004
            
            
            1,084,952
            
            $
            1.77Granted
            
            
            235,000
            
            $
            1.66Cancelled
            
            
            (44,000
            )
            $
            1.58Exercised
            
            
            (69,800
            )
            $
            1.37Options
                outstanding as of June 30, 2005
            
            
            1,206,152
            
            $
            1.78Exercisable
            
            
            887,152
            
            $
            1.87Available
                for future grant (2000 Plan only)
            
            
            171,000




F-18
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


The
      following table summarizes information about stock options outstanding under
      both plans as of June 30, 2005:





**Exercise**
              **Price**
            
            **Number
                Outstanding**
            
            **Weighted**
              **Average**
              **Remaining
                Contractual**
              **Life
                (years)**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number**
              **of
                Shares Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**$1.07
                to $2.16
            
            
            1,090,200
            
            
            6.72
            
            
            1.49
            
            
            771,200
            
            
            1.46$3.37
                to $4.13
            
            
            89,952
            
            
            2.30
            
            
            3.75
            
            
            89,952
            
            
            3.75$6.56
                to $7.63
            
            
            26,000
            
            
            3.81
            
            
            7.40
            
            
            26,000
            
            
            7.40**Totals**
            
            
            1,206,152
            
            
            
            
            
            
            
            
            887,152





(b)
              Director
                  Stock Options





The
      Company adopted effective as of May 2001 a separate stock option plan for
      non-employee members of the Company’s Board of Directors (the “Directors Plan”).
      The purpose of the Directors Plan is to provide an additional incentive to
      attract and retain qualified competent directors upon whose efforts and judgment
      are important to the Company’s success through the encouragement of the
      ownership of stock by such persons.




Under
      the
      Directors Plan, 350,000 shares of common stock are reserved for issuance upon
      the exercise of options granted. Each non-employee who serves as a member of
      the
      Company’s board of directors as of the effective date of the Directors Plan, and
      each non-employee who is elected or otherwise appointed as one of the Company’s
      directors thereafter, will receive a fully vested option to purchase 20,000
      shares of stock. On the last day of each fiscal quarter while the Directors
      Plan
      is in effect, each non-employee director will receive an additional grant of
      an
      option to purchase 625 shares of stock. Further, in accordance with the
      Directors Plan, additional options may be granted to non-employee directors
      from
      time to time. Options to purchase 233,750 shares of common stock are outstanding
      at June 30, 2005 under the Directors Plan and 116,250 shares of stock are
      available to be granted in the future.




Options
      granted under the Directors Plan expire no later than ten years from the date
      of
      grant and are with limited exceptions exercisable as of the grant
      date.




F-19
 Table
          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


The
      following table summarizes the stock option activity under the Directors’ Plan
      for the periods indicated:




**2000**
              **Plan**
            
            **Weighted
                Average**
              **Exercise
                Price**Options
                outstanding as of June 30, 2002
            
            
            152,500
            
            $
            1.57Granted
            
            
            53,125
            
            $
            1.21Cancelled
            
            
            (20,625
            )
            $
            1.25Exercised
            
            
            —
            
            $
            —Options
                outstanding as of June 30, 2003
            
            
            185,000
            
            $
            1.51Granted
            
            
            34,375
            
            $
            1.41Cancelled
            
            
            —
            
            $
            —Exercised
            
            
            —
            
            $
            —Options
                outstanding as of June 30, 2004
            
            
            219,375
            
            $
            1.50Granted
            
            
            14,375
            
            $
            1.93Cancelled
            
            
            —
            
            $
            —Exercised
            
            
            —
            
            $
            —Options
                outstanding as of June 30, 2005
            
            
            233,750
            
            $
            1.52Exercisable
            
            
            233,750
            
            $
            1.52Available
                for future grant
            
            
            116,250


The
      following table summarizes information about the Directors stock options
      outstanding under the Plan as of June 30, 2005:




**Exercise**
              **Price**
            
            **Number
                Outstanding**
            
            **Weighted**
              **Average**
              **Remaining
                Contractual**
              **Life
                (years)**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number**
              **of
                Shares Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**$
                .92 to $1.11
            
            
            12,500
            
            
            7.50
            
            
            1.02
            
            
            12,500
            
            
            1.02$1.21
                to $1.36
            
            
            40,000
            
            
            7.61
            
            
            1.27
            
            
            40,000
            
            
            1.27$1.40
                to $1.85
            
            
            174,375
            
            
            6.42
            
            
            1.59
            
            
            174,375
            
            
            1.59$2.08
                to $7.20
            
            
            6,875
            
            
            9.87
            
            
            2.13
            
            
            6,875
            
            
            2.13**Totals**
            
            
            233,750
            
            
            
            
            
            
            
            
            233,750


**(7)**
              **SHANK
                  SERVICES ACQUISITION**





On
      February 18, 2005, the Company acquired substantially all of the assets and
      related business of Shank Services, a Houston, Texas-based provider of
      commercial fueling and heavy haul transportation services for a purchase price
      of $8.3 million, which includes a $1.9 million performance based contingency
      and
      $0.6 million in acquisition costs. The Company acquired a fleet of 24 commercial
      fueling vehicles, including specialized fuel delivery, transport, oil and
      lubricant flatbed and tanker trucks and related support equipment; over 600
      portable fuel and lubricant tanks with more than 500,000 gallons of capacity
      used by customers to store products provided by Shank Services; 15 heavy haul
      tractor-trailer units designed to transport heavy construction equipment and
      other over-sized loads weighing up to 250,000 pounds; a limited quantity of
      fuel
      and lubricant inventories; office and computer equipment and related specialized
      software technology; customer lists and agreements; certain other intangible
      assets; and outstanding customer accounts receivable. The Company did not assume
      any material Shank Services’ liabilities or debt.




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**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


Of
      the
      $8.3 million purchase price for the acquired assets and related business, $5.8
      million was paid in cash at closing, $1.9 million of the purchase price is
      a
      contingent two-year deferred payment promissory note, and $0.6 million was
      incurred in acquisition costs. The payment of the promissory note is dependent
      on Shank Services meeting a specific target performance objective, and is
      subject to reduction up to the $1.9 million principal amount and accrued
      interest if the performance target is not achieved. Additionally, the Company
      will pay the previous owner 50% of collections on receivables deemed ineligible
      at the time of acquisition.





On
      January 25, 2005, in anticipation of closing the Shank Services acquisition
      in
      February 2005, the Company completed a $6.1 million private placement with
      a
      small group of institutions and other accredited investors to fund the
      acquisition, to develop its operations and for other general corporate purposes.
      The Company issued $6.1 million in 10%, five-year Senior Secured Notes that
      require six semi-annual principal payments commencing January 24, 2007 and
      a 40%
      balloon payment on January 24, 2010. The investors also received four year
      Warrants to purchase 866,200 shares of the Company’s common stock at an exercise
      price of $1.60 per share, including customary redemption and registration
      rights. In addition, 140,300 warrants with substantially similar terms were
      issued to the financing placement agent. These warrants were valued using a
      Black-Scholes Valuation Model and accounted for as a debt discount and a
      corresponding increase in shareholders’ equity. Results of Shank Services’
      operations have been included in the consolidated financial statements since
      the
      February 18, 2005 acquisition date.





The
      purchase price of the acquisition at closing was less than the fair value of
      the
      assets, which created negative goodwill. As required under FASB Statement 141,
      “Business Combinations,” the negative goodwill has been offset against the
      contingent two-year deferred payment promissory note that was issued by the
      Company. The payment of the note is dependent on Shank Services achieving a
      specific performance objective through the fiscal year ended December 31, 2005
      and will not be recorded as a liability by the Company until and unless the
      performance objective’s achievement is probable. Additionally, the holder of the
      note may elect to be paid up to 50% of the amount owed with the Company’s common
      stock, subject to certain ceilings imposed by the Company. Should the
      performance objective be achieved and payments due under the deferred payment
      promissory note become issuable, the Company will recognize the additional
      cost
      of the acquired entity and the related liability. The current estimate of
      negative goodwill as of the acquisition date is subject to further refinement
      based upon the ultimate resolution of contingent consideration.








F-21
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**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


To
      reflect the excess estimated fair value of tangible net assets acquired, the
      purchase price and the preliminary purchase price allocation are summarized
      as
      follows (in thousands):




Cash
                at closing
            
            $
            5,797Acquisition
                costs — direct
            
            
            639Contingent
                earnout
            
            
            1,913Total
                purchase price
            
            
            
            
            $
            8,349Less:
                Fair value of identifiable assets acquired:Plant,
                property and equipment
            
            $
            3,005Accounts
                receivable
            
            
            3,336Inventory
            
            
            150Other
                current assets
            
            
            17Intangible
                assets
            
            
            100Fair
                value of identifiable assets acquired
            
            
            
            
            $
            6,608Less:Contingent
                earnout not achieved
            
            
            
            
            $
            1,913Excess
                of cost over fair value of net assets acquired; negative goodwill,
                recordedas
                Note Payable on the ConsolidatedBalance
                Sheet at June 30, 2005
            
            
            
            
            $
            (172
            )


The
      following unaudited pro forma condensed consolidated statements of operations
      have been prepared as if the acquisition of Shank Services had occurred at
      July
      1, 2004 and July 1, 2003, respectively, (in thousands, except per share data).




**Year
                ended**
              **June
                30, 2005**
            
            **Year
                ended**
              **June
                30, 2004**Fuel,
                tax and service revenue
            
            $
            158,018
            
            $
            125,453Cost
                of fuel, tax and service
            
            
            149,609
            
            
            120,102Gross
                Profit
            
            $
            8,409
            
            $
            5,351Net
                loss
            
            $
            (2,773
            )
            $
            (4,585
            )Basic
                net loss per share
            
            $
            (0.35
            )
            $
            (0.63
            )Diluted
                net loss per share
            
            $
            (0.35
            )
            $
            (0.63
            )





The
      pro
      forma information is presented for informational purposes only and is not
      necessarily indicative of the results of operations that actually would have
      been achieved had the Shank Services acquisition been consummated as of those
      dates, nor is it intended to be a projection of future results.





**(8)**
            **SIGNIFICANT
                CUSTOMERS**





Revenues
      from one significant customer, the United States Postal Service, totaled $11.4
      million or 8.4%, $9.5 million or 14%, and $8.5 or 16% of total revenues in
      the
      fiscal years ended June 30, 2005, 2004 and 2003, respectively. The Company’s
      current agreement with the United States Postal Service expires in August
      2006.




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**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


(9)
            **INCOME
                TAXES**





The
      actual tax benefit of the Company for the years ended June 30, 2005, 2004 and
      2003 differs from the statutory Federal tax rate of 34% due to the following
      (in
      thousands):




**Fiscal
                Year June 30,**
              **2005**
            
            **Fiscal
                Year June 30,**
              **2004**
            
            **Fiscal
                Year**
              **June
                30,**
              **2003**Expected
                  benefit for income taxes at the statutory Federal income tax rate
                  of
                  34%
            
            $
            496
            
            $
            237
            
            $
            538Net
                operating loss carryforward adjustment
            
            
            –
            
            
            133
            
            
            –Change
                in tax rate
            
            
            (12
            )
            
            172
            
            
            –State
                income taxes, net of federal benefit
            
            
            53
            
            
            59
            
            
            37Other
            
            
            34
            
            
            14
            
            
            13Nondeductible
                expenses
            
            
            (10
            )
            
            (12
            )
            
            (9
            )Deferred
                tax valuation allowance
            
            
            (561
            )
            
            (603
            )
            
            (579
            )Benefit
                (provision) for income taxes
            
            $
            —
            
            $
            —
            
            $
            —





Deferred
      income taxes reflect the net effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      their income tax bases, and operating loss carryforwards.




The
      tax
      effects of temporary differences and operating loss carryforwards that give
      rise
      the significant portions of the deferred tax assets and liabilities at June
      30,
      2005 and 2004 are presented below (in thousands):




**June
                30,****2005**
            
            **2004**Deferred
                tax assets:Net
                operating loss carryforwards
            
            $
            5,995
            
            $
            5,684Asset
                basis adjustment for Reorganization
            
            
            222
            
            
            257Allowance
                for doubtful accounts
            
            
            –
            
            
            170Accrued
                expenses
            
            
            131
            
            
            42Contributions
                carryover
            
            
            2
            
            
            2Total
                gross deferred tax assets
            
            
            6,350
            
            
            6,155Less:
                valuation allowance
            
            
            (4,027
            )
            
            (3,466
            )Total
                deferred tax assets
            
            
            2,323
            
            
            2,689Deferred
                tax liabilities:Property
                and equipment
            
            
            (2,286
            )
            
            (2,666
            )Software
                development costs
            
            
            (1
            )
            
            (23
            )Allowance
                for doubtful accounts
            
            
            (6
            )
            
            –Deductible
                contingent payment
            
            
            (30
            )
            
            –Total
                deferred tax liabilities
            
            
            (2,323
            )
            
            (2,689
            )Net
                deferred tax assets
            
            $
            –
            
            $
            –


Realization
      of deferred tax assets is dependent upon generating sufficient taxable income
      in
      future periods. SFAS No. 109 requires a valuation allowance to reduce the
      deferred tax assets reported, if, based on management’s analysis, it is more
      likely than not that some portion or all of the deferred tax assets will not
      be
      realized. After consideration of all the information available, management
      has
      determined that a $4,027,000 and $3,466,000 valuation allowance at June 30,
      2005
      and 2004, respectively, is necessary to reduce the deferred tax assets to the
      amount that will likely be realized.





The
      net
      change in the valuation allowance for the years ended June 30, 2005, 2004 and
      2003 was an increase of $561,000, $603,000, $579,000, respectively. All
      increases to the valuation allowance during these periods were recorded through
      the provision for taxes. As of June 30, 2005, the Company has net operating
      loss carryforwards of approximately $15.1 million which will begin to expire
      in
      the year 2011.




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**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


(10)
            **COMMITMENTS
                AND CONTINGENCIES**





(a)
            Operating
                Leases





Rent
      expense amounted to approximately $594,000, $480,000 and $496,000 for the years
      ended June 30, 2005, 2004 and 2003, respectively. The Company leases real
      property and equipment under operating leases that expire at various times
      through the year 2015. Future minimum lease payments under non-cancelable
      operating leases as of June 30, 2005 are (in thousands):




**Year
                ended**
              **June
                30,**
            
            **Operating
                Lease**
              **Payments**2006
            
            $
            7282007
            
            
            5042008
            
            
            4882009
            
            
            6072010
            
            
            32Thereafter
            
            
            76$
            2,435





The
      Company was obligated to Stanley H. Streicher, the Company’s former President
      and Chief Executive Officer, under two operating leases covering property
      utilized for division truck yards and offices, one of which expired in April
      2002. While the second lease does not expire until August 2015, Mr. Streicher
      sold the property covered by it to an unrelated third party in April 2003.
      In
      conjunction with the sale, Mr. Streicher assigned the lease to the purchaser
      of
      the property extinguishing any further obligation of the Company to Mr.
      Streicher under it. Rent expense paid to Mr. Streicher by the Company for the
      lease of its former corporate offices and the two division facilities was $0,
      $0
      and $12,000 for the fiscal years ended June 30, 2005, 2004 and 2003,
      respectively.




(b)
            Governmental
                Regulation




Numerous
      federal, state and local laws, regulations and ordinances, including those
      relating to protection of the environment and worker safety, affect the
      Company’s operations. Various federal, state and local agencies have broad
      powers under these laws, regulations and ordinances. In particular, the
      operation of the Company’s mobile fueling fleet and its transportation of diesel
      fuel and gasoline are subject to extensive regulation by the U.S. Department
      of
      Transportation (“DOT”) under the Federal Motor Carrier Safety Act (“FMCSA”) and
      the Hazardous Materials Transportation Act (“HMTA”). The Company is subject to
      regulatory and legislative changes that can affect the economics of the industry
      by requiring changes in operating practices or influencing the demand for,
      and
      the cost of providing, its services. On January 4, 2004, new federal safety
      rules took effect reducing the number of hours truck drivers can be on duty,
      including any time spent fueling their trucks or equipment. In addition, the
      Company depends on the supply of diesel fuel and gasoline from the oil and
      gas
      industry and, therefore, is affected by changing taxes, price controls and
      other
      laws and regulations generally relating to the oil and gas industry. The Company
      cannot determine the extent to which its future operations and earnings may
      be
      affected by new legislation, new regulations or changes in existing
      regulations.




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**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 ****


Complying
      with the technical requirements of these laws and regulations is becoming
      increasingly expensive, complex and stringent. These laws may impose penalties
      or sanctions for damages to natural resources or threats to public health and
      safety. Such laws and regulations may also expose the Company to liability
      for
      the conduct of or conditions caused by others, or for acts of the Company that
      were in compliance with all applicable laws at the time such acts were
      performed. Sanctions for noncompliance may include revocation of permits,
      corrective action orders, administrative or civil penalties and criminal
      prosecution. Certain environmental laws provide for joint and several liability
      for remediation of spills and releases of hazardous substances. In addition,
      the
      Company may be subject to claims alleging personal injury or property damage
      as
      a result of alleged exposure to hazardous substances, as well as damage to
      natural resources.




In
      the
      opinion of management, the Company is in substantial compliance with existing
      laws and regulations, although there can be no assurance that substantial costs
      for compliance will not be incurred in the future. Moreover, it is possible
      that
      other developments, such as stricter environmental laws, regulations and
      enforcement policies thereunder, could result in additional, presently
      unquantifiable, costs or liabilities to the Company.




(c)
            Employment
                Agreements




The
      Company entered into an employment agreement with Richard E. Gathright on
      October 26, 2000 pursuant to which Mr. Gathright serves as President and Chief
      Executive Officer of the Company. The agreement has a term of three years,
      commencing on October 26, 2000, provides for an annual base salary of $300,000;
      participation, with other members of management, in a bonus program, whereby
      up
      to 10% of the Company’s pretax profits will be set aside for bonus payments; and
      the grant of 500,000 options to purchase shares of the Company’s common stock at
      a price of $1.50 per share. The agreement further provides that it may be
      terminated by the Company at any time and for any reason. If the agreement
      is
      terminated by the Company without cause, Mr. Gathright shall be due the greater
      of all base salary payable through the term of the agreement or eighteen months
      base salary. If the agreement is terminated for cause, as defined, Mr. Gathright
      will not be entitled to the severance payments specified. On September 25,
      2003,
      the Company and Mr. Gathright amended the terms of the agreement extending
      it
      from three to four years and increasing his annual base salary to $323,000.
      Additionally, this agreement was amended and restated in March 2005 and now
      expires on February 28, 2006.




The
      Company has also entered into written employment agreements with certain other
      Company officers. The agreements vary in terms up to one year and automatically
      renew for successive periods unless notice of termination and severance are
      given by the Company prior to a renewal period.




(d)
            Absence
                of Written Agreements




Most
      of
      the Company's customers do not have written agreements with the Company and
      can
      terminate the Company's services at any time and for any reason. If the Company
      were to experience a high rate of terminations, the Company's business and
      financial performance could be adversely affected.




(e)
            Litigation




The
      Company may be subject to legal proceedings and claims which arise in the
      ordinary course of its business. In the opinion of management, after consulting
      with legal counsel, no litigation or claims exist that should have a material
      effect on the consolidated financial position or results of operations of the
      Company as of June 30, 2005.




(f)
                  The
                      Company paid $78,000, $71,500 and $60,500 for the years ended
                      June 30,
                      3005, 2004 and 2003, respectively, to a provider of investor
                      relations and
                      public relations services whose Chief Executive Officer is
                      a member of the
                      Company’s Board of
                      Directors.


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          of Contents




**STREICHER
        MOBILE FUELING, INC. AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


**(11)**
              **SUBSEQUENT
                  EVENTS**





**H
      & W Acquisition**





On
      October 1, 2005, the Company acquired H & W Petroleum Company, Inc. (“H
& W”), a Houston-based marketer and distributor of lubricants, fuels and
      petroleum products, with additional operating locations in Lufkin, Freeport,
      Waco, Waxahachie and Longview, Texas. Immediately prior to the Company’s
      acquisition, H & W purchased the operating assets of Harkrider Distributing
      Company, Incorporated (“Harkrider”), also a Houston-based business related to H
& W through some common shareholder ownership engaged in the marketing and
      distribution of dry cleaning solvents, chemicals and petroleum products. In
      addition to the operating locations of H&W, Harkrider has an operating
      location in Converse, Texas.





The
      adjusted purchase price of $5.964 million consists of a combination of (i)
      cash,
      (ii) the assumption of specified liabilities, and (iii) the issuance of two
      year
      10% promissory notes totaling $2.463 million, which are subject to an earn
      out
      provision based on the performance of a combined H & W and Harkrider
      business after the acquisition. The price paid for H & W was adjusted by
      working capital and other closing adjustments, including the effect of the
      purchase of a limited amount of Harkrider inventory.





The
      purchase price will be allocated to the underlying assets and liabilities based
      on their estimated fair values.





**Private
      Debt Placement**





On
      September 1, 2005, the Company closed a $3.0 million private debt placement
      with
      institutional and other accredited investors to fund the H & W acquisition
      referred to above, develop its operations and for other general working capital
      purposes. The Company issued $3.0 million in 10% five-year Senior Secured Notes
      that require six semi-annual payments commencing on August 31, 2007 and a 40%
      balloon payment on August 31, 2010. In connection with the financing, the
      Company also issued four year warrants to purchase a total of 360,000 shares
      of
      the Company’s common stock at an exercise price of $2.28 per share, including
      customary redemption and registration rights.





**Amendment
      of Credit Facility**





Concurrently
      with the October 1, 2005 H & W Acquisition, in order to finance the acquired
      accounts receivable and inventory, the Company and its primary lender amended
      the credit facility. Among other changes, the amendment (1) added H & W as a
      borrower; (2) increased the facility to $20 million; (3) provided financing
      for
      the newly acquired and ongoing accounts receivable and inventory resulting
      from
      the H & W Acquisition; (4) extended the term of the original loan and
      security agreement to September 26, 2007; (5) reduced the interest rate to
      prime
      plus 0.75% per annum; (6) replaced the effective net worth covenant with a
      maximum capital expenditures covenant; and (7) lowered the fixed charge coverage
      ratio covenant to 1.0 to 1.0 and made such covenant effective only when there
      is
      less than $3 million available on the facility.




**Exercise
      of Warrants**





Between
      July 1, 2005 and October 1, 2005 approximately 243,000 warrants issued in
      connection with the August 2003 promissory notes were exercised at a price
      of
      $1.00 per share, resulting in cash proceeds of approximately $243,000.
      Additionally, between July 1, 2005 and October 1, 2005, approximately 569,000
      warrants issued in connection with the January 2005 notes were exercised at
      a
      price of $1.60 per share, resulting in cash proceeds of approximately
      $911,000.











F-26