**United
      States**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**




x
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934




**For
      the quarterly period ended September 30, 2005**




OR




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




Commission
      File Number 000-21825




**STREICHER
      MOBILE FUELING, INC.**


(Exact
      name of registrant as specified in its charter)







**Florida**
            
            **65-0707824**(State
                of Incorporation)
            
            (IRS
                Employer
              Identification
                Number)





**800
                West Cypress Creek Road, Suite 580, Fort Lauderdale,
                Florida,**
            
            **33309**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(954)
      308-4200**


(Issuer's
      telephone number, including area code)







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 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 
      oNo 
      x





As
      of November 8, 2005 there were 9,766,762 shares of the registrant’s common stock
      outstanding.










**STREICHER
      MOBILE FUELING, INC.**




**FORM
      10-Q**




**INDEX**




Form
                10-Q Part and Item No.Part
                I
            Financial
                Information:Item
                1.
            Condensed
                Unaudited Consolidated Financial StatementsCondensed
                Consolidated Balance Sheets as of September 30, 2005 (unaudited)
                and June
                30, 2005
            3Condensed
                Unaudited Consolidated Statements of Operations for the three-months
                ended
                September 30, 2005 and 2004
            4Condensed
                Unaudited Consolidated Statements of Cash Flows for the three-months
                ended
                September 30, 2005 and 2004
            5Notes
                to Condensed Unaudited Consolidated Financial Statements
            6Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            14Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            23Item
                4.
            Controls
                and Procedures
            23Part
                II
            Other
                InformationItems
                1. thru 6.
            24Signature
                Page
            25Certifications
            26
                - 28





2




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


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**SEPTEMBER
      30, 2005 AND JUNE 30, 2005**


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




**ASSETS**
              
              **September
                  30,**
                **2005**
                **(Unaudited)**
              
              **June
                  30,**
                **2005**Current
                  assets:Cash
                  and cash equivalents
              
              $
              1,657
              
              $
              4,108Accounts
                  receivable, less allowances of $1,975 and $1,806
              
              
              22,426
              
              
              14,129Inventories
              
              
              603
              
              
              495Prepaid
                  expenses and other current assets
              
              
              342
              
              
              660Total
                  current assets
              
              
              25,028
              
              
              19,392Property
                  and equipment, net
              
              
              9,325
              
              
              9,555Deferred
                  debt costs, net
              
              
              1,045
              
              
              991Other
                  assets
              
              
              181
              
              
              187Total
                  assets
              
              $
              35,579
              
              $
              30,125


**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY**Current
                  liabilities:Bank
                  line of credit payable
              
              $
              3,353
              
              $
              4,801Accounts
                  payable and other liabilities
              
              
              9,908
              
              
              7,345Current
                  portion of long-term debt
              
              
              1,385
              
              
              1,385Total
                  current liabilities
              
              
              14,646
              
              
              13,531Long-term
                  liabilities:Promissory
                  notes, net of unamortized debt discount of $2,497and
                  $2,056
              
              
              11,450
              
              
              9,584Note
                  payable
              
              
              178
              
              
              172Long-term
                  debt, net
              
              
              11,628
              
              
              9,756Total
                  liabilities
              
              
              26,274
              
              
              23,287Shareholders’
                  equity:Common
                  stock, par value $.01 per share; 50,000,000 shares
                  authorized;9,766,762
                  and 8,953,444 issued and outstanding at September 30, 2005 and June
                  30, 2005, respectively
              
              
              98
              
              
              90Additional
                  paid-in capital
              
              
              18,169
              
              
              16,325Accumulated
                  deficit
              
              
              (8,962
              )
              
              (9,577
              )Total
                  shareholders’ equity
              
              
              9,305
              
              
              6,838Total
                  liabilities and shareholders’ equity
              
              $
              35,579
              
              $
              30,125




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




3




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


**CONDENSED
      UNAUDITED CONSOLIDATED** **STATEMENTS
      OF OPERATIONS**


**FOR
      THE THREE-MONTH PERIODS ENDED**


**SEPTEMBER
      30, 2005 and 2004**


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




**2005**
            
            **2004**Petroleum
                product sales and service revenues
            
            $
            46,196
            
            $
            22,731Fuel
                taxes
            
            
            7,443
            
            
            6,178Total
                revenues
            
            
            53,639
            
            
            28,909Cost
                of petroleum product sales and service
            
            
            42,383
            
            
            20,931Fuel
                taxes
            
            
            7,443
            
            
            6,178Total
                cost of sales
            
            
            49,826
            
            
            27,109Gross
                profit
            
            
            3,813
            
            
            1,800Selling,
                general and administrative expenses
            
            
            2,534
            
            
            1,123Operating
                income
            
            
            1,279
            
            
            677Interest
                expense
            
            
            (675
            )
            
            (382
            )Interest
                and other income
            
            
            11
            
            
            —Income
                before income taxes
            
            
            615
            
            
            295Income
                tax expense
            
            
            —
            
            
            —Net
                income
            
            $
            615
            
            $
            295Basic
                net income per share
            
            $
            0.07
            
            $
            0.04Diluted
                net income per share
            
            $
            0.06
            
            $
            0.04Basic
                weighted average common shares outstanding
            
            
            9,339,196
            
            
            7,331,945Diluted
                weighted average common shares outstanding
            
            
            10,197,828
            
            
            7,869,780








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





4





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


**CONDENSED
      UNAUDITED CONSOLIDATED STATEMENTS OF** **CASH
      FLOWS**


**FOR
      THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2005 and 2004**


***(in
      000’s)***





**2005**
            
            **2004**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            615
            
            $
            295Adjustments
                to reconcile net income to net cash used in operating
                activities:Depreciation
                and amortization:Cost
                of sales
            
            
            336
            
            
            271Sales,
                general, and administrative
            
            
            66
            
            
            44Amortization
                of deferred debt costs
            
            
            92
            
            
            55Amortization
                of debt discount
            
            
            164
            
            
            81Amortization
                of stock compensation expense
            
            
            92
            
            
            —Gain
                on disposal of asset
            
            
            (11
            )
            
            —Provision
                for allowance for doubtful accounts
            
            
            200
            
            
            15Changes
                in operating assets and liabilities:Increase
                in restricted cash
            
            
            —
            
            
            (28
            )Increase
                in accounts receivable
            
            
            (8,497
            )
            
            (2,389
            )Decrease
                in inventories, prepaid expenses, and other assets
            
            
            200
            
            
            153Increase
                in accounts payable and other liabilities
            
            
            2,571
            
            
            611Net
                cash used in operating activities
            
            
            (4,172
            )
            
            (892
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchases
                of property and equipment
            
            
            (185
            )
            
            (57
            )Proceeds
                from disposal of property and equipment
            
            
            40
            
            
            —Other
            
            
            (2
            )
            
            —Net
                cash used in investing activities
            
            
            (147
            )
            
            (57
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from issuance of promissory notes
            
            
            3,000
            
            
            —Net
                (repayments) borrowings on line of credit payable
            
            
            (1,448
            )
            
            1,359Proceeds
                from exercise of common stock warrants and options
            
            
            1,155
            
            
            95Payments
                of debt issuance costs
            
            
            (146
            )
            
            —Principal
                payment on promissory notes
            
            
            (693
            )
            
            —Net
                cash provided by financing activities
            
            
            1,868
            
            
            1,454NET
                (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (2,451
            )
            
            505CASH
                AND CASH EQUIVALENTS, beginning of period
            
            
            4,108
            
            
            2,708CASH
                AND CASH EQUIVALENTS, end of period
            
            $
            1,657
            
            $
            3,213SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:Cash
                paid for-Interest
            
            $
            380
            
            $
            71Income
                taxes
            
            $
            —
            
            $
            —


**Supplemental
      Cash Flow Information of Non-Cash Activities:**





In
      the period ended September 30, 2005, the Company recorded unamortized debt
      discount of $605 related to the valuation of the common stock warrants issued
      in
      connection with its September 2005 issuance of private placement
      debt.




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





5





**NOTES
      TO CONDENSED UNAUDITED 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; 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
      delivers 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 distributes a wide variety of specialized petroleum products, lubricants
      and
      chemicals 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
      logistics services over short and long distances to customers requiring the
      movement of over-sized and/or over-weight equipment
      and heavy manufactured products. At September 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 and H & W Petroleum Company,
      Inc. acquisitions, discussed below, the Company now generates revenues from
      packaging, distribution and sales of lubricants and chemicals 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, lubricants and chemicals;
      and charges for transportation logistics services. Cost of sales is comprised
      primarily of the cost of fuel, lubricants and chemicals 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’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. 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 a 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 through the Company’s subsidiary, SMF Services, Inc., generates
      revenues from the sale of commercial fuel, petroleum lubricants and heavy haul
      operations.




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 was 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.




6




NOTES
      TO CONDENSED UNAUDITED CONSOLIDATED
      FINANCIAL STATEMENTS




**(****2****)**
            **BASIS
                OF PRESENTATION**





The
      condensed unaudited 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. The condensed unaudited
      financial statements do not include the accounts of H & W Petroleum Company,
      Inc. which the Company acquired on October 1, 2005.





The
      condensed unaudited consolidated financial statements included herein have
      been
      prepared in accordance with the instructions of Form 10-Q and Rule 10-01 of
      Regulation S-X, and do not include all the information and footnotes required
      by
      generally accepted accounting principles; however, they do include all
      adjustments of a normal recurring nature which, in the opinion of management,
      are necessary to present fairly the results of operations of the Company for
      the
      interim periods presented. Certain amounts have been reclassified to conform
      with current period presentation. Operating results for the three months ended
      September 30, 2005 are not necessarily indicative of the results that may be
      expected for any subsequent period or the full year ending June 30, 2006. These
      interim financial statements should be read in conjunction with the Company’s
      audited consolidated financial statements and related notes included in the
      Company’s Annual Report on Form 10-K for the year ended June 30,
      2005.




**(3)** **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 (prime plus 1.75%
      at September 30, 2005) and outstanding borrowings under the line are secured
      by
      substantially all of the Company assets other than its truck fleet and related
      equipment. The credit facility maturity was 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 in the agreement related to subjective
      acceleration clauses and due to an 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) reduced the unused
      line fee from .75% to .25% after September 25, 2005; and (5) imposes a .50%
      fee
      if the Company terminates the line of credit after September 26, 2005, but
      prior
      to September 26, 2006.





Concurrently
      with the October 1, 2005 H & W Acquisition, in order to finance the acquired
      accounts receivable and inventory, the Company and its bank line of credit
      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 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) eliminated the effective net worth 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.





As
      of
      September 30 2005 and June 30, 2005, the Company had outstanding borrowings
      of
      $3.4 and $4.8 million, respectively, under its $10 million bank line of credit.
      Based on eligible receivables outstanding at September 30, 2005, the Company
      had
      $6.6 million of cash availability on its bank line of credit, and was in
      compliance with all financial covenants required by the loan and security
      agreement.





7




NOTES
      TO CONDENSED UNAUDITED CONSOLIDATED
      FINANCIAL STATEMENTS




**(4)**
            **NET
                INCOME PER SHARE**





Basic
      income per share is computed by dividing the net income attributable to common
      shareholders by the weighted-average number of common shares outstanding during
      the period. Diluted income per share is computed by dividing income attributable
      to common shareholders by the weighted-average number of common shares
      outstanding during the period, increased to include the number of additional
      common shares that would have been outstanding if the dilutive potential common
      shares had been issued. The dilutive effect of outstanding stock options and
      warrants is reflected in diluted earnings per share by application of the
      treasury stock method.





At
      September 30, 2005 and 2004, there were 3,926,525 and 4,574,511, respectively,
      of common stock equivalents outstanding consisting of employee, director and
      unrelated third party stock options and common stock warrants at prices ranging
      from $0.86 to $9.49 per share. For the period ended September 30, 2005 and
      2004,
      858,632 and 537,835, respectively, of these outstanding common stock equivalents
      were dilutive and were included in the computation of diluted net income per
      share.





For
      the
      period ended September 30, 2005, the Company earned net income of $615,000
      or
      $0.07 and $0.06 per basic and diluted share, respectively. For the period ended
      September 30, 2004 the Company earned $295,000 or $0.04 per basic or diluted
      share.





**(5)** **STOCK-BASED
      COMPENSATION**





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 available to be granted under the 1996 Plan and options to purchase
      195,300 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 generally vest over three years
      of
      continuous service and 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.





Information
      concerning both the 1996 and 2000 employee stock option plans for the three
      months ending September 30, 2005 is summarized as follows:




**Shares**
            
            **Weighted
                average**
              **exercise
                price**Outstanding
                July 1, 2005
            
            
            1,206,152
            
            
            $1.78Granted
            
            
            120,000
            
            
            $2.29Exercised
            
            
            (800
            )
            
            $1.24Terminated
            
            
            (15,700
            )
            
            $2.60Outstanding
                September 30, 2005
            
            
            1,309,652
            
            
            $1.82Exercisable
                September 30, 2005
            
            
            873,852
            
            
            $1.85





The
      weighted average remaining contractual life for employee stock options
      outstanding and exercisable at September 30, 2005 is 6.5 years and 5.1 years,
      respectively. The weighted average remaining contractual life for 1,214,282
      options vested or expected to vest in future periods at September 30, 2005
      is
      6.2 years with a weighted average exercise price of $1.84.





8


NOTES
        TO CONDENSED UNAUDITED CONSOLIDATED
        FINANCIAL STATEMENTS





A
      summary
      of the status of the Company’s nonvested employee stock options as of September
      30, 2005 is presented below:




**Shares**
            
            **Weighted
                average**
              **grant-date
                fair value**Nonvested
                at July 1, 2005
            
            
            319,000
            
            
            $1.51Granted
            
            
            120,000
            
            
            $2.03Vested
            
            
            —
            
            
            —Forfeited
            
            
            (3,200
            )
            
            $1.27Nonvested
                at September 30, 2005
            
            
            435,800
            
            
            $1.65





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 whose efforts and judgment
      are
      important to the Company’s success by encouraging 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 257,500 shares of common stock are outstanding
      at September 30, 2005 under the Directors Plan and 92,500 shares of stock are
      available to be granted in the future. The weighted average grant date
      fair-value of director options granted during the three months ended September
      30, 2005 was $1.87.




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. All
      outstanding options as of September 30, 2005 are vested. The weighted average
      remaining contractual life for the outstanding and vested director stock options
      is 6.8 years.





Information
      concerning the Director stock option plan for the three months ending September
      30, 2005 is summarized as follows:




**Shares**
            
            **Weighted
                average**
              **exercise
                price**Outstanding
                July 1, 2005
            
            
            233,750
            
            
            $1.52Granted
            
            
            23,750
            
            
            $2.81Exercised
            
            
            —
            
            
            —Terminated
            
            
            —
            
            
            —Outstanding
                September 30, 2005
            
            
            257,500
            
            
            $1.64Exercisable
                September 30, 2005
            
            
            257,500
            
            
            $1.64





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
      granted to employees. 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. The amortization of stock
      compensation expense for the three months ended September 30, 2005 was $92,000
      and is included in selling, general and administrative expenses in the Company’s
      Condensed Consolidated Statement of Operations. The effect of this accounting
      change is reflected prospectively; therefore no stock based employee
      compensation expense was recognized in the Company’s Condensed Consolidated
      Statement of Operations for the three months ended September 30, 2004. As a
      result of adopting SFAS 123R, there was a reduction of net income for the three
      months ended September 30, 2005 of $92,000 and a reduction in basic and diluted
      income per share of $0.01. There was no effect on cash flow from operations
      or
      cash flow from financing activities. Supplemental disclosure, as if the change
      had been retroactively applied is as follows (dollars in thousands, except
      share
      data):





9


NOTES
        TO CONDENSED UNAUDITED CONSOLIDATED
        FINANCIAL STATEMENTS


**For
                  the Three Months Ended**
                **September
                  30,****2004**Net
                  income, as reported
              
              
              
              
              $
              295Stock-based
                  employee compensation expenseincluded
                  in reported net income
              
              
              
              
              $
              —Stock-based
                  employee compensation expensenot
                  included in reported net income
              
              
              
              
              $
              (31
              )Net
                  income - pro forma
              
              
              
              
              $
              264Basic
                  net income per share - as reported
              
              
              
              
              $
              0.04Basic
                  net income per share - proforma
              
              
              
              
              $
              0.04Diluted
                  net income per share - as reported
              
              
              
              
              $
              0.04Diluted
                  net income per share - proforma
              
              
              
              
              $
              0.03Assumptions:**2005**
              
              
              **2004**Risk
                  free interest rate
              
              
              4.3%
              
              
              3%Dividend
                  yield
              
              
              0%
              
              
              0%Expected
                  volatility
              
              
              110%
              
              
              100%Expected
                  life
              
              
              7.8
                  years
              
              
              10
                  years





The
      fair
      value of each option award is estimated on the date of grant using the
      Black-Scholes valuation model that uses the assumptions noted in the above
      table. Expected volatilities are based on the historical volatility of the
      Company’s stock. The Company uses historical data to estimate option exercise
      and employee termination within the valuation model. The expected term of
      options granted is derived from the output of the option valuation model and
      represents the period of time that options granted are expected to be
      outstanding. The risk-free rate for periods within the contractual life of
      the
      option is based on the rate for U.S. Treasury bonds. As of September 30, 2005
      there was $484,000 of total unrecognized compensation cost related to non-vested
      share-based compensation arrangements. The fair value of the stock options
      are
      expensed on a straight-line basis over the vesting period..




**(6)** **LONG
      TERM DEBT**





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





**September
                30,**
              **2005**
            
            **June
                30,**
              **2005**September
                2005 promissory notes (the “September 2005 Notes) (10% interest due
                semi-annually, February 28 and August 31); principal payments
                of
                $300,000 due beginning August 31, 2007, semi-annually on August 31
                and February 28; balloon payment of $1,200,000 due at maturity on
                August
                31, 2010; effective interest rate of 18.9% includes cost of warrants
                and
                other debt issue costs
            
            $
            3,000
            
            $
            —January
                2005 promissory notes (the “January 2005 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
            
            
            6,100August
                2003 promissory notes (the August 2003 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
            
            $
            6,232
            
            $
            6,925Note
                Payable (contingent deferred promissory note subject to earn-out
                provisions related to Shank Services acquisition if payable, due
                March 31,
                2007)
            
            
            178
            
            
            172Unamortized
                debt discount, net of amortization
            
            
            (2,497
            )
            
            (2,056
            )Less:
                current portion
            
            
            (1,385
            )
            
            (1,385
            )Long-term
                debt, net
            
            $
            11,628
            
            $
            9,756




10


NOTES
        TO CONDENSED UNAUDITED CONSOLIDATED
        FINANCIAL STATEMENTS





***September
      2005 Promissory Notes***





On
      September 1, 2005, the Company closed a $3.0 million private debt placement
      (the
“September 2005 Notes”) 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. The September
      2005 Notes are redeemable by the Company, in whole or in part, by payment of
      a
      percentage of the principal amount, 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%. 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. These warrants were valued at $605,000 and are being amortized over
      the
      four-year life of the Notes.




***Other***




Unamortized
      debt discounts of $2,497,000 at September 30, 2005 and $2,056,000 at June 30,
      2005 were recorded in connection with the August 2003 Notes, January 2005 Notes
      and September 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 $13.947 million and $11.640
      million of the notes at September 30 and June 30, 2005, 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, January 2005 Notes and September 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 September 30, 2005 the Company was in
      compliance with all covenants required by the debt agreements.





11


NOTES
        TO CONDENSED UNAUDITED CONSOLIDATED
        FINANCIAL STATEMENTS





**(7)** **SHAREHOLDERS’
      EQUITY**




For
      the
      three-month period ended September 30, 2005 shareholder’s equity increased by
      $2,467,000 due to: (1) $1,155,000 in proceeds realized from the exercise of
      warrants related to the issuance of the January 2005 Notes and the August 2003
      Notes, which exercises were at prices ranging from $1.00 to $1.60; (2) $605,000
      from the valuation of warrants issued in connection with the September 2005
      Notes; and (3) $615,000 in net income for the period. The following reflects
      the
      change in shareholders equity for three-month period ended September 30, 2005
      (in thousands):




**Common**
              **Stock**
            
            **Additional**
              **Paid
                in Capital**
            
            **Accumulated**
              **Deficit**
            
            **Total**
              **Shareholders’**
              **Equity**June
                30, 2005
            
            $
            90
            
            $
            16,325
            
            $
            (9,577
            )
            $
            6,838Exercise
                of options and warrants
            
            
            8
            
            
            1,147
            
            
            —
            
            
            1,155Issuance
                ofwarrants
            
            
            —
            
            
            605
            
            
            —
            
            
            605Amortization
                of stock compensation expense
            
            
            —
            
            
            92
            
            
            —
            
            
            92Net
                income
            
            
            —
            
            
            —
            
            
            615
            
            
            615September
                30, 2005
            
            $
            98
            
            $
            18,169
            
            $
            (8,962
            )
            $
            9,305




**(8)** **H
      & W PETROLEUM COMPANY, INC. ACQUISITION**





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 was 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.




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.




12


NOTES
        TO CONDENSED UNAUDITED CONSOLIDATED
        FINANCIAL STATEMENTS


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
      H & W acquisition. The purchase price will be allocated to the underlying
      assets and liabilities based on their estimated fair values. Due to the recent
      nature of the transaction, it is not yet practicable to include additional
      disclosures required under SFAS 141.







13





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





This
      report, including but not limited to this Item 2 and the footnotes to the
      financial statements 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
                  and bulk
                  fueling; lubricant and chemical 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 flows, margins, revenues, 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 our 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 under
      the caption “Certain Factors Affecting Future Operating Results,” included in
      the Company’s filing on Form 10-K for the fiscal year ended June 30, 2005, and
      in this Form 10-Q 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 $6.232
                  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





14




·
              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·
              ability
                  to maintain competitive pricing for our services at acceptable
                  margins·
              ability
                  to integrate the Shank Services and H & W 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**





We
      have
      historically generated substantially all of our 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 (as of
      October 1, 2005), 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 our operations 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 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
      and the three months ended September 30, 2005, market prices for fuel were
      significantly higher than in the two prior fiscal years. Delivered volumes
      in
      the current three-month period increased primarily due to the addition of new
      accounts, market expansion, the acquisition of Shank Services business and
      the
      increase in emergency response services related to Hurricanes Dennis, Katrina
      and Rita in Florida and the Gulf Coast Region. The increase in revenues, while
      significantly greater, is not as meaningful as the increase in volume since
      we
      pass through petroleum product 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 and chemicals; emergency response services;
      and transportation logistics services. 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.





15





The
      following table provides selected comparative financial information for the
      three month periods ended September 30, 2005 and 2004:





***(All
      amounts in thousands of dollars, except share and volume
      data)***


**Three-Month
                          Periods Ended**
                        **(Unaudited)**
                      
                      
                      **Increase****9/30/2005****(1)**
                      
                      
                      **9/30/2004**
                      
                      
                      **$**
                      
                      
                      **%**Total
                          revenues
                      
                      $
                      53,639
                      
                      $
                      28,909
                      
                      $
                      24,730
                      
                      
                      86%Gross
                          profit
                      
                      
                      3,813
                      
                      
                      1,800
                      
                      
                      2,013
                      
                      
                      112%Operating
                          income
                      
                      
                      1,279
                      
                      
                      677
                      
                      
                      602
                      
                      
                      89%Net
                          income
                      
                      
                      615
                      
                      
                      295
                      
                      
                      320
                      
                      
                      108%EBITDA******2,5**
                      
                      
                      1,784
                      
                      
                      992
                      
                      
                      792
                      
                      
                      80%Basic
                          net income per share
                      
                      $
                      0.07
                      
                      $
                      0.04
                      
                      $
                      0.03
                      
                      
                      75%Diluted
                          net income per share
                      
                      $
                      0.06
                      
                      $
                      0.04
                      
                      $
                      0.02
                      
                      
                      50%Basic
                          weighted average shares outstanding
                      
                      
                      9,339,196
                      
                      
                      7,331,945
                      
                      
                      2,007,251
                      
                      
                      27%Diluted
                          weighted average shares outstanding
                      
                      
                      10,197,828
                      
                      
                      7,869,780
                      
                      
                      2,328,048
                      
                      
                      30%Depreciation
                          and amortization******3**
                      
                      $
                      402
                      
                      $
                      315
                      
                      $
                      87
                      
                      
                      28%Gallons
                          sold (in thousands)
                      
                      
                      20,819
                      
                      
                      15,153
                      
                      
                      5,666
                      
                      
                      37%Average
                          net margin per gallon (in cents)******4**
                      
                      
                      19.9
                      
                      
                      13.7
                      
                      
                      6.2
                      
                      
                      45%
  1
                        Reflects
                            the Company’s September 1, 2005 issuance of $3,000,000 in Five Year
                            10%
                            Senior Subordinated Notes (the “September 2005 Notes”) and 360,000 four
                            year stock purchase warrants at $2.28 per share but does
                            not reflect the
                            October 1, 2005 acquisition of H & W, certain assets of which secure
                            the payment of the September 2005 Notes.2
                        Earnings
                            before interest, taxes, depreciation and amortization
                            and amortization of
                            stock compensation expense3
                        Depreciation
                            and amortization included in cost of sales was $336,000
                            and $271,000 for
                            the respective periods4
                        Net
                            margin per gallon equals gross profit plus cost of sales
                            depreciation and
                            amortization divided by number of gallons sold5
                        See
                            non-GAAP measure EBITDA Reconciliation Table as
                            follows:


**Non-GAAP
      Measure Reconciliation - EBITDA Reconciliation Table**





**3
                Months Ended****Increase**
            
            **Increase****9/30/2005**
            
            **9/30/2004**
            
            **$**
            
            **%****Net
                income**
            
            $
            615
            
            $
            295
            
            $
            320
            
            
            108%**Add
                back:****Interest,
                net**
            
            
            675
            
            
            382
            
            
            293
            
            
            77%**Depreciation
                and amortization:*****Cost
                of sales***
            
            
            336
            
            
            271
            
            
            65
            
            
            24%***Sales,
                general and administrative***
            
            
            66
            
            
            44
            
            
            22
            
            
            50%**Amortization
                of stock compensation expense**
            
            
            92
            
            
            —
            
            
            92
            
            
            —**EBITDA**
            
            $
            1,784
            
            $
            992
            
            $
            792
            
            
            80%




In
        the
        quarter ended September 30, 2005, our gross profit, operating income and
        net
        income increased over the same period in the prior year by $2,013,000, $602,000
        and $320,000, respectively. These improvements primarily relate to a higher
        net
        margin per gallon and a 37% increase in net new business (defined as the
        incremental change in the volume delivered and sold) as discussed below.


16




Commercial
      mobile and bulk fueling services business continues to be largely dependent
      on
      the number of gallons of fuel sold and the net margin per gallon achieved (“net
      margin per gallon” is defined as gross profit plus depreciation included in cost
      of sales divided by gallons sold). We increased our net new business in the
      current year quarter by 5.7 million gallons to 20.8 million gallons, or 37%,
      over 15.2 million gallons in the prior year quarter.





For
      the
      three months ended September 30, 2005, our net margin per gallon increased
      to
      19.9 cents per gallon compared to 13.1 and 13.7 cents per gallon for the fourth
      quarter ended June 30, 2005 and first quarter ended September 30, 2004,
      respectively. This increase resulted from overall higher margins for the
      services we provide, the 5.7 million gallons of net new business and the
      emergency response mobile fueling and delivery service related to Hurricanes
      Dennis, Katrina and Rita that affected Florida and the Gulf Coast region. There
      can be no assurance that the net margin improvement trend will continue in
      the
      future or that margins will not decrease as the result of increased competition
      or customer resistance to higher prices for our services and/or reduction in
      emergency response services **.**





Earnings
      before interest, taxes, depreciation and amortization and amortization of stock
      compensation expense, “EBITDA”, a non-GAAP measure, improved by $0.8 million to
      $1.8 million for the current quarter compared to the prior year quarter of
      $992,000, an 80% increase. This increase related primarily to a higher net
      margin per gallon of 6.2 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, stock compensation expense 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 and bulk fueling and fuel management
      services will continue to increase as below cost pricing by competitors for
      similar services declines, and existing and new customers recognize that our
      services represent a net cost savings when compared to other refueling
      alternatives.




**Capital
      Resources and Liquidity**





At
      September 30, 2005 and June 30, 2005, we had a total of cash and cash
      availability on our line of credit of $8.3 million and $9.3 million,
      respectively.





On
      September 1, 2005, we closed a $3.0 million private debt placement with
      institutional and other accredited investors (the “September 2005 Notes”) to
      fund the H & W Acquisition, develop our operations and for other general
      working capital purposes. We 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. The September 2005 Notes are redeemable
      by us, in whole or in part, by payment of a percentage of the principal amount,
      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%. In connection with the financing,
      we
      also issued four year warrants to purchase a total of 360,000 shares of our
      common stock at an exercise price of $2.28 per share, including customary
      redemption and registration rights.




In
      January 2005, we 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 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, we 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 the
      Company’s common stock at $1.00 per share. The August 2003 Notes are
      collateralized by a first priority security interest in our 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.
      We
      made our first semi-annual principal payment on August 28, 2005.




17


The
      September 2005, January 2005 and August 2003 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 all the financings. We believe that this has enhanced
      our business credibility with present and prospective customers, fuel suppliers,
      trade creditors, other lenders and the investment community, as well as our
      ability to compete more effectively.




During
      the quarter ended September 30, 2005, we recorded an increase in shareholders’
      equity of $0.6 million for the value of the 360,000 warrants issued in
      connection with the September 2005 Notes. Also, during the quarter ended
      September 30, 2005 warrants issued in connection with the January 2005 Notes
      and
      August 2003 Notes were exercised resulting in cash proceeds of approximately
      $1.2 million.




Our
      debt
      agreements have covenants establishing certain financial requirements and
      operating restrictions. Our 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 its 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.




During
      the three months ended September 30, 2005, our cash used in operating activities
      was $4.2 million compared to $0.9 million in the prior year, representing a
      change of $3.3 million. This use of working capital primarily related to the
      net
      increase in accounts receivable of $6.1 million offset by other operating
      activities netting to the $3.3 million change. The higher receivable balance
      at
      September 30, 2005 compared to June 30, 2005, was principally due to increased
      billings for September emergency response services due to Hurricanes Dennis,
      Katrina and Rita.




Our
      material financial commitments, other than fuel purchases, payroll and general
      expenses, primarily relate to maintaining our bank line of credit and servicing
      the September 2005 Notes, the January 2005 Notes and August 2003
      Notes.




Our
      liquidity and ability to meet 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 our debt
      covenants; and/or raising any required additional capital through the issuance
      of debt or equity securities or additional borrowings.




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 *.*




***$10
      Million Three-Year Credit Facility***





As
      of
      September 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 prime plus 1.75 % at September 30, 2005) and outstanding
      borrowings under the line of credit are secured by substantially all of our
      assets other than our truck fleet and related equipment. As of September 30,
      2005, the maturity date of the line of credit was September 25,
      2006.




18




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 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 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 Notes 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) reduced the
      unused line fee from .75% to .25% after September 25, 2005, and (5) imposes
      a
      .50% fee if we terminate the line of credit after September 26, 2005, but prior
      to September 26, 2006.




As
      of
      September 30, 2005 and June 30, 2005, we had outstanding borrowings of $3.4
      and
      $4.8 million, respectively, under our $10 million bank line of credit. Based
      on
      eligible receivables outstanding at September 30, 2005, we had $6.6 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, we and our 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
      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) eliminated the effective net worth 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**





***September
      2005 Promissory Notes***





On
      September 1, 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 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. The September 2005 Notes are redeemable
      by
      us, in whole or in part, by payment of a percentage of the principal amount,
      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%. In connection with the financing,
      we
      also issued four year warrants to purchase a total of 360,000 shares of our
      common stock at an exercise price of $2.28 per share, including customary
      redemption and registration rights.





19


***January
      2005 Promissory 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, which payments commence 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, including $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.




The
      issuance of 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 September 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 were $2.8 million, after payment of related fees and expenses
      and
      repayment of all outstanding equipment and subordinated debt. 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. We made
      our first semi-annual principal payment on August 28, 2005.




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 $6.232 million owed at September 30,
      2005.




**Results
      of Operations**




The
      following is a summary of selected condensed consolidated results of operations
      for the three-month periods ending September 30, 2005 and 2004 (in
      thousands):




20




**For
                  the Three-Month Periods Ended September 30,****Increase
                  (decrease)****2005**
              
              
              **2004**
              
              
              **Dollars**
              
              
              **Percent**Total
                  revenues
              
              $
              53,639
              
              $
              28,909
              
              $
              24,730
              
              
              85.5
                  %Total
                  cost of sales and services
              
              
              49,826
              
              
              27,109
              
              
              22,717
              
              
              83.8
                  %Gross
                  profit
              
              
              3,813
              
              
              1,800
              
              
              2,013
              
              
              111.8
                  %Selling,
                  general, and administrativeexpenses
              
              
              2,534
              
              
              1,123
              
              
              1,411
              
              
              125.6%Interest
                  expense
              
              
              (675
              )
              
              (382
              )
              
              293
              
              
              76.7
                  %Interest
                  and other income
              
              
              11
              
              
              —
              
              
              11
              
              
              —Net
                  income
              
              $
              615
              
              $
              295
              
              $
              320
              
              
              108.5
                  %Gallons
                  Delivered
              
              
              20,819
              
              
              15,153
              
              
              5,666
              
              
              37.4
                  %




**Comparison
      of Three Months Ended** **September
      30, 2005 to Three Months Ended September 30, 2004**




***Revenues***





Revenues
      increased $24.7 million, or 85.5%, in the current quarter compared to the prior
      year quarter. This increase was principally due to a 37.4 % increase in net
      new
      business and higher fuel prices which averaged 73 cents per gallon higher than
      the earlier period. We sold 20.8 million gallons of fuel in the current quarter,
      compared to the 15.2 million gallons in the prior year quarter, a 5.7 million
      gallon, or 37%, increase in net new business. The results for the current
      quarter include the revenue contribution from Shank Services. The increase
      in
      fuel prices was directly attributable to the volatility of world fuel markets
      and uncertain economic and political conditions, including unprecedented
      escalation in crude oil prices and greater global fuel demand.





***Gross
      Profit***





Gross
      profit increased by $2.0 million for the current quarter compared to the prior
      year quarter. The improvement in gross profit resulted from an increase of
      5.7
      million gallons of net new business sold and overall higher margins generated
      from the services provided, including the emergency response services related
      to
      the hurricanes that devastated wide areas of Florida and the Gulf Coast region,
      including Hurricanes Dennis, Katrina and Rita. The net margin per gallon was
      19.9 cents for the current quarter compared to 13.7 cents for the prior year
      quarter representing an overall 6.2 cent increase in net margin per gallon.
      There can be no assurance that the net margin improvement trend will continue
      in
      the future or that margins will not decrease as the result of increased
      competition or customer resistance to higher prices for our services and/or
      reduction in emergency response services.





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




Selling,
      general and administrative expenses increased $1.4 million in the current
      quarter compared to the prior year quarter. The increase in these expenses
      resulted primarily from an increase in payroll of $579,000 due to the hiring
      of
      new officers in July and August 2005 to strengthen our corporate infrastructure;
      the addition of Shank Services personnel in February 2005; and the new
      accounting rules requiring amortization of stock based compensation expense
      of
      $92,000 which became effective July 1, 2005. In addition, credit card fees
      and
      bad debt expense increased by $346,000 in the current quarter.





***Interest
      Expense Summary***




As
      a
      result of the issuance of the September 2005 Notes and the January 2005 Notes,
      interest expense increased by approximately $293,000 in the current quarter
      compared to the prior year quarter. The components of interest expense are
      as
      follows (in thousands):




21




**Three
                Months Ended**
              **September
                30,****2005**
            
            **2004****Stated
                Rate Interest Expense**:Bank
                line of credit
            
            $
            68
            
            $
            66Long
                term debt
            
            
            346
            
            
            173Other
            
            
            5
            
            
            5**Total
                stated rate interest expense**
            
            
            **419**
            
            
            **244****Non-Cash
                Interest Amortization:**Amortization
                of deferred debt costs
            
            
            92
            
            
            56Amortization
                of debt discount
            
            
            164
            
            
            82**Total
                amortization of interest expense**
            
            
            **256**
            
            
            **138****Total
                interest expense**
            
            $
            675
            
            $
            382





***Income
      Taxes***





We
      recorded no income tax expense for the current year quarter. The net operating
      loss carryforward at June 30, 2005 was $15.1 million.




***Net
      Income***




The
      $320,000 improvement in net income for the current year quarter over the prior
      year quarter was related to the increase in gross profit of $2.0 million,
      partially offset by the increase in selling, general and administrative expenses
      of $1.4 million and higher interest expense of $0.3 million.




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




Earnings
      before interest, taxes, depreciation, and amortization and amortization of
      stock
      compensation expense (“EBITDA”) increased $0.8 million in the current year
      quarter ****** compared
      to the three months ended September
      30, 2004 .
      The increase in EBITDA was primarily due to the increase in gross profit of
      $2.0
      million, partially offset by the increase in selling, general, and
      administrative expenses of $1.4 million. Components of EBITDA for the quarters
      ended September
      30, 2005 ****** and
      2004 are as follows (in thousands):




**For
                the Three Months Ended****September
                30,**
              **2005**
            
            **September
                30,**
              **2004**Net
                income
            
            $
            615
            
            $
            295Add
              back:Interest
                expense
            
            
            419
            
            
            244Non-cash
                interest expense
            
            
            256
            
            
            138Depreciation
                and amortization expense:Cost
                of sales
            
            
            336
            
            
            271Selling,
                general and administrative
            
            
            66
            
            
            44Amortization
                of stock compensation expense
            
            
            92
            
            
            —EBITDA
            
            $
            1,784
            
            $
            992




22





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Our
      exposure to market risk is limited primarily to the fluctuating interest rates
      associated with the variable rate portion of its outstanding debt. 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 the financial condition, results
      of operations and cash flows of the Company.





The
      interest on the our bank line of credit of up to $20,000,000 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. If the our line of credit average outstanding balance was $2.5 million,
      an increase of 1% in the variable interest rate would result in additional
      annual interest expense of $25,000. The interest on our $3.0 million, $6.1
      million and $6.925 million promissory notes is fixed for the term of the notes
      at 10% per annum.




**ITEM
      4. 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
      our 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.





During
      the three months ended September 30, 2005, the impact of Hurricanes Dennis,
      Katrina and Rita on Florida and the Gulf Coast region led us to deploy emergency
      response procedures and controls in order to manage some of our operations
      and
      administration. Certain of these procedures and controls required us to use
      alternative technology and/or different processes than we customarily use for
      communication and documentation. We believe that these alternatives were
      adequate to ensure the proper recording of our expenses and revenues during
      this
      period. Other than these temporary emergency response procedures and controls,
      however, there have been no significant changes in the Company’s internal
      controls during the quarter ended September 30, 2005, or in other factors that
      could significantly affect internal controls subsequent to the date of the
      evaluation described above.








23





**PART
      II. Other Information**





**ITEM
      1. LEGAL PROCEEDINGS**





As
      previously disclosed in the Company’s Form 10-K for the fiscal year ended June
      30, 2005, on April 18, 2005, the Court of Appeals for the 11th Circuit
      upheld the decision of the National Labor Relations Board (“NLRB”) naming the
      International Brotherhood of Teamsters, Local 385, AFL-CIO (the “Union”) 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.
      Subsequent to the Court of Appeals' decision, however, in an order dated October
      21, 2005, the NLRB declared that the Union had disclaimed any interest in
      further representing the employees at the Orlando facility. In addition, by
      letter dated October 20, 2005, the NLRB informed the Company that it had
      satisfactorily complied with the requirements of the Board Order and the case
      was therefore closed. Accordingly, the Union is no longer the
      bargaining representative for any of the Company's Orlando employees
      and there will be no further proceedings in this matter.




**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





None.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None.





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





None.





**ITEM
      5. OTHER INFORMATION**





None.




**ITEM
      6. EXHIBITS**





**Exhibits**





Exhibit
                No.
            Description31.1
            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




24


**SIGNATURES**


Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.




STREICHER
              MOBILE FUELING, INC.Date: November
              14, 2005
            By:
            /s/ Richard
              E. GathrightRichard
              E. GathrightChief
              Executive Officer and President




By:
            /s/ Michael
              S. ShoreMichael
              S. ShoreChief
              Financial Officer and Senior Vice President






25