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Mobley Environmental Services Inc – ‘10QSB’ for 3/31/99

As of: Monday, 5/17/99 · For: 3/31/99 · Accession #: 1047469-99-21085 · File #: 0-19497

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/17/99  Mobley Environmental Services Inc 10QSB       3/31/99    2:36K                                    Merrill Corp/New/FA

Quarterly Report — Small Business — Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Quarterly Report -- Small Business                    17     75K 
 2: EX-27       Exhibit 27 - FDS                                       2      8K

10QSB — Quarterly Report — Small Business
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Changes in Securities Defaults Upon Senior Securities Exhibits and Reports on Form 8-K Financial Statements Financial Statements (Unaudited) Legal Proceedings Management's Discussion and Analysis Management's Discussion and Analysis 13-14 Other Information Submission of Matters to a Vote of Security Holders
1	1st Page - Filing Submission
2	Item 1. Financial Statements (Unaudited)
"	Item 2. Management's Discussion and Analysis 13-14
3	Item 1. Financial Statements
14	Item 2. Management's Discussion and Analysis
16	Item 1. Legal Proceedings
"	Item 2. Changes in Securities
"	Item 3. Defaults Upon Senior Securities
"	Item 4. Submission of Matters to a Vote of Security Holders
"	Item 5. Other Information
"	Item 6. Exhibits and Reports on Form 8-K

10QSB 1st Page of 17 TOC ↑Top Previous Next ↓Bottom Just 1st
 
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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549 

------------------  

FORM 10-QSB 

  /X/   Quarterly Report Pursuant to Section 13 or 15(d)
        of the Securities Exchange Act of 1934
         For the quarterly period ended March 31, 1999

OR

   / /   Transition Report Pursuant to Section 13 or 15(d)
        of the Securities Exchange Act of 1934
         For the transition period from _____ to _____

  Commission File Number 0-19497

  ------------------

 MOBLEY ENVIRONMENTAL SERVICES, INC.
(Exact name of small business issuer as specified in its charter)   

DELAWARE                               75-2242963       
(State or other jurisdiction of                 (I.R.S. Employer                
Incorporation or organization)                 Identification No.)            

c/o 111 CONGRESS AVENUE, SUITE 1400                                             
AUSTIN, TEXAS                               78701             
(Address of principal executive offices)           (Zip Code)                   

Issuer's telephone number, including area code: None  

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12   
months and (2) has been subject to such filing requirements for the past 90     
days.  Yes   X     No                                                           
----       ----                                           

  The number of shares outstanding of the registrant's common stock, as of
May 1, 1999 was 4,259,650 shares of Class A Common Stock, $.01 par value and    
4,575,643 shares of Class B Common Stock, $.01 par value.                       

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
 FORM 10-QSB
 INDEX

                                                                [Download Table]

Part I - FINANCIAL INFORMATION                                            Page 
                                                                          ---- 
                                                                               
Item 1.           Financial Statements (Unaudited)                             

                  - Consolidated Balance Sheets - March 31, 1999               
                    and December 31, 1998                                   2  

                  - Consolidated Statements of Operations - Three              
                    Months Ended March 31, 1999 and 1998                    3  

                  - Consolidated Statement of Stockholders' Equity -           
                    Three Months Ended March 31, 1999                       4  

                  - Consolidated Statements of Cash Flows - Three Months       
                    Ended March 31, 1999 and 1998                           5  

                  - Notes to Consolidated Financial Statements             6-12

Item 2.           Management's Discussion and Analysis                    13-14

Part II - OTHER INFORMATION                                                    

Item 1.           Legal Proceedings                                        15  

Item 2.           Changes in Securities                                    15  

Item 3.           Defaults Upon Senior Securities                          15  

Item 4.           Submission of Matters to a Vote of Security Holders      15  

Item 5.           Other Information                                        15  

Item 6.           Exhibits and Reports on Form 8-K                         15  

Signatures                                                                 16  

1 

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PART I. FINANCIAL INFORMATION                                                   

ITEM 1.  FINANCIAL STATEMENTS                                                   

 MOBLEY ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES

 Consolidated Balance Sheets
 (dollars in thousands, except share data)

                                                        [Enlarge/Download Table]

                                                             MARCH 31,     DECEMBER 31,
                                                               1999            1998    
                                                            (UNAUDITED)                
                                                            ------------  ------------ 
                                                                                       
                                     ASSETS                                            
Current assets:                                                                        
    Cash and cash equivalents                                 $    527           81    
    Receivables                                                    142          155    
    Prepaid expenses                                                94           94    
                                                              ---------    ---------   
                  Total current assets                             763          330    

Property, plant and equipment, net                                 186          188    
Investment securities available for sale                         4,734        4,954    
Other assets, net                                                  335          359    
                                                              ---------    ---------   

                                                              $  6,018        5,831    
                                                              ---------    ---------   
                                                              ---------    ---------   

                      LIABILITIES AND STOCKHOLDERS' EQUITY                             

Accounts payable                                              $    133           61    
Accrued expenses                                                   591          413    
                                                              ---------    ---------   
                  Total liabilities                                724          474    
                                                              ---------    ---------   

Stockholders' equity:                                                                  
    Preferred stock; $.01 par value; 2,000,000 shares                                  
       authorized; none issued                                       -            -    
    Common stock; $.01 par value:                                                      
       Class A; 15,000,000 shares authorized; 4,259,650                                
          shares issued and outstanding                             43           43    
       Class B;  10,000,000 shares authorized; 4,660,350                               
          shares issued and 4,575,643 shares outstanding            47           47    
    Additional paid-in capital                                  25,159       25,159    
    Accumulated deficit                                        (20,020)     (19,845)   
    Accumulated other comprehensive income (loss)                   73          (39)   
    Treasury stock; 84,707 shares of Class B common                                    
       stock, at cost                                               (8)          (8)   
                                                              ---------    ---------   
                  Total stockholders' equity                     5,294        5,357    

Commitments and contingencies                                                          
                                                              ---------    ---------   
                                                              $  6,018        5,831    
                                                              ---------    ---------   
                                                              ---------    ---------   

                                                                 (Continued)

See accompanying notes to consolidated financial statements.                    

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 MOBLEY ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES

 Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
 (unaudited)

                                                        [Enlarge/Download Table]

                                                          THREE MONTHS ENDED MARCH 31,
                                                          ----------------------------
                                                             1999            1998     
                                                          --------         -------    
                                                                                      
Revenues                                                  $    -               -      
Cost of revenues                                               -               -      
                                                          --------         -------    
                  Gross profit                                 -               -      

General and administrative expenses                          275             159      
                                                          --------         -------    

                  Operating loss                            (275)           (159)     

Realized gain on sale of investment securities                22               -      
Interest income                                               66              77      
Other income, net                                             12               5      
                                                          --------         -------    

                  Net loss before income taxes              (175)            (77)     

Income taxes                                                   -               -      
                                                          --------         -------    
                  Net loss                                  (175)            (77)     

Comprehensive income (loss):                                                          
    Other comprehensive income - change in net                                        
       unrealized gains on securities, net of tax of $58     112               -      
                                                          --------         -------    
                  Comprehensive loss                       $ (63)            (77)     
                                                          --------         -------    
                                                          --------         -------    

Net loss per share - basic and assuming dilution           $(0.02)         (0.01)     
                                                          --------         -------    
                                                          --------         -------    

                                                                     (Continued)

See accompanying notes to consolidated financial statements.                    

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 MOBLEY ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES

Consolidated Statement of Stockholders' Equity
 Three Months Ended March 31, 1999
(dollars in thousands)
 (unaudited)

                                                                [Download Table]

                                                                       
Preferred Stock - none issued                                 $       -
                                                              ---------
Class A Common Stock:                                                  
    Balance at December 31, 1998 and March 31, 1999                 43 
                                                              ---------

Class B Common Stock:                                                  
    Balance at December 31, 1998 and March 31, 1999                 47 
                                                              ---------

Additional Paid-In Capital:                                            
    Balance at December 31, 1998 and March 31, 1999             25,159 
                                                              ---------

Accumulated Deficit:                                                   
    Balance at December 31, 1998                               (19,845)
    Net loss                                                      (175)
                                                              ---------
                  Balance at March 31, 1999                    (20,020)
                                                              ---------

Accumulated other comprehensive income (loss):                         
    Balance at December 31, 1998                                   (39)
    Change in unrealized gain on investment securities             112 
                                                              ---------
                  Balance at March 31, 1999                         73 
                                                              ---------

Treasury Stock:                                                        
    Balance at December 31, 1998 and March 31, 1999                 (8)
                                                              ---------

                  Total stockholders' equity at March 31, 1999 $  5,294
                                                              ---------
                                                              ---------

                                                   (Continued)

See accompanying notes to consolidated financial statements.                    

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 MOBLEY ENVIRONMENTAL SERVICES, INC.
AND SUBSIDIARIES

 Consolidated Statements of Cash Flows
(dollars in thousands)
 (unaudited)

                                                        [Enlarge/Download Table]

                                                                   THREE MONTHS ENDED MARCH 31,
                                                                   ----------------------------
                                                                      1999           1998      
                                                                   --------       ---------    
                                                                                               
Cash flows from operating activities:                                                          
    Net loss                                                         $(175)            (77)    
       Adjustments to reconcile net loss to net                                                
          cash provided (used) by operating activities:                                        
             Depreciation                                                2               6     
             Deferred compensation costs under restricted                                      
               stock agreements                                          -              24     
             Gain on sale of investment securities                     (22)              -     
             Changes in certain operating assets and liabilities:                              
               Receivables                                              13               4     
               Prepaid expenses and other                               24              35     
               Accounts payable                                         72             (24)    
               Accrued expenses                                        120              (7)    
                                                                   --------       ---------    
                  Net cash provided (used) by operating                                        
                     activities                                         34             (39)    
                                                                   --------       ---------    

Cash flows from investing activities - net proceeds from                                       
    sale of investment securities                                      412              56     
                                                                   --------       ---------    

Net increase in cash and cash equivalents                              446              17     

Cash and cash equivalents at beginning of period                        81             353     
                                                                   --------       ---------    

Cash and cash equivalents at end of period                           $ 527             370     
                                                                   --------       ---------    
                                                                   --------       ---------    

                                                                     (Continued)

See accompanying notes to consolidated financial statements.                    

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
 (unaudited)

(1)      BASIS OF PRESENTATION                                                  

         The accompanying financial statements present the consolidated accounts
of Mobley Environmental Services, Inc. (the "Company") and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.        

         The unaudited consolidated financial statements reflect all adjustments
which are, in the opinion of management, of a normal and recurring nature and   
necessary for a fair presentation of the consolidated financial position of the 
Company as of March 31, 1999, and the consolidated results of operations and    
cash flows for the periods presented herein. Interim results are not necessarily
indicative of results for a full year. The unaudited consolidated financial     
statements should be read in conjunction with the consolidated financial        
statements and notes thereto presented in the Company's Annual Report on Form   
10-KSB for the year ended December 31, 1998.                                    

Management of the Company has made a number of estimates and  
assumptions relating to the reporting of assets and liabilities and the         
disclosure of contingent assets and liabilities to prepare these financial      
statements in accordance with generally accepted accounting principles. Actual  
results could differ from those estimates.                                      

(2)      ASSET SALES AND DISCONTINUED OPERATIONS                                

    During 1996, in light of the Company's severely weakened financial
condition and, in particular, concerns about its liquidity, the Board of        
Directors reviewed the challenges facing the Company and discussed in general   
terms the alternatives available to address them. As part of these              
deliberations, management and the Company's financial advisors reviewed in      
detail with the Board of Directors their efforts with third parties to attract  
possible investments in, or strategic alliances with, the Company. Since such   
efforts did not yield access to funds on terms acceptable to the Company, the   
Board of Directors determined that the divestiture of its operations was in the 
best interest of the Company and its shareholders. These circumstances required 
the Company to re-evaluate the basis used to assess the carrying values of      
assets. Subsequently, on January 20, 1997, and May 29, 1997, the Company sold   
substantially all of its operating assets in two separate transactions. The     
Company's two business segments, waste management services and oilfield         
services, were accounted for as discontinued operations. The transactions and   
their impact on the Company's consolidated financial statements are described in
the following paragraphs.                                                       

 SALE OF OILFIELD SERVICES ASSETS AND DISCONTINUANCE OF BUSINESS
SEGMENT. On January 20, 1997, the Company sold substantially all of the assets  
related to its oilfield services business to Dawson Production Services, Inc.   
("Dawson"). As a result of that transaction, the Company received approximately 
$4,917,000 and a subordinated note in the amount of $500,000, due in January    
2002, in exchange for such assets. The note was paid in full during the fourth  
quarter of 1998.                                                                

         SALE OF WASTE MANAGEMENT SERVICES ASSETS AND DISCONTINUANCE OF BUSINESS
SEGMENT. On May 29, 1997, the Company sold substantially all of the assets      
related to its waste management services activities to United States Filter     
Corporation ("USF"). As a result of that transaction, the Company               

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
 (unaudited)

received $8,000,000 in shares of USF common stock (registered with the          
Securities and Exchange Commission) in exchange for such assets, and can earn   
up to an additional $4,000,000 in USF common stock based on the performance     
of the business during the two years following its sale. Upon completion of     
the sale of the waste management services segment, the $8,000,000 of USF        
common stock was sold. Proceeds from this sale were used to pay off existing    
long-term debt and current liabilities, and the remaining proceeds were used    
to purchase investment grade fixed term securities. As of May 29, 1998,         
approximately 20% of the earnout was achieved and 28,294 shares of U.S.         
Filter stock was received for the first year of operations subsequent to        
closing the sale.                                                               

  In 1995, the Company acquired certain assets of a group of three
affiliated companies, including Romero Brothers Oil Exchange, Inc.,             
Environmental Petroleum Products Co./EPPCO, and Environmental Insight, Inc. The 
principals of the acquired companies had the right to earn shares in the Company
based on the profitability of the acquired companies. This right was suspended  
due to the sale of the waste management services segment. In order to settle    
this obligation and to offer the principals of the acquired companies an        
incentive to remain with the business to maximize the Company's earnout         
provision with USF, the Company paid the principals of the acquired companies   
approximately $115,000 in June 1998. In addition, the principals of the acquired
companies are to receive a percentage of the Company's earnout with US Filter.  
Approximately $72,500 was paid to the principals of the acquired companies      
during the third quarter of 1998 resulting from the earnout with US Filter that 
was achieved as of May 29, 1998 for the first year of operations subsequent to  
closing the sale of the waste management services segment.                      

       Because of the outstanding contractual indemnification obligations of
the Company resulting from its business divestitures and in light of pending    
litigation to which the Company is a party, the Company will remain in existence
and incur certain general and administrative expenses for the foreseeable future
but will have no operating assets. Therefore, certain general and administrative
expenses and nonoperating income and expense have been accounted for as         
continuing operations. Future costs incurred in connection with these           
indemnification obligations and litigation responsibilities will be reported as 
part of the discontinued operations in which they originated or to which they   
related. The Company believes it is probable that it will continue to incur     
certain costs associated with these legal matters and accordingly established an
accrual for estimated out-of-pocket expenses related to the ongoing             
administrative management of such matters. However, the Company is currently    
unable to reasonably estimate its potential exposure for defending such matters,
any indemnity obligations resulting therefrom, and any corresponding insurance  
reimbursement (note 7).                                                         

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
 (unaudited)

(3)    INVESTMENT SECURITIES                                                    

  The amortized cost, gross unrealized holding gains, gross unrealized
       holding losses and fair value for investment securities by major security
      type and class of security at March 31, 1999 and December 31, 1998, were
as follows:                                                       

                                                        [Enlarge/Download Table]

                                                            GROSS              GROSS              
                                                          UNREALIZED         UNREALIZED           
                                        AMORTIZED          HOLDING            HOLDING       FAIR  
                                          COST              GAINS              LOSSES       VALUE 
                                        ---------         ----------         -----------   -------
                                                                                                  
             AT MARCH 31, 1999                                                                    

       U.S. Treasury securities         $    720                 14                  -         734
       Corporate debt securities           3,250                 37                  -       3,287
                                        ---------         ----------         -----------   -------
                                           3,970                 51                  -       4,021

       U.S. Filter common stock              654                 59                  -         713
                                        ---------         ----------         -----------   -------

                                        $  4,624                110                  -       4,734
                                        ---------         ----------         -----------   -------
                                        ---------         ----------         -----------   -------


                                                            GROSS              GROSS              
                                                          UNREALIZED         UNREALIZED           
                                        AMORTIZED          HOLDING            HOLDING       FAIR  
                                          COST              GAINS              LOSSES       VALUE 
                                        ---------         ----------         -----------   -------
                                                                                                  
             AT DECEMBER 31, 1998                                                                 

       U.S. Treasury securities         $    720                 20                  -         740
       Corporate debt securities           3,500                 67                  -       3,567
                                        ---------         ----------         -----------   -------
                                           4,220                 87                  -       4,307

       U.S. Filter common stock              794                  -               (147)        647
                                        ---------         ----------         -----------   -------
                                        $  5,014                 87               (147)      4,954
                                        ---------         ----------         -----------   -------
                                        ---------         ----------         -----------   -------

 (4)     ACCRUED EXPENSES                                                                         

         At March 31, 1999 accrued expenses were comprised of the following (in                   
thousands of dollars):                                                                            

       $  357   Accrued insurance claims payable                                                  
          126   Accrued expenses for estimated legal costs relating to Gibraltar (note 7)         
          108   Other                                                                             
       ------                                                                                     
       $  591                                                                                     
       ------                                                                                     
       ------                                                                                     

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
 (unaudited)

(5)      EARNINGS PER COMMON SHARE                                              

Earnings per share amounts presented were calculated under the
provisions of SFAS 128, EARNINGS PER SHARE. Basic earnings per share is computed
based on earnings available to common shareholders and the weighted average     
number of common shares outstanding. The earnings per share assuming dilution   
amounts presented are computed based on earnings available to common            
shareholders and the weighted average number of common shares outstanding,      
including shares assumed to be issued under the Company's 1995 Employee         
Restricted Stock Plan. SFAS 128 had no impact on earnings per share.            

        The following data shows the weighted average number of shares used in
computing basic and diluted net loss per share:                                 

                                                                [Download Table]

                                                Three Months Ended       
                                                      March 31,          
                                             ----------------------------
                                               1999               1998   
                                             ---------          ---------
                                                                         
Weighted average number of common shares                                 
   used in basic EPS                         8,835,293          8,835,293

Effect of dilutive securities                                            
   1995 Employee Restricted Stock Plan         168,000            168,000
                                             ---------          ---------

Weighted average number of common shares                                 
   and dilutive potential common stock used                              
   in EPS assuming dilution                  9,003,293          9,003,293
                                             ---------          ---------
                                             ---------          ---------

(6)      COMPREHENSIVE INCOME                                                   

 On January 1, 1998, the Company adopted SFAS No. 130, REPORTING
COMPREHENSIVE INCOME. SFAS No. 130 establishes standards for reporting and      
presentation of comprehensive income and its components in a full set of        
financial statements. Comprehensive income consists of net income and net       
unrealized gains (losses) on securities and is presented in the consolidated    
statements of operations. The Statement requires only additional disclosures in 
the consolidated financial statements; it does not affect the Company's         
financial position or results of operations.                                    

(7)      COMMITMENTS AND CONTINGENCIES                                          

  LETTERS OF CREDIT. At March 31, 1999, letters of credit totaling
approximately $442,566 had been provided by the Company to its insurance carrier
in connection with its workers' compensation, general liability, and auto       
liability insurance policies.                                                   

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
 (unaudited)

      LITIGATION AND VARIOUS OTHER CLAIMS. The Company continues to defend
various claims resulting from the operations of its former subsidiary,          
Gibraltar, which was sold effective December 31, 1994. As of March 31, 1999,    
three such lawsuits were pending. During the Company's ownership of Gibraltar,  
Gibraltar engaged in the collection, transportation, analysis, treatment,       
management, and disposal of various types of hazardous wastes. In the actions   
pending against the Company and/or Gibraltar, the plaintiffs complain of a      
variety of acts by Gibraltar which allegedly occurred in the course of its      
operations, including improper air emissions, nuisance odors, contamination of  
water supplies, and repeated and continuing violations of environmental laws. In
the various pending actions, plaintiffs assert similar theories as the alleged  
basis for recovery, including negligence, nuisance, trespass, fraudulent        
concealment, assault and battery, and intentional infliction of emotional       
distress. Likewise, such plaintiffs seek similar types of damages, including    
loss of property value and compensatory and punitive damages for personal injury
and property damage for nuisance odors, physical discomfort and impairment,     
interference with use and enjoyment of property, medical expenses, mental       
anguish, and loss of earning capacity. An additional claimant seeks permanent   
closure of the facility and civil penalties as the remedy for alleged violations
by Gibraltar of environmental protection statutes and endangerment to public    
health and the environment.                                                     

     These matters raise difficult and complex factual and legal issues,
including but not limited to, the nature and amount of the Company's liability, 
if any. Although the Company is a defendant in some litigation, in other matters
the Company's potential liability arises from material contractual              
indemnifications given by the Company to the purchaser of Gibraltar. In         
particular, in connection with the sale of Gibraltar, the Company made extensive
representations and warranties regarding Gibraltar. The Company is required to  
indemnify the American Ecology Corporation ("AEC") for all losses resulting from
breaches of representations and warranties and pending or future claims or      
proceedings resulting from circumstances existing prior to closing. The terms of
the stock purchase agreement between AEC and the Company provided that such     
indemnification obligations would extend through June 30, 1996 (or in the case  
of tax, environmental and ERISA claims, through June 30, 1998). However, the    
Company and AEC executed a Tolling Agreement dated July 30, 1997, pursuant to   
which the statute of limitations period for certain potential claims by either  
party against the other was tolled from July 30, 1997 through July 30, 2000.    
These indemnifications may include the potential liability of former customers  
of Gibraltar, a significant number of which have also become defendants in      
litigation involving Gibraltar's operations. The failure of Gibraltar to prevail
in these matters could result in significant liabilities to the Company.        

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
 (unaudited)

         The Company has been notified by its insurance carrier that it disputes
the Company's interpretation of its pollution liability insurance coverage and  
policy limitations applicable to the foregoing claims. While the Company is     
vigorously pursuing a favorable resolution of this dispute, it is unable to     
determine the likelihood of an unfavorable outcome at this time.                

     The Company, based on consultation with its legal counsel, believes
that it is probable that the Company will continue to incur certain costs       
associated with the foregoing matters and accordingly, in connection with the   
divestiture of Gibraltar in 1994, established an accrual for estimated          
out-of-pocket expenses related to the ongoing administrative management of such 
matters. However, the Company is currently unable to reasonably estimate its    
potential exposure for defending such matters, any indemnity obligations        
resulting therefrom, and any corresponding insurance reimbursement. As noted    
above, the litigation matters to which the Company is a party raise several     
difficult and complex factual and legal issues. More specifically: (i) while    
certain of the plaintiffs exhibit apparent physical injury and a variety of     
health problems, the requisite causal connection to Gibraltar's facilities or   
operations has not been established; (ii) certain of the cases involve literally
hundreds of plaintiffs whose physical condition and medical history have not yet
begun to be investigated; (iii) although the Company has historically           
experienced some degree of success in certain jury trials, there is inherent    
uncertainty associated with jury trials in cases such as these which tend to    
have a strong emotional appeal; (iv) the extent of pollution liability insurance
coverage available to the Company for potential indemnity exposure and defense  
costs is currently in dispute; (v) the Company's potential liability relating to
defense cost claims of approximately 50 of Gibraltar's former customers who have
also been named in the litigation (and who are represented by over 20 different 
law firms) is currently not determinable; and (vi) the indemnifications given to
AEC in connection with the Gibraltar sale are comprehensive and subject to broad
interpretation. Accordingly, the Company has not made an accrual for losses, if 
any, which might result from these legal matters as such amounts or a range of  
amounts are not currently reasonably estimable. The Company's future financial  
condition, results of operations, and liquidity could be materially adversely   
affected as the nature and scope of the Company's ultimate liability arising    
from Gibraltar's operations and sale become better defined.                     

      There are various other routine claims and legal actions pending and
threatened against the Company which are incidental to the Company's business   
and have arisen in the ordinary course of its business related to services,     
contracts, employment, and other matters. Where applicable, the Company has     
recorded accruals for estimated potential damages and expenses associated with  
such matters. While the final outcome of these matters cannot be predicted with 
certainty, management upon consultation with legal counsel, and considering the 
Company's limited continuing activities, believes that financial obligations of 
the Company arising from such claims could have a material adverse effect on its
consolidated financial condition, results of operations, or liquidity.          

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
 (unaudited)

(8)      YEAR 2000 COMPLIANCE                                                   

     The Company has made an assessment of the potential risk associated
with the Year 2000 issue. The Company has had no operations subsequent to the   
sale of its operating assets as previously discussed. The risk related to       
internal systems is minimal due to the limited accounting functions that are    
currently required. The Company does rely upon third parties such as its        
investment advisers and custodians. There can be no assurance that these third  
parties will be compliant but due to the limited activity, these functions could
be performed by the Company.                                                    

     The Company is not aware of any additional cost to become Year 2000
compliant nor is it aware of any contingency plans that would require additional
funding.                                                                        

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ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS                                  

GENERAL                                                                         

  Prior to May 29, 1997, the Company's business involved providing
diverse environmental and field-related services to industrial, governmental,   
and commercial markets, specializing in the collection, transportation,         
treatment, recycling and management of a wide variety of non-hazardous liquid   
hydrocarbons, oil filters, absorbents and related materials. Additionally, prior
to January 20, 1997, through its oilfield services segment, the Company provided
services for managing liquids used or produced during the life cycle of oil and 
gas wells.                                                                      

        The following discussion is designed to assist in the understanding of
the Company's financial condition as of March 31, 1999, as well as the Company's
operating results for the three-month period ended March 31, 1999. The Notes to 
Consolidated Financial Statements contain additional information that should be 
read in conjunction with this discussion.                                       

ASSET SALES AND DISCONTINUED OPERATIONS                                         

On January 20, 1997 and May 29, 1997, the Company completed   
transactions pursuant to which it sold substantially all of its operating assets
in two separate transactions (see Note 2 of Notes to Consolidated Financial     
Statements). The transactions and their impact on the consolidated financial    
statements are described in the following paragraphs.                           

 SALE OF OILFIELD SERVICES ASSETS AND DISCONTINUANCE OF BUSINESS
SEGMENT. On January 20, 1997, the Company sold substantially all of the assets  
related to its oilfield services business to Dawson Production Services, Inc.   
("Dawson"). As a result of that transaction, the Company received approximately 
$4,917,000 and a subordinated note in the amount of $500,000 due in January 2002
in exchange for such assets. The note was paid in full during the fourth quarter
of 1998.                                                                        

       SALE OF WASTE MANAGEMENT SERVICES ASSETS & DISCONTINUANCE OF BUSINESS
SEGMENT. On May 29, 1997, the Company sold substantially all of the assets      
related to its waste management services activities to United States Filter     
Corporation ("USF"). As a result of that transaction, the Company received $8.0 
million in shares of USF common stock (registered with the Securities and       
Exchange Commission) in exchange for such assets, and can earn up to an         
additional $4.0 million in USF common stock based on the performance of the     
business during the two years following its sale. Upon completion of the sale of
the waste management services segment, the $8,000,000 of USF common stock was   
sold. Proceeds from this sale were used to pay off existing long-term debt and  
current liabilities, and the remaining proceeds were used to purchase investment
grade fixed term securities. As of May 29, 1998, approximately 20% of the       
earnout was achieved and 28,294 shares of U.S. Filter stock was received for the
first year of operations subsequent to closing the sale.                        

  In 1995, the Company acquired certain assets of a group of three
affiliated companies, including Romero Brothers Oil Exchange, Inc.,             
Environmental Petroleum Products Co./EPPCO, and Environmental Insight, Inc. The 
principals of the acquired companies had the right to earn shares in the Company
based on the profitability of the acquired companies. This right was suspended  
due to the sale of the waste management services segment. In order to settle    
this obligation and to offer the principals of the acquired companies an        
incentive to remain with the business to maximize the Company's earnout         
provision with USF, the Company paid the principals of the acquired companies   
approximately $115,000                                                          

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in June 1998. In addition, the principals of the acquired companies are to      
receive a percentage of the Company's earnout with US Filter. Approximately     
$72,500 was paid to the principals of the acquired companies during the third   
quarter of 1998 resulting from the earnout with US Filter that was achieved as  
of May 29, 1998 for the first year of operations subsequent to closing the sale 
of the waste management services segment.                                       

RESULTS OF OPERATIONS                                                           

 General and administrative expenses amounted to $275,000 and $159,000 for
the three months ended March 31, 1999 and 1998, respectively. These costs       
represent the ongoing administrative costs of the Company after disposing all of
its operating assets. The increase in general and administrative expenses in    
1999 was created primarily by additional unexpected charges related to          
insurance claims and settlement of retro premiums which were not previously     
accrued. During the three months ended March 31, 1999, the Company realized     
gains on the sale of investment securities of approximately $22,000. There      
were no sales during the three months ended March 31, 1998.                     

CAPITAL RESOURCES AND LIQUIDITY                                                 

     All of the $8.0 million in U.S. Filter common stock received at the
time of the closing of the sale of its waste management services assets has been
sold. Cash from the USF stock sale, along with the proceeds from the sale of the
oilfield services assets, resulted in net proceeds totaling approximately $8.2  
million after repayment of the outstanding bank indebtedness and transaction    
expenses. Such net proceeds were used to fund the current liabilities retained  
by the Company following the sales, with the remaining surplus cash deployed in 
investment securities. General and administrative expenses incurred for the     
three month period ended March 31, 1999 were $275,000, which includes           
approximately $180,000 in insurance claims and settlement of retro premiums     
which had not previously been accrued. The Company anticipates that ongoing     
general and administrative expenses will be approximately $540,000 annually,    
exclusive of any litigation costs, and expects earnings from investments to     
partially offset such costs. The amounts described herein are approximate and   
based on the Company's current estimates. Furthermore, there can be no assurance
that such amounts will actually be realized.                                    

    In addition to the aforementioned proceeds, under the terms of the
asset purchase agreement with U.S. Filter, the Company may receive up to $4.0   
million in USF common stock during the two-year period following the sale of the
waste management services segment based on the performance of the hydrocarbon   
recycling business. As of May 29, 1998, approximately 20% of the earnout was    
achieved and 28,294 shares of U.S. Filter stock was received for the first year 
of operations subsequent to closing the sale.                                   

   Because of its indemnification obligations related to the sale of
Gibraltar, as well as potential indemnity obligations with respect to the asset 
sales to USF and Dawson, and in light of the ongoing litigation (described in   
the Company's Annual Report on Form 10-KSB for the year ended December 31,      
1998), the Company, based on consultation with legal counsel, does not currently
anticipate making a distribution to its stockholders in the foreseeable future. 
As circumstances change or additional information with respect to the extent of 
the Company's potential indemnity obligations becomes available, the Board of   
Directors will continue to evaluate various uses of the Company's funds. The    
Company has no plans to conduct any kind of operating business at any time in   
the future.                                                                     

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PART II.  OTHER INFORMATION                                                     

ITEM 1.  LEGAL PROCEEDINGS                                                      

     The cause of action styled DANIELS V. GIBRALTAR CHEMICAL RESOURCES,
INC. has been set for trial in February 2000. There have been no other material 
developments in the legal proceedings described in the Company's Annual Report  
on Form 10-KSB for the year ended December 31, 1998.                            

ITEM 2.  CHANGES IN SECURITIES                                                  

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 AND REPORTS ON FORM 8-K                                        

EXHIBITS                                                                        

                                                                [Download Table]

Exhibit                                                                     
Number         Description                                                  
-------        -----------                                                  
                                                                            
27             Financial Data Schedule (submitted only in electronic format)

REPORTS ON FORM 8-K                                                             

None.                                                               

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    In accordance with the requirements of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the    
undersigned thereunto duly authorized.                                          

               MOBLEY ENVIRONMENTAL SERVICES, INC.
(Registrant)        

/s/ John Mobley     
                            ------------------------------------------------
John Mobley         
                  Chairman of the Board, President,  and
   Chief Financial Officer

Date:  May 14, 1999                                                             

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10QSB’ Filing	Date	First	Last	Other Filings

	7/30/00	11
Filed on:	5/17/99
	5/14/99	17
	5/1/99	1
For Period End:	3/31/99	1	15	10KSB
	12/31/98	5	16	10KSB
	6/30/98	11		10-Q, 10-Q/A
	5/29/98	8	15
	3/31/98	2	15	10-Q
	1/1/98	10
	7/30/97	11
	5/29/97	7	14
	1/20/97	7	14
	6/30/96	11		10-Q
	12/31/94	11
				List all Filings

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Filing Submission 0001047469-99-021085 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Mobley Environmental Services Inc – ‘10QSB’ for 3/31/99

As of: Monday, 5/17/99 · For: 3/31/99 · Accession #: 1047469-99-21085 · File #: 0-19497

Quarterly Report — Small Business — Form 10-QSBFiling Table of Contents

10QSB — Quarterly Report — Small BusinessDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Quarterly Report — Small Business — Form 10-QSB
Filing Table of Contents

10QSB — Quarterly Report — Small Business
Document Table of Contents