Mobley Environmental Services Inc – ‘10-K405’ for 12/31/97

As of:  Thursday, 7/9/98   ·   For:  12/31/97   ·   Accession #:  1047469-98-26739   ·   File #:  0-19497

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Annual Report — [x] Reg. S-K Item 405   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     Annual Report -- [x] Reg. S-K Item 405                61    326K 
 2: EX-10.33    Material Contract                                      4     15K 
 3: EX-11       Statement re: Computation of Earnings Per Share        2      6K 
 4: EX-23       Consent of Experts or Counsel                          2      7K 
 5: EX-27       Financial Data Schedule                                2      9K 

10-K405   —   Annual Report — [x] Reg. S-K Item 405
Document Table of Contents

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================================================================================

      SECURITIES AND EXCHANGE COMMISSION
      WASHINGTON, D.C. 20549

     FORM 10-K

     FOR ANNUAL AND TRANSITION REPORTS
     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No Fee Required, effective October 7, 1996)        
For the Fiscal Year Ended December 31, 1997                     

      OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES     
EXCHANGE ACT OF 1934 (No Fee Required)                          
For the transition period from __________ to __________         

      COMMISSION FILE NUMBER 0-19497
     MOBLEY ENVIRONMENTAL SERVICES, INC.
      (Exact name of registrant as specified in its charter)

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

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

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: NONE

     SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

    Title of each class          Name of each exchange on which registered
    -------------------          -----------------------------------------
None                                     None         

     SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
      CLASS A COMMON STOCK, $.01 PAR VALUE PER SHARE
      (Title of Class)

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            No   X                       
                  -----          -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405  
of Regulation S-K is not contained herein, and will not be contained, to the    
best of registrant's knowledge, in definitive proxy or other information        
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]                                                                 

The aggregate market value of the Class A Common Stock held by non-affiliates of
the registrant at March 31, 1998, based on the closing bid price as reported by 
the OTC Bulletin Board as of such date, was estimated to be $1,250,155.         

The number of shares outstanding of the registrant's common stock, as of May 31,
1998 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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     FORM 10-K INDEX

      PART I

                                                                [Download Table]
                                                                         Page Number
                                                                         -----------
                                                                                    
Item 1.  Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

Item 2.  Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

Item 3.  Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Item 4.  Submission of Matters to a Vote of Security Holders. . . . . . . . . . . 12

                                      PART II                                       

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters. . 12

Item 6.  Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . 13

Item 7.  Management's Discussion and Analysis of Financial Condition and            
           Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . 15

Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . 19

Item 8.  Financial Statements and Supplementary Data. . . . . . . . . . . . . . . 19

Item 9.  Changes in and Disagreements with Accountants on Accounting and            
           Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 19

                                      PART III                                      

Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . 19

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 22

Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . 28

Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . 29

                                      PART IV                                       

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . . . . 29

         Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

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    PART I

ITEM 1.   BUSINESS                                                              

GENERAL                                                                         

    Prior to May 29, 1997, Mobley Environmental Services, Inc. (the "Company")
provided diverse environmental and field-related services to industrial,        
governmental and commercial markets, and specialized in the collection,         
transportation, treatment, recycling, and management of a wide variety of       
non-hazardous liquid hydrocarbons, oil filters, absorbents, and related         
materials. Prior to January 20, 1997, the Company also provided oilfield        
services, including transporting, marketing, storing, and disposing of          
various liquid materials used or produced as waste throughout the lifecycle     
of oil and gas wells.                                                           

The Company was formed in July 1991 for the purpose of combining the  
businesses of Gibraltar Chemical Resources, Inc. ("Gibraltar"), Mobley Company, 
Inc. ("Mobley Co."), and Mobley Group, Inc. which had been under common         
management since their inception.  Shareholders of the predecessor companies    
received shares of the Company's Class B Common Stock in exchange for their     
shares of common stock of these companies, and certain of the principal         
shareholders of the Company sold to the Company for cash certain assets used in 
the businesses of the predecessor companies.  As a result of the foregoing      
transactions, Gibraltar and Mobley Co. became wholly-owned subsidiaries of the  
Company and Mobley Group, Inc. was merged into the Company.                     

     The Company's oilfield services business was founded in 1943, primarily for
the recycling of tank bottoms, an oilfield waste material which was processed   
and used to make specialty polishes and waxes.  Based on the experience of      
certain of the Company's principal shareholders in establishing and operating   
several businesses managing chemicals and liquid and solid wastes, including the
operation of oilfield salt water disposal wells, in 1980 the Company expanded   
into the hazardous waste treatment and disposal business through its Gibraltar  
subsidiary with the construction of a deepwell and related facilities in Winona,
Texas.  Additional facilities for waste-derived fuels blending and solvent      
recycling were added at the Gibraltar site in 1986 and 1987 and a second        
deepwell was completed in 1991.  As discussed below and in Note 3 of Notes to   
Consolidated Financial Statements set forth in Item 8 herein, the Company       
completed the sale of Gibraltar on December 31, 1994.  Since that time, the     
Company has not been involved in the commercial management of hazardous wastes. 

   In 1987, the Company expanded its waste management services activities to
include the collection and treatment of non-hazardous, hydrocarbon-laden wastes 
for customers outside the oil and gas industry and opened its initial oily waste
treatment facility in Kilgore, Texas.  Subsequently, in 1991 and 1993,          
additional treatment facilities for the processing of non-hazardous             
hydrocarbon-laden fluids commenced operations in Corsicana, Texas and           
Baytown, Texas, respectively.  These treatment and recycling plants were        
supported by a network of seven transportation terminals and transfer           
facilities in Texas, Arkansas, and Louisiana. In 1995, the Company, through a   
newly-formed subsidiary, Hydrocarbon Technologies, Inc., broadened its          
hydrocarbon recycling and recovery activities to include the collection and     
marketing of used oil and oil filters through the acquisition of the assets     
of a group of three related recycling companies. Additionally, during 1996,     
the Company completed construction of two new facilities for the recycling of   
used motor oil and fuel mixtures into higher-value finished products for sale   
and the processing and recycling of used oil filters, absorbents and related    
materials. See "Business Strategy and Background of the Transaction" herein.    

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   On January 20, 1997, the Company completed the sale of the assets used in
its oilfield services business to Dawson Production Services, Inc. ("Dawson").  
See "BUSINESS--Oilfield Services" herein, Note 2 of Notes to Consolidated       
Financial Statements set forth in Item 8 herein, and "Management's Discussion   
and Analysis of Financial Condition and Results of Operations" set forth in Item
7 herein.                                                                       

   The Company executed a definitive asset acquisition agreement with United
States Filter Corporation ("U.S. Filter") for the sale of its hydrocarbon       
recycling and recovery assets (the "Transaction"). The Transaction was          
consummated on May 29, 1997. See "Business Strategy and Background of           
Transaction" herein, Note 2 of Notes to Consolidated Financial Statements set   
forth in Item 8 herein, and "Management's Discussion and Analysis of Financial  
Condition and Results of Operations" set forth in Item 7 herein.                

RESTRUCTURING AND DIVESTITURE OF HAZARDOUS WASTE OPERATIONS                     

In late 1993, the Company's senior management and Board of Directors  
determined that the divestiture of its hazardous waste business conducted by    
Gibraltar was in the best interests of the Company and its shareholders.  On May
10, 1994 the Company entered into a definitive agreement (the "Stock Purchase   
Agreement") for the sale of all of the outstanding shares of common stock of    
Gibraltar to American Ecology Corporation ("AEC"), and such sale was completed  
effective December 31, 1994. See Note 3 of Notes to Consolidated Financial      
Statements set forth in Item 8 herein.  The Company made extensive warranties   
and representations in the Stock Purchase Agreement, including the absence of   
any liabilities arising prior to closing other than those disclosed to AEC.  The
Company is required to indemnify AEC for all losses resulting from breaches of  
warranties and representations and pending or future claims or proceedings      
resulting from circumstances existing prior to closing through June 30, 1996 (or
in the case of tax, environmental and ERISA claims, through June 30, 1998).     
However, the Company and AEC have 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 has been tolled from July 30, 1997     
through July 30, 2000. The maximum liability of the Company under such indemnity
with respect to undisclosed claims is $3.0 million; there is no limit with      
respect to disclosed liabilities.  See Note 14 of Notes to Consolidated         
Financial Statements set forth in Item 8 herein for further information         
regarding certain obligations and contingent liabilities relating to Gibraltar. 

  The Company had also formed a joint venture called Pro Ambiente, S.A. de
C.V. ("Pro Ambiente"), with Cemex, S.A. de C.V. ("Cemex") in March of 1993 to   
collect organic hazardous wastes and blend hazardous waste fuels for certain    
cement kilns operated by Cemex in Mexico.  After the divestiture of Gibraltar   
and the Company's decision to focus on its non-hazardous hydrocarbon recycling  
business, and in light of the economic uncertainties in Mexico, the Company sold
its interest in the joint venture to Cemex in July 1995. See Note 5 of Notes to 
Consolidated Financial Statements set forth in Item 8 herein.                   

BUSINESS STRATEGY AND BACKGROUND OF THE TRANSACTION                             

   Having exited the hazardous waste industry with the year-end 1994 sale of
Gibraltar and the mid-1995 divestiture of its interest in Pro Ambiente, the     
Company focused on the continued growth and development of its non-hazardous    
hydrocarbon recycling and recovery business.  In anticipation of the Gibraltar  
sale, the Company sought to develop a strategic business plan to enhance its    
financial position in the face of changing conditions in the waste management   
services industry.  Through this planning process, management identified        
significant market opportunities in the business of non-hazardous hydrocarbon   
recycling and recovery.  The Company's Board of Directors and management        
believed that its core skills in managing liquid hydrocarbon wastes, combined   
with its experience in processing industrial oily wastes, formed a solid        
foundation for a business expansion into more advanced hydrocarbon recycling and
recovery technologies.                                                          

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The strategic plan developed by the Company contemplated growth through         
process enhancement projects, as well as through the acquisition of             
complementary existing business operations.                                     

 The Company developed a business plan that included (i) acquisitions of
small used oil collection operations in geographic areas where the Company was  
already active in the oily waste business; (ii) installation of a distillate    
fuels production facility at the Company's Baytown, Texas processing complex to 
manufacture value-added products from recovered hydrocarbon waste streams; (iii)
installation of a filter recycling plant at its Baytown facility for the        
recycling of used oil filters, absorbents and related materials; (iv) marketing 
of the Company's new services to its existing industrial customer base; and  (v)
exploration of new geographic and service markets for further expansion.        

 The Company pursued and eventually completed the acquisition of certain
assets of a group of three related recycling companies in July 1995. Also,      
specific plans were made for the engineering and construction of a distillate   
fuels production facility and oil filter recycling facility.  Construction of   
the filter recycling facility was completed by the end of the 1996 first quarter
and the plant began operations in April of that year.  The distillate fuels     
production facility began full-scale operations in August, 1996.                

In October 1995, the Company engaged Cureton and Co., Incorporated    
("Cureton & Co."), an investment banking and business advisory firm, to assist  
it with the investigation and possible financing of other business combination  
opportunities that had come to the Company's attention during the course of its 
strategic planning, industry analysis, and due diligence.  With the assistance  
of Cureton & Co., the Company investigated possible relationships or            
affiliations with a variety of entities whose operations might be a feasible    
expansion of, or complementary to, the Company's existing operations or those   
contemplated under its strategic plan.  Of the discussions undertaken by        
management, PORI International, Inc. ("PORI"), based in Baltimore, Maryland,    
emerged as a candidate for serious consideration due to its longstanding        
reputation in the treatment of oily wastes on customers' sites, its historic    
development of oil/water separations technologies, and its established presence 
as a consolidator of used oil from collectors in the Middle Atlantic region of  
the United States.  On March 11, 1996, the Company's discussions with PORI      
culminated in a letter of intent to acquire substantially all of PORI's assets  
with completion of the transaction subject to, among other things, the Company's
ability to secure the necessary financing.                                      

Although initial inquiries indicated financial institutions to be a   
potential source of financing, it also became evident that significant equity   
infusions would be required to complete the PORI acquisition and to otherwise   
carry out the Company's overall expansion plans.  In an effort to secure equity 
financing, the Company prepared a detailed business plan; in addition to the    
acquisition of PORI, the plan contemplated several follow-on business           
acquisitions in targeted geographic regions, the expansion of its used oil and  
filter collection capabilities, and the construction of new facilities for      
oil/water processing, distillate fuels production, and oil filter recycling.    
Financing necessary to effectuate the entire plan was estimated to require      
approximately $34.5 million in excess of internally-generated funds over a      
three-year period.                                                              

The Company incurred operating losses during the 1996 first and second
quarters reflecting the impact of an extended regional drought which severely   
diminished fluid volumes, revenues, and the related profitability of the        
Company's oil/water separations business.  In addition to the effect of the     
drought conditions, this core business was also impacted by the ongoing decline 
of fluids associated with underground storage tank remediation activities. While
such event-driven volumes were partially offset by an increase in               
production-oriented oily wastes, the change in business mix toward more         
difficult-to-treat waste streams resulted in diminished profit margins.         
Additionally, competitive pressures in the Company's oilfield services          
business, along with an unfavorable shift in business mix favoring a higher     
proportion of lower-margin contract services revenue, reduced the profit        
contribution from this segment during the fourth                                

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quarter of 1995 and first quarter of 1996.  Further, because of the startup     
nature of its used oil and filter collection and recycling activities,          
compounded by delays in bringing the new processing facilities on-line, these   
new business lines made virtually no contribution to operating profit during    
this period.  The operating losses sustained by the Company, coupled with the   
capital spending program associated with the execution of its growth            
strategy, significantly weakened the Company's liquidity over the first half    
of 1996.  By the end of the 1996 second quarter, the Company had a working      
capital deficit of approximately $4.8 million, including $4.4 million in        
outstanding bank indebtedness which was classified as a current liability as    
a result of violations of certain restrictive covenants in its bank credit      
agreement.  The Company's cash resources had been reduced from $1.5 million     
at year-end 1995 to $516,000 at June 30, 1996, and it had exhausted             
substantially all of its available borrowing capacity.                          

As a result of the Company's deteriorated financial condition and     
unfavorable results of operations, bank debt financing  had effectively been    
eliminated as a viable source of funds for the continued execution of its       
strategic plan.  Through Cureton & Co., the Company contacted over 30 venture   
capitalists, private investors, and industry participants during the ensuing    
months of the summer of 1996 to discuss the possibilities of a private          
investment in the Company or other strategic alliance.  Six potential investor  
groups toured the Company's Baytown facility to further discuss possible        
relationships or investment structures.  Through these discussions, it became   
evident to management that more serious negotiations with most potential        
investors were thwarted by one or more issues facing the Company, including the 
risks associated with the unproven nature of the Company's distillate fuels     
production facility, and the perceived litigation exposure arising from the     
Company's former ownership of Gibraltar (see "LEGAL PROCEEDINGS -- Claims and   
Legal Proceedings Against Gibraltar" set forth in Item 3 herein and Note 14 of  
Notes to Consolidated Financial Statements set forth in Item 8 herein).         

 Through this exhaustive process, U.S. Filter emerged as the most viable
party interested in pursuing a specific transaction with the Company.  After    
lengthy discussions, it became clear that U.S. Filter was not interested in     
joint ownership and would only proceed with negotiations on the basis of        
purchasing, with shares of U.S. Filter common stock as consideration, the       
Company's entire interest in its hydrocarbon recycling and oil/water processing 
business.                                                                       

  In light of the Company's severely weakened financial condition and U.S.
Filter's stated interest in acquiring the Company's hydrocarbon recycling and   
recovery business, 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 Cureton & Co. reviewed in 
detail with the Board of Directors the contacts that had been made with third   
parties regarding possible investments in, or strategic alliances with, the     
Company.  Since such efforts had not yielded access to funds on terms acceptable
to the Company, discussions were then focused on the possible acquisition of the
Company's hydrocarbon recycling and recovery business by U.S. Filter as offering
the best prospects for the Company and its shareholders.  In conjunction with   
this decision, the Company abandoned its plans to acquire the assets of PORI;   
such assets were subsequently acquired by U.S. Filter in February 1997.         

     On October 9, 1996, the Company's Board of Directors authorized the Company
to enter into a letter of intent to sell to U.S. Filter the net assets of the   
Company's hydrocarbon recycling and recovery business in consideration for U.S. 
Filter common stock having an aggregate exchange value of $8.0 million, plus the
right to receive additional shares of U.S. Filter common stock with an exchange 
value of up to $4.0 million upon the attainment of certain financial performance
goals in the two-year period following the sale.  The Company executed a letter 
of intent with U.S. Filter on October 30, 1996, and thereafter, U.S. Filter     
continued its due diligence business review of the Company.  Senior management  
of the Company, assisted by Cureton & Co. and legal counsel, and U.S. Filter    
then began negotiating the terms of a definitive asset                          

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purchase agreement.  A definitive Asset Purchase Agreement (the "Agreement")    
was executed on April 25, 1997.                                                 

Additional information regarding the sale of the Company's hydrocarbon
recycling and recovery business to U.S. Filter is contained in an Information   
Statement to the Company's shareholders dated May 9, 1997.                      

MARKET DEMAND FACTORS                                                           

     In recent years, the demand for the Company's waste management services had
resulted primarily from public concern over the quality of the environment and  
ensuing adoption and enforcement of increasingly stringent federal, state and   
local environmental laws and regulations.  Governmental regulation has also     
caused a number of commercial treatment and disposal facilities to close, as    
many have been unable to meet the increasingly strict siting and operating      
standards imposed by RCRA and other applicable laws.  Furthermore, many         
generators of hazardous and non-hazardous wastes have chosen not to maintain    
their own treatment and disposal facilities or to develop the technical         
expertise necessary to assure regulatory compliance.  Accordingly, many         
generators have sought to have their waste streams managed by firms that possess
collection, recycling, treatment, transportation and disposal capabilities and  
have the expertise and financial capacity necessary to comply with applicable   
environmental regulations.                                                      

    Additionally, concerns by generators about long-term liability has led the
industry toward waste minimization and recycle/recovery and thus have           
significantly changed the market for both hazardous and non-hazardous waste     
treatment and disposal in recent years, as waste generators continue to look for
ways to reduce or reuse the wastes they generate.  Many generators and other    
purchasers of waste management services have attempted to decrease the number of
providers of these services they utilize in response to liability concerns.     

BUSINESS SEGMENTS                                                               

    See Note 2 of Notes to Consolidated Financial Statements set forth in Item
8 herein for information regarding the Company's business segments.             

WASTE MANAGEMENT SERVICES                                                       

 Since the divestiture of Gibraltar at year-end 1994 through the May 29,
1997 disposition of the Company's remaining operating assets, the waste         
management services provided by the Company consisted of the collection,        
transportation, treatment, recycling, and management of non-hazardous liquid    
industrial hydrocarbons, off-specification motor fuels, used oils, oil filters, 
absorbents and related materials.  These activities are collectively referred to
herein as "hydrocarbon recycling and recovery".                                 

    TREATMENT AND RECYCLING OF OIL-WATER AND FUEL-WATER MIXTURES - The Company
treated selected non-hazardous oily fluids through phase separation processes as
a part of its hydrocarbon recycling and recovery services.  The Company operated
three hydrocarbon recycling and recovery facilities in Baytown, Kilgore, and    
Corsicana, Texas.  Sources of oily fluids include industrial and manufacturing  
operations and transportation activities.  Sources of motor fuel-water mixtures 
include motor fuel distribution, transportation, and retailing activities.      
Underground storage tank fluid sources include underground storage tank         
corrective action, removal, and groundwater remediation activities.             

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COLLECTION ACTIVITIES - The Company transported high-water oily fluids
using vacuum tank trucks and other transports dedicated to the waste management 
business.  The Company collected motor fuel-water mixtures, as well as waste    
lubricants, machine coolants, and other hydrocarbon-laden fluids, from          
industrial, manufacturing, and transportation operations.  The Company also used
its collection equipment to provide in-plant support services to industrial     
companies and environmental engineering firms engaged in remediating groundwater
problems, cleaning up spills, or pumping and transporting industrial liquids and
sludges within their own plant sites.                                           

     USED OIL COLLECTION AND RECOVERY SERVICES - In July 1995, the Company began
the collection and marketing of used lubricating oils from various sources,     
including automobile and truck dealers, transportation fleets, automotive       
garages, oil change outlets, service stations, industrial plants, and other     
businesses.  With the startup of its distillate fuels production facility in the
1996 second quarter, the Company began utilizing substantially all of the used  
oil it collected and purchased as feedstock for the manufacture of distillate   
fuel products.  Such conversion of used oils into higher-value finished products
was intended to allow the Company to derive revenue from the sale of such       
products it sells into relatively large commodity markets.                      

 FILTER COLLECTION AND RECYCLING SERVICES - Similarly, in July 1995, the
Company began the collection and recycling of used oil filters.  In this        
business line, the Company derived revenues from the fees it charges customers  
to manage used oil filters and related products, as well as from the sale of the
recovered products, as described below.  Containers of used automotive and      
industrial filters and absorbents were typically collected from customers using 
the Company's collection fleet and aggregated at selected sites in its network  
of transfer facilities.  These filters were then transported to the Company's   
Baytown filter recycling facility, which commenced operations in April 1996.    
The filter processing plant shredded, separated and recycled used oil filters   
into three reusable components--used oil, filter fluff, and metal.  The         
recovered used oil was utilized as feedstock for the distillate fuels production
facility described in the preceding paragraph.  The filter fluff was utilized as
an alternative fuel source for approved industrial users where possible, or     
otherwise properly managed.  The recovered metal was marketed as feedstock for  
regional "mini-mills" in the steel-producing industry.                          

    ANALYTICAL SERVICES - The Company provided analytical services through two
laboratory facilities in Baytown and Kilgore.  These captive laboratory         
facilities performed tests on the waste streams of customers and potential      
customers which enabled the Company to determine the optimal means of recycling 
or treatment.  These tests also allowed the Company to determine whether or not 
it has the capability of accepting the waste stream, determine whether the      
wastes conformed to the customer's pre-approved waste profile, and to estimate  
the cost of managing the wastes.                                                

OILFIELD SERVICES                                                               

   Until the sale of its oilfield services assets described in the following
paragraph, the Company's strategy with respect to this business was to maintain 
its operations in east Texas, but not to expand such services to other          
geographic regions.  This business segment consisted of the transportation,     
management and disposal of various liquids which are used or produced as waste  
in the drilling, completion, and production operations of oil and gas wells.  In
particular, the Company had extensive capabilities in supplying fluids and the  
necessary storage tanks for massive hydraulic fracture treatments prevalent in  
its oilfield market in east Texas.  The Company operated a fleet of specialized 
trucks, some of which were also used in its hydrocarbon recycling operations,   
for pumping and transporting oilfield drilling fluids and oilfield liquid waste,
including produced salt water, and it rented to customers portable tanks for    
well stimulation services and temporary                                         

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fluids storage.  The Company operated three salt water disposal wells in east   
Texas.  In addition, the Company sold clear brine fluids which are used in      
well completion, workover, and fracturing operations.                           

  In light of its decision to sell the assets of its hydrocarbon recycling
and recovery business, the Company's Board of Directors evaluated the remainder 
of the Company's assets and business activities, including its oilfield services
business.  Given the relatively high administrative costs of operating a        
business as small as the oilfield services business on a stand-alone basis, and 
the rather limited growth opportunities available to the Company for this       
business (either internally or through acquisition), the Board of Directors     
concluded that a sale of the business was in the best interest of the Company.  
On November 1, 1996, the Company executed a letter of intent to sell to Dawson  
substantially all of its oilfield services assets and such sale was completed on
January 20, 1997 pursuant to a definitive asset purchase agreement.  The Company
received approximately $4.9 million in cash and a subordinated note for         
$500,000, due in January 2002, as proceeds from the sale.  The cash proceeds    
were used to reduce the Company's outstanding bank indebtedness by $3.3 million,
fund transaction expenses of approximately $255,000 and for working capital     
purposes.  See Note 2 of Notes to Consolidated Financial Statements set forth in
Item 8 herein for related information regarding this segment of the Company's   
business.                                                                       

CUSTOMERS AND MARKETING                                                         

During the months it operated in 1997, the Company provided its waste 
management services to large and small-stream generators of recyclable          
hydrocarbons engaged in the manufacturing, transportation, steel, refining,     
chemical, automotive, and other industries.  The Company derived a substantial  
portion of its revenues from customers in Texas, Louisiana, and Arkansas.  The  
Company's waste management services were marketed directly by its sales force.  

COMPETITION                                                                     

   During the months it operated in 1997, the Company competed with numerous
large and small companies in its waste management services business.  Among its 
primary competitors were Allwaste, Inc., Laidlaw Environmental, Inc.,           
Safety-Kleen Corp., Specialty Environmental Services, Philip Environmental      
and World Fuel Services, Inc.  Each of these companies was able to provide      
one or more of the waste management services offered by the Company or          
alternative services, and many of the Company's competitors have access to      
greater financial resources than did the Company.  In addition, the Company     
competed with other local or smaller regional companies, many of which are      
privately-owned, that have hydrocarbon recycling capabilities or that collect   
and market used oil.                                                            

REGULATION                                                                      

As an operating entity, the Company was subject to comprehensive and  
continuously evolving regulation by federal, state, and local authorities.      
These authorities are empowered to regulate compliance with extensive           
environmental laws, regulations, and ordinances.  Various federal environmental 
statutes are designed to address management of waste at active disposal         
facilities, clean-up and remediation of inactive hazardous waste sites,         
protection of public water supplies, control of air quality standards, and      
exposure to toxic substances and other forms of pollution in the workplace.     
Such laws provide significant penalties for violators, as well as continuing    
liability for waste generators, owners, and operators of waste treatment        
facilities and others for past disposal practices.  Many states have been       
authorized by the EPA to enforce regulations promulgated under various federal  
environmental statutes.  The state of Texas has authority to administer most of 
the regulations related to the Resource Conservation and Recovery Act of 1976 as
well as regulate the management of non-hazardous industrial wastes.  In         
addition, there are numerous state and                                          

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local authorities that further regulate the environment, some of which impose   
standards stricter than those established in federal laws and regulations.      
Penalties for violations of applicable laws or regulations include injunctive   
relief, recovery of damages for injury to air, water or property, and fines     
for non-compliance.                                                             

In September 1992, the United States Environmental Protection Agency  
("EPA") finalized regulations that govern the management of used oils destined  
for recycling.  Although used oil is not classified as a hazardous waste under  
federal law, certain states do regulate used oil as hazardous.  The new         
regulations address several areas of environmental risks that caused            
environmental problems at used oil recycling facilities in the past, and contain
specific requirements for generators, transporters, and used oil processors.    
The Texas Natural Resource Conservation Commission ("TNRCC") has adopted rules  
that essentially implemented the EPA regulations in Texas effective March 26,   
1996.  In some respects, these regulations are more stringent than the EPA      
rules, including provisions for more frequent and comprehensive reporting and   
financial assurance requirements for used oil processors.  The Company built and
operated its facilities to standards that met and, in certain instances,        
exceeded current standards.                                                     

COMPLIANCE AND RISK MANAGEMENT                                                  

The Company regarded compliance with applicable environmental laws and
regulations as a critical component of its overall operations, from providing   
quality service to its customers to protecting the health and safety of its     
employees and neighbors and protecting the Company's facilities from damage.    
The Company's compliance program had developed for each of its operational      
facilities under the direction of the Company's compliance staff, which was     
responsible for facilities compliance, health and safety, field safety,         
compliance training, transportation compliance, and related record keeping.     

As part of the Company's continuing efforts to monitor environmental  
compliance, its treatment and recycling facilities were periodically inspected  
by its compliance staff, and also by regulators and  customers.  On certain     
occasions, the Company's facilities were cited for regulatory violations, and   
environmental problems were found in the facilities.  The extent to which such  
violations and problems have affected the financial condition and results of    
operations of the Company is reflected in the Consolidated Financial Statements 
and Notes thereto set forth in Item 8 herein.                                   

  The Company followed a program of risk management policies and practices
designed to reduce potential liability as well as to manage customers' ongoing  
regulatory responsibility.  This program included employee training, laboratory 
testing and environmental monitoring, and policy decisions restricting the types
of wastes handled or projects undertaken.                                       

INSURANCE                                                                       

The Company maintained insurance coverage for normal business risks,  
including workers' compensation for its employees, automobile liability, general
liability, and excess liability insurance coverage.  Additionally, the Company  
carried pollution liability insurance providing coverage for damage to third    
persons from pollution from its waste management facilities.  Since the sale of 
the Company's operating assets, the Company has maintained directors and        
officers liability and general liability insurance policies.                    

   As discussed in Note 14 of Notes to Consolidated Financial Statements set
forth in Item 8 herein, the Company has been notified by its pollution liability
insurance carrier that the carrier disputes the Company's interpretation of its 
pollution liability insurance coverage and policy limitations applicable to     
certain pending claims (see "LEGAL PROCEEDINGS--Litigation and Various Other    
Claims" set forth in Item 3 herein).                                            

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EMPLOYEES                                                                       

At May 31, 1998, the Company had no employees.                        

INVESTMENT SECURITIES HELD BY THE COMPANY                                       

    All of the 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  
U.S. Filter stock sale, along with the proceeds from the sale of the oilfield   
services assets, were used to pay bank indebtedness, transaction expenses, and  
current liabilities.  Remaining proceeds were used to purchase investment grade 
fixed term securities.  Such securities include U.S. Treasury and corporate     
bonds.  See Consolidated Financial Statements set forth in Item 8 herein.       

FUTURE PLANS OF THE COMPANY                                                     

The Company has had no operating assets since the sale of its oilfield
services business and hydrocarbon recovery and recycling business in 1997.      
Because of its indemnity obligations related to the sale of Gibraltar, as well  
as potential indemnification responsibilities with respect to the sale of its   
operating assets (see "BUSINESS--Oilfield Services" herein), and considering    
ongoing litigation (see "LEGAL PROCEEDINGS" set forth in Item 3 herein and Note 
14 of Notes to Consolidated Financial Statements set forth in Item 8 herein),   
the Company will remain in existence for the foreseeable future.                

    The litigation involving the Company is in varying stages, with some cases
in the early phases of discovery, while others are awaiting trial.  The claims  
are unliquidated; and the Company's potential liability, even after available   
insurance coverage, could exceed the amount of its assets.  Accordingly, based  
on consultation with legal counsel, the Company's Board of Directors believes   
that they are required by applicable law to hold the Company's assets as a      
fiduciary for potential creditors as well as the stockholders.  No steps will be
taken to reduce the corporate corpus of the Company by paying liquidating or    
other dividends to shareholders until these claims are resolved or more nearly  
quantified.  In light of the nature and complexity of the litigation, the       
Company expects that it may take a period of up to several years to resolve     
these matters.                                                                  

As circumstances change or additional information with respect to the 
Company's potential indemnity obligations and litigation exposure 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.                                             

ITEM 2.   PROPERTIES                                                            

     The principal facilities of the Company, prior to the sales of its oilfield
services and hydrocarbon recycling and recovery businesses in 1997, are         
described below.  Except as otherwise indicated, the Company owned all of its   
principal facilities.  The Company owned three facilities for processing and    
recycling certain materials managed as non-hazardous oily wastes,               
off-specification motor fuels, and underground storage tank remediation         
fluids which were located in Baytown, Kilgore, and Corsicana, Texas.            

   The Company completed construction of an oil filter recycling facility at
its site in Baytown in April 1996.  Construction of a distillate fuels          
production facility at the Baytown site for the manufacture of marine distillate
fuels and related products from used oils and motor fuel feedstocks was         
substantially completed in June 1996, with full-scale operations commencing in  
August 1996.                                                                    

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  The Company also owned a terminal facility adjacent to its Baytown plant
consisting of approximately 6,300 square feet of office space, which also served
as an administrative corporate office.  Another terminal facility near Austin,  
Texas, was owned and similar facilities in or near Dallas, Kilgore and San      
Antonio, Texas, Little Rock, Arkansas, and Baton Rouge, Louisiana were leased.  
These facilities provided for the dispatching of trucks and equipment to        
customers and providing other customer services, as well as serving as the base 
for regional sales activities.  In most cases, such facilities also temporarily 
held non-hazardous hydrocarbon-laden fluids, used oil and oil filters collected 
in the local service areas, but did not process or treat these materials.  All  
materials collected were shipped by truck to one of the Company's treatment and 
recovery facilities discussed above.                                            

   The Company completed the relocation of its primary corporate offices and
consolidation of administrative support functions to Baytown, Texas in late     
1996, utilizing the existing terminal facility referred to previously,          
supplemented by an additional 3,000 square feet of modular office space.  The   
Company's previous corporate office in Kilgore, Texas, consisting of land and   
approximately 10,000 square feet of office space, is still owned by the Company 
and is currently held by it for sale or lease.                                  

   The Company's current mailing address is c/o Howard V. Rose, 111 Congress
Avenue, Suite 1400, Austin, Texas  78701.                                       

ITEM 3.   LEGAL PROCEEDINGS                                                     

   LITIGATION AND VARIOUS OTHER CLAIMS.  On January 26, 1996, Mobley Co. was
notified by the Texas Natural Resource Conservation Commission ("TNRCC") that it
is a potentially responsible party ("PRP") for the alleged release, during the  
early or mid-1980s, of hazardous substances at the McBay Oil and Gas State      
Superfund Site located near Grapeland, Texas.  During 1997, the Company entered 
into a contractual remediation plan for this site and paid the contract amount. 
However, completion of the remediation and final resolution of the matter is    
subject to approval by the TNRCC.                                               

The Company previously filed a complaint against National Union Fire  
Insurance Company of Pittsburgh, Pa. ("National Union") seeking declaratory     
judgment that National Union is obligated to indemnify the Company under three  
pollution legal liability insurance policies issued by National Union and that  
certain claims previously made by the Company with respect to such policies are 
not "related claims" covered by a single policy as was alleged by National      
Union. Previously, National Union had issued three pollution liability policies 
to the Company, each covering a different time period and each containing a     
provision that all claims arising out of related or continuous acts would be    
considered a single loss and be deemed first reported during the policy period  
in which the initial claim was first reported.  The Company sought a declaratory
judgement establishing that the foregoing provision was not applicable to claims
that might arise under various lawsuits in which the Company is a defendant (see
"Claims and Legal Proceedings Against Gibraltar" below).  This case was         
dismissed in 1997; however, the issues raised in this action have not yet been  
resolved by the parties.                                                        

The Company was previously a defendant in litigation filed in Angelina
District Court styled NUGENT V. PILGRIM'S PRIDE CORPORATION.  The Company       
settled such litigation June 25, 1998 which settlement obligates the Company to 
pay the defendants a total of $75,000.00.  This amount was accrued by the       
Company as of December 31, 1997.                                                

Additionally, in connection with its prior ownership of Gibraltar, the
Company is a party to lawsuits styled WILLIAMS V. GIBRALTAR CHEMICAL RESOURCES, 
INC., ADAMS V. GIBRALTAR CHEMICAL RESOURCES, INC. and                           

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DANIELS V. GIBRALTAR CHEMICAL RESOURCES, INC. to which Gibraltar is also a      
party.  These lawsuits are described below.                                     

 CLAIMS AND LEGAL PROCEEDINGS AGAINST GIBRALTAR.  In connection with the
sale of Gibraltar discussed in Note 3 of Notes to Consolidated Financial        
Statements set forth in Item 8 herein, the Company is obligated to indemnify AEC
for certain claims against Gibraltar, including various legal claims and        
proceedings disclosed to AEC, arising from circumstances existing on or prior to
the date of the sale of Gibraltar.  The following items constitute material     
legal claims and proceedings for which the Company is obligated to indemnify    
AEC:                                                                            

A suit was filed against Gibraltar in August 1992 styled MONCRIEF V.  
GIBRALTAR CHEMICAL RESOURCES, INC. in State District Court in Smith County,     
Texas by certain persons who own land in the vicinity of Gibraltar's hazardous  
waste facility in Winona, Texas.  The suit asserts that the value of the        
plaintiffs' land has been diminished as a result of the alleged emission of     
objectionable odors from Gibraltar's facility.  The plaintiffs assert various   
grounds for recovery of damages and seek compensatory and punitive damages.  The
Company defended these claims in a jury trial which resulted in inconsequential 
damages being awarded to the plaintiffs on November 7, 1996.                    

On October 18, 1993, a suit styled WILLIAMS V. GIBRALTAR CHEMICAL     
RESOURCES, INC. was filed against the Company, Gibraltar, Mobley Co. and certain
individuals, former customers of Gibraltar and other entities.  This case is    
currently pending in the State District Court of Smith County, Texas.  The named
plaintiffs are certain individuals residing in Smith County, and are seeking    
monetary damages for themselves and on behalf of all other persons similarly    
situated.  The petition alleges various acts of negligence, fraudulent          
concealment, nuisance, trespass, and various others resulting from operations of
Gibraltar's hazardous waste facility.  On May 12, 1997, plaintiffs' claims were 
dismissed with prejudice by the Court. However, the Court's decision has been   
appealed to the Court of Appeals.                                               

    Also on October 18, 1993, a suit was filed against the Company, Gibraltar,
Mobley Co., and certain individuals, former customers of Gibraltar and other    
entities, and is currently pending in State District Court in Smith County,     
Texas styled STEICH V. GIBRALTAR CHEMICAL RESOURCES, INC.  This lawsuit was     
settled by all parties thereto on February 27, 1998.  The Company's financial   
obligations under the settlement agreement were within applicable insurance     
policy limits and were paid by the Company's insurance carrier.                 

  A suit styled DANIELS V. GIBRALTAR CHEMICAL RESOURCES, INC. was filed on
August 31, 1995 in the State District Court of Dallas County, Texas against the 
Company, Mobley Co., Gibraltar, and certain individuals, former customers of    
Gibraltar and other entities by certain residents of Smith County, Texas.  The  
plaintiffs claim that they have experienced personal injury and property damage 
which are alleged to have been caused by the operation of the Company's former  
subsidiary, Gibraltar.  The plaintiffs demand recovery of unspecified monetary  
damages based on various legal grounds, including fraudulent concealment,       
negligence, and assault & battery.  This case is in the early stages of         
discovery.  While the Company disputes the material allegations of the          
plaintiffs' suit and is vigorously defending the litigation, it is unable to    
determine the likelihood of an unfavorable outcome at this time.                

 A suit styled GLAZER V. GIBRALTAR CHEMICAL RESOURCES, INC. was filed on
September 6, 1994, in the United States District Court for the Eastern District 
of Texas Tyler Division against Gibraltar by an individual and Mothers Organized
to Stop Environmental Sins ("MOSES"), under the citizens' suit provisions of the
Clean Air Act and the Resource Conservation and Recovery Act.  The suit alleges 
repeated and continuing violations of these federal environmental protection    
statutes by Gibraltar and an imminent and substantial endangerment to public    
health and the environment caused by Gibraltar's alleged improper               
transportation,                                                                 

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storage, treatment and disposal of solid and hazardous wastes. The plaintiffs   
request that Gibraltar's hazardous waste facility be permanently closed,        
civil penalties be imposed, and plaintiffs' costs of litigation be awarded.     
The Company has recently been granted summary judgment as to a significant      
number of the claims against it as the court found that certain alleged         
violations of environmental protection statutes, on which plaintiffs' claims    
were based, were diligently prosecuted by the State of Texas.  This case has    
been suspended by the court pending closure of the plant site pursuant to       
TNRCC regulations and approvals.                                                

     A suit styled ADAMS V. AMERICAN ECOLOGY ENVIRONMENTAL SERVICES CORPORATION,
F/K/A GIBRALTAR CHEMICAL RESOURCES, INC. was filed on August 7, 1996 in the     
State District Court of Tarrant County, Texas against Gibraltar by certain      
individuals.  The plaintiffs claim that they have experienced personal injury   
and property damage which are alleged to have been caused by the operation of   
Gibraltar.  The plaintiffs demand recovery of unspecified monetary damages and  
injunctive relief based on various legal grounds including negligence, assault  
and battery, and intentional infliction of emotional distress.  Discovery is    
ongoing in this case.  The Company may be obligated to indemnify the purchaser  
of Gibraltar for certain losses resulting from the claims asserted by the       
plaintiffs.  While the Company disputes the material allegations of the         
plaintiffs suit and intends to vigorously defend the litigation, it is unable to
determine the likelihood of an unfavorable outcome at this time.                

The Company is currently not able to reasonably estimate its potential
exposure with respect to the foregoing matters.  The Company's future financial 
condition, results of operations, and liquidity could be materially adversely   
impacted as the nature and scope of the Company's ultimate liability arising    
from Gibraltar's operations and sale become better defined.  Notwithstanding the
sale of its oilfield services and hydrocarbon recycling and recovery businesses 
to U.S. Filter, all responsibility for the foregoing matters will be retained by
the Company.  To the extent the Company is held liable for these matters, it    
anticipates paying for any such obligations not covered by insurance with funds 
retained from the net proceeds of such sale.  See Note 14 of Notes to           
Consolidated Financial Statements set forth in Item 8 herein for related        
information.                                                                    

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

 No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.                              

     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 

Prior to May 23, 1996, the Company's Common Stock was traded on the   
National Market System of the National Association of Securities Dealers, Inc.  
Automated Quotation System National Market System ("NASDAQ") under the symbol   
"MBLYA".  Since that date, the Company's Common Stock has been quoted for       
trading on the OTC Bulletin Board under the same symbol.  The following table   
presents the high and low closing prices for the Company's Common Stock for 1996
and for 1997 prior to May 23, 1996, as reported by the NASDAQ. The table also   
reflects the range of reported high and low bid quotations for the Company's    
Common Stock for the period from May 23, 1996 through December 31, 1997 as      
reported by the OTC Bulletin Board.  Such over-the-counter market quotations    
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions.                              

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                                                                [Download Table]
Quarter Ended         1996                  1997         
-------------  -----------------    ---------------------
                 High       Low       High         Low   
               -------    ------    --------    -------- 
                                                         
March 31       $ 1 1/4    $5.5/8    $ 0 3/16    $ 0 9/32 
June 30          1 1/4     0 5/8      0 7/32      0 19/64
September 30    15.5/16    0 1/2      0 7/32      0 19/64
December 31      0 3/4     0 1/8      0 7/32      0 1/4  

At May 31, 1998, there were approximately 1,100 beneficial owners of the
Company's Class A Common Stock, and 36 stockholders of record of the Company's  
Class B Common Stock.                                                           

 The Company has not paid any cash dividends on its Common Stock since its
initial public offering in September 1991 and has no current plans to make any  
distributions to its shareholders (see "BUSINESS--Future Plans of the Company"  
set forth in Item 1 herein).                                                    

ITEM 6.   SELECTED FINANCIAL DATA                                               

The following table sets forth, for the periods indicated, (i) certain  
historical financial information of the Company and (ii) certain pro forma      
financial information of the Company after giving effect to the sales of        
substantially all of the operating assets of the Company's two business         
segments.  This information should be read in conjunction with the Consolidated 
Financial Statements and notes thereto set forth at pages F-1 to F-25. The      
information presented herein is not necessarily indicative of the financial     
position or operating results that would have occurred had the sales been       
completed on the date as of which, or at the beginning of periods for which, the
sales are being given effect nor is it necessarily indicative of future         
operating results or financial position.  All dollar amounts are in thousands,  
except per share data.                                                          

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                                                                [Download Table]
                                       Years Ended December 31,         
                            --------------------------------------------
                             1997         1996         1995       1994  
                            ------      --------      -------     ------
                                                                        
INCOME STATEMENT DATA:                                                  

Operating loss                (759)      (1,166)        (683)      (376)

Net loss from                                                           
 continuing operations          (4)      (1,286)        (993)      (332)

Net income (loss)            2,393      (10,235)      (1,463)    (4,095)

BALANCE SHEET DATA:                                                     
-------------------                                                     

Working capital                                                         
  (deficit)                   (322)      (7,471)         (95)    (2,646)
Total assets                 6,217       11,983)      19,097     22,252 

Long-term debt, excluding                                               
  current maturities            --           --          490         -- 

Total stockholders'                                                     
  equity                     5,076        2,467       12,606     12,373 

PER SHARE DATA:                                                         
---------------                                                         

Net loss per share:                                                     
  Continuing operations       (.00)       (0.15)       (0.12)     (0.04)
  Discontinued operations      .27        (1.01)       (0.05)     (0.48)
                            ------      --------      -------     ------
  Net income (loss)           0.27        (1.16)       (0.17)     (0.52)
                            ------      --------      -------     ------
                            ------      --------      -------     ------
  Book value                  0.57         0.28         1.50       1.56 

-    Years prior to 1995 include results of operations of Gibraltar Chemical    
Resources, Inc., which was sold effective December 31, 1994.          

-    Year ended December 31, 1995 includes results of acquired businesses from  
date of acquisition.                                                  

-    The 1993 information has been omitted because the discounted operations    
data is not readily available.                                        

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ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND       
RESULTS OF OPERATIONS                                       

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE       
COMPANY'S AUDITED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND       
1996, AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS, STOCKHOLDERS'      
EQUITY, AND CASH FLOWS FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED     
DECEMBER 31, 1997 ("CONSOLIDATED FINANCIAL STATEMENTS") AND RELATED NOTES       
THERETO SET FORTH AT PAGES F-1 TO F-25 ATTACHED HERETO.                         

GENERAL                                                                         

Prior to the sale of its hydrocarbon recycling and recovery business  
(see "BUSINESS - Background of the Transaction" set forth in Item 1 herein      
and Note 2 of Notes to Consolidated Financial Statements set forth in Item 8    
herein), the Company provided diverse environmental and field-related           
services to industrial, governmental, and commercial markets, and specialized   
in the collection, transportation, treatment, recycling and management of a     
wide variety of non-hazardous liquid hydrocarbons, oil filters, absorbents      
and related materials. Prior to the sale of Gibraltar at year-end 1994 (see     
Note 3 of Notes to Consolidated Financial Statements set forth in Item 8        
herein), the Company's waste management services activities also included the   
management of hazardous wastes.  Prior to the sale of its oilfield services     
assets on January 20, 1997, the Company also provided oilfield services for     
managing liquids used or produced during the lifecycle of oil and gas wells     
(see "BUSINESS--Oilfield Services" set forth in Item 1 herein and Note 2 of     
Notes to Consolidated Financial Statements set forth in Item 8 herein).         

The Company's revenues have historically consisted of fees collected  
from customers, principally related to waste management and oilfield services   
and, to a lesser extent, from product sales and equipment rentals.  As a        
result of new business lines which began in 1995 and continued to grow in       
1996, a larger percentage of the Company's waste management services revenues   
were derived from sales of manufactured or recovered products.  Revenues        
derived from waste management services were closely associated with volumes     
of waste collected, levels of service provided and the related pricing.         
Revenues from oilfield services were derived from hourly and fixed charges      
for services provided, equipment rentals and products sold.  Cost of revenues   
include direct costs of providing services to customers, such as labor, third   
party disposal, supplies and other consumables, depreciation, utilities and     
fuel, equipment maintenance, and repair.  Selling, general and administrative   
expenses include selling and marketing expenses, certain insurance and          
administrative salary expenses, depreciation, amortization of goodwill, and     
legal and consulting fees.                                                      

As more fully described in "LEGAL PROCEEDINGS" set forth in Item 3    
herein and Note 14 of Notes to Consolidated Financial Statements set forth in   
Item 8 herein, the Company continues to defend various claims resulting from    
the operations of Gibraltar.  As of May 31, 1998, four such lawsuits were       
pending, seeking compensatory and punitive damages for alleged personal         
injury and property damage allegedly caused by operations and emissions of      
Gibraltar's hazardous waste disposal facility, and 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 the nature and amount of the Company's      
liability, if any. Although the Company is a defendant in certain of these      
claims, in other matters the Company's potential liability arises from          
material contractual indemnifications given by the Company to the purchaser     
of Gibraltar, including the potential liability of certain former Gibraltar     
customers who have become defendants in litigation involving Gibraltar's        
operations.  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.             
Accordingly, the Company has not made an accrual for any losses                 

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which might result from these legal matters as such amounts or a range of       
amounts are not currently reasonably estimatable.  The Company's future         
financial condition and liquidity could be materially adversely impacted as     
the nature and scope of the Company's ultimate liability arising from           
Gibraltar's operations and sale become better defined.                          

1997 ASSET SALES, DISCONTINUED OPERATIONS, AND RESTRUCTURING CHARGES            

Due to the Company's inability to secure, on acceptable terms, the    
capital resources necessary to continue the implementation of its strategic     
plans to expand its hydrocarbon recycling and recovery business, and after      
considering the attendant risks of continuing to pursue such strategy in        
light of its severely strained liquidity, in September 1996, the Company's      
Board of Directors determined that the divestiture of its operations was in     
the best interests of the Company and its shareholders.  Subsequently, 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 "BUSINESS--Business Strategy and Background of       
the Transaction" and "--Oilfield Services" set forth in Item 1 herein and       
Note 2 of Notes to Consolidated Financial Statements set forth in Item 8        
herein).  Because of these sales, results of operations of the Company's two    
business segments have been accounted for as discontinued operations in the     
accompanying 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 November 1, 1996, the Company signed a letter of intent with Dawson          
Production Services, Inc. ("Dawson") to sell substantially all of the assets    
related to its oilfield services business.  Such sale was completed on          
January 20, 1997, pursuant to a definitive asset purchase agreement.  Under     
the terms of the definitive agreement, the Company received $4,917,000 and a    
subordinated note in the amount of $500,000 due in January 2002 in exchange     
for such assets. The assets which were the subject of the sale had a net book   
value, based on historical cost adjusted for accumulation depreciation and      
amortization, of approximately $2,354,000.  The results of operations           
associated with the discontinued segment through the disposal date, after       
allocation of certain overhead and interest costs, did not result in a loss.    
The Company recognized a gain upon completion of the sale, after transaction    
costs of approximately $261,000, amounting to approximately $2,802,000 in       
January 1997.                                                                   

SALE OF WASTE MANAGEMENT SERVICES ASSETS & DISCONTINUANCE OF BUSINESS 
SEGMENT.  On October 30, 1996, the Company signed a letter of intent with       
United States Filter Corporation ("U.S. Filter") to sell substantially all of   
the assets related to its waste management services activities.  Such sale      
was completed on May 29, 1997, pursuant to a definitive asset purchase          
agreement. Under the terms of the definitive agreement, the Company received    
$8.0 million in shares of U.S. Filter 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 U.S. Filter common stock based on the       
performance of the business during the two years following its sale.            
Additionally, U.S. Filter assumed certain liabilities (accounts payable and     
accrued expenses) as part of the transaction.  The net assets which were the    
subject of the definitive agreement have been removed from the consolidated     
balance sheet as of June 30, 1997.  Such assets had a net book value (net of    
assumed liabilities) of approximately $14,965,060.                              

During the year ended December 31, 1996, the Company recorded a charge
of $7,621,000 (net of a deferred income tax benefit of $698,000),               
representing the estimated loss on the disposal of the business segment         
including certain required capital expenditures prior to the sale.  In          
determining the estimated loss on disposal, only the $8.0 million guaranteed    
portion of the sales price was considered (i.e., that portion which is          
contingent on the future performance of the business was ignored).  The         
Company estimated that                                                          

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it would incur additional operating losses in this business segment after the   
allocation of certain overhead and interest costs, amounting to approximately   
$331,000 during the phase-out period from October 1, 1996 to May 1997.  A       
provision for such estimated net losses was made during the year ended          
December 31, 1996.  The Company's waste management services segment incurred    
a net loss of approximately $405,000 during the period from January 1, 1997     
until May 29, 1997, the date of closing on the sale, which was in excess of     
the amounts previously accrued.  The majority of this loss was created by       
additional charges related to automobile liability insurance claims and         
medical claims which were not included in the accruals established at           
December 31, 1996.  The Company's sale of its hydrocarbon recycling and         
recovery business is further described in the Company's Information Statement   
to its Shareholders dated May 9, 1997.                                          

RESULTS OF OPERATIONS                                                           

Comparisons of the 1996 and 1997 operations are not meaningful due to 
the sale of substantially all of the operating assets of the Company during     
1997. Additional losses from discontinued operations occurred in the second     
quarter of 1997 due to unexpected automobile liability insurance claims and     
medical claims in the amount of $400,000.  General and administrative costs     
in the amount of $759,000 for the year ended December 31, 1997 have been        
incurred that were not considered part of the cost of the discontinued          
operations.  In addition, a gain on the sale of U.S. Filter shares in the       
amount of $555,000 has been recorded through December 31, 1997 as all of the    
U.S. Filter stock has been sold.                                                

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 U.S. Filter 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 1997 were approximately $759,000.  The     
Company anticipates that ongoing general and administrative expenses will be    
approximately $310,000 annually, exclusive of any litigation costs, and         
expects earnings from investments to largely 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 U.S. Filter common stock during the two-year period following the    
sale based on the performance of the hydrocarbon recycling business.            
Additionally, in connection with the sale of the oilfield services business,    
the Company received a $500,000 subordinated note receivable from Dawson,       
bearing interest at 8.5%, which matures on January 4, 2002.                     

In connection with the sale of assets to U.S. Filter, 10% of the      
proceeds of such transaction (approximately $825,000) were required to be       
maintained in escrow for a period of one year from the closing of the           
transaction to satisfy indemnification obligations of the Company to U.S.       
Filter.  On May 29, 1998, approximately $500,000 were released from escrow      
and paid to the Company.  The remaining funds are being held by the escrow      
agent pending resolution of outstanding claims for which U.S. Filter seeks      
reimbursement from escrow.                                                      

Because of its indemnification obligations related to the sale of     
Gibraltar, as well as potential indemnity obligations with respect to the       
asset sales of U.S. Filter and Dawson, and in light of the ongoing litigation   

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(described in the Company's Annual Report on Form 10-K for the year ended       
December 31, 1996), 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.                                   

MANAGEMENT'S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS           

The Consolidated Financial Statements of the Company are the          
responsibility of management.  They have been prepared in accordance with       
generally accepted accounting principles and include estimates and judgments    
made by management. To meet the responsibility for reliable financial data,     
management maintains a system of internal accounting controls which is          
designed to provide reasonable assurance that transactions are executed as      
authorized and are accurately recorded and that assets are properly             
safeguarded.  Although accounting controls are designed to achieve this         
objective, it must be recognized that errors or irregularities may occur.  In   
addition, it is necessary to assess and balance the relative costs and the      
expected benefits of the internal accounting controls.                          

 The Company's independent auditors, KPMG Peat Marwick LLP, have audited
the Consolidated Financial Statements in accordance with generally accepted     
auditing standards, which include a review of the system of internal            
accounting controls only to the extent necessary to determine audit             
procedures required to express their opinion.                                   

CERTAIN TRENDS AND UNCERTAINTIES                                                

As a cautionary note to investors, the Company and its representatives
may make oral or written statements from time to time that are                  
"forward-looking statements" within the meaning of the United States federal    
securities laws, including information contained herein which is not            
historical.  There are a number of important factors which could cause actual   
results and consequences to differ materially from those anticipated.  Such     
factors include, but are not limited to, those set forth below.                 

RESOLUTION OF INDEMNIFICATION OBLIGATIONS AND PENDING LITIGATION.  As 
more fully discussed in "LEGAL PROCEEDINGS" set forth in Item 3 herein and      
Note 14 of Notes to Consolidated Financial Statements set forth in Item 8       
herein, the Company has various outstanding contractual indemnification         
obligations and is a defendant in various pending litigation matters. 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.       
The Company, based on consultation with its legal counsel, believes that it     
is probable that the Company will continue to incur expenses associated with    
the foregoing matters and the Company has made an accrual for estimated         
out-of-pocket costs associated with the ongoing administrative management of    
existing legal 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.  The Company's future financial condition, results of            
operations, and liquidity could be materially adversely impacted as the         
nature and scope of the Company's ultimate liability arising from Gibraltar's   
operations and sale become better defined.                                      

FUTURE PLANS OF THE COMPANY.  For reasons described elsewhere in this 
Form 10-K (see "BUSINESS--Future Plans of the Company" set forth in Item 1      
herein), the Company does not currently anticipate making a distribution to     
its shareholders in the foreseeable future.  As circumstances change or         
additional information with respect to the extent of the Company's potential    
indemnity obligations becomes                                                   

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available, the Board of Directors will continue to evaluate various uses for    
the Company's funds.  The Company anticipates that its ongoing general and      
administrative expenses will be approximately $310,000 annually, and expects    
earnings from investments to largely offset such costs.  This amount is based   
on current estimates and actual amounts could differ from this estimate.        

INVESTMENT SECURITIES OF THE COMPANY.  As of December 31, 1997, the   
Company's assets included $4,495,000 in investment securities available for     
sale.  Such securities are interest-bearing investment grade bonds and          
similar securities.  However, the future value or quality of such securities    
is subject to market fluctuation and their performance is not guaranteed.       

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK            

This Item is not applicable to the Company because its market         
capitalization was less than $2.5 billion on January 28, 1997.                  

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                           

The information on pages F-1 to F-25 of this Form 10-K is incorporated
by reference in response to this item.                                          

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING           
AND FINANCIAL DISCLOSURE                                    

Not Applicable.                                                       

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                    

DIRECTORS:                                                            

Set forth below is certain information regarding each of the three (3)
persons currently serving as directors of the Company.                          

                                                        [Enlarge/Download Table]
Name                 Age  Positions With The Company                                               Director Since
                                                                                                                 
Class A Director:                                                                                                
-----------------                                                                                                
Stewart Cureton, Jr. 52   Director; Member of Audit Committee and Compensation Committee                1991     

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Class B Directors:                                                                                               
------------------                                                                                               
John Mobley          67   Chairman of the Board; Member of Executive Committee, Environmental,                   
                          Health and Safety Committee and Compensation Committee                        1991     

T.M. Mobley          62   Vice-Chairman of the Board; Member of Executive Committee, Environmental,              
                          Health and Safety Committee, Compensation Committee and Audit Committee       1991     

JOHN MOBLEY has been Chairman of the Board of the Company since its   
organization.  From the time of the Company's organization through November     
1993, Mr. Mobley served as Chief Executive Officer.  Prior to the               
organization of the Company, Mr. Mobley held various senior management          
positions with the Company's predecessors.  Mr. Mobley was President of Tiger   
Corporation, a solid-waste disposal company, from 1971 until it was sold to a   
national solid-waste disposal company in 1986.  Upon the sale of                
substantially all of the Company's operating assets, Mr. Mobley became          
President, Chief Financial Officer and Secretary of the Company.                

T.M. MOBLEY has been Vice Chairman of the Board since November 1992.  
Previously Mr. Mobley had served as President and Chief Operating Officer of    
the Company from the time of its organization until November 1992 and had       
held various senior management positions with the Company's predecessors        
since 1961. Mr. Mobley joined Gibraltar Chemical Resources, Inc.                
("Gibraltar") as President in 1985 and served in that capacity until 1991.      
Mr. Mobley served as President of Mobley Company, Inc. ("Mobley Co.") from      
1965 until 1989.  Upon the sale of substantially all of the Company's           
operating assets, Mr. Mobley became Vice President and Treasurer of the         
Company.                                                                        

STEWART CURETON, JR. became a director upon completion of the initial 
public offering by the Company, which closed on October 1, 1991.  Mr. Cureton   
has been with Cureton & Co., Incorporated and its predecessor Curtin & Co.,     
Incorporated, a private investment firm, since 1978, and its President since    
1989.                                                                           

John Mobley and T.M. Mobley are brothers.  There are no other family  
relationships among the Company's directors and executive officers.             

EXECUTIVE OFFICERS:                                                   

The following persons are the Company's current executive officers.   

NAME        POSITION                                                      
John Mobley    President, Chief Financial Officer and Secretary                 

T.M. Mobley    Vice President and Treasurer                                     

  Officers are elected annually by the Board of Directors and serve at the
discretion of the Board.  Until the sale of the Company's hydrocarbon           
recycling and recovery business on May 29, 1997, Michael M. Stark served as     
the Company's President and Chief Executive Officer and W. Christopher          
Chisholm served as Vice President and Chief Financial Officer, Secretary and    
Treasurer.  Upon completion of the sale of assets to U.S.                       

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Filter, Mr. Stark and Mr. Chisholm became employees of U.S. Filter and,         
therefore, resigned as officers of the Company. Set forth below is certain      
information regarding Mr. Stark and Mr. Chisholm.                               

MICHAEL M. STARK was President and Chief Executive Officer of the Company       
from November 3, 1993 through May 29, 1997.  From November 1992 to November     
1993, he served as the Company's President and Chief Operating Officer.         
During the previous five years, Mr. Stark was Senior Vice President of TETRA    
Technologies, Inc. in Houston, Texas, heading its waste treatment operations.   
Mr. Stark served as a Director of the Company and member of the Executive       
and Environmental, Health and Safety Committees prior to his resignation from   
the Board on November 8, 1996.                                                  

W. CHRISTOPHER CHISHOLM was Vice President and Chief Financial Officer,         
Secretary and Treasurer of the Company since 1993.  Prior to that time, Mr.     
Chisholm held the position of Vice President and Controller.  Prior to          
joining the Company in October 1991, Mr. Chisholm was a Senior Manager with     
KPMG Peat Marwick LLP.                                                          

SECTION 16 REQUIREMENTS                                                         

Section 16(a) of the Securities Exchange Act of 1934, as amended (the 
"1934 Act"), requires the Company's directors and officers, and persons who     
own more than 10% of a registered class of the Company's equity securities,     
to file initial reports of ownership and reports of changes in ownership with   
the Securities and Exchange Commission (the "SEC").  Such persons are           
required by SEC regulations to furnish the Company with copies of all Section   
16(a) forms they file.  Based solely on its review of the copies of such        
forms received by it with respect to fiscal year 1997, or written               
representations from certain reporting persons, the Company believes that all   
filing requirements applicable to its directors, officers, and persons who      
own more than 10% of a registered class of the Company's equity securities      
have been complied with.                                                        

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ITEM 11.  EXECUTIVE COMPENSATION                                                

Summary Compensation Table                                                      

The following table sets forth certain information regarding          
compensation paid to the two individuals who served as the Company's Chief      
Executive Officer during the Company's last three fiscal years (no other        
executive officer of the Company earned in excess of $100,000 during 1997).     

                                                        [Enlarge/Download Table]
                                                                               Long-Term Compensation                   
                                                                         ---------------------------------              
                                         Annual Compensation                      Awards          Pay-outs              
                                   -----------------------------------   ------------------------ --------              
       (a)                   (b)     (c)         (d)           (e)          (f)           (g)        (h)         (i)    
--------------------------   ----  -------      ------       ---------   ----------   ----------  --------  ------------
                                                               Other                  Securities                        
                                                              Annual     Restricted   Underlying    LTIP     All Other  
Name and Principal                 Salary       Bonus        Compensa-     Stock       Options/   Pay-outs  Compensation
    Position                 Year    ($)        ($)(4)        tion ($)   Awards ($)    SARs (#)      ($)         ($)    
--------------------------   ----  -------      ------       ---------   ----------   ----------  --------  ------------
                                                                                                                        
Michael M. Stark (1)         1997  110,371      50,000           --         --             --        --       15,886(5) 
PRESIDENT & CHIEF            1996  218,000        --             --         --             --        --        7,453(6) 
EXECUTIVE OFFICER            1995  219,440       5,000           --       150,000(8)       --        --        6,500(8) 

W. Christopher Chisholm (2)  1997   53,308      64,642           --         --             --        --        9,559(9) 
VICE PRESIDENT & CHIEF                                                                                                  
FINANCIAL OFFICER                                                                                                       

John Mobley (3)              1997     --          --          6,000(10)     --             --        --         --      
PRESIDENT & CHIEF                                                                                                       
EXECUTIVE OFFICER                                                                                                       

---------------                                                                 
(1)  Mr. Stark served as the Company's Chief Executive Officer during 1995 and  
1996 and through May 29, 1997.                                        
(2)  Mr. Chisholm served as a Vice President and the Company's Chief Financial  
 Officer during 1997 until the sale of the Company's remaining operating
assets on May 29, 1997.                                               
(3)  Mr. Mobley has served as the Company's Chief Financial Officer since       
May 29, 1997.  Although Mr. Mobley is paid directors fees as set forth
  herein (see "Compensation of Directors" below), he was not paid a salary
in 1997 (other than a car allowance) to serve as the Company's Chief  
Executive Officer (nor has he received a salary to date in 1998).     
(4)  Reflects bonus earned during 1995 and amounts paid in 1997 in connection   
with resignation associated with the sale of assets to U.S. Filter.   
(5)  Consists of term life insurance premiums of $432, car allowance of $779,   
and the value of a Company vehicle conveyed to Mr. Stark of $14,675.  
(6)  Consists of contribution to Company's Profit Sharing Plan of $3,203, term  
life insurance premiums of $864 and disability insurance premiums of  
$3,386.                                                               
(7)  Mr. Stark was granted 100,000 shares of restricted Class A Stock in        
  conjunction with the approval of the 1995 Employee Restricted Stock Plan
(the "Restricted Stock Plan") at the Company's Annual Meeting of      
   Shareholders on June 8, 1995.  Based on the market price of such stock on
    that date, as reported by the NASDAQ ($1.50 per share), the total value of
   the restricted stock award was $150,000.  At December 31, 1997, the total
     value of such restricted shares was $25,000, based on the closing bid price
  of the Class A Stock on that date, as reported by the OTC Bulletin Board
 ($0.25 per share).  Pursuant to the modified terms of the grant of such
shares to Mr. Stark, such shares vest in proportion to the number of  
shares of U.S. Filter stock earned by the Company during the two-year 
period following the sale of assets to U.S. Filter based on the       
performance of such assets during that period.                        
(8)  Consists of contribution to the Company's Profit Sharing Plan of $2,250,   
   term life insurance premiums of $864 and disability insurance premiums of
$3,386.                                                               
(9)  Consists of term life insurance premiums of $91, car allowance of $968, and
the value of a Company vehicle conveyed to Mr. Chisholm of $8,500.    
(10) Consists of car allowance.                                                 

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AGGREGATED OPTION/SAR EXERCISES IN 1996 FISCAL YEAR AND DECEMBER 31, 1996       
OPTION/SAR VALUES                                                               

  During 1997, there was no exercise of any outstanding option to purchase
shares of stock in the Company, and as of December 31, 1997, all such stock     
options previously granted to the Company's executive officers had terminated   
unexercised.                                                                    

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS                  

During 1997, the Compensation Committee of the Board of Directors is  
comprised of Stewart Cureton, Jr., John Mobley, and T.M. Mobley, all of which   
are non-employee directors of the Company.  The Committee reviews the           
salaries, benefits and other compensation for officers of the Company and its   
subsidiaries and advises the Company's Board of Directors regarding the         
Company's compensation policies.                                                

 The following report submitted by the above-listed committee members in
their capacity as the Board's Compensation Committee addresses the Company's    
compensation policy as it relates to its executive officers for fiscal 1997.    

It has been the Committee's belief that it is in the Company's best   
interest for its compensation programs to be geared toward the attraction and   
retention of high-caliber executives and other key employees by rewarding       
individual performance and ultimately, to the promotion of shareholder value.   
To achieve these objectives, the Company's executive compensation programs      
were structured to include two principal elements:  (1) salary and bonuses,     
and (2) longer-term incentive rewards.                                          

ANNUAL COMPENSATION--SALARY AND BONUS                                           

 It has been the Compensation Committee's practice to review and approve
salaries, including salary increases for executive officers and bonus awards,   
annually.  The salary level for the Company's Chief Executive Officer is set    
by the Committee based on the experience he brings to that position and his     
contributions to the performance of the Company.  Mr. Stark joined the          
Company as President and Chief Operating Officer in November 1992 and became    
Chief Executive Officer from November 1993 to November 1997. His base salary    
did not change from the inception of his employment.  Mr. Stark's employment    
agreement entitled him to incentive compensation in an amount determined        
annually by the Compensation Committee.  No such incentive compensation was     
awarded during the year ended December 31, 1997; however, in connection with    
the sale of assets to U.S. Filter and the resulting termination of his          
employment by the Company, Mr. Stark was paid $50,000 and a Company vehicle     
valued at $14,675 was conveyed to him.                                          

The Committee receives reports of recommended salary and bonus actions
for the other executive officers from the Chief Executive Officer.  The         
Committee reviews these recommendations, may request additional information     
and analysis, and ultimately determines whether to approve, recommend           
changes, or disapprove salary actions.                                          

LONG-TERM INCENTIVE COMPENSATION                                                

In past years, incentives designed to focus on and reward performance 
over longer-term operations have been provided to executive officers and        
other key employees in the form of options to acquire shares of the Company's   
Class A Stock, as well as grants of restricted shares of Class A Stock.         

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RESTRICTED STOCK AWARDS                                                         

To enable the Company to provide its executive and other key officers 
with an additional incentive to maximize both long-term and short-term          
shareholder value by giving them a proprietary interest in the Company          
through the ownership of stock, thereby increasing the personal stakes of       
such key employees in the future growth and success of the Company, the         
Compensation Committee concluded that the grant of restricted shares of Class   
A Common Stock was in the best interests of the Company and its shareholders.   
Consequently, the Board of Directors adopted the 1995 Employee Restricted       
Stock Plan effective January 1, 1995.  In light of the sale of assets to U.S.   
Filter, the individual grant agreements were amended such that the deferred     
compensation costs associated with the unvested shares will be earned by the    
Company's two executive officers and two other officers only in the event and   
to the extent that the Company receives additional shares of U.S. Filter        
Stock pursuant to an "earnout" provision in the definitive asset acquisition    
agreement (see "BUSINESS--Business Strategy and Background of the               
Transaction" set forth in Item 1 herein).                                       

COMPENSATION PAID TO CERTAIN OFFICERS IN CONNECTION WITH TRANSACTION            

Effective with the closing of the sale of assets to U.S. Filter, the  
Company's Board of Directors approved payments totaling $165,000 to certain     
of the Company's officers in recognition of their years of service and past     
efforts.                                                                        

DEDUCTIBILITY OF COMPENSATION                                                   

  The compensation paid to the Company's executive officers during 1997 is
fully deductible by the Company in calculating the Company's Federal taxable    
income notwithstanding Section 162(m) of the Internal Revenue Code of 1986,     
as amended (the "Code"), which limits the deductibility of certain employee     
remuneration in excess of $1,000,000 per employee.                              

SUMMARY                                                                         

 The decisions the Committee makes in approving salaries and bonuses and
granting options and other incentives to executive officers are made            
subjectively by the Committee using their judgment and reflect their            
evaluation and assessment of individual performance.  The Committee bases its   
decisions, in part, on its regular exposure to these executive officers at      
Board meetings and the various information it receives about the business       
during the year.  Additionally, the Committee receives the Chief Executive      
Officer's recommendations regarding compensation for other executive officers   
and key employees.  All such decisions have been made with the objective of     
retaining and compensating those officers and key employees who have            
demonstrated to the satisfaction of the Committee the capacity to contribute    
to the performance of the Company.                                              

                          COMPENSATION COMMITTEE
                                  STEWART CURETON, JR., CHAIRMAN
               JOHN MOBLEY
               T.M. MOBLEY

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

The Compensation Committee of the Board of Directors is comprised of  
Stewart Cureton, Jr., John Mobley, and T.M. Mobley, all of which are            
currently non-employee directors of the Company.  From the time of the          
Company's organization until November 1993, John Mobley served as the           
Company's Chief Executive Officer and held various management positions with    
its predecessors prior to that time.  From the time of the Company's            
organization until November 1992, T.M. Mobley served as the Company's           
President and Chief Operating Officer, and held various senior management       
positions with its predecessors prior to that time.                             

COMPENSATION OF DIRECTORS                                                       

During 1997, directors received annual compensation as follows:       

                                                                [Download Table]
                                 Chairman &           Other Non-    
                               Vice Chairman      Employee Directors
                               -------------      ------------------
                                                                    
Annual retainer                    $7,500                $7,500     
Chairman/Vice Chairman                                              
   compensation                     5,000                    --     
Committee chairman fees             2,500                 2,500     
Board meeting fees (1)                750                   750     
Committee meeting fees (2)            500                   500     

-------------------------                                                       
(1)  Payment of fees limited to four meetings annually.               
   (2)  Committee meeting fees are $250 for committee meetings held the same
day and location as Board meetings.                         

COMPANY PERFORMANCE GRAPH 

 The chart below compares the yearly percentage change in the cumulative
total shareholder return on the Company's Class A Stock during the period       
from September 25, 1991 (the date the Company's stock began trading after its   
initial public offering) to December 31, 1997, with the cumulative total        
return on the S&P 500 Index, a Company-constructed peer group and the Russell   
2000 Index.  The comparison assumes $100 was invested on September 25, 1991     
in the Company's Class A Stock and in each of the foregoing indices and         
assumes reinvestment of dividends.                                              

Companies included in the peer group are as follows:  Clean Harbors,  
Inc.; Laidlaw Environmental Services, Inc.; Safety Kleen Corp. and TETRA        
Technologies, Inc.  Horsehead Resource Development, Inc., which was included    
in the peer group in prior years, has not been included in the chart below      
due to a change in its corporate structure during 1996.  Given the Company's    
inactive operating status, a comparison to the foregoing peer group is          
currently of relatively minor significance.  Accordingly, the Company has       
included a comparison to the Russell 2000 Index, which is comprised of          
companies without applicable per group companies, but with similar market       
capitalization to one another and the Company.                                  

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SUMMARY OF COMPENSATION PLANS 

  Prior to the disposition of substantially all of the Company's remaining
operating assets on May 29, 1997, the Company maintained the employee           
compensation plans summarized below.  Effective as of May 29, 1997, the         
Company had no employees participating in such plans, and the Company does      
not anticipate that any employees will participate in such plans at any time    
in the future (currently, the Company has no employees).                        

RESTATED STOCK COMPENSATION PLAN                                                

 The Company adopted the Restated Stock Compensation Plan to provide for
the grant of non-qualified options to participating employees.  An aggregate    
of 645,000 shares of Class A Stock were authorized and reserved for issuance    
under the plan.  The plan was administered by the Compensation Committee,       
which had the sole authority to interpret the plan, to determine the persons    
to whom options would be granted, and to determine the exercise price,          
duration and other terms of options to be granted under the plan; provided      
that, the exercise price of all options granted under the plan could not be     
less than the fair market value of the Class A Stock at the date of grant of    
the option, and no option could be exercisable more than ten years after the    
date of grant.  During 1997, no options were granted under this plan, no        
previously granted options were exercised, and as of December 31, 1997, no      
unexercised options remained outstanding (all such options having terminated    
during 1997).                                                                   

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PROFIT SHARING PLAN                                                             

The Company and its former subsidiaries adopted the Mobley Employees  
Profit Sharing Plan, which was intended to comply with Section 401 of the       
Internal Revenue Code and the provisions of the Employee Retirement Income      
Security Act of 1974 ("ERISA").  All employees of the companies who had         
completed six months of service and attained the age of 21 were eligible to     
participate in the plan.  Participating employees were allowed to make          
pre-tax contributions to their accounts of up to 15% of their compensation      
(up to a maximum of $9,500 in 1997).  The employer, in its discretion, may      
make matching contributions based on the employee's elective contribution and   
may make an aggregate contribution which would be allocated among               
participating employees based on relative compensation levels.  Employer        
contributions vested 30% after three years of service, 40% after four years     
of service, and 20% per year of service thereafter.  Distributions generally    
were payable in a lump sum after retirement, death or disability.   No          
contribution was made to the Plan in 1997, based on the Company's financial     
performance.                                                                    

EMPLOYMENT AGREEMENT                                                            

The Company entered into an employment agreement with Michael M. Stark
effective October 23, 1992, which specified that his duties were that of        
President and Chief Operating Officer of the Company, with a base annual        
salary of $218,000 (Mr. Stark subsequently became Chief Executive Officer       
effective November 3, 1993 and served in that capacity until his May 29, 1997   
resignation).  The agreement also provides that Mr. Stark is entitled to a      
bonus in an amount to be determined annually by the Compensation Committee.     
In 1997, Mr. Stark was not awarded bonus compensation pursuant to his           
Employment Agreement, but did receive compensation in connection with the       
sale of assets to U.S. Filter, as previously described.  Pursuant to the        
terms of the employment agreement, Mr. Stark was granted options covering       
240,000 shares of the Company's Class A Stock; however, such options have       
terminated.                                                                     

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ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                       
AND MANAGEMENT                                              

 The following table sets forth, as of May 31, 1998, the shares of Class
A and Class B Stock beneficially owned by (i) each person known to the          
Company to be the beneficial owner of more than five percent of the issued      
and outstanding shares of the Company's Class A or Class B Stock, (ii) each     
director, (iii) the Company's Chief Executive Officer, and (iv) the directors   
and executive officers as a group.  This information is based on public         
filings made with the Securities and Exchange Commission through May 1998,      
and certain information supplied to the Company by the persons listed below.    

                                                        [Enlarge/Download Table]
                                     CLASS A STOCK(1)            CLASS B STOCK(1)     
                                                Percent of                 Percent of 
Name of Beneficial Owner (2)       Shares        Class(3)      Shares        Class    
----------------------------      ---------     ----------  -------------  -----------
                                                                                      
John Mobley                        4,600(4)         *         687,004(5)      15.0%   
Lois Ann Mobley                       --           --         253,550(6)       5.5%   
James A. Mobley(7)                    --           --         647,517         14.1%   
Steven M. Mobley(7)                   --           --         647,517         14.1%   
H. David Hughes, Trustee              --           --         365,786(8)       8.0%   
T.M. Mobley                           --           --       1,108,210(9)      24.2%   
Jo Ann Mobley Grooms                  --           --         324,671(10)      7.10%  
Susan Mobley Matthews                 --           --         235,471(11)      5.1%   
David Mobley                          --           --         515,163(12)     11.3%   
Robert G. Schleier, Trustee           --           --         691,527(13)     15.1%   
Stewart Cureton, Jr.(14)          10,000            *              --           --    
Directors and Executive Officers                                                      
  as a Group (3 persons)          14,600            *       1,795,214         39.2%   

-------------------                                                             
*Less than 1%                                                                   

(1)  Each share of Class B Stock is convertible into Class A Stock on a         
   share-for-share basis at any time.  The information set forth for Class A
  Stock does not include the shares of Class B Stock which are convertible
into Class A Stock.                                                   
(2)  Addresses of beneficial owners are as follows:  John Mobley and Lois Ann   
 Mobley, 305 Camp Craft Road, Suite 150, Austin, Texas; James A. Mobley,
919 Hillcrest Drive, Longview, Texas; Steven M. Mobley, 816 Congress  
  Avenue, Suite 1100, Austin, Texas; H. David Hughes, 111 Congress Avenue,
  Suite 1400, Austin, Texas; T.M. Mobley, 609 Willow Bend, Kilgore, Texas;
Stuart Cureton, Jr., Cureton & Co., Inc., 1100 Louisiana, Suite 3250, 
   Houston, Texas; Jo Ann Mobley Grooms, 1880 Bent Tree, Tyler, Texas; Susan
Mobley Matthews, HCR 68, Box 23A, Hondo, Texas; David Mobley, 1909 N. 
   Longview Street, Kilgore, Texas; and Robert G. Schleier, 1100 Stone Road,
Suite 101, Kilgore, Texas.                                            
(3)  Percentages are calculated on the number of shares that would be           
outstanding if all remaining stock options were exercised.            
(4)  Includes a pro-rata portion of the shares of Class A Stock owned by a      
     corporation which is owned 40% by John Mobley; Mr. Mobley shares voting and
investment power for shares owned by such corporation.                
(5)  Includes 253,550 shares held by a family trust for which Mr. Mobley's      
spouse, Lois Ann Mobley, is co-trustee; Mr. Mobley has no pecuniary   
interest in such shares.                                              

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(6)  Represents shares held as co-trustee for a trust; Mrs. Mobley shares voting
and investment power for such shares with H. David Hughes.            
(7)  The number of shares listed for each of James A. Mobley and Steven M.      
Mobley includes 290,600 shares owned by trusts for which they serve as
trustees.                                                             
(8)  Represents shares held as co-trustee for two trusts (see Footnotes (6) and 
(9)).  Although Mr. Hughes shares voting and investment power for such
shares, he has no pecuniary interest in the shares.                   
(9)  Includes 112,236 shares held as co-trustee for a trust; although Mr. Mobley
     shares voting and investment power with H. David Hughes for shares owned by
such trust, he has no pecuniary interest in those shares.             
(10) Includes 296,671 shares owned by trusts for which Mrs. Grooms is sole      
trustee.  Also includes 28,000 shares owned of record by Mrs. Grooms' 
spouse; Mrs. Grooms disclaims beneficial ownership for such shares.   
(11) Includes 207,471 shares owned by trusts for which Mrs. Matthews is sole    
 trustee.  Also includes 28,000 shares owned of record by Mrs. Matthews'
spouse; Mrs. Matthews disclaims beneficial ownership for such shares. 
(12) Represents shares held as trustee or co-trustee for trusts.  Mr. Mobley    
shares voting and investment power for 512,739 of the shares.         
(13) Represents shares held as trustee or co-trustee for four trusts; Mr.       
   Schleier shares voting and investment power with David Mobley for 511,527
     of these shares.  However, Mr. Schleier has no pecuniary interest in any of
the shares he beneficially owns.                                      
(14) Represents shares which may be acquired within 60 days of May 31, 1998     
under stock options granted to Mr. Cureton.                           

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                       

In 1996, the Company engaged Cureton & Co., an entity in which Stewart
Cureton, Jr. has an ownership and management interest, to provide certain       
business consulting services to the Company, including analysis and             
negotiation of potential business combination transactions to which the         
Company might be a party.  Mr. Cureton is a Class A director.  Under the        
terms of the engagement, the Company paid Cureton & Co. retainer fees of        
$12,200 through December 31, 1997.  Additionally, the Company paid Cureton &    
Co. a total of approximately $220,000, plus out-of-pocket expenses, in          
conjunction with the sale of assets to U.S. Filter, and a fee of                
approximately $207,500, plus out-of-pocket expenses, in connection with U. S.   
Filter's acquisition of PORI, which was completed on February 28, 1997.         
Under the terms of the Agreement, U.S. Filter reimbursed the Company $250,000   
for expenses associated with its due diligence investigations of PORI,          
including amounts due to Cureton & Co.  Additionally, in connection with the    
disposition of its oilfield services business described previously, the         
Company paid Cureton & Co. approximately $150,000, plus out-of-pocket           
expenses. The Company believes that the terms of its arrangements with          
Cureton & Co. are consistent with industry standards for similar services.      

PART IV 

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K      

ITEM 14 (a) 1.  FINANCIAL STATEMENTS                                  

The following consolidated financial statements of the Company and its
subsidiaries are incorporated by reference in response to this item:            

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                                                                        Page
                                                                        ----

Independent Auditor's Report                                              F-1   

Consolidated Balance Sheets                                                     
December 31, 1997 and 1996                                              F-2 

Consolidated Statements of Operations                                           
Years ended December 31, 1997, 1996 and 1995                            F-3 

Consolidated Statements of Stockholders' Equity                                 
Years ended December 31, 1997, 1996 and 1995                            F-4 

Consolidated Statements of Cash Flows                                           
Years ended December 31, 1997, 1996 and 1995                            F-5 

Notes to Consolidated Financial Statements                         F-6 to F-25  

ITEM 14 (a) 2.  FINANCIAL STATEMENT SCHEDULES                         

   All schedules have been omitted because the required information is shown
in the consolidated financial statements or notes thereto or they are not       
applicable.                                                                     

ITEM 14 (a) 3.  LIST OF EXHIBITS                                      

                                                                [Download Table]
Exhibit                                                                         
Number                                                                          
-------                                                                         
                                                                                
3.1*      Certificate of Incorporation of the Company (filed as Exhibit 3.1 to  
          the Company's Registration Statement on Form S-1, No. 33-41722).      

3.2*      Bylaws of the Company (filed as Exhibit 3.2 to the Company's          
          Registration Statement on Form S-1, No. 33-41722).                    

3.3*      Amendment to Bylaws of the Company (filed as Exhibit 3.2(b) to the    
          Company's Annual Report on Form 10-K for the year ended December 31,  
          1991).                                                                

4.1*      Specimen Class A Common Stock Certificate (filed as Exhibit 4.1 to the
          Company's Registration Statement on Form S-1, No. 33-41722).          

4.2*      Specimen Class B Common Stock Certificate (filed as Exhibit 4.2 to the
          Company's Registration Statement on Form S-1, No. 33-41722).          

10.1*+    Form of Nonqualified Stock Option Plan for Outside Directors (filed as
          Exhibit 10.6 to the Company's Registration Statement on Form S-1, No. 
          33-41722).                                                            

10.2*+    Form of Restated Stock Compensation Plan (filed as Exhibit 4.3 to the 
          Company's Registration Statement on Form S-8, No. 33-92336).          

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10.3*     Agreement and Plan of Restructuring among the Company, Gibraltar,     
          Mobley Co., Mobley Group, Inc. ("Mobley Group"), Mobley Industries    
          Partnership ("MIP"), Mobley Properties, John Mobley, Thomas M. Mobley,
          David Mobley and David Mobley Grantor Trust (filed as Exhibit 10.9 to 
          the Company's Registration Statement on Form S-1, No. 33-41722).      

10.4*+    Mobley Employees Profit Sharing Plan, as amended and restated         
          effective January 1, 1994 (filed as Exhibit 10(e) to the Company's    
          Annual Report on Form 10-K for the year ended December 31, 1994).     

10.5*     Registration Rights Agreement, dated August 23, 1991 between the      
          Company and David Mobley Grantor Trust (filed as Exhibit 10.54 to the 
          Company's Registration Statement on Form S-1, No. 33-41722).          

10.6*+    Employment agreement between Mobley Environmental Services, Inc. and  
          Michael M. Stark, dated October 23, 1992 (filed as Exhibit 10.1 to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          September 30, 1992).                                                  

10.7*     Stock Purchase Agreement dated May 10, 1994 by and between American   
          Ecology Corporation and Mobley Environmental Services, Inc. (filed as 
          Exhibit 10(ii) to the Company's Annual Report on Form 10-K for the    
          year ended December 31, 1993).                                        

10.8*     Side Letter Agreement dated May 13, 1994 between American Ecology     
          Corporation and Mobley Environmental Services, Inc. regarding the     
          Stock Purchase Agreement set forth at Exhibit 10(ii) (filed as Exhibit
          10(jj) to the Company's Annual Report on Form 10-K for the year ended 
          December 31, 1993).                                                   

10.9*     Amendment to Stock Purchase Agreement dated September 2, 1994 between 
          American Ecology Corporation and Mobley Environmental Services, Inc.  
          regarding the Stock Purchase Agreement (filed as Exhibit 10(mm) to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          June 30, 1994).                                                       

10.10*    Promissory Note in the original principal amount of $550,000 dated    
          December 31, 1994 executed by American Ecology Corporation payable to 
          Mobley Environmental Services, Inc. (filed as Exhibit 10(v) to the    
          Company's Annual Report on Form 10-K for the year ended December 31,  
          1994).                                                                

10.11*    Loan Agreement dated June 2, 1995 between the Company and Bank One,   
          Texas, N.A. (filed as Exhibit 10(a) to the Company's Quarterly Report 
          on Form 10-Q for the quarterly period ended June 30, 1995).           

10.12*    Security Agreement dated June 2, 1995 between the Company and Bank    
          One, Texas, N.A. (filed as Exhibit 10(b) to the Company's Quarterly   
          Report on Form 10-Q for the quarterly period ended June 30, 1995).    

10.13*    Unlimited Guaranty between Mobley Company, Inc. and Bank One, Texas,  
          N.A. (filed as Exhibit 10(c) to the Company's Quarterly Report on Form
          10-Q for the quarterly period ended June 30, 1995).                   

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10.14*    Asset Purchase Agreement dated June 7, 1995 between the Company and   
          Romero Bros. Oil Exchange, Environmental Petroleum Products Co./EPPCO,
          and Environmental Insight, Inc. (the "Romero Asset Purchase           
          Agreement") (filed as Exhibit 10(d) to the Company's Quarterly Report 
          on Form 10-Q for the quarterly period ended June 30, 1995).           

10.15*    Assignment by the Company of the Romero Asset Purchase Agreement to   
          Hydrocarbon Technologies, Inc., a wholly-owned subsidiary of the      
          Company (filed as Exhibit 10(e) to the Company's Quarterly Report on  
          Form 10-Q for the quarterly period ended June 30, 1995).              

10.16*    Escrow Agreement dated July 19, 1995 between the Company, Romero Bros.
          Oil Exchange, Inc. and Bank One, Texas, N.A. (filed as Exhibit 10(f)  
          to the Company's Quarterly Report on Form 10-Q for the quarterly      
          period ended June 30, 1995).                                          

10.17*    Promissory Note in the amount of $75,000.00 dated July 19, 1995,      
          executed by the Company, payable to Romero Bros. Oil Exchange, Inc.   
          (filed as Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q
          for the quarterly period ended June 30, 1995).                        

10.18*    Pledge Agreement between the Company and Romero Bros. Oil Exchange,   
          Inc. securing the Promissory Note executed by the Company payable to  
          Romero Bros. Oil Exchange, Inc. (filed as Exhibit 10(h) to the        
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          June 30, 1995).                                                       

10.19*    Contract dated July 12, 1995 between the Company and Promotora de     
          Servicios y Proyectos Ecologicos, S.A. de C.V. for the sale of the    
          shares of Pro Ambiente, S.A. de C.V. (filed as Exhibit 10(i) to the   
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          June 30, 1995).                                                       

10.20*    Memorandum dated August 3, 1995 regarding amendment of contract for   
          the sale of shares of Pro Ambiente, S.A. de C.V. to Promotora de      
          Servicios y Proyectos Ecologicos, S.A. de C.V. (filed as Exhibit 10(j)
          to the Company's Quarterly Report on Form 10-Q for the quarterly      
          period ended June 30, 1995).                                          

10.21*    Modification Agreement dated August 11, 1995 between the Company and  
          Promotora de Servicios y Proyectos Ecologicos, S.A. de C.V., amending 
          the contract for the sale of the shares of Pro Ambiente, S.A. de C.V. 
          (filed as Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q
          for the quarterly period ended September 30, 1995).                   

10.22*    Termination Agreement dated July 12, 1995 between the Company and     
          Promotora de Servicios y Proyectos Ecologicos, S.A. de C.V.,          
          terminating the Organization Agreement dated March 29, 1993 (filed as 
          Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the  
          quarterly period ended September 30, 1995).                           

10.23*+   1995 Employee Restricted Stock Plan (filed as Exhibit 4.4 to the      
          Company's Registration Statement on Form S-8, No. 33-92336).          

10.24*    Asset Purchase Agreement dated April 25, 1997 by and among Mobley     
          Environmental Services, Inc., Mobley Company, Inc., Hydrocarbon       
          Technologies, Inc., United States Filter Corporation, and U.S. Filter 
          Recovery Services (Southwest), Inc.                                   

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10.25*    Asset Purchase Agreement dated January 20, 1997 by and among Mobley   
          Company, Inc., and Dawson Production Services, Inc.                   

10.26*    Promissory Note in the amount of $500,000 dated January 20, 1997      
          executed by Dawson Production Services, Inc. payable to Mobley        
          Company, Inc.                                                         

10.27*    First Amendment to Letter Loan Agreement and Master Lease Modification
          Agreement dated January 20, 1997 between the Company and Bank One,    
          Texas, N.A.                                                           

10.28*    Deed of Trust, Security Agreement, and Financing Statement dated      
          January 20, 1997 executed by Mobley Company, Inc. for the benefit of  
          Bank One, Texas, N.A.                                                 

10.29*    Unlimited Guaranty dated January 20, 1997 executed by Hydrocarbon     
          Technologies, Inc. to Bank One, Texas, N.A. guaranteeing indebtedness 
          of the Company.                                                       

10.31*    Security Agreement dated January 20, 1997 executed by Hydrocarbon     
          Technologies, Inc. in favor of Bank One, Texas, N.A. securing         
          indebtedness of the Company.                                          

10.32*    Information Statement dated May 9, 1997 to the Shareholders of the    
          Company relating to the pending sale of the Company's hydrocarbon     
          recycling and recovery business, including Supplement thereto dated   
          May 12, 1997 (filed as Schedule 14C on May 9, 1997 and May 14, 1997). 

10.33     Tolling Agreement dated July 30, 1997 between American Ecology        
          Corporation and Mobley Environmental Services, Inc.                   

11        Statement regarding computation of per share earnings (loss).         

23        Independent Auditors' Consent.                                        

27        Financial Data Schedule (submitted only in electronic format).        

--------------------                                                            
   * Incorporated herein by reference to the respective filing identified above.
+ Identifies management or compensatory plan or arrangement required to be
 filed as an exhibit to this form pursuant to Item 14(c) of this report.

ITEM 14 (b)  REPORTS ON FORM 8-K                                      

None                                                                  

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    SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.                       

Date: July 9, 1998                     Mobley Environmental Services, Inc.      
        Registrant

             /s/ John Mobley
                                     ---------------------------------------
         John Mobley
                                    President, Chief Financial Officer and
       Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934,  
this report has been signed below by the following persons on behalf of the     
Registrant and in the capacities and on the dates indicated.                    

Signature                              Title                         Date       
---------                              -----                         ----       

/s/ John Mobley              Chairman of the Board              July 9, 1998
----------------------------   and Director; President,                         
John Mobley                    Chief Financial Officer,                         
and Secretary     

/s/ T.M. Mobley              Vice-Chairman of the               July 9, 1998
----------------------------   Board and Director;                              
T.M. Mobley                    Vice President and                               
Treasurer         

/s/ Stewart Cureton, Jr.     Director                           July 9, 1998
----------------------------                                                    
Stewart Cureton, Jr.                                                            

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INDEPENDENT AUDITORS' REPORT  

The Board of Directors and Stockholders                                         
Mobley Environmental Services, Inc.:                                            

We have audited the accompanying consolidated balance sheets of Mobley          
Environmental Services, Inc. and subsidiaries as of December 31, 1997 and       
1996, and the related consolidated statements of operations, stockholders'      
equity, and cash flows for each of the years in the three-year period ended     
December 31, 1997.  These consolidated financial statements are the             
responsibility of the Company's management.  Our responsibility is to express   
an opinion on these consolidated financial statements based on our audits.      

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

In our opinion, the consolidated financial statements referred to above         
present fairly, in all material respects, the financial position of Mobley      
Environmental Services, Inc. and subsidiaries as of December 31, 1997 and       
1996, and the results of their operations and their cash flows for each of      
the years in the three-year period ended December 31, 1997, in conformity       
with generally accepted accounting principles.                                  

/s/ KPMG PEAT MARWICK LLP                                                       

KPMG PEAT MARWICK LLP                                                           

Shreveport, Louisiana                                                           
March 6, 1998                                                                   

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  MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

 Consolidated Balance Sheets

  December 31, 1997 and 1996
   (in thousands, except share data)

                                                                [Download Table]
                     Assets                                    1997      1996   
                     ------                                    ----      ----   
                                                                                
Current assets:                                                                 
    Cash and cash equivalents                                $    353       385 
    Receivables                                                   373       161 
    Prepaid expenses                                               93       207 
    Net assets of discontinued operations-current                  --     1,144 
                                                             --------   ------- 
              Total current assets                                819     1,897 

Property, plant, and equipment, net                               211       230 
Net assets of discontinued operations-noncurrent                   --     9,659 
Note receivable                                                   500        -- 
Investment securities available for sale                        4,495        -- 
Other assets, net                                                 192       197 
                                                             --------   ------- 

                                                             $  6,217    11,983 
                                                             --------   ------- 
                                                             --------   ------- 

        Liabilities and Stockholders' Equity                                    
        ------------------------------------                                    

Current liabilities:                                                            
    Notes payable and current portion of long-term debt      $     --     5,014 
    Accounts payable                                              100       633 
    Accrued expenses                                            1,041     3,721 
                                                             --------   ------- 
              Total current liabilities                         1,141     9,368 

Deferred income taxes                                              --       148 
                                                             --------   ------- 
              Total liabilities                                 1,141     9,516 
                                                             --------   ------- 

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 and                        
         4,155,097 shares issued and outstanding in 1997 and                    
         1996, respectively                                        43        42 
    Class B, 10,000,000 shares authorized; 4,660,350 shares                     
         issued and 4,575,643 shares outstanding in 1997,                       
         4,764,903 shares issued and 4,680,196 shares                           
         outstanding in 1996                                       47        48 
    Additional paid-in capital                                 25,159    25,159 
    Accumulated deficit                                       (20,093)  (22,486)
    Net unrealized gain on available for sale securities           29        -- 
    Deferred compensation costs under restricted stock                          
         agreements                                              (101)     (288)
    Treasury stock, 84,707 shares of Class B common stock,                      
         at cost                                                   (8)       (8)
                                                             --------   ------- 
              Total stockholders' equity                        5,076     2,467 

Commitments and contingencies                                                   
                                                             --------   ------- 
                                                             $  6,217    11,983 
                                                             --------   ------- 
                                                             --------   ------- 

See accompanying notes to consolidated financial statements.                    

                                                                   (continued)
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  MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations   

Years ended December 31, 1997, 1996, and 1995   
(in thousands, except per share amounts and share data)   

                                                                [Download Table]
                                                1997        1996          1995    
                                             ----------   ---------    ---------  
                                                                                  
Revenues                                     $       --          --           --  
Cost of revenues                                     --          --           --  
                                             ----------   ---------    ---------  
         Gross profit                                --          --           --  

Selling, general, and                                                             
  administrative expenses                           759         516          683  
Restructuring expenses                               --         650           --  
                                             ----------   ---------    ---------  

         Operating loss                            (759)     (1,166)        (683) 

Gain on sale of investments                         555          --           --  

Other income (expense), net                         200        (120)        (630) 
                                             ----------   ---------    ---------  

          Loss from continuing                                                    
           operations before income taxes            (4)     (1,286)      (1,313) 

Income tax benefit                                   --          --          320  
                                             ----------   ---------    ---------  

         Loss from continuing operations             (4)     (1,286)        (993) 
                                             ----------   ---------    ---------  

Discontinued operations, net of tax:                                              
    Provision for loss on disposal of waste                                       
         management services segment                 --      (7,621)          --  

    Provision for losses during phase-out                                         
         period of waste management services                                      
         segment                                     --        (331)          --  

    Net loss from operations of waste management                                  
         services segment                          (405)       (623)        (318) 

    Net loss from operations of                                                   
         oilfield services segment                   --        (374)        (152) 

    Gain on sale of oilfield services             2,802          --           --  
                                             ----------   ---------    ---------  

         Income (loss) from discontinued                                          
             operations                           2,397       (8,949)        (470)
                                             ----------   ---------    ---------  

         Net income (loss)                    $   2,393      (10,235)      (1,463)
                                             ----------   ---------    ---------  
                                             ----------   ---------    ---------  

Net income (loss) per share:                                                      
    Basic - continuing operations            $    (.00)       (0.15)       (0.12) 
    Basic - discontinued operations                .27        (1.01)       (0.05) 
                                             ----------   ---------    ---------  

                                             $     .27        (1.16)       (0.17) 
                                             ----------   ---------    ---------  
                                             ----------   ---------    ---------  

    Assuming dilution - continuing                                                
         operations                          $    (.00)       (0.14)       (0.12) 
    Assuming dilution - discontinued                                              
         operations                                .27        (0.99)       (0.05) 
                                             ----------   ---------    ---------  
                                             $     .27        (1.13)       (0.17) 
                                             ----------   ---------    ---------  
                                             ----------   ---------    ---------  

Weighted average number of common shares                                          
            outstanding                       8,835,293   8,835,293    8,378,142  
                                             ----------   ---------    ---------  
                                             ----------   ---------    ---------  

See accompanying notes to consolidated financial statements.                    

                                                                   (continued)

F-3 

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES    

Consolidated Statements of Stockholders' Equity     

Years ended December 31, 1997, 1996, and 1995     
(in thousands, except share data)   

                                                        [Enlarge/Download Table]
                                                                   1997       1996      1995  
                                                                 --------   -------   ------- 
                                                                                              
Preferred stock - none issued                                    $     --        --        -- 
                                                                 --------   -------   ------- 
Class A common stock:                                                                         
  Balance at beginning of year                                         42        41        27 
  Issuance of 420,000 shares of restricted common stock                --        --         4 
  Issuance of 500,000 shares of common stock in connection                                    
   with asset acquisition                                              --        --         5 
  Conversion of Class B common stock (104,553 shares in 1997,                                 
   69,754 shares in 1996, and 500,809 shares in 1995)                   1         1         5 
                                                                 --------   -------   ------- 
    Balance at end of year                                             43        42        41 
                                                                 --------   -------   ------- 
Class B common stock:                                                                         
  Balance at beginning of year                                         48        49        54 
  Conversion into Class A common stock (104,553 shares in                                     
   1997, 69,754 shares in 1996, and 500,809 shares in 1995)            (1)       (1)       (5)
                                                                 --------   -------   ------- 
    Balance at end of year                                             47        48        49 
                                                                 --------   -------   ------- 
Additional paid-in capital:                                                                   
  Balance at beginning of year                                     25,159    25,159    23,788 
  Issuance of restricted common stock                                  --        --       626 
  Issuance of common stock in connection with asset acquisition        --        --       745 
                                                                 --------   -------   ------- 
    Balance at end of year                                         25,159    25,159    25,159 
                                                                 --------   -------   ------- 
Accumulated deficit:                                                                          
  Balance at beginning of year                                    (22,486)  (12,251)  (10,788)
  Net income (loss)                                                 2,393   (10,235)   (1,463)
                                                                 --------   -------   ------- 
    Balance at end of year                                        (20,093)  (22,486)  (12,251)
                                                                 --------   -------   ------- 
Allowance for foreign currency translation loss:                                              
  Balance at beginning of year                                         --        --      (700)
  Provision for foreign currency translation loss                      --        --      (155)
  Reduction in allowance for foreign currency translation loss                                
   due to sale of investment in foreign joint venture                  --        --       855 
                                                                 --------   -------   ------- 
    Balance at end of year                                             --        --        -- 
                                                                 --------   -------   ------- 
Net unrealized gain on available for sale securities:                                         
  Balance at beginning of year                                         --        --        -- 
  Unrealized gain                                                      29        --        -- 
                                                                 --------   -------   ------- 
    Balance at end of year                                             29        --        -- 

Deferred compensation costs under restricted stock agreements:                                
  Balance at beginning of year                                       (288)     (384)       -- 
  Issuance of restricted stock                                         --        --      (630)
  Amortization of deferred compensation costs                         187        96       246 
                                                                 --------   -------   ------- 
    Balance at end of year                                           (101)     (288)     (384)
                                                                 --------   -------   ------- 
Treasury stock                                                         (8)       (8)       (8)
                                                                 --------   -------   ------- 
      Total stockholders' equity                                 $  5,076     2,467    12,606 
                                                                 --------   -------   ------- 
                                                                 --------   -------   ------- 

See accompanying notes to consolidated financial statements.                    

                                   F-4                           (Continued)

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES    

Consolidated Statements of Cash Flows     

Years ended December 31, 1997, 1996 and 1995    
(in thousands)    

                                                        [Enlarge/Download Table]
                                                                        1997      1996     1995  
                                                                      -------   -------   ------ 
                                                                                                 
Cash flows from operating activities:                                                            
  Net income (loss)                                                   $ 2,393   (10,235)  (1,463)
  Adjustments to reconcile net income (loss) to net cash used by                                 
   operating activities:                                                                         
    Provision for loss on disposal and losses during phase-out                                   
     period of waste management services segment                           --     8,650       -- 
    Provision for restructuring charges                                    --       650       -- 
    Gain on sale of US Filter stock                                      (556)       --       -- 
    Loss on sale of investment securities                                   1        --       -- 
    Gain on sale of oilfield services segment                          (2,802)       --       -- 
    Gain on sale of fixed assets                                          (37)       --       -- 
    Depreciation and amortization                                         538     2,594    2,361 
    Deferred income tax benefit                                          (148)     (698)    (471)
    Deferred compensation costs under restricted stock agreements         187        96      246 
    Bad debt expense                                                      152        --      200 
    Equity in net loss and loss on sale of joint venture                   --        --      323 
    Write-down of assets                                                   --        --      392 
    Changes in certain operating assets and liabilities:                                         
      Trade receivables                                                  (750)     (698)    (123)
      Prepaid expenses and other assets                                   364      (126)     343 
      Accounts payable                                                   (931)      840   (1,732)
      Accrued expenses                                                 (2,122)   (1,279)    (265)
                                                                      -------   -------   ------ 
         Net cash used by operating activities,                                                  
          including discontinued operations                            (3,711)     (206)    (189)
                                                                      -------   -------   ------ 
Cash flows from investing activities:                                                            
  Net proceeds from sale of oilfield services segment                   4,656        --       -- 
  Net proceeds from sale of US Filter stock                             8,556        --       -- 
  Net proceeds from sale of investment securities available for sale      349        --       -- 
  Purchase of investment securities available for sale                 (4,801)       --       -- 
  Proceeds from sale of assets                                             45        --       -- 
  Capital expenditures                                                   (112)   (5,339)  (5,226)
  Proceeds from sale of joint venture investment                           --        --    1,324 
  Acquisition of assets                                                    --        --     (770)
  Other investing activities, net                                          --        --       56 
                                                                      -------   -------   ------ 
         Net cash provided (used) by investing activities,                                       
          including discontinued operations                             8,693    (5,339)  (4,616)
                                                                      -------   -------   ------ 
Cash flows from financing activities:                                                            
  Net borrowings under revolving lines of credit and                                             
   short-term notes payable                                                --     4,686       -- 
  Principal payments on long-term debt                                 (5,014)     (232)  (1,750)
  Borrowings of long-term debt                                             --        --      560 
                                                                      -------   -------   ------ 
         Net cash provided (used) by financing activities,                                       
          including discontinued operations                            (5,014)    4,454   (1,190)
                                                                      -------   -------   ------ 
         Net decrease in cash and cash equivalents                        (32)   (1,091)  (5,995)

Cash and cash equivalents at beginning of year                            385     1,476    7,471 
                                                                      -------   -------   ------ 
Cash and cash equivalents at end of year                              $   353       385    1,476 
                                                                      -------   -------   ------ 
                                                                      -------   -------   ------ 

See accompanying notes to consolidated financial statements.                    

                                   F-5                           (Continued)

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements  

December 31, 1997, 1996 and 1995  

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES      

  PRINCIPLES OF CONSOLIDATION -- The accompanying financial statements
present the consolidated accounts of Mobley Environmental Services, Inc.
(the "Company") and its wholly-owned subsidiaries, Hydrocarbon          
   Technologies, Inc. ("HTI") and Mobley Company, Inc. ("Mobley").  In January
  1997, the Company sold the assets of its oilfield services segment, and in
May 1997, it sold the assets of its waste management services segment   
 (note 2).  The Company's former subsidiary, Gibraltar Chemical Resources,
   Inc. ("Gibraltar") was sold on December 31, 1994 (note 3).  All significant
intercompany accounts and transactions have been eliminated in          
consolidation.                                                          

       DESCRIPTION OF BUSINESS -- Prior to the sale of its oilfield services and
waste management services segments, the Company provided diverse        
 environmental and field-related services to industrial, governmental, and
commercial markets, specialized in the collection, transportation,      
treatment, recycling, and management of a wide variety of non-hazardous 
liquid hydrocarbons, oil filters, absorbents, and related materials and 
also provided oilfield services for managing liquids used or produced   
  during the lifecycle of oil and gas wells.  Prior to the sale of Gibraltar
 in 1994, the Company's waste management services activities also included
  the management of hazardous wastes.  The Company operated primarily in the
states of Texas, Louisiana, and Arkansas.                               

As of December 31, 1997, the Company has sold all of its operating
assets.  Proceeds from the sale of its segments are being invested until
  pending litigation and outstanding contractual indemnification obligations
  expire or are otherwise satisfied.  The Company currently has no employees
   and is being managed by its President.  Accounting and other administrative
functions are being performed by third-parties through contractual      
arrangements.                                                           

BASIS OF PRESENTATION -- The accompanying consolidated financial  
  statements have been prepared assuming that the Company will continue as a
going concern.  As discussed in note 2, the Company's Board of Directors
   determined that the divestiture of its operations was in the best interests
   of the Company and its shareholders.  The consolidated financial statements
do not include any adjustments that might result from the liquidation of
the Company.                                                            

   CASH EQUIVALENTS -- For purposes of reporting cash flows, the Company
 considers investments with original maturities of three months or less to
be cash equivalents.  Cash equivalents consist of investments in money  
market accounts at December 31, 1997 and 1996.                          

       REVENUE RECOGNITION -- Waste management services revenues were recognized
when the services were performed or upon the receipt and acceptance of  
waste material at the Company's transfer or processing facilities.  Upon
the recognition of such revenue, appropriate incidental treatment and   
residual disposal costs were accrued.  In the case of product sales,    
revenues were recognized upon acceptance of the related product by the  
customer.  Oilfield services revenues were recognized when the services 
were performed.                                                         

                                    F-6                          (Continued)

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements  

SECURITIES -- The Company accounts for its investment securities  
under the provisions of Statement of Financial Accounting Standards No. 
115 (Statement 115), ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND     
EQUITY SECURITIES.  Under Statement 115, the Company classifies its debt
and marketable equity securities in one of three categories:  trading,  
available-for-sale, or held-to-maturity.  Trading securities are bought 
and held principally for the purpose of selling them in the near term.  
Held-to-maturity securities are those securities in which the Company   
has the ability and intent to hold the security until maturity.  All    
other securities not included in trading or held-to-maturity are        
classified as available-for-sale.  All of the Company's investment      
securities are classified as available-for-sale, which are recorded at  
fair value. Unrealized holding gains and losses, net of the related tax 
effect, are excluded from earnings and are reported as a separate       
component of stockholders' equity until realized.                       

     A decline in the market value of any security below cost that is deemed
other than temporary is charged to operations resulting in the          
establishment of a new cost basis for the security.                     

Due to the overall immateriality to the consolidated financial    
statements, premiums and discounts are taken to the income statement at 
the time of purchase.  Dividend and interest income are recognized when 
earned. Realized gains and losses are included in earnings and are      
derived using the specific identification method for determining the    
cost of securities sold.                                                

    The carrying amount of securities at December 31, 1997, by contractual
maturity are as follows:  1998 - $551,195; 1999 - $906,965; 2000 -      
$1,261,743; and 2001 - $1,774,898.                                      

  PROPERTY, PLANT, AND EQUIPMENT -- Property, plant, and equipment are
  recorded at cost and depreciated using the straight-line method over their
estimated useful lives ranging from three to thirty years.              

       MAINTENANCE AND REPAIRS -- Major repairs to disposal well facilities were
estimated and accrued by monthly charges to expense.  Periodic costs    
  incurred for such items were charged against the related accrued expenses.
  All other maintenance and repair costs are charged to expense as incurred.
Renewals and betterments are capitalized.                               

     IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
   -- The Company utilizes the provisions of Statement of Financial Accounting
 Standards No. 121, Accounting for the Impairment of Long-Lived Assets and
 for Long-Lived Assets to be Disposed Of ("SFAS 121"), which requires that
long-lived assets and certain identifiable intangibles be reviewed for  
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  Recoverability of  
assets to be held and used is measured by a comparison of the carrying  
amount of an asset to future net cash flows, undiscounted and without   
interest charges, expected to be generated by the asset.  If such assets
  are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets exceed the fair
   value of the assets.  Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.                   

                                    F-7                          (Continued)

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements  

       INVESTMENT IN JOINT VENTURE -- Investment in joint venture consisted of a
25% interest in Pro Ambiente, S.A. de C.V. ("Pro Ambiente"), a joint    
  venture in Mexico.  On July 12, 1995, the Company sold its interest in Pro
   Ambiente (note 5).  This investment was accounted for by the equity method.

   Assets and liabilities of Pro Ambiente were translated at the rate of
exchange in effect on the last day of each fiscal year.  The related    
translation adjustments were reflected in the allowance for foreign     
currency translation loss in the stockholders' equity section of the    
consolidated balance sheet at that date.  Income and expenses were      
translated at the average rates of exchange prevailing during the year. 

INCOME TAXES -- Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the     
   financial statement carrying amounts of existing assets and liabilities and
   their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
 expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  The effect on     
  deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.               

    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.  The           
   implementation of SFAS 128 had no significant impact on earnings per share.
 (For a reconciliation of amounts used in per share computations, see note
13 - Earnings Per Share).                                               

USE OF ESTIMATES -- 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 conformity with generally accepted
 accounting principles.  Actual results could differ from those estimates.

  FINANCIAL INSTRUMENTS -- Statement of Financial Accounting Standards
No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires
that the Company disclose estimated fair values for its financial       
instruments.  Fair value estimates are set forth below for the Company's
financial instruments:                                                  

    -  Cash and Cash Equivalents, Receivables, Accounts Payable, and Accrued
       Expenses - The carrying amounts approximate fair value because of the
short maturity of these instruments.                          

                                    F-8                          (Continued)

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements  

  -  Notes Payable and Long-term Debt - The carrying amount of the notes
        payable and long-term debt approximates market because of the variable
        interest rate, which is based on the bank's prime rate, or the current
  interest rate available to the Company for debt of similar terms
approximates the existing rate.                               

-  Note Receivable - The carrying amount of the note receivable     
approximates market because the interest rate is comparable to
current market rates.                                         

      -  Investment Securities Available for Sale - The fair value of securities
  available for sale is estimated based on bid prices published in
        financial newspapers or bid quotations received from security dealers.

       STOCK OPTION PLANS -- Prior to January 1, 1996, the Company accounted for
its stock option plans in accordance with the provisions of Accounting  
 Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES
("APB 25") and related interpretations.  As such, compensation expense  
  would be recorded on the date of grant only if the current market price of
  the underlying stock exceeded the exercise price.  On January 1, 1996, the
Company adopted Statement of Accounting Standards Statement No. 123,    
ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS 123"), which permits     
  entities to recognize as expense over the vesting period the fair value of
  all stock-based awards on the date of grant.  Alternatively, SFAS 123 also
 allows entities to continue to apply the provisions of APB 25 and provide
pro forma net income and pro forma earnings per share disclosures for   
  employee stock option grants made in 1995 and future years as if the fair-
 value-based method defined in SFAS 123 has been applied.  The Company has
 elected to continue to apply the provisions of APB 25 and provide the pro
forma disclosure provisions of SFAS 123 (note 11).  As a result of the  
 Company selling all of its operating assets during 1997, all stock option
plans, other than the 1995 Employee Restricted Stock Plan, have been    
  terminated and options outstanding at December 31, 1996, under these plans
have terminated (note 11).                                              

RECLASSIFICATIONS -- Certain amounts in the prior year's financial
statements have been reclassified to conform to the current year        
presentation.                                                           

(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.  Among other  
things, the Board of Directors considered (i) the Company's relatively  
   small size and the resultant constraints on its ability to make significant
investments in additional processing or collection businesses without an
infusion of equity in an industry characterized by increasing           
consolidation, intensifying competition, and continued growth through   
 acquisition by larger entities with greater access to financial resources
   than has the Company; (ii) the Company's inability to obtain bank financing
  and the unfavorable results of efforts to attract equity investors to fund
activities then contemplated by the Company's strategic business plan;  
(iii) the                                                               

                                    F-9                          (Continued)

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements  

Company's default under its bank credit agreement due to its inability  
to maintain compliance with certain covenants contained in such         
agreement; and (iv) the Company's severely strained liquidity and       
immediate need for working capital to continue its current operations.  
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 had not yielded 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 October 30, 1996, and       
November 1, 1996, the Company executed letters of intent to sell        
substantially all of its operating assets in two separate transactions. 
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 November 1, 1996, the Company signed a letter of intent with Dawson  
 Production Services, Inc. to sell substantially all of the assets related
  to its oilfield services business.  Such sale was completed on January 20,
 1997, pursuant to a definitive asset purchase agreement.  Under the terms
  of the definitive agreement, 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 assets which were the subject of the sale
had a net book value, based on historical cost adjusted for accumulated 
   depreciation and amortization, of approximately $2,354,000.  The results of
operations associated with the discontinued segment through the disposal
date, after allocation of certain overhead and interest costs, did not  
result in a loss.  The Company's oilfield services segment generated net
income of approximately $120,000 during the period October 1, 1996 to   
January 20, 1997.  The Company recognized a gain upon completion of the 
sale, after transaction costs of approximately $261,000, amounting to   
approximately $2,802,000 in January 1997.                               

     SALE OF WASTE MANAGEMENT SERVICES ASSETS AND DISCONTINUANCE OF BUSINESS
 SEGMENT.  On October 30, 1996, the Company signed a letter of intent with
 United States Filter Corporation ("USF") to sell substantially all of the
  assets related to its waste management services activities.  Such sale was
completed on May 29, 1997, pursuant to a definitive asset purchase      
agreement.  Under the terms of the definitive agreement, the Company    
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.    
   Additionally, USF assumed certain liabilities (accounts payable and accrued
expenses) as part of the transaction.  The net assets which were the    
   subject of the definitive agreement have been removed from the consolidated
balance sheet as of December 31, 1997.  Such assets had a net book value
(net of assumed liabilities) of approximately $14,965,060.              

                                    F-10                         (Continued)

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements  

       During the year ended December 31, 1996, the Company recorded a charge of
   $7,621,000 (net of a deferred income tax benefit of $698,000), representing
the estimated loss on the disposal of the business segment, including   
certain required capital expenditures prior to the sale amounting to    
approximately $900,000.  In determining the estimated loss on disposal, 
  only the $8,000,000 fixed portion of the sales price was considered (i.e.,
  that portion which is contingent on the future performance of the business
  was ignored).  Such loss was recognized in the third quarter of 1996, when
it was determined that a sale of the assets was necessary given the     
 Company's inability to secure acceptable financing and concerns about its
liquidity.  Prior to that time, the evaluation of potential asset       
impairment had been made on a "going concern" basis and cash flow       
projections for the segment supported the carrying values of the related
assets.  The Company estimated that it would incur additional operating 
 losses in this business segment, after the allocation of certain overhead
    and interest costs, amounting to approximately $331,000 during the phase-out
period from October 1, 1996 to May 29, 1997.  A provision for such      
   estimated net losses was made during the year ended December 31, 1996.  The
Company's waste management services segment incurred a net loss of      
   approximately $405,000 during the period from January 1, 1997 until May 29,
 1997, the date of closing on the sale, which was in excess of the amounts
previously accrued.  The majority of this loss was created by additional
   charges related to automobile liability insurance claims and medical claims
 which were not included in the accruals established at December 31, 1996.

       In anticipation of the planned divestitures and the significant reduction
in personnel necessary to support the administration of the Company's   
   remaining assets, the Company recorded certain restructuring expenses, none
of which were expected to benefit its future activities, during the 1996
third quarter.  Such expenses, totaling $650,000, included employee     
  severance obligations of approximately $285,000, costs associated with the
relocation of personnel of approximately $155,000, and other related    
 expenses of approximately $210,000.  Substantially all of such costs were
subsequently incurred during the 1996 fourth quarter and 1997 first     
quarter.  The twelve employees terminated were primarily involved in    
providing certain corporate support functions, including accounting,    
information systems, and environmental, health and safety.              

       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 14).                                                

                                    F-11                         (Continued)

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MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements  

The Company's two business segments, waste management services and        
oilfield services, have been accounted for as discontinued operations, and      
accordingly, their operations have been segregated in the accompanying          
consolidated statements of operations.  The revenues, operating costs and       
expenses, interest expense, and income taxes for the years ended December 31,   
1997, 1996, and 1995, have been reclassified for amounts associated with the    
discontinued segments.  Due to the relative significance of the Company's       
business segments to its operations as a whole, and in light of the Company's   
decision in 1996 to divest itself of all of its operating assets, the Company   
has allocated certain general and administrative expenses to the business       
segments in the accompanying consolidated segments of operations.  General      
and administrative expenses attributable to continuing operations have been     
determined based upon an allocation of such costs between the business          
segments and continuing operations. Other income and expense have been          
recorded as continuing operations as such amounts are not specifically          
attributable to either of the Company's business segments which are being       
disposed of.  Interest expense has been allocated to the segments based on      
the outstanding indebtedness attributable to each of the business segments.     

Operating results and the estimated loss on disposal of the Company's     
waste management services segment for the years ended December 31, 1997,        
1996, and 1995 are as follows (in thousands of dollars):                        

                                                                [Download Table]
                                                    1997     1996     1995  
                                                    ----     ----     ----  
                                                                            
Revenues                                         $  9,489   17,207   14,233 
Cost of revenues                                    7,697   14,006    9,923 
                                                 --------   ------   ------ 
   Gross profit                                     1,792    3,201    4,310 

Selling, general, and administrative expenses,                              
 including allocated amounts                        2,209    3,902    4,730 
                                                 --------   ------   ------ 
   Operating loss                                    (417)    (701)    (420)

Interest expense, net                                (136)    (210)     --  
                                                 --------   ------   ------ 
   Loss before income taxes                          (553)    (911)    (420)

Income tax benefit                                    148       --      102 
                                                 --------   ------   ------ 
   Net loss from operations of waste                                        
    management services segment                      (405)    (911)    (318)

Reduction in reserve for losses from operations                             
 of waste management services segment during                                
 phase-out period                                      --      288       -- 
                                                 --------   ------   ------ 
                                                 $   (405)    (623)    (318)
                                                 --------   ------   ------ 
                                                 --------   ------   ------ 

                                      F-12                       (Continued)

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Notes to Consolidated Financial Statements  

                                                        [Enlarge/Download Table]
                                                      1997        1996         1995  
                                                      ----        ----         ----  
                                                                                     
  Provision for losses from operations of waste                                      
   management services segment during                                                
   phase-out period, recognized in the third                                         
   quarter of 1996                                 $     --        (331)          -- 
                                                   --------      ------        ----- 
                                                   --------      ------        ----- 
  Provision for loss on disposal of waste                                            
   management services segment, recognized                                           
   in the third quarter of 1996:                                                     
      Asset valuation adjustment                         --      (5,673)          -- 
      Accrued transaction costs and capital                                          
       expenditures subsequent to measurement                                        
       date                                              --      (1,595)          -- 
      Write-off of excess of purchase price over                                     
       fair value of net assets acquired                 --       1,051)          -- 
      Deferred income tax benefit                        --         698           -- 
                                                   --------      ------        ----- 

                                                   $     --      (7,621)          -- 
                                                   --------      ------        ----- 
                                                   --------      ------        ----- 

       Operating results of the Company's oilfield services segment for the          
years ended December 31, 1997, 1996, and 1995 are as follows (in thousands of        
dollars):                                                                            
                                                      1997        1996         1995  
                                                      ----        ----         ----  

  Revenues                                         $    231       4,373        4,355 
  Cost of revenues                                      168       3,241        2,934 
                                                   --------      ------        ----- 
      Gross profit                                       63       1,132        1,421 

  Selling, general, and administrative expenses,                                     
   including allocated amounts                           63       1,506        1,622 
                                                   --------      ------        ----- 
      Operating loss                                     --        (374)        (201)

  Income tax benefit                                     --          --           49 
                                                   --------      ------        ----- 
    Net loss from operations of oilfield                                             
     services segment                                $   --        (374)        (152)
                                                   --------      ------        ----- 
                                                   --------      ------        ----- 

Upon completion of the sale of the waste management services segment, the 
$8,000,000 of USF common stock was sold resulting in a gain of $556,000 which   
is reflected in other income in continuing operations.  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. These investments are accounted for as investments available for    
sale.  As of December 31, 1997, approximately $800,000 in investments was       
held in escrow until May 29, 1998 to satisfy any indemnification obligations    
of the Company to U.S. Filter.                                                  

                                    F-13                         (Continued)

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Notes to Consolidated Financial Statements

  In 1996, the Company engaged an investment banking and financial
   advisory firm in which a Class A director has an ownership and management
  interest to provide certain business consulting services to the Company,
including analysis and negotiation of potential business combination  
     transactions to which the Company might be a party.  Under the terms of the
   engagement, the Company paid the investment banking firm retainer fees of
     approximately $162,000 through December 31, 1996, and an additional $12,200
 in 1997.  Additionally, the Company paid such investment banking firm a
total of approximately $220,000, plus out-of-pocket expenses, in      
    conjunction with the transaction with USF and approximately $207,500, plus
out-of-pocket expenses, in connection with USF's acquisition of an    
     unrelated entity.  However, USF reimbursed the Company $250,000 for certain
    expenses, including amounts that were paid to the investment banking firm.
In connection with the disposition of the Company's oilfield services 
segment, the Company paid the investment banking firm approximately   
     $150,000, plus out-of-pocket expenses.  The Company believes that the terms
 of its arrangement with the investment banking firm are consistent with
industry standards for similar services.                              

(3)  SALE OF GIBRALTAR                                                          

        After a period of continued operating losses, in light of management's
 ongoing assessment of changed conditions in the hazardous waste market,
and considering the significance of Gibraltar's regulatory issues and 
    future capital requirements, in late 1993, the Company's senior management
    and Board of Directors determined that the divestiture of Gibraltar was in
the best interests of the Company and its shareholders.               

   On May 10, 1994, the Company executed a definitive agreement (the
   "Stock Purchase Agreement") for the sale of all of the outstanding shares
     of common stock of Gibraltar to American Ecology Corporation ("AEC").  Such
     agreement was subsequently amended in an agreement dated September 2, 1994.
  The Company completed the sale of Gibraltar to AEC pursuant to the Stock
    Purchase Agreement, as amended, on December 31, 1994, and received cash of
 $5,500,000 from AEC.  In addition to the cash proceeds reflected above,
    AEC executed a note payable to the Company in the amount of $550,000 to be
held in escrow as a source of payment of claims, if any, for which the
Company indemnifies AEC under the Stock Purchase Agreement (note 14). 

During 1993, as part of a restructuring of its hazardous waste
business, the Company recorded charges of $5,711,000 related to the   
   abandonment and write-down of certain of Gibraltar's assets and to reduce
the net assets of Gibraltar to their estimated net realizable value at
 December 31, 1993, determined primarily based on the terms of the Stock
Purchase Agreement.  During 1994, the Company recorded additional     
provisions for losses on the divestiture of Gibraltar of $4,092,000 to
further reduce the carrying value of Gibraltar's net assets.  The     
   additional charges were necessitated by: (i) the settlement of litigation
 against Gibraltar by the State of Texas involving its alleged violation
   of environmental laws and regulations; (ii) Gibraltar's continuing losses
prior to the closing of the sale on December 31, 1994; (iii) the      
aforementioned amendment to the Stock Purchase Agreement; (iv) certain
 indemnity obligations of the Company to AEC relative to existing claims
involving Gibraltar (note 14); and (v) additional expenses related to 
the sale.                                                             

                                  F-14                           (Continued)

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Notes to Consolidated Financial Statements

        The change in the reserve for loss on sale of subsidiary for the years
  ended December 31, 1997 and 1996, is summarized as follows (in thousands
of dollars):                                                          

                                                                [Download Table]
                                                                         
Balance at December 31, 1995, included in accrued expenses       $   896 
1996 expenditures related to Gibraltar indemnity obligations        (492)
                                                                 ------- 
Balance at December 31, 1996, included in accrued expenses           404 
Allocation of additional reserves to cover Gibraltar indemnity           
  obligations                                                        190 
1997 expenditures related to Gibraltar indemnity obligations        (331)
                                                                 ------- 
Balance at December 31, 1997, included in accrued expenses       $   263 
                                                                 ------- 
                                                                 ------- 

(4)  PREVIOUS ASSET ACQUISITION                                                 

       On July 21, 1995, the Company acquired, pursuant to an asset purchase
     agreement dated June 7, 1995, certain assets of a group of three affiliated
companies, including Romero Bros. Oil Exchange, Inc., Environmental   
  Petroleum Products Co./EPPCO, and Environmental Insight, Inc.  The Texas
     and Louisiana-based companies were involved in the collection and marketing
   of used oils and oil filter collection and recycling.  The asset purchase
was effectuated through a newly-formed, wholly-owned subsidiary of the
Company, HTI.  The tangible assets acquired, consisting primarily of  
transportation equipment, were recorded at their estimated fair market
 value of $500,000 and depreciated over their estimated remaining useful
lives.  The total acquisition cost of $1,536,000 included cash of     
approximately $786,000, including acquisition-related costs, and the  
issuance of 500,000 shares of the Company's Class A common stock.  The
purchase method of accounting was used for this asset acquisition;    
    therefore, HTI's results of operations are consolidated with the Company's
since July 21, 1995.  The excess of cost over fair market value of net
    assets acquired amounted to $1,152,000, including $116,000 of deferred tax
  liabilities for the basis difference in tangible assets.  Such excess of
cost over fair market value of net assets acquired was written off in 
connection with the decision to sell the Company's operating assets   
(note 2).                                                             

(5)  SALE OF INTEREST IN MEXICAN JOINT VENTURE                                  

    On July 12, 1995, effective June 30, 1995, the Company executed an
 agreement for the sale of its 25% interest in Pro Ambiente to Promotora
   de Servicios y Proyectos Ecologicos, S.A. de C.V., owner of the remaining
   75% of the joint venture.  Pro Ambiente was a Mexican corporation engaged
 in the collection and blending of waste-derived fuels for use in cement
   kilns.  The payment terms of the sale were subsequently modified pursuant
to an agreement dated August 11, 1995.  Under the terms of the sale   
  agreement, as amended, the Company received cash proceeds of $1,324,000.
As a result of the sale and other expenses associated with its Mexican
     operations, the Company recorded losses totaling $547,000 in the year ended
December 31, 1995.                                                    

                                  F-15                           (Continued)

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Notes to Consolidated Financial Statements

(6)  PROPERTY, PLANT, AND EQUIPMENT                                             

       Property, plant, and equipment consisted of the following at December
31, 1997 and 1996 (in thousands of dollars):                          

                                                                [Download Table]
                                         1997       1996  
                                       -------     -------
                                                          
Land                                   $    65         802
Buildings and improvements                 253       1,862
Machinery and equipment                     32      26,514
Furniture, fixtures, and other              43         704
Construction in progress                    --          61
                                       -------     -------
                                           393      29,943
Less: Accumulated depreciation             182      14,414
      Valuation reserve                     --       5,673
                                       -------     -------
Net property, plant, and equipment     $   211       9,856
                                       -------     -------
                                       -------     -------

   Included in net assets of discontinued operations at December 31,
1996, is property, plant, and equipment of $9,626,000.                

   Depreciation expense totaled $485,000, $2,523,000, and $2,328,000
for the years ended December 31, 1997, 1996, and 1995, respectively.  

   The Company recorded a pre-tax charge of $392,000 during the 1995
    fourth quarter related to the write-down of an office building in Kilgore,
   Texas, to its estimated net realizable value.  Such amount is included in
"other expenses, net" as a component of continuing operations in the  
accompanying consolidated statements of operations for the year ended 
December 31, 1995.  The property is currently held for sale.          

(7)  NOTES PAYABLE                                                              

  The Company had a credit agreement (the "Credit Agreement") that
provided up to $6,500,000 in available credit for the Company.  In    
    connection with the closing of the sale of the Company's oilfield services
segment in January 1997, the Company repaid $3,300,000 of outstanding 
  indebtedness under the Credit Agreement.  In connection with the closing
     of the sale of the Company's waste management services segment in May 1997,
the Company repaid the remaining balance of $1,714,000 of outstanding 
indebtedness under the Credit Agreement.                              

                                  F-16                           (Continued)

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Notes to Consolidated Financial Statements

(8)  ACCRUED EXPENSES                                                           

      Accrued expenses consisted of the following at December 31, 1997 and
1996 (in thousands of dollars):                                       

                                                                [Download Table]
                                                               1997     1996  
                                                             --------  -------
                                                                              
Accrued transaction costs and capital expenditures to be                      
  incurred prior to the sale of the waste management                          
  services segment (note 2)                                  $     --      987
Insurance premiums and accrued claims payable                     526      696
Accrued expenses for estimated legal costs relating to                        
  Gibraltar (notes 3 and 14)                                      263      404
Accrued restructuring expenses (note 2)                            --      402
Salaries, wages, and benefits                                      --      258
Current portion of Gibraltar judgment (notes 3 and 14)             --      167
Taxes other than income taxes                                      45      116
Accrued losses from operations of waste management                            
  services segment during phase-out period (note 2)                --       43
Other                                                             207      648
                                                             --------  -------
                                                                1,041    3,721
                                                             --------  -------
Salaries, wages, and benefits                                      --      400
Taxes other than income taxes                                      --      210
Other                                                              --      491

Accrued expenses, included in net assets available for sale        --    1,101
                                                             --------  -------
                                                             $  1,041    4,822
                                                             --------  -------
                                                             --------  -------

(9)  INCOME TAXES                                                               

     Income tax expense (benefit) for the years ended December 31, 1997,
1996, and 1995, consisted of the following (in thousands of dollars): 

                                                                [Download Table]
                                              1997        1996     1995  
                                             -------     -----    ------ 
                                                                         
Deferred Federal income tax benefit from                                 
  continuing operations                      $    --        --      (320)
                                             -------     -----    ------ 
Deferred Federal income tax benefit from                                 
  discontinued operations                       (148)     (698)     (151)
                                             -------     -----    ------ 
     Income tax expense benefit              $  (148)     (698)     (471)
                                             -------     -----    ------ 
                                             -------     -----    ------ 

                                  F-17                           (Continued)

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        Notes to Consolidated Financial Statements

    Income tax expense (benefit) differed from the amounts computed by
  applying the U.S. Federal income tax rate of 34% to income (loss) before
income taxes as a result of the following (in thousands of dollars):  

                                                                [Download Table]
                                                      1997       1996     1995  
                                                    -------     ------   ------ 
                                                                                
Computed "expected" tax expense (benefit)           $   763     (3,717)    (658)
Change in the beginning-of-the-year balance of                                  
  the valuation allowance for deferred tax assets      (911)     3,198      364 
Other, net                                               --       (179)    (177)
                                                    -------     ------   ------ 
     Total income tax benefit                       $  (148)      (698)    (471)
                                                    -------     ------   ------ 
                                                    -------     ------   ------ 

        The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at   
    December 31, 1997 and 1996, are presented below (in thousands of dollars):

                                                                [Download Table]
                                                            1997      1996   
                                                          --------   ------- 
                                                                             
Deferred tax assets:                                                         
  Net operating loss carryforwards                        $  2,144     1,954 
  Property, plant and equipment - basis differences and                      
    depreciation                                                89     1,985 
  Accrued expenses, provisions for book not yet                              
    deductible for tax                                         468       896 
  Capital loss carryforward                                    194       194 
  Alternative minimum tax credit carryforward                  134       134 
  US Filter contingent gain recognized for tax purposes      1,360        -- 
  Other                                                         --       137 
                                                          --------   ------- 
       Total gross deferred tax assets                       4,389     5,300 
       Less valuation allowance                             (4,389)    5,300)
                                                          --------   ------- 
       Net deferred tax assets                            $     --        -- 
                                                          --------   ------- 
                                                          --------   ------- 
Deferred tax liabilities:                                                    
  Property, plant, and equipment - depreciation and                          
    basis differences                                     $     --       --  
                                                          --------   ------- 
  Other                                                         --       148 
                                                          --------   ------- 
       Total gross deferred tax liabilities                     --       148 
                                                          --------   ------- 
       Net deferred tax liability                         $     --       148 
                                                          --------   ------- 
                                                          --------   ------- 

   In assessing the realizability of deferred tax assets, management
  considers whether it is more likely than not that some portion or all of
    the deferred tax assets will not be realized.  The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become 
  deductible.  Management considers the scheduled reversal of deferred tax
liabilities and projected future                                      

                                  F-18                           (Continued)

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        Notes to Consolidated Financial Statements

taxable income in making this assessment.  Subsequently recognized tax
    benefits relating to the valuation allowance for deferred tax assets as of
December 31, 1997, will be included as an income tax benefit in the   
consolidated statement of operations in future periods.               

        At December 31, 1997, the Company has net operating loss carryforwards
    for federal income tax purposes of approximately $6,000,000.  Such amounts
     are available to offset future Federal taxable income, if any, through 2012
     and expire in the following years:  2009 - approximately $1,700,000; 2010 -
approximately $1,200,000; 2011 - approximately $2,200,000; and 2012 - 
approximately $900,000.                                               

(10) LEASES                                                                     

 The Company leased certain equipment and facilities used in its
   operations, all of which were assumed by USF and Dawson at closing of the
     respective transactions.  Total rentals approximated $303,000, $550,000 and
$330,000 for the years ended December 31, 1997, 1996, and 1995,       
respectively.                                                         

(11) EMPLOYEE BENEFIT PLANS                                                     

 RESTATED STOCK COMPENSATION PLAN -- The Company had adopted the
   Restated Stock Compensation Plan to provide for the grant of nonqualified
options to participating employees.  An aggregate of 645,000 shares of
  Class A common stock had been authorized and reserved for issuance under
    such plan.  The plan was administered by the Compensation Committee of the
    Board of Directors, which had the sole authority to interpret the plan, to
  determine the persons to whom options would be granted, and to determine
the exercise price, duration, and other terms of options to be granted
   under the plan, provided that options would not be granted at prices less
  than fair market value on the dates of the grants and that options would
 not be outstanding for a period longer than ten years from the date the
     options were granted.  As a result of the Company selling all its operating
     assets during 1997, the Restated Stock Compensation Plan was terminated and
any options outstanding were forfeited.                               

      The following table summarizes activity under the Company's Restated
 Stock Compensation Plan for the years ended December 31, 1997 and 1996:

                                                                [Download Table]
                                  Number of     Average
                                   options       price 
                                  --------      -------
                                                       
Balance at December 31, 1995       596,127       2.3138
  Granted                            3,500       1.2500
  Forfeited                        (31,954)      1.7161
                                  --------      -------
Balance at December 31, 1996       567,673       2.3408
  Granted                               --           --
  Forfeited                       (567,673)      2.3408
                                  --------      -------
Balance at December 31, 1997            --           --
                                  --------      -------
                                  --------      -------

                                  F-19                           (Continued)

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        Notes to Consolidated Financial Statements

    The per-share weighted average fair value of stock options granted
 during 1996 was not material.  The Company applied APB 25 in accounting
     for the plan and, accordingly, no compensation cost had been recognized for
its stock options in the consolidated financial statements.  Had the  
   Company determined compensation cost based on the value at the grant date
   for its stock options under SFAS 123, the Company's net loss and net loss
    per share for 1996 and 1995 would not have been affected.  The full impact
    of calculating compensation costs for stock options under SFAS 123 had not
   been considered because compensation cost was reflected over the options'
vesting period of five years and compensation cost for options granted
prior to January 1, 1995, was not considered.                         

      1995 EMPLOYEE RESTRICTED STOCK PLAN -- In January 1995, the Board of
    Directors adopted the 1995 Employee Restricted Stock Plan (the "Restricted
     Plan").  The Restricted Plan was approved by the shareholders in June 1995,
     at which time 420,000 shares of Class A common stock available for issuance
 under the Restricted Plan were issued to certain executive officers and
senior managers of the Company pursuant to the terms of the Restricted
   Plan.  The original shares granted under the Restricted Plan were to vest
    20% per year beginning in January 1995 with provisions for earlier vesting
based on increases in the Company's stock price.  As a result of the  
    Company selling its operating assets during 1997, certain shares under the
  plan were forfeited.  As of December 31, 1997, four former employees are
    still covered by the plan.  The total number of shares remaining under the
    plan is 168,000, with future vesting being dependent on the performance of
     the hydrocarbon business that was sold to USF in May 1997.  Under the terms
   of the definitive asset purchase agreement, the Company 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.  Should the business
perform as expected, the four former employees will receive shares of 
Company stock in accordance with the plan.                            

       1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN -- In December 1995, the
Board of Directors adopted, subject to shareholder approval, the 1996 
Non-Employee Director Stock Option Plan.  Such plan replaced the      
    Nonqualified Stock Option Plan for Outside Directors, which was adopted in
 1991.  Directors who were not employees of the Company were eligible to
   participate in the plan.  Under the terms of the plan, the exercise price
of each option granted was to be equal to the fair market value on the
    date of grant.  Options became fully exercisable one year from the date of
grant, provided that such vesting period would be accelerated upon the
    occurrence of a change of control.  Options were to expire ten years after
  the date of grant.  A total of 90,000 shares of Class A common stock had
been reserved for issuance under the plan.  Participants were granted,
  effective December 6, 1995, options to purchase 15,000 shares of Class A
  common stock at an exercise price equal to the fair market value at that
date of $1.0625, of which 5,000 shares vested immediately with the    
   remainder vesting in equal increments on the first and second anniversary
   dates of the grant.  Upon the election of any new outside directors, each
such director was to be granted an option to purchase 7,500 shares of 
  Class A common stock.  Thereafter, each participant was to be granted an
 option to purchase 3,000 shares of Class A common stock each date he or
she was reelected as a director of the Company, subject to share      
availability, adjustment for stock                                    

                                  F-20                           (Continued)

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        Notes to Consolidated Financial Statements

    dividends, splits, and similar events.  As a result of the Company selling
    all its operating assets during 1997, the 1996 Non-Employee Director Stock
Option Plan was terminated and any options outstanding were forfeited.

         MOBLEY EMPLOYEES' PROFIT SHARING PLAN -- The Company had a contributory
profit sharing plan for the benefit of substantially all employees.   
   Contributions to the plan were made at the discretion of the Compensation
  Committee of the Board of Directors and approximated $8,000, $62,000 and
$51,000 for the years ended December 31, 1997, 1996, and 1995,        
 respectively.  Subsequent to the sale of the Company's operating assets
during 1997, the plan was terminated.                                 

     MOBLEY ENVIRONMENTAL SERVICES, INC. EMPLOYEES' BENEFIT TRUST -- The
Company had a medical benefit plan which was funded by employer and   
participant contributions and supplemented by stop-loss insurance.    
Contributions were determined by the plan administrator based upon the
    actual claim experience and administrative costs of the plan.  As a result
of the sale of the Company's operating assets, the plan was terminated
effective July 1, 1997 and benefits were no longer available to       
participants.  All remaining claims incurred prior to the termination 
date are being funded by the Company and paid by the plan.            

(12) STOCKHOLDERS' EQUITY                                                       

        The Company is authorized to issue up to 2,000,000 shares of preferred
     stock (par value $.01), and the Board of Directors has the authority to fix
    the rights, preferences, privileges, limitations, and restrictions of such
stock.  No preferred stock has been issued as of December 31, 1997.   

 Each share of the Company's Class A and Class B common stock is
     entitled to one vote per share and ten votes per share, respectively.  Each
share of Class B common stock is convertible into one share of Class A
common stock at any time at the option of the stockholder, and certain
restrictions exist upon the transfer of Class B common shares.        

(13) EARNINGS PER SHARE                                                         

   In February 1997, the Financial Accounting Standards Board issued
   SFAS 128, EARNINGS PER SHARE.  SFAS 128 supersedes the earnings per share
 calculation methods of APB 15, effective for annual and interim periods
ending after December 15, 1997.  In accordance with this standard,    
    earnings per share ("EPS") amounts presented on the Company's Consolidated
Statements of Operations have been calculated using the measurement   
provisions of SFAS 128.                                               

                                  F-21                           (Continued)

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        Notes to Consolidated Financial Statements

       The following data shows amounts used in computing earnings per share
    under the provisions of SFAS 128:  (In thousands, except per share amounts
and share data).                                                      

                                                                [Download Table]
                                               1997        1996         1995    
                                            ----------  ----------   ---------- 
                                                                                
Net income (loss)                           $    2,393     (10,235)      (1,463)

Weighted average number of common shares                                        
  used in basic EPS                          8,835,293   8,835,293    8,378,142 

Effect of dilutive securities                                                   
  1995 Employee Restricted Stock Plan          168,000     168,000       84,000 

Weighted average number of common shares                                        
  and dilutive potential common stock used                                      
  in EPS assuming dilution                   9,003,293   9,003,293    8,462,142 

(14) COMMITMENTS AND CONTINGENCIES                                              

LETTERS OF CREDIT                                                     

At December 31, 1997, letters of credit totaling approximately
 $1,012,000 had been provided by the Company to its insurance carrier in
connection with its workers' compensation, general liability, and auto
liability insurance policies.                                         

REGULATORY ENFORCEMENT ACTION AND LAWSUIT                             

        In November 1993, the State of Texas filed a lawsuit against Gibraltar
stemming from an enforcement action by the TNRCC alleging certain     
 regulatory violations.  The lawsuit was subsequently amended to include
certain notices of violation issued by the TNRCC and allegations of   
 noncompliance associated with certain regulatory orders.  In July 1994,
 this litigation was tentatively settled through mediation and an Agreed
    Final Judgment was subsequently entered in December 1994.  Under the terms
   of the judgment, Gibraltar was obligated for $1,150,000 in assessed fines
and attorneys fees.  Of such amount, $450,000 was paid by the American
    Ecology Corporation ("AEC") and the Company was responsible for payment of
    the remaining $700,000.  As of December 31, 1996, the Company had paid all
of its obligations except $167,000 which was accrued.  During 1997 the
remaining $167,000 was paid.                                          

LITIGATION AND VARIOUS OTHER CLAIMS                                   

   The Company continues to defend various claims resulting from the
operations of its former subsidiary, Gibraltar (the sale of which is  
  discussed in note 3).  As of December 31, 1997, three such lawsuits were
  pending.  During the Company's ownership of Gibraltar, Gibraltar engaged
 in the collection, transportation, analysis, treatment, management, and
disposal of                                                           

                                  F-22                           (Continued)

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        MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

        Notes to Consolidated Financial Statements

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 international 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.  While all of the three actions are technically pending, one
case was dismissed by the trial judge for plaintiff's failure to file 
 expert reports as required by a case management order.  This action has
been appealed.                                                        

     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
and agreed to indemnify the purchaser, AEC, for any breaches of such  
    representations and warranties.  Additionally, the Company is obligated to
indemnify AEC for certain claims against Gibraltar arising from       
  circumstances existing on or prior to the closing of the sale, including
various claims and proceedings disclosed to AEC.  The Company's       
 indemnification obligations to AEC expired June 30, 1996, except in the
case of tax, environmental and ERISA claims, for which any claims for 
indemnification must be asserted prior to June 30, 1998.  These       
  indemnifications may include the potential liability of former customers
of Gibraltar, approximately 50 of which have also become defendants in
 litigation involving Gibraltar's operations.  The Company's contractual
indemnity obligations to AEC also encompass various pending regulatory
 and permit renewal proceedings.  The failure of Gibraltar to prevail in
these matters could result in significant liabilities to the Company. 

         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 (notes 3 and 8).  However, the Company is currently unable to
reasonably estimate its                                               

                                  F-23                           (Continued)

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        Notes to Consolidated Financial Statements

  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 of 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 experienced some degree of success recently in two separate
   jury trials, there is inherent uncertainty associated with jury trials in
     such 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       
estimatable.  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.                

      In January 1996, the Company was notified by the TNRCC that it was a
   potentially responsible party of the alleged release, during the early or
     mid-1980s, of hazardous substances at the McBay Oil and Gas State Superfund
    Site located near Grapeland, Texas.  During 1997, the Company entered into
 a contractual remediation plan for this site.  Such plan did not have a
material affect on the consolidated financial statements.  However,   
completion of the remediation and final resolution of the matter is   
subject to approval of the TNRCC.                                     

      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.                       

(15) SUPPLEMENTAL CASH FLOW INFORMATION                                         

                                                                [Download Table]
                                             1997       1996       1995
                                             ----       ----       ----
                                             (in thousands of dollars) 
                                                                       
Interest paid, net of amounts capitalized   $  151       261         32
Noncash operating activities - provision                               
  for foreign currency translation loss         --        --        155

                                  F-24                           (Continued)

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        MOBLEY ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES

          Notes to Consolidated Financial Statements

(16) QUARTERLY FINANCIAL DATA (UNAUDITED)                                       

  Summarized consolidated quarterly financial data for 1997, 1996,
     and 1995 is as follows (in thousands of dollars, except per share amounts):

                                                                [Download Table]
                                                           QUARTER                 
                                       ------------------------------------------- 
                                        1ST(1)         2ND       3RD(2)     4TH(3) 
                                       --------      -------    -------     ------ 
                                                                                   
1997                                                                               
----                                                                               
Revenues                               $  5,995        3,725         --         -- 
Gross profit                              1,285          570         --         -- 
Operating loss                             (158)        (164)      (194)      (243)
Net income (loss)                         2,775         (189)       (46)      (147)
Net income (loss) per common share          .32         (.02)      (.01)      (.02)

1996                                                                               
----                                                                               
Revenues                               $  4,507        4,670      5,751      6,652 
Gross profit                                901        1,105      1,221      1,106 
Operating loss                             (690)        (284)    (1,056)      (212)
Net income (loss)                          (672)        (491)    (9,117)        45 
Net income (loss) per common share        (0.08)       (0.06)     (1.03)      (.01)

1995                                                                               
----                                                                               
Revenues                               $  4,206        4,763      4,904      4,715 
Gross profit                              1,487        1,603      1,630      1,011 
Operating income (loss)                     117          142        195     (1,758)
Net income (loss)                            81         (254)       233     (1,523)
Net income (loss) per common share(4)      0.01        (0.03)      0.03      (0.17)

(1)  First quarter 1997 results include a gain on the sale of the oilfield      
services segment in the amount of $2,802,000.                         

(2)  Third quarter 1996 results of operations include charges of $7,952,000     
    related to provisions for loss on disposal and provision for losses during
phase-out period of waste management services segment.  In addition,  
  charges of $650,000 related to restructuring expenses including employee
     severance obligations, costs associated with the relocation and recruitment
     of personnel, and other related expenses are included in third quarter 1996
results of operations.                                                

(3)  Fourth quarter 1995 results of operations include certain nonrecurring     
expenses totaling $1,162,000, including insurance accruals, severance 
expenses, relocation expenses, legal and consulting expenses, and a   
     write-down of the carrying value of an office building to its estimated net
realizable value.                                                     

(4)  The sum of the 1995 quarterly per share amounts does not equal the per     
     share amount for the year due to the effect of the issuance of common stock
on the weighted average number of common shares outstanding.          

F-25    

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K405’ Filing		Date		First		Last			Other Filings
		1/4/02		19
		7/30/00		4
Filed on:		7/9/98		36
		6/30/98		4		59			10-Q,  10-Q/A
		6/25/98		12
		5/31/98		1		31
		5/29/98		19		49
		3/31/98		1					10-Q
		3/6/98		37
		2/27/98		13
For Period End:		12/31/97		1		58
		12/15/97		57
		7/30/97		4		35
		7/1/97		57
		6/30/97		18					10-Q
		5/29/97		3		47
		5/14/97		35					DEFR14C
		5/12/97		13		35
		5/9/97		7		35			DEF 14C
		4/25/97		7		34			8-K
		2/28/97		31
		1/28/97		21					8-K
		1/20/97		3		46
		1/1/97		19		47
		12/31/96		17		58			10-K,  NT 10-K
		11/8/96		23
		11/7/96		13
		11/1/96		9		46
		10/30/96		6		46
		10/9/96		6
		10/7/96		1
		10/1/96		19		47
		8/7/96		14
		6/30/96		4		59			10-Q
		5/23/96		14
		3/26/96		10
		3/11/96		5
		1/26/96		12
		1/1/96		45
		12/31/95		16		57
		12/6/95		56
		9/30/95		34
		8/31/95		13
		8/11/95		34		51
		8/3/95		34
		7/21/95		51
		7/19/95		34
		7/12/95		34		51
		6/30/95		33		51
		6/8/95		24
		6/7/95		34		51
		6/2/95		33
		1/1/95		26		56
		12/31/94		3		50
		9/6/94		13
		9/2/94		33		50
		6/30/94		33
		5/13/94		33
		5/10/94		4		50
		1/1/94		33
		12/31/93		33		50
		11/3/93		23		29
		10/18/93		13
		3/29/93		34
		10/23/92		29		33
		9/30/92		33
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