Forward Looking Statements

This report, including but not limited to this Item 2 and the footnotes to the financial statements in Item 1, contains "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements concern expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Statements preceded by, followed by, or that include the words "believes," "expects," "anticipates," or similar expressions are generally considered to be forward-looking statements.

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

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

· Our strategies, plan, objectives and expectations concerning our future operations, cash flows, margins, revenues, profitability, liquidity and capital resources;

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

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

The forward-looking statements reflect our current view about future events and are subject to risks, uncertainties and assumptions. We caution readers of this report that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. In addition to the Risk Factors included in Part I, Item 1A, of the Company's Annual Report on Form 10-K for the year ended June 30, 2008, as filed with the United States Securities and Exchange Commission, the inaccuracy of any of the following assumptions could prevent us from achieving our goals, and cause the assumptions underlying the forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements:

· The avoidance of future net losses;

· The avoidance of adverse consequences relating to our outstanding debt;

· Our continuing ability to pay interest and principal on our debt instruments, and to pay our accounts payable and other liabilities when due;

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

· Our continuing ability to obtain all necessary waivers of covenant violations, if any, in our debt agreements;

· The avoidance of significant provisions for bad debt reserves on our accounts receivable;

· The continuing demand for our products and services at competitive prices and acceptable margins;

· The avoidance of negative customer reactions to new or existing marketing strategies;

· The avoidance of significant inventory reserves for slow moving products;

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

· The successful integration of acquired companies and/or organic geographic expansion into our existing operations, and enhancing the profitability of the integrated businesses or new markets;

· The successful execution of our acquisition and diversification strategy, including the availability of sufficient capital to acquire additional businesses and to support the infrastructure requirements of a larger combined company;

· The success in responding to competition from other providers of similar services;

· The impact of generally positive economic and market conditions; and

· The ability to retire or convert debt to equity.

OUR BUSINESS

We are a supplier of specialized transportation and distribution services for petroleum products and chemicals. We provide commercial mobile and bulk fueling, lubricant and chemical distribution, emergency response services and transportation logistics to the trucking, manufacturing, construction, shipping, utility, energy, chemical, telecommunications and government services industries. At September 30, 2008, we were conducting operations through 26 service locations in the ten states of Alabama, California, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and Texas. In November 2008, we expanded our operations into the state of Nevada. We have recently opened five additional service locations, giving us a total of 31 service location in eleven states.

We provide commercial mobile and bulk fueling, integrated out-sourced fuel management, packaging, distribution and sale of lubricants and chemicals, transportation logistics, and emergency response services. Our specialized equipment fleet delivers diesel fuel and gasoline to customer locations on a regularly scheduled or as needed basis, refueling vehicles and equipment, re-supplying bulk storage tanks, and providing fuel for emergency power generation systems. Our fleet also handles the movement of customer equipment and storage tanks we provide for use by our customers. We also distribute a wide variety of specialized petroleum products, lubricants and chemicals to our customers in Texas and in certain other markets that we service.

We compete with several large and numerous small distributors, jobbers and other companies offering services and products in the same markets in which we operate. We believe that the industry and these markets offer us opportunities for consolidation, as customers increasingly demand one-stop shopping for their petroleum based needs and seek reliable supply deliveries particularly to prevent business interruptions during emergencies. We believe that certain factors, such as our ability to provide a range of services and petroleum based products and services, create advantages for us when compared to our competitors.

An objective of our business strategy is to become the leading "single source" provider of petroleum products and services in the markets we currently operate in, as well as expanding into additional contiguous markets. To achieve this objective we plan to focus on increasing revenues in our core operations and in expanding through selective acquisitions.

OVERVIEW

The first quarter of fiscal 2009 was a very exciting and successful quarter for the Company and its management team.

· We achieved net income of $512,000 and EBITDA of $2.0 million for the quarter compared to a net loss of $3.0 million and EBITDA of $196,000 for the same period a year ago, a $3.5 million and $1.8 million improvement to our financial performance, respectively. In the quarter, we saw a continuation of the improvements in net margin contribution, bolstered by an increased level of emergency response services provided during this period. See the quarterly financial trend table below. We believe that, with our substantially improved performance and the complete implementation of our new Enterprise Resource Planning ("ERP') system, we are now positioned to execute our acquisition strategy, with the ability to integrate acquired companies within six to twelve months from closing and achieve new economies of scale. While our ability to accelerate the execution of our acquisition plan may be limited by the global economic crisis and the resulting tight capital markets, we expect that, as those markets loosen, we will be in a position to make a number of valuable strategic acquisitions.

· During the quarter, we were awarded a new, two-year agreement to provide fleet and emergency fueling services to the United States Postal Service (USPS). Under this expanded agreement, the Company will provide scheduled fueling services to approximately 10,000 postal vehicles domiciled at over 350 locations across the United States. In the new contract, we were awarded the servicing rights for new Vehicle Maintenance Facilities covering a large number of additional USPS delivery points, representing a 40% increase in volumes over the prior contract. The USPS was already our largest customer, representing 8% of our business in fiscal 2008, before these expanded services began on November 1, 2008.

· We entered into a new multi-year Lubrication Marketer Agreement with Chevron Products Company to market Chevron branded lubricants, supplementing the Company's similar 2005 agreement with Chevron for its Texaco brand of lubricants. Our rights with respect to the newly consolidated Chevron and Texaco brands and product lines eliminates product gaps in the Texaco line, allowing us to provide a single source solution for our lubricant customers. We will be able to leverage the strength of both brands in specific applications and offer a more inclusive product line, with continuing availability of the historical Texaco product formulations to those customers who rely on them in their applications. Most importantly, the addition of the Chevron product line to our Texaco portfolio will allow us to reach out to new customers that in the past would have required multiple vendors.

· During the quarter, we expanded our May 2008 exclusive distribution agreement with Enviro Tech International, Inc., the manufacturer of DrySolv™, its patented environmentally friendly dry cleaning solvent, soap, and spotting chemicals, to include the states of Arizona and California, in addition to our previously granted rights for the states of Florida, Georgia, Louisiana, North Carolina, South Carolina, Tennessee and Texas. DrySolv™ is an environmentally friendly dry cleaning product and natural replacement product for PERC, the hazardous material used by most dry cleaners in the United States today. While the margin contribution of the DrySolv™ product is minimal today, we expect significant growth in the future as the U.S. Environmental Protection Agency ("EPA") and other regulatory agencies continue to focus on the elimination of PERC.

· During the quarter, we provided emergency response services following both Hurricane Gustav and Hurricane Ike, helping to stabilize the disaster areas by providing services to various customers, including many governmental agencies, utilities, hospitals, telecommunications and commercial fleet distributors. A portion of the improved performance during the first quarter over the prior year is attributable to these emergency response services.

· The active hurricane season also affected the petroleum products supply distribution during the quarter, which caused delays in fuel availability in many of our markets. As such, we made a considerable effort in order to procure product from alternative markets and transport it into the markets where the supply was limited. In conjunction with these efforts, on September 2, 2008 we sold $725,000 in 12% unsecured convertible promissory notes maturing on September 1, 2010 to accredited investors. Since the new notes mature in September 1, 2010, the debt associated with the promissory notes was classified in our condensed unaudited consolidated balance sheet as long-term debt. The Company used the proceeds for working capital purposes, including the enhancement of supplier credit for those markets that had limited supply to purchase from alternative petroleum products suppliers. The additional credit is now being used to improve the overall product procurement opportunities for the Company.

· We entered into amendments to our revolving line of credit agreement with our principal lender Wachovia, N.A., to extend the current maturity to July 1, 2009, and modified certain financial covenants. We believe that this extension will enable us to continue to meet the working capital needs of our business. It has recently been announced that Wachovia is to be acquired by Wells Fargo Corporation, a move that is widely expected to solidify Wachovia's assets and lending ability going forward.

· On October 16, 2008, our previously announced extension of time from the Nasdaq Stock Market to attain a minimum bid price of $1.00 until December 23, 2008 was, in light of the current extraordinary market conditions, further extended to March 30, 2009. According to Nasdaq, this temporary suspension should help to restore investor confidence in affected Nasdaq companies, allowing investors to make decisions without considering the likelihood of a near-term delisting. Nasdaq indicated that it would continue to monitor the affect that market conditions are having on the operation of its rules. Under the terms of the extension, as amended, the Company is required to have a closing bid price of $1.00 or more for a minimum of ten prior consecutive trading days on or before March 30, 2009, and to otherwise maintain compliance with all other applicable NASDAQ listing standards.

· During the quarter, Taglich Brothers, a full-service broker dealer offering institutional and retail brokerage services, investment banking and comprehensive research coverage to the investment community, focused exclusively on companies with less than $250 million in market capitalization, initiated research coverage on the Company. During the past four years, Taglich has provided coverage on approximately 100 companies. The Company has paid a fee of $12,000 to Taglich for the creation and dissemination of research reports for the first six months and will pay a similar fee per six month period thereafter.

· As previously noted, we are reporting net income for the first quarter of fiscal 2009 of $512,000 compared to a loss of $3.0 million a year ago. Notwithstanding the Company's ability to achieve a profit this quarter, the financial results of the Company still carry a high burden of non-cash charges, stated rate interest expense, legal fees and additional public company costs. The $512,000 profit included $1.3 million in non-cash charges, such as depreciation and amortization of assets, debt costs, debt discounts, stock based compensation, and provision for doubtful accounts. The results include stated interest expense associated with servicing of our debt of $601,000, legal expenses of $351,000 and public company costs of $182,000.

· The net margin in the first quarter of fiscal 2009 and 2008 was $6.2 million and $3.6 million on 18.6 million and 18.7 million gallons sold, resulting in net margin per gallon of 33.2 cents and 19.1 cents, respectively. The increase in net margin was primarily due to the continuation of the higher net margin per gallon trend reported in the fourth quarter of fiscal year 2008 plus the incremental margin contribution from the emergency response services provided in Louisiana and Texas during Hurricanes Gustav and Ike. The increase in net margins may also be attributed, in part, to the efficiencies of our new ERP system, which have helped us to identify and eliminate non-contributory lower margin business. Such elimination allows for increased capacity of our fleet and for personnel to be deployed for emergency response business as needed.

· We achieved improvements in our operating results as reflected through our net income, EBITDA and net margin per gallon when compared to our most recent sequential quarterly results. Specifically, EBITDA improved by $836,000 from the fourth quarter of fiscal 2008 to the first quarter of fiscal 2009, and $1.8 million from the first quarter of fiscal 2008 to the first quarter of fiscal 2009, primarily due to the higher net margin contributions discussed above. The results for operating income also show an upward trend over the last three sequential quarters.

The following table presents certain operating results for the last six sequential quarters (in thousands, except net margin per gallon):

                                                            For the three months ended
                           June 30,       September 30,     December 31,     March 31,       June 30,      September 30,
                              2007            2007              2007            2008           2008            2008

Revenues                  $     57,526   $        55,497   $       58,994   $     64,162   $     82,036   $        79,271
Gross profit              $      2,921   $         3,182   $        2,565   $      2,875   $      4,290   $         5,819
Selling, general and
administrative            $      3,950   $         3,803   $        3,788   $      3,445   $      3,845   $         4,632
Operating income (loss)   $     (1,029 ) $          (621 ) $       (1,223 ) $       (570 ) $        445   $         1,187
Interest expense and
other income, net         $       (585 ) $          (757 ) $         (763 ) $       (720 ) $       (811 ) $          (667 )
Loss on extinguishment
of promissory notes       $          -   $        (1,641 ) $            -   $       (108 ) $          -   $             -
Net income (loss)         $     (1,614 ) $        (3,019 ) $       (1,986 ) $     (1,398 ) $       (366 ) $           512

EBITDA 1                  $        127   $           196   $         (387 ) $        277   $      1,154   $         1,990

Net margin                $      3,307   $         3,569   $        2,945   $      3,228   $      4,611   $         6,161
Net margin per gallon     $       0.17   $          0.19   $         0.16   $       0.18   $       0.24   $          0.33
Gallons sold                    19,678            18,695           18,050         18,102         19,024            18,550

1EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, a non-GAAP financial measure within the meaning of Regulation G promulgated by the Securities and Exchange Commission. To the extent that loss on extinguishment of debt constitutes the recognition of previously deferred interest, it is considered interest expense for the calculation of interest expense. We believe that EBITDA provides useful information to investors because it excludes transactions not related to the core cash operating business activities. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations.

The following chart reconciles EBITDA to the net income (loss) for each of the six quarterly periods presented above (in thousands):

                                                                For the three months ended
                                June 30,      September 30,     December 31,     March 31,     June 30,      September 30,
                                  2007            2007              2007           2008          2008            2008

Net income (loss)              $    (1,614 ) $        (3,019 ) $       (1,986 ) $    (1,398 ) $      (366 ) $           512
Add back:
Income tax expense                       -                 -                -             -             -                 8
Interest expense                       919               778              782           780           720               683
Depreciation and
amortization expense:
Cost of sales                          386               388              380           353           321               342
Selling, general and
administrative expenses                249               282              304           311           357               341
Stock-based compensation
amortization expense                   187               126              133           123           122               104
Loss on extinguishment of
promissory notes                         -             1,641                -           108             -                 -
EBITDA                         $       127   $           196   $         (387 ) $       277   $     1,154   $         1,990

· Financial results from our commercial mobile and bulk fueling services continue to be largely dependent on the number of gallons of fuel sold and the net margin per gallon achieved. The first quarter of 2009 continued to reflect a decrease in the number of gallons sold compared to the same period in 2008 due to lower volumes demanded by some of our existing customers in response to higher fuel prices and a weaker economy, the elimination of lower margin customers and our pursuit of business with higher net margin contributions partially offset by the volume generated from new customer additions. When compared to the fourth quarter, the lower gallons sold resulted from the hurricanes that impacted the Gulf Coast in August and September of 2008. Specifically, the Company preferentially reduced certain lower margin, high volume bulk day business in order to increase the delivery of higher margin emergency response services, but generate fewer gallons sold.

· Escalating fuel prices in fiscal 2008 continued into most of the first quarter of fiscal 2009. In the first three quarters of fiscal 2008, however, these increases dampened the demand for the services and goods provided by much of our customer base and increased the fuel running costs of our own delivery fleet. In addition in fiscal 2008 and the first quarter of fiscal 2009, the higher fuel prices substantially increased the credit needed to cover the time between our payment for fuel and our receipt of payment from our customers. Our higher demand for credit caused new and pre-existing limitations on supplier credit, some of which may be attributable to the broader credit problems currently facing many financial institutions, to become a negative factor in our business by increasing our borrowing costs. While market fuel prices decreased an average of 8% in the first quarter of fiscal 2009 when compared to the preceding quarter, the situation remains volatile, as recently imposed limitations on credit availability for fuel purchases persist and suppliers limit product supply availability to avoid market adjustments on stored inventory. As a result, we still consider the terms and availability of supplier credit to be a critical factor in our selection of fuel suppliers.

RESULTS OF OPERATIONS:

To monitor our results of operations, we review key financial information, including net revenues, gross profit, selling, general and administrative expenses, net income or losses, and non-GAAP measures, such as EBITDA. We continue to seek ways to more efficiently manage and monitor our business performance. We also review other key operating metrics, such as the number of gallons sold and net margins per gallon sold. As our business is dependent on the supply of fuel and lubricants, we closely monitor pricing and fuel availability from our suppliers in order to purchase the most cost effective products. We calculate our net margin per gallon by adding gross profit and the depreciation and amortization components of cost of sales, and dividing that sum by the number of gallons sold.

Comparison of Three Months Ended September 30, 2008 ("first quarter of fiscal 2009") to Three Months Ended September 30, 2007 ("first quarter of fiscal 2008")

Revenues

Revenues were $79.3 million in the first quarter of fiscal 2009, as compared to $55.5 million in the same period of the prior year, an increase of $23.8 million, or 43%, primarily as a result of price variances due to overall higher market prices of petroleum products. Market fuel prices have increased approximately 55% in the first quarter of fiscal 2009 compared to the same period in the prior year. Price variances resulted in an increase of $24.2 million in revenues, including a partial contribution from the emergency response services provided during the current quarter, partially offset by a $430,000 decrease in revenues due to a 1% reduction in gallons sold compared to prior year. While we continued to add new customers during the first quarter of fiscal 2009, we believe that the slightly lower sales volume is largely the result of the contraction of the national economy, particularly as it is impacting the industries and geographic locations we serve, as well as some of our customers' efforts to reduce their fuel consumption in light of substantially higher fuel prices. We cannot be certain that the recent easing of fuel prices will cause these customers to increase their fuel usage.

Gross Profit

Gross profit was $5.8 million in the first quarter of fiscal 2009, as compared to $3.2 million in the same period of the prior year, an increase of $2.6 million, or 83%. The net margin per gallon for the first quarters of fiscals 2009 and 2008 was 33.2 cents and 19.1 cents, respectively, an increase of 14.1 cents. This improvement was the result of the continued trend in higher net margin per gallon we achieved in the fourth quarter of fiscal year 2008 plus the incremental margin contribution from the emergency response services provided in Louisiana and Texas for Hurricanes Gustav and Ike.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $4.6 million in the first quarter of fiscal 2009, as compared to $3.8 million in the same period of the prior year, an increase of $829,000, or 22%. The increases in selling, general and administrative expenses were due to increases of $257,000 in the provision for doubtful accounts, $195,000 for legal expenses related to public company costs and other matters, $119,000 in credit card fees due to higher fuel prices, $114,000 in payroll related expenses, $62,000 in travel expenses primarily due to the emergency response work performed, $59,000 increase in SG&A depreciation due to the additions in fixed assets, and $24,000 in other expenses.

Interest Expense

Interest expense was $683,000 in the first quarter of fiscal 2009, as compared to $778,000 in the same period of the prior year, a decrease of $95,000, or 12%. The decrease was due to the reduction in our long-term debt as the outstanding secured promissory notes issued on August 2003, January 2005 and September 2005 were refinanced in August 2007 with new senior secured convertible subordinated notes and the decrease in the base interest rate related to our line of credit which is prime rate plus a margin of 0.75%. At September 30, 2008, the effective rate on our line of credit was 5.75% as compared to 9.0% at September 30, 2007.

The components of interest expense were as follows (in thousands):

                                                     Three Months Ended
                                                       September 30,
                                                     2008         2007
            Stated Rate Interest Expense:
            Line of credit                         $     313    $     359
            Long term debt                               267          302
            Other                                         21           20
            Total stated rate interest expense           601          681

            Non-Cash Interest Amortization:
            Amortization of deferred debt costs           72           47
            Amortization of debt discount                 10           50
            Total non-cash interest amortization          82           97

            Total interest expense                 $     683    $     778

Loss on Extinguishment of Debt

In August 2007, we recorded a loss on extinguishment of debt of $1.6 million related to our long-term debt, as the outstanding secured promissory notes issued on August 2003, January 2005 and September 2005 were refinanced in August . . .