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. A number of important factors may affect our actual results and could cause them 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 December 31, 2008, the Company was conducting operations through 31 service locations in the eleven states of Alabama, California, Florida, Georgia, Louisiana, Mississippi, Nevada, North Carolina, South Carolina, Tennessee and Texas.

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.

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

· We continued to focus on the improvement of our business by adding new customers, deriving higher net margin per gallon, managing our expenses and maintaining our customer base in a difficult economic environment. In the fourth quarter of fiscal 2008, we began a trend of financial performance improvement as evidenced by the achievement of higher net margins, reduction of our losses, and improvements in EBITDA. While our volumes have decreased in the second quarter of fiscal 2009 as a direct result of the rapid contraction of the national economy and the current world-wide severe economic downturn and recession, impacting the majority of our 4,600 customers and all industry sectors we service, we are able to operate more efficiently, partly due to our new ERP system, which allows us more visibility into our business allowing us to react quickly to market conditions or business opportunities.

· The trend of improvement continued throughout the first quarter of fiscal 2009 and while we are able to deliver improved results when compared to the prior year, we experienced a dramatic decline in our volumes in November and December as a result of our customers delivering less of their goods and services in the current economy and world-wide financial crisis. We took swift far reaching cost cutting and business restructuring steps beginning late in November, continuing through December and into the current quarter to meet the decrease in customer demand. These steps have included eliminating operating and administrative personnel, reducing other employee expenses and benefits, maximizing the use of running equipment and reducing direct and office operating expenses. This process has included the consolidation of delivery routes wherever possible to improve efficiencies, while ensuring that we are able to maintain our same high level of service to our existing customers. This undertaking has required extremely detailed scheduling and planning as we have aggressively sought and have added new customers who are attempting to reduce their costs of operations or whose prior service providers were ineffective in delivering value to them.

· During this difficult market environment, we have continued our track record of collecting our receivables. At December 31, 2008, our receivables were $15.0 million compared to $30.2 million at June 30, 2008, partly a reflection of decreased fuel prices, but also of our strong credit and underwriting efforts. Towards the end of January, 2009, and into February we are experiencing some stabilization of existing customer demand and volumes, together with a marked increase in new customer starts. While there can be no assurances that this trend will continue, we remain cautiously optimistic that these developments coupled with the cost cuts and efficiency improvements taken in response to the current deep economic recession, will positively impact our operations and financial performance.

· We achieved a net loss of $660,000 and EBITDA of $690,000 for the quarter compared to a net loss of $2.0 million and a negative EBITDA of $387,000 for the same period a year ago, a $1.3 million and $1.1 million improvement to our financial performance, respectively. During the six months ended December 31, 2008, we had a net loss of $148,000 and EBITDA of $2.7 million compared to a net loss of $5.0 million and negative EBITDA of $191,000 for the same period a year ago, a $4.9 million and $2.9 million improvement, respectively.

· As previously noted, we are reporting a net loss for the second quarter of fiscal 2009 of $660,000 compared to a loss of $2.0 million a year ago. The $660,000 net loss included $688,000 in non-cash charges, such as depreciation and amortization of assets, debt costs, debt discounts, stock based compensation, and provision for doubtful accounts. The net loss also included stated interest expense associated with servicing of our debt of $584,000, legal expenses of $178,000 and public company costs of $208,000.

· The net margin in the second quarter of fiscal 2009 and 2008 was $3.5 million and $2.9 million, respectively, on 16.6 million and 18.1 million gallons sold during those periods. The net margins per gallon in the second quarter of fiscal 2009 and 2008 were 21.3 cents and 16.3 cents, respectively. The increase in net margin in 2009 was primarily due to the continuation of the higher net margin trend previously reported for the fourth quarter of fiscal year 2008. The increase in net margins can be attributed, in part, to the efficiencies of our new ERP system, which has helped us to identify and eliminate non-contributory, lower margin business.

· During the quarter, we began deliveries under 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 is providing scheduled fueling services to approximately 10,000 postal vehicles domiciled at over 350 locations across the United States. Under 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 before taking into account the current slow-down in business attributable to the economy. The USPS was already our largest customer, representing 8% of our business in fiscal 2008, before these expanded services began on November 1, 2008.

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
                               September 30,       December 31,       March 31,       June 30,        September 30,       December 31,
                                   2007                2007             2008            2008              2008                2008

Revenues                      $        55,497     $       58,994     $    64,162     $    82,036     $        79,271     $       45,112
Gross profit                  $         3,182     $        2,565     $     2,875     $     4,290     $         5,819     $        3,292
 Selling, general and
administrative                $         3,803     $        3,788     $     3,445     $     3,845     $         4,632     $        3,267
 Operating income (loss)      $          (621 )   $       (1,223 )   $      (570 )   $       445     $         1,187     $           25
 Interest expense and other
income, net                   $          (757 )   $         (763 )   $      (720 )   $      (811 )   $          (667 )   $         (677 )
 Loss on extinguishment of
promissory notes              $        (1,641 )   $            -     $      (108 )   $         -     $             -     $            -
Net income (loss)             $        (3,019 )   $       (1,986 )   $    (1,398 )   $      (366 )   $           512     $         (660 )

EBITDA 1                      $           196     $         (387 )   $       277     $     1,154     $         1,990     $          690

Net margin 2                  $         3,569     $        2,945     $     3,228     $     4,611     $         6,161     $        3,534
Net margin per gallon         $          0.19     $         0.16     $      0.18     $      0.24     $          0.33     $         0.21
Gallons sold                           18,695             18,050          18,102          19,024              18,550             16,602

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.

2 Net margin per gallon is calculated by adding gross profit to the cost of sales depreciation and amortization and dividing that sum by the number of gallons sold.

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
                               September 30,       December 31,       March 31,       June 30,        September 30,       December 31,
                                   2007                2007             2008            2008              2008                2008

Net income (loss)             $        (3,019 )   $       (1,986 )   $    (1,398 )   $      (366 )   $           512     $         (660 )
Add back:
Interest expense                          778                782             780             720                 683                680
Income tax expense                          -                  -               -               -                   8                  8
Depreciation and
amortization expense:
Cost of sales                             388                380             353             321                 342                242
Selling, general and
administrative expenses                   282                304             311             357                 341                342
Stock-based compensation
amortization expense                      126                133             123             122                 104                 78
Loss on extinguishment of
promissory notes                        1,641                  -             108               -                   -                  -
EBITDA                        $           196     $         (387 )   $       277     $     1,154     $         1,990     $          690

· 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 second 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 a weaker economy, and our pursuit of business with higher net margin contributions partially offset by the volume generated from new customer additions.

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 December 31, 2008 ("second quarter of fiscal 2009") to Three Months Ended December 31, 2007 ("second quarter of fiscal 2008")

Revenues

Revenues were $45.1 million in the second quarter of fiscal 2009, as compared to $59.0 million in the same period of the prior year, a decrease of $13.9 million, or 24%, primarily as a result of price variances due to recent decreases in market prices of petroleum products. Market fuel prices have decreased approximately 29% in the second quarter of fiscal 2009 compared to the same period in the prior year, which resulted in a decrease of $9.2 million in revenues. Additionally, $4.7 million of the $13.9 million decrease was due to an 8% reduction in gallons sold compared to the same period in the prior year. While we continued to add new customers during the second quarter of fiscal 2009, there was a dramatic and significant overall decrease in volume demand from our existing customers beginning in November 2008, resulting in the overall reduction in volume sold during the quarter. This lower sales volume is a direct result of the rapid contraction of the national economy and the current world-wide recession, impacting the majority of our 4,600 customers and all industry sectors we service. While we have seen stabilization in the demand for our services from existing customers since the end of the second quarter and a strong increase in new customer business as companies attempt to reduce their costs of operation, we cannot be certain that this trend will continue into the future or that the new business will offset possible future decreases in demand from our base customers. To date, we have not seen any connection between the recent easing of fuel prices and increased fuel usage by our existing customers, as the overall recessionary condition of the economy and its impact on our customer's businesses appears to be outweighing any elasticity of demand based on price. We remain cautiously optimistic, however, that customer demand for our services will not decline further and that we can maintain or increase present volume levels by attracting new customers.

Gross Profit

Gross profit was $3.3 million in the second quarter of fiscal 2009, as compared to $2.6 million in the same period of the prior year, an increase of $727,000, or 28 %. The net margin per gallon for the second quarters of fiscals 2009 and 2008 was 21.3 cents and 16.3 cents, respectively, an increase of 5.0 cents. This improvement was the result of the continued trend in higher net margin per gallon we established in the fourth quarter of fiscal 2008.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $3.3 million in the second quarter of fiscal 2009, as compared to $3.8 million in the same period of the prior year, a decrease of $521,000, or 14%. The decreases in selling, general and administrative expenses were primarily due to decreases of $161,000 in the provision for doubtful accounts since, as fuel prices have decreased, our total outstanding receivables have correspondingly decreased. Additionally, a decrease of $341,000 in employee expense due to our efforts to reduce employee benefit costs contributed to the decrease in SG&A.

Interest Expense

Interest expense was $680,000 in the second quarter of fiscal 2009, as compared to $782,000 in the same period of the prior year, a decrease of $102,000 or 13%. The decrease was primarily due to the reduction in our debt as the noteholders of promissory notes issued in November 2007 were converted into the Company's Series A Preferred stock during the third quarter of fiscal 2008. The decrease is also due to lower interest expense related to the line of credit as the base interest rate has decreased. At December 31, 2008, the effective rate on our line of credit was 4.00% as compared to 8.0% at December 31, 2007.

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

                                                      Three Months Ended
                                                         December 31,
                                                     2008            2007
          Stated Rate Interest Expense:
          Line of credit                           $     276       $     318
          Long term debt                                 283             354
          Other                                           25              14
          Total stated rate interest expense             584             686

          Non-Cash Interest Amortization:
          Amortization of deferred debt costs             86              83
          Amortization of debt discount                   10              13
          Total amortization of interest expense          96              96

          Total interest expense                   $     680       $     782

Income Taxes

State income tax expense of $8,000 was recorded for the second quarter of fiscal 2009. No federal income tax expense was recorded for the second quarters of fiscals 2009 and 2008. The net operating loss carryforward at June 30, 2008 was $29.8 million, which includes a $2.2 million net operating loss carryforward acquired in connection with the H & W acquisition.

Net Loss

Net loss was $660,000 in the second quarter of fiscal 2009, as compared to a loss of $2.0 million in the same period in the prior year. The $1.3 million improvement was primarily attributable to the continuing higher net margin per gallon trend that we established in the fourth quarter of fiscal year 2008. The decrease in the loss was also due to a reduction of $521,000 in selling, general and administrative expenses, as discussed above.

EBITDA

As noted above, EBITDA is a non-GAAP financial measure within the meaning of Regulation G promulgated by the Securities and Exchange Commission. EBITDA is defined as earnings before interest, taxes, depreciation, and amortization. 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.

EBITDA was $690,000 in the second quarter of fiscal 2009, as compared to a negative EBITDA of $387,000 in the same period of the prior year, an increase of $1.1 million. The increase was primarily due to the continued higher net margin per gallon traction we achieved in the fourth quarter of fiscal year 2008 as described above in our Business Overview. The increase was also partially due to a decrease in selling, general, and administrative expenses.

The reconciliation of EBITDA to net loss for the second quarters of fiscals 2009 and 2008 was as follows (in thousands):

                                                         Three Months Ended
                                                            December 31,
                                                         2008           2007

       Net loss                                        $    (660 )    $ (1,986 )
       Add back:
       Interest expense                                      680           782
       Income tax expense                                      8             -
       Depreciation and amortization expense:
       Cost of sales                                         242           380
       Selling, general and administrative expenses          342           304
       Stock-based compensation amortization expense          78           133
       EBITDA                                          $     690      $   (387 )

Comparison of Six Months Ended December 31, 2008 to Six Months Ended December 31, 2007

Revenues

Revenues were $124.4 million in the six months ended December 31, 2008, as compared to $114.5 million in the same period of the prior year, an increase of $9.9 million, or 9%, primarily as a result of price variances due to overall higher market prices of petroleum products during the first quarter of fiscal 2009. Overall, for the first half of fiscal 2009, market fuel prices were approximately 10% higher compared to the same period a year ago. Price variances resulted in an increase of $14.9 million in revenues, including a partial contribution from the emergency response services provided during the first quarter of fiscal 2009, partially offset by a $5.0 decrease in revenues due to a 4% reduction in gallons sold compared to the same period in the prior year. While we continued to add new customers during the second quarter of fiscal 2009, there was a dramatic and significant overall decrease in volume demand from our existing customers beginning in November 2008, resulting in the overall reduction in volume sold during the quarter. This lower sales volume is a direct result of the rapid contraction of the national economy and the current world-wide recession, impacting the majority of our 4,600 customers and all industry sectors we service. While we have seen stabilization in the demand for our services from existing customers at the end of the second quarter and a strong increase in new customer business as companies attempt to reduce their costs of operation, we cannot be certain that this trend will continue into the future or that the new business will offset possible future decreases in demand . . .