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 unanticipated 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 debt agreements and to replace, extend or refinance the debts evidenced by those agreements as they mature;

· 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; and

· The avoidance of a substantial adverse impact from recent generally negative economic and market conditions.

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 March 31, 2009, 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

· During the first three quarters of fiscal 2009, we have continued to better align our business with the needs and demands of our customers, resulting in improved financial results. While the difficult economic environment has impacted the demand from our existing customers, we have maintained our customer base, and we have added new customers, as evidenced by the expansion of our services during this fiscal year into two new states and five new territories. The trend of steadily improving financial performance, which started in the fourth quarter of fiscal 2008, continued during the third quarter of fiscal 2009, as we reported higher net margins, reduced operating losses, and improved EBITDA versus the same period a year ago. We continue to operate more efficiently than in prior periods, partly as the result of our ERP system, and partly because of our timely reaction to changing economic conditions during the second quarter of fiscal 2009, when we quickly adjusted our costs in response to decreasing volumes as a result of the rapid contraction of the national economy and the impact on the majority of our customers.

· We responded with various cost cutting measures, including business restructuring steps, beginning late in November 2008, continuing through December 2008 and into the third quarter of fiscal 2009 to meet the decrease in customer demand. Our results reflect the impact of eliminating operating and administrative personnel and maximizing the productivity of equipment and reducing direct and office operating expenses. For example, we consolidated delivery routes to improve efficiencies without sacrificing our high level of customer service. Moreover, as the economy has contracted, we have continued to add new customers seeking to reduce their costs of operations with mobile fueling or replacing their prior service providers for the higher value solution we provide, which includes greater reliability, a substantial reduction in service issues and better reporting metrics. We have also expanded the services we provide to existing customers, such as the recent addition of mobile fueling services in North Carolina for the United States Postal Service, which has been a customer for over 15 years.

· Financial results from 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. During the first nine months of fiscal 2009, we have experienced a 6.7% decrease in the number of gallons sold compared to the same period in 2008. This decrease is due to lower volumes demanded by some of our existing customers in response to the weaker economy and to our pursuit of business with higher net margin contributions, with the overall decrease partially offset by the volume generated from new customers. While these volumes clearly represent a decrease when compared to prior years, in the third quarter of fiscal 2009 we began to see some stabilization of existing customer demand. While there can be no assurance that the recent downturn in customer volumes has in fact bottomed out, we remain cautiously optimistic that, in light of the stabilization of customer demand, our continuing success in adding new customers, and the cost cutting measures made earlier in the fiscal year, our operations and financial performance will continue to improve as they have during the first three quarters of this fiscal year compared to last fiscal year.

· In light of the prevailing weak economic conditions and their negative impact on almost all of our customers, we have placed special emphasis on the optimization of cash flows. This includes, for example, our strong focus on collecting our receivables. At March 31, 2009, our receivables were $13.3 million compared to $30.2 million at June 30, 2008, primarily a reflection of decreased commodity prices, but also partly from strong credit, underwriting, and collection efforts.

· We also moved to cautiously conserve cash in the third quarter of fiscal 2009 by entering into agreements to defer cash interest payments that were due in January and March 2009 related to the August 2007 Notes and the September 2008 Notes. We paid a 1% fee of the outstanding balance as consideration for the deferral. Fifty percent of this Deferral Fee was paid in cash and the balance was paid with unregistered shares of our common stock. We paid the deferred interest on April 15, 2009, as required by the agreements with the Note holders. Additionally, on May 5, 2009, the Company entered into an agreement with the holders of the Series A, Series B, and Series C Preferred Stock to satisfy the outstanding $256,000 dividends payable through the issuance of 1,111,091 unregistered shares of the common stock of the Company.

· During the first nine months of fiscal 2009, we achieved improvements in our bottom line and EBITDA results. We reported a net loss of $243,000 and positive EBITDA of $974,000 for the third quarter of this fiscal year, compared to a net loss of $1.4 million and EBITDA of $277,000 for the same period a year ago, improvements of $1.2 million or 83% and $697,000 or 252% to our financial performance, respectively. During the nine months ended March 31, 2009, we had a net loss of $391,000 and EBITDA of $3.7 million compared to a net loss of $6.4 million and EBITDA of $86,000 for the same period a year ago, improvements of $6.0 million or 94% and $3.6 million or 4,149%, respectively.

· As previously noted, we are reporting a net loss for the third quarter of fiscal 2009 of $243,000 compared to a loss of $1.4 million a year ago. The $243,000 net loss included $906,000 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 $495,000, legal expenses of $212,000 and public company costs of $179,000.

· The net margin in the third quarter of fiscal 2009 and 2008 was $4.0 million and $3.2 million, respectively, on 16.0 million and 18.1 million gallons sold during those periods. The net margins per gallon in the third quarter of fiscal 2009 and 2008 were 25.1 cents and 17.8 cents, respectively. The increase in net margin per gallon in 2009 was primarily due to the continuation of the higher net margin trend previously reported for the fourth quarter of fiscal year 2008 and thereafter. The increase in net margin per gallon can be attributed, in part, to the efficiencies of our ERP system, which has helped us to identify and eliminate non-contributory, lower margin business and has allowed for improved route delivery efficiency including the consolidation of routes.

TRENDS IN FISCAL YEAR 2009 TO DATE

· We began our 2009 fiscal year with a strong first quarter during which we achieved improved results in several of our key financial categories when compared to the fourth quarter of our 2008 fiscal year. These improvements included increases in gross profit of 36%, a change from net loss to net income of $878,000 and an EBITDA increase of 72%. While emergency storm response work contributed to these strong results, we believe that the most important factor was the significant margin contribution stemming from the efficiencies generated by ERP system and our focus on higher margin business.

· While we ended our first quarter of fiscal 2009 with optimism in regards to our improving bottom-line performance, we were materially impacted in the second quarter of fiscal 2009 by the down spiraling worldwide economy and its dramatic effect on our approximately 4,600 customers across virtually all U.S. manufacturing and service sectors. When comparing the second quarter of fiscal 2009 against the first quarter, this economic downturn yielded a reduction in gallons sold of 11% net of any additions attributable to new business, and contributed to a decrease in gross profit of 43%, a $1.2 million change from net income to net loss and an EBITDA decrease of 65%. We did respond decisively, however, in November and December 2008 to this sudden reduction in customer demand by making significant reductions in costs, improving the efficiencies in all operating areas of the Company and expanding into five new markets and two states to meet demand for our services.

· We believe that our fully operational ERP system underpinned our ability to execute the tactical measures that we initiated in the second quarter of fiscal 2009 and put us back on track toward the financial performance that we had previously anticipated coming out of the first quarter of 2009. When comparing the third and second quarters of fiscal year 2009, we realized material improvements in all the key financial categories, including an increase in gross profit of 15%, a reduction in net loss of 63%, together with an EBITDA increase of 41%. The key to our improved performance was the 25-cent net margin per gallon we achieved in the third fiscal quarter, a 4-cent or 19% improvement from the second quarter. We currently expect the stabilization of customer demand that we saw emerging in the third quarter to continue in the fourth quarter of the 2009 fiscal year and believe that the demand from new customers for our services is strong. However, we are unable to predict an improvement in demand from our existing customers in the short run. There can be no assurance that a continuation or a worsening of the current adverse economic condition will not further adversely impact our customers and, in turn, our business.

The following table presents certain operating results for the last seven 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,       March 31,
                                 2007                2007             2008            2008              2008                2008             2009

Revenues                    $        55,497     $       58,994     $    64,162     $    82,036     $        79,271     $       45,112     $    34,982
Gross profit                $         3,182     $        2,565     $     2,875     $     4,290     $         5,819     $        3,292     $     3,790
Selling, general and
administrative              $         3,803     $        3,788     $     3,445     $     3,845     $         4,632     $        3,267     $     3,455
Operating income (loss)     $          (621 )   $       (1,223 )   $      (570 )   $       445     $         1,187     $           25     $       335
Interest expense and
other income, net           $          (757 )   $         (763 )   $      (720 )   $      (811 )   $          (667 )   $         (677 )   $      (570 )
Loss on extinguishment of
promissory notes            $        (1,641 )   $            -     $      (108 )   $         -     $             -     $            -     $         -
Net income (loss)           $        (3,019 )   $       (1,986 )   $    (1,398 )   $      (366 )   $           512     $         (660 )   $      (243 )

EBITDA¹                     $           196     $         (387 )   $       277     $     1,154     $         1,990     $          690     $       974

Net margin                  $         3,569     $        2,945     $     3,228     $     4,611     $         6,161     $        3,534     $     4,027
Net margin per gallon²      $          0.19     $         0.16     $      0.18     $      0.24     $          0.33     $         0.21     $      0.25
Gallons sold                         18,695             18,050          18,102          19,024              18,550             16,602          16,041

¹ EBITDA 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 reported net income (loss) for each of the seven quarterly periods presented above (in thousands):

                                                                              For the three months ended
                              September 30,       December 31,       March 31,         June 30,        September 30,       December 31,       March 31,
                                  2007                2007              2008             2008              2008                2008              2009

Net income (loss)            $        (3,019 )   $       (1,986 )   $     (1,398 )   $       (366 )   $           512     $         (660 )   $       (243 )
Add back:
Interest expense                         778                782              780              720                 683                680              575
Income tax expense                         -                  -                -                -                   8                  8                8
Depreciation
and amortization expense:
Cost of sales                            388                380              353              321                 342                242              239
Selling, general
and administrative
expenses                                 282                304              311              357                 341                342              334
Stock-based compensation
amortization expense                     126                133              123              122                 104                 78               61
Loss on extinguishment of
promissory notes                       1,641                  -              108                -                   -                  -                -
EBITDA                       $           196     $         (387 )   $        277     $      1,154     $         1,990     $          690     $        974

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 March 31, 2009 ("third quarter of fiscal 2009") to Three Months Ended March 31, 2008 ("third quarter of fiscal 2008")

Revenues

Revenues were $35.0 million in the third quarter of fiscal 2009, as compared to $64.2 million in the same period of the prior year, a decrease of $29.2 million, or 45%, primarily as a result of price variances due to recent decreases in market prices of petroleum products. Market fuel prices have decreased approximately 54% in the third quarter of fiscal 2009 compared to the same period in the prior year, which resulted in a decrease of $24.7 million in revenues. The decrease in revenues is also partially due to a decrease in $4.5 million, or an 11% reduction, in gallons sold compared to the same period in the prior year. Starting in November 2008, as the economy was rapidly contracting, we experienced a dramatic and significant overall decrease in volume demand from our existing customers resulting in the overall reduction in volume sold during the quarter compared to the same period in the prior year. During the third quarter of fiscal 2009, we have seen some stabilization in the demand for our services from existing customers and a strong increase in new customer business as companies seek 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 existing customer base. We remain cautiously optimistic, however, that overall 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 $3.8 million in the third quarter of fiscal 2009, as compared to $2.9 million in the same period of the prior year, an increase of $915,000, or 32 %. The net margin per gallon for the third quarters of fiscal 2009 and 2008 was 25.1 cents and 17.8 cents, respectively, an increase of 7.3 cents. This improvement in gross profit and margin can be attributed to the improved efficiencies related to our route structure consolidation and other steps we have taken to increase productivity since we recognized the lowering of customer volumes in the second quarter of fiscal 2009.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were $3.5 million in the third quarter of fiscal 2009 and $3.4 million in the third quarter of fiscal 2008. SG&A has basically remained flat as a result of the cost cutting and business restructuring steps taken beginning in late November 2008 to meet the decrease in customer demand. These steps, which helped decrease employee expense by $132,000, were offset by increases in the provision for doubtful accounts of $181,000, and depreciation expense of $22,000.

Interest Expense

Interest expense was $575,000 in the third quarter of fiscal 2009, as compared to $780,000 in the same period of the prior year, a decrease of $205,000, or 26%. The decrease was primarily due to lower interest expense related to the line of credit as the base interest rate has decreased. Additionally, the average outstanding balance on the line of credit was $7.6 million lower during the third quarter of fiscal 2009 than during the third quarter of fiscal 2008 primarily due to lower commodity fuel prices. At March 31, 2009, the effective rate on our line of credit was 4%, as compared to 6% at March 31, 2008, while the weighted average rate was 4.00% this quarter compared to 7.18% last year. Included in long-term debt interest expense in the three months ended March 31, 2009 is the $96,000 deferral fee that we incurred to extend the interest payment on the August 2007 and September 2008 Notes to April 15, 2009. Without the Deferral Fee, the reduction in interest expense would have been $301,000 lower, or 39%, from the third quarter of fiscal 2008.

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

                                                        Three Months Ended
                                                             March 31,
                                                       2009            2008
        Stated Rate Interest Expense:
        Line of credit                               $      96       $     295
        Long-term debt                                     324             356
        Other                                               75              24
              Total stated rate interest expense           495             675

        Non-Cash Interest Amortization:
        Amortization of deferred debt costs                 69              94
        Amortization of debt discount                       11              11
              Total non-cash interest amortization          80             105

        Total interest expense                       $     575       $     780

Loss on Extinguishment of Debt

In the third quarter of fiscal 2008, we recorded losses on extinguishment of debt of $108,000. The losses were primarily due to the extinguishment of $3.8 million in debt by the exchange of $2.0 million of the November 2007 Notes and $1.8 million of the August 2007 Notes into shares of Series A and Series B Preferred Stock, respectively. The loss on extinguishment of debt was the result of the write-off of unamortized debt discounts of $15,000, the write-off of unamortized debt costs of $69,000 related to the August 2007 Notes, and the write-off of $24,000 of unamortized debt costs related to the November 2007 Notes. No similar losses were recorded in the third quarter of fiscal year 2009.

Income Taxes

State income tax expense of $8,000 was recorded for the third quarter of fiscal 2009. No federal income tax expense was recorded for the third quarters of . . .