x
|
Quarterly
Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
o
|
Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
Delaware
|
22-3520840
|
(State
or other jurisdiction of
|
(I.R.S.
employer
|
incorporation
or organization)
|
identification
No.)
|
198
Green Pond Road
Rockaway,
NJ
|
07866
|
(Address
of principal executive offices)
|
(Zip
code)
|
Page
|
|||
Part
I.
|
Financial
Information
|
||
Item
1.
|
Financial
Statements
|
||
Condensed
Consolidated Balance Sheets as of March 31, 2006 (unaudited) and
June 30,
2005
|
1
|
||
Condensed
Consolidated Statements of Operations for the Three and Nine Months
Ended
March
31,
2006 and 2005 (unaudited).
|
2
|
||
Condensed
Consolidated Statements of Changes in Stockholders' Equity for the
Nine
Months
Ended
March 31, 2006 (unaudited)
|
3
|
||
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended March
31,
2006
and 2005 (unaudited)
|
4
|
||
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
5
|
||
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
|
14
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
18
|
|
Item
4.
|
Controls
and Procedures
|
18
|
|
Part
II
|
Other
Information
|
||
Item
1.
|
Legal
Proceedings
|
19
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
19
|
|
Item
5.
|
Other
Information
|
19
|
|
Item
6.
|
Exhibits
|
20
|
|
Signatures
|
20
|
|
March
31,
|
June
30,
|
|||||
|
2006
|
2005
|
|||||
ASSETS
|
(unaudited)
|
|
|||||
Current
Assets:
|
|||||||
Cash
|
$
|
1,605,404
|
$
|
1,754,318
|
|||
Accounts
receivable, net of allowance for doubtful accounts of approximately
$472,000 and
$238,000 at March 31, 2006 and June 30, 2005, respectively
|
3,526,628
|
2,876,900
|
|||||
Inventories
|
1,021,456
|
726,987
|
|||||
Notes
receivable - current portion
|
276,962
|
282,826
|
|||||
Deferred
income taxes
|
-
|
64,776
|
|||||
Notes
receivable - related parties
|
1,904,457
|
-
|
|||||
Prepaid
expenses and other current assets
|
700,313
|
591,840
|
|||||
Total
Current Assets
|
9,035,220
|
6,297,647
|
|||||
|
|||||||
Property
and equipment, net
|
4,528,837
|
4,284,147
|
|||||
Deferred
income taxes
|
-
|
45,091
|
|||||
Security
deposits
|
84,918
|
54,918
|
|||||
Notes
receivable - less current portion
|
849,182
|
1,099,435
|
|||||
Intangible
assets, net
|
548,418
|
683,416
|
|||||
Deferred
financing costs, net
|
164,656
|
357,246
|
|||||
Prepaid
acquisition costs
|
311,940
|
-
|
|||||
Total
Assets
|
$
|
15,523,171
|
$
|
12,821,900
|
|||
LIABILITIES
& STOCKHOLDERS' EQUITY
|
|||||||
Current
Liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
2,939,705
|
$
|
2,306,626
|
|||
Line
of credit
|
1,115,741
|
1,015,468
|
|||||
Notes
payable, current portion
|
74,951
|
516,610
|
|||||
Capital
leases payable, current portion
|
316,125
|
321,602
|
|||||
Customer
pre-purchase payments
|
2,086,864
|
2,457,384
|
|||||
Unearned
income
|
228,579
|
79,679
|
|||||
Total
Current Liabilities
|
6,761,965
|
6,697,369
|
|||||
|
|||||||
Convertible
debentures, net of unamortized discount of $86,078
|
46,422
|
-
|
|||||
Deferred
income taxes
|
-
|
104,517
|
|||||
Notes
payable, less current portion
|
3,195,688
|
3,307,103
|
|||||
Capital
leases payable, less current portion
|
685,250
|
654,796
|
|||||
Total
Liabilities
|
10,689,325
|
10,763,785
|
|||||
|
|||||||
Commitments
and contingencies
|
|||||||
|
|||||||
Stockholders'
Equity:
|
|||||||
Preferred
stock; authorized 10,000,000 shares par value $.001 per share issued
-
none
|
-
|
-
|
|||||
Common
stock $.001 par value; 10,000,000 shares authorized; 3,031,920 and
2,457,320 shares
issued and outstanding at March 31, 2006 and June 30, 2005,
respectively
|
3,032
|
2,457
|
|||||
Additional
paid-in capital
|
14,224,220
|
6,481,102
|
|||||
Accumulated
deficit
|
(9,188,999
|
)
|
(4,425,444
|
)
|
|||
Deferred
compensation
|
(204,407
|
)
|
-
|
||||
Total
Stockholders' Equity
|
4,833,846
|
2,058,115
|
|||||
|
|||||||
Total
Liabilities and Stockholders' Equity
|
$
|
15,523,171
|
$
|
12,821,900
|
|
Three
Months Ended
March
31,
|
Nine
Months Ended
March
31,
|
|||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
sales
|
$
|
26,265,365
|
$
|
23,668,771
|
$
|
61,736,954
|
$
|
50,878,714
|
|||||
|
|||||||||||||
Cost
of sales
|
23,810,808
|
20,923,233
|
56,332,818
|
45,730,958
|
|||||||||
|
|||||||||||||
Gross
profit
|
2,454,557
|
2,745,538
|
5,404,136
|
5,147,756
|
|||||||||
|
|||||||||||||
Operating
Expenses:
|
|||||||||||||
Selling,
general and administrative
|
2,611,873
|
1,827,711
|
6,242,669
|
4,371,637
|
|||||||||
Depreciation
and amortization
|
321,192
|
286,845
|
974,457
|
890,775
|
|||||||||
Total
operating expenses
|
2,933,065
|
2,114,556
|
7,217,126
|
5,262,412
|
|||||||||
|
|||||||||||||
(Loss)
income from operations
|
(478,508
|
)
|
630,982
|
(1,812,990
|
)
|
(114,656
|
)
|
||||||
|
|||||||||||||
Other
income (expenses):
|
|||||||||||||
Interest
and other income
|
25,497
|
61,219
|
113,688
|
164,697
|
|||||||||
Interest
expense
|
(139,620
|
)
|
(97,240
|
)
|
(525,331
|
)
|
(264,118
|
)
|
|||||
Note
conversion expense
|
-
|
-
|
(125,000
|
)
|
-
|
||||||||
Amortization
of discounts on debt
|
(928,385
|
)
|
-
|
(2,413,922
|
)
|
-
|
|||||||
Total
other expenses
|
(1,042,508
|
)
|
(36,021
|
)
|
(2,950,565
|
)
|
(99,421
|
)
|
|||||
|
|||||||||||||
(Loss)
income before provision for income taxes
|
(1,521,016
|
)
|
594,961
|
(4,763,555
|
)
|
(214,077
|
)
|
||||||
|
|||||||||||||
Provision
for income taxes
|
-
|
25,500
|
-
|
35,480
|
|||||||||
|
|||||||||||||
Net
(Loss) Income
|
$
|
(1,521,016
|
)
|
$
|
569,461
|
$
|
(4,763,555
|
)
|
$
|
(249,557
|
)
|
||
|
|||||||||||||
Basic
per common share:
Weighted
average common shares outstanding
|
2,939,379
|
2,030,281
|
2,700,748
|
2,030,281
|
|||||||||
Basic
(loss) income per common share
|
$
|
(.52
|
)
|
$
|
.28
|
$
|
(1.76
|
)
|
$
|
(.12
|
)
|
Diluted
per common share:
Weighted
average shares outstanding
|
2,939,379
|
2,052,481
|
2,700,748
|
2,030,281
|
|||||||||
Diluted
(loss) income per common share
|
$
|
(.52
|
)
|
$
|
.28
|
$
|
(1.76
|
)
|
$
|
(.12
|
)
|
Total
|
|||||||||||||||||||
Common
Stock
|
Additional
Paid
|
Accumulated
|
Deferred
|
Stockholders'
|
|||||||||||||||
Shares
|
Amount
|
-In
Capital
|
Deficit
|
Compensation
|
Equity
|
||||||||||||||
Balance
- July 1, 2005
|
2,457,320
|
$
|
2,457
|
$
|
6,481,102
|
$
|
(4,425,444
|
)
|
$
|
-
|
$
|
2,058,115
|
|||||||
|
|||||||||||||||||||
Discounts
on convertible debentures
|
-
|
-
|
2,500,000
|
-
|
-
|
2,500,000
|
|||||||||||||
Option
and warrant exercises
|
288,000
|
288
|
1,727,712
|
-
|
-
|
1,728,000
|
|||||||||||||
Note
conversion
|
57,604
|
58
|
624,942
|
-
|
-
|
625,000
|
|||||||||||||
Conversion
of convertible debentures
and related accrued
interest
|
371,856
|
372
|
2,416,691
|
-
|
-
|
2,417,063
|
|||||||||||||
Shares
cancelled in connection with
termination of consulting
agreement
|
(142,860
|
)
|
(143
|
)
|
(71,286
|
)
|
-
|
-
|
(71,429
|
)
|
|||||||||
Options
granted to board members
|
-
|
-
|
175,593
|
-
|
(175,593
|
)
|
-
|
||||||||||||
Options
granted in connection with
consulting agreements
|
-
|
-
|
369,466
|
-
|
(369,466
|
)
|
-
|
||||||||||||
Amortization
of deferred compensation
|
-
|
-
|
-
|
-
|
340,652
|
340,652
|
|||||||||||||
Net
loss
|
-
|
-
|
-
|
(4,763,555
|
)
|
-
|
(4,763,555
|
)
|
|||||||||||
Balance
- March 31, 2006
|
3,031,920
|
$
|
3,032
|
$
|
14,224,220
|
$
|
(9,188,999
|
)
|
$
|
(204,407
|
)
|
$
|
4,833,846
|
|
For
the Nine Months Ended
|
||||||
|
March
31,
|
||||||
|
2006
|
2005
|
|||||
|
|
|
|||||
Cash
flow from operating activities:
|
|||||||
Net
loss
|
$
|
(4,763,555
|
)
|
$
|
(249,557
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|||||||
used in operating activities:
|
|||||||
Depreciation
and amortization
|
974,457
|
890,775
|
|||||
(Gain)
loss on disposal of equipment
|
(5,000
|
)
|
35,722
|
||||
Provision
for loss on accounts receivable
|
250,750
|
-
|
|||||
Note
conversion expense
|
125,000
|
-
|
|||||
Amortization
of discount on convertible debentures
|
2,413,922
|
-
|
|||||
Amortization
of non-employee deferred stock compensation
|
340,652
|
3,247
|
|||||
(Increase)
decrease in:
|
|||||||
Accounts
receivable
|
(900,478
|
)
|
(1,440,781
|
)
|
|||
Inventories
|
(294,469
|
)
|
(343,823
|
)
|
|||
Prepaid
expenses and other current assets
|
(174,552
|
)
|
189,180
|
||||
Increase
(decrease) in:
|
|||||||
Accounts
payable and accrued expenses
|
682,642
|
694,767
|
|||||
Customer
pre-purchase payments
|
(370,520
|
)
|
(1,170,139
|
)
|
|||
Unearned
revenue
|
148,900
|
(2,333
|
)
|
||||
Net
cash used in operating activities
|
(1,572,251
|
)
|
(1,392,942
|
)
|
|||
|
|||||||
Cash
flow from investing activities:
|
|||||||
Advances
to related parties
|
(1,904,457
|
)
|
-
|
||||
Collection
of notes receivable
|
256,117
|
243,386
|
|||||
Capital
expenditures
|
(431,045
|
)
|
(903,069
|
)
|
|||
Proceeds
from sale of property and equipment
|
5,000
|
229,814
|
|||||
Prepaid
acquisition costs
|
(311,940
|
)
|
-
|
||||
Other
|
(30,000
|
)
|
(12,896
|
)
|
|||
Net
cash used in investing activities
|
(2,416,325
|
)
|
(442,765
|
)
|
|||
|
|||||||
Cash
Flow From Financing Activities
|
|||||||
Proceeds
from issuance of convertible debentures
|
2,500,000
|
-
|
|||||
Deferred
financing costs
|
(217,175
|
)
|
-
|
||||
Net
borrowings under line of credit
|
100,273
|
50,389
|
|||||
Payments
on capital leases payable
|
(218,362
|
)
|
(225,000
|
)
|
|||
Proceeds
from notes payable
|
-
|
500,000
|
|||||
Repayments
of notes payable
|
(53,074
|
)
|
--
|
||||
Proceeds
from option and warrant exercises
|
1,728,000
|
463,600
|
|||||
Net
cash provided by financing activities
|
3,839,662
|
788,989
|
|||||
|
|||||||
Net
Decrease In Cash
|
(148,914
|
)
|
(1,046,718
|
)
|
|||
Cash
- Beginning of Year
|
1,754,318
|
1,309,848
|
|||||
Cash
- End of Period
|
$
|
1,605,404
|
$
|
263,130
|
|||
|
|||||||
Cash
paid during the period for interest
|
$
|
406,918
|
$
|
246,176
|
|||
Cash
paid during the period for income taxes
|
$
|
-
|
$
|
16,649
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
March
31,
2006
|
March
31,
2005
|
March
31,
2006
|
March
31,
2005 |
||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
||||||||||
Net
(loss) income
|
$
|
(1,521,016
|
)
|
$
|
569,461
|
$
|
(4,763,555
|
)
|
$
|
(249,577
|
)
|
||
Weighted
average common shares outstanding - basic
|
2,939,379
|
2,030,281
|
2,700,748
|
2,030,281
|
|||||||||
Dilutive
effect of stock options and warrants
|
-
|
22,200
|
-
|
-
|
|||||||||
Diluted
common shares outstanding
|
2,939,379
|
2,052,481
|
2,700,748
|
2,030,281
|
|||||||||
(Loss)
income per common share:
|
|||||||||||||
Basic
|
$
|
(.52
|
)
|
$
|
.28
|
$
|
(1.76
|
)
|
$
|
(.12
|
)
|
||
Diluted
|
$
|
(.52
|
)
|
$
|
.28
|
$
|
(1.76
|
)
|
$
|
(.12
|
)
|
Liquid
fuel
|
$
|
277,514
|
||
Parts,
supplies and equipment
|
743,942
|
|||
Total
|
$
|
1,021,456
|
For
the Year
Ending
March 31,
|
Principal Amount |
|||
2007
|
$
|
276,962
|
||
2008
|
769,519
|
|||
2009
|
44,519
|
|||
2010
|
35,144
|
|||
Total
|
$
|
1,126,144
|
Land
|
$
|
479,346
|
||
Buildings
|
1,340,438
|
|||
Trucks
|
3,826,414
|
|||
Fuel
tanks
|
839,064
|
|||
Machinery
and equipment
|
1,006,502
|
|||
Leasehold
improvements
|
614,875
|
|||
Cylinders
|
375,421
|
|||
Office
furniture and equipment
|
212,856
|
|||
8,694,916
|
||||
Less:
accumulated depreciation and
amortization
|
(4,166,079
|
)
|
||
Property
and equipment, net
|
$
|
4,528,837
|
Website
development costs
|
$
|
2,400,187
|
||
Customer
list
|
610,850
|
|||
Non-compete
|
100,000
|
|||
3,111,037
|
||||
Less:
accumulated amortization
|
(2,562,619
|
)
|
||
Intangible
assets, net
|
$
|
548,418
|
For
the Year
Ending
March 31,
|
Principal
Amount
|
||||
2007
|
$
|
74,951
|
|||
2008
|
85,348
|
||||
2009
|
80,019
|
||||
2010
|
78,845
|
||||
2011
|
74,927
|
||||
Thereafter
|
2,876,549
|
||||
Total
|
$
|
3,270,639
|
|||
|
|||||
For
the Year
Ending
March 31,
|
Amount
|
||||
2007
|
$
|
385,755
|
|||
2008
|
322,895
|
||||
2009
|
276,727
|
||||
2010
|
120,741
|
||||
2011
|
39,191
|
||||
Total
minimum lease payments
|
1,145,309
|
||||
Less
amount representing interest
|
(143,934
|
)
|
|||
Present
value of net minimum lease payments
|
1,001,375
|
||||
Less
current maturities
|
316,125
|
||||
Long-term
maturities
|
$
|
685,250
|
Risk-free
interest rate
|
3.8%
|
Expected
volatility
|
92.7%
|
Dividend
yield
|
-
|
Expected
life
|
10
years
|
Risk-free
interest rate
|
4.25%
|
Expected
volatility
|
91.0%
|
Dividend
yield
|
-
|
Expected
life
|
1
-
10 years
|
Former
Chief Executive Officer
|
23.5%
|
President
|
3.6%
|
Chief
Operating Officer
|
2.3%
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||
March
31,
|
March
31,
|
|||||||||||
2006
|
2005
|
2006
|
2005
|
|||||||||
|
|
|
||||||||||
|
|
|
|
|
||||||||
Number
2 heating oil
|
$
|
19,989,072
|
$
|
18,196,703
|
|
$
|
41,219,943
|
|
$
|
33,736,651
|
|
|
Gasoline,
Diesel Fuel, Kerosene,
Propane
and Lubricants
|
5,517,943
|
4,714,157
|
|
|
18,150,057
|
|
|
14,591,053
|
|
|||
Equipment
Sales, Services and
Installation
|
758,350
|
757,911
|
|
|
2,366,954
|
|
|
2,551,010
|
|
|||
|
|
|
|
|
||||||||
Net
Sales
|
$
|
26,265,365
|
$
|
23,668,771
|
|
$
|
61,736,954
|
|
$
|
50,878,714
|
|
A.
|
"Modified
prospective" method in which compensation cost is recognized beginning
with the effective date (a) based on the requirements of Statement
123(R)
for all share-based payments granted after the effective date and
(b)
based on the requirements of Statement 123 for all awards granted
to
employees prior to the effective date of Statement 123(R) that remain
unvested on the effective date.
|
B.
|
"Modified
retrospective" method which includes the requirements of the modified
prospective method described above, but also permits entities to
restate,
based on the amounts previously recognized under Statement 123 for
purposes of pro forma disclosures, either (a) all prior periods presented
or (b) prior interim periods of the year of
adoption.
|
§
|
Commodity
Supply
|
§
|
Commodity
Pricing
|
§
|
Customers
Converting to Natural Gas
|
§
|
Alternative
Energy Sources
|
§
|
Winter
Temperature Variations (Degree Days)
|
§
|
Customers
Moving Out of The Area
|
§
|
Legislative
Changes
|
§
|
The
Availability (Or Lack of) Acquisition Candidates
|
§
|
The
Success of Our Risk Management Activities
|
§
|
The
Effects of Competition
|
§
|
Changes
in Environmental Law
|
§
|
General
Economic, Market, or Business Conditions
|
For
the Three Months
Ended
March 31,
|
For
the Nine Months
Ended
March 31,
|
For
the
Three
Months
Ended
March
31,
|
For
the
Nine
Months
Ended
March
31,
|
||||||||||||||||
2006
|
2005
|
2006
|
2005
|
2006
vs. 2005
|
2006
vs.
2005
|
||||||||||||||
Net
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
11.0
|
%
|
21.3
|
%
|
|||||||
Cost
of sales
|
90.7
|
88.4
|
91.2
|
89.9
|
13.8
|
23.2
|
|||||||||||||
Gross
profit
|
9.3
|
11.6
|
8.8
|
10.1
|
(10.6
|
)
|
5.0
|
||||||||||||
Selling
general and administrative
|
9.9
|
7.7
|
10.1
|
8.6
|
42.9
|
42.8
|
|||||||||||||
Depreciation
and amortization
|
1.2
|
1.2
|
1.6
|
1.8
|
12.0
|
9.4
|
|||||||||||||
(Loss)
income from operations
|
(1.8
|
)
|
2.7
|
(2.9
|
)
|
(0.2
|
)
|
*
|
*
|
||||||||||
Interest
and other income
|
0.1
|
0.3
|
0.2
|
0.3
|
(58.4
|
)
|
(31.0
|
)
|
|||||||||||
Interest
expense
|
(0.5
|
)
|
(0.4
|
)
|
(0.9
|
)
|
(0.5
|
)
|
43.6
|
98.9
|
|||||||||
Note
conversion expense
|
-
|
-
|
(0.2
|
)
|
-
|
*
|
*
|
||||||||||||
Amortization
of discounts on debt
|
(3.5
|
)
|
-
|
(3.9
|
)
|
-
|
*
|
*
|
|||||||||||
(Loss)
income before provision for income taxes
|
(5.8
|
)
|
2.5
|
(7.7
|
)
|
(0.4
|
)
|
*
|
*
|
||||||||||
Provision
for income taxes
|
-
|
0.1
|
-
|
0.1
|
*
|
*
|
|||||||||||||
Net
(loss) income
|
(5.8
|
)%
|
2.4
|
%
|
(7.7
|
)%
|
(0.5
|
)%
|
*
|
*
|
Payments
Due by Period
|
|||||||||||||||
Contractual
Obligations
|
Total
|
Less
than
1
year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
||||||||||
Long-Term
Debt
|
$
|
4,387,000
|
$
|
1,191,000
|
|
$
|
165,000
|
|
$
|
154,000
|
|
$
|
2,877,000
|
|
|
Capital
Lease Obligations
|
|
1,146,000
|
|
|
386,000
|
|
|
600,000
|
|
|
160,000
|
|
|
-
|
|
Operating
Leases
|
|
686,000
|
|
|
261,000
|
|
|
401,000
|
|
|
23,000
|
|
|
1,000
|
|
Unconditional
Purchase Obligations
|
|
751,000
|
|
|
751,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
Long-Term Obligations
|
|
528,000
|
|
|
457,000
|
|
|
71,000
|
|
|
-
|
|
|
-
|
|
Total
Contractual Cash Obligations
|
$
|
7,498,000
|
|
$
|
3,046,000
|
|
$
|
1,237,000
|
|
$
|
337,000
|
|
$
|
2,878,000
|
|
31.1
|
Certification
of Chief Executive Officer of Periodic Report pursuant to Rule
13a-14(a)
and Rule 15d-14(a).
|
31.2
|
Certification
of Chief Financial Officer of Periodic Report pursuant to Rule
13a-14(a)
and Rule 15d-14(a).
|
32.1 |
Certification
of Chief Executive Officer and Chief Financial Officer pursuant
to 18
U.S.C. Section 1350.
|
By:
/s/ Gregory D. Frost
Gregory D. Frost
Chief Executive Officer, Chairman and
General Counsel
By:
/s/ Steven M. Vella
Steven M. Vella
Chief Financial Officer
|