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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______________to_______________
Commission file number: 001-15035
ABLE ENERGY, INC.
(Exact name of registrant as specified in its charter)
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)
Registrant's telephone number, including area code: (973) 625-1012
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check X whether registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
As of February 9, 2004, 2,013,250 shares, $.001 Par value per share, of
Able Energy, Inc. were issued and outstanding.
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TABLE OF CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets as of June 30, 2003 and
December 31, 2003 3 - 4
Consolidated Statements of Income for the three and six
months ended December 31, 2003 and 2002 5
Consolidated Statement of Stockholders' Equity six months
ended December 31, 2003 6
Consolidated Statements of Cash Flows for the six months
ended December 31, 2003 and 2002 7 - 8
Notes to Unaudited Financial Statements 9 - 30
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
------
December 31, June 30,
2003 2003
Current Assets: (Unaudited) (Audited)
----------- ---------
Cash $ 391,534 $ 400,033
Accounts Receivable (Less Allowance for Doubtful
Accounts of $90,472 (December 31) and $279,913 (June 30) 3,221,559 2,661,808
Inventory 1,293,138 789,422
Notes Receivable - Current Portion 63,133 57,577
Miscellaneous Receivables 89,798 70,503
Prepaid Expenses 475,433 395,982
Insurance Claim Receivable - 349,526
Deferred Costs - Insurance Claims 828,786 703,675
Prepaid Expense - Income Taxes 2,063 2,063
Deferred Income Tax 33,047 73,777
----------- ---------
Total Current Assets 6,398,491 5,504,366
----------- ---------
Property and Equipment:
Land 479,346 451,925
Buildings 946,046 946,046
Trucks 3,551,189 3,125,453
Fuel Tanks 1,567,615 1,455,501
Machinery and Equipment 784,057 769,817
Leasehold Improvements 612,935 597,759
Cylinders 755,496 755,496
Office Furniture and Equipment 200,640 200,640
Website Development Costs 2,317,994 2,274,575
----------- ---------
11,215,318 10,577,212
Less: Accumulated Depreciation and Amortization 4,918,731 4,331,055
----------- ---------
Net Property and Equipment 6,296,587 6,246,157
----------- ---------
Other Assets:
Deferred Income Taxes 45,091 45,091
Deposits 132,720 165,541
Notes Receivable - Less Current Portion 170,237 177,793
Customer List, Less Accumulated Amortization of ($188,122)
December 31 and June 30. 422,728 422,728
Covenant Not to Compete, Less Accumulated Amortization of
$86,667 (December 31) and $76,667 (June 30). 13,333 23,333
Development Costs - Franchising 22,977 27,573
----------- ---------
Total Other Assets 807,086 862,059
----------- ---------
Total Assets $13,502,164 $12,612,582
=========== ===========
See Accompanying Notes
3
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont'd)
LIABILITIES & STOCKHOLDERS' EQUITY
DECEMBER 31, JUNE 30,
2003 2003
CURRENT LIABILITIES: (UNAUDITED) (AUDITED)
----------- ---------
Accounts Payable $ 2,951,094 $ 1,420,911
Note Payable - Bank 700,000 -
Note Payable - Other 335,000 335,000
Current Portion of Long-Term Debt 357,367 1,238,982
Accrued Expenses 634,597 735,370
Accrued Taxes 27,640 98,612
Customer Pre-Purchase Payments 1,254,228 936,680
Customer Credit Balances 673,060 416,644
Escrow Deposits 5,000 5,000
Note Payable - Officer 320,188 321,630
9,333 -
----------- ---------
TOTAL CURRENT LIABILITIES 7,267,507 5,508,829
DEFERRED INCOME 79,679 79,679
DEFERRED INCOME TAXES 76,980 70,310
SHORT-TERM DEBT REFINANCED - 3,170,000
LONG-TERM DEBT: less current portion 4,694,198 296,472
----------- ---------
TOTAL LIABILITIES 12,118,364 9,125,290
----------- ---------
STOCKHOLDERS' EQUITY:
Preferred Stock
Authorized 10,000,000 Shares Par Value $.001 per share
Issued - None
Common Stock
Authorized 10,000,000 Par Value $.001 per share Issued
and Outstanding Shares 2,013,250 (2003) and 2,007,250 (2002) 2,014 2,014
Paid in Surplus 5,711,224 5,711,224
Retained Earnings (Deficit) (4,329,438) (2,225,946)
----------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,383,800 3,487,292
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,502,164 $12,612,582
=========== ===========
See Accompanying Notes
4
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
(UNAUDITED)
THREE MONTHS DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
------------------------- -----------------------------
2003 2002 2003 2002
---- ---- ---- ----
NET SALES $12,427,350 $12,453,732 $19,277,562 $18,687,071
COST OF SALES 10,876,794 9,934,503 16,840,256 15,337,328
GROSS PROFIT 1,550,556 2,519,229 2,437,306 3,349,743
EXPENSES
Selling, General and Administrative Expenses 1,543,776 1,218,992 3,186,821 2,430,518
Depreciation and Amortization Expense 319,981 297,265 633,047 594,671
Total Expenses 1,863,757 1,516,257 3,819,868 3,025,189
INCOME (LOSS) FROM OPERATIONS (313,201) 1,002,972 (1,382,562) 324,554
OTHER INCOME (EXPENSES):
Interest and Other Income 35,452 33,279 63,923 66,114
Interest Expense (111,776) (107,963) (434,204) (189,086)
Legal and Professional Fees relating to Other Expense (173,042) - (303,249) -
TOTAL OTHER INCOME (EXPENSES) (249,366) (74,684) (673,530) (122,972)
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (562,567) 928,288 (2,056,092) 201,582
PROVISION (REDUCTION) FOR INCOME TAXES 29,635 3,880 47,400 7,000
NET INCOME (LOSS) $(592,202) $ 924,408 $(2,103,492) $ 194,582
BASIC INCOME (LOSS) PER COMMON SHARE $ (.29) $ .46 $ (1.04) $ .10
DILUTED INCOME (LOSS) PER COMMON SHARE $ (.29) $ .45 $ ( 1.04) $ .09
WIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - USED IN BASIC 2,013,250 2,006,855 2,013,250 2,006,855
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - USED IN DILUTED 2,013,250 2,057,512 2,013,250 2,057,512
See Accompanying Notes
5
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 2003
(UNAUDITED)
COMMON STOCK
.001 PAR VALUE
--------------
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SURPLUS EARNINGS EQUITY
------ ------ ------- -------- ------
Balance - July 1, 2003 2,013,250 $ 2,014 $5,711,224 $(2,225,946) $3,487,292
Net (Loss) (2,103,492) (2,103,492)
--------- ----- --------- ---------- ----------
Balance - December 31, 2003 2,013,250 $2,014 $5,711,224 $(4,329,438) $1,383,800
========= ====== ========== =========== ==========
See Accompanying Notes
6
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
SIX MONTHS ENDED DECEMBER 31
UNAUDITED
---------
2003 2002
---- ----
CASH FLOW FROM OPERATING ACTIVITIES
- -----------------------------------
Net Income (Loss) - Continuing Operations $(2,103,492) $ 194,582
Adjustments to Reconcile Net Income to Net Cash
used by Operating Activities:
Depreciation and Amortization 633,047 594,671
Directors' Fees - 24,000
Loss on Disposal of Equipment - 842
(Increase) Decrease in:
Accounts Receivable (559,751) (1,626,729)
Inventory (503,716) (250,243)
Prepaid Expenses (79,451) (31,646)
Deposits 32,821 -
Insurance Claims 349,526 -
Deferred Costs Insurance Claims (125,111) -
Deferred Income Tax - Asset 40,730 -
Increase (Decrease) in:
Accounts Payable 1,530,183 942,526
Accrued Expenses (100,773) (65,064)
Customer Advance Payments 317,548 4,005
Taxes Payable (70,972) 4,011
Customer Credit Balance 256,416 (134,769)
Deferred Income Taxes 6,770 7,000
Deferred Income 9,333 -
Escrow Deposits - (12,400)
---------- ---------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (366,892) (349,214)
---------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (699,322) (383,731)
Web Site Development Costs (43,419) -
Disposition of Equipment 73,860 -
Increase in Deposits - (32,500)
Payment on Notes Receivable - Sale of Equipment 2,000 8,965
Note Receivable - Montgomery - 655
Other Receivables (19,395) (12,800)
---------- ---------
Net Cash (Used) Provided By Investing Activities $ (686,276) $ (419,411)
========== ==========
See Accompanying Notes
7
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW (CONT'D)
(UNAUDITED)
SIX MONTHS ENDED DECEMBER 31
UNAUDITED
---------
2003 2002
---- ----
CASH FLOW FROM FINANCING ACTIVITIES
(Decrease) in Notes Payable - Bank $(1,270,000) $(200,000)
Increase in Notes Payable - Other (1,250,000) 750,000
Note Payable - Bank 700,000 -
Decrease in Long-Term Debt (1,939,112) (288,067)
Increase in Long-Term Debt 4,805,223 331,163
Note Payable - Officer (1,442) 50,000
--------- ---------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 1,044,669 643,096
--------- ---------
NET (DECREASE) INCREASE IN CASH
Cash - Beginning of Year (8,499) (125,529)
Cash - End of Year 400,033 258,560
--------- ---------
$ 391,534 $ 133,031
========= =========
The Company had Interest Cash Expenditures of: $ 424,598 $ 195,099
The Company had Tax Cash Expenditures of: $ 54,508 $ 7,017
See Accompanying Notes
8
ABLE ENERGY, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Able Energy, Inc. and its subsidiaries. The minority interest
of 1% in Able Propane, LLC is immaterial and has not been
shown separately. All material inter-company balances and
transactions were eliminated in consolidation.
MAJORITY OWNERSHIP
The Company is the majority owner, owning 70.6% of the issued
shares of a subsidiary, PriceEnergy.Com, Inc. in which their
capital investment is $25,000. The subsidiary has established
a E-Commerce Operating System for the sale of products through
a network of suppliers originally on the East Coast of the
United States. The Web Site became active in October 2000 (See
Notes 8 and 13)
MINORITY INTEREST
The minority interest in PriceEnergy.Com, Inc. is a deficit
and, in accordance with Accounting Research Bulletin No. 51,
subsidiary losses should not be charged against the minority
interest to the extent of reducing it to a negative amount. As
such, the losses have been charged against the Company, the
majority owner. The loss for six months ended December 31,
2003 is $348,033 (See Notes 8 and 13).
The consolidated interim financial statements included herein
have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments which, in the opinion of management, are
necessary for fair presentation of the information contained
therein. It is suggested that these consolidated financial
statements be read in conjunction with the financial
statements and notes thereto included in the Company's annual
report for the year ended June 30, 2003. The Company follows
the same accounting policies in preparation of interim
reports.
9
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
- ------------------------------------------------------------------
Results of operations for the interim periods are not
indicative of annual results.
NATURE OF OPERATIONS
Able Oil Company, Able Melbourne and Able Energy New York,
Inc. are full service oil companies that market and distribute
home heating oil, diesel fuel and kerosene to residential and
commercial customers operating in the northern New Jersey,
Melbourne, Florida, and Warrensburg, New York respectively.
Able Propane, installs propane tanks which it owns and sells
propane for heating and cooking, along with other residential
and commercial uses.
The Company's operations are subject to seasonal fluctuations
with a majority of the Company's business occurring in the
late fall and winter months. Approximately 70% of the
Company's revenues are earned and received from October
through March, and the overwhelming majority of such revenues
are derived from the sale of HVAC products and services and
home heating fuel. However, the seasonality of the Company's
business is offset, in part, by the increase in revenues from
the sale of diesel and gasoline fuels during the spring and
summer months due to the increased use of automobiles and
construction apparatus.
INVENTORIES
Inventories are valued at the lower of cost (first in, first
out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is provided by using the
straight-line method based upon the estimated useful lives of
the assets (5 to 40 years). Depreciation expense for the six
months ended December 31, 2003 and 2002 amounted to $388,970
and $360,025, respectively.
For income tax basis, depreciation is calculated by a
combination of the straight-line and modified accelerated cost
recovery systems established by the Tax Reform Act of 1986.
Expenditures for maintenance and repairs are charged to
expense as incurred whereas expenditures for renewals and
betterments are capitalized.
The cost and related accumulated depreciation of assets sold
or otherwise disposed of during the period are removed from
the accounts. Any gain or loss is reflected in the year of
disposal.
10
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
- ------------------------------------------------------------------
E-COMMERCE OPERATING SYSTEM DEVELOPMENT COSTS
Costs of $2,317,944 incurred in the developmental stage and
thereafter for computer hardware and software have been
capitalized in accordance with accounting pronouncement
SOP98-1. The costs are included in Property and Equipment and
will be amortized on a straight line basis during the
estimated useful life, 5 years. Operations commenced in
October 2000. Amortization for the six months ended December
31, 2003 and 2002 amounted to $229,481 and $220,050,
respectively.
INTANGIBLE ASSETS
Intangibles are stated at cost and amortized as follows:
Customer Lists of $571,000 related to the Connell's Fuel Oil
Company acquisition on October 28, 1996, by Able Oil Company
was being amortized over a straight-line period of 15 years.
The current period amortization also includes a customer list
of $39,850 and Covenant Not To Compete of $100,000 relating to
the acquisition from B & B Fuels on August 27, 1999, is being
amortized over a straight-line period of 10 and 5 years,
respectively. The amortization for the six months ended
December 31, 2003 and 2002 are $10,000 and $10,000,
respectively.
In July 2001, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142").
SFAS 142 requires goodwill and other intangible assets to be
tested for impairment under certain circumstances, and written
off when impaired, rather than being amortized as previous
standards required, as such, effective July 1, 2001, the
Customer List will no longer be amortized for financial
statement purposes.
For income tax basis, the Customer Lists and the Covenant Not
To Compete are being amortized over a straight-line method of
15 years as per the Tax Reform Act of 1993.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future,
they may ultimately differ from actual results.
11
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
- ------------------------------------------------------------------
INCOME TAXES
Effective January 1, 1997, all the subsidiaries, which were
S-Corporations, terminated their S-Corporation elections. The
subsidiaries are filing a consolidated tax return with Able
Energy, Inc.
Effective January 1, 1997, the Company has elected to provide
for income taxes based on the provisions of Financial
Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes", which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been included in the financial statements and tax
returns in different years. Under this method, deferred income
tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
CONCENTRATIONS OF CREDIT RISK
The Company performs on-going credit evaluations of its
customers' financial conditions and requires no collateral
from its customers.
Financial instruments which potentially subject the Company to
concentrations of credit risk consists of checking and savings
accounts with several financial institutions in excess of
insured limits. The excess above insured limits is
approximately $268,363. The Company does not anticipate
non-performance by the financial institutions.
CASH
For the purpose of the statement of cash flows, cash is
defined as balances held in corporate checking accounts and
money market accounts.
ADVERTISING EXPENSE
Advertising costs are expensed at the time the advertisement
appears in various publications and other media. The expense
was $348,095 and $232,593 for the six months ended December
31, 2003 and 2002, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts of certain of the Company's financial
instruments, including cash and cash equivalents, accrued
compensation, and other accrued liabilities, approximate fair
value because of their short maturities.
12
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
- ------------------------------------------------------------------
REVENUE RECOGNITION
Sales of fuel and heating equipment are recognized at the time
of delivery to the customer, and sales of equipment are
recognized at the time of installation. Revenue from repairs
and maintenance service is recognized upon completion of the
service. Payments received from customers for heating
equipment service contracts are deferred and amortized into
income over the term of the respective service contracts, on a
straight line basis, which generally do not exceed one year.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the
weighted-average number of common shares outstanding during
the period. Diluted net income per share is computed using the
weighted-average number of common and dilutive potential
common shares outstanding during the period. Diluted net loss
per share is computed using the weighted- average number of
common shares and excludes dilutive potential common shares
outstanding, as their effect is anti-dilutive. Dilutive
potential common shares primarily consist of employee stock
options.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be
recoverable. Measurement of an impairment loss for long-lived
assets that management expects to hold and use is based on the
fair value of the asset. Long-lived assets to be disposed of
are reported at the lower of carrying amount or fair value
less costs to sell.
RECENT ACCOUNTING PRONOUNCEMENTS
FASB Interpretation No. 45 (FIN 45), "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." In November 2002, the
FASB issued FIN 45 which requires a guarantor to recognize a
liability for the fair value of the obligation it assumes
under certain guarantees. Additionally, FIN 45 requires a
guarantor to disclose certain aspects of each guarantee, or
each group of similar guarantees, including the nature of the
guarantee, the maximum exposure under the guarantee, the
current carrying amount of any liability for the guarantee,
and any recourse provisions allowing the guarantor to recover
from third parties any amounts paid under the guarantee. The
disclosure provisions of FIN 45 are effective for financial
statements for both interim and annual periods ending after
December 15, 2002. The fair value measurement provisions of
FIN 45 are to be adopted as of July 1, 2003. The Company has
no obligation effected by this pronouncement.
13
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
- ------------------------------------------------------------------
RECENT ACCOUNTING PRONOUNCEMENTS (Cont'd)
SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure (an amendment of FASB Statement No.
123)." In December 2002, the FASB issued SFAS No. 148, which
amends SFAS No. 123, "Accounting for Stock-Based
Compensation," and provides alternative methods of transition
for a voluntary change to the fair value-based method of
accounting for stock-based employee compensation; SFAS No. 148
also amends the disclosure requirements of SFAS No. 123 and
APB Opinion No. 28, "Interim Financial Reporting," to require
prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based
employee compensation and the effect of the method used on
reported results. The provisions of SFAS No. 148 are effective
for financial statements for periods ending after December 15,
2002. The Company will adopt SFAS No. 148 effective July 1,
2003. It currently has no effect on the Company.
DEBT EXTINGUISHMENT
In April 2002, the FASB issued SFAS No. 145, "Rescission of
FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement
No. 13, and technical Corrections." Among other things, this
statement rescinds SFAS No. 4, "Reporting Gains and Losses
from Extinguishment of Debt" (SFAS No. 4), which required all
gains and losses from extinguishment of debt to be aggregated
and, if material, classified as an extraordinary item, net of
the related income tax effect. As a result, the criteria in
Accounting Principles Board Opinion No. 30, "reporting the
Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," which
requires gains and losses on extinguishment of debts to be
classified as income or loss from continuing operations, will
now be applied. We adopted the provisions of this statement as
of July 1, 2002, as it was effective for years beginning after
June 15, 2002.
EXIT COSTS AND DISPOSAL ACTIVITIES
In June 2002, FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS NO. 146),
which addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies
Emerging Issues Task Force No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a
Restructuring)" (EITF 94-3). The principal difference between
SFAS No. 146 and EITF 94-3 relates to SFAS No. 146's
requirements for recognition of a liability for a cost
associated with an exit or disposal activity. SFAS No. 146
requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is
incurred. Under EITF 94-3, a liability for an exit cost as
generally defined in EITF 94-3 was recognized at the date of
an entity's commitment to an exit plan. We will adopt the new
standard effective July 1, 2003. This currently has no effect
on the Company's operations.
14
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
- ------------------------------------------------------------------
ASSET RETIREMENT OBLIGATIONS
Effective January 1, 2003, the Company has adopted SFAS No.
143, "Accounting for Asset Retirement Obligations" (SFAS No.
143). This statement provides the accounting for the cost of
legal obligations associated with the retirement of long-lived
assets. SFAS No. 143 requires that companies recognize the
fair value of a liability for asset retirement obligations in
the period in which the obligations are incurred and
capitalize that amount as part of the book value of the
long-lived asset. SFAS No. 143 also precludes companies from
accruing removal costs that exceed gross salvage in their
depreciation rates and accumulated depreciation balances if
there is no legal obligation to remove the long-lived assets.
The adoption had no current effect on the financial records.
NOTE 2 NOTES RECEIVABLE
- --------------------------------
A. The Company has a Receivable from Able Montgomery, Inc. and
Andrew W. Schmidt related to the sale of Able Montgomery, Inc.
to Schmidt, and truck financed by Able Energy, Inc. No
payments of principal or interest had been received for more
than one year. A new note was drawn dated June 15, 2000 for
$170,000, including the prior balance, plus accrued interest.
The Note bears interest at 9.5% per annum and payments
commence October 1, 2000. The payments will be monthly in
varying amount each year with a final payment of $55,981.07
due September 1, 2010. No payments were received in the year
ended December 31, 2000. In February 2001, two (2) payments
were received in the amount $2,691.66, interest only. In
September 2001, $15,124.97 was received covering payments from
December 2000 through October 2001, representing interest of
$14,804.13 and principal of $320.84. Payments were received in
November and December 2002, representing December 2001 and
January 2002, a total of $3,333.34; interest of $2,678.88, and
principal of $654.46.
The note is secured by a pledge and security agreement and
stock purchase agreement (Stock of Able Montgomery, Inc.),
dated December 31, 1998, and the assets of Andrew W. Schmidt
with the note dated June 15, 2000. The income on the sale of
the company in December 1998 and the accrued interest on the
drawing of the new note are shown as deferred income in the
amount of $79,679.18 to be realized on collection of the
notes.
Maturities of the Note Receivable are as follows:
For the 12 Months Ending
December 31, Principal Amount
------------ ----------------
2004 $ 25,781
2005 11,933
2006 13,118
2007 14,420
2008 15,850
Balance 87,599
--------
Total $ 168,701
=========
15
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 2 NOTES RECEIVABLE (CONT'D)
- -----------------------------------------
B. Able Oil Company has four (4) Notes Receivable for the sale of
oil delivery trucks to independent drivers who also deliver
oil for the Company. The Notes bear interest at the rate of
12% per annum. Two notes began December 1998, one began
February 1999 and one will begin in January 2004. The Notes
are payable eight (8) months per year September through April,
the oil delivery season.
Maturities of these Notes Receivable are as follows:
For the 12 Months Ended
December 31, Principal Amount
------------ ----------------
2004 $43,637
2005 21,764
2006 15,910
2007 16,358
-------
Total $97,669
=======
NOTE 3 INVENTORIES
- ---------------------------
December 31, June 30,
Items 2003 2003
----- ---- ----
Heating Oil $ 578,954 $ 241,107
Diesel Fuel 24,724 18,921
Kerosene 11,945 2,534
Propane 13,194 8,851
Parts, Supplies and Equipment 664,321 518,009
------- -------
Total $1,293,138 $ 789,422
========== =========
NOTE 4 NOTES PAYABLE BANK
- ---------------------------------
A. On September 22, 2003, the Company closed a new loan facility
with UPS Capital Business Credit. The facility is a $4,300,000
term loan, payable over fifteen (15) years with interest at
the prime rate, plus 1.75%, and a line of credit of $700,000
with interest at prime plus 1.00%. The payments on the term
loan, due the first of each month, include principal, interest
of $35,900.04, and real estate tax escrow of $2,576.63,
totaling $38,476.67. Real estate tax escrow of $7,745.03 was
paid at closing. December 31, 2003 was the first payment and
included nine (9) days of interest plus principal totaling
$20,382.02. Any payment received more than five (5) days after
the due date is subject to a late charge of 5% of such
payment. Upon the occurrence of an event of default, the loan
shall bear interest at five percentage points (5%) above the
rate otherwise in effect under the loan.
16
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2003 AND DECEMBER 31, 2003
NOTE 4 NOTES PAYABLE BANK (cont'd)
A. The collateral will be as follows for the term loan:
1. A first mortgage on properties located at 344 Route 46,
Rockaway, NJ and 38 Diller Avenue, Newton, NJ
2. A first security interest in equipment and fleet
vehicles
3. A first security interest in the customer list
Terms and Collateral related to the Revolving Line of Credit
Interest is payable monthly on the first day of each month, in
arrears. This loan shall be paid down annually for a minimum
of thirty (30) days at the borrower's discretion, but prior to
renewal. The maturity is annually renewing from the closing
date. This part of the loan is secured by a first priority
lien on accounts receivable and inventory.
The Revolving Line of Credit will have rates supported by 75%
on accounts receivable less than 90 days outstanding, plus 50%
on inventory. The outstanding balance at December 31, 2003 is
$700,000.
The loan facility is guaranteed by Able Energy, Inc. Officers
loans are subordinated to the lender and will remain
standstill until all debt due to the lender is paid in full.
The agreement contains certain financial covenants:
1. Limit of unfinanced capital expenditures not to exceed
$350,000 for fiscal year 2004.
The Company paid the following loans on September 22, 2003:
Fleet Bank $ 1,340,644 (including interest and fees of $70,644)
KMA Associates 750,000
Jeff Will 505,000 (including interest of $5,000)
Estate of Birdsal 657,895 (including interest of $7,895)
Long-term Debt 1,084,866
-----------
Total Refinance 4,338,405
Other Fees and Costs Paid at Closing 123,198
-----------
Total $ 4,461,603
===========
The loan advanced was $4,300,000, the balance of $161,603 was paid by the Company.
The balance of the term loan at December 31, is $ 4,241,891
Included in current portion of long-term debt 173,697
-----------
Included in long-term debt - less current portion $ 4,068,194
===========
17
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 4 NOTES PAYABLE BANK (cont'd)
- -------------------------------------------
B. On October 22, 2001, the Company and its subsidiaries, either
as Borrower or Guarantor, entered into a loan and security
Agreement with Fleet National Bank. The bank is providing the
following credit facility.
A borrowing base of 75% of Eligible Accounts Receivable, as
defined in the Agreement, plus $500,000 against the value of
the Company's customer list, for a total amount of $1,500,000.
The revolving credit may also be used for Letters of Credit,
with the lender's approval.
The Letters of Credit will have an annual fee of 1.25% of the
face value of each Letter of Credit. The applicable interest
rate on the revolving credit advances will be the bank's prime
rate or Libor interest rate, plus 2.75%, see below increase in
interest rate. Interest is to be paid on the amount advanced
on the last day of each month.
The Agreement had an expiration date of November 30, 2002.
Fleet Bank did not renew the credit facility upon expiration
of the Agreement on November 30, 2002. Effective December 1,
2002, the bank is charging an additional annual interest of 4%
as the Note is in default. The total current interest rate
charged is currently 8.25% per annum. The Company and Lender
have entered into a Forbearance Agreement, where the Lender is
willing to forbear until May 31, 2003 from exercising its
rights and remedies. The Lender will receive a forbearance fee
of $50,000 at May 31, 2003, reduced by $2,500 for each week
prior to May 31, 2003, that the credit facility and all
charges are paid in full, with a minimum forbearance fee of
$15,000. The interest charged is at 8.25% per annum. The
principal amount outstanding is $1,270,000. Interest for the
three months ended December 31, 2003 was $18,062. The loan and
the $50,000 forbearance fee were not paid at May 31, 2003. The
note payable plus forbearance fee, accrued interest and other
costs were paid in full on September 22, 2003, in the amount
of $1,340,644 (See Note 4 A). The bank released all the
collateral securing the Company debt.
NOTE 5 NOTES PAYABLE
- -----------------------------
A. The Company has borrowed $500,000 from an unrelated
individual. The Note was dated June 26, 2001 with interest at
12% per annum. The interest will be paid monthly at $5,000 per
month commencing on August 1, 2001. The Note will mature on
June 26, 2002 unless the borrower (the Company), at its
option, elects to extend the maturity date to December 26,
2002. The Company has exercised its option and has extended
the Note to December 26, 2002. The lender has granted the
Company an additional extension at the same terms to June 26,
2003. The Lender has granted the Company an extension to July
26, 2003. The Note may be prepaid in whole or part from
time-to-time without penalty. No principal payments have been
made on the Note. At the maturity date, a final payment of the
unpaid principal and interest shall be due and payable. In
connection with this Note, the Company has issued the lender
warrants to purchase 40,000 shares of its common stock at $4
per share. The warrants vest immediately and must be exercised
no later than June 26, 2004. The warrants have not been
registered under the Securities Act of 1933. The Note was paid
in full on September 22, 2003 (See Note 4 A).
18
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 5 NOTES PAYABLE
- -----------------------------
B. The Company has borrowed $750,000 from an unrelated company.
The mortgage and note are dated September 13, 2002. The term
of the note is for one (1) year. Payments of interest only on
the outstanding principal balance shall be paid monthly at a
rate of 10%. The first payment was paid on November 1, 2002
and on the first day of each month thereafter until October 1,
2003, when the Note shall mature and all principal and accrued
interest shall be due and payable in full. The Note was paid
in full on September 22, 2003 (See Note 4 A).
C. The Company has borrowed $335,000 from an unrelated Company.
The mortgage and Note are dated April 16, 2003. The loan is to
Able Energy New York, Inc., a wholly owned subsidiary. The
loan is collateralized by a mortgage on property in Lake
George, New York owned by the subsidiary and a second mortgage
on property in Bolton, New York, owned by the Company's CEO
who is also a guarantor on the loan. Payments of interest only
on the outstanding principal balance at a rate of 14% per
annum, are payable monthly. The first payment was paid June 1,
2003. The entire amount, both principal and accrued interest
shall be due and payable on May 1, 2004.
NOTE 6 LONG-TERM DEBT
- ------------------------------
Mortgage note payable dated, August 27, 1999, related to the
purchase of B & B Fuels facility and equipment. The total note
is $145,000. The note is payable in the monthly amount of
principal and interest of $1,721.18 with and interest rate of
7.5% per annum. The initial payment was made on September 27,
1999, and continues monthly until August 27, 2009 which is the
final payment. The note is secured by a mortgage made by Able
Energy New York, Inc. on property at 2 and 4 Green Terrace and
4 Horican Avenue, Town of Warrensburg, Warren County, New
York. The balance due on this Note at December 31, 2003 and
June 30, 2003 was $95,109 and $101,724, respectively.
Mortgage note payable dated, August 31, 1999, related to the
purchase of the facility and equipment in Rockaway, New Jersey
by Able Energy Terminal, LLC ("Terminal"). The note is in the
amount of $650,000.
Pursuant to Section 4.4 of the Agreement of Sale to purchase
the Terminal, , the Principal Sum of the $650,000 Note shall
be reduced by an amount equal to one-half of all sums expended
by Borrower on the investigation and remediation of the
property provided, however, that the amount of said reduction
shall not exceed $250,000 (the "Remediation Amount").
The Note is collateralized by the property and equipment
purchased and assignment of the leases. The Note was paid in
full on September 22, 2003 in the amount of $650,000 plus
interest of $7,895 (See Note 4 A).
The Company has long-term debt represented by Notes Payable
and capitalized leases collateralized by trucks, vans, office
and computer equipment. The total outstanding at June 30, 2003
was $1,433,731. On September 22, 2003, $1,084,866 of these
Notes, then outstanding, were paid in full (See Note 4 A).
19
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
------------------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 7 INCOME TAXES
Effective January 1, 1997, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes.
The differences between the statutory Federal Income Tax and
Income Taxes Continuing Operation is accounted for as follows:
2003
AMOUNT PERCENT
------ -------
Statutory Federal Income Tax $ 33,180 15.0%
State Income Tax 14,220 6.5
------ ------
Income Taxes $ 47,400 21.5%
======== ======
Income Taxes consist of:
Current $ -
Deferred 47,400
--------
Total $ 47,400
========
2002
PERCENT OF
PRETAX
AMOUNT INCOME
Statutory Federal Income Tax $ 60,410 34.0%
Federal Income Tax Reduction due to Carryforward
Loss (55,510)
State Income Tax (Note X) 18,100 5.9
State Income Tax Reduction due to Carryforward
Loss (16,000)
-------- -----
Income Taxes $ 7,000 39.9%
======== ====
Income Taxes consists of:
Current $ -
Deferred 7,000
--------
Total $ 7,000
========
(Note X) The State of New Jersey has suspended the use of carryforward losses
for the years 2002 and 2003. As such, state income taxes of $45,091
have been shown as a deferred asset and as income taxes payable for the
year ended June 30, 2003. New Jersey carryforward is treated separately
by the Company. Able Oil Company has a New Jersey Operating Loss of
$501,010 which could not be utilized in the current year ended June 30,
2003. Under current New Jersey law, the carryforward will be available
after 2003, the Company's fiscal year ending June 30, 2005.
20
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2003 AND DECEMBER 31, 2003
NOTE 7 INCOME TAXES (cont'd)
- -------------------------------------
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax liability and deferred tax
asset and their approximate tax effects are as follows at:
DECEMBER 31, 2003
-----------------
TEMPORARY TAX
DIFFERENCE EFFECT
---------- ------
Depreciation and Amortization $ (273,019) $(76,980)
Allowance for Doubtful Accounts 90,472 29,012
Gain on Sale of Subsidiary 18,766 4,035
New Jersey Net Operating Loss Carryforward 501,010 45,091
(See Note X, Prior Page)
JUNE 30, 2003
-------------
TEMPORARY TAX
DIFFERENCE EFFECT
---------- ------
Depreciation and Amortization $ (241,993) $(70,310)
Allowance for Doubtful Accounts 279,913 69,742
Gain on Sale of Subsidiary 18,766 4,035
New Jersey Net Operating Loss Carryforward 501,010 45,091
(See Note X, prior page)
Able Energy, Inc., et al, open years are December 31, 2000 and June 30,
2001, 2002 and 2003. The Company has a net operating loss carryforward
of approximately $2,070,000. The net operating loss expires between
June 30, 2019 and 2021.
These carryforward losses are available to offset future taxable
income, if any. The Company's utilization of this carryforward against
future taxable income is subject to the Company having profitable
operations or sale of Company assets which create taxable income. At
this time, the Company believes that a full valuation allowance should
be provided. The component of the deferred tax asset as of December 31,
2003 are as follows:
Net Operating Loss Carryforward - Tax Effect $ 728,205
Valuation Allowance (728,205)
---------
Net Deferred Tax based upon Net
Operating Loss Carryforward $ - 0 -
=========
21
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 8 NOTE RECEIVABLE - SUBSIDIARY
- ---------------------------------------------
The Company has a Note Receivable from PriceEnergy.Com, Inc.
for advances made in the development of the business,
including hardware and software costs. All of PriceEnergy.Com,
Inc.'s assets are pledged as collateral to Able Energy, Inc.
The amount of the note is $1,350,000 dated November 1, 2000
with interest at 8% per annum payable quarterly. Principal
payments to begin two years after the date of the Note,
November 1, 2002. Through December 31, 2003, no principal has
been paid. No interest was accrued for the six months ended
December 31, 2003 or the six months ended June 30, 2003 as the
note is non performing. Unpaid accrued interest due through
June 30, 2003 is $234,000. The Note and accrued interest have
been eliminated in the consolidated financial statements (See
Notes 1 and 13). Able Oil Company has a Note Receivable
originally dated September 30, 2002 in the amount of
$1,510,372.73 from PriceEnergy.Com, Inc. The Note has been
updated for transactions resulting in a balance of $2,140,121
with interest at 8% per annum, to be paid quarterly. Principal
payments to begin one year after date of Note, October 1,
2003, and continue monthly thereafter. The Note is the result
of the transference of the unpaid accounts receivable which
resulted from the sale of heating oil through PriceEnergy.Com,
Inc. Able Oil Company has a second position as collateral in
all of the assets of PriceEnergy.Com, Inc. to Able Energy,
Inc. No interest has been recorded for the six months ended
December 31, 2003. Any payments will go to pay principal. The
note receivable and accrued interest have been eliminated in
consolidation against the amounts on PriceEnergy.Com, Inc.
NOTE 9 PROFIT SHARING PLAN
- -----------------------------------
Effective January 1, 1997, Able Oil Company established a
Qualified Profit Sharing Plan under Internal Revenue Code
Section 401-K. The Company matches 25% of qualified employee
contributions. The expense was $12,657 (2003) and $11,512
(2002), for the six months ended December 31.
NOTE 10 COMMITMENTS AND CONTINGENCIES
- ---------------------------------------------
The Company is subject to laws and regulations relating to the
protection of the environment. While it is not possible to
quantify with certainty the potential impact of actions
regarding environmental matters, in the opinion of management,
compliance with the present environmental protection laws will
not have a material adverse effect on the financial condition,
competitive position, or capital expenditures of the Company.
In accordance with the agreement on the purchase of the
property on Route 46, Rockaway, New Jersey by Able Energy
Terminal, LLC, the purchaser shall commence after the closing,
the investigation and remediation of the property and any
hazardous substances emanating from the property in order to
obtain a No Further Action letter from the New Jersey
Department of Environmental Protection (NJDEP). The purchaser
will also pursue recovery of all costs and damages related
thereto in the lawsuit by the seller against a former tenant
on the purchased property. Purchaser will assume all
responsibility and direction for the lawsuit, subject to the
sharing of any recoveries from the lawsuit with the seller,
50-50.
22
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 10 COMMITMENTS AND CONTINGENCIES (cont'd)
- ------------------------------------------------------
The seller by reduction of its mortgage will pay costs related
to the above up to $250,000 (see Note 6). A settlement has
been achieved by the Company with regard to the lawsuit. The
settlement provides for a lump sum payment of $397,500 from
the defendants to the Company. In return, the defendants
received a release from the Estate (the Seller) and a release
and indemnification from the Company. The defendants provided
a release to Able Energy and the Estate. Pursuant to the
original agreement, the Estate receives 50% of the settlement
amount, net of attorney fees.
This has been amended by an agreement dated November 5, 2001.
The entire settlement, net of attorney fees, was collected and
placed in an attorney's escrow account for payment of all
investigation and remediation costs. Able Energy Terminal, LLC
has incurred costs of $102,956 to December 31, 2003, which are
included in Prepaid Expenses and must be presented to the
attorney for reimbursement. Per management, certain items such
as a performance bond are being finalized, then reimbursement
can be made.
The costs of the cleanup pursuant to the Agreement of Sale
must be shared equally (50/50) by the seller and purchaser up
to Seller's cap of $250,000. Seller's contribution to the
cleanup is in the form of a reduction to the Note and not by
direct payments. In the opinion of management, the Company
will not sustain costs in this matter which will have a
material adverse effect on its financial condition.
Able Oil Company is under contract to purchase #2 oil as
follows:
Gallons Open Open Dollar
Commitment Commitment
Company Period Total Gallons at 12/31/03 at 12/31/03
------- ------ ------------- ----------- -----------
Total Energy Solutions, LLC 10/1/03 - 4/30/04 588,000 336,000 $254,846
Conectiv Energy 11/1/03 - 3/31/04 1,008,000 588,000 476,318
Center Oil 12/1/03 - 2/28/04 252,000 168,000 134,904
Petrocom 11/1/03 - 3/31/04 462,000 336,000 258,384
Sunoco (1) 12/1/03 - 2/28/04 210,000 168,000 153,224
Petrocom (1) 11/1/03 - 3/31/04 336,000 210,000 162,288
Total 2,856,000 1,806,000 $1,439,964
(1) Product for two franchisees, contracts with Able Oil Company
23
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2003 AND DECEMBER 31, 2003
NOTE 10 COMMITMENTS AND CONTINGENCIES (cont'd)
- ------------------------------------------------------
Able Energy New York, Inc. is under contract to purchase #2
oil as follows:
Gallons Open Open Dollar
Commitment Commitment
Company Period Total Gallons at 12/31/03 at 12/31/03
------- ------ ------------- ----------- -----------
Sprague 11/1/03 - 2/28/04 126,000 84,000 $68,880
------------- ----------- -----------
Total 126,000 84,000 $68,880
============= =========== ===========
Following an explosion and fire that occurred at the Able
Energy Facility in Newton, NJ on March 14, 2003, and through
the subsequent clean up efforts, Able Energy has cooperated
fully with all local, state and federal agencies in their
investigations into the cause of this accident.
On April 2, 2003, Able Energy received a Notice Of Violation
from the New Jersey Department of Community Affairs ("DCA")
citing a total of 13 violations to the New Jersey
Administrative Code, Liquefied Petroleum Gas. Twelve of the
violations were assessed a penalty of $500 each. One of the
violations, regarding the liquid transfer from one truck to
another truck, was assessed a penalty of $408,000, a second
notice was received on April 29, 2003, for an alleged
violation on April 12, 2003, and a fine of $5,500 was assessed
for a total of $419,500. This amount is included in accrued
expenses at June 30, and December 31, 2003.
The DCA document is currently under review by counsel. Based
upon initial review, the company disagrees with many of the
findings of the report and disputes many of the allegations.
The company has contested the DCA Notice of Violation and the
assessed penalties. Counsel and the DCA have had several
meetings and hearings are currently docketed in the Office of
Administrative Law (See Note 22).
Other violations have been sited by the NJ DCA. The penalties
assessed amount to $4,000. The Company has appealed the
assessments to the Office of Administrative Law.
Company personnel met with personnel of the United States
Occupational Safety and Health Administration ("OSHA") on
September 12, 2003. OSHA has conducted an investigation
relating to the safety practices of the Company, including
such practices relating to the March 14, 2003 explosion and
fire. OSHA has informed the Company it will be assessed a
penalty of $16,000 based upon violations sited. This amount is
included in Accrued Expenses at June 30, and December 31,
2003.
The Sussex County, New Jersey, Prosecutor's Office is
conducting and investigation as a result of the March 14, 2003
explosion and fire. No determination has been made with
respect to its investigation.
24
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2003 AND DECEMBER 31, 2003
NOTE 10 COMMITMENTS AND CONTINGENCIES (cont'd)
- ------------------------------------------------------
In a complaint dated October 6, 2003, the New Jersey
Department of Community Affairs commenced a civil action
against the Company seeking injunctive relief enjoining the
Company, its subsidiaries, affiliated companies, agents,
employees and corporate officers, from engaging in the
distribution, sale, purchase or receipt of liquified petroleum
gas. Pursuant to an order dated October 15, 2003, the Superior
Court of New Jersey ordered a hearing to be held on November
12, 2003, at which time the Company shall show cause why a
preliminary injunction shall not be ordered preliminarily
enjoining the Company, its subsidiaries, affiliate companies,
agents, employees and corporate officers, from engaging in the
distribution, sale, purchase or receipt of liquified petroleum
gas and from engaging in any form of business operations for
the distribution and sale of liquified petroleum gas.
Certain temporary restraints were also ordered upon the
Company which are still imposed as the result of a November 12
hearing. The order requires the Company to retain the
assistance of Boyer Safety Services, experts in the propane
industry, to assume responsibility and authority of Able
Propane's daily operational, compliance an/or safety issues
relating to its propane business.
The order prohibits Able Propane from entering into any new
delivery or installation contracts for the delivery of propane
other than those customers existing on the date of the order.
Able Propane may, however, honor contracts, commitments or
arrangements entered into prior to the date of the order.
The Company is vigorously disputing that it is a proper party
to the action and is contesting any administrative and
equitable remedies sought by the Department of Community
Affairs.
A lawsuit has been filed against the Company by property
owners who allegedly suffered property damages as a result of
the March 14, 2003 explosion and fire. The Company's insurance
carrier is defending as related to compensatory damages. Legal
counsel is defending on the punitive damage claim. Per legal
counsel, it is too early in the process to assess the outcome,
in their opinion, the matter will not be certified as a Class
Action.
As a result of the March 14, 2003 explosion and fire, various
claims for property damage have been submitted to the
Company's insurance carrier. These claims are presently being
handled and, in many cases, settled by the insurance carrier's
adjuster. There are approximately 200 claims being handled and
adjusted with reserves for losses established as deemed
appropriate by the insurance carrier.
The Company in the normal course of business has been involved
in law suits. Current suits are being defended by the
insurance carrier and should be covered by insurance.
25
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND December 31, 2003
-----------------------------------
NOTE 11 OPERATING LEASE
- -------------------------------
Able Energy Terminal, LLC, has acquired the following lease on
the property it purchased on Route 46 in Rockaway, New Jersey.
The lease with Able Oil Company, a wholly owned subsidiary of
Able Energy, Inc., has an expiration date of July 31, 2004.
The lease provides for a monthly payment of $1,200 plus a one
cent per gallon through put, as per a monthly rack meter
reading.
Estimated future rents are $14,400 per year, plus the one cent
per gallon through put charges per the monthly rack meter
readings.
The Company leased 9,800 square feet in the Rockaway Business
Centre on Green Pond Road in Rockaway, New Jersey. The
facility will be used as a call center and will combine the
administrative operations in New Jersey in one facility. The
lease has a term of five (5) years from August 1, 2000 through
July 31, 2005.
The rent for the first year is $7,145.83 per month and the
second through fifth year is $7,431.67 per month, plus 20.5%
of the building's annual operational costs and it's portion of
utilities. The current monthly rent, including Common Area
Charges, is $9,799.04 per month.
The lease does not contain any option for renewal. The rent
expense was $29,237 for the three months ended December 31,
2003. The estimated future rents are as follows:
YEAR ENDED JUNE 30,
-------------------
2004 $ 117,588
2005 117,588
July 2005 9,799
---------
Total $ 244,975
=========
The following summarizes the month to month operating leases
for the other subsidiaries:
Able Oil Melbourne $500.00, per month
Total rent expense, $3,000
Able Energy New York $600.00, per month
Total rent expense, $3,600
26
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 12 FRANCHISING
- ----------------------------
The Company sells franchises permitting the operation of a
franchised business specializing in residential and commercial
sales of fuel oil, diesel fuel, gasoline, propane and related
services. The Company will provide training, advertising and
use of Able credit for the purchase of product, among other
things, as specified in the Agreement. The franchisee has an
option to sell the business back to the Company after two (2)
years of operations for a price calculated per the Agreement.
The Company signed its first franchise agreement in September
2000. On June 29, 2001, PriceEnergy.Com Franchising, LLC, a
subsidiary, signed its first franchise agreement. The
franchisee will operate a B-franchised business, using the
proprietary marks and a license from PriceEnergy.Com, Inc. and
will establish the presence of the franchisee's company on the
PriceEnergy Internet Website. The franchisee will have the
exclusive territory of Fairfield County, Connecticut as
designated in the agreement. No new franchise agreements have
been signed.
NOTE 13 RELATED PARTY TRANSACTIONS
- ------------------------------------------
$44,690 is due from the major Shareholder/Officer of the
Company. This amount is evidenced by a Note bearing interest
at a rate of 6% between the Shareholder and the Company. This
Shareholder has loaned the Company a total of $380,000 as of
June 30, 2003 and December 31, 2003, as evidenced by a Demand
Note with interest at 6% per annum, which can be paid all or
in part at any time without penalty. The balance of the new
note is $364,878 at December 31, 2003. Interest expense has
been accrued in the amount of $9,606 for the six months ending
December 31, 2003.
The following officers of this Company own stock in the
subsidiary, PriceEnergy.Com, Inc., which they incorporated in
November 1999.
Chief Executive Officer 23.5%
President 3.6%
No capital contributions have been made by these officers (See
Notes 1 and 8).
27
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 14 EARNINGS PER SHARE
- ----------------------------------
The shares used in the computation of the Company's basic and
diluted Earnings Per Common Share are as follows:
DECEMBER 31, DECEMBER 31,
2003 2002
------------ -------------
Weighted Average of Common
Shares Outstanding Used in Basic
Earnings Per Share 2,013,250 2,006,855
Dilutive Effect of:
Employee Stock Options - 50,657
Stock Warrants - -
------------ -------------
Weighted Average Common Shares
Outstanding Used in Diluted
Earnings Per Share 2,013,250 2,057,512
============ =============
Weighted average common shares outstanding, assuming dilution,
includes the incremental shares that would be issued upon the
assumed exercise of stock options, and stock warrants. For
2003, approximately 389,000 of the company's stock options and
stock warrants were excluded from the calculation of diluted
earnings per share because their inclusion would have been
anti- diluted, 335,183 (2002). These options and warrants
could be dilutive in the future. The numerator for the
calculation of both basic and diluted earnings per share is
the earnings or loss available for common stockholders. The
above table shows the denominator for basic and diluted
earnings per share.
NOTE 15 STOCK OPTION PLANS
- -----------------------------------
The Company has stock option plans under which stock options
may be issued to officers, key employees, and non-employee
directors to purchase shares of the Company's authorized but
unissued common stock. The Company also has a stock option
plan under which stock options may be granted to employees and
officers.
Options granted currently expire no later than 3 to 5 years
from the grant and have vesting periods from none to 25% at
grant and 25% each anniversary.
28
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 15 STOCK OPTION PLANS
- -----------------------------------
OUTSTANDING OPTIONS
-------------------
NUMBER OF SHARES EXERCISE PRICE TERM
---------------- -------------- ----
January 6, 2000
Grants 56,000 $5.00 5 years
Exercises 0
December 21, 2000
Grants 60,000 $1.80 5 years
Exercises 0
Grants 23,000 $2.25 5 years
Exercises 0
October 22, 2002
Grants 50,000 $3.00 5 years
Exercises 0
NOTE 16 STOCK WARRANTS
- ------------------------------
The Company has issued stock warrants as follows:
D. 60,000 Common Stock Purchase Warrants at $4.81 per share,
effective August 31, 2000, and expiring August 31, 2005, to
Andrew Alexander Wise & Company in connection with an
investment banking advisory agreement with the Company, dated
July 1, 2000.
E. 40,000 Common Stock Purchase Warrants at $4.00 per share,
effective June 26, 2001 and expiring June 26, 2004, in
connection with a $500,000 Note Payable (See Note 5). These
warrants have not been registered under the Securities Act of
1933.
F. 100,000 Common Stock Purchase Warrants at $4.00 per share,
effective September 13, 2002, and expiring September 13, 2004,
in connection with a $750,000 Note Payable (see Note 5).
The 200,000 warrants to purchase shares of common stock were
outstanding during the third quarter of 2003 and were not
included in the computation of diluted EPS as the warrants'
were all higher than the average stock price of $3.36 and
would have been anti-diluted (See Note 14). These warrants
have not been registered under the Securities Act of 1933.
29
ABLE ENERGY, INC. AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
---------------------------------------------------
JUNE 30, 2003 AND DECEMBER 31, 2003
-----------------------------------
NOTE 17 COMPENSATED ABSENCES
- --------------------------------------
There has been no liability accrued for compensated absences;
as in accordance with Company policy, all compensated
absences, accrued vacation and sick payment must be used by
December 31st.
NOTE 18 CASH FLOW INFORMATION
- ---------------------------------------
The Directors received Common Stock as payment of Directors'
Fees, $24,000, in the quarter ended September 30, 2002. No
cash was received or paid.
NOTE 19 INSURANCE CLAIM
- ---------------------------------
The Company suffered a loss on March 14, 2003 of a building,
trucks, leasehold improvements, product inventory and
equipment as well as cost of cleanup and restoration. The
Company has filed an insurance claim. The insurance adjusters
are in the process of finalizing the amounts to be paid to the
Company. The estimated costs not reimbursed are $828,786.47
and is currently shown as deferred costs insurance claims on
the balance sheet. Management anticipates the insurance
recovery will cover the company costs. The following is a
summary of insurance claims filed:
Building (commercial property) $349,526
Paid by December 31, 2003 349,526
--------
Contents $387,984
Vehicles $302,674
Paid by December 31, 2003 247,409 55,265
--- ---- --------- --------
Total $443,249
========
The above amounts were submitted as claims but do not
represent a settlement with the insurance carriers.
NOTE 20 BUSINESS SEGMENT INFORMATION
- ----------------------------------------------
The Company does not have separate operating financial
segments. The financial information is evaluated on a company
wide basis. As such, no segment reporting is prepared for
internal use.
NOTE 21 RECLASSIFICATION
- ----------------------------------
The Company has entered into a financing agreement with UPS
Capital Business Credit, that permits the Company to borrow a
$4,300,000 term loan, payable over fifteen (15) years. The
loan closed on September 22, 2003 (see Note 4). The Company
used the funds in part to repay short-term debt of $3,170,000,
a bank loan of $1,270,000 and other notes totaling $1,900,000.
In accordance with Financial Accounting Standards Board FAS6,
the refinanced short-term debt at June 30, 2003, has been
reclassified to long-term as "Short-Term Debt Refinanced".
30
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ABLE ENERGY, INC. AND SUBSIDIARIES
Statements in this Quarterly Report on Form 10-Q concerning the Company's
outlook or future economic performance, anticipated profitability, gross
billings, expenses or other financial items, and statements concerning
assumptions made or exceptions to any future events, conditions, performance
or other matters are "forward looking statements," as that term is defined
under the Federal Securities Laws. Forward-looking statements are subject to
risks, uncertainties, and other factors that would cause actual results to
differ materially from those stated in such statements. Such risks, and
uncertainties and factors include, but are not limited to: (i) changes in
external competitive market factors or trends in the Company's results of
operation; (ii) unanticipated working capital or other cash requirements and
(iii) changes in the Company's business strategy or an inability to execute
its competitive factors that may prevent the Company from competing
successfully in the marketplace.
REVENUE RECOGNITION
Sales of fuel and heating equipment are recognized at the time of
delivery to the customer, and sales of equipment are recognized at
the time of installation. Revenue from repairs and maintenance
service is recognized upon completion of the service. Payments
received from customers for heating equipment service contracts are
deferred and amortized into income over the term of the respective
service contracts, on a straight-line basis, which generally do not
exceed one year.
RESULTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 2003, COMPARED TO THE SIX MONTHS ENDED
DECEMBER 31, 2002.
The Company reported revenues of $19,277,562 for the six months
ended December 31, 2003, an increase of 3.16% over the prior year's
revenues for the same six-month period. This increase can be
attributed primarily to the Company's continued aggressive sales
activities, which resulted in a growing customer base as well as an
increase in commercial sales as well as #2 heating oil and propane
gas. In fiscal year 2002, management instituted a business plan to
market and sell other liquid products, specifically propane gas and
diesel fuel during the warmer months. These changes were initiated
to help even out the seasonality of the Company's business when
heating related sales are generally down. Management has committed
to a reasonable gross margin percentage to allow for profitability
on the sale of these products.
Gross profit margin, as a percentage of revenues, for the six months
ended December 31, 2003, vs. 2002 was a decrease of 5.28% or
$912,437. The decrease in margin was the result of the dramatically
rising product costs during the months of October, November and
December. Retail pricing was adjusted appropriately to cover most
of the increases while continuing to maintain the company's
competitive position in the marketplace.
Selling, General, and Administrative expenses, as a percent of
sales, increased by 3.52% from 13.01% in the six months ending
December 31, 2002 to 16.53% during the same period in 2003. There
were increases in payroll, advertising, vehicle repair and
maintenance, bank charges, interest expense, a write-off of
uncollectible accounts and an increase in insurance costs due to the
unsettled insurance market. Management will continue to monitor the
fiscal budget against actual results on an ongoing basis and
strengthen its efforts to reduce SG&A as a percentage of
sales.
Operating loss for the six months ended December 31, 2003 was
$(1,382,562), an increase of 100+% over the Company's operating
income of $324,554 for the six months ended December 31, 2002. This
increased operating loss for the six months was directly related to
the increased operating costs and lower gross profit.
Net loss for the six months ended December 31, 2003 increased by
$2,298,074 to $2,103,492 as compared to the same period for the
previous year income of $194,582. This net loss was the result of a
lower gross profit margin due to higher product costs and higher
operating costs during this six-month period as well as additional
interest on refinancing and legal costs. The company has
experienced higher operating costs related to professional fees and
other expenses related to the March 14, 2003 explosion at its Newton
facility.
OPERATIONAL EFFICIENCIES
The Company is evaluating several alternatives to increase the
utilization of existing personnel and equipment, to reduce expenses
and increasing profitability, within its current business
configuration. Currently, since the March 14th 2003 explosion at
its Newton, New Jersey location, the company is operating the
business of its main subsidiary, Able Oil Co. out of the Rockaway,
New Jersey facility. This has caused an increase in operating costs
due to increased travel distances for service and delivery
vehicles. The company is currently seeking approval to rebuild at
the Newton location or a similar suitable location in the Sussex
County New Jersey area to reduce expenses and increase efficiency.
The Company believes that there is value to the products and
services that it provides to its consumers in varying levels based
upon the specific needs of the consumer and the products provided.
While gross margins for the period October to December 2003 were
temporarily lower due to a dramatic rise in the cost of distillates,
the company believes that its margin management program is working
and has been expanded to include equipment sales and services.
On October 1st The Company began billing for its in home heating
repairs utilizing a methodology known as "Flat Rate Pricing", an
approach similar to that used in the automobile repair field. Flat
rate pricing will be introduced in stages with the first phase
having commenced in October. This system gives sales and service
personnel the ability to offer the customer an easy to understand,
"package approach" to repairs and equipment installations with one
or two line billings per invoice. This system will interface with
the Company's automated dispatch communications program that was
introduced last year. It is anticipated that this system will be
fully implemented by the end of the current fiscal year.
OPERATING SUBSIDIARY
The company's operating subsidiary, PriceEnergy with its modern
order-processing platform is now in its third full year of
operation. The revolutionary proprietary technology is fully
automated and allows for the removal of the inefficiencies
associated with traditional heating oil companies within this
industry. PriceEnergy has generated over 2 million gallons in new
business last year, which were delivered by PriceEnergy's dealer
network. In December 2002, PriceEnergy began sales of Home Heating
Oil in the initial BJ's Wholesale Club. Since then, gallons sold
through this venue have been increasing with each week. The Company
is excited about the new sales opportunity with its new "Channel
Partner", BJ's. The Company believes that this is the first of many
prime retail opportunities to utilize the PriceEnergy operating
platform to open new markets for the sales of heating oil, diesel
fuel, and propane gas.
EXPLOSION AND FIRE
On March 14, 2003, Able Energy experienced an explosion and fire at
its Newton, New Jersey facility which resulted in the destruction of
an office building on the site, as well as damage to 18 company
vehicles and neighboring properties. Fortunately, due to the
immediate response by employees at the site, a quick evacuation of
all personnel occurred prior to the explosion, preventing any
serious injuries.
The results of the company's investigation indicate that the
explosion was an accident that occurred as a result of a combination
of human error, mechanical malfunction, as well as the failure to
follow prescribed state standards and company policy for propane
delivery truck loading. On April 3, 2003, Able Energy received a
Notice of Violation from the New Jersey Department of Community
Affairs. The dollar amount of the assessed penalty totaled
$414,000. Able Energy has contested the notice of Violation as well
as the assessed penalties with the State of New Jersey and is
currently working with the Department of Community Affairs to
negotiate a settlement.
The Company has taken the lessons learned from this event very
seriously. Able Energy has worked closely, and cooperated fully
with all local and state officials in clean-up phase, tank testing
process, and subsequent investigations. Strict and clear employee
communications have taken place to reinforce compliance with all
governmental regulations as well as all company policies regarding
the safe and proper handling of propane. The Company has retained
the assistance of Boyer Safety Services, experts in the propane
industry; to hold safety-training sessions for all propane related
employees. This training will be ongoing and will upgrade employee
training to the most modern and up-to-date levels as well as
reinforce Able Energy's commitment to operate all aspects of the
company in a professional, responsible, and safe manner.
The Company is currently not processing deliveries from the Newton,
New Jersey facility while it appeals the Newton Board of
Adjustment's decision to deny operations at this location. The
company is also contesting the adoption of the zoning ordinance,
which changed the zoning to a non-permitted use. In the meantime,
company operations have continued throughout the aftermath of the
incident using its main distribution facility in Rockaway, New
Jersey along with temporary `through-put' agreements with other area
marketers. While these arrangements permit the company to continue
to operate, greater efficiency and customer service will be achieved
by a location in the Sussex County area, as the Company believes
that its Newton facility is crucial to its future operations,
especially during the winter heating season. The company will
continue to work diligently to obtain approval to resume its core
heating oil operations at the Newton site.
RECENTLY IMPLEMENTED TECHNOLOGICAL PROCEDURES
The Company has established goals, which will be accomplished
through the implementation of some modern technologies that are
currently being installed into the Company's existing infrastructure.
The Company began introducing additional customer service technology
to its Rockaway call and administrative center during the second
fiscal quarter of 2002/2003. Management believes that by providing
enhancements to existing telephony hardware and in-house management,
the Company's call center environment will be provided with the
ability to respond to changing call patterns, both higher and lower,
without the expense of clerical over-staffing to meet unrealized
needs. New software will provide customers with the option of
placing an order via a voice activated technology. This will enable
customers who simply wish to refill their fuel tank, the opportunity
to quickly place an order 24 hours a day without the help of a live
customer service representative.
The Company is now beginning full implementation of the recently
announced automated dispatch technology, which provides management
with the ability to communicate with service technicians
instantaneously. This system also is now performing billing
functions at the customer's location as well as documenting payment
data instantaneously. Additionally, management is now aware of the
status of every on-duty worker and obtains real time reporting for
stand-by, en-route, and service work time. This enables the Company
to maximize scheduling opportunities and eliminating service
technician down time.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended December 31, 2003, compared to the six
months ended December 31, 2002, the Company's cash position
increased by $258,503 from $133,031 to $391,534. For the year ended
June 30, 2003, cash was generated through loans, one from a private
company of $750,000 and officer loan in excess of $300,000. In the
quarter ending December 31, 2003, the Company entered into an
agreement and closed a new loan facility. The facility provided a
term loan of $4,300,000, payable over 15 years. These funds were
used to pay existing debt. There is also a line of credit of
$700,000. This will enable the Company to continue to grow while
strengthening its infrastructures. The Company also generated funds
from customer advance payments. The Company is in negotiations to
sell certain product lines, which should generate substantial cash,
which will be used as working capital and also debt reduction.
SEASONALITY
The Company's operations are subject to seasonal fluctuations, with
a majority of the Company's business occurring in the late fall and
winter months. Approximately 70% of the Company's revenues are
earned and received from October through March, most of such
revenues are derived from the sale of home heating products
including propane gas and home heating oil. However the seasonality
of the Company's business is offset, in part, by an increase in
revenues from the sale of HVAC products and services, diesel and
gasoline fuels during the spring and summer months, due to the
increased use of automobiles and construction apparatus
From May through September, Able Oil can experience considerable
reduction of retail heating oil sales. Similarly, Able Propane can
experience up to an 80% decrease in heating related propane sales
during the months of April to September, this is offset somewhat by
increased sales of propane gas used for pool heating, heating of
domestic hot water in homes and fuel for outdoor cooking equipment.
Over 90% of Able Melbourne's revenues are derived from the sale of
diesel fuel for construction vehicles, and commercial and
recreational sea-going vessels during Florida's fishing season,
which begins in April and ends in November. Only a small percentage
of Able Melbourne's revenues are derived from the sale of home
heating fuel. Most of these sales occur from December through March,
Florida's cooler months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES
As of December 31, 2003, an evaluation was performed under the supervision
and with the participation of the Company's management, including the
Principal Executive Officer and the Principal Accounting Officer, of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on that evaluation, the Company's management,
including the Principal Executive Officer and the Principal Accounting
Officer, concluded that the Company's disclosure controls and procedures were
effective as of December 31, 2003. There have been no significant changes in
the Company's internal controls or in other factors that could significantly
affect internal controls subsequent to December 31, 2003.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In a complaint dated October 6, 2003, the New Jersey Department of
Community Affairs commenced a civil action against the Company seeking
injunctive relief enjoining the Company, its subsidiaries, affiliated companies,
agents, employees and corporate officers, from engaging in the distribution,
sale, purchase or receipt of liquified petroleum gas. Pursuant to an order dated
October 15, 2003, the Superior Court of New Jersey ordered a hearing to be held
on November 12, 2003, at which time the Company shall show cause why a
preliminary injunction shall not be ordered preliminarily enjoining the Company,
its subsidiaries, affiliate companies, agents, employees and corporate officers,
from engaging in the distribution, sale, purchase or receipt of liquified
petroleum gas and from engaging in any form of business operations for the
distribution and sale of liquified petroleum gas.
Certain temporary restraints were also ordered upon the Company which will
be imposed until the conclusion of the November 12 hearing. The order requires
the Company to retain the assistance of Boyer Safety Services, experts in the
propane industry, to assume responsibility and authority of Able Propane's daily
operational, compliance an/or safety issues relating to its propane business.
The order prohibits Able Propane from entering into any new delivery or
installation contracts for the delivery of propane other than those customers
existing on the date of the order. Able Propane may, however, honor contracts,
commitments or arrangements entered into prior to the date of the order.
The Company is vigorously disputing that it is a proper party to the
action and is contesting any administrative and equitable remedies sought by the
Department of Community Affairs.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification by Chief Executive Officer pursuant to
Sarbanes-Oxley Section 302
31.2 Certification by Chief Financial Officer pursuant to
Sarbanes-Oxley Section 302
32.1 Certification by Chief Executive Officer pursuant to
18 U.S. C. Section 1350
32.2 Certification by Chief Financial Officer pursuant to
18 U.S. C. Section 1350
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the six months
ended December 31, 2003.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on this 17th day of February 2004.
ABLE ENERGY, INC.
/s/ Timothy Harrington
--------------------------------
Timothy Harrington, Chief Executive
Officer, Secretary, and Chairman
/s/ Christopher P. Westad
--------------------------------
Christopher P. Westad, President,
Chief Financial Officer, and Director