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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 March 31, 2004
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.
(An 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 May 10, 2004, 2,013,250 shares, $.001 Par value per share, of
Able Energy, Inc. were issued and outstanding.
TABLE OF CONTENTS
-----------------
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets as of June 30, 2003 and
March 31, 2004 3 - 4
Consolidated Statements of Income for the three and nine
months ended March 31, 2004 and 2003 5
Consolidated Statement of Stockholders' Equity nine months
ended March 31, 2004 6
Consolidated Statements of Cash Flows for the nine months
ended March 31, 2004 and 2003 7 - 8
Notes to Unaudited Financial Statements 9 - 29
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
------
MARCH 31, JUNE 30,
2004 2003
CURRENT ASSETS: (UNAUDITED) (AUDITED)
----------- ---------
Cash $ 1,166,560 $ 400,033
Accounts Receivable (Less Allowance for Doubtful
Accounts of $90,472 (March 31) and $279,913 (June 30) 3,198,626 2,661,808
Inventory 924,380 789,422
Notes Receivable - Current Portion 59,259 57,577
Other Receivable - Non-Compete - Current Portion 225,000 --
Miscellaneous Receivables 124,385 70,503
Prepaid Expenses 339,592 395,982
Insurance Claim Receivable -- 349,526
Deferred Costs - Insurance Claims 544,902 703,675
Due From Officer 61,530 --
Prepaid Expense - Income Taxes 2,063 2,063
Deferred Income Tax 33,047 73,777
----------- ---------
TOTAL CURRENT ASSETS 6,679,344 5,504,366
----------- ---------
PROPERTY AND EQUIPMENT:
Land 479,346 451,925
Buildings 946,046 946,046
Trucks 3,217,443 3,125,453
Fuel Tanks 660,927 1,455,501
Machinery and Equipment 891,125 769,817
Leasehold Improvements 600,204 597,759
Cylinders 164,637 755,496
Office Furniture and Equipment 200,640 200,640
Web Site Development Costs 2,317,994 2,274,575
----------- ---------
9,478,362 10,577,212
Less: Accumulated Depreciation and Amortization 4,524,453 4,331,055
----------- ---------
NET PROPERTY AND EQUIPMENT 4,953,909 6,246,157
----------- ---------
OTHER ASSETS:
Deferred Income Taxes 45,091 45,091
Deposits 121,780 165,541
Other Receivable - Non-Compete - Less Current Portion 675,000 177,793
Notes Receivable - Less Current Portion 667,765 --
Customer List, Less Accumulated Amortization of ($188,122)
March 31 and June 30 422,728 422,728
Covenant Not to Compete, Less Accumulated Amortization of
$91,667 (March 31) and $76,667 (June 30) 8,333 23,333
Development Costs - Franchising 20,680 27,573
----------- ---------
TOTAL OTHER ASSETS 1,961,377 862,059
----------- ---------
TOTAL ASSETS $13,594,630 $12,612,582
=========== ===========
See Accompanying Notes
3
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONT'D)
LIABILITIES & STOCKHOLDERS' EQUITY
MARCH 31, JUNE 30,
2004 2003
CURRENT LIABILITIES: (UNAUDITED) (AUDITED)
------------ ------------
Accounts Payable $ 2,271,819 $ 1,420,911
Note Payable - Bank 700,000 --
Note Payable - Other 200,000 335,000
Current Portion of Long-Term Debt 352,146 1,238,982
Accrued Expenses 330,022 735,370
Accrued Taxes 46,204 98,612
Income Taxes Payable 138,130 --
Deferred Income 5,833 --
Customer Pre-Purchase Payments 593,900 936,680
Customer Credit Balances 264,382 416,644
Escrow Deposits 16,072 5,000
Note Payable - Officer -- 321,630
------------ ------------
TOTAL CURRENT LIABILITIES 4,918,508 5,508,829
DEFERRED INCOME 79,679 79,679
DEFERRED INCOME TAXES 82,290 70,310
SHORT-TERM DEBT REFINANCED -- 3,170,000
LONG-TERM DEBT: less current portion 3,660,731 296,472
------------ ------------
TOTAL LIABILITIES 8,741,208 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 (2004) and 2,013,250 (2003) 2,014 2,014
Paid in Surplus 5,711,224 5,711,224
Retained Earnings (Deficit) (859,816) (2,225,946)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,853,422 3,487,292
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,594,630 $ 12,612,582
============ ============
See Accompanying Notes
4
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS MARCH 31, NINE MONTHS ENDED MARCH 31,
-------------------------------- ------------------- ------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
NET SALES $ 17,495,340 $ 19,490,580 $ 36,772,902 $ 38,177,651
COST OF SALES 14,463,233 15,879,981 31,303,489 31,217,309
------------ ------------ ------------ ------------
GROSS PROFIT 3,032,107 3,610,599 5,469,413 6,960,342
------------ ------------ ------------ ------------
EXPENSES
Selling, General and Administrative Expenses 1,854,423 1,747,490 5,041,244 4,178,008
Depreciation and Amortization Expense 319,717 317,251 952,764 911,922
------------ ------------ ------------ ------------
TOTAL EXPENSES 2,174,140 2,064,741 5,994,008 5,089,930
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 857,967 1,545,858 (524,595) 1,870,412
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES):
Gain on Sale of Subsidy 2,668,490 -- 2,668,490 --
Interest and Other Income 27,889 60,554 91,812 126,668
Interest Expense (138,424) (151,137) (572,628) (340,223)
Other (Expense) Income (Notes 10 and 22) 394,500 (414,000) 394,500 (414,000)
Legal and Professional Fees relating to Other
(Expense) Income (197,360) -- (500,609) --
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSES) 2,755,095 (504,583) 2,081,565 (627,555)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 3,613 062 1,041 275 1,556,970 1,242,857
PROVISION (REDUCTION) FOR INCOME TAXES 143,440 (39,890) 190,840 (32,890)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 3,469,622 $ 1,081,165 $ 1,366,130 $ 1,275,747
============ ============ ============ ============
BASIC INCOME (LOSS) PER COMMON SHARE $ 1.72 $ .54 $ .68 $ .63
============ ============ ============ ============
DILUTED INCOME (LOSS) PER COMMON SHARE $ 1.70 $ .53 $ .67 $ .62
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - USED IN BASIC 2,013,250 2,009,814 2,013,250 2,009,814
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - USED IN DILUTED 2,040,588 2,052,751 2,040,588 2,052,751
============ ============ ============ ============
See Accompanying Notes
5
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 2004
(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
----------- ----------- ----------- ----------- -----------
1,366,130
-----------
Net Income 1,366,130
-----------
$ 4,853,422
===========
Balance - March 31, 2004 2,013,250 $ 2,014 $ 5,711,224 $ (859,816)
========= =========== =========== ===========
See Accompanying Notes
6
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
NINE MONTHS ENDED MARCH 31,
UNAUDITED
2004 2003
CASH FLOW FROM OPERATING ACTIVITIES
Net Income (Loss) - Continuing Operations $ 1,366,130 $ 1,275,747
Adjustments to Reconcile Net Income (Loss) to Net Cash
used by Operating Activities:
Depreciation and Amortization 952,764 911,922
Other Expense (Income) (394,500) 414,000
Directors' Fees -- 24,000
Gain on Disposal of Equipment -- (44)
Gain on Sale of Subsidiary (2,668,490) --
Gain on Sale of Subsidiary - Non-Cash 1,400,000 --
(Increase) Decrease in:
Accounts Receivable (536,818) (2,429,365)
Inventory (134,958) (549,953)
Prepaid Expenses 56,390 (76,560)
Insurance Claim Receivable 349,526 (238,099)
Deferred Costs Insurance Claims 158,773 43,761 --
Deposits 40,730 (65,000) (43,400)
Deferred Income Tax - Asset
Increase (Decrease) in:
Accounts Payable 850,908 1,194,466
Accrued Expenses (457,756) (44,288)
Customer Advance Payments (342,780) (494,559)
Customer Credit Balance (152,262) (375,833)
Deferred Income Taxes 11,980 10,510
Deferred Income 5,833 --
Escrow Deposits 11,072 (12,400)
Income Taxes Payable 138,130 --
----------- -----------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES 698,433 (498,856)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (1,034,781)
Web Site Development Costs (43,419) (810,415)
Increase in Deposits -- (41,824)
Disposition of Equipment (1,297,433) (8,845)
Payment on Notes Receivable - Sale of Equipment 8,346 1,726
Cash Received Sale of Equipment & Inventory-Subsidiary 3,000,000 13,359
Note Receivable - Montgomery -- --
Other Receivables (53,882) 655
Receivable - Officer (61,530) 22,961
----------- -----------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES $ 517,301 $ (822,383)
=========== ===========
See Accompanying Notes
7
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW (CONT'D)
(UNAUDITED)
NINE MONTHS ENDED MARCH 31,
UNAUDITED
2004 2003
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Notes Payable - Bank $ 700,000 $ --
(Decrease) in Notes Payable - Bank (1,270,000) (200,000)
(Decrease) Increase in Notes Payable - Other (1,385,000) 850,000
Decrease in Long-Term Debt (3,289,892) (496,824)
Increase in Long-Term Debt 5,117,315 607,789
Note Payable - Officer (321,630) 313,604
----------- -----------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (449,207) 1,074,569
----------- -----------
NET (DECREASE) INCREASE IN CASH 766,527 (246,670)
Cash - Beginning of Year 400,033 258,560
----------- -----------
Cash - End of Year $ 1,166,560 $ 11,890
=========== ===========
The Company had Interest Cash Expenditures of: $ 578,123 $ 315,223
The Company had Tax Cash Expenditures of: $ 59,638 $ 22,167
See Accompanying Notes
8
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND MARCH 31, 2004
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 nine months ended
March 31, 2004 is $396,071 (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 MARCH 31, 2004
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. Able propane, LLC was sold March 3, 2004, and the Company
is no longer selling propane (See Note 22).
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 nine months ended March 31, 2004 and 2003 amounted to $585,491 and
$557,915, 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, and accelerated special depreciation per
the Tax Acts of 2002 and 2003.
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 MARCH 31, 2004
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
E-COMMERCE OPERATING SYSTEM DEVELOPMENT COSTS
Costs of $2,317,994 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 nine months ended March 31, 2004 and 2003 amounted to
$345,380 and $332,114, 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 nine months ended March 31, 2004
and 2003 are $15,000 and $15,000, 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 MARCH 31, 2004
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 ongoing 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 $346,297. 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 $508,510 and
$341,961 for the nine months ended March 31, 2004 and 2003, 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 MARCH 31, 2004
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 MARCH 31, 2004
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 MARCH 31, 2004
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
MARCH 31, PRINCIPAL AMOUNT
2005 $ 28,659
2006 12,219
2007 13,432
2008 14,765
2009 16,230
Balance 83,396
--------
TOTAL $168,701
========
15
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
NOTE 2 NOTES RECEIVABLE (CONT'D)
B. Able Oil Company has three (3) 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. One Note
began December 1998, one began February 1999 and one began 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
MARCH 31, PRINCIPAL AMOUNT
--------- ----------------
2005 $30,600
2006 6,028
2007 4,566
2008 4,887
2009 5,233
Balance 7,009
-------
TOTAL $58,323
=======
NOTE 3 INVENTORIES
ITEMS MARCH 31, JUNE 30,
2004 2003
--------- ---------
Heating Oil $ 394,609 $ 241,107
Diesel Fuel 24,975 18,921
Kerosene 4,059 2,534
Propane 7,448 8,851
Parts, Supplies and Equipment 493,289 518,009
--------- ---------
TOTAL $ 924,380 $ 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.
September 30, 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.
On March 3, 2004, the Company repaid $1,100,000 of the term loan principal
balance. The monthly payments of principal and interest were reduced to
$26,672.65, commencing with the payment due April 1, 2004 which was paid
by the Company in March 2004. All other terms of the loan will remain the
same (See Note 22).
16
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
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
1. A first security interest in equipment and fleet vehicles
1. 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 March 31, 2004 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 March 31, is $3,099,661
Included in current portion of long-term debt 142,871
----------
Included in long-term debt - less current portion $2,956,790
==========
17
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
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 was $1,270,000. Interest for the three months ended March 31,
2004 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). The same individual loaned the Company
$300,000 on February 12, 2004, to be paid $100,000 per month plus
interest, at 6% per annum on March, April and May 15, 2004. The balance at
March 31, 2004 was $200,000.
18
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
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.
The loan was paid in full on March 11, 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 March 31, 2004 and June 30, 2003 was $91,708 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 MARCH 31, 2004
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:
2004
----
AMOUNT PERCENT
------ -------
Statutory Federal Income Tax $ 586,695 34.0%
Federal Income Tax Reduction due to Carryforward
Loss (531,070)
State Income Tax 135,215 5.9
--------- ---------
Income Taxes $ 190,840 39.9%
========= =========
Income Taxes consist of:
Current $ 138,130
Deferred 52,710
---------
TOTAL $ 190,840
=========
Statutory Federal Income Tax $ 513,619 34.0%
Federal Income Tax Reduction due to Carryforward
Loss (536,639)
State Income Tax (Note X) 159,980 5.9
State Income Tax Reduction due to Carryforward
Loss (169,850)
Income Taxes $ (32,890) 39.9%
========= =========
Income Taxes consists of:
Current
Deferred
TOTAL $ --
(32,890)
---------
$ (32,890)
=========
(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 MARCH 31, 2004
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:
MARCH 31, 2004
TEMPORARY TAX
DIFFERENCE EFFECT
---------- ------
Depreciation and Amortization $(297,723) $ (82,290)
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
$2,302,315. 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. For the nine months
ended March 31, 2004 $1,561,970 of net income has been utilized against
the net operating loss carryforward. At this time, the Company believes
that a full valuation allowance should be provided. The component of the
deferred tax asset as of March 31, 2004 are as follows:
Net Operating Loss Carryforward - Tax Effect $ 782,787
Valuation Allowance (782,787)
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 MARCH 31, 2004
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
March 31, 2004, no principal has been paid. No interest was accrued for
the nine months ended March 31, 2004 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 $2,029,878 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 nine months ended March 31, 2004. 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 $19,945
(2004) and $18,219 (2003), for the nine months ended March 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 MARCH 31, 2004
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 March
31, 2004, 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.
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. (See below)
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 were held in the Office
of Administrative Law. The Company and DCA have settled the penalties of
$419,500 for $25,000, resulting in Other Income of $394,500 (See Note 22).
The $25,000 was paid March 10, 2004.
23
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
NOTE 10 COMMITMENTS AND CONTINGENCIES (CONT'D)
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 March14, 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, 2003. This amount was paid in October 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.
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. A hearing was held on March 11, 2004 on an
application on certain matters by the Plaintiffs, which were denied. Per
legal counsel, 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.
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.
24
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
NOTE 11 OPERATING LEASE (CONT'D)
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
$110,342 for the nine months ended March 31, 2004. The estimated future
rents are as follows:
YEAR ENDED JUNE 30,
2004 $ 29,397
2005 117,588
July 2005 9,799
---------
TOTAL $ 156,784
=========
The following summarizes the month to month operating leases for the other
subsidiaries:
Able Oil Melbourne $500.00, per month
Total rent expense, $4,500
Able Energy New York $600.00, per month
Total rent expense, $5,400
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.
25
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
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, 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 Shareholder was repaid $135,000 on March 3, 2004 (See
Note 22). The balance of the Note was paid in March 2004. Interest expense
has been paid in the amount of $13,033. In relation to the payment of this
Note, the Shareholder has a liability to the Company of $16,840.
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).
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:
MARCH 31, MARCH 31,
2004 2003
---- ----
Weighted Average of Common
Shares Outstanding Used in Basic
Earnings Per Share 2,013,250 2,009,814
Dilutive Effect of:
Employee Stock Options 27,338 42,937
Stock Warrants -- --
--------- ---------
Weighted Average Common Shares
Outstanding Used in Diluted
Earnings Per Share 2,040,588 2,052,751
========= =========
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.
26
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
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.
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:
C. 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.
C. 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.
C. 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).
27
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
NOTE 16 STOCK WARRANTS
The 200,000 warrants to purchase shares of common stock were outstanding
during the first quarter of 2004 and were not included in the computation
of diluted EPS as the warrants' were all higher than the average stock
price of $2.87 and would have been anti-diluted (See Note 14). These
warrants have not been registered under the Securities Act of 1933.
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. At March 31, 2004, any
amount for accrual of the above is not material and has not been computed.
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. Upon the sale of the subsidiary on March 1, 2004, $1,400,000 is a
receivable and has no effect on cash.
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 $544,902 and
is currently shown as deferred costs insurance claims on the balance
sheet. Management anticipates the insurance recovery will cover the
company costs. A claim for business interruption still has to be filed.
The following is a summary of insurance claims filed:
Building (commercial property) $349,526
Paid by March 31, 2004 349,526
--------
Contents $337,617
Paid by March 31, 2004 319,332 $ 18,285
--------
Vehicles $302,674
Paid by March 31, 2004 247,409 55,265
Total $ 73,550
========
The above amounts were submitted as claims but do not represent a
settlement with the insurance carriers.
28
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2003 AND MARCH 31, 2004
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".
NOTE 22 SALE OF SUBSIDIARY
On March 1, 2004, the Company sold its subsidiary , Able Propane, LLC. The
Sale was a sale of inventory and equipment (the operating assets of the
subsidiary). The total price of the sale was $4,400,000. Of that,
$3,000,000 was received in cash and was used as a reduction of long-term
debt in the amount of $1,284,737. There was also payment of $135,000 of
Officer Loan and $325,000 of Legal Fees. The Company had a cash increase
of $1,255,268.
In conjunction with the sale of the propane business, the New Jersey Dept.
of Community Affairs (DCA) reduced the fine that was charged of $419,500
to $25,000 and the reduction of $394,500 is shown as Other Income. The
$419,500 had been deducted as an expense in the prior fiscal year ended
June 30, 2003 (See Note 10).
The Company received a Note receivable for $500,000, principal balance of
this Note payable in full on the fourth anniversary of the closing, March
1, 2008. The Note bears interest at 6% per annum ($30,000 per year),
payable quarterly within 45 days of the closing of each fiscal quarter.
The Company also has signed a non-competition agreement and will receive a
total payment of $900,000, payable in $225,000 installments due one, two,
three and four years from the date of closing.
The Company will receive the accounts receivable due 60 days or less as
follows: Current 100%, 30 days 95% and 60 days 85%. Within 30 days
following closing, the Company is due approximately $124,586 from the
buyer, $208,917 of accounts receivable have been paid. Accounts 90 days
and greater, if collected, go to the buyer, which is approximately
$42,000.
29
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
NINE MONTHS ENDED MARCH 31, 2004, COMPARED TO THE NINE MONTHS ENDED MARCH
31, 2003.
The Company reported revenues of $36,772,902 for the nine months ended
March 31, 2004, a decrease of 3.68% over the prior year's revenues for the
same nine-month period. The sales decreased by $1,401,749. A higher
commodity cost during this past season due to economic unrest, and the
fear that war could disrupt the world's oil supply also impacted revenues.
The Company did not have use of its facility in Newton, New Jersey, due to
the explosion in March 2003, which affected its deliveries to Sussex and
Warren Counties in New Jersey.
Gross profit margin, as a percentage of revenues, for the nine months
ended March 31, 2004, vs. 2003 decreased by 3.36% or $1,490,929. 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 2.77% from 10.94% in nine months ending March 31,2003 to
13.71% during the same period in 2004. There were increases in payroll,
advertising, vehicle repair and maintenance, bank charges, interest
expense, a write-off of uncollectable 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 nine months ended March 31, 2004 was $(524,595) as
compared to the Company's income of $1,870,412 for the nine months ended
March 31, 2003. This operating loss for nine months was directly related
to the increase in operating costs and lower gross profit.
Net income for the nine months ended March 31, 2004 was $1,366,130 as
compared to the same period for the previous year of $1,275,747. This net
income in 2004 was the result of the sale of the propane operation of Able
Propane, LLC, a subsidiary, at a gain of $2,668,490.
OPERATIONAL EFFICIENCIES
The Company is continuing to evaluate several alternatives to increase the
utilization of existing personnel and equipment, to reduce expenses and
increase profitability, within its current business configuration. Since
the March 14th 2003 explosion at its Newton, New Jersey fuel distribution
facility, the company is operating the business of its main subsidiary,
Able Oil Co. out of its Rockaway, New Jersey site. This has caused an
increase in operating costs due to increased travel distances for the
service and delivery vehicles. The company is currently seeking approval,
via appeal to Superior Court in Morris County, to rebuild at the Newton
site (Sussex County). The Company is also looking at several additional
locations within Sussex County as an alternative. These options are being
weighed to reduce expense 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. Gross margins for the
period October 2003 to March 2004 were temporarily lower due to a dramatic
rise in the cost of distillates, and the company believes that its margin
strategy is working and has been expanded to include equipment sales and
services. During this current fiscal year, the Company began marketing
discounted heating oil sales under the name of Able Oil Express. The full
service heating oil deliveries including a full line of HVAC service
continues to be operated under the trade name of Able Energy. This
distinctive strategy was put into place to differentiate the Company's
full service business from its sales of discounted heating oil as a
further step in Able's margin management strategy.
In October of 2003, 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 is
being introduced in stages with the first phase having been introduced in
October. This system gives the Company's 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 that is used to power the PriceEnergy
platform is fully automated and allows for the removal of the
inefficiencies associated with a traditional heating oil company in this
industry. PriceEnergy has generated almost 4 million gallons in new
business this year, which was delivered by its dealer network. In December
2002, PriceEnergy began sales of Home Heating Oil in two BJ's Wholesale
Club stores in the Northeast. Since the introduction of home heating oil
sales in the initial two stores, heating oil sales are now being offered
in over 50 BJ's Wholesale Club stores and being delivered by a network of
over 50 independent dealers in 8 states. The Company is enthused about the
growth with its new "Channel Partner", BJ's and looks for further sales
gains as the occasion to sell in other retail venues materialize.
EXPLOSION AND FIRE
On March 14, 2003, Able Energy experienced and 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 as well as
some neighboring properties. Fortunately, due to the immediate response by
employees at this location, a quick evacuation of all personnel occurred
prior to the explosion, preventing any serious injuries.
The results of the investigations done by the Company as well as local
officials, OSHA, and the New Jersey Department of Community Affairs,
indicted 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. Later in April of 2003,
Able Energy received a subsequent fine in the amount of $5,500. Able
Energy contested the Notices of Violation and ultimately settled with the
Department of Community Affairs via a "global settlement" which was
arrived at earlier this year. The settlement resulted in the sale of the
operating subsidiary, Able Propane, Co. LLC, and the reduction of the
fines and penalties to the Department of Community Affairs down to
$25,000.
Able Energy worked closely and cooperated fully with the investigations
conducted by all federal, state, and local officials since the accident.
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 all hazardous
materials. 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 not currently conducting operations at its 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. 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 is currently
diligently working, through appeal to the Superior Court in Morris County,
to obtain approval to resume its core heating oil operations at the Newton
site.
RECENTLY IMPLEMENTED TECHNOLOGICAL MEASURES
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 prior fiscal year.
Management believes that by providing enhancements to existing telephony
hardware and in-house equipment, 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 overstaffing to
meet unrealized needs. New software now provides customers with the option
of placing an order via a voice activated technology. This new feature
lets 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. This unique technology was developed by a
voice recognition company called Votara and integrated into the Able call
center via a unique cost sharing agreement between both companies.
The Company is continuing to fully implement an automated dispatch
technology into the service sector of Able's HVAC business. This system
provides management with the ability to communicate with all service and
installation personnel instantaneously. This system will also perform
billing functions at the customer's location as well as immediately
documenting payment data. Management will be aware of the status of every
on-duty worker and be able to obtain real time reporting for stand-by,
en-route, and service work time. This system, when fully implemented, will
enable the Company to maximize scheduling opportunities and eliminate
service technician down time. Unfortunately, much of the automated
dispatch hardware and system was destroyed at the time of the explosion
and fire in the Newton location in March of 2003. This system is currently
in the process of being restored and should be fully functional during the
next fiscal year.
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 nine months ended March 31, 2004, compared to the nine months
ended March 31, 2003, the Company's cash position increased by $1,154,670
from $11,890 to $1,166,560. 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 March 31, 2004,
the Company sold the propane operation of a subsidiary, Able Propane, LLC,
generating $3 million in cash, plus $1.4 million to be received in the
future. The Company also paid debts and other costs of an excess of $2.4
million. The Company will continue to grow its primary operation by
aggressively marketing the sale of #2 Heating Oil and diesel fuels as well
as its HVAC services, while strengthening its infrastructures. The Company
is also exploring other avenues of debt or equity financing.
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, primarily 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.
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 March 31, 2004, 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 March 31,
2004. There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect internal controls subsequent
to March 31, 2004.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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
DATE OF REPORT ITEM REPORTED ON
March 16, 2004 On March 1, 2004, Able Energy, Inc (the "Company"), Able
Propane Co., LLC ("Able Propane"), Chris Westad, Timothy
Harrington, Action Gas Propane Operations, LLC and Liberty
Propane, L.P. executed an Asset Purchase Agreement for the
sale of all of the assets of Able Propane. The assets
included various size tanks and delivery trucks ("Assets").
The aggregate purchase price for the Assets was $4,400,000,
which includes a $500,000 promissory note and $900,000 in
future payments in consideration for non-compete agreements.
The purchase price was determined by an arms length third
party negotiation between the parties
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 16th day of May 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