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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, 2005
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 [ ]
Check whether the Registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act). Yes [X] No [ ]
As of May 12, 2005, 2,449,520 shares, $.001 Par value per share, of Able Energy,
Inc. were issued and outstanding.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Consolidated Balance Sheets as of June 30, 2004 and March 31, 2005 3
Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2005 and 2004 5
Consolidated Statement of Stockholders' Equity for the Nine Months March 31, 2005 6
Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2005 7
Notes to Unaudited Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
Part II. OTHER INFORMATION
------------------
Item 1. Legal Proceedings 25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits 27
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
MARCH 31, JUNE 30,
2005 2004
UNAUDITED AUDITED
------------ ------------
CURRENT ASSETS:
Cash $ 263,130 $ 1,309,848
Accounts Receivable (Less Allowance for Doubtful
Accounts of $132,992 and $192,222 as of March 31, 2005 and
June 30, 2004, respectively) 3,877,335 2,436,554
Inventory 903,148 559,325
Notes Receivable - Current Portion 55,346 51,851
Other Receivable - Non-Compete - Current Portion 225,000 225,000
Miscellaneous Receivables 56,095 127,422
Prepaid Expenses 569,950 310,142
Deferred Costs - Insurance Claims 207,999 424,547
Prepaid Expense - Income Taxes -- 2,063
Deferred Income Tax 42,223 54,923
Other Receivable (Note 13) 67,340 75,833
------------ ------------
TOTAL CURRENT ASSETS 6,267,566 5,577,508
------------ ------------
PROPERTY AND EQUIPMENT:
Land 479,346 479,346
Buildings 946,046 1,000,268
Trucks 3,562,186 3,217,443
Fuel Tanks 800,025 674,765
Machinery and Equipment 994,755 911,177
Leasehold Improvements 702,142 607,484
Cylinders 295,476 183,773
Office Furniture and Equipment 205,319 200,640
Website Development Costs 2,377,270 2,330,794
------------ ------------
10,362,565 9,605,690
Less: Accumulated Depreciation and Amortization 5,686,700 4,819,707
------------ ------------
NET PROPERTY AND EQUIPMENT 4,675,865 4,785,983
------------ ------------
OTHER ASSETS:
Deferred Income Taxes 33,391 45,091
Deposits 50,418 137,015
Other Receivable - Non-Compete - Less Current Portion 450,000 675,000
Notes Receivable - Less Current Portion 653,414 675,295
Customer List, Less Accumulated Amortization of ($188,122)
March 31, 2005 and June 30, 2004 422,728 422,728
Covenant Not to Compete, Less Accumulated Amortization of
$100,000 and $96,667 at March 31,2005 and June 30, 2004, respectively -- 3,333
Development Costs - Franchising 11,489 18,382
Deferred Closing Costs - Financing 97,920 103,360
------------ ------------
TOTAL OTHER ASSETS 1,719,360 2,080,204
------------ ------------
TOTAL ASSETS $ 12,662,791 $ 12,443,695
============ ============
See Accompanying Notes
3
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS(CONT'D)
LIABILITIES & STOCKHOLDERS' EQUITY
MARCH 31, JUNE 30,
2005 2004
(UNAUDITED) (AUDITED)
------------ ------------
CURRENT LIABILITIES:
Accounts Payable $ 2,214,552 $ 1,703,005
Note Payable - Bank 699,236 699,236
Note Payable - Other 275,000 --
Current Portion of Long-Term Debt 413,951 371,838
Accrued Expenses 295,904 318,154
Accrued Taxes 79,348 31,582
Employee Income Tax Withheld 146,624 --
Deferred Income -- 2,333
Customer Pre-Purchase Payments 795,937 1,495,906
Customer Credit Balances 228,729 698,899
------------ ------------
TOTAL CURRENT LIABILITIES 5,149,281 5,320,953
DEFERRED INCOME 79,679 79,679
DEFERRED INCOME TAXES 102,256 91,176
LONG TERM DEBT: less current portion 3,647,962 3,553,836
------------ ------------
TOTAL LIABILITIES 8,979,178 9,045,644
------------ ------------
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 2,449,520 (March 31) and
2,013,250 (June 30) 2,450 2,014
Paid in Surplus 6,245,907 5,711,224
Retained Earnings (Deficit) (2,564,744) (2,315,187)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,683,613 3,398,051
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,662,791 $ 12,443,695
============ ============
See Accompanying Notes
4
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS MARCH 31, NINE MONTHS ENDED MARCH 31,
---------------------------- -----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
NET SALES $ 23,668,771 $ 16,645,044 $ 50,878,714 $ 34,909,872
COST OF SALES 20,923,233 13,807,152 45,730,958 29,791,532
------------ ------------ ------------ ------------
GROSS PROFIT 2,745,538 2,837,892 5,147,756 5,118,340
------------ ------------ ------------ ------------
EXPENSES
Selling, General and Administrative Expenses 1,651,567 1,781,421 4,132,146 4,761,677
Depreciation and Amortization Expense 286,845 293,592 890,775 845,185
------------ ------------ ------------ ------------
TOTAL EXPENSES 1,938,412 2,075,013 5,022,921 5,606,862
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 807,126 762,879 124,835 (488,522)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES):
Gain on Sale of Subsidiary 2,668,490 2,668,490
Interest and Other Income 53,719 25,386 188,205 84,084
Interest Expense (97,240) (118,312) (264,118) (489,669)
Gain (Loss) on Sale of Assets 7,500 (23,508)
Other (Expense) Income (Notes 10 and 22) (110,237) (110,237)
Legal and Professional Fees relating to Other
(Expense) Income (65,907) (69,700) (129,254) (199,907)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSES) (212,165) 2,505,864 (338,912) 2,062,998
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 594,961 3,268,743 (214,077) 1,574,476
PROVISION (REDUCTION) FOR INCOME TAXES 25,500 143,440 35,480 190,840
------------ ------------ ------------ ------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS $ 569,461 $ 3,125,303 $ (249,557) $ 1,383,636
============ ============ ============ ============
DISCONTINUED OPERATIONS -- 344,319 -- (17,506)
------------ ------------ ------------ ------------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS -- 344,319 -- (17,506)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 569,461 $ (249,557) $ 3,469,622 $ 1,366,130
============ ============ ============ ============
BASIC EARNINGS INCOME (LOSS) PER COMMON SHARE
INCOME FROM CONTINUING OPERATIONS $ .28 $ 1.55 $ (.12) $ 0.69
============ ============ ============ ============
INCOME (LOSS) FROM DISCONTINUED OPERATIONS $ -- $ .17 $ -- $ (.01)
========== ============ ======== ============
DILUTED EARNINGS (LOSS) PER COMMON SHARE
INCOME FROM CONTINUING OPERATIONS $ .28 $ 1.53 $ (.12) $ 0.68
============ ============ ============ ============
INCOME (LOSS) FROM DISCONTINUED OPERATIONS $ -- $ .17 $ -- $ (.01)
=========== ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - USED IN BASIC 2,030,281 2,013,250 2,030,281 2,013,250
=========== ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - USED IN DILUTED 2,052,481 2,040,588 2,030,281 2,040,588
=========== ============ ============ ============
See Accompanying Notes
5
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 2005
(UNAUDITED)
Common Stock
$.001 Par Value
---------------
Additional Total
Paid-in Retained Stockholders'
Shares Amount Surplus Earnings Equity
----------- ----------- ----------- ----------- -----------
Balance - July 1, 2004 2,013,250 $ 2,014 $ 5,711,224 $(2,315,187) $ 3,398,051
Additional Shares Issued 436,270 436 534,683 535,119
Net Loss (249,557) (249,557)
----------- ----------- ----------- ----------- -----------
Balance - March 31, 2005 2,449,520 $ 2,450 $ 6,245,907 $(2,564,744) $ 3,683,613
========= =========== =========== =========== ===========
See Accompanying Notes
6
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
NINE MONTHS ENDED MARCH 31,
UNAUDITED
2005 2004
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS
Net Income (Loss) $ (249,557) $ 1,366,130
(Loss) from Discontinued Operations (17,506)
- -----------------------------------------------------------------------------------------------------------
Income (Loss) - Continuing Operations (249,557) 1,383,636
Adjustments to Reconcile Net Income (Loss) to Net Cash
used by Operating Activities:
Depreciation and Amortization 890,775 845,185
Consulting Fee 3,247 --
Gain on Disposal of Equipment 35,722 --
Gain on Sale of Subsidiary -- (2,668,490)
Gain on Sale of Subsidiary - Non-Cash -- 1,400,000
(Increase) Decrease in:
Accounts Receivable (1,440,781) (536,818)
Inventory (343,823) (134,958)
Prepaid Expenses (191,544) 56,390
Insurance Claim Receivable -- 349,526
Deferred Costs Insurance Claims 216,548 158,773
Deposits 86,597 43,761
Deferred Income Tax - Asset 26,463 40,730
Miscellaneous Receivable 51,116 --
Increase (Decrease) in:
Accounts Payable 511,547 850,908
Accrued Expenses 25,516 (457,756)
Employee Income Tax Withheld 146,624 --
Customer Advance Payments (699,969) (342,780)
Customer Credit Balance (470,170) (152,262)
Deferred Income Taxes 11,080 11,980
Deferred Income (2,333) 5,833
Escrow Deposits -- 11,072
Income Taxes Payable -- 138,130
----------- -----------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (1,392,942) 1,002,860
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (903,069) (1,034,781)
Web Site Development Costs (46,476) (43,419)
Cash Received on Sale of Property 229,814 --
Disposition of Equipment 4,876 (1,297,433)
Payment on Notes Receivable - Sale of Equipment 18,386 8,346
Cash Received Sale of Equipment & Inventory-Subsidiary 225,000 3,000,000
Other Receivables 20,211 (53,882)
Receivable - Officer 8,493 (61,530)
----------- -----------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES $ (442,765) $ 517,301
=========== ===========
See Accompanying Notes
7
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW (CONT'D)
(UNAUDITED)
NINE MONTHS ENDED MARCH 31,
UNAUDITED
2005 2004
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Notes Payable - Bank $ -- $ 700,000
(Decrease) in Notes Payable - Bank -- (1,270,000)
(Decrease) Increase in Notes Payable - Other 500,000 (1,385,000)
Decrease in Long-Term Debt (278,454) (3,289,892)
Increase in Long-Term Debt 328,843 5,117,315
Note Payable - Officer -- --
Note Payable - Other Payment (225,000) --
Sale of Common Stock 463,600 (321,630)
----------- -----------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 788,989 (449,207)
----------- -----------
DISCONTINUED OPERATIONS:
Net Cash (Used) Provided by Discontinued Operations -- (304,427)
----------- -----------
NET CASH (USED) PROVIDED BY DISCONTINUED OPERATIONS -- (304,427)
----------- -----------
NET (DECREASE) INCREASE IN CASH
Cash - Beginning of Year (1,046,718) 766,527
Cash - End of Year 1,309,848 400,033
----------- -----------
$ 263,130 $ 1,166,560
=========== ===========
The Company had Interest Cash Expenditures of:
The Company had Tax Cash Expenditures of: $ 246,176 $ 578,123
$ 16,649 $ 59,638
See Accompanying Notes
8
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND MARCH 31, 2005
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Able Energy, Inc. and its subsidiaries. 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, 2005
is $509,563 (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, 2004. The Company follows
the same accounting policies in preparation of interim
reports.
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 Energy New York, Inc. also installs propane tanks which
it owns and sells propane for heating and cooking, along with
other residential and commercial uses in the Warrensburg, New
York area.
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.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company provides a specific allowance for accounts in
excess of $3,000 due over 90 days. A general allowance of 10%
is provided for the balances under $3,000 due over 90 days.
9
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 from
continuing operations for the nine months ended March 31, 2005
and 2004 amounted to $527,169 and $477,912, 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.
E-COMMERCE OPERATING SYSTEM DEVELOPMENT COSTS
Costs of $2,377,270 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,
2005 and 2004 amounted to $353,380 and $345,380, 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
are 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, 2005 and 2004 are $3,333 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.
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.
10
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 $326,042.
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 $246,463 and $508,510 for the nine months ended March 31,
2005 and 2004, 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.
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 antidilutive. 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.
GOODWILL AND INTANGIBLE ASSETS
In June 2001, FASB approved two new pronouncements: SFAS No.
141, "Business Combinations", and SFAS No. 142, "Goodwill and
Other Intangible Assets". SFAS No. 141 applies to all business
combinations with a closing date after June 30, 2001. This
Statement eliminates the pooling-of-interests method of
accounting and further clarifies the criteria for recognition
of intangible assets separately from goodwill.
SFAS No. 142 eliminates the amortization of goodwill and
indefinite-lived intangible assets and initiates an annual
review for impairment. Identifiable intangible assets with a
determinable useful life will continue to be amortized. The
amortization provisions apply to goodwill and other intangible
assets acquired after June 30, 2001. Goodwill and other
intangible assets acquired prior to June 30, 2001 will be
affected upon adoption. The Company has adopted SFAS No. 142
effective July 1, 2001, which will require the Company to
cease amortization of its remaining net customer lists balance
and to perform an impairment test of its existing customer
lists and any other intangible assets based on a fair value
concept.
The Company has reviewed the provisions of these Statements.
Based upon an assessment of the customer lists, there has been
no impairment. As of June 30, 2001, the Company has net
unamortized customer lists of $422,728.
11
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2003, the FASB issued FASB Interpretation ("FIN")
No. 46-R, "Consolidation of Variable Interest Entities". FIN
No. 46-R, which modifies certain provisions and effective
dates of FIN No. 46, sets forth criteria to be used in
determining whether an investment in a variable interest
entity should be consolidated, and is based on the general
premise that companies that control another entity through
interests other than voting interests should consolidate the
controlled entity. The provisions of FIN No. 46 became
effective for the Company during the third quarter of Fiscal
2004. The adoption of this new standard did not have any
impact on the Company's financial position, results of
operations or cash flows.
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 EXTINGUISHMENTS
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.
In December, 2003, the Financial Accounting Standards Board
("FASB") issued a revision to SFAS No. 132, "Employers'
Disclosures about Pensions and Other Post retirement
Benefits." This revised statement requires additional annual
disclosures regarding types of pension plan assets, investment
strategy, future plan contributions, expected benefit payments
and other items. The statement also requires quarterly
disclosure of the components of net periodic benefit cost and
plan contributions. This currently has no effect on the
Company.
In May 2003, the FASB issued SFAS No,. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity". This statement affects the
classification, measurement and disclosure requirements of
certain freestanding financial instruments including
mandatorily redeemable shares. This currently has no effect on
the Company's operations.
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
12
of $3,333.34; interest of $2,678.88, and principal of $654.46.
No payments have been received in more than 24 months.
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.
Management has informed us they are in negotiations with
Andrew Schmidt. The amount due will be paid to bring the note
current, plus interest, or the Company will foreclose and take
the stock of Able Montgomery, Inc. and assume the operations
of the Company as a distributor of #2 oil. Andrew Schmidt and
the Company are finalizing an agreement on a method of
payment. Management has stated that the value of the
collateral will cover the amount due.
Maturities of the Note Receivable are as follows:
For the nine months Ended
March 31, Principal Amount
------------------------- ----------------
2006 $ 40,878
2007 13,432
2008 14,765
2009 16,230
2010 17,841
Balance 65,555
--------
Total $168,701
========
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. Two notes bear interest at the rate of
12% per annum and one Note 9% 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 Nine Months Ended
March 31, Principal Amount
------------------------- ----------------
2006 $ 14,468
2007 11,985
2008 6,102
2009 6,477
2010 1,026
----------
TOTAL $ 40,058
=====---==
NOTE 3 INVENTORIES
- ----------------------------
MARCH 31, JUNE 30,
ITEMS 2005 2004
----- -------- --------
Heating Oil $540,459 $232,364
Diesel Fuel 29,092 19,998
Kerosene 15,932 4,906
Propane 17,216 13,461
Parts, Supplies and Equipment 300,449 288,596
-------- --------
TOTAL $903,148 $559,325
======== ========
NOTE 4 NOTES PAYABLE BANK
- ------------------------------------
1. 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
13
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 20).
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 advances 75% on accounts
receivable less than 90 days outstanding, plus 50% of
inventory up to a maximum of $700,000. The outstanding balance
at March 31, 2005 is $699,236. The eligible accounts
receivable were $ 2,032,763 and the collateral of accounts
receivable were approximately $ 3,348,100.
The Agreement contains certain financial covenants as
enumerated in the Agreement.
The balance of the term loan at March 31, is $2,974,207
Included in current portion of long-term debt 138,729
----------
Included in long-term debt - less current portion $2,835,478
==========
NOTE 5 NOTE PAYABLE
- -----------------------------
The Company has a mortgage note payable to Able Income Fund,
LLC with an original balance of $500,000. The note is dated
February 22, 2005 and is due May 22, 2005. The note has an
interest rate of 14% per annum and is payable with interest
only at $5,833.33 per month with the balance and any accrued
interest due at May 22, 2005. The note is secured by a
mortgage on property in Warrensburg Industrial Park,
Warrensburg, New York, owned by Able Energy New York, Inc., a
wholly owned subsidiary of the Company. One of the owners of
Able Income Fund, LLC is the prior Chief Executive Officer
(CEO) of Able Energy, Inc. The balance due at March 31, 2005
is $275,000.
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, 2005 and June
30, 2004 was $77,448 and $88,242, respectively.
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:
14
2005
----
Percent of
Pretax
Amount Income
------- ------
Statutory Federal Income Tax $24,836 15.0%
State Income Tax 10,644 6.5
------- ------
Income Taxes $35,480 21.5%
======= ======
Income Taxes consists of:
Current $ --
Deferred 35,480
-------
TOTAL $35,480
========
2004
----
Amount Percent
--------- -------
Statutory Federal Income Tax $ 586,695 34.0%
Federal Income Tax Reduction due to Carry
Forward Loss\
State Income Tax (Note X) (531,070)
135,215 5.9
--------- -------
Income Taxes
$ 190,840 39.9%
========= =======
Income Taxes consist of:
Current
Deferred $ 138,130
TOTAL 52,710
--------
$ 190,840
=========
(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 each Company.
Able Oil Company has a New Jersey Operating Loss of $501,010
which could not be utilized in the year ended June 30, 2003.
Under current New Jersey law, the carryforward will be
available up to 50% of the Company's income after 2003, the
Company's fiscal year ending June 30, 2005, as such, the
deferred tax has been reduced by $11,700 using $130,000 of
income, 50% of Able Oil Company income.
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, 2005
--------------
Temporary Tax
Difference Effect
---------- ------
Depreciation and Amortization $(390,584) $(102,256)
Allowance for Doubtful Accounts 132,992 38,154
Gain on Sale of Subsidiary 18,766 4,035
New Jersey Net Operating Loss Carryforward, 371,010 33,391
(See Note X, above)
June 30, 2004
-------------
Temporary Tax
Difference Effect
---------- ------
Depreciation and Amortization $(339,045) $ (91,176)
Allowance for Doubtful Accounts 192,222 50,888
Gain on Sale of Subsidiary 18,766 4,035
New Jersey Net Operating Loss Carryforward 501,010 45,091
(See Note X, prior page)
15
Able Energy, Inc., et al, open years are June 30, 2001, 2002,
2003 and 2004. The Company has a net operating loss
carryforward of approximately $2,302,315. The net operating
loss expires between June 30, 2019 and 2021. Able Energy, Inc
and PriceEnergy.Com, inc. have a New Jersey net operating loss
carryforward of approximately $489,374 and $2,217,251,
respectively, which can be utilized up to 50% of the income in
the year ended June 30, 2005.
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 March 31, 2005
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 -
=========
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.
The Note has been updated for transactions through March 31,
2005, resulting in a balance of $3,544,389.08 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 year ended June 30, 2004,
or for the nine months ended March 31, 2005. Any payments will
go to pay principal. The note receivable accrued interest and
interest income 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 $20,461 (2005) and $19,945
(2004), for the nine months ended March 31.
NOTE 10 COMMITMENTS AND CONTINGENCIES
- ----------------------------------------------
Able Oil Company is under contract to purchase #2 oil as
follows:
GALLONS OPEN OPEN DOLLAR
COMMITMENT COMMITMENT AT
COMPANY PERIOD TOTAL GALLONS AT 03/31/05 03/31/05
------- ------ ------------- ----------- --------
Petrocom 11/1/04 - 4/30/05 2,478,000 168,000 $ 215,052
Conectiv Energy 10/1/04 - 4/30/05 336,000 84,000 81,879
--------- --------- ---------
Total 2,814,000 252,000 $ 296,931
========= ========= =========
16
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.
The seller by reduction of its mortgage will pay costs related
to the above up to $250,000. 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, 2005 which are
included in Prepaid Expenses and must be presented to the
attorney for reimbursement. The New Jersey Department of
Environmental Protection (NJDEP) has issue an approval for
treated water run-off. The ruling is for a 180 day period
which can be renewed for an additional 180 days, per
management, during which a valid permit must be obtained. When
approval is received and contract invoice wording is
sufficient for the attorney, reimbursement can be made upon
approval of the attorney and the Estate.
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. The note has been paid in full. As such, any
payment by the Estate must be direct payments. Payments will
begin when and if costs exceed $397,500. 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.
All violation charges with the New Jersey Department of
Community Affairs and OSHA have been settled and paid.
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 (known as Hicks vs. Able Energy, Inc.) 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. The Court presently has before
it a motion by Plaintiffs for Class Action Certification. Per
legal counsel, whether this matter is certified a Class Action
will greatly influence the Company's potential exposure. Legal
counsel is guardedly optimistic that Class Action will be
denied.
After the March 14, 2003, fire and explosion, the town of
Newton changed its zoning requirements and made fuel oil and
propane distribution prohibited uses. The Company is appealing
a denial of a request for building permits to reconstruct
damaged and destroyed buildings and sought a Non-Conforming
Use Certificate to permit the fuel oil distribution use only.
On August 20, 2004, the Superior Court of New Jersey ruled
that the Company may continue to use the site as a
non-conforming use, but stayed its decision subject to
Newton's appellate rights. The decision was upheld in May 2005
by the court upon the appeal of the Town of Newton. The
Company is planning to use the property in the manner approved
by the decision.
17
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 were approximately 200 claims being handled
and adjusted with reserves for losses established as deemed
appropriate by the insurance carrier. The majority of these
claims have been settled.
Two lawsuits have been filed by homeowners in Newton, New
Jersey 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 the property damage claims.
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 and legal
counsel is defending on punitive damage claims as noted above.
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., had an expiration date of July 31, 2004 and
has been rewritten. The lease provides for a change of $0.022
per gallon through put, as per a monthly rack meter reading.
Estimated future rents are $0.022 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 total
rent expense was $108,921 and $110,342 for the nine months
ended March 31, 2005 and 2004, respectively. The estimated
future rents for Greenpond Road, Rockaway, New Jersey are as
follows:
Year Ended June 30,
-------------------
2005 $29,397
July 2005 9,799
-------
TOTAL $39,196
=======
The following summarizes the month to month operating leases
for the other subsidiaries:
Able Oil Melbourne $500.00, per month
Total rent expense, $6,000
Able Energy New York $500.00, per month
Total rent expense, $6,000
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.
18
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
- -------------------------------------------
$67,340 is due from the former major Shareholder/Officer of
the Company. This Shareholder had 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. The balance of the Note was paid in
March 2004. Interest expense was paid in the amount of
$13,033. In relation to the payment of this Note and other
transactions, the Shareholder has a liability to the Company
of $75,833, at June 30, 2004 and $67,340 at March 31, 2005.
The following officers of this Company own stock in the
subsidiary, PriceEnergy.Com, Inc., which they incorporated in
November 1999.
Former Chief Executive Officer 23.5%
President
3.6%
Chief Operating Officer 2.3%
No capital contributions have been made by these individuals
(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:
Mar. 31, Mar. 31,
2005 2004
--------- ---------
Weighted Average of Common
Shares Outstanding Used in Basic
Earnings Per Share
2,030,281 2,013,250
Dilutive Effect of:
Employee Stock Options
22,111 27,338
Stock Warrants
89 --
--------- ---------
Weighted Average Common Shares
Outstanding Used in Diluted
Earnings Per Share
2,052,481 2,040,588
========= =========
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 the
current period, March 31, 2005, - 0 - 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, 389,000 (2004). 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.
19
Outstanding Options
-------------------
Number of Shares Exercise Price Term
---------------- -------------- ----
December 21, 2000
Grants 60,000 $1.80 5 years
Exercised 60,000
Grants 24,000 $2.25 5 years
Exercised 16,000
October 22, 2002
Grants 50,000 $3.00 5 years
Exercised 45,000
June 30, 2003
Grants 50,000 $3.16 5 years
Exercised 35,000
June 30, 2004
Grants 50,000 $2.55 5 years
Exercised 35,000
During the three months ended March 31, 2005, 203,000 shares
of common stock were issued from the exercise of stock
options. This resulted in $463,600 received by the Company.
This is shown in the Consolidated Statement of Change in
Stockholders' Equity.
NOTE 16 STOCK WARRANTS
- -------------------------------
The Company has issued stock warrants as follows:
180,000 Common Stock Purchase Warrants at an average of
approximately $5.50 per share, initial effective date of
August 31, 2000 through December 7, 2002, and expiring August
31, 2005 through December 7, 2007, to Andrew Alexander Wise &
Company in connection with an investment banking advisory
agreement with the Company, dated July 1, 2000. The warrants
were converted under a formula into 91,213 shares of common
stock. 90,413 shares were issued March 18, 2005 and 800 shares
April 6, 2005. These were cash less transactions with no funds
to the Company. The issued shares are recorded in the
Consolidated Statement of Stockholders' Equity.
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, 2005, any amount for accrual of
the above is not material and has not been computed.
NOTE 18 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 insurance claims. The insurance adjusters
are in the process of finalizing the amounts to be paid to the
Company. The estimated costs not reimbursed are $207,999 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 and a pollution claim is
also pending.
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 June 30, 2004 337,617 -
-------- --------
Vehicles $302,674
Paid by June 30, 2004 247,409 55,265
-------- --------
Total $ 55,265
========
The above open amounts were submitted as claims but do not
represent a settlement with the insurance carriers.
NOTE 19 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 20 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.
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. $225,000 was received in March 2005.
NOTE 21 DISCONTINUED OPERATIONS
- -----------------------------------------
On March 1, 2004, the Company sold the operating assets of its
subsidiary, Able Propane, LLC (see Note 20), and discontinued
the sale of propane fuel in the State of New Jersey.
Following the sale, the results of Able Propane, LLC were
reported in the Company's Consolidated Statements of Income
and Cash Flows, separately, as discontinued operations. In
accordance with Generally Accepted Accounting Principals
(GAAP), the Consolidated Statement of Financial Position has
not been restated. Able Propane, LLC represented the primary
vehicle by which the Company engaged in the sale of propane
fuel.
Summarized financial information for discontinued operations
for the nine months March 31, 2004, as follows:
2004
----
TOTAL REVENUES $1,863,030
==========
Income (Loss) from Discontinued
Operations $(17,506)
========
Able Propane, LLC is treated as a Partnership for tax purposes
and pays no income tax. As such, there is no provision for
income taxes. Able Propane, LLC has no assets or liabilities
at June 30, 2004. The assets and liabilities after the sale
and collection of accounts receivables and payment of accounts
payables, which were transferred to the Company were
immaterial to the total assets and liabilities of the Company.
NOTE 22 OTHER
- -----------------------
In December 2004, the major shareholder and Company Chief
Executive Officer (CEO) signed a contract and received a
deposit representing the sale of his 50% plus interest in the
Company. In the period ended March 31, 2005, this individual
has resigned as an Officer (CEO) and from the Board of
Directors, where he was Chairman of the Board.
20
In March 2005, the Company finalized and entered into a
consulting agreement with Summit Ventures, Inc. The agreement
is for $71,428.50 payable in common stock valued at $.50 per
share, 142,857 restricted common shares which can not be sold
for a period of one year. The shares were issued March 23,
2005. The Agreement shall terminate by December 31, 2006. The
consulting fee expense will be recorded during the 22 month
period of the Agreement.
NOTE 23 STATEMENT OF CASH FLOWS
- -------------------------------------------
The following transaction resulted in no cash being received
or expended. Issuance of common stock to Summit Ventures,
Inc., $71,429 (See Note 22). Exercise of stock warrants (see
Note 16).
Purchase of equipment which was financed and no cash was
expended. The amount financed was $85,850.
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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
THREE AND NINE MONTHS ENDED MARCH 31, 2005, COMPARED TO THE THREE AND NINE
MONTHS ENDED MARCH 31, 2004
The Company reported revenues of $50,878,714 for the nine months ended March 31,
2005, which was an increase of $15,968,842 from the prior year's revenues of
$34,909,872 for the same period. This increase can be attributed primarily to
significantly higher prices for the commodity in the world market for crude and
refined oil products resulting in higher wholesale prices being paid by the
company for these commodities (primarily #2 home heating oil and diesel fuel)
purchased during the period.
Gross profit margin, as a percentage of revenues, for the nine months ended
March 31, 2005, decreased by 4.54%. Total dollar amount of gross profit margin
increased by $29,416 on higher sales. The decrease in margin percentage was the
result of the dramatically rising product costs during the months of July
through March. Retail pricing was adjusted appropriately to cover most of the
increases in the Company's traditional heating oil segment, Able Oil Co. while
increasing volumes moving through the Company's PriceEnergy subsidiary moved
gross profit margins down as this subsidiary continues to move higher volumes
with its BJ's Heating Oil Advantage program with BJ's wholesale Club.
Selling, General, and Administrative expenses, as a percent of sales, decreased
by 5.52% from 13.64% in the nine months ending March 31, 2004 to 8.12% during
the same period in 2005. The Company attributes this decrease to lower costs for
payroll, vehicle repair and maintenance, credit card processing fees, bad debt
expense, and legal fees. Management will continue to aggressively manage
expenditures against last year's actual using the new budget process put into
place for this current fiscal year and the comprehensive financial reporting
software known as Great Plains, which was implemented in July of this year.
The three months ended March 31, 2005 had operating income of $807,126 compared
to a prior year operating income of $762,879. Operating income for the nine
months ended March 31, 2005 was $124,835 as compared to the Company's same
period last year loss of $(488,522) for the nine months ended March 31, 2004.
This operating income for the nine months was directly related to operating
margins being managed while experiencing volatile market pricing, and a decrease
in expenses.
The three months ended March 31, 2005, the end of the heating season, had a
profit of $569,461 as compared to a prior year profit of $3,125,303 for the
comparative three months (Last year's profit was impacted by the gain on the
sale of the propane subsidiary) of $2,668,490 resulting in net income after the
sale of $456,813. Net loss for the nine months ended March 31, 2005 was
$(249,557) as compared to a profit in the same period last year of $1,366,130.
This net loss for the nine months is being compared to a profit of last year,
which had a gain on the sale of the propane subsidiary included.
The shares of common stock that were issued and outstanding at the end of March
31, 2005 were 2,449,520. This is an increase of 436,270 which was reported as of
the period ending December 31, 2004. This increase is the result of the exercise
during the quarter ended March 31, 2005 of certain previously outstanding
options and warrants.
22
OPERATIONAL EFFECTIVENESS
The Company continues to redefine its organizational chart and related position
descriptions in order to enhance the Company's personnel utilization and
ultimate profitability. The Company believes that it will continue to increase
the utilization of existing personnel and equipment, in an effort to reduce
expenses as a percent of sales, and increasing profitability, within its current
business configuration. This process is monitored and guided via bi-weekly
meetings of the Company's executive committee whereby policies are reviewed,
results evaluated, and changes made to continue to stay focused on improving the
Company's profitability.
Furthermore, the Company has completed implementation of its new fuels
management system called "Sunrise" which it originally purchased from Versyss in
Providence, Rhode Island (This operating system, which is built on ".NET"
(dot-net) technology, is a Microsoft(R) Windows-based application that is easier
to build, deploy, and integrate with other networked systems. Sunrise is unique
new industry operating software, which allows developers, and systems
administrators to more easily build and maintain the system with improvements
toward performance, security, and reliability. Sunrise will permit Able Energy
to increase corporate profitability, while simultaneously providing exceptional
customer service. This new operating system also affords the necessary
flexibility to handle multiple payment plans, can maintain the security of
confidential account information, has easily customizable fields, and the
capability to e-mail invoices and statements to the customer base. This
operating system along with the new financial software, Great Plains, will serve
to further streamline operations and information processing. In January of 2005,
Versyss Commercial Systems, LLC, in Providence, Rhode Island sold their new
Sunrise software to Advanced Digital Data, Inc. (ADD Systems) of Flanders, New
Jersey. ADD Systems is a leader in the energy software industry and the Company
(Able) expects ADD Systems to continue to provide a high level of service in
support and on-going development of the Sunrise software.
Management values the significance of correctly managing all aspects of expense
control, and as such, has enlisted the support of an outside consultant to
assist in the integration and implementation of its new comprehensive operating
budget and related reporting structure which now interfaces with the new Sunrise
operating system. The Company believes that these changes will enable management
to quickly respond to changing trends in sales and expenses. The Company
believes that its new budget structure is effective as the period ending March
31, 2005 shows a year-to-year decrease in SG&A of $629,531 or 13.22%. The
combination of the new operating system and the detailed budget and reporting
program is now providing all levels of management with real time results not
previously available. These results have now been designed to report down to the
department level, which is line with the Company's goal of holding each level of
management accountable for improved operating and sales results.
The Company's margin strategy is to use the PriceEnergy subsidiary to handle
highly discounted non-service related home heating oil sales previously sold
through the Able Oil subsidiary. This change will permit Able Oil Co. to grow
its automatic delivery customer base using its moniker of "Full Service at
Discount Prices", while the PriceEnergy entity will cater to those customers
looking for the lowest possible retail price either "on-line" or over the phone.
The Company believes that this further segmentation of its customer base will be
successful in increasing overall profitability while enhancing customer appeal.
The Company has identified several customer segments that prefer varying levels
of service. By better aligning the Company's product offerings to match the
desires of these customer segments, the Company believes that it will be able to
capture a larger market share as well as protect the margin strategy of the
Company's conventional full service subsidiary, Able Oil Company. In order to
improve gross margins in the Company's Able Oil Company subsidiary, management
is exploring the possibility of increasing PriceEnergy dealer network coverage
in its Northwestern New Jersey market.
The Company has taken a dramatic new approach in the provision of HVAC products
and services to its customer base. This division of the Company's business has
traditionally been viewed as a support vehicle for the full service oil delivery
business in order to maintain customer loyalty through the provision of
necessary services to maintain the customer's heating or cooling system. This
business segment is now charged with being a self-funding independent business
unit within Able Oil and as such must be profitable. The service department has
now turned a profit nine months ending March 2005 vs. a loss for the same period
last year. This is now possible through the Company's focus on individual
performance and accountability within this department as well as with the
assistance of Flat Rate Pricing methodology. This new system of "Flat Rate
Pricing", provides the Company's sales and service personnel with a "package
approach" to selling service, and provides the customer with an easy to
understand invoice. This policy is consistent with the Company's customer
segmentation strategy, permitting different retail prices for different customer
segments, based upon their choice of service level desired. This system will
interface with the Company's automated dispatch communications program that was
introduced last year. Flat rate pricing has now been fully rolled out and has
proven so far to be successful in streamlining the service billing process while
maintaining clarity for the customer.
WARRENSBURG, NEW YORK OPERATIONAL ENHANCEMENTS
The Company is still in the process of making operational changes to its
Warrensburg, New York business, which will permit the consolidation of all daily
operations on to one modern facility located in the newly developed Warrensburg
Industrial Park. The Company's current propane gas storage operations on its
Lake George property have been moved to the new site and the Lake George
property has been sold with proceeds of the sale having been allocated to
provide funding for the new operations at the industrial park.
23
When completed, the new fuel depot and sales office will house the local sales
and administrative support personnel as well as operations and fuel storage for
#2 heating oil, kerosene, propane gas, and diesel fuel. When a new modular
office and tank farm is completed on the new property, the Company will
terminate its leased office space and fuel operations on Horicon Avenue and have
all operations combined in the new location with the ability to grow the
business more effectively as well as handle a greater volume of all products. As
of December 31, 2004, the Company has completed the installation of, and is now
using two new 30,000-gallon propane storage tanks to service its customer base
in that area. The project is more than halfway completed. With warmer weather
now in place contractors can now continue the process of finishing the
installation of the new office space and completion of site work. By the end of
the summer of 2005, the installation of #2 heating oil, kerosene, and diesel
storage tanks, will complete the project.
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 has introduced additional customer service technology to its
Rockaway call and administrative center during the past year. Able Energy
management believes that the improvements to its existing telephone 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. This telephony
software known, as Votara will once again provide the customer with the option
of placing a fuel 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 will soon be able to
monitor 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 enables the
Company to maximize scheduling opportunities and eliminate service technician
down time.
PRICEENERGY OPERATING SUBSIDIARY
The company's operating subsidiary, PriceEnergy with its modern order-processing
platform, has been in full operation for the past four years. This revolutionary
proprietary technology is fully automated and allows for the removal of the
inefficiencies associated with traditional heating oil companies within this
industry. PriceEnergy generates gallons sales in new business every day, which
are delivered by PriceEnergy's dealer network. Gallons sales, this year, have
continued to strengthen over the same period last year. In December of 2002,
PriceEnergy began sales of Home Heating Oil in the initial BJ's Wholesale Club.
Gallons sold through this new venue have been increasing with each week. The
Company is excited about this 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 and diesel fuel. In late December 2004, the Company
strengthened the operating margins for this subsidiary with its current channel
partner has been working to lower some of the operating costs such as the cost
per call with its current call center. The subsidiary has experienced continued
losses since its inception. Net loss for the first nine months ending March 31,
2004 was ($310,664). PriceEnergy did, however, have its first quarterly profit
for the most recent quarter ending March 31, 2005 of $60,979 before allocation
of an inter-company management fee.
MARCH 2003 NEWTON NEW JERSEY INCIDENT
The March 2003 accident, which affected our Newton fuel depot, currently leaves
this facility in an "out of service" condition. We are currently working
diligently to get this location back in service, at least on a limited basis,
before the end of the current fiscal year. The ability to use this location will
greatly improve our service level to the Sussex County delivery area of
Northwestern New Jersey. The Newton Board of Adjustment originally denied the
Company's application to repair and rebuild the facility on the grounds that the
zoning laws covering the Newton, New Jersey property had been changed
immediately following the accident. The Company appealed the Board's decision in
August of 2004, and was granted immediate permission to make some building
repairs and restore power to the underground cathodic protection system, which
safeguards the underground tanks from corrosion. The Company is currently
effectuating these repairs. Recently, in early November 2004, The Town of Newton
appealed the court's August 2004 decision to allow Able any use of its property.
On May 11, 2005, the Superior Court of New Jersey - Appellate Division, ruled in
favor of the Company and upheld the August 2004 decision, which permitted the
Company to use its Newton facility as a fuel storage and distribution facility.
The Company is now in the process of submitting for site plan approval so that
it can place this location back into service.
24
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended March 31, 2005, compared to the nine months ended
March 31, 2004, the Company's cash position decreased by $903,430 from
$1,166,560 to $263,130. In the year ended June 30, 2004, the Company closed a
credit facility on September 22, 2003, with UPS Business Capital Credit and
obtained a term loan of $4.3 million to consolidate a large portion of its
existing debt and has also obtained a working capital line of credit of
$700,000. This new debt restructuring will, in future years, save in excess of
$200,000 per year in interest payments and eliminate previous administrative
efforts in the managing of over two-dozen individual leases and loans. The
Company also sold the operating assets of a subsidiary, which yielded cash of
$1,255,000 and reduced debt in excess of $1.4 million. The Company also had
increased collections of customer advance payments. In the nine months ended
March 31, 2005, the Company generated funds from an increase in customer advance
payments and from the sale of its common stock in the amount of $463,600 and the
sale of property by its New York subsidiary yielding cash of $226,499. The cash
will assist the Company with a new facility under construction in Warrensburg,
New York and to grow in that marketplace while strengthening its infrastructure.
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 #2 home heating fuel 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 Energy's New York propane operations
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
Our exposure to financial market risk, including changes in interest rates,
relates primarily to our loan facility. Borrowings under our loan facility bear
interest at floating rates, based upon LIBOR or a base rate plus an applicable
margin. As a result, we are subject to fluctuations in interest rates. A 100
basis point increase in LIBOR would increase our annual interest expense by
$36,734. As of March 31, 2005, we had borrowed $3,673,443 million under our loan
facility, with a current weighted average interest rate of 6.85%. We operate
only in the United States, and all sales have been made in U.S. dollars. We do
not have any material exposure to changes in foreign currency exchange rates.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our principal executive
officer and principal financial officer, after evaluating the effectiveness of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly
Report on Form 10-Q, have concluded that, based on such evaluation, our
disclosure controls and procedures were adequate and effective to ensure that
material information relating to Able, including our consolidated subsidiaries,
was made known to them by others within those entities, particularly during the
period in which this Quarterly Report on Form 10-Q was being prepared.
CHANGES IN INTERNAL CONTROLS. There were no changes in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
An explosion and fire occurred at the Able Energy Facility in Newton, NJ on
March 14, 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.
25
A lawsuit (known as Karen Hicks vs. Able Energy, Inc.) 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. The Court
presently has before it a motion by Plaintiffs for Class Action Certification.
Per legal counsel, whether this matter is certified a Class Action will greatly
influence the Company's potential exposure. Legal counsel is guardedly
optimistic that Class Action will be denied.
After the March 14, 2003, fire and explosion, the town of Newton changed its
zoning requirements and made fuel oil and propane distribution prohibited uses.
The Company appealed a denial of a request for building permits to reconstruct
damaged and destroyed buildings and sought a Non-Conforming Use Certificate to
permit the fuel oil distribution use only. On August 20, 2004, the Superior
Court of New Jersey ruled that the Company may continue to use the site as a
non-conforming use, but stayed its decision subject to Newton's appellate
rights. On November 3, 2004, the Town of Newton Zoning Board of Adjustment
entered a filing to appeal the August 20, 2004 Final Judgment of Judge B.
Theodore Bozonelis of the Superior Court of New Jersey Appellate Division. On
May 11, 2005, The Superior Court of the State of New Jersey - Appellate
Division, ruled in favor of the Company, and upheld the August 2004 decision,
which permitted the Company to use its Newton facility as a fuel storage and
distribution facility for #2 home heating oil, diesel fuel, and kerosene.
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 were approximately 200 claims being handled and
adjusted with reserves for losses established as deemed appropriate by the
insurance carrier. The majority of these claims have now been settled.
In addition, the following lawsuits were also filed against the Company by
property owners who allegedly suffered property damage as a result of the March
14, 2003 explosion and fire: (A) Merriam Gateway v. Able Energy, Inc. which was
filed on November 17, 2003 in the Superior Court of New Jersey Law Division,
County of Sussex in which the plaintiff seeks unspecified compensatory and
punitive damages; (B) Courtright v. Able Energy, Inc. which was filed on April
6, 2003 in the Superior Court of New Jersey Law Division, County of Sussex in
which the plaintiff seeks unspecified compensatory and punitive damages; and (C)
Marius and Jennifer Scholz v. Able Energy, Inc. which was filed on June 23, 2004
in the Superior Court of New Jersey Law Division, County of Sussex in which the
plaintiff seeks unspecified compensatory and punitive damages. (D) June Bergen
v. Able Energy, Inc. which was filed on March 3, 2005 in the Superior Court of
New Jersey Law Division, County of Sussex in which the plaintiff seeks
unspecified personal injury damages. (E) Charles J. Balassone V. Able Energy,
Inc., et al. was filed in March of 2005 seeking unspecified personal injury
damages. The Company's insurance carrier is defending these claims.
The Company in the normal course of business has been involved in lawsuits.
Current suits are being defended by the insurance carrier and should be covered
by insurance.
The Company is not currently involved in any other legal proceedings that could
have a material adverse effect on the results of operations or the financial
condition of the Company. From time to time, the Company may become a party to
litigation incidental to its business. There can be no assurance that any future
legal proceedings will not have a material adverse affect on the Company.
ITEM 2. UNREGISTERED SALES OF EQUITY 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.
26
ITEM 6. 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
27
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.
ABLE ENERGY, INC.
(Registrant)
/s/ Christopher P. Westad
Date: May 16, 2005 --------------------------
Christopher P. Westad
Interim Chief Executive Officer
/s/ Christopher P. Westad
Date: May 16, 2005 --------------------------
Christopher P. Westad
President, Chief Financial Officer and
Director (Principal Financial and
Accounting Officer)
28