SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the Fiscal Year ended June 30, 2002
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------------------- ----------------------
Commission file number: 333-59109
ABLE ENERGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3520840
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
198 GREENPOND ROAD
ROCKAWAY, NJ 07866
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (973) 625-1012
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of class)
Indicate by check mark 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[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [ ]
The Issuer's Revenues for the Most Recent Fiscal Year, June 30, 2002, was
$26,723,482.
The aggregate market of the voting stock held by non-affiliates of the
registrant was approximately $4,395,488 as of the close of business on September
16, 2002.
The number of shares of Common Stock, $.001 par value, issued and
outstanding as of September 16, 2002 was 2,013,250.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY
Able Energy was incorporated on March 13, 1997 in the state of Delaware,
to act as a holding company for five operating subsidiaries: Able Oil; Able
Propane; Able Melbourne; Able Montgomery and A&O.
In August 1999, the company formed a wholly-owned subsidiary, Able Energy
Terminal, LLC for the sole purpose of purchasing property located at 344 Route
46 in Rockaway, New Jersey for the Company's operations.
In August 1999, the company formed a wholly-owned subsidiary, Able Energy
New York, Inc. for the sole purpose of purchasing B&B Fuels, an acquisition in
Warrensburg, New York. This acquisition sold heating oil, diesel fuel, and
kerosene and the Company added propane gas as an additional product shortly
after the acquisition.
On December 29, 1998, the Company sold all of its outstanding shares of
Able Montgomery, its Pennsylvania retail heating oil distributor, to an
unaffiliated third party in exchange for monetary consideration and a ten-year
franchise agreement with the buyer.
On December 31, 1998, the Company sold all of its outstanding shares of
common stock of A&O, its environmental consulting and engineering subsidiary, to
Owl Environmental, Inc., one of A&O's subcontractors, for nominal consideration.
The Company decided to sell A&O in light of A&O's continuing operating losses.
In October 2000, the Company began operations of a majority-owned
subsidiary, PriceEnergy.com, Inc. PriceEnergy was developed in order to bring
about efficient transactions in the liquid fuels market by streamlining the
ordering and delivery process utilizing Internet technology.
OVERVIEW
The Company is engaged in the retail distribution of, and the provision of
services relating to, home heating oil, propane gas and diesel fuels. In
addition to selling liquid energy products, the Company offers complete HVAC
(heating, ventilation and air conditioning) installation and repair and also
markets other petroleum products to commercial customers, including on-road and
off-road diesel fuel, gasoline, and lubricants.
In fiscal year 2002, sales of home heating oil accounted for approximately
58% of the Company's revenues. The remaining 42% of revenues were from sales of
gasoline, diesel fuel, kerosene, propane, home heating equipment services, and
related sales. The Company now serves approximately 26,000 home heating oil
customers from three locations, of which two are located in New Jersey and one
is located in Florida.
The Company also provides installation and repair of heating equipment as
a service to its customers. The Company considers service and installation
services to be an integral part of its business. Accordingly, the Company
regularly provides service incentives to obtain and retain customers. The
Company provides home heating equipment repair service on a 24 hours-a-day,
seven days-a-week basis, generally within four hours of request. Except in
isolated instances, the Company does not provide service to any person who is
not a customer.
The Company believes that it obtains new customers and maintains existing
customers by offering full service home energy products at discount prices,
providing quick response refueling and repair operations, providing automatic
deliveries to customers by monitoring historical use and weather patterns, and
by providing customers a variety of payment options. The Company also regularly
provides service incentives to obtain and retain customers. The Company
aggressively promotes its service through a variety of direct marketing media,
including mail and telemarketing campaigns, by providing discounts to customers
who refer new customers to the Company, and through an array of advertising,
including television advertisements and billboards, which aim to increase brand
name recognition. The Company believes that this focused marketing strategy has
been key to its success.
The Company intends to expand its operations by acquiring select operators
in the Company's present markets as well as other markets, capturing market
share from competitors through increased advertising and other means,
diversifying its products, diversifying its customer base, and replicating its
marketing and service formula in new geographic areas either directly or through
franchise arrangements. The Company may also enter into marketing alliances with
other entities in product areas different than the Company's current product
mix.
RETAIL FUEL OIL
The Company's retail fuel oil distribution business is conducted through
its subsidiaries Able Oil, Able Energy New York, Inc., and Able Melbourne. The
Company serves both residential and commercial fuel oil accounts. The Company
sells premium quality home heating oil to its residential customers offering
delivery seven days-a-week. To its commercial customers, in addition to selling
home heating oil, the Company sells diesel fuels, gasoline and kerosene. The
Company also provides an oil burner service that is available 24 hours-a-day for
the maintenance, repair, and installation of oil burners. These services are
performed on an as needed basis. Customers are not required to enter into
service contracts to utilize the Company's service department, however the
Company does offer such service contracts if desired.
Approximately 50% of the Company's customers receive their home heating
oil pursuant to an automatic delivery system without the customer having to make
an affirmative purchase decision. These deliveries are scheduled by computer,
based on each customer's historical consumption patterns and prevailing weather
conditions. Customers can also order deliveries of home heating oil through the
Company's Web site located at WWW.ABLEENERGY.COM, or the Company's Subsidiary
PriceEnergy.com's Web site at www.priceenergy.com. The Company delivers home
heating oil approximately six times each year to the average customer. The
Company bills customers promptly upon delivery or receives payment upon
delivery. The Company's customers can pay for fuel deliveries with cash, check
or credit card.
In addition, approximately 10% of the Company's total sales are made to
customers pursuant to an agreement which pre-establishes the maximum annual
sales price of fuel oil and is paid by customers over a ten month period in
equal monthly installments. Such prices are renegotiated in April of each year
and the Company has historically purchased fuel oil for these customers in
advance and at a fixed cost.
The Company delivers fuel with its own fleet of 25 custom fuel oil trucks
and five owner-operator fuel oil delivery trucks. The Company's fuel trucks have
fuel capacities ranging from 3,000 to 8,000 gallons. Each vehicle is assigned to
a specific delivery route, and services between 4 and 40 customer locations per
day depending on market density and customers' fuel requirements. The Company
also operates 14 Company owned service vans and one owner-operated service vans,
which are equipped with state of the art diagnostic equipment necessary to
repair and/or install heating equipment. The number of customers each van serves
mostly depends upon the number of service calls received on any given day.
ABLE OIL
Able Oil was established in 1989 and is the Company's largest subsidiary,
accounting for approximately 83% of the Company's total revenues in fiscal 2002.
Able Oil is headquartered in Rockaway, New Jersey, and serves just under 25,000
oil customer accounts throughout northern New Jersey, mostly in Morris, Sussex,
Warren, Passaic and Essex counties, from its distribution locations in Rockaway
and Newton, New Jersey. Of these accounts, approximately 85% are residential
customers and 15% are commercial customers.
Generally, 20 of the Company's fuel oil trucks are reserved for use by
Able Oil, of which 12 trucks operate from the Rockaway facility and eight trucks
operate from the Newton, New Jersey, facility. In addition, Able Oil utilizes
the services of six owner-operated trucks. Each owner operator is under
contract; they are responsible for all of the vehicle operating expenses
including insurance coverage. All of the trucks have the Company's logo on them.
Able Oil's 20 fuel oil delivery trucks, and the six owner-operator trucks,
acquire fuel inventory at the Company's facilities in Rockaway and Newton.
Dispatch of fuel oil trucks is conducted at both the Rockaway and Newton
facilities. Billing is conducted from Able Energy's corporate headquarters in
Rockaway.
The Rockaway and Newton facilities have the capacity to store 1.5 million
gallons and 200,000 gallons of fuel, respectively. During seasons where demand
for heating oil is higher, or when wholesale oil prices are favorable, a
slightly larger inventory is kept on hand. However, Management generally
believes that short inventory life and high inventory turnover enables the
Company to rapidly respond to changes in market prices. Thus, Management employs
"just in time" inventory practices and rarely stores fuel to capacity levels.
Additional fuel oil purchases are made daily on the spot market using electronic
funds transfers. Able Oil carts its fuel purchases from wholesale purchase sites
to the Rockaway and Newton facilities with two tractor-trailer tankers owned by
the Company, and by two owner-operated tractor-trailer tankers that are used on
an as needed basis. These two owner-operated tankers are under contract and bear
the Able logo or name.
Able Oil's oil burner service operates exclusively out of the Newton
facility. Able Oil dispatches a total of 15 service vans, one of which is
subcontracted from an owner-operator.
ABLE MELBOURNE
Able Melbourne was established in July 1996, and is located in Cape
Canaveral Florida. Presently, revenues from Able Melbourne account for
approximately 3% of the Company's total revenues. Able Melbourne is engaged
primarily in the sale of diesel fuel for commercial fleet fueling and other
on-road vehicles, and dyed diesel fuel, which is used for off-road vehicles and
purposes, including commercial and recreational fishing vessels, heating oil,
and generator fuel. Additionally, a small portion of Able Melbourne's revenues
is generated from the sale of home heating oil, lubricants and lubricant
products. Able Melbourne serves approximately 300 customer accounts in Brevard
County, Florida, primarily in the Cape Canaveral Area.
Able Melbourne delivers fuel with two fuel delivery trucks, which are
capable of storing 6,000 gallons of fuel in aggregate. Because Able Melbourne's
peak season is at the opposite time of the year than the rest of the Company,
during this season, Able Melbourne uses one of Able Oil's trucks to meet its
demand. Currently, Able Melbourne does not have facilities to store fuel oil
beyond what is held on its trucks, and thus, purchases fuel inventory from local
refineries. However, since Able Melbourne is located only three miles from port
storage, the lack of inventory capacity is not material to the Company's
operations or revenue.
RETAIL PROPANE DISTRIBUTION
The Company is engaged in the retail distribution of propane gas and
propane equipment, and provides services related thereto through its subsidiary
Able Propane. Able Propane, based in Rockaway, New Jersey, was established 1996
as part of the Company's efforts to increase market penetration through
diversification. Able Propane serves approximately 3,200 accounts, the majority
of which are located in northern New Jersey.
Propane can be used for virtually all household and business utility
applications. Of Able Propane's customers, approximately 50% use propane for hot
water heating and cooking; approximately 10% use propane for pool heating; and
approximately 40% use propane for home heating. Although burned as a gas,
propane is transported as a liquid and stored in tanks that vaporize the liquid
for use. Able Propane provides its customers with such tanks at no charge, and
by doing so, remains such customer's exclusive supplier of propane. Able Propane
employs a delivery system similar to the Company's retail oil distribution
business, whereby customers receive propane deliveries pursuant to an automatic
delivery system without the customer having to make an affirmative purchase
decision. These deliveries are scheduled by computer, based on each customer's
historical consumption patterns and prevailing weather conditions.
With a continued marketing effort, the Company believes that Able Propane
has the opportunity to gain a larger share of the New Jersey energy market by
converting electricity users to propane, and by encouraging owners of
newly-constructed homes and buildings to select propane as their energy source.
The Company also believes that the use of propane as an alternate fuel for cars,
trucks and public transportation to meet clean air requirements, poses a great
opportunity for future growth.
Able Propane's base of operations is located in Rockaway, New Jersey, at
the Company's headquarters. Currently, Able Propane has no propane storage
facilities, and its only investment in propane inventory is what can be stored
on its four propane delivery trucks. The delivery trucks have the capacity to
deliver 3,000 gallons of propane, and can service approximately 35 customers per
day. Able Propane purchases wholesale propane on the spot market at local
facilities. The Company is considering plans to lease or build a facility that
would enable Able Propane to store approximately 30,000 gallons of propane.
PRICEENERGY
PriceEnergy started business in October 2000 and is a majority-owned
subsidiary of Able Energy, Inc. PriceEnergy was developed in order to bring
about efficient transactions in the liquid fuels market by streamlining the
ordering and delivery process utilizing Internet technology. PriceEnergy has
developed a business technology platform that enables the company to sell and
deliver liquid fuels and related energy products. This has been possible by
utilizing a branded distribution channel of dealers and Able Energy's own
delivery network. By leveraging its proprietary web technology and wireless
dispatch platform, PriceEnergy intends to achieve cost leadership and create a
competitive advantage in the industry.
PriceEnergy is currently completing its dealer network throughout New
York, Pennsylvania, Connecticut, and New Jersey. Products and services will be
ordered over the Internet and forwarded to the local dealer to schedule
delivery. PriceEnergy receives payment and retains a four cent per gallon
override on all oil ordered through the system.
Once the proper dealer network is in place, the company expects that about
20 million gallons will be ordered in the following fiscal year. This will
result in a minimum gross revenue stream of $800,000, which is approximately the
break-even point of the enterprise.
EFFECT OF CHANGES IN GENERAL ECONOMY
The Company's business is relatively unaffected by business cycles.
Because fuel oil, propane and gasoline are such basic necessities, variations in
the amount purchased as a result of general economic conditions are limited.
CUSTOMER STABILITY
The Company has a relatively stable customer base due to the tendency of
homeowners to remain with their traditional distributors. In addition, a
majority of the home buyers tend to remain with the previous owner's
distributor. As a result, the Company's customer base each year includes most
customers retained from the prior year, or home buyers who have purchased from
such customers. Like many other companies in the industry, the Company delivers
fuel oil and propane to each of its customers an average of approximately six
times during the year, depending upon weather conditions and historical
consumption patterns. Most of the Company's customers receive their deliveries
pursuant to an automatic delivery system, without the customer having to make an
affirmative purchase decision each time home heating oil or propane is needed.
In addition, the Company provides home heating equipment repair service on a
seven-days-a-week basis.
No single customer accounts for 10% or more of the Company's consolidated
revenues.
CONVERSION TO NATURAL GAS
The rate of conversion from the use of home heating oil to natural gas is
primarily affected by the relative prices of the two products, and the cost of
replacing oil fired heating systems with one that uses natural gas. The Company
believes that approximately 1% of its customer base annually converts from home
heating oil to natural gas. Even when natural gas had a significant price
advantage over home heating oil, such as in 1980 and 1981 when there were
government controls on natural gas prices or during the Persian Gulf Crisis in
1990 and 1991, the Company's customers converted to natural gas at only a 2%
annual rate. During the latter part of 1991 and through 1995, natural gas
conversions have returned to their 1% historical annual rate as the prices for
the two products have been at parity.
OIL PRICE VOLATILITY
Although prices of energy sources have been volatile, historically, this
has not affected the performance of the Company because it has been able to pass
substantially all wholesale cost increases along to its customers. While
fluctuations in wholesale prices have not significantly affected demand to date,
it is possible that significant wholesale price increase could have the effect
of encouraging conservation of energy resources. If demand was reduced and the
Company was unable to increase its gross profit margin or reduce its operating
expenses, the effect of such decrease in demand would be a reduction of net
income.
SEASONALITY
The Company's business is directly related to the heating needs of its
customers. Accordingly, the weather can have a material effect on the Company's
sales in any particular year. Generally, however, the temperatures in the past
thirty years have been relatively stable, and as a result, have not had a
significant impact on the Company's performance, except on a short-term basis.
In the years 1997 and 2001, "El Nino" caused two of the warmest winters on
record, which impacted home heating oil sales during the 1997-1998 and 2001-2002
winter seasons. Conversely, the winter of 2000-2001 was approximately 11% colder
than normal, resulting in record revenues for Able Energy.
Approximately 60% 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 home heating oil. During the spring and summer months,
revenues from the sale of diesel and gasoline fuels increase due to the
increased use of automobiles and construction apparatus.
Each of the Company's divisions are seasonal. From May through September,
Able Oil experiences considerable reduction of retail heating oil sales.
Able Propane can experience up to 80% decrease in heating related propane
sales during the months of April to September, which is offset somewhat by an
increase of pool heating and cooking fuel.
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 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.
WHOLESALE SUPPLIERS
The Company has three supply contracts for the purchase of Number 2
Heating Oil, representing 10% of the Company's annual heating fuel purchases.
The Company purchases its remaining fuel supplies on the spot market. The
Company satisfies its inventory requirements with nine different suppliers, the
majority of which have significant domestic fuel sources, and many of which have
been suppliers to the Company for over 5 years. The Company's current suppliers
are Ameranda Hess Corporation,.Motiva Enterprises, Petron Oil Corporation, Star
Enterprises, Sprague Energy, Petrocom Energy Group Ltd., Valero Marketing and
Supply Co., and Sun Co., Inc. (R&M). The Company monitors the market each day
and determines when to purchase its oil inventory and from whom. As of June
1998, the Company began storing supplies of fuel equal to a month's sales of
fuel because of unusually low fuel prices.
Three of these suppliers provided Able Oil with approximately 60% of its
heating oil requirements for the year ended June 30, 2002.
Coastal Refining & Marketing, Inc., provided Able Melbourne with
approximately 99% of its diesel fuel product requirements for the year ended
December 31, 1998. Two major suppliers provided Able Melbourne with
approximately 67% and 33%, respectively, of its lubricant and related product
requirements for the year ended June 30, 2002. Two major suppliers, Keystone
Propane and Propane Power, provided Able Propane with approximately 50% each, of
its propane requirements for the year ended December 31, 1998.
Management believes that if the Company's supply of any of the foregoing
products was interrupted, the Company would be able to secure adequate supplies
from other sources without a material disruption in its operations. However,
there can be no assurance that adequate supplies of such products will be
readily available in the future.
TRUCK PURCHASES AND MAINTENANCE
The Company presently orders and purchases its fuel oil trucks from two
companies that manufacture trucks suitable for the Company's operations. The
Company has the option to purchase or lease standard equipment fuel trucks. The
typical configuration of the Company's fuel trucks is a Kenworth with a 3,000
gallon multi-compartment aluminum tank, a vapor recovery system and a device
that records fuel flow from the storage compartments. Each truck carries the
Company's registered logo emblazoned on its side.
Service vehicles are standard commercial vans, which are obtained from a
number of sources. These vehicles also carry the Company logo.
Generally, the Company relies upon equipment warranties, fixed fee service
contracts and on-site repairs for the maintenance of the Company's fleet of
vehicles. To date, the Company has not experienced significant downtime on the
any of its fuel trucks.
FRANCHISE DEVELOPMENT
On December 29, 1999, the Company sold its Able Montgomery subsidiary as a
franchise operation. Able Montgomery located in Horsham, Pennsylvania, was
established in 1996 and is engaged in the retail sale and delivery of home
heating oil. Pursuant to a Stock Purchase Agreement, the Company sold all of the
outstanding shares of Able Montgomery held by the Company to an unaffiliated
third party for a purchase price of $140,000, and the purchaser agreed to enter
into a ten-year franchise agreement with the Company. As an incentive for the
purchaser to enter into the Stock Purchase Agreement and operate Able Montgomery
as a franchise, the Company agreed to waive the $25,000 franchise fee and the
$15,000 grand opening fee the Company typically charges new franchisees. At the
time of the sale, Able Montgomery represented approximately 1.52% of the total
assets of the Company and approximately 1.82% of the total revenues of the
Company.
The purchaser of Able Montgomery issued to the Company a promissory note
for the purchase price of Able Montgomery. On June 15, 2000, the promissory note
was restructured to include the amount still due, plus an additional amount for
purchases of oil and advertising, for a total principal amount of $175,000.
Pursuant to the Stock Purchase Agreement, the Company agreed to indemnify the
purchaser in certain circumstances, which include, any personal injury
or property damage claims, or any environmental violation, caused by the Company
prior to the closing of the sale of Able Montgomery. The purchaser agreed to
indemnify the Company in certain circumstances, which include, the breach of any
representation or warranty made by purchaser in the Stock Purchase Agreement or
any of the other agreements executed by the purchaser in connection with the
sale of Able Montgomery. Additionally, pursuant to the Stock Purchase Agreement,
the purchaser agreed to enter into a Pledge and Security Agreement whereby the
purchaser agreed to pledge to the Company all of the assets and outstanding
shares of Able Montgomery, and grant to the Company a security interest in all
of the assets of Able Montgomery, pending the satisfaction of the promissory
note. The promissory note is payable 60 months from the date of the note and
accrues interest at a rate of 9.5% per annum, payable to the Company in monthly
installments.
On June 27, 2000, the Company issued a franchise to an independent third
party for exclusive rights to operate our franchised business in the Pocono
Mountains, Pennsylvania. This franchise commenced business operations in
September 2000. In conjunction with issuance of the franchise, the franchisee
paid the company a non-refundable fee of $25,000, an advertising deposit of
$15,000 and a $5,000 escrow deposit. 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 pursuant to the
agreement.
1998 SALE OF A&O SUBSIDIARY
A&O was established in 1995 and was engaged in the business of
environmental consulting and engineering. After assessing the potential
profitability of A&O versus its potential liabilities, Management determined
that it was in the Company's best interest to sell A&O. During the year ended
December 31, 1999, A&O experienced a loss from operations of approximately
$152,000 on revenues of $734,032. At December 31, 1999, A&O's liabilities were
approximately $374,712 as compared to assets of $221,000. From its inception
through year ended December 31, 1998, the Company, through Able Oil, advanced to
A&O approximately $128,442. Pursuant to a Stock Purchase Agreement dated
December 31, 1998, the Company sold all of the outstanding shares of common
stock of A&O held by the Company to Owl Environmental, Inc. ("Owl"), one of
A&O's subcontractors, for nominal consideration. Owl purchased such shares "as
is" without recourse or express or implied warranty from the Company.
PRODUCT LINES
In fiscal year 2002, sales of home heating oil accounted for approximately
58% of the Company's revenues. The remaining 42% of revenues were from sales of
gasoline, diesel fuel, kerosene, propane, equipment sales and service, and
related sales. The Company also installs heating equipment and repairs such
equipment on a 24 hours-a-day, seven days-a-week basis, generally within four
hours of request.
INDUSTRY OVERVIEW
The Company's business is highly competitive. In addition to competition
from alternative energy sources, the Company competes with distributors offering
a broad range of services and prices, from full service distributors similar to
the Company, to those offering delivery only. Competition with other companies
in the propane industry is based primarily on customer service and price.
Longstanding customer relationships are typical in the retail home heating oil
and propane industry. Many companies in the industry, including the Company,
deliver fuel oil or propane to their customers based upon weather conditions and
historical consumption patterns without the customers having to make an
affirmative purchase decision each time fuel oil or propane is needed. In
addition, most companies, including the Company, provide equipment repair
service on a 24 hour-a-day basis, which tends to build customer loyalty. As a
result, the Company may experience difficulty in acquiring new retail customers
due to existing relationships between potential customers and other fuel oil or
propane distributors.
MARKETING, SALES & STRATEGIC PARTNERSHIPS
The Company employs a dynamic marketing strategy that the Company believes
has been the key to its success. The Company believes that it obtains new
customers and maintains existing customers by offering its full service home
energy products at discount prices, providing quick response refueling and
repair operations, providing automatic deliveries to customers by monitoring
historical use and weather patterns, and by providing customers a variety of
payment options. To expand its customer base and aggressively promote its
service, the Company engages in direct marketing campaigns, advertises
regularly, offers employee incentives, and encourages referrals.
The Company has successfully expanded its customer base by employing a
variety of direct marketing tactics, including telemarketing campaigns,
billboards, mass and direct mailings, and by distributing hand-bills and
promotional
items, such as refrigerator magnets, sweatshirts and hats. Additionally, the
Company's delivery personnel are an integral part of the Company's direct
marketing activities. While in the field, drivers isolate potential new
customers by taking note of where the Company is not servicing accounts, and act
as salespersons for the Company. The Company offers its drivers and customer
care representatives an incentive payment of $20 for each new automatic delivery
customer and $10 for each conversion of an existing customer to automatic
delivery.
The Company uses advertising campaigns to increase brand recognition and
expand its customer base, including radio and television advertisements,
billboards, and newsprint and telephone directory advertisements. Additionally,
the Company utilizes its fleet of fuel delivery trucks and service vans as
moving advertisements by emblazoning them with the Company's logo.
Historically, referrals have been an important part of the Company's
efforts to expand its business and the Company offers incentives to customers
who refer business. Customers who refer business receive either $30 or 25
gallons of heating oil at no charge for each new customer referred. The Company
also offers other special limited time promotional offers to customers, designed
to increase business in specific targeted business segments. The Company also
encourages civic and religious organizations to refer business to the Company.
As an incentive, the Company pays such organizations a donation for each of its
members who become customers and a stipend based upon the members' fuel
consumption.
PATENTS AND TRADEMARKS
Able Oil owns the exclusive right and license to use, and to license
others to use, the proprietary marks, including the service mark "Able Oil-
-Registered Trademark-" (and design) ("Proprietary Marks"). The "Able Oil-
-Registered Trademark-" service mark and design was registered under Classes 37
and 39 of the Principal Register of the U.S. Patent & Trademark Office ("USPTO")
on April 30, 1996 (registration No. 1,971,758). In addition, Able Oil
established certain common law rights to the Proprietary Marks through its
continuous, exclusive and extensive public use and advertising. The Proprietary
Marks are not registered in any state.
Presently there is no effective determination by the USPTO, Trademark
Trial and Appeal Board, the trademark administrator of any state, or court
regarding the Proprietary Marks, nor is there any pending interference,
opposition or cancellation proceeding or any pending litigation involving the
Proprietary Marks or the trade names, logotypes, or other commercial symbols of
Able Oil. There are no agreements currently in effect that significantly limit
the rights of Able Oil to use or license the use of the Proprietary Marks.
In December 2000, the Company was advised by the United States Patent and
Trademark Office that its applications for registration for the
"PriceEnergy.com" mark was assigned Serial No. 76/172083 and the
"PriceEnergy.com The Energy Hotspot" mark was assigned Serial No. 76/171829, as
of November 28, 2000.
ENVIRONMENTAL CONSIDERATIONS AND REGULATION
The Company has implemented environmental programs and policies designed
to avoid potential liability under applicable environmental laws. The Company
has not incurred any significant environmental compliance cost, and compliance
with environmental regulations has not had a material effect on the Company's
operating or financial condition. This is primarily due to the Company's general
policies of closely monitoring its compliance with all environmental laws. In
the future, the Company does not expect environmental compliance to have a
material effect on its operations and financial condition. The Company's policy
for determining the timing and amount of any environmental cost is to reflect an
expense as and when the cost becomes probable and reasonably capable of
estimation.
On July 6, 2000, Able Oil received approval from the New Jersey Department
of Environmental Protection a revised Discharge Prevention Containment and
Countermeasure plan ("DPCC") and Discharge, Cleanup and Removal plan ("DCR") for
the facility at 344 Route 46 East in Rockaway, New Jersey. This plan has
received approval and will be in effect for three years. The State of New Jersey
requires companies which operate major fuel storage facilities to prepare such
plans, as proof that such companies are capable of, and have planned for, an
event that might be deemed by the State to be hazardous to the environment. In
addition to these plans, Able Oil has this facility monitored on an ongoing
basis to ensure that the facility meets or exceeds all standards required by the
State.
The Company experienced no spill events that would warrant investigation
by state or other environmental regulatory agencies. All locations are prepared
to deal with such an event should one occur.
GOVERNMENT REGULATIONS
Numerous federal, state and local laws, including those relating to
protection of the environment and worker safety, effect the Company's
operations. The transportation of fuel oil, diesel fuel, propane and gasoline is
subject to regulation by various federal, state and local agencies including the
U.S. Department of Transportation ("DOT"). These regulatory authorities have
broad powers, and the Company is subject to regulatory and legislative changes
that can effect the economies of the industry by requiring changes in operating
practices or influencing demand for, and the cost of providing, its services.
The regulations provide that, among other things, the Company's drivers
must possess a commercial driver's licence with a hazardous materials
endorsement. The Company is also subject to the rules and regulations concerning
Hazardous Materials Transportation Act. For example, the Company's drivers and
their equipment must comply with the DOT's pre-trip inspection rules,
documentation regulations concerning hazardous materials (i.e. certificates of
shipments which describe the type, and amount of product transported), and
limitations on the amount of fuel transported, as well as driver "hours of
service" limitations. Additionally, the Company is subject to DOT inspections
that occur at random intervals. Any material violation of DOT rules or the
Hazardous Materials Transportation Act may result in citations and/or fines upon
the Company. In addition, the Company depends upon the supply of petroleum
products from the oil and gas industry and, therefore, is affected by changing
taxes, price controls and other laws and regulations relating to the oil and gas
industry generally. The Company cannot determine the extent to which future
operations and earnings may be affected by new legislation, new regulations and
changes in existing regulations.
The technical requirements of these laws and regulations are becoming
increasingly expensive, complex and stringent. These laws may impose penalties
or sanctions for damages to natural resources or threats to public health and
safety. Such laws and regulations may also expose the Company to liability for
the conduct or conditions caused by others, or for acts of the Company that were
in compliance with all applicable laws at the time such acts were performed.
Sanctions for noncompliance may include revocation of permits, corrective action
orders, administrative or civil penalties and criminal prosecution. Certain
environmental laws provide for joint and several liabilities for remediation of
spills and releases of hazardous substances. In addition, companies may be
subject to claims alleging personal injury or property damages as a result of
alleged exposure to hazardous substances, as well as damage to natural
resources.
Although the Company believes that it is in compliance with existing laws
and regulations and carries adequate insurance coverage for environmental and
other liabilities, there can be no assurance that substantial costs for
compliance will not be incurred in the future or that the insurance coverage in
place will be adequate to cover future liabilities. There could be an adverse
affect upon the Company's operations if there were any substantial violations of
these rules and regulations. Moreover, it is possible that other developments,
such as more stringent environmental laws, regulations and enforcement policies
thereunder, could result in additional, presently unquantifiable, costs or
liabilities to the Company.
EMPLOYEES
As of June 30, 2002, the Company employed approximately 68 individuals.
From October through March, the Company's peak season, the Company employs
approximately 100 persons. From April through September, the Company employs
approximately 65 persons. Currently, there are no organized labor unions
representing any of the employees of Company or any of its related companies.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's corporate headquarters are located in a 9,800 square foot
facility in Rockaway, New Jersey. This facility accommodates the Company's
corporate, administrative, marketing and sales personnel. The lease expires July
31, 2005 and carries an annual rent increasing from $109,000 to $290,000 over
the term of the lease. The Company owns the property located at 344 Route 46 in
Rockaway, New Jersey. This facility accomodates the Company's fuel terminal,
including fuel storage tanks, truck yard space and dispatch operations. The
Company purchased the property in August 1999, through a newly formed
wholly-owned subsidiary, Able Energy Terminal, LLC, at a purchase price of
$1,150,000. The Company also owns two buildings, totaling 4,512 square feet,
consisting of wood frame facilities located at 38 Diller Avenue, Newton, New
Jersey that serves as a supply depot, storage area administrative offices and
service facility.
The Company also leased an additional facility on Route 46 in Rockaway,
New Jersey. The lease has a term of one year from September 1, 1999 to August
31, 2000. The rent was $1,300 per month, $15,600 for the year, plus 10% of the
increase in real estate taxes over the base year, 1999. The Company had the
option to renew for five additional one-year terms. The Company vacated this
leased facility in October 2000.
Able Melbourne leases a 4,000 square foot concrete and aluminum facility
that serves as a storage facility, a service facility and administrative
offices, located at 757 Scallop Drive, Port Canaveral, Florida and is governed
by an oral, month-to-month lease with annual rent of $6,000. The Company does
not store fuel oil at this location with the exception of that which is kept in
the delivery trucks. This facility is conveniently located within three miles of
its
wholesale supplier. The Company is responsible for maintaining the facilities in
compliance with all environmental rules and laws.
ITEM 3. LEGAL PROCEEDINGS
In accordance with the purchase of the property on Route 46, Rockaway, New
Jersey by Able Energy Terminal, LLC, the Company intends to pursue recovery of
all costs and damages related to a lawsuit by the seller against a former tenant
of the property, based on environmental cleanup costs on the property. Purchaser
will assume all responsibility and direction for the lawsuit, subject to the
sharing of half of any recoveries from the lawsuit with the seller. The seller
by reduction of its mortgage will pay costs related to the above up to $250,000.
In December of 2000, the Company reached an agreement with the former tenants
whereby the former tenants agreed to pay Able Energy, Inc. the sum of $397,000
in order to pay for the environmental cleanup costs on the Company's Route 46
property. PriceEnergy has commenced suit against ThinkSpark Corporation based on
claims of breach of a Consulting Services Agreement, dated June 2, 2000. Under
the agreement, ThinkSpark was to develop, deliver and install a data processing
software system to be operational by mid-August 2000. ThinkSpark ceased work in
mid-October 2000, prior to completion of the project, and PriceEnergy hired
another firm to continue the project. ThinkSpark has filed a counterclaim
seeking payment of $283,100.62, which is the total amount of bills rendered. The
Company reached a settlement agreement with ThinkSpark Corporation whereby the
Company paid the sum of $30,000 to ThinkSpark representing payment in full for
the partial work done by ThinkSpark and agreed settlement in full.
Except as noted above, the Company is not currently involved in any legal
proceeding that could have a material adverse effect on the results of
operations or the financial condition of the Company. From time to time, the
Company may become a party to litigation incidental to its business. There can
be no assurance that any future legal proceedings will not have a material
adverse affect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote and ratified at our annual
meeting held in Rockaway, New Jersey on Friday June 21, 2002.
(1) Elected a board of seven directors to hold office until the 2003 Annual
Meeting of Shareholders and until their successors are elected and qualified;
FOR AGAINST ABSTAIN
Timothy Harrington 1,948,100 0 1,000
Christopher P. Westad 1,949,100 0
James Pucaro 1,949,100 0
Gregory Sichenzia 1,949,100 0
Patrick O'Neill 1,949,100 0
Edward C. Miller, Jr. 1,949,100 0
Ron J. Ponder 1,949,100 0
(2) Ratified the selection of Simontacchi & Company, LLP as our auditors for the
fiscal year ending June 30, 2003.
FOR AGAINST ABSTAIN
1,949,100 0 0
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET FOR SECURITIES
The Company's Common Stock commenced trading on the Nasdaq SmallCap Market
under the symbol "ABLE" on June 29, 1999. The following table sets forth the
high and low sale price of the Common Stock on a quarterly basis, as reported by
Nasdaq:
QUARTER ENDED HIGH PRICE ($) LOW PRICE ($)
------------------------------------------------------------------
June 30, 2000 6 4 1/4
September 30, 2000 5 1/4 3
December 31, 2000 4 1 5/8
March 31, 2001 3 9/16 2
June 30, 2001 6.75 2.35
September 30, 2001 5.89 3.70
December 31, 2001 4.58 3.55
March 31, 2002 4.72 3.34
June 30, 2002 4.55 3.30
At September 23, 2002, there were approximately 600 holders of record of
the Company's Common Stock. The Company has not paid dividends on its shares of
Common Stock outstanding in the past. There are no restrictions that limit the
ability of the Company to pay dividends or are likely to do so in the future.
RECENT SALE OF UNREGISTERED SECURITIES
None.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ABLE ENERGY, INC. AND SUBSIDIARIES
Statements in this Annual Report on Form 10-KSB 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 matter 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
YEAR ENDED JUNE 30, 2002, COMPARED TO THE YEAR ENDED JUNE 30, 2001.
The Company reported revenues of $26,723,482 for the year ended June
30, 2002, a decrease of 21.29% over the prior year's revenues of
$33,953,373 for the same period. This decrease can be attributed
primarily to a decrease in the cost of product (mainly home heating
oil) and the resulting lower retail sales price, which was sold by the
Company below the prices that the Company sold the same products the
prior year. In addition, the winter of 2001/2002 was abnormally warm,
making it the warmest temperatures on record for the last 125 years.
Gross profit margin, as a percentage of revenues, for the year ended
June 30, 2002, increased to 18.98% from 15.22%. The increase in margin
is primarily a result of the Company's new margin management policy.
This program, which was introduced in September of 2001, is designed
to maximize margins, by product segment, on each of the products and
services that it markets to the consumer. This program is
designed to promote product pricing that is in line with the specific
type of service provided.
Selling, General and Administrative expenses decreased by $618,367, or
10.38%, from $5,959,044 for the year ended June 30, 2001 to $5,340,677
for the year ended June 30, 2002. The lower costs resulted from a
decrease in telephone, repairs, consulting fees, and advertising. The
overall decrease in SG&A was achieved even with the operations of a
new subsidiary, PriceEnergy.com, included in the results of this year
but only nine months last year as PriceEnergy.com began its operations
in October of 2000. PriceEnergy had salaries, advertising, and
computer consulting costs of approximately $143,000 for the three
months ended September 30, 2001, the quarter that was not included in
the year ended June 30, 2001.
Operating loss for the year ended June 30, 2002 was $1,426,268, a
decrease of 20.73% over the Company's operating loss of $1,799,235 for
the year ended June 30, 2001. This decreased operating loss for the
year ended June 30, 2002 was directly attributable to the lower SG&A
expenses and sales at higher margins.
This net loss included the results of a new subsidiary, Price
Energy.com, which had a loss of $1,010,682 for the year ended June 30,
2002. The subsidiary began operations in October 2000. Other causes
that reduced income included warmer weather. The entire Northeast,
which includes the Company's main area of operations, experienced the
warmest winter season in 125 years which also significantly reduced
income during the primary heating season of the six-month period
October through March. In addition, interest income decreased and the
Company's gross margin was lower during the quarter ended September
30th 2001, prior to full implementation of the new margin management
program.
OPERATIONAL EFFICIENCY
The Company believes that it can continue to significantly increase
the utilization of existing personnel and equipment, thereby reducing
expenses and increasing profitability, within its current business
configuration.
During this past fiscal year, in September of 2001, the Company
implemented a new margin management program which is a policy and
system that was designed to increase profitability without sacrificing
customer appeal. 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.
Within the new margin matrix that the Company has implemented, product
pricing has been put into line with the level of service and specific
product packages provided to the consumer. This pricing methodology is
now being introduced into the service department with the initial
implementation of "Flat Rate Pricing" which will introduce enhanced
margins into the service sector of the Company's business.
For those consumers requiring more in depth or full-service, prices
have been adjusted appropriately to match the level of the services
provided. This new margin management program has already begun to
yield positive results for the Company as evidenced by the 3.8%
increase in Gross Profit for the year 2002 vs. 2001. The Company
believes that this trend of increasing gross profit will continue into
the 2003 fiscal year.
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 believes, in the current down economy, that it can
significantly increase its ability to provide superior customer
service from its Rockaway Call Center while at the same time operating
its administration more efficiently through the use of newly installed
Customer Relationship Management software. By utilizing existing
telephony hardware and in-house management, the Company's call center
environment will be provided with the ability to respond to changing
call patterns, both higher and lower, without the expense of clerical
over-staffing to meet unrealized needs. Full implementation and
integration of this software has now been completed.
The Company also has an arrangement with a service provider to make
available a further level of automation into the existing call center
using voice- activated technology. This software will provide
customers with the option of placing an order via a "Voice Driven
Order Entry System". This technology will enable existing 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 believes that this system will
further reduce its call center costs as this new system is put into
place this fall. An additional benefit is that the cost for this
enhancement will be paid for only as operational savings are realized.
The Company's full implementation of the previously announced
Automated Dispatch Technology is approximately 80% complete as of the
period ending June 30, 2002. This technology will enable the
organization to increase the efficiency, productivity, and
profitability of its equipment service and fuel delivery dispatch
systems. The initial rollout of this system is focusing on the
Company's heating oil service department. This is in line with the
organization's current initiative to maximize its customer service on
all of its in-home services.
Within the home heating equipment service environment, this technology
is providing management with the ability to communicate with service
technicians instantaneously via wireless CDPD technology to perform
billing functions at the
customer's location and receive and input payment information
remotely. In addition, management will be aware of the status of every
on-duty worker and provide real time reporting for stand-by, enroute,
and service work time thus maximizing scheduling opportunities and
eliminating service technician down time. All service vehicles have
been equipped with GPS (Global Positioning System) to track the
ongoing location, ground speed, and vehicle movement history for both
service and delivery personnel. It is expected that the Company will
also have full implementation of this technology on all of its
delivery vehicles by the end of this current fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended June 30, 2002, compared to the year ended June 30,
2001, the Company's cash position decreased by $1,230,458 from
$1,489,018 to $258,560. For the year ended June 30, 2002, cash was
generated through collections of customer advance payments, and an
increased loan from the bank. The primary reason for reduction in cash
was a loan to PriceEnergy.com, Inc. and a reduction in accounts
payable and installment debt.
During the year ended June 30, 2001, cash was generated through
collection of customer advance payments and a loan from an outside
individual.
In September 2002, the Company entered into an agreement and received
a loan of $750,000 from a private company. The Company is in
discussion on the consolidation of a large portion of its existing
debt and obtaining a working capital line of credit in the $2 - $2.5
million dollar range. This will enable the Company to continue to grow
while strengthening its infrastructures.
SEASONALITY
The Company's operations are subject to seasonal fluctuations, with a
majority of the Company's business occurring in the late fall and
winter months. Approximately 70% of the Company's revenues are earned
and received from October through March, most of such revenues are
derived from the sale of home heating products including propane gas
and home heating oil. The warmer weather in the nine months ended June
30, 2002 reduced the sale of heating oil by approximately 14.3%. The
heating season, September through March, resulted in a 32% decrease in
degree-days, comparing the period in the years 2001 and 2000. The
Company still continued to grow its customer base in the period ended
June 30, 2002. The Company is attempting to reduce the effects of
weather on the seasonality of its business through greater emphasis on
equipment sales and by the addition of a commission based diesel sales
representative.
In general, the seasonality of the Company's business is offset, in
part, by an increase in revenues from the sale of HVAC products and
services, diesel and gasoline fuels
during the spring and summer months, due to the increased use of
automobiles and construction apparatus.
From May through September, Able Oil can experience considerable
reduction of retail heating oil sales. Similarly, Able Propane can
experience up to 75% 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 7. FINANCIAL STATEMENTS
All financial information required by this Item is attached hereto
beginning on Page F-1.
ABLE ENERGY, INC.
JUNE 30, 2001 AND 2000
C O N T E N T S
PAGE
CONSOLIDATED FINANCIAL STATEMENTS:
ACCOUNTANTS' REPORT F-2
CONSOLIDATED BALANCE SHEET F-3 - F-4
CONSOLIDATED STATEMENT OF OPERATIONS F-5
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY F-6
CONSOLIDATED STATEMENT OF CASH FLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-9 - F-31
F-1
TO THE BOARD OF DIRECTORS
ABLE ENERGY, INC.
ROCKAWAY, NEW JERSEY 07866
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of Able Energy, Inc.
and subsidiaries as of June 30, 2002 and the related consolidated statements of
operations, changes in Stockholders' equity, and cash flows for the years ended
June 30, 2002 and 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, based on our audits the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Able Energy, Inc. and subsidiaries as of June 30, 2002, and the
results of their operations and their cash flows for the years ended June 30,
2002 and 2001 in conformity with accounting principles generally accepted in the
United States of America.
Simontacchi & Company, LLP
Rockaway, New Jersey
September 16, 2002
F-2
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
ASSETS
2002
----
CURRENT ASSETS:
Cash $ 258,560
Accounts Receivable (Less Allowance for Doubtful
Accounts of ($242,358) 1,933,526
Inventory 405,424
Notes Receivable - Current Portion 32,756
Miscellaneous Receivables 113,905
Prepaid Expenses 228,839
Prepaid Expense - Income Taxes 2,733
Deferred Income Tax 65,703
Due From Officer 44,690
-----------
TOTAL CURRENT ASSETS 3,086,136
-----------
PROPERTY AND EQUIPMENT:
Land 451,925
Buildings 1,096,046
Trucks 3,037,192
Fuel Tanks 1,190,153
Machinery and Equipment 576,123
Leasehold Improvements 578,792
Cylinders 731,692
Office Furniture and Equipment 200,640
Website Development Costs 2,200,511
-----------
10,063,074
Less: Accumulated Depreciation and Amortization 3,461,342
-----------
NET PROPERTY AND EQUIPMENT 6,601,732
-----------
OTHER ASSETS:
Deposits 70,570
Notes Receivable - Less Current Portion 216,628
Customer List, Less Accumulated Amortization of ($188,122) 422,728
Covenant Not to Compete, Less Accumulated Amortization of ($56,667) 43,333
Development Costs - Franchising 36,764
-----------
TOTAL OTHER ASSETS 790,023
-----------
TOTAL ASSETS $10,477,891
===========
See Accompanying Notes and Auditor's Report
F-3
ABLE ENERGY, INC. AND SUBSIDIARIES
BALANCE SHEET (CONT'D)
JUNE 30, 2002
LIABILITIES & STOCKHOLDERS' EQUITY
2002
----
CURRENT LIABILITIES:
Accounts Payable $ 1,159,341
Note Payable - Bank 1,470,000
Note Payable - Other 500,000
Current Portion of Long-Term Debt 584,384
Accrued Expenses 309,363
Accrued Taxes 24,673
Customer Pre-Purchase Payments 880,111
Customer Credit Balances 548,336
Escrow Deposits 28,472
Note Payable - Officer 55,000
-----------
TOTAL CURRENT LIABILITIES 5,559,680
DEFERRED INCOME 79,679
DEFERRED INCOME TAXES 54,712
LONG TERM DEBT: less current portion 1,522,680
-----------
TOTAL LIABILITIES 7,216,751
-----------
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 2,007,250 Shares 2,008
Paid in Surplus 5,687,230
Retained Earnings (Deficit) (2,428,098)
-----------
TOTAL STOCKHOLDERS' EQUITY 3,261,140
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,477,891
===========
See Accompanying Notes and Auditors' Report
F-4
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED JUNE 30, 2002 AND 2001
2002 2001
---- ----
NET SALES $26,723,482 $33,953,373
COST OF SALES 21,652,472 28,784,363
----------- -----------
GROSS PROFIT 5,071,010 5,169,010
----------- -----------
EXPENSES
Selling, General and Administrative Expenses 5,340,677 5,959,044
Depreciation and Amortization Expense 1,156,601 1,009,201
----------- -----------
Total Expenses 6,497,278 6,968,245
----------- -----------
INCOME (LOSS) FROM OPERATIONS (1,426,268) (1,799,235)
----------- -----------
OTHER INCOME (EXPENSES):
Interest and Other Income 214,707 404,290
Interest Expense (298,331) (236,599)
Directors' Fees (20,400) -
----------- -----------
Total Other Income (Expense) (104,024) 167,691
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (CREDIT) (1,530,292) (1,631,544)
PROVISION FOR INCOME TAXES (CREDIT) (8,037) (16,635)
----------- -----------
NET (LOSS) INCOME $(1,522,255) $(1,614,909)
=========== ===========
BASIC EARNINGS (LOSS) PER COMMON SHARE $ (.76) $ (.81)
----------- -----------
DILUTED EARNINGS PER COMMON SHARE $ (.76) $ (.81)
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,001,332 2,000,000
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,
ASSUMING DILUTION 2,001,332 2,000,000
=========== ===========
See Accompanying Notes and Auditors' Report
F-5
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2002 AND 2001
COMMON STOCK
.001 PAR VALUE
---------------
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SURPLUS EARNINGS EQUITY
------ ------ ------- -------- ------
Balance - July 1, 2000 2,000,000 $ 2,000 $5,662,775 $ 709,066 $6,373,841
Net Loss (1,614,909) (1,614,909)
---------- ----------
Balance - June 30, 2001 2,000,000 2,000 5,662,775 (905,843) 4,758,932
Sale of Common Stock 1,250 2 4,061 4,063
Issuance of Common Stock for Payment of
Directors' Fees 6,000 6 20,394 20,400
Net Loss (1,522,255) (1,522,255)
---------- ----------
Balance - June 30, 2002 2,007,250 $ 2,008 $5,687,230 $(2,428,098) $3,261,140
========= ======= ========== =========== ==========
See Accompanying Notes and Auditors' Report
F-6
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED JUNE 30, 2002 AND 2001
2002 2001
---- ----
CASH FLOW FROM OPERATING ACTIVITIES
-----------------------------------
Net (Loss) - Continuing Operations $ (1,522,255) $ (1,614,909)
Adjustments to Reconcile Net Income to Net Cash
used by Operating Activities:
Depreciation and Amortization 1,156,601 1,009,201
Gain on Disposal of Equipment (331) (35,434)
(Increase) Decrease in:
Accounts Receivable (113,670) 381,984
Inventory (38,098) (63,807)
Prepaid Expenses (117,275) (29,154)
Prepaid Income Taxes 81,171 36,047
Deposits 30,713 (47,035)
Deferred Income Tax - Asset (6,973) (10,460)
Increase (Decrease) in:
Accounts Payable (496,146) (286,809)
Accrued Expenses (151,103) 184,675
Customer Advance Payments (444,138) 1,324,249
Customer Credit Balance 324,616 223,720
Deferred Income Taxes (1,064) (6,175)
Escrow Deposits 23,472 (10,000)
Deferred Income - (27,729)
------------ ------------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (1,274,480) 1,028,364
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES
-----------------------------------
Purchase of Property and Equipment (941,489) (1,469,504)
Web Site Development Costs 63,630 (1,163,049)
Increase in Deposits - (16,623)
Sale of Equipment 591 46,439
Notes Receivable - Sale of Equipment - (94,500)
Payment on Notes Receivable - Sale of Equipment 7,939 36,353
Note Receivable - Montgomery 644 (11,293)
Miscellaneous Receivables (75,272) 8,072
------------ ------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES $ (943,957) $ (2,664,105)
============ ------------
See Accompanying Notes
F-7
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
YEARS ENDED JUNE 30, 2002 AND 2001
2002 2001
---- ----
CASH FLOW FROM FINANCING ACTIVITIES
-----------------------------------
Increase in Notes Payable - Bank $ 1,470,000 $ 157,492
Note Payable - Other - 500,000
Note Payable - Officer 55,000 -
(Decrease) in Notes Payable - Bank (449,720) -
Decrease in Long-Term Debt (520,509) (738,916)
Increase in Long-Term Debt 408,745 959,203
Decrease Escrow Deposit Payable - (20,000)
Sale of Common Stock 24,463 -
----------- -----------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 987,979 857,779
----------- -----------
NET (DECREASE) INCREASE IN CASH (1,230,458) (777,962)
Cash - Beginning of Year 1,489,018 2,266,980
----------- -----------
Cash - End of Year $ 258,560 $ 1,489,018
=========== ===========
The Company had Interest Cash Expenditures of: $ 292,318 $ 230,849
The Company had Tax Cash Expenditures of: $ 13,400 $ 17,900
See Accompanying Notes
F-8
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND 2001
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------
CONSOLIDATION AND BASIS OF PRESENTATION
Change of Fiscal Year End:
The Board of Directors have elected to change the Company and
Subsidiaries' year end from December 31, to June 30, to more clearly
reflect the natural business year end when the business activities
have reached the lowest point in their annual cycle. The initial year
of the change was a six month short period year end, January 1, 2001
to June 30, 2001. The attached financial statements for the year ended
June 30, 2001 reflect the period July 1, 2000 through June 30, 2001
for comparative purposes.
The Company's financial statements have been prepared assuming the
Company will continue as a going concern. Significant losses were
incurred during the years ended June 30, 2002 and 2001, resulting in a
reduction of working capital and stockholders' equity. The Company as
of June 30, 2002, has a positive stockholders' equity of $3,261,140.
The Company's business plan is as follows:
1. Suspend the operations of its subsidiary, Price Energy.Com, Inc.,
which had a loss in excess of $1 million in the year ended June
30, 2002, and has been a drain on cash.
2. The Company is pursuing several sources of financing:
1. The Company is currently in talks to consolidate a large
potion of its existing debt into one facility and obtain a
working capital line of credit in the $2 - $2.5 million
range.
2. The Company is also working on a Stock Purchase Agreement
that will increase ownership equity.
3. The Company has received a loan of $750,000 in September
2002 from a privately owned entity.
3. The Company is working on a decrease in operating expenses, has
increased its gross margin during the past nine months and also
has budgeted higher sales for the 2002/2003 year, as sales of
primarily #2 heating oil were reduced in the 2001/2002 heating
season by abnormally high temperatures in the northeast.
Based upon management's plans, it appears that substantial doubt about
the Company's ability to continue as a going concern for a reasonable
period of time (one year) is alleviated. Continuation of the Company
as a going concern is dependent upon its ability to implement its
plans. No assurance can be given that the Company will be successful
in these efforts.
F-9
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
-------------------------------------------------------------
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 Web Site 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 9 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 year
ended June 30, 2002 is $1,010,682, (See Notes 9 and 13).
NATURE OF OPERATIONS
Able Oil Company, Able Melbourne and Able Energy New York, Inc. are
full service oil companies that market and distribute home heating
oil, diesel fuel and kerosene to residential and commercial customers
operating in the northern New Jersey, Melbourne, Florida, and
Warrensburg, New York respectively. Able Propane installs propane
tanks which it owns and sells propane for heating and cooking, along
with other residential and commercial uses.
The Company's operations are subject to seasonal fluctuations with a
majority of the Company's business occurring in the late fall and
winter months. Approximately 70% of the Company's revenues are earned
and received from October through March, and the overwhelming majority
of such revenues are derived from the sale of 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.
F- 10
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
-------------------------------------------------------------
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 year ended June 30, 2002 and 2001
amounted to $681,192 and $597,217, 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.
WEB SITE DEVELOPMENT COSTS
Costs of $2,200,511 incurred in the developmental stage 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 year ended June 30, 2002 is $436,177, and
amortization for the period ended June 30, 2001 was $313,219.
INTANGIBLE ASSETS
Intangibles are stated at cost and amortized as follows: Customer
Lists of $571,000 and Covenant Not To Compete of $183,567 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
and 5 years, respectively. 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 years ended June 30,
2002 and 2001 are $39,232 and $98,765, respectively. The covenant Not
To Compete with Connell's Fuel Oil Company ended in October 2001, and
was fully amortized.
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.
F-11
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
-------------------------------------------------------------
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.
CONCENTRATIONS OF CREDIT RISK
The Company performs on-going credit evaluations of its customers'
financial conditions and requires no collateral from its customers.
Financial instruments which potentially subject the Company to
concentrations of credit risk consists of checking and savings
accounts with several financial institutions in excess of insured
limits. The excess above insured limits is approximately $143,904. 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 $524,859 and
$566,049 for the years ended June 30, 2002 and 2001, respectively.
F - 12
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
-------------------------------------------------------------
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.
RECENT ACCOUNTING PRONOUNCEMENTS
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.
F - 13
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
-------------------------------------------------------------
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. It is
management's assessment that customer lists impairment will not result
upon adoption. As of June 30, 2001, the Company has net unamortized
customer lists of $422,728. Amortization expense of the customer list
was $20,125 for the six month short year ended June 30, 2001 and
$42,052 for the full year ended December 31, 2000.
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 of
$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
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 to be realized on collection of the notes.
F-14
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 2 NOTES RECEIVABLE
--------------------------
Maturities of the Note Receivable are as follows:
For the 12 Months Ending
June 30, Principal Amount
-------- ----------------
2003 $ 11,351
2004 10,354
2005 11,382
2006 12,511
2007 13,753
Balance 110,005
- --------
Total $169,356
========
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. Two
notes began December 1998 and one began February 1999. 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 Ending
June 30, Principal Amount
-------- ----------------
2003 $ 21,405
2004 23,803
2005 18,648
2006 11,013
2007 5,159
--------
Total $ 80,028
========
NOTE 3 INVENTORIES
---------------------
ITEMS 2002 2001
----- ---- ----
Heating Oil $ 141,114 $134,229
Diesel Fuel 21,642 40,770
Kerosene 6,220 8,013
Propane 12,343 14,287
Parts and Supplies 224,105 170,027
--------- ---------
TOTAL $ 405,424 $ 367,326
========= =========
F - 15
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 4 NOTES PAYABLE BANK
----------------------------
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%. Interest is to be paid on the amount
advanced on the last day of each month.
As security for the performance of this Agreement, the other Loan
Documents and the payment of the Liabilities, each Borrower and
Guarantor grants, pledges and assigns to Lender a security interest in
all assets of such Borrower or Guarantor, whether now owned or
hereafter acquired including, without limitation, (a) all Accounts,
Goods, Chattel Paper, Equipment, Documents, Deposits, Instruments,
General Intangibles and Payment Intangibles (including, but not
limited to, any and all interests in trademarks, service marks,
patents, licenses, permits, and copyrights), (b) all inventory of
Borrowers, if any, held by any Borrowers for sale or lease or to be
furnished under contracts of service, (c) all Books and Records, (d)
any Account maintained by any Borrower with Lender and all cash held
therein, and (e) all proceeds and products of the foregoing, including
casualty insurance thereon (collectively, the "Collateral").
The Agreement provides for covenants as follows:
(1) Use of proceeds only for Working Capital, Letters of Credit and
for acquisitions with Lender's prior written consent.
(2) Financial information to be furnished either annually, quarterly
or monthly.
(3) Financial covenants to be tested as of the end of each fiscal
quarter.
(4) Limitations on loans and investments.
(5) Compliance with laws and environmental matters.
(6) Limitations on Borrowing.
(7) Can not declare or pay any dividends.
All of the above and other items as per article VI of the Agreement.
The Agreement has a current expiration date of November 30, 2002. The
Company, as of June 30, 2002, was in an over draft position of
approximately $71,760 with respect to its borrowing base of 75% of
eligible accounts receivable. This has been cleared as of the
statement date (see Note 19).
F - 16
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 4 NOTES PAYABLE BANK
----------------------------
The Agreement with Able Oil Company and PNC Bank, dated August 11,
1999, was amended July 14, 2000. The term was extended from June 30,
2001 to September 29, 2001. The loan was paid in full effective
September 29, 2001. The banking relation was terminated and all
collateral was being released by PNC Bank.
NOTE 5 NOTE PAYABLE
----------------------
The Company has borrowed $500,000 from an unrelated individual. The
Note is 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 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.
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 June 30, 2002 was
$114,235.
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").
F - 17
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 6 LONG-TERM DEBT (CONT'D)
---------------------------------
The "Principal Sum: Less the "Remediation Amount" shall be an amount
equal to $400,000 (the "Reduced Principal Sum"). The Reduced Principal
Sum shall bear interest from the date hereof at the rate of 8.25% per
annum. Any portion of the Remediation Amount not utilized in the
investigation and remediation of the property shall not begin to
accrue interest until such time that (i) a "No Further Action Letter"
is obtained from the Department of Environmental Protection and (ii)
an outstanding lawsuit concerning the property is resolved through
settlement or litigation (subject to no further appeals). All payments
on this Note shall be applied first to the payment of interest, with
any balance to the payment to reduction of the reduced Principal Sum.
Based upon an amendment, dated November 5, 2001, and commencing with
interest due December 1, 2001, interest will be paid at the rate of
8.25% on the principal sum of $650,000. Only interest is required to
be paid and the principal is due on July 31, 2004 (See Note 11).
The Note is collateralized by the property and equipment purchased and
assignment of the leases. The balance due on this Note at June 30,
2002 was $650,000.
Two Notes Payable to Chrysler Financial at a range of interest from of
8.9% to 9.15% with total monthly payments of $830.53. The earliest of
these Notes originated on March 25, 1999 and the last Note matures in
March 2004. These Notes are collateralized by a 1999 and a 1998 Dodge
truck.
Notes Balance $ 15,314
Note Payable to World Omni at an interest rate of 8.99% with a monthly
payment of $316.44. The Note originated October 20, 2000 and matures
October 20,2005. The Note is collateralized by a Ford F-150 Pick-up
Truck.
Note Balance $ 10,956
Note Payable to Fleet Capital Leasing at an interest rate of 8.50%
with a monthly payment of $1,124.52. The Note originated on November
10, 1997 and matures on November 10, 2002. The Notes are
collateralized by a 1998 Freightliner fuel oil truck.
Note Balance $ 4,380
The Company and Able Propane, LLC have a lease/purchase agreement with
First Sierra Financial, Inc. The agreement calls for 48 payments of
$1,457.50, including principal, interest and sales tax and a final
purchase option payment of $5,576.02 plus sales tax. The interest rate
is approximately 8 1/2%. The agreement is collateralized by the
equipment purchase.
Balance Due $ 7,943
F-18
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 6 LONG-TERM DEBT (CONT'D)
---------------------------------
Able Oil Company and Able Propane, LLC have a lease/purchase agreement
with Fleet Capital Leasing, Lease #002, interest approximately 8 1/2%
collateralized by a 1998 Peterbilt Model 375 truck and a Trinity
trailer. The lease and payments began August 20, 1998 at $1,605.50 per
month for 48 payments thereafter until all payments are made through
and including July 20, 2002.
Balance Due $ 2,571
Able Oil Company and Able Propane have a lease/purchase agreement with
Fleet Capital Leasing, Lease #003, interest approximately 8 1/2%
collateralized by a Freightliner truck. The lease commenced November
10, 1998 and has 48 monthly payments of $1,286.12 until November 2002
with a final purchase option payment of $12,682.
Balance Due $ 18,646
Able Oil Company and Able Propane, LLC have a lease/purchase agreement
with Fleet Capital Leasing, Lease #004, collateralized by a Ford F-450
truck and a 1997 Chevy 3/4 ton van. The lease and payments began
January 1, 1999 at $1,591.87 per month for 48 payments thereafter
until all payments are made through and including December 2002.
Interest at 6.92%
Note Balance $ 23,075
Able Oil Company has a lease/purchase agreement with Fleet Capital
Leasing, Lease #005, interest approximately 8 1/2% collateralized by a
1999 Freightliner FL-70, 2800 gallon Tri State Truck tank and a 1999
Kenworth Model T-300 conventional cab and chassis. The lease payments
began January 5, 1999 at $2,810.62 per month for 48 months and 5
additional days until all payments are made through January 10, 2003.
Able Oil Company has the option to purchase all the equipment for an
amount agreed upon as the fair market value at the end of the lease
term.
Note Balance $ 37,337
Two Notes payable to Ford Credit at interest rates of 3.90% and 8.79%,
with monthly payments of $602.32 and $737.34 including interest. The
Notes originated in January 1999 and include 48 monthly payments and
mature December 2002. The Notes are collateralized by two 1998 Ford
Econo-Line trucks.
Notes Balance $ 5,776
F - 19
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 6 LONG-TERM DEBT (CONT'D)
---------------------------------
The Company and Able Propane, LLC have a lease/purchase agreement with
First Sierra Financial, Inc. The agreement calls for 48 payments of
$592.54, including principal and interest and sales tax and a final
purchase option payment of $2,191.10, plus sales tax. The lease began
February 1999 and ends January 2003. The interest rate is
approximately 8 1/2%. The agreement is collateralized by the equipment
purchase.
Note Balance $ 3,704
Two Notes payable to Ford Credit at interest rates of 8.60% and 6.02%
with monthly payments of $629.46 and $695.83 including interest. The
Notes originated June 1999 and December 1999, they each include 48
monthly payments and mature May 2003 and November 2003, respectively.
The Notes are collateralized by two 1999 Ford Vans.
Notes Balance $ 17,765
Able Oil Company has a lease/purchase agreement with Fleet Capital
Leasing, lease #007, collateralized by equipment as stated in the
agreement. The lease payments began December 25, 1999 at $9,023.46 per
month for 48 months and 5 additional days until all payments are made
through November 25, 2003. The interest is an average of 4.5% per
annum. Able Oil Company has the option to purchase all the equipment
for an amount agreed upon as the fair market value at the end of the
lease term.
Note Balance $138,850
The Company has a lease purchase agreement with Diamond Lease
(U.S.A.), Inc. collateralized by computer equipment and software on
the books of Price Energy.Com, a subsidiary of the Company. The lease
commenced October 1, 2000, with an initial payment of $32,062 paying
the first and last payment. There will be 34 payments of $16,031,
final payment on September 1, 2003 and a $1 purchase option payment.
The annual rate of interest is 9.56%.
Note Balance $225,789
The Company has Notes payable under Purchase Money Security Agreements
No. 00501, 00502 and 00503 with Monarch Capital Corporation. Agreement
#00501 commenced October 25, 2000, with the payment of $6,804 being
the first and last payment. The payments will be 60 payments of
$3,402, including principal and interest, with an interest rate of
11.5%. The Note will mature in September 2005. The note is secured by
the equipment purchased, two 2001 Kenworth Oil Trucks and Two KW Fuel
Tanks.
Notes Balance $109,162
F-20
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 6 LONG-TERM DEBT (CONT'D)
---------------------------------
Agreement #00502 commenced December 21, 2000 for 60 months and matures
November 21, 2005. The monthly payments are $1,834, including
principal and interest with an interest rate of 12.5%. The Note is
secured by the equipment purchased, one 2001 Kenworth Oil Truck and
one Amthor 2800-gallon aluminum Cardinal Classic Canopy Style tank.
This Note was sold to Sovereign Bank by Monarch.
Note Balance $ 59,104
Agreement #00503 commenced December 21, 2000 for 60 months and matures
November 21, 2005. The monthly payments are $1,822.50, including
principal and interest with an interest rate of 12.5%. The Note is
secured by the equipment purchased, a 2001 Kenworth Model T 300 truck
and 2800-gallon aluminum fuel tank.
Note Balance $ 58,733
Agreement #00504 commenced on April 30, 2001 for 48 months and matures
on April 30, 2005. The monthly payments are $2,692.48, including
principal and interest with an interest rate of 6.80%. The Note is
secured by furniture purchased.
Note Balance $ 74,234
The Company and Able Propane, LLC have a Lease/Purchase Agreement with
New Concepts Leasing. The Lease commenced February 12, 2001, with the
payment of $2,986 being the first and last payment. The payments will
be 60 payments of $1,493, including principal and interest, with an
interest rate of 10.88%. The Note will mature in February 2006 with a
final principal payment of $5,000. The Note is secured by a 2001 Ford
F-550 Cab and Chassis.
Note Balance $ 58,975
Note Payable to Ford Credit at an interest rate of 8.05% with monthly
payments of $653.80, including interest. The note originated in
September 2000 and includes 48 monthly payments and matures September
2004. The Note is collateralized by the ford Truck purchased.
Note Balance $ 15,923
Note payable to GMAC Finance at an interest rate of 5.00% with monthly
payments of $602.43, including interest. The Note originated in
October 2000 and includes 48 monthly payments and matures October
2004. The Note is collateralized by the GMAC truck purchased.
Note Balance $ 15,254
F-21
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 6 LONG-TERM DEBT (CONT'D)
---------------------------------
The Company has four lease/purchase agreements with New Concepts
Leasing, Inc. The leases commenced October, November, December 2001
and January 2002. The lease for a 1997 Chevy 3500 Box Truck on October
8, 2001 is for 36 months at $546 per month, including interest at
7.350%. The three other leases are for 60 months each with total
monthly payments of $4,886, including interest at the effective rate
of 8.69%. The last note will mature December 2006. The notes are
secured by the equipment purchased.
Note Balance $246,794
Able Oil Company has two notes payable to GMAC dated October 5, 2001.
The Company purchased two 2001 Chevrolet vans. The notes are payable
in 48 monthly installments each at $542.09 per month with interest at
0.90%. The notes are secured by the vans. The final payment on each is
due October 27, 2005.
Note Balance $ 42,116
The Company has a note payable to Interchange Capital Company, LLC
dated February 27, 2002, in the amount of $86,711 on the purchase of a
2002 Kenworth 7300 Oil Truck. The note has 60 monthly payments of
$1,821, including interest at approximately 5.50% per annum. The note
is secured by the equipment purchased.
Note Balance $ 80,947
The Company has a note payable to Marlin Leasing dated October 3,
2001, in the amount of $50,032 on the purchase of a telephone system
for the Call Center. The note has 60 monthly payments of $1,129,
including interest at approximately 12.63% per annum, plus sales tax.
The initial payment of $2,258 paid the first and last payment. The
Note will mature in November 2006 with a $1 purchase option payment
due December 2006. The Note is secured by the equipment purchased.
Note Balance $ 45,785
The Company has a note payable to Canon Financial Services, Inc. dated
February 13, 2002, in the amount of $11,500 on the purchase of a
scanner. The note has 30 monthly payments of $407, including interest
at approximately 4.70% per annum, plus sales tax. The initial payment
of $814 paid the first and last payment. The Note will mature in
August 2004 with an end of term purchase option at 10% of maximum Fair
Market Value due September 2004. The Note is secured by the equipment
purchased.
Note Balance $ 10,043
F-22
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 6 LONG-TERM DEBT (CONT'D)
---------------------------------
The Company has a note payable/Master Lease Agreement to Graybar
Financial Services, LLC dated January 18, 2002, in the amount of
$14,388 on the purchase of a Cisco 1721 Voice Equipment. The note has
60 monthly payments of $313, including interest at approximately
10.96% per annum, plus sales tax. The initial payment of $625 paid the
first and last payment. The Note will mature in July 2007 with a $1
purchase option payment due at the end of the lease. The Note is
secured by the equipment purchased.
Note Balance $ 13,653
Maturities on the Notes Payable subsequent to June 30, 2002 are as
follows:
FOR THE 12 MONTHS ENDING
JUNE 30, PRINCIPAL AMOUNT
-------- ----------------
2003 $ 584,384
2004 343,843
2005 889,818
2006 158,452
2007 89,382
Balance 41,185
----------
TOTAL $2,107,064
==========
F - 23
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
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 is accounted for as follows:
2002 2001
---- ----
PERCENT OF PERCENT OF
PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME
------- ------ -------- -----
Statutory Federal Income Tax (Benefits) $(5,608) (15.0%) $(11,605) (15.0%)
Increase resulting from State Income
Tax, net of Federal Tax Benefit (2,429) (7.6%) (5,030) (7.6%)
------- ------ -------- -----
Income Taxes (Benefits) $(8,037) (22.6%) $(16,635) (22.6%)
======= ====== ======== ======
Income Taxes consist of:
Current - -
Deferred $(8,037) $(16,635)
------- --------
TOTAL $(8,037) $(16,635)
======= ========
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:
2002
----
TEMPORARY TAX
DIFFERENCE EFFECT
---------- -------
Depreciation and Amortization $(169,441) $(54,712)
Allowance for Doubtful Accounts $ 242,358 $ 61,668
Gain on Sale of Subsidiary $ 18,766 $ 4,035
Able Energy, Inc., et al, open years are December 31, 1999, 2000 and
June 30, 2001 and 2002. The Company has a net operating loss
carryforward of approximately $2,730,000. The net operating loss
expires between June 30, 2019 and 2021.
F-24
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 7 INCOME TAXES (CONT'D)
-------------------------------
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 June 30,
2002 are as follows:
Net Operating Loss Carryforward - Tax Effect $ 928,200
Valuation Allowance (928,200)
---------
Net Deferred Tax based upon Net
Operating Loss Carryforward $ - 0 -
=========
NOTE 8 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 $30,270 (2002) and $27,665 (2001).
NOTE 9 NOTE RECEIVABLE - SUBSIDIARY
--------------------------------------
The Company has a Note Receivable from PriceEnergy.Com, Inc. for
advances made in the development of the Website, 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. Interest, in the amount of
$108,000 has been accrued for the year ended June 30, 2002. Unpaid
accrued interest due through June 30, 2002 is $180,000. The Note,
accrued interest and interest expense have been eliminated in the
consolidated financial statements (See Notes 1 and 13). Able Oil
Company has an accounts receivable for sale of heating oil from
PriceEnergy.Com, Inc. of $1,336,646 which has been eliminated in
consolidation against the accounts payable on PriceEnergy.Com, Inc.
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.
F - 25
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 10 COMMITMENTS AND CONTINGENCIES (CONT'D)
------------------------------------------------
Able Oil Company is under contract to purchase #2 oil as follows:
GALLONS OPEN OPEN DOLLAR
COMMITMENT COMMITMENT AT
COMPANY PERIOD TOTAL GALLONS AT 6/30/02 6/30/02
------- ------ ------------- ---------- -------
Conectiv Energy 10/1/02 - 3/31/03 252,000 252,000 $181,616
Conectiv Energy 11/1/02 - 3/31/03 210,000 210,000 $153,615
Mieco, Inc. 11/1/02 - 2/28/03 1,050,000 1,050,000 See Note Below
The agreement with Mieco, Inc. contains the following terms:
2. The oil has been delivered and is in storage at the Company's facility
in Rockaway, New Jersey. Mieco, Inc. has filed a UCC for the product
stored at the terminal.
3. The purchase price FOB delivered basis buyer's terminal shall be set
when buyer (the Company) notifies Mieco that it will purchase in
minimum 1,000 barrel increments. The delivery month NYMEX heating oil
contract prior to its expiration will be used. The price plus the
differential of USD $.0125 per gallon shall be the established price
for this contract for all barrels delivered in accordance with the
schedule set forth in the agreement.
Able Propane, LLC is under contract with Keystone-Propane Service,
Inc. to purchase propane gas for the period October 1, 2002 through
March 31, 2003. The total is 210,000 gallons at $ .53 per gallon,
total cost $111,300.
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 (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 require a release from the Estate (the Seller)
and a release and indemnification from the Company. The defendants
will provide 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.
F-26
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 10 COMMITMENTS AND CONTINGENCIES (CONT'D)
------------------------------------------------
This has been amended by an agreement dated November 5, 2001. The
entire settlement, net of attorney fees, will be placed in an
attorney's escrow account for payment of all investigation and
remediation costs.
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.
Price Energy.Com, Inc., a subsidiary, has commenced suit against
ThinkSpark Corporation on Consulting Services Agreement, dated June 2,
2000. ThinkSpark was to provide services of professional quality
performed by knowledgeable staff familiar with the operation of the
software and its application and conforming to generally accepted data
processing practices. ThinkSpark agreed that it could develop, deliver
and install the system to be operational by mid-August 2000.
ThinkSpark ceased work in mid-October 2000 and the project was not
completed. Price Energy hired another firm which is completing the
project. ThinkSpark admits the original estimate for the project was
$266,000.
Price Energy paid ThinkSpark $82,539 and is paying the new firm
$75,600 which will complete the work.
ThinkSpark has filed a counterclaim seeking payment of $283,100.62,
which is the total amount of bills rendered. There is a liability of
$107,861 in accounts payable on the financial statements. This amount
represents the original estimate of $266,000, less payments, to
ThinkSpark and the new firm hired to complete the project. On January
11, 2002, Price Energy and ThinkSpark agreed to settle their dispute.
Price Energy will pay ThinkSpark $30,000 and there will be mutual
releases of all claims as well as dismissals of the pending actions in
New Jersey and Texas. The liability at June 30, 2002 was $25,000 and
was paid in July 2002.
The Company in the normal course of business has been involved in
several suits. Two suits have been settled out of court at agreeable
terms, according to management. No suits are currently in litigation,
except 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., 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.
F - 27
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 11 OPERATING LEASE (CONT'D)
----------------------------------
Estimated future rents are $14,400 per year, plus the one cent per
gallon through put charges per the monthly rack meter readings.
The Company leased 9,800 square feet in the Rockaway Business Centre
on Green Pond Road in Rockaway, New Jersey. The facility will be used
as a call center and will combine the administrative operations in New
Jersey in one facility. The lease has a term of five (5) years from
August 1, 2000 through July 31, 2005.
The rent for the first year is $7,145.83 per month and the second
through fifth year is $7,431.67 per month, plus 20.5% of the
building's annual operational costs and it's portion of utilities. The
monthly rent, including Common Area Charges, as of October 2000 is
$9,084 per month. The lease does not contain any option for renewal.
The rent expense was $119,443 for the year ended June 30, 2002. The
estimated future rents are as follows:
YEAR ENDED JUNE 30,
-------------------
2003 $110,000
2004-2005 230,000
--------
Total $340,000
========
The following summarizes the month to month operating leases for the
other subsidiaries:
Able Oil Melbourne $500.00, per month, Total rent expense
years ended June 30, 2002 and
2001, $6,000
Able Energy New York $500.00, per month, Total rent expense
years ended June 30, 2002 and
2001, $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. 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.
F-28
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
NOTE 12 FRANCHISING (CONT'D)
------------------------------
The franchisee paid the following amounts in July 2001:
1. A non-refundable franchise fee of $25,000.
2. An advertising deposit of $15,000 and a $5,000 escrow
deposit.
The non-refundable fee of $25,000 has been recorded as Other Income in
the period ended June 30, 2002, and the advertising deposit has been
credited to advertising expense.
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 $55,000, on May 10, 2002 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 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 9).
NOTE 14 EARNINGS PER SHARE
----------------------------
The shares used in the computation of the Company's basic Earnings Per
Common Share are as follows:
JUNE 30, JUNE 30,
2002 2001
---- ----
Weighted Average of Common Shares Outstanding 2,001,332 2,000,000
Dilutive Effect of:
Employee Stock Options - -
Stock Warrants - -
--------- ---------
Weighted Average Common Shares Outstanding 2,001,332 2,000,000
========= =========
The dilutive potential common shares that were anti-dilutive at June
30, 2002 amounted to 50,456 Shares.
F - 29
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
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 1, 2000
Grants 48,090 $3.25 3 years
Exercises 1,250
December 21, 2000
Grants 60,000 $1.80 5 years
Exercises 0
Grants 23,000 $2.25 5 years
Exercises 0
16 STOCK WARRANTS
------------------------
The Company has issued stock warrants as follows:
1. 60,000 Common Stock Purchase Warrants at $4.81 per share, effective
August 31, 2000, and expiring August 31, 2005, have been issued to
Andrew Alexander Wise & Company in connection with an investment
banking advisory agreement with the Company, dated July 1, 2000.
2. 40,000 Common Stock Purchase Warrants at $4.00 per share, effective
June 26, 2001 and expiring June 26, 2004, have been issued in
connection with a $500,000 Note Payable (See Note 5).
The 100,000 warrants to purchase shares of common stock were
outstanding during the second quarter of 2002 and were not included in
the computation of diluted EPS as the warrants' exercise price was
greater than the average market price of the common stock, which was
$3.93 for the quarter ended June 30, 2002.
F - 30
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 2002 AND 2001
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 June 30,
2002, any amount for accrual of the above is not material and has not
been computed.
NOTE 18 STOCK ISSUANCE
------------------------
During the quarter ended June 30, 2002, 6,000 shares of Common Stock
were issued to the directors for services rendered during the year
2000, and charged at the fair market value as Directors Fees. The
share price was $3.40 per share for total Directors Fees of $20,400.
NOTE 19 SUBSEQUENT EVENT
--------------------------
On August 2, 2002, 6,000 shares of Common Stock were issued to the
Directors for services rendered during the year 2001, and charged at
the fair market value as Directors' Fees. The share price was $4.00
per share for total Directors' Fees of $24,000.
We have been informed by management that Fleet Bank has informed them
the bank will not renew the credit facility upon expiration of the
Agreement which is November 30, 2002 (see Note 4). Management has
informed us they are currently in discussion for a new credit
facility.
F - 31
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
--------------------------------------- ------------- ---------------------------------------------------------------
NAME Age Position
--------------------------------------- ------------- ---------------------------------------------------------------
Timothy Harrington 35 Chief Executive Officer, Chairman of the Board and Secretary
--------------------------------------- ------------- ---------------------------------------------------------------
Christopher P. Westad 48 President, Chief Financial Officer and Director
--------------------------------------- ------------- ---------------------------------------------------------------
James Purcaro 40 Director
--------------------------------------- ------------- ---------------------------------------------------------------
Gregory Sichenzia 40 Director
--------------------------------------- ------------- ---------------------------------------------------------------
Patrick O'Neill 42 Director
--------------------------------------- ------------- ---------------------------------------------------------------
Edward C. Miller, Jr. 35 Director
--------------------------------------- ------------- ---------------------------------------------------------------
Set forth below is a brief background of the executive officers and
directors of the Company, based on information supplied by them.
TIMOTHY HARRINGTON, serves as the Company's Chief Executive Officer,
Chairman of the Board, and Secretary. In 1989, Mr. Harrington founded Able Oil
Company, Inc., and since that time, has served as Able Oil's President, Chief
Executive Officer and Chairman of the Board. Mr. Harrington has also served as
the Chief Executive Officer and Chairman of the Board of Directors of Able
Energy, Able Melbourne and Able Propane since their respective inception.
CHRISTOPHER P. WESTAD, serves as the President, Chief Financial Officer
and a Director of the Company. Since September 1996, Mr. Westad has served as
the President of Able Propane, and since July of 1998, President of Able Energy,
Inc. From 1991 through 1996, Mr. Westad was a Market Manager and Area Manager
for Ferrellgas Partners, L.P., a company engaged in the retail distribution of
liquefied petroleum gas. >From 1977 through 1991, Mr. Westad served in a number
of management positions with RJR Nabisco. In 1975, Mr. Westad received a
Bachelor of Arts in Business and Public Management from Long Island
University--Southampton, New York.
JAMES PURCARO, has served as a director to the Company since
September1999. Since 1986, Mr. Purcaro has served as the president and chief
executive officer of Kingsland Trade Print Group, Inc., a commercial printing
company.
GREGORY SICHENZIA, has served as a director to the Company since August
1999. Mr. Sichenzia is a partner of the law firm of Sichenzia, Ross Friedman,
and Ferrence LLP in New York, New York and has been since May 1998. Prior to
that he had been a partner of Singer Zamansky LLP in New York, New York, since
November 1996. Prior to that he had been an associate attorney at Schneck
Waeltman Hashmall & Mischel LLP in New York City, since 1994.
PATRICK O'NEILL, has served as a director to the Company since August
1999. Mr. O'Neill has served as the President of Fenix Investment and
Development, Inc., a real estate company based in Parsippany, New Jersey for the
past five years. Prior to this, Mr. O'Neill served as Vice President of Business
Development for AvisAmerica, a Pennsylvania based home manufacturer. Mr. O'Neill
holds a B.S. from the United States Military Academy, and has been awarded the
Army Achievement Medal for his work with the Army Corps of Engineers.
EDWARD C. MILLER, JR., has served as a director to the Company since
February 2000. Mr. Miller has served as the Director of Marketing for the law
firm of Norris, McLaughlin & Marcus, P.A., located in Somerville, New Jersey
since September 1999. Prior to that, Mr. Miller served as Practice Development
Coordinator at the law firm of Riker, Danzig, Scherer, Hyland & Perretti, LLP
since May 1991. Mr. Miller holds a B.S. in Marketing Management from Syracuse
University School of Management.
RON J. PONDER, has served as a director to the Company since June 2002.
Mr. Ponder has served as Chief Executive Officer of Telecom, Media & Networks, a
Cap Gemini Ernst & Young company since 1999. Previously, Mr.
Ponder served as President and CEO of BDSI, a telecommunications and software
company, from 1997 until being acquired by Cap Gemini Telecommunications in
1999. Prior to that, Mr. Ponder served as Executive Vice President of Operations
and Service Management for AT&T where he was responsible for budgets in excess
of $18 billion and an employee base of over 25,000. Before joining AT&T, Mr.
Ponder was CIO for Sprint communications and spent 17 years at Federal Express
spearheading some of the most critical innovations in the overnight package
industry. Mr. Ponder holds a Doctorate in Information Systems and Operations
Research from Mississippi State University, and an MBA from Louisiana
Polytechnic University.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established a Compensation Committee and an
Audit Committee consisting of at least two directors who are not salaried
officers of the Company.
The purpose of the Compensation Committee is to review the Company's
compensation of its executives, to make determinations relative thereto and to
submit recommendations to the Board of Directors with respect thereto. The
Compensation Committee also selects the persons to whom options to purchase
shares of the Company's Common Stock under the 1999 Stock Option Plan will be
granted and to make various other determinations with respect to such Plan.
The purpose of the Audit Committee is to provide general oversight of
audit, legal compliance and potential conflict of interest matters.
COMPENSATION OF DIRECTORS
The Company recently paid compensation to the directors in the amount of
2,000 common shares of common stock in the Company for acting in such capacity..
Directors serve until the next annual meeting of stockholders or until
their successors are elected and qualified. Officers serve at the discretion of
the Board of Directors. Directors are reimbursed for travel expenses.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5, and amendments thereto,
furnished to the Company during fiscal year 2002, the Company is not aware of
any director, officer or beneficial owner of more than ten percent of the
Company's Common Stock that failed to file reports required by Section 16(a) of
the Securities Exchange Act of 1934 on a timely basis during fiscal year 2002.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain summary information with respect to
the compensation paid to the Company's Chief Executive Officer and President for
services rendered in all capacities to the Company for the fiscal years ending
2002, 2001, and 2000. Other than as listed below, the Company had no executive
officers whose total annual salary and bonus exceeded $100,000 for that fiscal
year:
-------------------------------------------------------------------- -----------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- ---------------------
Awards Payouts
------------------- --------- ------------ ---------- -------------- ------------ ------------ ---------- ----------
Name and Year Salary ($) Bonus ($) Other Annual Restricted Securities LTIP All,
Principal Position Compensation Stock Award Underlying Payouts Other
($) Options / ($) Compen-
SARs (#) sation ($)
------------------- --------- ------------ ---------- -------------- ------------ ------------ ---------- ----------
Timothy 2002 225,000 19,033 7,284 (1)
Harrington,
Chief
Executive Officer
--------- ------------ ---------- -------------- ------------ ------------ ---------- ----------
2001 225,000 14,890 7,284 (1)
--------- ------------ ---------- -------------- ------------ ------------ ---------- ----------
2000 225,000 - 11,000 (1) - - - -
------------------- --------- ------------ ---------- -------------- ------------ ------------ ---------- ----------
Christopher P. 2002 100,000 6,360 5,035 (1)
Westad,
President
--------- ------------ ---------- -------------- ------------ ------------ ---------- ----------
2001 100,000 5,746 5,035 (1) - - - -
--------- ------------ ---------- -------------- ------------ ------------ ---------- ----------
2000 100,000 - - - - - -
-------------
(1) Represents car allowance and travel expense reimbursements pursuant to his
employment agreement with the Company.
OPTION GRANTS
No option grants were made to our executive officers during fiscal year
ended June 30, 2002.
No named executive held unexercised options as at June 30, 2002.
EMPLOYMENT ARRANGEMENTS
Timothy Harrington and Christopher P. Westad have three year employment
agreements with the Company. Timothy Harrington is retained as Chief Executive
Officer of the Company at an annual salary of $225,000. Christopher Westad is
retained as President of the Company at an annual salary of $100,000. Each of
the Messrs. Harrington and Westad are entitled to bonuses pursuant to their
employment agreements if the Company meets certain financial targets based on
sales, profitability and good management goals as predetermined by the Board of
Directors or compensation committee and other subjective criteria as determined
by the Board of Directors or compensation committee. Such bonuses, plus all
other bonuses payable to the executive management of the Company, shall not
exceed in the aggregate, a "bonus pool" which shall equal up to 5% of the
Company's earnings before taxes, depreciation and amortization ("EBITDA") for
1999, provided the Company achieves at least $800,000 in EBITDA, 10% of EBITDA
for 2,000 and 2001, provided the Company achieves at least $3,000,000 and
$5,000,000, respectively, of EBITDA in each of such years. The employment
agreements also provide for reimbursement of reasonable business expenses.
Timothy Harrington also receive additional compensation including Company
automobile, insurance and retirement savings matched contributions by the
Company and such other perquisites as are customary. The employment agreements
for each of Messrs. Harrington and Westad contain a covenant not to compete
whereby Messrs. Harrington and Westad agree, for the term of the employment
agreements and until one year following the termination of the agreements, not
to (i) persuade any customer of the Company to cease or reduce the amount of
business it does with the Company; (ii) solicit the Company's customers for
their own benefit; or (iii) persuade any of the Company's employees to leave the
employ of the Company.
In the event that there is a change in control of the Company, through an
acquisition where any person acquires more than 50% of the shares of the
Company, a consolidation or merger with another corporation resulting in at
least 50% of the voting shares of the surviving corporation being controlled by
a new acquirer or the sale directly or otherwise of all of the assets of the
Company to a third party in a non-distress situation, then the Company shall pay
to Timothy Harrington a lump sum payment equal to one year's salary.
EMPLOYEE BONUS POOL
The Company has adopted an Employee Bonus Pool, pursuant to which
Management may, at its own discretion, award employees for exemplary
performance. The Company has allocated $25,000, $40,000 and $50,000 for the
years 1999, 2000 and 2001, respectively, for such purposes. Management may not,
however, award employees bonuses from the Employee Bonus Pool (i) if such
bonuses would result in negative earning before taxes for the year in which such
bonuses are to be granted, or (ii) if the Company does not have net profits in
such year.
EMPLOYEE STOCK OPTION PLAN
The Company has adopted a Stock Option Plan (the "1999 Plan"), pursuant to
which 300,000 shares of Common Stock are reserved for issuance.
The 1999 Plan is administered by the board of directors, or by a committee
with at least two directors as delegated by the board of directors who determine
among other things, those individuals who shall receive options, the time period
during which the options may be partially or fully exercised, the number of
shares of Common Stock issuable upon the exercise of the options and the option
exercise price.
The 1999 Plan's duration is for a period of ten years. Options under the
1999 Plan must be issued within ten years from the effective date of the 1999
Plan. Options may be granted to officers, directors, consultants, key employees,
advisors and similar parties who provide their skills and expertise to the
Company. Options granted under the 1999 Plan may be exercisable for up to ten
years, may require vesting, and shall be at an exercise price all as determined
by the board. Options will be non-transferable except to an option holder's
personal holding company or registered retirement savings plan and except by the
laws of descent and distribution or a change in control of the Company, as
defined in the 1999 Plan, and are exercisable only by the participant during his
or her lifetime. Change in control includes (i) the sale of substantially all of
the assets of the Company and merger or consolidation with another, or (ii) a
majority of the board changes other than by election by the shareholders
pursuant to board solicitation or by vacancies filled by the board caused by
death or resignation of such person.
If a participant ceases affiliation with the Company by reason of death,
permanent disability or the retirement of an Optionee either pursuant to a
pension or retirement plan adopted by the Company or on the normal retirement
date prescribed from time to time by the Company, the option remains exercisable
for three months from such occurrence but not beyond the option's expiration
date. Other termination gives the participant three months to exercise, except
for termination for cause which results in immediate termination of the option.
Options granted under the 1999 Plan, at the discretion of the compensation
committee or the board, may be exercised either with cash, by certified check or
bank cashier's check, Common Stock having a fair market equal to the cash
exercise price, the participant's promissory note, or with an assignment to the
Company of sufficient proceeds from the sale of the Common Stock acquired upon
exercise of the Options with an authorization to the broker or selling agent to
pay that amount to the Company, or any combination of the above.
The exercise price of an option may not be less than the fair market value
per share of Common Stock on the date that the option is granted in order to
receive certain tax benefits under the Income Tax Act of United States (the
"ITA"). The exercise price of all future options will be at least 100% of the
fair market value of the Common Stock on the date of grant of the options. A
benefit equal to the amount by which the fair market value of the shares at the
time the employee acquires them exceeds the total of the amount paid for the
shares or the amount paid for the right to acquire the shares shall be deemed to
be received by the employee in the year the shares are acquired pursuant to
paragraph 7(1) of the ITA. Where the exercise price of the option is equal to
the fair market value of the shares at the time the option is granted, paragraph
110(1)(d) of the ITA allows a deduction from income equal to one quarter of the
benefit as calculated above. If the exercise price of the option is less than
the fair market value at the time it is granted, no deduction under paragraph
110(1)(d) is permitted. Options granted to any non-employees, whether directors
or consultants or otherwise will confer a tax benefit in contemplation of the
person becoming a shareholder pursuant to subsection 15(1) of the ITA.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the 1999 Plan.
The 1999 Plan may be terminated or amended at any time by the board of
directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the 1999 Plan may not be
increased without the consent of the shareholders of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 2002, certain information
concerning beneficial ownership of shares of Common Stock with respect to (i)
each person known to the Company to own 5% or more of the outstanding shares of
Common Stock, (ii) each director of the Company, (iii) the executive officers of
the Company, and (iv) all directors and officers of the Company as a group:
--------------------------------- ------------------------ -------------------------
NUMBER OF SHARES APPROXIMATE PERCENTAGE
BENEFICIALLY OF COMMON STOCK**
NAME* OWNED
--------------------------------- ------------------------ -------------------------
Timothy Harrington 1,000,000 50%
--------------------------------- ------------------------ -------------------------
Christopher Westad -- --
--------------------------------- ------------------------ -------------------------
All Officers and Directors as a 1,000,000 50%
Group (2 persons)
--------------------------------- ------------------------ -------------------------
------------------
* Except as noted above, the address for the above identified officers and
directors of the Company is c/o Able Energy, Inc., 198 Green Pond Road,
Rockaway, New Jersey 7866.
** Percentages are based upon the assumption that the shareholder has
exercised all of the currently exercisable options he or she owns which
are currently exercisable or exercisable within 60 days and that no other
shareholder has exercised any options he or she owns.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, our majority-owned subsidiary Price Energy has borrowed
money from us. As of June 30, 2001, the aggregate indebtedness to us was a
promissory note made on November 1, 2000 for $1,350,000. This note bears
interest at a rate of 8% per annum payable quarterly with principal payments
beginning on November 1, 2002. Able Energy, Inc. own approximately 70.6% of
Price Energy, Timothy Harrington, our Chief Executive Officer, owns 23%, and
Christopher Westad, our President, owns 3.6%.
On May 10, 2002, we borrowed $55,000 from our Chief Executive Officer,
Timothy Harrington. This amount is evidenced by a demand note bearing interest
at a rate of 6%. Currently, $44,690 is due to Mr. Harrington.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
The Company has not filed any reports on Form 8-K during the last quarter
of the period covered by this report.
EXHIBITS
The following Exhibits are filed as part of this Report:
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation of Registrant*
3.2 By-Laws of Registrant*
4.1 Specimen Common Stock Certificate*
5.1 Opinion of Sichenzia, Ross & Friedman LLP***
10.1 Form of Consulting Agreement with the Walsh Manning Securities,
LLC***
10.2 1999 Stock Option Plan***
10.3 Lease of Company's Facility at 344 Route 46, Rockaway, New Jersey*
10.4 Form of employment agreement between the Company and Timothy
Harrington, to be executed on or before the Effective Date***
10.5 Form of employment agreement between the Company and Christopher P.
Wested, to be executed on or before the Effective Date***
10.6 $600,000 Revolving Credit Facility and $350,000 Line of Credit with
PNC Bank, National Association dated October 23, 1996, and
amendment thereto, dated June 12, 1998, extending the Line of
Credit to $500,000*
10.7 $675,000 Term Loan Agreement dated June 11, 1998 by and between the
Company and PNC Bank, National Association and exhibits thereto,
including Pledge Agreement by and between Timothy Harrington and
PNC Bank, Guaranty and Suretyship Agreement by and between the
Company and PNC Bank, and Pledge Agreement by and between the
Company and PNC Bank*
10.8 Marketing Alliance Agreement, dated March 1, 1998, between the
Company and AllEnergy Marketing Company, L.L.C., wherby the Company
obtained the exclusive right to market natural gas supplied by
AllEnergy in specified areas**
10.9 In tank agreement between the Company and Mieco, Inc., dated May
11, 1998, for the storage of the Mieco's petroleum products in the
Company's tank facilities**
10.10 Form of Company's Pre-Purchase Enrollment Form*
10.11 Oil Supply Agreement between the Company and Mieco, Inc., dated May
19, 1998**
10.12 Letter agreement, dated July 3, 1998, between the Company and
Mieco, Inc. modifying the Oil Supply Agreement, dated May 19, 1998,
whereby the Company agreed to increase the amount of oil purchased
from Mieco**
10.13 Oil Supply Agreement between the Company and Amarada Hess
Corporation, dated July 30, 1998**
10.14 Oil Supply Agreement between the Company and Bayway (TOSCO)
Refining Company, dated March 27, 1998**
10.15 Oil Supply Agreement between the Company and Koch Refining Company,
L.P., dated March 17, 1998**
10.16 Fuel Purchase Agreement (Natural Gas) between the Company and
Ferrellgas, dated September 3, 1996**
10.17 Fuel Purchase Agreement (Propane) between the Company and Keystone
Propane Service, Inc., dated July 28, 1998**
10.18 Lease between the Company and Summit Leasing Corporation
("Summit"), dated December 3, 1997**
10.19 Franchise Agreement, dated December 31, 1998, between the Company
and Andrew Schmidt regarding sale of Able Oil Company Montgomery,
Inc. as a franchise***
10.20 Stock Purchase Agreement, dated December 31, 1998, between the
Company and Andrew Schmidt regarding the sale of stock of Able Oil
Company Montgomery, Inc. by the Company to Mr. Schmidt***
10.21 Pledge and Security Agreement, dated December 31, 1998, between the
Company and Andrew Schmidt regarding the pledge of stock of Able
Oil Company Montgomery, Inc.***
10.22 $140,000 principal amount, 9.5% Promissory Note, dated December 31,
1998, between the Company and Andrew Schmidt regarding the sale of
stock of Able Oil Company Montgomery, Inc. by the Company to Mr.
Schmidt
10.23 Stock Sale Agreement, dated December 31, 1998, between the Company
and Owl Environmental, Inc. regarding the sale of stock of A&O
Environmental Services, Inc. by the Company to Owl Environmental,
Inc.*
21.1 List of Subsidiaries of Registrant*
99.1 Certification of the Chief Executive Officer of Able Energy, Inc.
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of the Chief Financial Officer of Able Energy, Inc.
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
--------------
(*) Reference is made to the Company's Registration Statement, filing
Number 333-51909, filed with the SEC on July 15, 1998.
(**) Reference is made to the Company's Registration Statement, filing
Number 333-51909, filed with the SEC on November 6, 1998.
(***) Reference is made to the Company's Registration Statement, filing
Number 333-51909, filed with the SEC on April 15, 1999.
(****) Reference is made to the Company's Registration Statement, filing
Number 333-51909, filed with the SEC on May 17, 1999.
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 23rd day of September, 2002.
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
/s/ James Purcaro
James Purcaro, Director
/s/ Gregory Sichenzia
Gregory Sichenzia, Director
/s/ Patrick O'Neill
Patrick O'Neill, Director
/s/ Edward C. Miller, Jr.
Edward C. Miller, Jr., Director
/s/ Ron Ponder
Ron Ponder, Director