<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to
Commission file number: 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.)
344 ROUTE 46
ROCKAWAY, NJ 07866
(Address of principal executive offices, Zip code)
Registrant's telephone number, including area code: (973) 625-1012
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check X whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of November 9, 1999, 2,000,000 shares, $.001 Par value per share,
of Able Energy, Inc. were issued and outstanding.
<PAGE>
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets as of December 31, 1998 and
September 30, 1999 3 - 4
Consolidated Statements of Income for the three and nine
months ended September 30, 1999 and September 30, 1998 5
Consolidated Statement of Stockholders' Equity nine months
ended September 30, 1999 6
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 7
Notes to Unaudited Financial Statements 8 - 18
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED) AUDITED
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash $4,072,463 $ 125,844
Accounts Receivable (Less Allowance for Doubtful
Accounts of ($69,235) at 12/31/98 and ($73,335) 9/30/99 895,557 658,139
Inventory 252,598 129,483
Notes Receivable - Current Portion 30,168 36,651
Miscellaneous Receivable 24,045 13,074
Prepaid Expense 28,865 51,709
Prepaid Expense - Income Taxes 140,337 96,003
Deferred income Tax 24,565 24,460
Due From Officer 44,690 34,173
---------- ----------
TOTAL CURRENT ASSETS 5,513,288 1,169,536
---------- ----------
PROPERTY AND EQUIPMENT:
Land 482,075 90,800
Building 990,000 150,000
Trucks 1,800,335 1,300,046
Fuel Tanks 837,310 487,677
Machinery and Equipment 226,684 275,938
Leasehold Improvements 124,986 160,429
Cylinders 165,076 204,477
Office Furniture and Equipment 9,313 9,313
---------- ----------
4,635,779 2,678,680
Less: Accumulated depreciation 1,139,266 859,316
---------- ----------
NET PROPERTY AND EQUIPMENT 3,496,513 1,819,364
---------- ----------
OTHER ASSETS:
Deposits 5,007 14,371
Notes Receivable - Less Current Portion 141,111 146,885
Customer List, Less Amortization of 1998 ($85,650), and
1999 ($114,532) 496,318 485,350
Covenant Not to Compete, Less Amortization of 1998
($81,743) and 1999 ($110,946) 172,622 104,020
---------- ----------
TOTAL OTHER ASSETS 815,058 750,626
---------- ----------
TOTAL ASSETS $9,824,859 $3,739,526
========== ==========
</TABLE>
See Accompanying Notes
3
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONT'D)
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED) (AUDITED)
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 439,737 $ 689,246
Note Payable - Bank 332,012 100,434
Current Portion of Long-Term Debt 689,366 651,817
Covenant Not To Compete -- 36,714
Accrued Expenses 321,602 62,244
Taxes Payable 32,775 15,298
Customer Advance Payments 312,067 355,983
Income Taxes Payable - Prior 23,960 33,962
Current Portion of Deferred Income 14,548 14,548
Escrow Deposits 15,000 15,088
---------- ----------
TOTAL CURRENT LIABILITIES 2,181,067 1,975,334
DEFERRED INCOME: less current portion 53,342 58,191
DEFERRED INCOME TAXES 56,440 50,601
COVENANT NOT TO COMPETE: less current portion -- 67,308
LONG TERM DEBT: less current portion 1,403,281 1,043,209
---------- ----------
TOTAL LIABILITIES 3,694,130 3,194,643
---------- ----------
STOCKHOLDERS' EQUITY:
Common Stock
Authorized 10,000,000 Shares, Par Value $.001 per
share Issued and Outstanding 2,000,000 shares 2,000 1
Paid in Surplus 5,662,775 3,999
Retained Earnings 465,954 540,883
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 6,130,729 544,883
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,824,859 $3,739,526
========== ==========
</TABLE>
See Accompanying Notes
4
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
$ 3,382,508 $ 3,333,591 $ 12,940,203 $ 11,934,693
NET SALES
3,334,807 2,733,262 10,640,692 9,408,585
------------ ------------ ------------ ------------
COST OF SALES
47,701 600,329 2,299,511 2,526,108
------------ ------------ ------------ ------------
GROSS PROFIT
EXPENSES 761,476 611,674 2,100,476 1,925,880
Selling, General and Administrative Expenses 124,790 138,929 340,230 333,537
------------ ------------ ------------ ------------
Depreciation and Amortization Expense 886,266 750,603 2,440,706 2,259,417
------------ ------------ ------------ ------------
TOTAL EXPENSES
(838,565) (150,274) (141,195) 266,691
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS
OTHER INCOME (EXPENSES): 60,247 57,781 108,301 67,406
Interest and Other Income (53,424) (48,634) (130,364) (135,363)
------------ ------------ ------------ ------------
Interest Expense 6,823 9,147 (22,063) (67,957)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSES)
INCOME (LOSS) EXTRAORDINARY ITEM AND BEFORE (831,742) (141,127) (163,258) 198,734
PROVISION FOR INCOME TAXES
(305,320) (61,800) (33,310) 76,450
------------ ------------ ------------ ------------
PROVISION (REDUCTION) FOR INCOME TAXES
(526,422) (79,327) (129,948) 122,284
NET INCOME (LOSS) - CONTINUING OPERATIONS
55,019 -- 55,019 --
------------ ------------ ------------ ------------
EXTRAORDINARY ITEM NET OF INCOME TAXES
$ (471,403) $ (79,327) $ (74,929) $ 122,284
============ ============ ============ ============
NET INCOME (LOSS)
$ (.39) $ (.08) $ (.09) $ .12
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE - CONTINUING OPERATIONS
EXTRAORDINARY GAIN - PER SHARE .04 -- .04 --
------------ ------------ ------------ ------------
NET INCOME (LOSS) PER SHARE $ (.35) $ (.08) $ (.05) $ .12
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING $ 1,366,300 $ 1,000,000 $ 1,366,300 $ 1,000,000
============ ============ ============ ============
</TABLE>
See Accompanying Notes
5
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
.001 PAR VALUE
--------------
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SURPLUS EARNINGS EQUITY
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1999 1,000 $ 1 $ 3,999 $ 540,883 $ 544,883
Common Stock Split - 1,000 for 1 999,000 999 (999) -- --
Sale of Common Stock 1,000,000 1,000 5,659,775 -- 5,660,775
Net Income (Loss) (74,929) (74,929)
----------- -----------
Balance - September 30, 1999 2,000,000 $ 2,000 $ 5,662,775 $ 465,954 $ 6,130,729
=========== =========== =========== =========== ===========
</TABLE>
See Accompanying Notes
6
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
UNAUDITED
---------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income(Loss) - Continuing Operations $ (129,948) $ 122,284
Adjustments to Reconcile Net Income to Cash
used by Operating Activities:
Depreciation and Amortization 340,230 333,537
Extraordinary Item - Net 55,019 --
(Increase) Decrease in:
Accounts Receivable (237,418) 6,508
Inventory (123,115) 85,467
Prepaid Expenses (21,595) (31,728)
Deposits 9,364 --
Increase (Decrease) in:
Accounts Payable (249,509) 3,550
Accrued Expenses 259,270 43,952
Other Taxes Payable 17,477 (975)
Customer Advance Payments (43,916) 91,186
Income Taxes Payable (10,002) (3,590)
Deferred income Taxes 5,839 6,850
Deferred Income (4,849) --
----------- -----------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (133,153)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (1,957,099) (288,969)
(Increase) Decrease in Shareholder's Loan (10,517) 33,803
(Increase) Decrease in Other Receivables 1,286 (5,994)
Purchase of Intangible Assets (139,850) --
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (2,106,180) (261,160)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Notes Payable 1,371,591 1,093,806
Decrease in Notes Payable (846,414) (1,347,319)
Loan From Employee -- 12,584
Funds from Sale of Common Stock 5,660,775 --
----------- -----------
NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES 6,185,952 (240,929)
----------- -----------
NET INCREASE IN CASH 3,946,619 154,952
Cash - Beginning of Year 125,844 155,904
----------- -----------
Cash - End of Year $ 4,072,463 $ 310,856
=========== ===========
The Company had Interest Cash Expenditures of: $ 130,364 $ 135,363
The Company had Tax Cash Expenditures of: $ 25,002 $ 50,650
</TABLE>
See Accompanying Notes
7
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 1 BASIS OF PRESENTATION
Able Energy, Inc. was incorporated in the state of Delaware on March
13, 1997. Mr. Timothy Harrington exchanged his stock in the following
companies: Able Oil Company (a New Jersey corporation), Able Oil
Company Montgomery, Inc. (a Pennsylvania corporation), A & O
Environmental Services, Inc. (a New Jersey corporation), Able Oil
Melbourne, Inc. (a Florida corporation) and his 99% interest in Able
Propane, LLC for 1,000 shares of Able Energy, Inc. and became its sole
shareholder. In December 1998, the Company sold A & O Environmental
Services, Inc. and Able Oil Company Montgomery, Inc.
On August 27, 1999, the Company, through a newly formed wholly owned
subsidiary, Able Energy New York, Inc., purchased the assets of B & B
Fuels of Warrensburg, New York. This acquisition was treated as a
purchase. The operations of this company are included from August 27,
1999 to September 30, 1999.
On August 31, 1999, the Company, through a newly formed wholly owned
subsidiary, Able Energy Terminal, LLC, purchased the facility on Route
46, Rockaway, NJ. The facility has two tenants (see Note 3). The
operations of this company are included from September 1, 1999 to
September 30, 1999.
The consolidated interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities Exchange Commission. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to make
the information presented not misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments which, in the opinion of management, are
necessary for fair presentation of the information contained therein.
It is suggested that these consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's annual report for the year ended December 31, 1998. The
Company follows the same accounting policies in preparation of interim
reports.
Results of operations for the interim periods are not indicative of
annual results.
8
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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
fuel, diesel fuel and kerosene to residential and commercial customers
operating in the northern New Jersey and Melbourne, Florida, and
Warrensburg, New York respectively. Able Propane, which was
incorporated in July 1996, installs propane tanks which it owns, and
sells propane gas 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.
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 so immaterial and has not been shown separately. All
material intercompany balances and transactions were eliminated in
consolidation.
INVENTORIES
Inventories are valued at the lower of cost (first in, first out
method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is provided by using the straight-line
method based upon the estimated useful lives of the assets (5 to 40
years).
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.
9
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
PROPERTY AND EQUIPMENT (CONT'D)
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.
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 nine months ended September 30,
1999 is $58,085.
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 now filing a consolidated tax return with Able Energy,
Inc.
10
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
INCOME TAXES (CONT'D)
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 a financial institution in excess of insured limits. The Company
does not anticipate non-performance by the financial institution.
NOTE 3 ACQUISITIONS
On August 27, and 31, 1999, the Company through newly formed wholly
owned subsidiaries (see Note l) acquired the following:
1) The assets of B & B Fuels, a retail distributor of home heating fuel
in Warrensburg, New York. The assets purchased include an oil terminal,
three oil delivery trucks, and a customer list of approximately 1,200
customers. The purchase price was $295,000. The Company also acquired
9.2 acres of land in Warren County, New York. The property is located
1/4 miles from the B & B Facility. The cost was $125,000, paid in cash.
2) Property on Route 46, Rockaway, New Jersey. The facility is a large
fuel terminal and also houses the Company's executive offices and other
operating facilities for Able Subsidiaries. There is also a building
rented to an outside party with an annual rental of approximately
$40,000. The purchase price was $1,150,000.
11
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 4 NOTES RECEIVABLE
The Company has received payment from Able Oil Montgomery, Inc. for the
months of January 1999 through September 1999 on its notes receivable
of $140,000. The payments totaled $11,761, including interest of
$2,428. The Statement of Income recognized income on this installment
sale of $4,849 for the nine months ended September 30, 1999.
NOTE 5 INVENTORIES
<TABLE>
<CAPTION>
ITEMS 1999 1998
-------- --------
<S> <C> <C>
Heating Oil $129,691 $ 38,733
Diesel Fuel 34,232 9,260
Kerosene 6,017 2,082
Propane 3,320 70
Parts and Supplies 79,338 79,338
-------- --------
TOTAL $252,598 $129,483
======== ========
</TABLE>
NOTE 6 NOTES PAYABLE BANK
Notes payable to PNC Bank include a line of credit of $500,000 with
interest at the rate of Prime minus 1/2%. The agreement with Able Oil
Company, dated October 20, 1997, and amended August 11, 1999, has a
current expiration date of June 30, 2000. There is also a term loan
with PNC Bank. The term loan was refinanced for a total of $675,000 on
June 12, 1998. The balance as of September 30, 1999 is $393,750. The
bank has released as collateral the stock of the Company owned by the
prior sole shareholder and has released the subsidiaries and Timothy
Harrington as guarantors. The Company has replaced this by granting the
PNC Bank a first priority lien on collateral consisting of Provident
Institution Money Market Fund containing no less than $972,000. The
Company under a guaranty and suretyship agreement will unconditionally
guarantee payment of the indebtedness to the bank. All other collateral
and covenants per the agreement have been deleted.
12
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 7 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 September 30, 1999 was $144,185.
Mortgage note payable dated, August 31, 1999, related to the purchase
of the facility and equipment in Rockaway, New Jersey by Able Energy
Terminal, LLC ("Terminal"). The note is in the amount of $650,000.
Pursuant to Section 4.4 of the Agreement of Sale to Purchase the
Terminal, the Principal Sum of the 650,000 note shall be reduced by an
amount equal to one-half of all sums expended by Borrower on the
investigation and remediation of the property provided, however, that
the amount of said reduction shall not exceed $250,000 (the
"Remediation Amount").
The "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 and reduction of the Reduced Principal Sum.
The Principal Sum and interest shall be due and payable commencing on
September 30, 1999. In addition interest on the Reduced Principal Sum
of the note shall be due and payable on the last day of each month
thereafter, up to and including July 31, 2004.
The Note is collateralized by the property and equipment purchased and
assignment of the leases. The balance due on this Note at September 30,
1999 was $641,211.
13
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 8 INCOME TAXES
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
The differences between the statutory Federal Income Tax and Income
Taxes Continuing Operation is accounted for as follows:
<TABLE>
<CAPTION>
1999
----
PERCENT OF
PRETAX
AMOUNT INCOME
-------- ----------
<S> <C> <C>
Statutory Federal Income Tax (Benefit) $(27,405) (15.0%)
Decrease resulting from State Income
Tax, net of Federal Tax benefit (5,905) (7.6%)
-------- ------
Income Taxes (Benefit) $(33,310) (22.6%)
======== ======
Income Taxes consist of:
Current (27,775)
Deferred (5,535)
--------
TOTAL $(33,310)
========
</TABLE>
14
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 8 INCOME TAXES (CONT'D)
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax liability and deferred tax
asset and their approximate tax effects are as follows at:
<TABLE>
<CAPTION>
1998
----
TEMPORARY TAX
DIFFERENCE EFFECT
--------- ---------
<S> <C> <C>
Depreciation $(159,389) $ (50,601)
Allowance for Doubtful Accounts 69,235 19,385
Gain on Sale of Subsidiary 23,615 5,075
<CAPTION>
1999
----
TEMPORARY TAX
DIFFERENCE EFFECT
--------- ---------
<S> <C> <C>
Depreciation $(179,190) $ (56,440)
Allowance for Doubtful Accounts 73,335 20,530
Gain on Sale of Subsidiary 18,766 4,035
</TABLE>
NOTE 9 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.
Able Oil Company has contracted with Unocal to take deliveries of
24,000 barrels of #2 oil. The oil will be stored in Able storage tanks
and remain the property of Unocal until purchased by Able Oil. Able Oil
is under contract to purchase the product in the months of November and
December 1999 and January and February 2000. The pricing will be the
NYMEX less $.01 per barrel on 12,000 barrels and flat on 12,000
barrels. At September 30, 1999, Able Oil had in their tanks 24,000
barrels or 1,008,000 gallons of oil belonging to Unocal. The total
exposure for the cost of this oil priced at future November, December
1999 and January, February 2000 is $631,672.
15
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 9 COMMITMENTS AND CONTINGENCIES (CONT'D)
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 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 7). In the
opinion of management, the Company will not sustain costs in this
matter which will have a material adverse effect on its financial
condition.
Able Oil Company has been examined by the Internal Revenue Service
through the year ended December 31, 1995. The only open year for Able
Oil Company is December 31, 1996 and Able Energy, Inc., et al, open
years are December 31, 1997 and December 31, 1998.
NOTE 10 OPERATING LEASE
Able Energy Terminal, LLC, has acquired the following lease on the
property it purchased on Route 46 in Rockaway, New Jersey.
The lease with Able Oil Company, a wholly owned subsidiary of Able
Energy, Inc., has an expiration date of July 31, 2004. The lease
provides for a monthly payment of $1,200 plus a one cent per gallon
through put, as per a monthly rack meter reading.
Estimated future rents are $14,400 per year, plus the one cent per
gallon through put charges per the monthly rack meter readings.
The Company leased 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 is $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 has the option to renew for five additional one-year terms.
The renewals are at an increase of $100 per month during each renewal
term.
16
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 11 EXTRAORDINARY ITEM
The extraordinary item is the income realized on the extinguishment of
debt for less than its carrying amount. The amount shown is net of
income taxes of $9,710.
On September 7, 1999, the Company paid two loans to Connell's Fuel Oil
Company and William Toriello which had original due dates of November
1, 2001.
<TABLE>
<S> <C>
Total Amount Due $312,454
Amount Paid 247,725
--------
Income on Extinguishment of Debt 64,729
Less Income Taxes 9,710
--------
Extraordinary Item $ 55,019
========
</TABLE>
NOTE 12 COMMON STOCK SPLIT
In conjunction with the Company's initial public offering, its common
stock was split 1000-for-l.
<TABLE>
<CAPTION>
AFTER SPLIT AND
ORIGINAL PUBLIC OFFERING
-------- ---------------
<S> <C> <C>
Authorized Shares 10,000 10,000,000
----------- -----------
Issued and Outstanding Shares 1,000 1,000,000
Public Offering Shares 0 1,000,000
Total Issued and Outstanding Shares 2,000,000
-----------
Par Value $.001 per Share $ 1 $ 2,000
-----------
</TABLE>
17
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
NOTE 13 PUBLIC OFFERING
On June 25, 1999, the Company consummated its initial public offering.
The Company sold 1 million shares of its common stock to the public at
$7 per share.
<TABLE>
<S> <C> <C>
Total $7,000,000
Less: Underwriting Commission $ 700,000
Underwriter's Non-Accountable
Expense Allocation 210,000
Other Expenses of Offering 108,000 1,018,000
---------- ----------
Net to Company after underwriting Costs 5,982,000
Other Offering Costs:
Legal Fees 154,000
Accounting Fees 50,000
Printing Costs 100,000
Stock Exchange and Other Registration Costs 17,225 321,225
---------- ----------
Net Funds Realized $5,660,775
==========
</TABLE>
NOTE 14 PER SHARE INFORMATION
Per share information has been computed based on the weighted average
number of shares. The shares give effect to a 1,000-for-1 stock split
by the Company and its public offering of 1,000,000 shares.
18
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this Quarterly Report on Form 10-QSB concerning the
Company's outlook or future economic performance, anticipated
profitability, gross billings, expenses or other financial items, and
statements concerning assumption 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 which would cause actual results to differ materially
from those stated in such statements. Such risks, and uncertainties and
factors include, but are not limited to: (i) changes in external
competitive market factors or trends in the Company's results of
operation; (ii) unanticipated working capital or other cash
requirements and (iii) changes in the Company's business strategy or an
inability to execute its competitive factors that may prevent the
Company from competing successfully in the marketplace.
REVENUE RECOGNITION
Sales of fuel and heating equipment are recognized at the time of
delivery to the customer, and sales of equipment are recognized at the
time of installation. Revenue from repairs and maintenance service is
recognized upon completion of the service. Payments received from
customers for heating equipment service contracts are deferred and
amortized into income over the term of the respective service
contracts, on a straight line basis, which generally do not exceed one
year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1998.
The Company reported revenues of $3,382,508 for the three months ended
September 30, 1999, an increase of 1.47% over the prior year's revenues
for the same three month period. This increase can be attributed to an
aggressive marketing program and fuel sold at a discount, under a
promotion. There was also an increase in service work during this
period. Revenues for the three months ended September 30, 1998 include
$208,321 of sales made by subsidiaries which were sold in December
1998. Had such revenues not been included in total revenue for the
three month period ended September 30, 1998, the increase in revenues
from such period to the three month period ended September 30, 1999
would have been 8.23%. The three months ended September 30, 1999
included $59,054 of revenues for the month of September from the
acquisition of B & B Fuels on August 27, 1999.
19
<PAGE>
Gross profit margin, as a percentage of revenues, for the three months
ended September 30, 1999, decreased 16.36%, from 17.77% one year ago to
1.41% in 1999. This decrease is a result of a rise in the price of fuel
without an equal corresponding sales price increase. These figures do
not take into account the sub-sidiaries sold in December 1998, whose
effect on gross margin was immaterial.
Selling, General and Administrative expenses increased by $149,802, or
24.49%, from $611,674 for the three months ended September 30, 1998 to
$761,476 for the three months ended September 30, 1999. Had the
expenses attributable to the two subsidiaries sold in December 1998 not
been included, this increase would have been $244,808 or 47.38%. This
increase was due to an increase in marketing costs, sales promotion,
outside service related to acquisitions, computer equipment and
software upgrade to account for year 2000 issue and additional staff to
manage this upgrade.
Operating loss for the three months ended September 30, 1999 was
$838,565, an increase of 458.02% over the Company's operating loss of
$150,274 for the three months ended September 30, 1998. This increase
in operating loss was attributable to lower gross profit resulting from
higher product cost without a corresponding raise in price.
The unusual loss for this period was exacerbated by a number of
extraordinary events and one time charges and is not indicative of
future results of the Company. For instance, the Company has recently
invested heavily in its infrastructure to support anticipated growth
that the Company intends to accomplish through an aggressive
acquisitions strategy and marketing program. To this end, the Company
has put in place a sophisticated computer hardware and software system
and has hired additional mid-management personnel to support its
growth. In addition, on August 31, 1999, the Company purchased B&B
Fules of Warrensburg (Albany), New York and has expended significant
cash resources to establish its presence in the greater Albany area and
raise the B&B facilities to the Company's standards. All of these
factors have contributed to the Company's large loss for this period.
Net loss for the three months ended September 30, 1999 increased by
$392,076, or 494%, to $471,403 as compared to the same period for the
previous year loss of $79,327. This increase in net loss was the result
of greater marketing costs, sales promotion, higher product cost,
higher direct wages and an investment cost on a growing service
operation as well as the extraordinary factors referred to above.
20
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998.
The Company reported revenues of $12,940,203 for the nine months ended
September 30, 1999, an increase of 8.43% over the prior year's revenues
of $11,934,693 for the same nine month period. The increase can be
attributed to increased commercial fuel sales and marketing efforts for
both residential and commercial customers. Revenues for the nine months
ended September 30, 1998 include $649,649 of sales made by subsidiaries
which were sold in December 1998. Had such revenues not been included
in total revenue for the nine month period ended September 30, 1998,
the increase in revenues from such period, as compared to the nine
month period ended September 30, 1999, would have been 14.67%.
Gross profit margin, as a percentage of revenues, for the nine months
ended September 30, 1999, decreased to 17.77% of net revenues,
representing an decrease of 3.40% over a margin of 21.17% for the same
nine month period one year ago. This reduction in margin is primarily a
result of higher product cost for home heating fuel with a slower
corresponding increase in retail price.
Selling, General and Administrative expenses increased by $174,596, or
9.06%, from $1,925,880 for the nine months ended September 30, 1998 to
$2,100,476 for the nine months ended September 30, 1999. These expenses
include the expenses of two subsidiaries sold December 1998. If these
expenses were eliminated, the increase would be $419,182, or 24.93%
which is due to aggressive marketing, sales promotion, higher staff
costs and outside services related to acquisitions and year 2000
computer enhancements..
Operating Loss for the nine months ended September 30, 1999 was
$(141,195), in comparison to the Company's operating income of $266,691
for the nine months ended September 30, 1998. This decrease from
operating income to an operating loss was attributable to higher prices
for home heating oil without a corresponding price increase and
increased salaries and marketing costs. The operating income for the
two subsidiaries sold in December 1998 was included in this calculation
but was not material with respect to this nine months comparison.
Net Loss for the nine months ended September 30, 1999 was $(74,929) in
comparison to income of $122,284 for the same period in previous year.
This decrease in net income to a net loss is a result of lower gross
margin, occasioned primarily by higher wholesale fuel price, increase
in wages and marketing costs. In addition, the Company is reorganizing
its internal and accounting operations and installing a new computer
system, to insure Year 2000 compliance.
21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the nine month period ended September 30, 1999, compared to the
nine months ended September 30, 1998, the Company's cash position
increased by $3,761,607 from $310,856 to $4,072,463. For the nine
months ended September 30, 1999, cash of $5,867,100 was generated from
the Company's initial public offering. For the nine months ended
September 30, 1998, cash was generated through operations, net income
and collections of customer advance payments.
As a result of a refinancing with its primary financial institution,
the Company has access to $500,000 of credit line funds. The Company's
credit line was increased from $350,000 to $500,000 at 1/2% below
prime, and its current outstanding credit line and other debt with the
bank was rolled into a 3-year term loan in the principal amount of
$675,000, bearing interest at a rate of approximately 1% above prime
rate. As of September 30, 1999, $332,000 of this line of credit was
used by the Company.
The Company received net proceeds from its initial public offering in
an amount of $5,867,100. The Company believes that the net proceeds of
this offering, coupled with the refinancing and income from operations,
will fulfill the Company's working capital needs for the next 18
months. As the Company continues to grow, and strengthen its
infrastructure, to position itself for additional growth, bank
borrowings, or other debt placements and equity offerings may be
considered, in part, or in combination, as the Company's situation
warrants.
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, and the overwhelming majority
of such revenues are derived from the sale of home heating products
including propane gas and fuel oil. However, the seasonality of the
Company's business is offset, in part, by an increase in revenues from
the sale of HVAC products and services, diesel and gasoline fuels
during the spring and summer months, due to the increased use of
automobiles and construction apparatus.
From May through September, Able Oil can experience considerable
reduction of retail heating fuel sales. Similarly, 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.
22
<PAGE>
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.
YEAR 2000
Many existing computer programs use only a two digit suffix to identify
a year in the date field with an assumed prefix of "19". Consequently,
this limits those systems to dates between 1900 and 1999. If not
corrected, many computer systems and applications could fail or create
erroneous results at or in connection with applications after the year
2000.
Approximately 50% of the Company's customers receive their home heating
oil and/or propane pursuant to an automatic delivery system whereby
deliveries are scheduled by computer, based on each customer's
historical consumption patterns and prevailing weather conditions. In
the event that the Company does have Year 2000 problems, failures and
interruptions resulting from computing system problems could have a
material adverse effect on the Company's results of operations.
The Company has undertaken to review the potential impact of the year
2000 issue to its internal operations. Such assessment has included a
review of the impact of the issue on business systems and other areas.
Based on the results of the Company's review, it does not anticipate
that the year 2000 issue will impact operations or operating results.
Although the Company has determined that all of its systems are
currently Year 2000 compliant, it has undertaken to replace its
computer systems. The Company anticipates that it will have a new
computer system in place by December 1999 at a cost of approximately
$250,000.
Additionally, the Company relies on its customers, suppliers, utility
service providers, financial institutions and other partners in order
to continue normal business operations. The Company has been advised by
most, if not all, of its external vendors, business associates, and
associated financial institutions that they are now Year 2000
compliant. However, at this time, it is impossible to assess the impact
of the year 2000 issue on each of these organizations. There can be no
guarantee that the systems of other unrelated entities will be
corrected on a timely basis and will not have a material adverse effect
on the Company. As the Company does not typically engage in contracts
with its vendors for the supply of energy products, it is not dependent
on any one vendor. In the event any of the Company's vendors are
affected by year 2000 issues, management believes that it will have
access to a number of alternative vendors and management believes that
such occurrence should not have material adverse effect on the
Company's business or operations.
23
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and use of Proceeds
The Company's public offering was June 22, 1999, and $5,867,100 was
received June 25, 1999 on the sale of 1,000,000 shares of Common Stock.
As of September 30, 1999, funds have been expended as follows:
<TABLE>
<S> <C>
Acquisition of B & B Fuels, Warrensburg, New York $ 150,000
Acquisition of Land in Warren County, New York 125,000
Acquisition of Facility in Rockaway, New Jersey 510,000
Payment of Debt 247,725
----------
TOTAL USE OF PROCEEDS TO SEPTEMBER 30, 1999 $1,032,725
==========
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits filed herewith:
None
(B) Forms 8-K filed during quarter:
The Company filed a report on Form 8-K dated Setpember 8,
1999, reporting on the acquisition of assets under Item 2,
thereof. The acquisition related to the Company's purchase of
the following:
1) The assets of B & B Fuels, a retail distributor of home
heating oil, located in Warrensburg, New York.
2) The purchase of a 9.2 acre parcel of property in Warren
County, New York.
The above items are owned by Able Energy, Inc. New York, a
wholly owned subsidiary.
3) Property at 344 Route 46 East, Rockaway, New Jersey. The
facility contains the Company's executive offices and other
operating facilities. The property is owned by Able Energy
Terminal, LLC, a wholly owned subsidiary.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ABLE ENERGY, INC.
(Registrant)
By
---------------------------
President and
Principal Financial Officer
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the interim
financial statements for the nine month period ended September 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,072
<SECURITIES> 0
<RECEIVABLES> 896
<ALLOWANCES> (73)
<INVENTORY> 253
<CURRENT-ASSETS> 5,513
<PP&E> 4,636
<DEPRECIATION> (1,139)
<TOTAL-ASSETS> 9,825
<CURRENT-LIABILITIES> 2,181
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 6,129
<TOTAL-LIABILITY-AND-EQUITY> 9,825
<SALES> 12,950
<TOTAL-REVENUES> 12,950
<CGS> 10,641
<TOTAL-COSTS> 2,441
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> (163)
<INCOME-TAX> (33)
<INCOME-CONTINUING> (130)
<DISCONTINUED> 0
<EXTRAORDINARY> 55
<CHANGES> 0
<NET-INCOME> (75)
<EPS-BASIC> (.050)
<EPS-DILUTED> (.050)
</TABLE>
