<PAGE>
UNITED STATES
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 June 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 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 [ ] No [X]
As of August 9, 1999, 2,000,000 shares, $.001 par value per share, of
Able Energy, Inc. were issued and outstanding.
----------------------
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
TABLE OF CONTENTS
PAGE
----
Consolidated Balance Sheets as of December 31, 1998 and
June 30, 1999 3 - 4
Consolidated Statements of Income for the three and six
months ended June 30, 1999 and June 30, 1998 5
Consolidated Statement of Stockholders' Equity six months
ended June 30, 1999 6
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998 7
Notes to Unaudited Financial Statements 8 - 13
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED) AUDITED
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash $6,107,665 $ 125,844
Accounts Receivable (Less Allowance for Doubtful
Accounts of ($69,235) at 12/31/98 and 6/30/99 652,902 658,139
Inventory 143,581 129,483
Notes Receivable - Current Portion 30,168 36,651
Miscellaneous Receivable 33,565 13,074
Prepaid Expense 66,784 51,709
Prepaid Expense - Income Taxes -- 96,003
Deferred income Tax 20,970 24,460
Due From Officer 39,515 34,173
---------- ----------
TOTAL CURRENT ASSETS 7,095,150 1,169,536
---------- ----------
PROPERTY AND EQUIPMENT:
Land 90,800 90,800
Building 150,000 150,000
Trucks 1,673 447 1,300,046
Fuel Tanks 633,542 487,677
Machinery and Equipment 224,292 275,938
Leasehold Improvements 124,986 160,429
Cylinders 151,270 204,477
Office Furniture and Equipment 10,514 9,313
---------- ----------
3,058,851 2,678,680
Less: Accumulated depreciation 1,037,368 859,316
---------- ----------
NET PROPERTY AND EQUIPMENT 2,021,483 1,819,364
---------- ----------
OTHER ASSETS:
Deposits 1,796 14,371
Notes Receivable - Less Current Portion 138,227 146,885
Customer List, Less Amortization of 1998 ($85,650), and
1999 ( 104,683) 466,317 485,350
Covenant Not to Compete, Less Amortization of 1998
($81,743) and 1999 (97,903) 85,664 104,020
---------- ----------
TOTAL OTHER ASSETS 692,004 750,626
---------- ----------
TOTAL ASSETS $9,808,637 $3,739,526
========== ==========
</TABLE>
See Accompanying Notes
3
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONT'D)
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED) (AUDITED)
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 590,461 $ 689,246
Note Payable - Bank 280,453 100,434
Current Portion of Long-Term Debt 692,104 651,817
Covenant Not To Compete 36,714 36,714
Accrued Expenses 144,605 62,244
Taxes Payable 24,635 15,298
Customer Advance Payments 66,473 355,983
Income Taxes Payable - Current 164,737 --
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 2,053,690 1,975,334
DEFERRED INCOME: less current portion 53,341 58,191
DEFERRED INCOME TAXES 58,381 50,601
COVENANT NOT TO COMPETE: less current portion 48,951 67,308
LONG TERM DEBT: less current portion 992,142 1,043,209
---------- ----------
TOTAL LIABILITIES 3,206,505 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 937,357 540,883
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 6,602,132 544,883
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,808,637 $3,739,526
========== ==========
</TABLE>
See Accompanying Notes
4
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 3,376,760 $ 3,096,590 $ 9,557,695 $ 8,601,102
COST OF SALES 2,878,708 2,523,853 7,305,885 6,675,323
----------- ----------- ----------- -----------
GROSS PROFIT 498,052 572,737 2,251,810 1,925,779
----------- ----------- ----------- -----------
EXPENSES
Selling, General and Administrative Expenses 638,427 567,868 1,339,000 1,314,206
Depreciation and Amortization Expense 107,189 88,528 215,440 194,608
----------- ----------- ----------- -----------
TOTAL EXPENSES 745,616 656,396 1,554,440 1,508,814
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (247,564) (83,659) 697,370 416,965
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES):
Interest and Other Income 28,963 4,639 48,054 9,625
Interest Expense (48,513) (34,637) (76,940) (86,729)
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSES) (19,550) (29,998) (28,886) (77,104)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (267,114) (113,657) 668,484 339,861
PROVISION (REDUCTION) FOR INCOME TAXES (106,600) (47,450) 272,010 138,250
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (160,514) $ (66,207) $ 396,474 $ 201,611
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE $ (.15) $ (.07) $ .38 $ .20
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 1,044,198 1,000,000 1,044,198 1,000,000
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes
5
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 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 396,474 396,474
----------- ----------- ----------- ----------- -----------
Balance - June 30, 1999 2,000,000 $ 2,000 $ 5,662,775 $ 937,357 $ 6,602,132
=========== =========== =========== =========== ===========
</TABLE>
See Accompanying Notes
6
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
UNAUDITED
---------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 396,474 $ 201,611
Adjustments to Reconcile Net Income to Cash
used by Operating Activities:
Depreciation and Amortization 215,440 194,608
Gain on Sale of Equipment --
Excess of Subsidiary Losses over Investment --
(Increase) Decrease in:
Accounts Receivable 5,237 168,782
Inventory (14,098) 31,545
Prepaid Expenses 84,419 (32,688)
Deposits 12,575 --
Increase (Decrease) in:
Accounts Payable (98,785) (97,038)
Accrued Expenses 82,273 15,474
Other Taxes Payable 9,337 (3,131)
Customer Advance Payments (289,510) (88,550)
Income Taxes Payable 154,735 77,200
Deferred income Taxes 7,780 4,250
Deferred Income (4,850) (100)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 561,027 471,963
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (380,171) (162,367)
(Increase) Decrease in Shareholder's Loan (5,342) 34,692
Other Receivables (5,350) (3,123)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (390,863) (130,798)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Notes Payable 525,032 1,022,822
Decrease in Notes Payable (374,150) (968,196)
Loan From Employee -- 13,545
Funds from Sale of Common Stock 5,660,775 --
----------- -----------
NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES 5,811,657 68,171
----------- -----------
NET INCREASE IN CASH 5,981,821 409,336
Cash - Beginning of Year 125,844 155,904
----------- -----------
Cash - End of Year $ 6,107,665 $ 565,240
=========== ===========
The Company had Interest Cash Expenditures of: $ 76,940 $ 86,729
The Company had Tax Cash Expenditures of: $ 10,002 $ 50,650
</TABLE>
See Accompanying Notes
7
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1998 AND JUNE 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.
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.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Able Oil Company and Able Melbourne 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 and Melbourne, Florida,
respectively. Able Propane, which was incorporated in July
1996, installs propane tanks which it owns and sells propane
for heating and cooking.
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 oil. 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.
8
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND JUNE 30, 1999
NOTE 2 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 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.
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 were 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.
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.
9
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND JUNE 30, 1999
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
INCOME TAXES
Effective January 1, 1997, all the subsidiaries, which were
S-Corporations, terminated their S-Corporation elections. The
subsidiaries will be filing a consolidated tax return with
Able Energy, Inc. for 1997 and future years.
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 accounts
with a financial institution in excess of insured limits. The
Company does not anticipate non-performance by the financial
institution.
NOTE 3 NOTES RECEIVABLE
The Company has received payment from Able Oil Montgomery,
Inc. for the months of January 1999 through June 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
six months ended June 30, 1999.
NOTE 4 INVENTORIES
<TABLE>
<CAPTION>
ITEMS 1999 1998
----- ---- ----
<S> <C> <C>
Heating Oil $ 50,612 $ 38,733
Diesel Fuel 9,648 9,260
Kerosene 1,941 2,082
Propane 2,042 70
Parts and Supplies 79,338 79,338
-------- --------
TOTAL $143,581 $129,483
======== ========
</TABLE>
10
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND JUNE 30, 1999
NOTE 5 NOTES PAYABLE BANK
Notes payable to PNC Bank include a line of credit of $500,000
with interest at the rate of Prime plus 1/2%. The agreement,
dated October 20, 1997, and amended July 20, 1998 has a
current expiration date of August 31, 1999. 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 June 30,
1999 is $450,000. The bank has released as collateral the
stock of the Company owned by the prior sole shareholder. The
Company has replaced this with funds of $975,000 deposited in
the bank. All other collateral and covenants remain as per the
agreement.
NOTE 6 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:
<TABLE>
<CAPTION>
1999
----
PERCENT OF
PRETAX
AMOUNT INCOME
-------- ------
<S> <C> <C>
Statutory Federal Income Tax $210,700 34.0%
Increase resulting from State Income
Tax, net of Federal Tax benefit 61,310 5.9%
-------- ----
Income Taxes $272,010 39.9%
======== ====
Income Taxes consist of:
Current 264,860
Deferred 7,150
--------
TOTAL $272,010
========
</TABLE>
11
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND JUNE 30, 1999
NOTE 6 INCOME TAXES
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
---------- ---------
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 $(172,590) $ (58,381)
Allowance for Doubtful Accounts 69,235 16,695
Gain on Sale of Subsidiary 18,766 4,275
</TABLE>
NOTE 7 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 12,000 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 2000. The pricing will be the NYMEX less $.01 per
barrel. At June 30, 1999, Able Oil had in their tanks 6,907
barrels or 290,097 gallons of oil belonging to Unocal. The
total exposure for the cost of this oil priced at future
November, December 1999 and January 2000 is $146,961.
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.
12
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (CONT'D)
DECEMBER 31, 1998 AND JUNE 30, 1999
NOTE 8 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>
NOTE 9 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 10 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.
13
<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,
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 oil 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 JUNE 30, 1999, COMPARED TO THE THREE MONTHS
ENDED JUNE 30, 1998.
The Company reported revenues of $3,376,760 for the three
months ended June 30, 1999, an increase of 9.05% 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 June 30, 1998 include $152,119 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 June 30, 1998, the increase in revenues
from such period to the three month period ended June 30, 1999
would have been 14.68%.
Gross profit margin, as a percentage of revenues, for the
three months ended June 30, 1999 remained relatively constant,
decreasing 0.40%, from 15.1% one year ago to 14.7% in 1999.
This decrease is a result of the Company's fuel promotion and
lower pricing of fuel oil. These figures do not take into
account the subsidiaries sold in December 1998, whose effect
on gross margin was immaterial.
14
<PAGE>
Selling, General and Administrative expenses increased by
$70,559, or 12.43%, from $567,868 for the three months ended
June 30, 1998 to $638,427 for the three months ended June 30,
1999. Had the expenses attributable to the two subsidiaries
sold in December 1998 not been included, this increase would
have been $197,595 or 44.82%. This increase was due to an
increase in marketing costs, sales promotion and additional
staff which were carried over from the winter months.
Operating loss for the three months ended June 30, 1999 was
$247,564, an increase of 195.9% over the Company's operating
loss of $83,659 for the three months ended June 30, 1998. This
increase in operating loss was attributable to lower gross
profit resulting from lower product sale prices and the
Company's marketing program.
Net loss for the three months ended June 30, 1999 increased by
$94,307, or 142%, to $160,514, as compared to the same period
for the previous year. This increase in net loss was the
result of greater marketing costs, sales promotion with
discounted sale prices and higher staff salaries which were
carried over from the winter months that were more productive
than the prior year.
SIX MONTHS ENDED JUNE 30, 1999, COMPARED TO THE SIX MONTHS
ENDED JUNE 30, 1998.
The Company reported revenues of $9,557,659 for the six months
ended June 30, 1999, an increase of 11.12% over the prior
year's revenues of $8,601,102 for the same six month period.
This increase can be attributed to increased sales as a result
of cooler weather in the Northeast during the March quarter as
compared to warmer weather experienced by the Northeast during
November and December 1998. Therefore, some customers who
would normally receive delivery of fuel oil in the fourth
quarter of 1998, instead, received delivery in the first
quarter of 1999. Increased revenues can also be attributable
to increased marketing efforts. Revenues for the six months
ended June 30, 1998 include $441,328 of sales made by
subsidiaries which were sold in December 1998. Had such
revenues not been included in total revenue for the six month
period ended June 30, 1998, the increase in revenues from such
period, as compared to the six month period ended June 30,
1999, would have been 17.13%.
Gross profit margin, as a percentage of revenues, for the six
months ended June 30, 1999, increased to 23.56% of net
revenues, representing an increase of 1.6% over a margin of
22.40% for the same six month period one year ago. This
improvement in margin is primarily a result of stable retail
prices for home heating oil with lower product cost.
15
<PAGE>
Selling, General and Administrative expenses increased by
$24,794, or 1.89%, from $1,314,206 for the six months ended
June 30, 1998 to $1,339,000 for the six months ended June 30,
1999. These expenses include the expenses of two subsidiaries
sold December 1998. If these expenses were eliminated, the
increase would be $174,374, or 14.97%, which is due to
aggressive marketing, sales promotion and higher staff costs.
Operating Income for the six months ended June 30, 1999 was
$697,370, an increase of 67.25% over the Company's operating
income of $416,965 for the six months ended June 30, 1998.
This increase in operating income was attributable to stable
retail prices for home heating oil and lower home heating oil
product costs paid by the Company during the last twelve
months as a result of unusually low fuel prices. The operating
income for the two subsidiaries sold in December 1998 was
included in this calculation but was not material with respect
to this six months comparison.
Net income for the six months ended June 30, 1999 increased by
$194,863 or 96.65% to $396,474 as compared to the same period
in previous year. This increase in net income is a direct
result of continued sales growth and improved gross margin,
occasioned primarily by lower wholesale fuel prices, which
more than offset the Company's investment in consumer
promotions and advertising. As a percentage of net revenues,
income for the first six months of 1999 increased to 4.14% as
compared to 2.34% for the same period in the previous year. In
addition to an increase in gross margin, as described above,
the Company also profited from certain forward purchase
contracts and from sales to customers with automatic delivery
contracts.
CONCENTRATION OF REVENUE WITH GUARANTEED MAXIMUM PRICE
CUSTOMERS
Approximately 5% of the Company's heating oil volume is sold
to individual customers under an agreement which
pre-establishes the maximum sales price of oil over a twelve
month period. The maximum price at which oil is sold to these
customers is renegotiated in each spring to reflect current
market conditions. The Company currently enters into a forward
purchase contract for a substantial majority of the oil it
sells to these customers. Should the cost of oil rise above
the capped sales price, margins for the capped-price customer
whose oil was not purchased in advance would be lower than
expected. Conversely, should the cost of oil decrease below
the capped sales price, margins for the capped-price customers
whose oil was purchased in advance would be higher than
expected. The capped-priced customers' payments are received
in advance and are shown on the Company's balance sheet as
customer deposits in current liabilities.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the six month period ended June 30, 1999, compared to the
six months ended June 30, 1998, the Company's cash position
increased by $5,552,865 from $554,800 to $6,107,665. For the
six months ended June 30, 1999, operations generated $114,721
in cash, and $5,867,100 in cash was generated from the
Company's initial public offering. For the six months ended
June 30, 1998, cash was generated through operations, net
income and collections of accounts receivable.
As a result of a refinancing with its primary financial
institution, PNC Bank, 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 0.5% above the prime rate, 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 June 30, 1999,
$280,000 of this line of credit was used by the Company. Both
the credit line and the term loan are guaranteed by $975,000
which is deposited in with PNC Bank.
The Company received net proceeds from its initial public
offering in an amount estimated to be $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 24 months. As the
Company continues to grow, 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 oil. However, the
seasonality of the Company's business is offset, in part, by
an 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.
From May through September, Able Oil can experience
considerable reduction of retail heating oil 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.
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.
17
<PAGE>
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 October 1999 at a cost
of approximately $50,000.
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.
18
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 21, 1999, the Company's registration statement on Form
SB-2, registration number 333-59109, was declared effective.
The registration statement related to the initial public
offering of 1,000,000 shares of the Company's common stock,
$.001 par value per share, at a public offering price of $7.00
per share. Kashner Davidson Securities Corp. served as the
managing underwriter of the offering.
An aggregate of 1,250,000 shares of the Company's common stock
were registered pursuant to its registration statement which
consisted of: (i) 1,000,000 shares offered to the public; (ii)
150,000 shares which underlie the over-allotment option
granted to the underwriters of the offering, of which 75,000
shares were to be offered by the Company and 75,000 shares
were to be offered by Timothy Harrington, the Company's Chief
Executive Officer; and (iii) 100,000 shares of common stock
issuable upon exercise of the underwriter's warrant, such
shares are exercisable for a period commencing June 21, 2000
until four years thereafter at an exercise price of $11.55 per
share. The aggregate price of the securities registered was
$9,205,100. Of the 1,250,000 shares that were registered,
1,000,000 shares were sold for an aggregate offering price of
$7,000,000.
The following table sets forth the expenses incurred by the
Company in connection with the offering from the effective
date of the Company's registration statement through June 30,
1999, plus the net amount of proceeds from the offering
received by the Company: the Company incurred the following
expenses:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
- ----------- ------
<S> <C>
Underwriters' Discount................................... $ 700,000
Underwriters' Non-Accountable Expense
Allowance................................................ 210,000
Underwriters' Consulting Fee............................. 108,000
Printing Services......................................... 100,000
Accounting Services....................................... 50,000
Legal Services, Including Blue Sky Fees and
Expenses................................................. 154,000
Miscellaneous Expenses.................................... 17,225
----------
Net Proceeds to Company.................................. $5,660,775
</TABLE>
As of June 30, 1999, none of the net proceeds from the
offering has been expended by the Company; however, $975,000
of the proceeds from the offering has been deposited with PNC
Bank as a guaranty for a line of credit and a term
19
<PAGE>
loan with PNC Bank. The term loan and the line of credit total
an aggregate of $975,000 in indebtedness. Such indebtedness
was previously guaranteed by, among other things, all of the
shares of common stock of the Company beneficially owned by
Timothy Harrington, the Company's Chief Executive Officer.
Upon the deposit of the $975,000, PNC Bank released Mr.
Harrington's shares from the guaranty. See Note 5 to Financial
Statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits filed herewith:
EXHIBIT
10.1 Sale Agreement between the Comapny and Union Oil
Company of California, dated June 4, 1999
10.2 Storage Throughput Agreement between the Company and
Union Oil
Company of California, dated June 4, 1999
27.1 Financial Data Schedule
(B) Forms 8-K filed during quarter:
None.
20
<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.
By: CHRISTOPHER P. WESTAD
------------------------
Christopher P. Westad,
President and
Principal Financial Officer
Dated: August 13, 1999
21
<PAGE>
Exhibit 10.1
SALE AGREEMENT BETWEEN THE COMAPNY AND UNION OIL
COMPANY OF CALIFORNIA, DATED JUNE 4, 1999
June 4, 1999
Tim Harrington
Able Oil Company
344 Route 46 East
Rockaway, NJ 07866
CONTRACT NO.: 99120
We are pleased to confirm a sale agreement reached June 4, 1999 between UNOCAL,
hereafter called "Seller" and Able Oil Co., hereinafter called "Buyer" under the
following terms and conditions. In any future correspondence concerning this
agreement, please refer to UNOCAL contract number above.
Seller: Union Oil Company of California d.b.a UNOCAL
14141 Southwest Freeway
Sugar Land, TX 77477
Buyer: Able Oil Co.
344 Route 46 East
Rockaway, NJ 07866
PRODUCT:
No. 2 Heating Oil meeting NYMEX grade summer specifications.
QUALITY:
Approximately 12,000bbls adjusted to 60 degrees F.
LOCATION:
For Able Oil Terminal, Rockaway, NJ
DELIVERY TIMING:
During June 1999 as mutually scheduled.
SALES SCHEDULE: Buyer agrees to purchase product according to the following
schedule.
MONTH BARRELS
----- -------
Nov 99 1,000
Dec 99 3,000
Jan 00 4,000
Feb 00 4,000
------
12,000
PRICE:
The purchase price for FOB delivered basis Buyer's terminals listed in the
delivery clause herein shall be set when Buyer notifies UNOCAL by phone on a
business day during normal NYMEX trading hours (9:50am - 3:10pm est.) to
purchase, in minimum 1,000 barrel increments, the delivery month NYMEX Heating
oil contract prior to it expiration will be used. This price minus the
differential of USD -.0100 per gallon shall be the established price for this
contract for all barrels delivered in accordance with the schedule below.
<PAGE>
Buyer has the option to purchase and lift barrels prior to the delivery month
listed below, provided that the quantities, as broken down below, are priced
based on the corresponding NYMEX delivery month listed below, and that the
product is available.
PRICING/SALES SCHEDULE:
<TABLE>
<CAPTION>
DELIVERY MONTH NYMEX CONTRACT FIXED DIFF/$GAL QUANTITY (BBLS)
PRICING MONTH
<S> <C> <C> <C>
Nov 99 Nov 99 -0100 1,000
Dec 99 Dec 99 -0100 3,000
Jan 00 Jan 00 -0100 4,000
Feb 00 Feb 00 -0100 4,000
</TABLE>
Buyer has the option to set prices, beyond the current delivery month subject to
the maximum exposure hereunder. If, on a mark-to-market basis, Seller's total
exposure on the forward-priced barrels plus accounts receivable exceeds the
credit limit Buyer shall, within two (2) business days of UNOCAL's written
request, either prepay, open an irrevocable letter of credit acceptable to
Seller or deposit with UNOCAL such collateral as UNOCAL may request as security
for the payment of amounts due or that may become due by Buyer to UNOCAL under
this agreement.
Buyer is required to purchase at least the minimum monthly quantities listed
above. Therefore any barrels no previously priced and invoiced will be priced on
the settlement price on the last trading day at the expiration of the relevant
delivery month contract on the NYMEX plus the fixed differential.
ROLLING OPTION:
Unpurchased barrels may be rolled to the following month. A time value of money
charge of $.0045 per gallon plus the gain or loss on the NUMEX roll will be
added to the differential.
DELIVERY:
F.O.B. delivered into Buyer's stock inventory at Able Oil terminal in Rockaway,
NJ per the schedule shown in the price clause herein. Prior to sale product will
be stored under the terms of the Throughput/Storage Agreement between Able and
UNOCAL.
Upon completion of delivery of UNOCAL's product into Buyer's storage terminal
per the terms of the above referenced Throughput/Storage Agreement, the volumes
delivered into the terminal will be confirmed in writing by telex or telecopy by
Seller to Buyer and this confirmation will serve to identify the quantities sold
under the terms of this sales agreement.
INSPECTION:
Loading rack meter ticket at Motiva, Newark, NJ truck rack to Able Oil trucks.
TITLE:
Title to the oil delivered hereunder shall pass to buyer on effective date of
the in-tank stock transfer/release.
All product volumes delivered into Buyers terminal and to be purchased by Buyer
based on as determined by Rack meter tickets and adjusted to 60 degrees F.
PAYMENT:
As pre-payment terms, payment due prior to release of product.
For volumes being priced in the current delivery month:
Within one (1) working day of the time product is priced, Seller will telefax
invoice to Buyer. Payment is due in US dollars prompt upon receipt of invoice.
For volume priced in previous months:
<PAGE>
On the first working day of the delivery month, Seller will invoice prepriced
barrels with payment due prompt upon receipt of invoice.
For any miscellaneous charges, other than product invoices, payment shall be
paid prompt upon receipt of invoice.
Should Buyer lift any product prior to reaching price agreement with Seller, it
will be considered breach of contract and all funds due hereunder shall become
immediately due and payable.
Payment without deduction, offset, or counterclaim, is to be made by wire
transfer, free of all charges that Seller's account is credited in same day
(usable) funds to:
Payment Instructions: Wire transfer to:
Union Oil Company of California
Northern Trust Company
Chicago, Illinois
ABA Routing No.: 071000152
For credit to Account No.: 54356
Location Code in first text field NGL-0225
Buyer shall identify by number Union Oil invoices being paid in the wire
transfer comments.
In the event payment is not received when due it shall bear interest at 1.5% per
month for each month or portion of a month thereafter during which such amount
remains unpaid.
CREDIT:
Buyer to satisfy UNOCAL's credit requirements as per price clause above. Buyer
to have $50,000 credit unless notified by Seller upon UNOCAL's credit department
review that Buyer shall either prepay or establish a letter of credit through a
first class bank and in a format acceptable to Seller.
FORCE MAJEURE:
Seller shall not be obligated to deliver or Buyer obligated to received product
hereunder when, while and to the extent that seller is prevented from obtaining
or making deliveries or Buyer is prevented from receiving it in the customary
manner, due to events caused by acts of God; fires, strikes, or other labor
disturbances; war; declared or undeclared, embargoes; perils of the sea;
accident; acts, requests or orders of civil or military authorities; or any
cause whatsoever beyond the control of Seller or Buyer, whether or not similar
to the causes herein specified.
Where the shipment is by pipeline, Seller shall also have the same rights under
force majeure as granted to the pipeline carrier by the relevant tariff, in any.
In any event, if the goods are lost in-transit, Seller shall be entitled to
allocate the volume remaining among all customers on a prorata basis.
Notwithstanding the foregoing provisions, Buyer shall not be relieved of any
obligation to make payments, in US dollars, for the oil/product delivered
hereunder or any other payment obligations already incurred.
TAXES:
All taxes, fees, and dues (except for New York State Spill Tax), now or
hereafter imposed by federal, state or local governments, in respect to or
measured by the products delivered hereunder or the manufacture, storage,
delivery, receipt, exchange or inspection thereof, shall be for the account of
Buyer. Upon receipt of invoice thereof, Buyer shall reimburse Seller for any
such taxes fees or dues legally required to be paid. Each party respectively
warrants that he is properly licensed to Buy/Sell this product in the state of
tile transfer exempt of tax and, if required, shall furnish a valid federal and
state license and/or registration number to the requesting party.
If this transaction results in payment of New York, Connecticut, or New Jersey
gross receipt taxes or any other state taxes by supplier, then these taxes shall
appear as a separate item on the invoice and will be due and payable to supplier
in accordance with the payment terms of this contract.
LIQUIDATION CLAUSE:
<PAGE>
Without limiting any other rights that may be available to the liquidating
party, in the event that a party hereto (the defaulting party) shall (A) become
bankrupt or insolvent, however evidenced, or (B) file a petition or otherwise
commence a proceeding under any bankruptcy, insolvency or similar law, or have
any such petition filed or proceeding commenced against it, or (C) have a
liquidator, administrator, receiver or trustee appointed with respect to it or
any substantial portion of its property or assets, or (D) fail to give adequate
security for, or assurances of its ability to perform, its obligations - then in
any such event the performing party shall have the right to liquidate any or all
forward contracts when outstanding at anytime or from time to time thereafter by
declaring any and all such contracts terminated (whereupon they shall
automatically be declaring any and all such contracts terminated (whereupon they
shall automatically be terminated, except for the payment obligation referred to
below), calculating the difference, if any, between the price specified therein
and the market price for relevant commodity (as determined by the liquidating
party in a commercially reasonable manner at a time or times reasonably
determined by the liquidating party), and aggregating or netting such market
damages to a single liquidated settlement payment that will be due and payable
upon demand thereof. The non-performing party shall indemnify and hold the
performing party harmless from all costs and expenses of collection, including
reasonable attorneys fees, incurred in the exercise of any remedies hereunder.
The parties hereto acknowledge that this contract constitutes a forward contract
for purposes of Section 556 of the USA Bankruptcy Code.
ASSIGNMENT:
Neither Seller nor Buyer shall assign the whole or any part of its rights and
obligations hereunder directly or indirectly without prior written consent of
the other party. Assignor remains responsible for non-performance.
OTHER:
Buyer will give UNOCAL a no cost Throughput Agreement at inventory terminal
locations.
UNOCAL will file UCC-1's for product stored at inventory terminals.
UNOCAL will supply barrels at Motiva, Newark, NJ truck rack. Able Oil will enter
into an exchange agreement whereby Able gives UNOCAL the FOB load
quantity/quality at Able inventory location that UNOCAL supplies at Motiva
rack.
At UNOCAL's expense, independent inspectors will be allowed to gauge the
inventory at Able Oil terminal.
There are no guarantees or warranties, express or implied, of merchantability,
fitness, suitability of the oil/product for any particular purpose, or
otherwise, which extend beyond the description of the face hereof. Under no
conditions shall any claim be made under this contract for prospective profits
of special, indirect, or consequential damages resulting from a breach of
warranty herein. The foregoing limitations on damages shall not apply to claims
of property damage, death, or personal injury.
Our coordinators is Mary Jane Laurion (281) 287-5045
Our financial contact is: Bob Hill (281) 287-7178
This instrument contains the complete agreement of both parties and cannot be
modified unless in writing. Any other amendments received shall be deemed
proposals to this contract unless confirmed in writing by seller.
Able Oil Company Union Oil Company of California
By:_________________________________ By:___________________________________
Title:______________________________ Title:________________________________
Date:_______________________________ Date:_________________________________
<PAGE>
Exhibit 10.2
STORAGE THROUGHPUT AGREEMENT BETWEEN THE COMPANY AND
UNION OIL COMPANY OF CALIFORNIA, DATED JUNE 4, 1999
STORAGE/THROUGHPUT AGREEMENT
This Agreement made and entered into by and between Able Oil Company hereinafter
refereed to as "Able Oil" and,
Name: Union Oil Company of California d.b.a. UNOCAL
Hereinafter referred to as "Customer"
WHERAS, Customer desires to enter into this Agreement hereinafter referred to as
"Agreement" under which Able Oil will provide storage, load and unload petroleum
products for Customer as hereinafter provided.
NOW, THEREFORE, it is hereby agreed by and between Able Oil and Customer hereto
as follows:
TERMS OF AGREEMENT: Beginning Date: June 4, 1999
Ending Date: June 4, 2000
2. APPROXIMATE VOLUME: Approximately 12,000 Barrels of No.
2 heating oil NYMEX summer grade
specifications.
3. LOCATION: Able Oil Company
344 Route 46 East
Rockaway, NJ 07866
4. PRODUCT: No. 2 heating oil NYMEX summer grade
5. THROUGHPUT CHARGE ($/GAL): $.0060 for any volume sold out of
tankage to any party other than Able
Oil. Payable upon movement of the
product from storage.
6. MOVEMENTS: Movements into and out of
Able Oil will be by Exchange,
Pipeline, tank truck, tank car,
and/or storage transfer or barge.
7. PARTIES ADDRESS INFORMATION: Union Oil Company of California
14141 Southwest Freeway
Sugar Land, Texas 77477
8. DEFINITIONS: In this Agreement, the following
words will have the meaning herein
set forth:
"Product" will mean No. 2 heating oil NYMEX grade summer specifications.
"Barrel" will mean forty-two (42) US gallons
"Terminal" or Terminal premises will mean Able Oil Terminals located at the
various locations listed in paragraph 3 which include land, storage tanks,
truck loading racks, pipes, offices - and related facilities, together with
modifications or additions thereto.
Throughput Services will mean the acceptance of Product tendered by Customer at
the Terminal for the account of Customer, interim storage of the product,
and re-delivery of Product via Customer's designated receiving equipment
for the account of Customer, (as specified in paragraph 6) together with
all necessary recordkeeping.
9. SERVICES AND FACILITIES: Able Oil, at its own expense, will maintain and
make such repairs as are necessary to keep the Terminal in operating condition
and in compliance with all applicable laws and ordinances.
10. OPERATIONS:
10.1 Able Oil, shall use its best efforts to accommodate and arrange
delivery of product to and from storage on a first-come first-served
basis with advance nomination schedules arranged through Customer with
Able Oil on behalf of the owner or charterer of such vessel/barge
and/or common
<PAGE>
carrier pipeline.
10.2 Customer understands and agrees that a positive inventory position will
be maintained on every Product held in storage.
10.3 Able Oil agrees to hold customer's inventory for the Customer's
account. Able Oil will not draw upon the Customer's inventory unless
advanced notification and mutually agreeable terms are negotiated between
the Customer and Able Oil in writing.
10.4 Upon written request and instructions provided by Customer, Able Oil
will transfer Inventory held in storage for its Customer to another party
maintaining a storage account with Able Oil.
11. QUANTITY:
11.1 The quantity of Product received into storage at the terminal shall be
determined as follows: If by book transfer, quantity is determined as
mutually agreed between parties. If by pipeline, the quantity received
into storage shall be determined by pipeline meter tickets
adjusted to 60 degrees F at inventory Terminal Locations.
If by barge, quantity determined on shore tank receipt at
discharge inventory Terminal adj. To 60 degrees F.
If via exchange agreement FOB loading trucks rack meter tickets
at Motiva Newark loadport, as mutually agreed to apply as
inventory total barrels at Able Oil Terminal, New Jersey
adjust to 60 degrees Fahrenheit.
11.2 The quality of Product delivered from the Terminal storage will be as
follows: Deliveries into Customer designated trucks will be determined
by truck rack meter reading. Otherwise all deliveries from Customer's
account will be stock transferred to in 1,000 bbls increments.
11.3 All quantity determination herein will be corrected to sixty (60)
degree Fahrenheit based on a US gallon of 231 cubic inches and 42
gallons to the barrel, in accordance with the latest supplement or
amendment to ASTM-IP petroleum measurement tables (ASTM designated D
1250) Table 6(b). All quantity determinations for barge receipts shall
be made basis static shore tanks.
12. TERMINAL LOSSES/BALANCES:
12.1 Able Oil agrees to guarantee Customer that all barrels received in
storage under Paragraph 11.1 will be available to customer at all
times. Customer will experience no gains or losses.
13. QUALITY:
13.1 The quality of Products received into Commingled storage by Able Oil
for Customer's account will meet or exceed Able Oil's minimum product
specifications for such Products. Product quality will be verified by
Independent inspectors analysis prior to discharge into Able Oil
Terminals.
13.2 Customer may request a sample of Product held in storage at the
Terminal during normal business hours to satisfy themselves that the
Product specifications existing on receipt by Able Oil are maintained.
If such a sample indicates the presence of Product which does not meet
or exceed such product specification, the Terminal Manager is to be
informed immediately. If the presence in storage of off-specification
Product is determined, Customer's account will be credited with a like
amount of on specification Product at Able Oil's sole expense. Upon
delivery of Product to Customer's account, all Product samplings of
such delivered Product will be final and in compliance with all
applicable Product specifications.
13.3 If any of Customer's product delivered to the facility does not meet
the specifications, then Able Oil shall promptly notify Customer
before permitting any of Customer's product to be placed in the tanks.
If Able Oil fails to test the Customer's product or permits any of
Customer's product that does not meet the specifications to be
commingled with other products in the tanks, then Customer shall bear
no responsibility for, and Able Oil will hold Customer harmless from
any claims that result from the commingling of Customer's Products
with other products.
13.4 Able Oil, according to normal terminal operating procedures will make
very effort to assure that its lines are packed before receiving
Customer's product into tankage.
14. TITLE & CUSTODY:
14.1 Title to Customer's Product stored at Able Oil Terminal shall remain in
Customer's name. 14.2 Able Oil will be deemed to have custody of Product
delivered by Customer at the time it passes
through the flange connection between the delivery line and Able Oil
delivery line. Delivery of such Product by Able Oil to Customer for
its account will occur when: (I) In all deliveries, Able Oil shall be
responsible for received Product until such Products have passed the
terminal's receiving Pipeline flange.
<PAGE>
15. CERTIFICATIONS:
15.1 Customer certifies that none of the Products covered by this agreement
was produced or withdrawn from storage in violation of any federal,
state, or other governmental law, or in violation of any rule,
regulation, or other promulgated by any governmental agency having, or
presuming to have, jurisdiction.
15.2 Customer certifies that the Product covered by this Agreement complies
with all applicable Product quality or composition specifications
established by any federal, state, or local authority.
15.3 Customer will indemnify, defend, and hold harmless Able Oil from any
claims, penalties, or liabilities imposed by any governmental agency
having jurisdiction for the failure of any Customer Product,
designated truck, barge, or vessel to comply with any applicable
governmental rule or regulation.
16. TAXES:
All taxes, fees, and dues, now or hereafter imposed by federal, state, or
local governments, in respect to or measures by the producers delivered
hereunder or the manufacture, storage, delivery, receipt, exchange or
inspection thereof, shall be for the account of Customer. Parties each
respectively warrant that they are properly licensed to buy/sell this
product in the state of title transfer exempt of tax, and if required shall
furnish the proper federal and state license and/or registration number to
the requesting party.
17. INDEMNITY:
Each party shall defend and indemnify the other party against all claims,
demands or liabilities (including reasonable attorney's fees) from any
cause whatsoever, for the injury or the death of any and all persons of the
damage to any property caused by or arising out of or connected in any
manner with the performance of each party's obligations under this
Agreement, except for such claims, demands or liabilities that result from
the active negligence of the other.
18. ASSIGNABILITY:
18.1 This Agreement will be binding upon and shall inure to the benefit of
the successors and assigns of the party hereto. Neither party will
assign its interest in this Agreement without prior written consent of
the other.
18.2 Any attempted assignment prohibited by Paragraph 18.1 above will be
void and without effect. This Agreement will not become an asset in
any bankruptcy or receivership proceedings.
19. FORCE MAJEURE:
Neither party will be responsible for damages caused by delay or failure to
perform in whole in part thereunder, if such delay or failure is
attributable to storms, floods, or other act of God, strikes, differences
with workers, lockouts, riots, civil disorders, explosions, fires, acts of
compliance with requests or rules or regulations of my governmental
authority or conditions, sabotage, accidents, breakdowns, delay in
transportation or other cause beyond the control of the affected party
whether or not similar to those enumerated above all of which will be
considered events of force majeure. It is understood and agreed that the
settlement of strikes, lockouts, or differences with workers will be
entirely within the discretion of the party having the difficulty.
20. POLLUTION AVOIDANCE:
Able Oil hereby indemnifies Customer from and against all losses, claims,
or pollution accidents rising out of or resulting from all inherent defects
contained in any and all equipment or property owned or leased by Able Oil
or Able Oil agents as pertains to this Agreement.
21. WAIVER AND TERMINATION:
21.1 The following will be deemed Events of Default hereunder: Failure to
comply with any of the terms herein:
If either party, (I) files, or consents by answers or otherwise to
the filing against it of, any petition or case seeking relief
under any Federal, state or foreign bankruptcy, insolvency or
similar law (collectively, "Bankruptcy Laws":), (ii) makes a
general assignment for the benefits of its creditors, (iii)
applies for or consents to the appointment of a custodian,
receiver, trustee, conservator or other officer with similar
powers over it or over any substantial part of its property
("Custodian") or (iv) takes corporate action for the purpose of
any of the foregoing (v) is dissolved; (vi) becomes insolvent or
is unable or admits in writing its inability generally to pay
debts as they become due: (vii) or is unable to provide assurances
to the other party of its continued ability to perform; or
<PAGE>
A court or governmental authority, agency, instrumentality or
official of competent jurisdiction enters or issues an order or
decree with respect to the defaulting party (I) appointing a
Custodian, (ii) constituting an order for relief under, or
approving a petition or case to take advantage of, any bankruptcy
Laws or (iii) ordering its dissolution, winding-up or liquidation;
or
21.2 In the Event of Default under 21.1 (a), the defaulting party will have
ten (10) days to cure the default following receipt of a "Notice of
Default" from the non-defaulting party. If the default is not cured
within said ten (10) days, the non-defaulting party will have the
right to terminate this Agreement effective thirty (30) days from
default date.
21.3 In the Event of Default other than 21.1 (a), the non-defaulting party
may take whatever action it deems necessary to secure its product.
21.4 In the event of termination by either party for any reason, or
expiration of this Agreement, Customer will remove all of its Product
and the Terminal on or before the effective date of termination or
expiration.
21.5 In the event of non-performance, breach of contract, insolvency or
bankruptcy by Able Oil, Customer shall have the right to terminate
this Agreement and secure and/or sell all Product in Able Oil Storage
in any manner whatsoever, including but no limited to rack sales, and
to seek any and all remedies and damages allowed by law.
22. INVENTORY CONTROL AND RECORDS:
Able Oil will maintain, during the term of this Agreement, books and
records that clearly show Customer's inventory at all times. Able Oil will
provide written reports to Customer on a monthly basis which set forth the
quantities, types, and locations of all Customer's physical inventory
stored on Able Oil premises. Able Oil will complete and deliver to Customer
copies of such records, including delivery tickets and inventory forms, as
are required for the proper accounting of Product handled under the terms
of this Agreement. Customer will have the right to audit, at its cost and
expense and during ordinary business hours, the accounting records and
other pertinent documents which relate to receipts, storage or delivery of
Customer's product handled under this Agreement and to take Physical
Inventory as may be required in Customer's opinion to verify the related
inventory records.
23. LAW OF GOVERN:
The laws of the State of Texas shall govern this contract and performance
thereunder, excluding its choice-of-law rules.
24. MODIFICATION:
This agreement may be modified by the parties only by an amendment in
writing to such effect.
25. WHOLE AGREEMENT:
This Agreement, including all attachments or amendments, embodies the whole
Agreement of the parties.
Accepted and Agreed to this _______, 19___
Able Oil Company Union Oil Company of California
By:_______________________________ By: ________________________________
Title:____________________________ Title: _____________________________
Date: ____________________________ Date:_______________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the interim
financial statements for the six month period ended June 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,108
<SECURITIES> 0
<RECEIVABLES> 722
<ALLOWANCES> (69)
<INVENTORY> 144
<CURRENT-ASSETS> 7,059
<PP&E> 3,059
<DEPRECIATION> (1,037)
<TOTAL-ASSETS> 9,809
<CURRENT-LIABILITIES> 2,054
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 6,600
<TOTAL-LIABILITY-AND-EQUITY> 9,809
<SALES> 9,558
<TOTAL-REVENUES> 9,558
<CGS> 7,306
<TOTAL-COSTS> 1,554
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77
<INCOME-PRETAX> 668
<INCOME-TAX> 272
<INCOME-CONTINUING> 396
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 396
<EPS-BASIC> .038
<EPS-DILUTED> .038
</TABLE>
