<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1999
REGISTRATION NO. 333-59109
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT #4 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ABLE ENERGY, INC.
(Name of Small Business Issuer as specified in its charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 5983 22-3520840
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
344 ROUTE 46
ROCKAWAY, NJ 07866
(973) 625-1012
(Address and telephone number of principal executive offices)
------------------------------
TIMOTHY HARRINGTON, CHIEF EXECUTIVE OFFICER
ABLE ENERGY, INC.
344 ROUTE 46
ROCKAWAY, NJ 07866
(973) 625-1012
(Name, address and telephone number of agent for service)
------------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
GREGORY SICHENZIA, ESQ. JAY M. KAPLOWITZ, ESQ.
SICHENZIA, ROSS & FRIEDMAN LLP GERSTEN, SAVAGE & KAPLOWITZ, LLP
135 WEST 50TH STREET, 20TH FLOOR 10 EAST 52ND STREET
NEW YORK, NEW YORK 10020 NEW YORK, NEW YORK 10022
TELEPHONE NO.: (212) 664-1200 TELEPHONE NO.: (212) 752-9700
FACSIMILE NO.: (212) 664-7329 FACSIMILE NO.: (212) 980-5192
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE AND
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SECURITY(1) PRICE(1) FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value per
share(2)......................... 1,150,000 $7.50 $8,625,000 $2,397.75
Underwriter's Warrant(3)........... 1 $10.00 $10.00 $(4)
Common Stock underlying
Underwriters Warrant(5).......... 100,000 $12.375 $1,237,500 $344.03
Total.............................. $9,862,510 $2,741.78(6)
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a) of the Securities Act of 1933, as amended.
(2) Includes 150,000 shares of Common Stock subject to sale upon exercise of the
Underwriter's over-allotment option.
(3) The Underwriter's Warrant is for the purchase of Common Stock.
(4) No fee due pursuant to Rule 457(g).
(5) Consists of Common Stock issuable upon the exercise of the Underwriter's
Warrant.
(6) Previously paid.
<PAGE>
ABLE ENERGY, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION CAPTIONS IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus................................ Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus...................................... Cover Page, Inside Cover Page, Outside Back Page
3. Summary Information and Risk Factors................. Prospectus Summary, Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Cover Page, Underwriting
6. Dilution............................................. Dilution
7. Selling Securityholders.............................. Principal Stockholders and Selling Securityholders
8. Plan of Distribution................................. Prospectus Summary, Underwriting
9. Legal Proceedings.................................... Business
10. Directors, Executive Officers, Promoters and Control
Persons............................................ Management, Principal Stockholders and Selling
Securityholders
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal Stockholders and Selling Securityholders
12. Description of Securities............................ Description of Securities
13. Interest of Named Experts and Counsel................ *
14. Disclosure of Commission Position on Indemnification
for Securities Act
Liabilities........................................ Management
15. Organization Within Last Five Years.................. Prospectus Summary, Business
16. Description of Business.............................. Prospectus Summary, Business
17. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property.............................. Business
19. Certain Relationships and Related
Transactions....................................... Certain Transactions
20. Market for Common Equity and RelatedShareholder
Matters............................................ Front Cover Page, Description of Securities
21. Executive Compensation............................... Management
22. Financial Statements................................. Financial Statements
23. Changes in and Disagreements with Accounts on
Accounting and Financial Disclosure................ *
</TABLE>
- ------------------------
* Not Applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 27, 1999
PROSPECTUS
[LOGO]
ABLE ENERGY, INC.
1,000,000 SHARES OF COMMON STOCK
Able Energy, Inc. (the "Company") is hereby offering to the public 1,000,000
shares of common stock, $.001 par value per share (the "Common Stock" or the
"Shares"). It is presently anticipated that the initial public offering price
per share of Common Stock will be between $7.00 and $7.50 which has been
determined by negotiations between the Company and Kashner Davidson Securities
Corp. and Andrew, Alexander, Wise & Company, Incorporated (the "Underwriters")
and does not necessarily bear any direct relationship to the Company's assets,
earnings, book value per share or other generally accepted criteria of value.
For a discussion of the factors considered in determining the offering price see
"Underwriting." The offering of Common Stock hereby is sometimes referred to
herein as the "Offering" and Kashner Davidson Securities Corp. shall be referred
to herein as the "Managing Underwriter."
Prior to the Offering, there has been no public market for the Company's
securities and there can be no assurance that a market will develop in the
future or that if developed, it will be sustained. The Company is applying for
listing and quotation of the Common Stock on the Nasdaq SmallCap Market under
the symbol "ABLE" and for listing on the Boston Stock Exchange under the symbol
"AEI."
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING ON
PAGE 7 AND "DILUTION" ON PAGE 18.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) THE COMPANY(2)
<S> <C> <C> <C>
Per Share of Common Stock................................ $ $ $
Total (3)................................................ $ $ $
</TABLE>
(1) Does not include additional consideration to be received by the Underwriters
in the form of (i) a non-accountable expense allowance equal to 3% of the
gross offering proceeds, (ii) any value attributable to the Underwriters'
Warrant entitling the Underwriters to purchase up to 100,000 Shares of
Common Stock at a price per Share equal to 165% of the initial public
offering price per Share ("Underwriters' Warrant"), and (iii) a financial
consulting agreement with the Underwriters for a period of two years for an
aggregate consideration of $108,000 payable in full on the closing of the
Offering. In addition, the Company has agreed to indemnify the Underwriters
against certain liabilities under the Securities Act of 1933, as amended
(the "Act"). See "Underwriting".
(2) After deducting discounts and commission payable to the Underwriters, but
before payment of the Underwriters' non-accountable expense allowance of
$ (or $ if the Over-Allotment Option, defined below, is
exercised in full) and the other expenses of the Offering, estimated at
$ payable by the Company. See "Underwriting."
(3) The Company has granted the Underwriters an option, exercisable for 45 days
after the effective date of the Offering (the "Effective Date") to purchase
up to an additional 150,000 shares of Common Stock from the Company (which
include the Shareholder Shares, as defined below) solely for the purpose of
covering over-allotments, if any (the "Over-Allotment Option"). In the event
that the Over-Allotment Option is exercised by the Underwriters, the
Underwriters have agreed to use their best efforts to allow Timothy
Harrington, the Chief Executive Officer of the Company, to sell up to an
aggregate of 75,000 shares of the Company's Common Stock held by Mr.
Harrington (the "Shareholder Shares"). All references and calculations
concerning the exercise of the Over-Allotment Option assume the sale of the
Shareholder Shares. If the Over-Allotment Option is exercised in full, the
total Price to the Public, Underwriting Discounts and Commissions, Proceeds
to the Company will be $ , $ and $ ,
respectively. See "Underwriting."
The securities being offered by this Prospectus are being offered by the
Underwriters on a "firm commitment" basis, when, as and if delivered to and
accepted by the Underwriters, subject to prior sale, and other conditions and
legal matters. The Underwriters reserve the right to withdraw, cancel or modify
the Offering and to reject orders, in whole or in part. It is expected that
delivery of the certificates representing the Common Stock will be made against
payment therefor at the offices of Kashner Davidson Securities Corp., 77 South
Palm Avenue, Sarasota, Florida 34236 on or about [ ], 1999.
<TABLE>
<S> <C>
KASHNER DAVIDSON ANDREW, ALEXANDER, WISE
SECURITIES CORP. & COMPANY, INCORPORATED
</TABLE>
------------------
The date of this Prospectus is , 1999
<PAGE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE THEIR
MARKET PRICE, PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT
POSITION IN THE COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE
CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" REFERS TO ABLE ENERGY, INC. AND
ITS WHOLLY-OWNED SUBSIDIARIES ABLE OIL, INC. ("ABLE OIL"), ABLE OIL MELBOURNE,
INC. ("ABLE MELBOURNE"), AND ITS 99% INTEREST IN ABLE PROPANE, L.L.C. ("ABLE
PROPANE"). EXCEPT AS OTHERWISE INDICATED HEREIN, THE INFORMATION CONTAINED IN
THIS PROSPECTUS GIVES NO EFFECT TO THE ISSUANCE OR EXERCISE OF (I) THE
OVER-ALLOTMENT OPTION, (II) THE UNDERWRITERS' WARRANT, AND (III) OPTIONS
ISSUABLE UNDER THE COMPANY'S STOCK OPTION PLAN. ALL PER SHARE INFORMATION IN
THIS PROSPECTUS HAS BEEN ADJUSTED TO REFLECT A 1,000 FOR ONE FORWARD STOCK SPLIT
OF THE COMPANY'S COMMON STOCK TO BE EFFECTED ON OR BEFORE THE EFFECTIVE DATE.
THE COMPANY
Able Energy was incorporated on March 13, 1997 in the state of Delaware, to
act as a holding company for its operating subsidiaries: Able Oil; Able Propane;
Able Melbourne; Able Oil Company Montgomery, Inc. ("Able Montgomery") and A&O
Environmental Services, Inc. ("A&O"). In December 1998, the Company sold Able
Montgomery as its first franchise, and it also sold A&O.
The Company's operating entities are engaged in the retail distribution of,
and the provision of services relating to: (i) fuel oil, (ii) propane gas, and
(iii) natural gas through a marketing alliance with AllEnergy Marketing Company
LLC, a division of New England Electric Systems, Inc. In addition to selling
home energy products, the Company offers complete HVAC (heating, ventilation and
air conditioning) installation and repair, and also markets other petroleum
products to commercial customers, including diesel fuel, gasoline and
lubricants. The Company considers service and installation services to be an
integral part of its business. For example, the Company provides HVAC service to
its customers on a twenty-four hours-a-day, seven days-a-week basis, generally
within two hours of request. Except in isolated instances, the Company does not
provide service to any person who is not a customer.
In fiscal year 1998, sales of home heating oil accounted for approximately
70% of the Company's revenues. The remaining 30% of revenues were from sales of
gasoline, diesel fuel, kerosine and propane. The Company serves approximately
20,000 home heating oil customers from three locations, of which two are located
in New Jersey and one is located in Florida.
The Company believes that it is able to obtain new customers and maintain
existing customers by offering its unique concept of full service home energy
products at discount prices, providing quick response refueling and repair
operations, providing automatic deliveries to customers by monitoring historical
use and weather patterns, and by providing customers a variety of payment
options. The Company regularly provides various service incentives to obtain and
retain customers. The Company aggressively promotes its service through a
variety of direct marketing media, including mail and telemarketing campaigns,
by providing discounts to customers who refer new customers to the Company, and
through an array of advertising, including television advertisements and
billboards, which aim to increase brand name recognition. The Company believes
that this focused marketing strategy has been key to its success.
The Company intends to use a substantial portion of the proceeds of this
offering to expand its operations. The Company's strategy to expand its
operations includes (i) the acquisition of select operators in the Company's
present markets as well as other markets; (ii) capturing market share from
competitors through increased advertising and other means; (iii) diversifying
its products; (iv) diversifying its customer base; and (iv) replicating its
marketing and service formula in new geographic areas either directly or through
franchise arrangements. The Company may also enter into joint ventures with
other entities in product areas different than the Company's current product
mix.
3
<PAGE>
The Company believes that it has established, albeit in a limited area, a
brand name and a reputation for quality, volume and service. The Company
believes that it may be able to expand its franchise operation to capitalize and
expand on its brand name recognition. The Company intends to operate its
franchise operations pursuant to franchise agreements with franchisees. Under
these franchise agreements, franchisees are required to pay to the Company (i) a
$25,000 initial franchise fee; (ii) a $15,000 grand opening fee which the
Company uses to coordinate a public relations campaign and to purchase
promotional and marketing materials; (iii) a monthly fee of 1% of the
franchisees monthly gross sales; and (iv) an administrative fee equal to $.04
per gallon of fuel sold. Franchisees are granted the exclusive right and license
to operate the franchise within certain defined territory as an independent
contractor. The Company provides franchisees with guidelines and specifications
for the operations of the franchise, initial training, licenses for the use of
the Company's name, service markets and propriety marks, assistance with site
location, and advice on advertising and other promotional techniques. As of the
date of this Prospectus, one such franchise has been sold by the Company, there
can be no assurance that any additional will be sold in the future.
The Company believes that recent and anticipated deregulation of public
utility companies in the Company's markets has created a window of opportunity
for the Company to expand into new product areas, particularly the retail sale
of electricity and natural gas. The Company believes it can capitalize on these
opportunities through joint ventures with companies which have previously been
successful in such areas although there can be no assurance that the Company's
expansion into the retail sale of electricity and natural gas will be
successful.
The Company's principal offices are located at 344 Route 46, Rockaway, NJ
07866 and its telephone number is (973) 625-1012.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................ 1,000,000 shares of Common Stock. See "Description of
Securities."
Common Stock Outstanding
Prior to Offering(1)............ 1,000,000
Common Stock to be Outstanding
After Offering(2)............... 2,000,000
Use of Proceeds................... The net proceeds to the Company from the sale of the
Shares are estimated to be approximately $5,889,500
after deducting commissions and expenses of the
Offering, which are estimated at $1,360,500. The Company
intends to use the net proceeds of this Offering for
acquisitions, new products and business lines, sales and
marketing, addition of new terminal space, computer
hardware and software and installation, purchase of real
property, hiring of additional personnel, and for
working capital and general corporate purposes. See "Use
of Proceeds."
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Proposed Nasdaq SmallCap Symbol(3):
ABLE
Proposed Boston Stock Exchange Symbol (3):
AEI
Risk Factors...................... The securities offered hereby are speculative, involve a
high degree of risk and immediate substantial dilution,
and should be considered only by investors who can
afford to sustain a loss of their entire investment. See
"Risk Factors" and "Dilution."
</TABLE>
- ------------------------
(1) Reflects issuance of 1,000,000 shares of Common Stock to Timothy Harrington
as founder's stock and in exchange for all of the common stock previously
held by him in the operating subsidiaries, and also gives effect to a
1,000-for-one stock split to be completed on or before the effective date of
the Offering.
(2) Does not include (i) 100,000 shares of Common Stock which may be issued upon
exercise of the Underwriters' Warrants; (ii) 150,000 shares of Common Stock
which may be issued upon exercise of the Underwriters' Over-Allotment
Option; and (iii) 300,000 shares of Common Stock reserved for issuance under
the Company's Stock Option Plan of which no options to purchase shares have
been issued as of the date hereof. See "Management," "Description of
Securities" and "Underwriting."
(3) Notwithstanding listing on the Boston Stock Exchange and Nasdaq SmallCap
Market, there can be no assurance that an active trading market for the
Company's securities will develop or, if developed, will be sustained.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary historical financial data and other
operation information of the Company. The selected historical financial data in
the table for the years ended December 31, 1998 and 1997 is derived from the
audited financial statements of the Company. The selected financial data set
forth below should be read in conjunction with the Company's financial
statements and notes thereto and with the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
STATEMENT OF INCOME DATA:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
1998 1997 1999 1998
------------- ------------- ------------- -------------
Revenues(1)............................................... $ 16,317,668 $ 16,380,992 $ 6,180,935 $ 5,504,512
Gross Profit.............................................. 3,272,744 3,358,357 1,735,758 1,353,042
Income from operations.................................... 100,745 217,588 948,965 500,624
Earnings (loss) per share(2).............................. .101 .218 .949 .501
Weighted average number of shares outstanding............. 1,000,000 1,000,000 1,000,000 1,000,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
MARCH 31, 1999
DECEMBER 31, -----------------------------
1997 ACTUAL AS ADJUSTED(2)
------------- ------------- --------------
<S> <C> <C> <C>
Working capital(3)................................................. $ (805,798) $ (370,600) $ 5,518,900
Total assets(3)(4)................................................. 3,739,526 4,184,751 10,924,251
Long-term liabilities(4)........................................... 1,219,309 1,118,217 1,968,217
Total liabilities(4)............................................... 3,194,643 3,083,655 3,923,655
Total shareholders' equity(3)(4)................................... 544,883 1,101,096 6,990,596
</TABLE>
- ------------------------
(1) Approximately 70% of the Company's revenues are attributable to sales of
home heating oil. In 1998, the price of crude oil was greatly depressed.
Consequently, in fiscal year 1997, the Company charged customers an average
of $.829 per gallon for home heating oil, as opposed to $.711 per gallon in
fiscal year 1998, a difference of $.118 per gallon.
(2) Net earnings per common share is based upon the weighted average number of
common shares outstanding for each period presented.
(3) As adjusted to reflect net proceeds of $5,889,500 from the sale by the
Company in this offering of 1,000,000 shares of Common Stock at the assumed
public offering price of $7.25 per Share.
(4) Long-term liabilities and total liabilities have been adjusted to reflect an
$850,000 increase in debt projected to be incurred for the purchase of the
Company's headquarters in Rockaway, New Jersey, which the Company currently
leases. Total assets have also been increased by $850,000, representing the
purchase of the Company's headquarters.
6
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH INVESTMENTS IN THE SECURITIES OFFERED HEREBY. THIS PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
This Prospectus contains certain forward-looking statements, including among
other things: (i) anticipated trends in the Company's financial condition and
results of operations; and (ii) the Company's business strategy for managing and
expanding its operations. These forward-looking statements are based largely on
the Company's current expectations and are subject to a number of risks and
uncertainties. Actual results could differ materially from these forward-looking
statements. In addition to other risks described elsewhere in this "Risk
Factors" discussion, important factors to consider in evaluating such
forward-looking statements include (i) changes in external competitive market
factors or trends in the Company's results of operation; (ii) unanticipated
working capital or other cash requirements; (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. In light of
these risks and uncertainties, many of which are described in greater detail
elsewhere in this "Risk Factors" discussion, there can be no assurance that the
events predicted in forward-looking statements contained in this Prospectus
will, in fact, transpire.
LIMITED OPERATING HISTORY; MANAGEMENT OF GROWTH; SUBSTANTIAL LONG-TERM
DEBT. The Company was incorporated in March 1997 to act as a holding company
for its operating subsidiaries. Although the Company has only been in operation
for a limited time, Able Oil, the Company's major operating subsidiary, has been
in business since 1989 and currently accounts for approximately 87% of the
Company's total revenue. The Company's remaining subsidiaries were each
established within the past three years and, accordingly, have limited operating
histories upon which evaluation of its prospects can be made. There can be no
assurance that the subsidiaries, other than Able Oil, will generate substantial
revenues or attain profitable operations.
The Company plans to continue to pursue an aggressive growth strategy
through its operating subsidiaries, and anticipates significant change in its
business activities and operations. The Company's growth has required, and will
continue to require, increased investment in management personnel, financial and
management systems and controls and facilities. The Company's past expansion has
placed, and any future expansion would place, significant demands on the
Company's administrative, operational, financial and other resources. The
Company intends to continue to expand its business and operations, including
entry into new markets, that will place additional strain on the Company's
management and operations. The Company's future operating results will depend,
in part, on its ability to continue to broaden the Company's senior management
group and administrative infrastructure, and its ability to attract, hire and
retain skilled employees. The Company's success will also depend on the ability
of its officers and key employees to continue to implement and improve the
Company's operational and financial control systems and to expand, train and
manage its employee base. In addition, the Company's future operating results
will depend on its ability to expand its sales and marketing capabilities and
expand its customer support operations commensurate with its growth, should such
growth occur. If the Company's revenues do not increase in proportion to its
operating expenses, the Company's management systems do not expand to meet
increasing demands, the Company fails to attract, assimilate and retain
qualified personnel, or the Company's management otherwise fails to manage the
Company's expansion effectively, there would be a material adverse effect on the
Company's business, financial condition and operating results. See "Business."
7
<PAGE>
After giving effect to the proposed purchase by the Company of its facility
in Rockaway, New Jersey, as of March 31, 1999, the Company had long term
liabilities of 1,968,217. See "Capitalization" and Note 6 to the Company's
financial statements.
The Company's ability to satisfy such obligations will depend on the
Company's future operating performance, which will be affected by, among other
things, prevailing economic conditions and financial, business and other
factors, many of which are beyond the Company's control. There can be no
assurance that the Company will be able to service its indebtedness. If the
Company is unable to service its indebtedness, it will be forced to examine
alternative strategies that may include actions such as reducing or delaying
capital expenditures, restructuring or refinancing its indebtedness, or the sale
of assets or seeking additional equity and/or debt financing. There can be no
assurance that any of these strategies could be effected on satisfactory terms,
if at all. See "--Need for Additional Capital."
SEASONAL FACTORS. To date substantially all of the Company's revenues and
income have been derived from the home heating oil business. The Company's home
heating oil business is seasonal, as a substantial portion of its business is
conducted during the fall and winter months. Weather patterns during the winter
months can have a material adverse impact on its revenues. Although temperature
levels for the heating season have been relatively stable over time, variations
can occur from time to time, and warmer than normal winter weather will
adversely effect the results of the Company's fuel oil operations. See
"Business--Fundamental Characteristics of the Company's Business--Seasonality."
FUEL PRICING: EFFECT ON PROFITABILITY. Gasoline, Heating Oil and Diesel
Fuel are commodities and, as such, their wholesale prices are subject to changes
in supply or other market conditions over which the Company has no control.
While, in the past, the Company has been able to pass on any increases in
commodities prices to its customers, there can be no assurance that the Company
may be able to fully pass on future increases in the wholesale prices of these
commodities to its customers and still be competitive. Additionally,
approximately 5% of the Company's total sales are made to customers pursuant to
an agreement which pre-establishes the maximum sales price of fuel oil over a
twelve-month period. Such prices are renegotiated in April of each year and the
Company has historically purchased fuel oil for these customers in advance and
at a fixed cost. Should the Company be unable to make such advance purchases of
fuel oil, any future increase in wholesale fuel oil prices could have an adverse
affect on the Company. Because the Company sells fuel to its customers at fixed
amounts over its wholesale cost, the Company's gross profit as a percentage of
gross revenue may not fluctuate as a result of changes in the wholesale prices
of these goods. The Company does not engage in derivatives or futures trading to
hedge fuel price movements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
DEPENDENCE UPON SUPPLY OF PETROLEUM PRODUCTS. Five major suppliers provide
the Company with its inventory requirements. One supplier Bayway Tosco Refining
Corp., located in Linden, New Jersey, provided approximately 30%, and Sun Oil
Company provided approximately 30%, of the Company's total Number 2 Heating Oil
requirements for the year ended December 31, 1998. The loss of either supplier
would not have a material adverse effect on the Company.
The Company entered into a fuel oil storage agreement with Mieco Trading Co.
("Mieco"), whereby the Company stored 1,500,000 gallons of Number 2 Heating Oil
in the Company's facility in Rockaway, New Jersey. Pursuant to an additional
agreement with Mieco, the Company purchased all of such oil during the months of
November 1998 through March 1999. Presently, the Company does not intend to
renew its agreement, or extend this arrangement, with Mieco. Additional fuel oil
purchases are made on a daily basis on the spot market by electronic funds
transfers.
Two major suppliers provide the Company with its propane product
requirements. Each of Ferrellgas Partners, L.P. and Propane Power, Inc. provided
the Company with approximately 50% of its propane
8
<PAGE>
requirements for the year ended December 31, 1998. The loss of either supplier
could have a material adverse effect on Able Propane.
The Company met substantially all of its gasoline and diesel product
requirements through Bayway Tosco Refining Corp. and Petron Oil Corporation for
the year ended December 31, 1998. Each of these entities supplied approximately
50% of such requirements during such period.
Notwithstanding the agreements with Mieco, the Company has not entered into
any agreements for the supply of Number 2 Heating Oil, propane or gasoline.
Management believes that if the Company's supply of any of the foregoing
products was interrupted, the Company would be able to secure adequate supplies
from other sources without a material disruption in its operations. However,
there can be no assurance that adequate supplies of such petroleum products will
be readily available in the future. See "Business--Fundamental Characteristics
of the Company's Business--Wholesale Suppliers."
GROWTH DEPENDENT UPON UNSPECIFIED ACQUISITIONS. The Company's growth
strategy includes the acquisition of existing fuel distributors. The Company
expects to allocate 47.5% ($2.8 million) of the net proceeds of this Offering
for such purposes. There can be no assurance that the Company will be able to
identify new acquisition candidates or, even if a candidates is identified, that
the Company will have access to the capital necessary to consummate such
acquisitions. Shareholders will not have an opportunity to vote on any
acquisition proposed by the Company, nor will shareholders have any opportunity
to review the financial status of such acquisition candidates. Furthermore, the
acquisition of additional companies involve a number of additional risks. These
risks include the diversion of Management's attention from the operations of the
Company, possible difficulties with the assimilation of personnel and operations
of acquired companies, the amortization of acquired intangible assets, and the
potential loss of key employees of acquired companies. The future success of the
Company's business will depend upon the Company's ability to manage its growth
through acquisitions. See "Business--Expansion--Acquisitions."
BROAD DISCRETION IN APPLICATION OF PROCEEDS BY MANAGEMENT. Approximately
47.5% of the net proceeds of this Offering will be applied towards unidentified
acquisitions, 17.0% for development of new products and business lines, and 14%
of the net proceeds of this Offering will be applied to working capital and
general corporate purposes. Accordingly, Management will have broad discretion
over the use of proceeds. See "Use of Proceeds."
GOVERNMENT REGULATION. Federal, state and local laws, particularly laws
relating to the protection of the environment and worker safety, can materially
affect the Company's operations. The transportation of fuel oil, diesel fuel,
propane and gasoline is subject to regulation by various federal, state and
local agencies, including the U.S. Department of Transportation ("DOT"). These
regulatory authorities have broad powers and the Company is subject to
regulatory and legislative changes that can effect the economies of the industry
by requiring changes in operating practices or influencing demand for, and the
cost of providing, its services. Additionally, the Company is subject to random
DOT inspections. Any material violation of DOT rules or the Hazardous Materials
Transportation Act may result in citations
and/or fines upon the Company. In addition, the Company depends on the supply of
petroleum products from the oil and gas industry and, therefore, is affected by
changing taxes, price controls and other laws and regulations relating to the
oil and gas industry generally. The Company cannot determine the extent to which
future operations and earnings may be affected by new legislation, new
regulations or changes in existing regulations. See "Business--Government
Regulation."
POTENTIAL ENVIRONMENTAL LIABILITY. The Company's operations are subject to
all of the operating hazards and risks that are normally incidental to handling,
storing, transporting and delivering fuel oils, gasoline, diesel and propane,
which are classified as hazardous materials. The Company faces potential
liability for, among other things, fuel spills, gas leaks and negligence in
performing environmental clean-ups for its customers. Specifically, the Company
maintains fuel storage facilities on sites owned or leased by the Company, and
could incur significant liability to third parties or governmental entities for
damages,
9
<PAGE>
clean-up costs and/or penalties in the event of certain discharges into the
environment. Such liability can be extreme and could have a material adverse
effect on the Company's financial condition or results of operations.
Although the Company believes that it is in compliance with existing laws
and regulations, there can be no assurance that substantial costs for compliance
will not be incurred in the future. Any substantial violations of these rules
and regulations could have an adverse affect upon the Company's operations.
Moreover, it is possible that other developments, such as more stringent
environmental laws, regulations and enforcement policies thereunder, could
result in additional, presently unquantifiable, costs or liabilities to the
Company. See "Business--Environmental Considerations."
NO ASSURANCE OF ADEQUATE INSURANCE PROTECTION. The Company maintains
insurance policies in such amounts and with coverage and deductibles as the
Company' management ("Management") believes are reasonable and prudent. There
can be no assurance, however, that such insurance will be adequate to protect
the Company from liabilities and expenses that may arise from claims for
personal and property damage arising in the ordinary course of business or that
such levels of insurance will be maintained by the Company or will be available
at economic prices.
FRANCHISING. The Company intends to expand franchise arrangements to expand
its operations and revenue base. The Company's future growth may be dependent
upon new franchisees and the manner in which they operate and develop their Able
Energy locations to promote and develop the Company's concept and its reputation
for quality and value. To date, the Company has sold only one franchise. There
can be no assurance that this franchisee or additional franchisees will have the
business abilities or access to financial resources necessary to open Able
Energy locations or operate such locations in their franchise areas in a manner
consistent with the Company's concepts and standards. In addition, because the
Company believes that a potential franchisee's total estimated investment
relating to an Able Energy location is generally low, the Company may be more
likely to attract franchisees with limited franchise experience and limited
financial resources.
As a result of its franchising activity, the Company is be subject to
Federal Trade Commission ("FTC") regulation and various state laws that govern
the offer, sale and termination of, and refusal to renew, franchises. Several
state laws also regulate substantive aspects of the franchisor-franchisee
relationship. The FTC requires the Company to furnish prospective franchisees a
franchise offering circular containing prescribed information. A number of
states in which the Company might consider franchising also regulate the sale of
franchises and require registration of the franchise offering circular with
state authorities. Substantive state laws that regulate the
franchisor-franchisee relationship presently exist in substantial number of
states, and bills have been introduced in Congress from time to time which would
provide for federal regulation of the franchisor-franchisee relationship in
certain respects. The state laws often limit, among other things, the duration
and scope of non-competition provisions and the ability of a franchisor to
terminate or refuse to renew a franchise. See "Business--Franchises and
Government Regulation."
TRADEMARKS AND SERVICE MARKS. The Company believes that its trademarks and
service marks have significant value and are important to the marketing of its
products and services, especially if the Company is successful in implementing
its franchise program. There can be no assurance, however, that the Company's
proprietary marks do not or will not violate the proprietary rights of others,
that the Company's marks would be upheld if challenged or that the Company would
not be prevented from using its marks, any of which could have an adverse effect
on the Company. In addition, there can be no assurance that the Company will
have the financial resources necessary to enforce or defend its trademarks and
service marks against infringement. See "Business--Patents and Trademarks."
COMPETITION FROM ALTERNATE ENERGY SOURCES. The Company is engaged primarily
in the retail home heating business and competes for customers with suppliers of
alternate energy products, principally
10
<PAGE>
natural gas and electricity. While the Company is now marketing regulated
natural gas, every year, a small percentage of the Company's oil customers
convert to other home heating sources, primarily natural gas. In addition, the
Company may lose additional customers due to conversions during periods in which
the cost of its services exceeds the cost of alternative energy sources. See
"Business--Conversion to Natural Gas and Competition."
COMPETITION FOR NEW CUSTOMERS. The Company's business is highly
competitive. In addition to competition from alternative energy sources, the
Company competes with distributors offering a broad range of services and
prices, from full service distributors similar to the Company, to those offering
delivery only. Competition with other companies in the retail home heating
industry is based primarily on customer service and price. Longstanding customer
relationships are typical in the industry. Many companies, including the
Company, deliver fuel to their customers based upon weather conditions and
historical consumption patterns without the customers making an affirmative
purchase decision each time fuel is needed. In addition, most companies,
including the Company, provide equipment repair service on a 24 hour a day
basis, which tends to build customer loyalty. The Company competes against
companies that may have greater financial resources than the Company. As a
result, the Company may experience difficulty in acquiring new retail customers
due to existing relationships between potential customers and other retail home
heating distributors. See "Business--Competition."
ABSENCE OF WRITTEN AGREEMENTS. Approximately 50% of the Company's customers
do not have written agreements with the Company and can terminate services at
any time, for any reason. Although the Company has never experienced a
significant loss of its customers, if the Company were to experience a high rate
of terminations, the Company's business and financial condition could be
adversely affected. See "Business--Retail Propane Distribution."
RISKS ASSOCIATED WITH EXPANSION INTO NEW MARKETS. A significant element of
the Company's future growth strategy involves the expansion of the Company's
business into new geographic and product markets. Expansion of the Company's
operations depend, among other things, the success of the Company's marketing
strategy in new markets, successfully establishing and operating new locations,
hiring and retaining qualified management and other personnel, and obtaining
adequate financing for vehicle and site purchases and working capital purposes.
See "Business--Expansion."
NEED FOR ADDITIONAL FINANCING. The Company believes that the proceeds of
the Offering, together with revenues from operations and capital available from
the Company's line of credit, will be sufficient to finance the Company's
working capital requirements for the foreseeable future following the completion
of the Offering. In addition, a part of the Company's growth strategy is to
expand its operations through the acquisition of existing fuel distributors. The
continued operation and expansion of the Company's business may be dependent
upon its ability to obtain additional financing to acquire new and existing
entities. There can be no assurance that additional financing will be available
on terms acceptable to the Company, or at all. In the event that the Company is
unable to obtain such additional financing as it becomes necessary, the Company
may not be able to achieve all of its business plans. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
CONTINUING INFLUENCE OF THE UNDERWRITERS. The Underwriters may be able to
exert continuing influence on the Company in light of the fact that they have
the right to (i) appoint a board member for a five year period; (ii) receive
warrants to purchase 100,000 shares of Common Stock, exclusive of the
Over-Allotment Option; and (iii) exercise its registration rights. Additionally,
the Managing Underwriter has the right to act as financial consultant to the
Company for a two year period and receive a finders fee for the same period. In
light of the forgoing, the Underwriters may be, for the forseeable future, a
dominating influence, and thereafter, a factor of decreasing importance in the
market for the Common Stock.
DEPENDENCE ON KEY PERSONNEL. The Company's future success will depend, to a
significant extent, on the efforts of key management personnel, including
Timothy Harrington, the Company's Chairman and
11
<PAGE>
Chief Executive Officer. The Company will enter into employment agreements with
Timothy Harrington and Christopher Westad prior to the effective date of the
Registration Statement. The loss of one or more of these key employees could
have a material adverse effect on the Company's business. The Company will use
its best efforts to acquire key-person life insurance policies on Mr. Harrington
in the amount of $3 million prior to the closing at this offering. In addition,
the Company believes that its future success will depend, in large part, upon
its continued ability to attract and retain highly qualified management,
technical and sales personnel. There can be no assurance that the Company will
be able to attract and retain the qualified personnel necessary for its
business. See "Management."
CONTROL BY EXISTING STOCKHOLDERS. Upon the completion of this Offering, the
Company's management will collectively beneficially own approximately 50% (46.5%
if the Underwriters' Over-Allotment Option is exercised in full) of the
Company's outstanding Common Stock. Because of their beneficial stock ownership,
these stockholders will be in a position to continue to elect the majority
members of the Board of Directors and decide matters requiring stockholder
approval. See "Principal Stockholders."
NO PRIOR PUBLIC MARKET. Prior to this Offering, there has been no public
market for the Securities. Accordingly, there can be no assurance that an active
trading market will develop and be sustained upon the completion of this
Offering. The initial public offering price of the Securities has been
determined by negotiations between the Company and the Underwriters and does not
necessarily bear any relation to the Company's asset value, earnings or other
objective criteria. See "Underwriting." The stock market has, from time to time,
experienced extreme price and volume fluctuations which often have been
unrelated to the operating performance of particular companies. Although it has
no obligation to do so, the Underwriters intend to engage in market-making
activities or solicited brokerage activities with respect to the purchase or
sale of the Securities on the Nasdaq SmallCap Market. However, no assurance can
be given that the Underwriters will continue to participate as a market-maker in
the securities of the Company or that other broker-dealers will make a market in
such securities which may adversely impact the liquidity of the securities.
Regulatory developments and economic and other external factors, as well as
period-to-period fluctuations in financial results, may also have a significant
impact on the market price of such securities. See "Description of Securities."
IMMEDIATE AND SUBSTANTIAL DILUTION. This Offering involves an immediate and
substantial dilution to investors. Assuming a public offering price of $7.25 per
share of Common Stock, purchasers of Common Stock in the Offering will incur an
immediate dilution of $.83 per share of Common Stock in the net tangible book
value of their investment from the initial public offering price, which dilution
amounts to approximately 11.4% of the initial public offering price per share of
Common Stock. Investors in the Offering will pay approximately $7.25 per share
of Common Stock, as compared with an average cash price of $.48 per share of
Common Stock paid by existing stockholders. See "Dilution."
ISSUANCE OF BLANK CHECK PREFERRED STOCK. The Board of Directors will have
the authority to issue up to 10,000,000 shares of preferred stock with
designations, rights and preferences determined from time to time by the Board
of Directors. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue classes of preferred stock with voting
liquidation, conversion or other rights that could adversely effect the holders
of the Common Stock in that the issuance of such preferred stock may adversely
dilute the proportionate equity interest and voting power of such holders.
However, no such preferred stock may issued by the Company without the
Underwriters' consent for a period of 24 months following the effective date.
See "Description of Securities; Preferred Stock."
SHARES ELIGIBLE FOR FUTURE SALE. Of the 2,000,000 shares of Common Stock of
the Company to be outstanding upon completion of this Offering, 1,000,000 shares
shall be "restricted securities" owned by "affiliates" of the Company (assuming
none of the Shareholder Shares are sold in the Over-Allotment), as those terms
are defined in Rule 144 promulgated under the Act. Absent registration under the
Act, the sale of such shares is subject to Rule 144, as promulgated under the
Act. All of the "restricted securities" are eligible for resale under Rule 144.
In general, under Rule 144, subject to the satisfaction of certain
12
<PAGE>
other conditions, a person, including an affiliate of the Company, who has
beneficially owned restricted shares of Common Stock for at least one year is
permitted to sell in a brokerage transaction, within any three-month period, a
number of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class, or if the Common Stock is quoted on Nasdaq
or a stock exchange, the average weekly trading volume during the four calendar
weeks preceding the sale. Rule 144 also permits a person who presently is not
and who has not been an affiliate of the Company for at least three months
immediately preceding the sale and who has beneficially owned the shares of
Common Stock for at least two years to sell such shares without regard to any of
the volume limitations as described above. Holders of 1,000,000 shares of Common
Stock are affiliates of the Company. All of the Company's shareholders who are
affiliates have agreed not to sell or otherwise dispose of any of their shares
of Common Stock now owned or issuable upon the exercise of any option for a
period of 24 months from the Effective Date, without the prior written consent
of the Underwriters. No prediction can be made as to the effect, if any, that
sales of shares of Common Stock or the availability of such shares for sale will
have on the market prices of the Company's securities prevailing from time to
time. The possibility that substantial amounts of Common Stock may be sold under
Rule 144 into the public market may adversely affect prevailing market prices
for the Common Stock and could impair the Company's ability to raise capital in
the future through the sale of equity securities. See "Shares Eligible for
Future Sale."
NO DIVIDENDS AND NONE ANTICIPATED. To date, no dividends have been declared
or paid on the Common Stock, and the Company does not anticipate declaring or
paying any dividends in the foreseeable future, but rather intends to reinvest
profits, if any, in its business. Investors should, therefore, be aware that it
is unlikely that any dividends will be paid on the Common Stock in the
foreseeable future. See "Dividends."
POSSIBLE ADVERSE EFFECT OF PENNY STOCK REGULATIONS ON THE LIQUIDITY OF THE
COMPANY'S SECURITIES. The Company intends to apply for listing of the Common
Stock on the Nasdaq SmallCap Market and the Boston Stock Exchange. In the
absence of the Common Stock being quoted on Nasdaq and if the Common Stock is
not listed on another exchange, trading in the Common Stock would be covered by
Rule 15g-9 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") if the Common Stock is a "penny stock." Under such rule,
broker-dealers who recommend such securities to persons other than established
customers and accredited investors must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement to
a transaction prior to sale. Securities are exempt from this rule if the market
price is at least $5.00 per share.
The Commission adopted regulations that generally define a penny stock to be
any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Such exceptions include an equity security listed
on Nasdaq, and an equity security issued by an issuer that has (i) net tangible
assets of at least $2,000,000, if such issuer has been in continuous operation
for three years, (ii) net tangible assets of at least $5,000,000, if such issuer
has been in continuous operation for less than three years, or (iii) average
revenue of at least $6,000,000 for the preceding three years. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.
If the Company's securities were to become subject to the regulations
applicable to penny stocks, the market liquidity for the securities would be
severely affected, limiting the ability of broker-dealers to sell the securities
and the ability of purchasers in this Offering to sell their securities in the
secondary market. There can be no assurance that trading in the securities will
not be subject to these or other regulations that would adversely affect the
market for such securities.
NASDAQ ELIGIBILITY AND MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF
COMMON STOCK FROM NASDAQ SMALLCAP MARKET. Prior to this Offering, there has
been no established public trading market for the Company's Common Stock and
there is no assurance that a public trading market for the Company's
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<PAGE>
securities will develop after the completion of this Offering. If a trading
market does in fact develop for the securities offered hereby, there can be no
assurance that it will be sustained.
The Commission has approved rules imposing criteria for listing of
securities on the Nasdaq SmallCap Market, including standards for maintenance of
such listing. In order to qualify for initial quotation of securities on the
Nasdaq SmallCap Market, an issuer, among other things, must have at least
$4,000,000 in net tangible assets, $5,000,000 in market value of the public
float and a minimum bid price of $4.00 per share. For continued listing, an
issuer, among other things, must have $2,000,000 in net tangible assets,
$1,000,000 in market value of securities in the public float and a minimum bid
price of $1.00 per share. If the Company is unable to satisfy the Nasdaq
SmallCap Market's maintenance criteria in the future, its Common Stock may be
delisted from the Nasdaq SmallCap Market. In such event, trading, if any, in the
Company's Common Stock, would thereafter be conducted in the over-the-counter
market in the so-called "pink sheets" or the NASD's "Electronic Bulletin Board."
As a consequence of such delisting, an investor would likely find it more
difficult to dispose of, or to obtain quotations as to, the price of the
Company's Common Stock.
UNDERWRITERS' INFLUENCE ON THE MARKET. A significant amount of the Common
Stock offered may be sold to customers of the Underwriters. Such customers
subsequently may engage in transactions for the sale or purchase of such
securities and may otherwise effect transactions in such securities. If they
participate in the market, the Underwriters may exert substantial influence on
the market, if one develops, for the Common Stock. Such market-making activity
may be discontinued at any time. The price and liquidity of the Common Stock may
be significantly affected by the degree, if any, of the Underwriters'
participation in such market. See "Underwriting."
YEAR 2000 EFFECT. While the Company believes that its own operating systems
are year 2000 compliant, there can be no assurance until such time that all
systems will then function adequately. Approximately 50% of the Company's
customers receive their home heating oil 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 the computing system problems could have a material adverse
effect on the Company's results of operations. There can be no assurance that
the Year 2000 issue can be resolved prior to the upcoming change in the century.
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<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of securities
offered hereby at an assumed public offering prices of $7.25 per share of Common
Stock, after deducting underwriting commissions and offering expenses estimated
to be $1,360,500 to be paid by the Company, is estimated to be $5,889,500. The
Company expects to apply the net proceeds of the Offering as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF NET
APPLICATION OF PROCEEDS APPROXIMATE AMOUNT PROCEEDS
- -------------------------------------------------------------------------- ------------------- -----------------
<S> <C> <C>
Acquisitions of home energy product companies, and other energy related
entities (1)............................................................ $ 2,800,000 47.5%
Development of new product and business lines(2).......................... 1,000,000 17.0%
Sales & Marketing(3)...................................................... 515,000 8.7%
Terminal space(4)......................................................... 300,000 5.1%
Hardware, software and installation cost of information system(5)......... 250,000 4.2%
Acquisition of real property (6).......................................... 150,000 2.5%
Addition of personnel(7).................................................. 50,000 0.8%
General Corporate and Working Capital..................................... 824,500 14.0%
Total..................................................................... $ 5,889,500 100%
------------------- ------
------------------- ------
</TABLE>
- ------------------------
(1) The Company plans to acquire certain assets or the securities of other home
energy product companies and other energy related entities. The Company has
no current plans, arrangements, commitments or understandings to acquire the
assets or the securities of other energy related entities.
(2) The net proceeds allocated to development of new product and business lines
are expected to be applied to new operating subsidiaries including, but not
limited to, a subsidiary for the Company's franchising operation, subsidiary
for the retail sale of electrical power and a subsidiary for a joint venture
for the retail sale of natural gas. See "Business."
(3) The net proceeds allocated to marketing and sales are expected to be applied
towards the promotion of the Company's service in its current markets and
expansion of the Company's markets. The proceeds are expected to be applied
to advertising, distributor incentive programs and sales person incentive
programs.
(4) The net proceeds will be allocated to the rental of additional terminal
space for the storage of home heating oil.
(5) Represents cost of the hardware, software and the installation costs
associated with the upgraded information system the Company plans to
install.
(6) Represents downpayment for purchase of the Company's headquarters currently
leased by the Company in Rockaway, New Jersey. Although no formal agreement
has been consummated, the Company is currently in negotiation to purchase
the property for an aggregate purchase price of approximately $1 million.
The purchase of this property is contingent upon the property meeting all
applicable environmental rules and regulations prior to purchase.
(7) The Company anticipates hiring additional sales and operations employees and
has allocated these net proceeds to fund these additions.
The foregoing represents the Company's estimate of the allocation of the net
proceeds of the Offering, based upon the current status of its operations and
anticipated business needs. It is possible, however, that the application of
funds will differ considerably from the estimates set forth herein due to
changes in the economic climate and/or the Company's planned business operations
or unanticipated complications, delays and expenses, as well as any potential
acquisitions that the Company may consummate, although no specific acquisition
has been identified. See "Management's Discussion and Analysis of
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<PAGE>
Financial Condition and Results of Operations." Any reallocation of the net
proceeds will be at the discretion of the Board of Directors of the Company.
Any additional net proceeds realized from the exercise of the Over-Allotment
Option (up to approximately $473,063) will be added to the Company's working
capital.
Pending application, the net proceeds will be invested principally in
short-term certificates of deposit, money market funds or other short-term
interest-bearing investments.
DIVIDEND POLICY
The Company has never paid or declared dividends on its Common Stock. The
payment of cash dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements, financial condition and other relevant factors. The Company
intends, for the foreseeable future, to retain future earnings for use in the
Company's business.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1999 and as adjusted to reflect the sale of 1,000,000 shares of Common
Stock, offered hereby. The information provided below should be read in
conjunction with the Financial Statements and the other financial information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
------------ --------------
Long-term liabilities, less current maturities(1)................................... $ 1,118,217 $ 1,968,217
------------ --------------
------------ --------------
Shareholders' equity: 10,000,000 Capital Stock, shares authorized: 1,000,000 issued
and outstanding(2); and 2,000,000 issued and outstanding as adjusted (3).......... 1 2,000
Retained earning.................................................................. 1,097,096 1,097,096
Paid in Surplus................................................................... 3,999 5,891,500
------------ --------------
Total shareholders' equity........................................................ 1,101,096 6,990,596
------------ --------------
------------ --------------
</TABLE>
- ------------------------
(1) Long-term liabilities have been adjusted to reflect an $850,000 increase in
debt projected to be incurred for the purchase of the Company's headquarters
in Rockaway, New Jersey, which the Company currently leases.
(2) Does not include 300,000 shares of Common Stock provided for issuance under
the Company's Stock Option Plan.
(3) Reflects the issuance of 1,000,000 shares of Common Stock by the Company in
connection with this Offering. Does not include 300,000 shares of Common
Stock provided for issuance under the Company's Stock Option Plan or
10,000,000 shares of preferred stock at $.001 per share par value, to be
authorized on or before the Effective Date.
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<PAGE>
DILUTION
Dilution represents the difference between the initial public offering price
paid by the purchasers in the Offering and the net tangible book value per share
immediately after completion of the Offering. Net tangible book value per Share
represents the amount of the Company's total assets minus the amount of its
liabilities and intangible assets divided by the number of shares outstanding.
As of March 31, 1999, the net tangible book value of the Company's Common Stock
was $530,420 or ($.53) per share. Without taking into account any changes in net
tangible book value after March 31, 1999, other than to give effect to the sale
of the Shares offered hereby and the receipt of the net proceeds of this
Offering, the pro forma net tangible book value of the Company as of March 31,
1999 would have been $6,419,920 or $6.42 per share. Consequently, there will be
an immediate increase in net tangible book value of $5.89 per Share to the
existing shareholders and an immediate substantial dilution (i.e. the difference
between the assumed offering price of $7.25 per Share and the pro forma net
tangible book value per Share after the Offering) of $.83 or 11% to new
investors purchasing the Shares offered hereby.
The following table illustrates, as of March 31, 1999, this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per Share of Common Stock.... $ 7.25
Net tangible book value per share before Offering...... $ .53
Increase per Share attributable to new investors....... $ 5.89
Pro forma net tangible book value per Share after
Offering................................................. $ 6.42
---------
Dilution per Share to new investors........................ $ .83
---------
---------
</TABLE>
The following table summarizes, as of March 31, 1999, the total number of
shares of Common Stock purchased from the Company, the total consideration paid,
and the average price per share paid by the existing shareholders and by new
investors who purchase Shares pursuant to this Offering.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES PERCENTAGE AGGREGATE OF TOTAL AVERAGE PRICE
PURCHASED(1) OF TOTAL SHARES CONSIDERATION CONSIDERATION PER SHARE
------------ ----------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders................. 1,000,000 50% $ 480,760 6.2% $ 0.48
New Investors......................... 1,000,000 50% 7,250,000 93.8% 7.25
------------ --- ------------- ---
Total........................... 2,000,000 100% $ 7,730,760 100%
------------ --- ------------- ---
------------ --- ------------- ---
</TABLE>
- ------------------------
(1) This information does not reflect 300,000 Shares that may be issued under
the Company's Stock Option Plan.
18
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data and other
operation information of the Company. The selected historical financial data in
the table for the years ended December 31, 1998 and 1997 is derived from the
audited financial statements of the Company. The selected financial data set
forth for the three month period ended March 31, 1998 and 1999 are derived from
unaudited financial information provided by the Company, which in the opinion of
Management have been prepared on the same basis as the audited financial
statements and contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations for
such periods. The results of operations for the three months ended March 31,
1999, are not necessarily indicative of results to be expected for the full
fiscal year. The selected financial data set forth below should be read in
conjunction with the Company's financial statements and notes thereto and with
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------------------
<S> <C> <C> <C> <C>
1998 1997 1999 1998
------------- ------------- ------------ ------------
Total revenues......................................... $ 16,317,668 $ 16,380,992 $ 6,180,935 $ 5,504,512
Total costs and expenses............................... 16,276,975 16,304,931 5,624,722 5,236,694
Net income (loss)...................................... 40,693 76,061 556,213 267,818
Net income(loss) per common share(1)................... .041 .076 0.556 0.268
Weighted average common shares
outstanding.......................................... 1,000,000 1,000,000 1,000,000 1,000,000
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1999
------------ ----------------------------
<S> <C> <C> <C> <C>
1998 1997 ACTUAL AS ADJUSTED(2)
------------ ------------ ------------ --------------
Working capital(3)..................................... $ (805,798) $ (761,188) $ (370,600) $ 5,518,900
Total assets(2)(3)..................................... 3,739,526 3,552,524 4,184,751 10,924,251
Total liabilities(2)................................... 3,194,643 3,154,264 3,083,655 3,933,655
Total stockholders' equity(3).......................... 544,883 398,260 1,101,096 6,990,596
</TABLE>
- ------------------------
(1) Net earnings per common share is based upon the weighted average number of
common shares outstanding for each period presented.
(2) Total liabilities have been adjusted to reflect an $850,000 increase in debt
projected to be incurred for the purchase of the Company's headquarters in
Rockaway, New Jersey, which the Company currently leases. Total assets have
also been increased by $850,000 representing the purchase of the Company's
headquarters.
(3) As adjusted to reflect net proceeds of $5,889,500 from the sale by the
Company in this offering of 1,000,000 Shares at the assumed public offering
price of $7.25 per Share.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The statements contained in this Prospectus that are not historical are
forward looking statements, including statements regarding the Company's
expectations, intentions, beliefs or strategies regarding the future. Forward
looking statements include the Company's statements regarding liquidity,
anticipated cash needs and availability and anticipated expense levels. All
forward looking statements included in this prospectus are based on information
available to the Company on the date hereof and the Company assumes no
obligation to update any such forward looking statements. It is important to
note that the Company's actual results could differ materially from those in
such forward looking statements. Among the factors that could cause actual
results to differ materially are the factors detailed in the risks discussed in
the " Risk Factors" section included in this Prospectus at page 8.
The home heating and home energy market is highly competitive and
fragmented, in both the heating oil and alternative energy markets, and consists
of suppliers most of whom are larger and with greater resources than the
Company. The diverse distribution channels in which the Company markets its
products involve different competitive factors, and the ability to provide
specialized customer services at discounted prices is important to mass market
the Company's products. See "Business -- Competition".
The Company's future success as a retailer of energy related products will
be influenced by several factors including the ability of the Company to
efficiently meet customer demand and develop a larger customer base,
management's ability to evaluate the public's home energy requirements and to
achieve market acceptance of new energy related products. With respect to
achieving market acceptance of new energy related products, the Company has
entered into a marketing agreement with AllEnergy where the Company will market
and sell natural gas to residential and commercial customers in New Jersey. The
Company will receive a commission equal to 35% of the gross profit margin for
sales generated by the Company. Further factors impacting the Company's
operations are increases in expenses associated with continued sales growth, the
ability of the Company to control costs, to offer products with satisfactory
profit margins and the ability to develop and manage the introduction of new
products and competition. Quality control as well as customer satisfaction are
also essential to the Company's success.
REVENUE RECOGNITION
Sales of fuel oil and heating equipment are recognized at the time of
delivery of the product 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 terms of the respective service contracts, on a straightline basis, which
generally do not exceed one year.
RESULTS OF OPERATIONS
Since the Company was only incorporated in March 1997, the financial data
for the fiscal year ended December 31, 1996 represents solely the results of
operations of Able Oil and related entities which, in 1997, are subsidiaries of
the Company, and, as such, are the same operating entities in 1997 and 1996.
THREE MONTHS ENDED MARCH 31, 1999, COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1998.
The Company reported revenues of $6,180,935 for the three months ended March
31, 1999, an increase of 12.29% over the prior year's revenues of $5,504,512 for
the same three month period. This increase can be attributed to increased sales
as a result of cooler weather in the Northeast during this quarter as compared
to warmer weather experienced by the Northeast during November and December
1998; therefore, some customers who would normally receive delivery in the
fourth quarter of 1998
20
<PAGE>
instead received delivery in the first quarter of 1999. Increased revenues can
also be attributable to increased marketing efforts. Revenues for the three
months ended March 31, 1998 include $289,209 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 March 31, 1998, the increase in revenues from
such period to the three month period ended March 31, 1999 would have been
18.51%.
Gross profit margin, as a percentage of revenues, for the three months ended
March 31, 1999, increased to 28.37% of net revenues, representing an increase of
3.79% over a margin of 24.58% for the same quarter one year ago. The improvement
in margin is primarily a result of stable retail prices for home heating oil
with lower product cost.
Selling, General and Administrative expenses decreased by $49,796 or 6.67%
from $746,338 for the three months ended March 31, 1998 to $696,542 for the
three months ended March 31, 1999. This decrease was attributable to the sale of
two subsidiaries in December 1998 which had costs of $91,230 in the three months
ended March 31, 1998.
Operating Income for the three months ended March 31, 1999 was $948,965, an
increase of 89.56% over the Company's operating income of $500,624 for the three
months ended March 31, 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.
Net income for the three months ended March 31, 1999 increased by $288,395
or 107% to $556,213 as compared to the previous year. This increase in net
income is a direct result of continued sales growth and improved gross margins
(occasioned primarily by lower wholesale fuel prices), which more than offset
the investment in consumer promotions and advertising. As a percentage of net
revenues, income for the first quarter of 1999 increased to 9.0% as compared to
4.8% for the same period in the previous year. In addition to an increase in
gross margin and operating efficiencies, as described above, the Company also
profited from certain forward purchase contracts and from sales to customers
with automatic delivery contracts.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997.
Revenues for the year ended December 31, 1998 were $16,317,668, a 0.38%
decrease over the prior year's revenues of $16,308,992. The decrease in revenue
for the year ended December 1998 was due in part to lower product costs during
the second half of fiscal 1998. For example, the cost to the Company for number
2 home heating oil averaged $0.42 per gallon for fiscal 1998 as compared to
$0.59 for 1997. In fiscal year 1997, the Company charged customers an average of
$.829 per gallon as opposed to $.711 per gallon for number 2 home heating oil,
in fiscal year 1998. Therefore, although revenue decreased the Company was able
to increase margins on number 2 home heating oil by $.052 per gallon in fiscal
year 1998. Additionally, the decrease in revenues was a result of a reduction of
gallons sold of home heating oil. This reflects management's decision to stop
sales of home heating oil to two wholesale customers because of low profit
margins on such sales. Management believes that the elimination of these
customers will result in an increase in overall profit margins from sales of
home heating oil. The Company did, however, experience a 78% increase in gallon
sales of propane, from 215,508 gallons during fiscal 1997 to 383,678 gallons in
fiscal 1999 which was the result of an increase in propane customers.
The Company's gross profit margin for the year ended December 31, 1998 was
20.1% of sales, a decrease from the 20.5% margin for the comparable period ended
December 31, 1997. Selling General & Administration expenses ("SG&A") for the
Company decreased by 0.92% from $2,745,963 to $2,720,598 for the year ended
December 31, 1998 as compared to December 31, 1997. These changes can be
attributed, in part, to the reclassification of expenses from SG&A to cost of
goods sold to better classify such expenses. For example, during fiscal year
1997, the Company included $108,000 in insurance expense and $80,000 of fuel and
excise tax in SG&A; however, in fiscal 1998, these expenses were included in
cost
21
<PAGE>
of goods sold. The decrease in gross profit can also be attributed to
fluctuating costs for product during the second half of 1998 and higher costs
attributable to A&O, which was sold in December 1998. The decrease in SG&A can
also be attributed to decreased executive officers salaries, as certain officers
did not take a bonus in 1998.
Operating income for the year ended December 31, 1998 was $100,705 a
decrease of 53.7% over the Company's operating income for the previous year
ended December 31, 1997 of $217,588. This decrease in income from operations is
related to the increase in one time expenditures relating to strengthening the
Company's infrastructure. For example, in fiscal 1998, the Company established a
garage in its Newton Facility which is staffed with one full-time employee. The
Company expects that the addition of this garage will help to reduce operating
expenses related to its fleet of trucks during fiscal year 1999. Additionally,
increased costs related to A&O further decreased operating income.
Net income for the year ended December 31, 1998 was $40,693, a 46.50%
decrease in the Company's net income of $76,061 for the year ending December 31,
1997. This decrease in net income is primarily attributable to lower gross
profit and higher depreciation expenses due to additional tanks and other
equipment.
Depreciation and amortization expense for the year ended December 31, 1998
was $451,441, an increase from $394,806 for the year ending December 31, 1997.
Amortization relates to the amortization of customer lists, being amortized over
15 years and a Non-Compete Agreement amortized over 5 years, per the agreement.
These relate to the acquisition of Connell's Fuel Co. in October 1996. The
amortization of the customer list is a non-cash expense. The amortization
expense for the year ended December 31, 1998 was $88,800, as compared to $75,636
for the year ended December 31, 1996 and reflects a full year's amortization of
the Non-Compete Agreement and customer list. Depreciation expense for the year
ended December 31, 1998 was $376,661 compared to $320,026 for the prior year.
This was due to the addition of propane cylinders and tanks, and the purchase of
additional trucks and other equipment at a cost of approximately $450,000.
Interest expense for the year ended December 31, 1998 was $169,040 as
compared to $211,133 for the year ended December 31, 1997. This decrease was due
to debt restructuring. For example, the Company reduced total debt by $235,550
during fiscal 1998. Also the Company converted certain short-term notes to long
term notes, resulting in a 1.5% lower interest rate.
During the year ended December 31, 1998, the Company sold one Freightliner
delivery truck for a total selling price of $44,000. The book value of the truck
was $20,043, resulting in a gain on sales of equipment of $23,957.
During the year ended December 31, 1998, the Company sold A&O and Able
Montgomery for an aggregate selling price of $140,000. The gain on sale of Able
Montgomery of $72,739 has been deferred and will be shown over 60 months as the
funds are collected. The gain on A&O is shown as excess of subsidiary losses
over investment of $54,404.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996.
The financial data for the fiscal year ending December 31, 1996, represents
the operations of Able Oil Company and related entities. Pursuant to Regulation
S-B these entities, in aggregate, were considered the predecessor of Able
Energy, Inc. and Subsidiaries. in order to have a proper comparison of Fiscal
1996 and 1997, the December 31, 1996 financial statements were retroactively
restated to include Able Oil Company and related entities.
Revenues for the year ended December 31, 1997 were $16,308,992, a 25.6%
increase over the prior year revenues of $12,981,457. The increase in revenue
for the year ended December 1997 was due in part to the October 1996 acquisition
of Connell's Fuel Co., in Newton, New Jersey. The Company also
22
<PAGE>
increased its customer base through intensive marketing and advertising
promotions offering the Company's full home heating services at discounted
prices. In addition, the revenue for 1997 reflects the added revenue of Able
Propane, A&O Environmental, Able Melbourne and Able Montgomery. Although these
affiliates were established in or about July 1996, the revenue generated by
these entities is most apparent in the financial statements for the subsequent
twelve month period ended December 31, 1997.
The Company's gross profit margin for the year ended December 31, 1997 was
20.5% of sales, an improvement over the 18.5% margin for the comparable period
ended December 31, 1996. This positive change can be attributed to a 4.2%
decrease in the cost of inventory sold.
Selling General & Administration expenses for the Company increased by 45.3%
from $1,889,905 to $2,745,963 for the year ended December 31, 1997 as compared
to December 31, 1996. This increase is attributable to the acquisition of
Connell's Fuel in Newton, New Jersey which incurred expenses of $828,622, as
well as the start-up costs associated with the establishment of Able Propane and
Able Montgomery which were in operation for a full year in 1997.
Operating income for the year ended December 31, 1997 was $217,588 a
decrease of 15.1% over the Company's operating income for the previous year
ended December 31, 1996 of $256,411. This decrease in income from operations is
directly related to the organizational and start-up costs associated with the
addition of the aforementioned start-up entities, which had an operating loss of
$181,389. Further costs were incurred in establishing the Company's franchising
program, as well as investments in the Company's infrastructure.
Net income for the year ended December 31, 1997 was $76,061 as compared to
$227,596 for the year ending December 31, 1996. This decrease in net income is
primarily attributable to the additions of the start-up entities, in addition,
to a lessor extent, the acquisition of Connell's Fuel Co., which increased
Selling General and Administrative expenses.
Amortization relates to the amortization of customer lists, being amortized
over 15 years and a Non-Compete Agreement amortized over 5 years, per the
agreement. These relate to the acquisition of Connell's Fuel Co. in October
1996. The amortization of the customer list is a non-cash expense. The
amortization expense for the year ended December 31, 1997 was $74,780, as
compared to $12,463 for two months in the year ended December 31, 1996.
Depreciation expense for the year ended December 31, 1997 was $320,026 which
is a 28.1% increase over the prior year's $249,928. This was due to the October
1996 acquisition of Connell's Fuel Co., and a full year of the above referenced
start -up companies which resulted in an aggregate expense of $69,934, and the
purchase of additional trucks and other equipment.
Interest expense for the year ended December 31, 1997 was $211,133 as
compared to $80,586 for the year ended December 31, 1996. This increase was due
to the October 1996 acquisition of Connell's Fuel Co. and the costs associated
with the start-up entities.
During the year ended December 31, 1997, the Company sold three trucks for a
total selling price of $114,490. The book value of these trucks was $42,386,
resulting in a gain on sales of equipment of $72,104. The terms of sale were
cash.
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 pre-establishing the maximum sales price of oil
over a twelve month period. The maximum price at which oil is sold to these
capped-price customers is renegotiated in each Spring to reflect the current
market conditions. The Company currently enters into forward purchase contract
for a substantial majority of the oil it sells to these capped-price customers
in advance and at a fixed cost. Should events occur after a capped-sales price
is established that increases the cost of oil above the amount anticipated,
23
<PAGE>
margins for the capped-price customer whose oil was not purchased in advance
would be lower than expected, while those customers whose oil was purchased in
advance would be unaffected. Conversely, should events occur during this period
that decrease the cost of oil below the amount anticipated, margins for the
capped-price customers whose oil was purchased in advance could be higher than
expected, while those customers whose oil was not purchased in advance would be
unaffected or higher than expected. The capped-price customers payments are
received in advance and are shown on the balance sheet as customer deposits
current liabilities.
LIQUIDITY AND CAPITAL RESOURCES
For the three month period ended March 31, 1999 compared to the three months
ended March 31, 1998, the Company's cash position decreased by $136,662 or
22.66% from the March 31, 1998 balance of $603,115 to the March 31, 1999 balance
of $466,453. For the three months ended March 31, 1999 cash was generated
through operations. For the three months ended March 31, 1998 cash was generated
through operations, net income and collections of accounts receivable.
For the year ended December 31, 1998, compared to the year ended December
31, 1997, the Company's cash position decreased by $30,060 from December 31,
1997 balance of $155,904 to December 31, 1998 balance of $125,844. For the year
ended December 31, 1998, cash was generated through operations and a decrease in
inventory and an increase in customer advance payments. For the year ended
December 31, 1997, cash was generated through operations, and an increase in
customer advance payments.
The increase in cash from December 31, 1998 to March 31, 1999 was $340,609
and from December 31, 1997 to March 31, 1998 was $447,211. This is due to the
seasonal fluctuations with greater sales and net income in the winter months.
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
had been increased from $350,000 to $500,000 at 1/2% above prime and its current
outstanding credit line and other debt with the bank has been 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 December 31, 1998, $100,000 of this
line had been used by the Company.
The Company will receive net proceeds from this Offering in an amount
estimated to be $5,818,750. The Company believes that the net proceeds of the
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 situation
warrants.
On the Effective Date, Timothy Harrington and Christopher P. Westad will
enter into three year employment agreements with the Company. Timothy Harrington
will be retained as Chief Executive Officer of the Company at an annual salary
of $225,000. Christopher Westad will be retained as President of the Company at
an annual salary of $100,000. Each of the Messrs. Harrington and Westad are
entitled to bonuses pursuant to their employment agreements if the Company meets
certain financial targets based on sales, profitability and good management
goals as predetermined by the Board of Directors or compensation committee and
other subjective criteria as determined by the Board of Directors or
compensation committee. " See Management; Employment Agreements."
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
24
<PAGE>
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.
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 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 sale 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 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.
25
<PAGE>
BUSINESS
GENERAL
Able Energy was incorporated on March 13, 1997 in the state of Delaware, to
act as a holding company for five operating subsidiaries: Able Oil; Able
Propane; Able Melbourne; Able Montgomery and A&O. In December 1998, the Company
sold Able Montgomery as its first franchise, and it also sold A&O.
Presently the Company's operating entities are engaged in the retail
distribution of, and the provision of services relating to, (i) fuel oil, (ii)
propane gas, and (iii) natural gas through a marketing alliance agreement with
AllEnergy Marketing Company LLC, a division of New England Electric Systems,
Inc. In addition to selling home energy products, the Company offers complete
HVAC (heating, ventilation and air conditioning) installation and repair and
also markets other petroleum products to commercial customers, including diesel
fuel, gasoline and lubricants.
In fiscal year 1998, sales of home heating oil accounted for approximately
70% of the Company's revenues. The remaining 30% of revenues were from sales of
gasoline, diesel fuel, kerosine, propane, and environmental services and related
sales. The Company serves approximately 20,000 home heating oil customers from
three locations, of which two are located in New Jersey and one is located in
Florida.
The Company also provides installation and repair of heating equipment as a
service to its customers. The Company considers service and installation
services to be an integral part of its business. Accordingly, the Company
regularly provides various service incentives to obtain and retain customers.
The Company provides home heating equipment repair service on a 24 hours-a-day,
seven days-a-week basis, generally within two hours of request. Except in
isolated instances, the Company does not provide service to any person who is
not a customer.
The Company believes that it is able to obtain new customers and maintain
existing customers by offering its concept of full service home energy products
at discount prices, providing quick response refueling and repair operations,
providing automatic deliveries to customers by monitoring historical use and
weather patterns, and by providing customers a variety of payment options. The
Company regularly provides various service incentives to obtain and retain
customers. The Company aggressively promotes its service through a variety of
direct marketing media, including mail and telemarketing campaigns, by providing
discounts to customers who refer new customers to the Company, and through an
array of advertising, including television advertisements and billboards, which
aim to increase brand name recognition. The Company believes that this focused
marketing strategy has been key to its success.
The Company intends to use a substantial portion of the proceeds of this
offering to expand its operations. The Company's strategy to expand its
operations includes (i) the acquisition of select operators in the Company's
present markets as well as other markets; (ii) capturing market share from
competitors through increased advertising and other means; (iii) diversifying
its products; (iv) diversifying its customer base; and (iv) replicating its
marketing and service formula in new geographic areas either directly or through
franchise arrangements. The Company may also enter into marketing alliances with
other entities in product areas different than the Company's current product
mix.
RETAIL FUEL OIL
The Company's retail fuel oil distribution business is conducted through its
subsidiaries Able Oil and Able Melbourne. The Company serves both residential
and commercial fuel oil accounts. The Company sells premium quality home heating
oil to its residential customers offering delivery seven days-a-week. To its
commercial customers, in addition to selling home heating oil, the Company sells
diesel fuel, gasoline and kerosene. The Company also provides an oil burner
service that is available 24 hours-a-day for the maintenance, repair and
installation of oil burners. These services are performed on an as needed basis.
Customers are not required to enter into service contracts to utilize the
Company's service department.
26
<PAGE>
Approximately 50% of the Company's customers receive their home heating oil
pursuant to an automatic delivery system without the customer having to make an
affirmative purchase decision. These deliveries are scheduled by computer, based
on each customer's historical consumption patterns and prevailing weather
conditions. Customers can also order deliveries of home heating oil through the
Company's Web site located at www.ableenergy.com. The Company delivers home
heating oil approximately six times each year to the average customer. The
Company's bills customers promptly upon delivery or receives payment upon
delivery. The Company's customers can pay for fuel deliveries with cash or with
their credit card.
In addition, approximately 5% of the Company's total sales are made to
customers pursuant to an agreement which pre-establishes the maximum annual
sales price of fuel oil and is paid by customers over a ten month period in
equal monthly installments. Such prices are renegotiated in April of each year
and the Company has historically purchased fuel oil for these customers in
advance and at a fixed cost.
The Company delivers fuel with its own fleet of 18 custom fuel oil trucks
and four owner-operator fuel oil delivery trucks. The Company's fuel trucks have
fuel capacities ranging from 3,000 to 8,000 gallons. Each vehicle is assigned to
a specific delivery route, and services between 4 and 40 customer locations per
day depending on market density and customers' fuel requirements. The Company
also operates seven Company owned service vans and four owner-operated service
vans, which are equipped with state of the art diagnostic equipment necessary to
repair and/or install heating equipment. The number of customers each van serves
mostly depends upon the number of service calls received on any given day.
ABLE OIL
Able Oil was established in 1989 and is the Company's largest subsidiary,
accounting for approximately 87% of the Company's total revenues in 1998. Able
Oil is located in Rockaway, New Jersey, and serves just under 22,000 oil
customer accounts throughout northern New Jersey, mostly in Morris, Sussex,
Warren, Passaic and Essex counties, from its distribution locations in Rockaway
and Newton, New Jersey. Of these accounts, approximately 90% are residential
customers and 10% are commercial customers.
Generally, 18 of the Company's fuel oil trucks are reserved for use by Able
Oil, of which nine trucks operate from the Rockaway facility and six trucks
operate from the Newton facility. In addition, Able Oil utilizes the services of
four owner-operated trucks. Each owner operator is under contract; they are
responsible for all of the vehicle operating expenses including insurance
coverage. All of the trucks have the Company's logo on them.
Able Oil's 18 fuel oil delivery trucks, and the four owner-operator trucks,
acquire fuel inventory at the Company's facilities in Rockaway and Newton.
Dispatch of fuel oil trucks is conducted at both the Rockaway and Newton
facilities. Billing is conducted from Able Oil's corporate headquarters in
Rockaway.
The Rockaway and Newton facilities have the capacity to store 1.5 million
gallons and 200,000 gallons of fuel, respectively. During seasons where demand
for heating oil is higher, or when wholesale oil prices are favorable, a
slightly larger inventory is kept on hand. However, Management generally
believes that short inventory life and high inventory turnover enables the
Company to rapidly respond to changes in market prices. Thus, Management employs
"just in time" inventory practices and rarely stores fuel to capacity levels.
However, in June of 1998, oil prices reached a historic low and the Company
entered into an in-tank storage agreement with Mieco Trading Co., to store 1.5
million gallons of fuel oil at the Company's facility in Rockaway, New Jersey.
The Company entered into an additional agreement with Mieco whereby it purchased
all of such fuel oil from November 1998 through March 1999. Additional fuel oil
purchases are made daily on the spot market using electronic funds transfers.
Able Oil carts its fuel purchases from wholesale purchase sites to the Rockaway
and Newton facilities with two tractor-trailer tankers owned by the Company, and
by two owner-operated tractor-trailer tankers that are used on an as needed
basis. These two owner-operated tankers are under contract and bear the Able
logo or name.
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Able Oil's oil burner service operates exclusively out of the Newton
facility. Able Oil dispatches a total of eleven service vans, four of which are
subcontracted from owner-operators.
ABLE MELBOURNE
Able Melbourne was established in July 1996, and is located in Cape
Canaveral Florida. Presently, revenues from Able Melbourne account for
approximately 5.3% of the Company's total revenues. Able Melbourne is engaged
primarily in the sale of diesel fuel for commercial fleet fueling and other
on-road vehicles, and dyed diesel fuel, which is used for off-road vehicles and
purposes, including commercial and recreational fishing vessels, heating oil and
generator fuel. Additionally, a small portion of Able Melbourne's revenues are
generated from the sale of home heating oil, lubricants and lubricant products.
Able Melbourne serves approximately 300 customer accounts in Brevard County,
Florida, primarily in the Cape Canaveral Area. In 1998, six of Able Melbourne's
customers, Beyel Brothers Crane Service, Beyel Marina, Diamond Royale, Frank-lin
Excavating, Inc., CG Reed, S&S Seafood and ABC Landclearing Development,
individually, accounted for more than five percent of Able Melbourne's annual
revenues.
Able Melbourne delivers fuel with two fuel delivery trucks which are capable
of storing 6,000 gallons of fuel in aggregate. Because Able Melbourne's peak
season is at the opposite time of the year than the rest of the Company, during
this season, Able Melbourne uses one of Able Oil's trucks to meet its demand.
Currently, Able Melbourne does not have facilities to store fuel oil beyond what
is held on its trucks, and thus, purchases fuel inventory from local refineries.
However, since Able Melbourne is located only three miles from port storage, the
lack of inventory capacity is not material to the Company's operations or
revenue.
RETAIL PROPANE DISTRIBUTION
The Company is engaged in the retail distribution of liquid propane gas and
propane equipment, and provides services related thereto through its subsidiary
Able Propane. Able Propane, based in Rockaway, New Jersey, was established 1996
as part of the Company's efforts to increase market penetration through
diversification. Able Propane serves approximately 1,100 accounts, the majority
of which are located in northern New Jersey.
Although propane can be used for virtually all household and business
utility applications, of Able Propane's customers, approximately 60% use propane
for hot water heating and cooking; approximately 10% use propane for pool
heating; and approximately 30% use propane for home heating. Although burned as
a gas, propane is transported as a liquid and stored in tanks that vaporize the
liquid for use. Able Propane provides its customers with such tanks at no
charge, and by doing so, remains such customer's exclusive supplier of propane.
Able Propane employs a delivery system similar to the Company's retail oil
distribution business, whereby customers receive propane deliveries pursuant to
an automatic delivery system without the customer having to make an affirmative
purchase decision. These deliveries are scheduled by computer, based on each
customer's historical consumption patterns and prevailing weather conditions.
With an increased marketing effort, the Company believes that Able Propane
has the opportunity to gain a larger share of the New Jersey energy market by
converting electricity and fuel oil users to propane, and by encouraging owners
of newly-constructed buildings to select propane as their buildings' energy
source. The Company also believes that the use of propane as an alternate fuel
for cars, trucks and public transportation to meet clean air requirements, poses
a great opportunity for future growth.
Able Propane's base of operations is located in Rockaway, New Jersey, at the
Company's headquarters. Currently, Able Propane has no propane storage
facilities, and its only investment in propane inventory is what can be stored
on its one propane delivery truck. The delivery truck has the capacity to
deliver 3,000 gallons of propane, and can service approximately 35 customers per
day. Able Propane
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purchases wholesale propane on the spot market at local facilities. The Company
is considering plans to lease or build a facility that would enable Able Propane
to store approximately 30,000 gallons of propane.
FUNDAMENTAL CHARACTERISTICS OF THE COMPANY'S BUSINESS
UNAFFECTED BY GENERAL ECONOMY
The Company's business is relatively unaffected by business cycles. Because
fuel oil, propane and gasoline are such basic necessities, variations in the
amount purchased as a result of general economic conditions are limited.
CUSTOMER STABILITY
The Company has a relatively stable customer base due to the tendency of
homeowners to remain with their traditional distributors. In addition, a
majority of the home buyers tend to remain with the previous owner's
distributor. As a result, the Company's customer base each year includes most
customers retained from the prior year, or home buyers who have purchased from
such customers. Like many other companies in the industry, the Company delivers
fuel oil and propane to each of its customers an average of approximately six
times during the year, depending upon weather conditions and historical
consumption patterns. Most of the Company's customers receive their deliveries
pursuant to an automatic delivery system, without the customer having to make an
affirmative purchase decision each time home heating oil or propane is needed.
In addition, the Company provides home heating equipment repair service on a
seven-days-a-week basis.
No single customer accounts for 10% or more of the Company's consolidated
revenues.
CONVERSION TO NATURAL GAS
The rate of conversion from the use of home heating oil to natural gas is
primarily affected by the relative prices of the two products, and the cost of
replacing oil fired heating systems with one that uses natural gas. The Company
believes that approximately 1% of its customer base annually converts from home
heating oil to natural gas. Even when natural gas had a significant price
advantage over home heating oil, such as in 1980 and 1981 when there were
government controls on natural gas prices or during the Persian Gulf Crisis in
1990 and 1991, the Company's customers converted to natural gas at only a 2%
annual rate. During the latter part of 1991 and through 1995, natural gas
conversions have returned to their 1% historical annual rate as the prices for
the two products have been at parity.
In an effort to insulate itself against natural gas conversions and as part
of the Company's efforts to expand its product line, the Company, pursuant to a
marketing alliance with AllEnergy, now provides natural gas service as an option
to its customers (See "Business-Expansion and Acquisitions"). AllEnergy is a
subsidiary of New England Electric Systems, Inc. ("NEES"), a utility company
listed on the New York Stock Exchange. Recently, the New Jersey Board of Public
Utilities deregulated the sale and supply of natural gas to residential and
commercial customers. Natural gas customers can now choose from different
providers of natural gas. Natural gas providers, such as the Company, will
deliver the gas through the existing network of underground gas pipes owed and
maintained by the local gas utility.
OIL PRICE VOLATILITY
Although prices of energy sources have been volatile, historically, this has
not affected the performance of the Company because it has been able to pass
substantially all wholesale cost increases along to its customers. While
fluctuations in wholesale prices have not significantly affected demand to date,
it is possible that significant wholesale price increase could have the effect
of encouraging conservation of energy resources. If demand was reduced and the
Company was unable to increase its gross profit margin
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or reduce its operating expenses, the effect of such decrease in demand would be
a reduction of net income.
SEASONALITY
The Company's business is directly related to the heating needs of its
customers. Accordingly, the weather can have a material effect on the Company's
sales in any particular year. Generally, however, the temperatures in the past
thirty years have been relatively stable, and as a result, have not had a
significant impact on the Company's performance, except on a short-term basis.
In 1997 "El Nino" caused one of the warmest winters on record which impacted
home heating oil sales during the 1997-1998 winter.
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. During the spring and summer months,
revenues from the sale of diesel and gasoline fuels increase due to the
increased use of automobiles and construction apparatus.
Each of the Company's divisions are seasonal. From May through September,
Able Oil experiences considerable reduction of retail heating oil sales.
Able Propane can experience up to 80% decrease in heating related propane
sales during the months of April to September, which is offset somewhat by an
increase of pool heating and cooking fuel.
Over 90% of Able Melbourne's revenues are derived from the sale of diesel
fuel for construction vehicles, and commercial and recreational sea-going
vessels during Florida fishing season, which begins in April and ends in
November. Only a small percentage of Able Melbourne's revenues are derived from
the sale of home heating fuel. Most of these sales occur from December through
March, Florida's cooler months.
WHOLESALE SUPPLIERS
Notwithstanding the agreement between the Company and Mieco for the supply
of Number 2 Heating Oil, the Company does not have agreements or contracts for
the supply of fuel. The Company purchases its fuel on the spot market. The
Company satisfies its inventory requirements with nine different suppliers, the
majority of which have significant domestic fuel sources, and many of which have
been suppliers to the Company for over 5 years. The Company's current suppliers
are Ameranda Hess Corporation, Bayway Refining Co., Petron Oil Corporation, Star
Enterprises, Louis Dreyfus Energy, Koch Industries, Co., Valero Marketing and
Supply Co., and Sun Co., Inc. (R&M). The Company monitors the market each day
and determines when to purchase its oil inventory and from whom. As of June
1998, the Company began storing supplies of fuel equal to a month's sales of
fuel because of unusually low fuel prices.
Two of these suppliers provided Able Oil with approximately 60% of its
heating oil requirements for the year ended December 31, 1998.
Coastal Refining & Marketing, Inc., provided Able Melbourne with
approximately 99% of its diesel fuel product requirements for the year ended
December 31, 1998. Two major suppliers provided Able Melbourne with
approximately 67% and 33%, respectively, of its lubricant and related product
requirements for the year ended December 31, 1998. Two major suppliers,
Ferrellgas Partners, L.P. and Propane Power, provided Able Propane with
approximately 50% each, of its propane requirements for the year ended December
31, 1998.
Management believes that if the Company's supply of any of the foregoing
products was interrupted, the Company would be able to secure adequate supplies
from other sources without a material disruption in its operations. However,
there can be no assurance that adequate supplies of such products will be
readily available in the future.
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TRUCK PURCHASES AND MAINTENANCE
The Company presently orders and purchases its fuel oil trucks from two
companies which manufacture trucks suitable for the Company's operations. The
Company has the option to purchase or lease standard equipment fuel trucks. The
typical configuration of the Company's fuel trucks is a Freightliner with a
3,000 gallon multi-compartment aluminum tank, a vapor recovery system and a
device that records fuel flow from the storage compartments. Each truck carries
the Company's registered logo emblazoned on its side.
Service and environmental testing vehicles are standard commercial vans
which are obtained from a number of sources. These vehicles also carry the
Company logo.
Generally, the Company relies upon equipment warranties, fixed fee service
contracts and on-site repairs for the maintenance of the Company's fleet of
vehicles. To date, the Company has not experienced significant downtime on the
any of its fuel trucks.
COMPETITION
The Company's business is highly competitive. In addition to competition
from alternative energy sources, the Company competes with distributors offering
a broad range of services and prices, from full service distributors similar to
the Company, to those offering delivery only. Competition with other companies
in the propane industry is based primarily on customer service and price.
Longstanding customer relationships are typical in the retail home heating oil
and propane industry. Many companies in the industry, including the Company,
deliver fuel oil or propane to their customers based upon weather conditions and
historical consumption patterns without the customers having to make an
affirmative purchase decision each time fuel oil or propane is needed. In
addition, most companies, including the Company, provide equipment repair
service on a 24 hour-a-day basis, which tends to build customer loyalty. As a
result, the Company may experience difficulty in acquiring new retail customers
due to existing relationships between potential customers and other fuel oil or
propane distributors.
MARKETING
The Company employs a dynamic marketing strategy which the Company believes
has been the key to its success. The Company believes that it is able to obtain
new customers and maintain existing customers by offering its full service home
energy products at discount prices, providing quick response refueling and
repair operations, providing automatic deliveries to customers by monitoring
historical use and weather patterns, and by providing customers a variety of
payment options. To expand its customer base and aggressively promote its
service, the Company engages in direct marketing campaigns, advertises regularly
and encourages referrals.
The Company has successfully expanded its customer base by employing a
variety of direct marketing tactics, including telemarketing campaigns, mass and
direct mailings, and by distributing hand-bills and promotional items, such as
refrigerator magnets, sweatshirts and hats. Additionally, the Company's delivery
personnel is an integral part of the Company's direct marketing activities.
While in the field, drivers isolate potential new customers by taking note of
where the Company is not servicing accounts, and act as salespersons for the
Company. The Company offers its drivers an incentive payment of $.0025 per
gallon of oil delivered to new customers obtained by the driver, plus $20 for
each new automatic delivery customer and $10 for each conversion of an existing
customer to automatic delivery.
The Company uses advertising campaigns to increase brand recognition and
expand its customer base, including radio and television advertisements,
billboards, and newsprint and telephone directory advertisements. Additionally,
the Company utilizes its fleet of fuel delivery trucks and service vans as
moving advertisements by emblazoning them with the Company's logo.
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Historically, referrals have been an important part of the Company's efforts
to expand its business and the Company offers incentives to customers who refer
business. Customers who refer business receive either $30 or 25 gallons of
heating oil at no charge for each new customer referred. The Company also
encourages civic and religious organizations to refer business to the Company.
As an incentive, the Company pays such organizations a donation for each of its
members who become customers and a stipend based upon the members' fuel
consumption.
EXPANSION STRATEGY
Currently, the majority of the Company's revenues are generated from the
Company's retail fuel oil division. While the Company intends to expand its
retail fuel oil operations, the Company goal is to operate as a total energy
provider and has plans to expand its operations into the sale and distribution
of additional energy sources. It is anticipated that initial acquisitions will
be made in the Company's current geographic area (the Northeast United States);
however, the Company would consider acquisitions in other geographic areas if
worthwile acquisition candidates present themselves.
The Company intends to use a substantial portion of the proceeds of this
offering to expand its operations. The Company's strategy to expand its
operations includes (i) the acquisition of select operators in the Company's
present markets as well as other markets; (ii) capturing market share from
competitors through increased advertising and other means; (iii) diversifying
its products; (iv) diversifying its customer base; and (iv) replicating its
marketing and service formula in new geographic areas either directly or through
franchise arrangements. The Company may also enter into joint ventures with
other entities in product areas different than the Company's current product
mix.
ACQUISITION STRATEGY
The Company has developed a strategy to capture market share and diversify
its customer base and product line through the acquisition and integration of
businesses in the Company's existing markets or in new markets. The Company
believes that many of the proprietors of businesses which compete with the
Company's operating divisions are in established family businesses and may be
receptive to selling their operations. Another potential source of acquisitions
are companies which are owned by entrepreneurs who find expansion within the
petroleum products industry difficult, either operationally or financially, or
who have other investment opportunities.
More specifically, the Company intends to acquire two types of distributors.
The first type are relatively small distributors which management believes could
be easily integrated into the Company's operations. Management believes that
such distributors could benefit from significant economies of scale created by
the centralization of purchasing, marketing, credit, data processing and other
administrative functions. The second type of distributor consists of larger,
stand-alone businesses which could not be integrated but would most likely be
located in new markets or distribute product lines not offered by the Company.
The Company expects that acquisitions of these businesses would provide not only
attractive investment returns, but also provide hubs for future expansion.
FRANCHISE STRATEGY
The Company also intends to diversify its customer base and expand its
operations by replicating its marketing formula in new geographic areas by
franchising its delivery system and techniques. In December 1998, the Company
sold Able Montgomery, one of the Company's subsidiaries, as its first franchise.
See "Business Recent Developments." Franchisees operate pursuant to a franchise
agreement which is for a ten (10) year term, and is renewable for an additional
ten year term unless terminated earlier. Franchises are granted the exclusive
right and license to operate the franchise within certain defined territory as
an independent contractor. The Company provides franchisees with guidelines and
specifications for the operations of the franchise, initial training, licenses
for the use of the Company's name, service marks and
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propriety marks, assistance with site locations, and advice on advertising and
other promotional techniques. Franchisees bear complete financial responsibility
for opening and operating the franchise, including purchasing insurance,
entering into a lease agreement, as the lessee, for the space in which the
franchise is located and purchasing or leasing fuel-oil delivery trucks and
equipment. Franchisees are required to purchase from the Company promotional
materials and energy products during the life of the franchise. Energy product
purchases are made through the Company's credit facilities with its wholesale
suppliers. Franchisees are required to pay to the Company (i) a $25,000 initial
franchise fee; (ii) a $15,000 grand opening fee which the Company uses to
coordinate a public relations campaign and to purchase promotional and marketing
materials; (iii) a monthly fee of 1% of the franchisee's monthly gross sales
(which can be waived by the Company based on franchisees' monthly sales volume);
and (iv) an administrative fee equal to $.04 per gallon of fuel sold to
franchisees. Pursuant to the franchise agreement, franchisees are required to
indemnify and hold harmless the Company from any liability, claim or judgment
arising from the franchisees business. The franchise agreement is terminable by
the Company upon certain events of default, which include, but are not limited
to, a franchisees' failure to pay monies owed to the Company, failure to
maintain certain licenses, franchisee's misuse of the Company's service or
proprietary marks or a franchisee's insolvency.
NEW PRODUCT AREA EXPANSION
The Company believes that recent and anticipated deregulation of public
utility companies in the Company's markets has created a window of opportunity
for the Company to expand into new product areas, particularly the retail sale
of electricity and natural gas. The Company believes it can capitalize on these
opportunities through joint ventures with companies which have previously been
successful in such areas although there can be no assurance that the Company's
expansion into the retail sale of electricity and natural gas will be
successful.
In March 1998, the Company entered into a 36 month marketing alliance
agreement (the "Marketing Agreement") with AllEnergy Marketing Company, LLC
("AllEnergy"), a limited liability company organized under the laws of the state
of Massachusetts. Under the Marketing Agreement, the Company will market and
sell natural gas to residential and commercial customers in New Jersey. The
Company will receive from AllEnergy a percentage of the gross profit margin for
sales generated by the Company. Also, pursuant to the Marketing Agreement,
should the New Jersey Board of Public Utilities approve a program for the retail
sale of electricity, the Company has the option to market and sell electrical
service under similar terms and conditions. There can be no assurance that the
Company will generate or receive any revenues from this agreement. The agreement
does not have any minimum purchase requirements and may be terminated by either
party at any time.
RECENT DEVELOPMENTS
On December 31, 1999, the Company sold two of its subsidiaries: Able
Montgomery and A&O. Able Montgomery located in Horsham, Pennsylvania, was
established in 1996 and is engaged in the retail sale and delivery of home
heating oil. Pursuant to a Stock Purchase Agreement, the Company agreed to sell
all of the outstanding shares of Able Montgomery held by the Company to an
unaffiliated third party for a purchase price of $140,000, and the purchaser
agreed to enter into a ten-year franchise agreement with the Company. As an
incentive for the purchaser to enter into the Stock Purchase Agreement and
operate Able Montgomery as a franchise, the Company agreed to waive the $25,000
franchise fee and the $15,000 grand opening fee the Company typically charges
new franchisees. See "Business--Expansion Strategy-Franchise Strategy." At the
time of the sale, Able Montgomery represented approximately 1.52% of the total
assets of the Company and approximately 1.82% of the total revenues of the
Company. The purchaser of Able Montgomery issued to the Company a promissory
note for the purchase price of Able Montgomery. Pursuant to the Stock Purchase
Agreement, the Company agreed to indemnify the purchaser in certain
circumstances, which include, any personal injury or property damage claims, or
any environmental
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violation, caused by the Company prior to the closing of the sale of Able
Montgomery. The purchaser agreed to indemnify the Company in certain
circumstances, which include, the breach of any representation or warranty made
by purchaser in the Stock Purchase Agreement or any of the other agreements
executed by the purchaser in connection with the sale of Able Montgomery.
Additionally, pursuant to the Stock Purchase Agreement, the purchaser agreed to
enter into a Pledge and Security Agreement whereby the purchaser agreed to
pledge to the Company all of the assets and outstanding shares of Able
Montgomery, and grant to the Company a security interest in all of the assets of
Able Montgomery, pending the satisfaction of the promissory note. The promissory
note is payable 60 months from the date of the note and accrues interest at a
rate of 9.5% per annum, payable to the Company in monthly installments.
A&O was established in 1995 and was engaged in the business of environmental
consulting and engineering. After assessing the potential profitability of A&O
versus its potential liabilities, Management determined that it was in the
Company's best interest to sell A&O. During the year ended December 31, 1999,
A&O experienced a loss from operations of approximately $152,000 on revenues of
$734,032. At December 31, 1999, A&O's liabilities were approximately $374,712 as
compared to assets of $221,000. From its inception through year ended December
31, 1998, the Company, through Able Oil, advanced to A&O approximately $128,442.
Pursuant to a Stock Purchase Agreement, the Company sold all of the outstanding
shares of common stock of A&O held by the Company to Owl Environmental, Inc.
("Owl"), one of A&O's subcontractors, for nominal consideration. Owl purchased
such shares "as is" without recourse or express or implied warranty from the
Company.
EMPLOYEES
From October through March, the Company's peak season, the Company employs
approximately 63 persons. From April through September, the Company employs
approximately 44 persons. Currently, there are no organized labor unions
representing any of the employees of Company or any of its related companies.
Currently the Company employs 44 full time employees and 13 part time employees.
PATENTS AND TRADEMARKS
Able Oil owns the exclusive right and license to use, and to license others
to use, the proprietary marks, including the service mark "Able Oil
- -Registered Trademark-" (and design) ("Proprietary Marks"). The "Able Oil
- -Registered Trademark-" service mark and design was registered under Classes 37
and 39 of the Principal Register of the U.S. Patent & Trademark Office ("USPTO")
on April 30, 1996 (registration No. 1,971,758). In addition, Able Oil
established certain common law rights to the Proprietary Marks through its
continuous, exclusive and extensive public use and advertising. The Proprietary
Marks are not registered in any state.
Presently there is no effective determination by the USPTO, Trademark Trial
and Appeal Board, the trademark administrator of any state, or court regarding
the Proprietary Marks, nor is there any pending interference, opposition or
cancellation proceeding or any pending litigation involving the Proprietary
Marks or the trade names, logotypes, or other commercial symbols of Able Oil.
There are no agreements currently in effect that significantly limit the rights
of Able Oil to use or license the use of the Proprietary Marks.
PROPERTIES AND FACILITIES
The Company's corporate headquarters are located in a 4,000 square foot
facility in Rockaway, New Jersey. This facility accommodates the Company's
corporate, administrative, marketing and sales personnel as well as truck yard
space and oil storage space for Able Oil. The lease expires July 31, 1999 and
the annual rent is $14,400 plus $.01 per gallon of throughput at the facility up
to 10,000,000 gallons. After throughput exceeds 10,000,000 gallons the rent is
calculated as $.007 per gallon of throughput. The Company is currently in
negotiations with the owner to purchase the property. While the landlord has
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agreed to indemnify the Company from environmental violations prior to the
Company's occupancy, the Company is responsible for maintaining the facilities
in compliance with all environmental rules and laws. The Company also owns two
buildings, totaling 4,512 square feet, consisting of wood frame facilities
located at 38 Diller Avenue, Newton, New Jersey that serves as a supply depot,
storage area administrative offices and service facility.
Able Melbourne leases a 4,000 square foot concrete and aluminum facility
that serves as a storage facility, a service facility and administrative
offices, located at 735 Snapper Road, Cape Canaveral, Florida and is governed by
an oral, month-to-month lease with annual rent of $2,862. The Company does not
store fuel oil at this location with the exception of that which is kept in the
delivery trucks. This facility is conveniently located within three miles of its
wholesale supplier. The Company is responsible for maintaining the facilities in
compliance with all environmental rules and laws.
Able Propane leases a 619 square foot facility, located at 318 Route 46,
Dover, New Jersey, which houses its administrative offices. No propane is stored
at this facility. The lease expires September 14, 1999, and the annual rent is
$8,851.80 for the period of September 14, 1997 to September 14, 1998, and
$9,736.80 for the period of September 15, 1998 to September 14, 1999. In
addition, the Company must pay 20.89% of the costs of refuse collection, common
area maintenance and insurance. The Company is responsible for maintaining the
facilities in compliance with all environmental rules and laws. The Company
intends to relocate the propane division to the Company's existing facilities in
Rockaway, New Jersey that will house not only administrative offices but also
service and supply facilities.
ENVIRONMENTAL CONSIDERATIONS AND REGULATION
The Company has implemented environmental programs and policies designed to
avoid potential liability under applicable environmental laws. The Company has
not incurred any significant environmental compliance cost, and compliance with
environmental regulations has not had a material effect on the Company's
operating or financial condition. This is primarily due to the Company's general
policies of not owning or operating fuel oil terminals and of closely monitoring
its compliance with all environmental laws. In the future, the Company does not
expect environmental compliance to have a material effect on its operations and
financial condition. The Company's policy for determining the timing and amount
of any environmental cost is to reflect an expense as and when the cost becomes
probable and reasonably capable of estimation.
On January 31, 1997, Able Oil submitted to the New Jersey Department of
Environmental Protection a revised Discharge Prevention Containment and
Countermeasure plan ("DPCC") and Discharge, Cleanup and Removal plan ("DCR") for
the facility at 344 Route 46 East in Rockaway, New Jersey. The State of New
Jersey requires companies which operate fuel storage facilities to prepare such
plans, as proof that such companies are capable of, and have planned for, an
event that might be deemed by the State to be hazardous to the environment. In
addition to these plans, Able Oil has this facility monitored on an ongoing
basis to ensure that the facility meets or exceeds all standards required by the
State
The Company experienced no spill events that would warrant investigation by
state or other environmental regulatory agencies. All locations are prepared to
deal with such an event should one occur.
GOVERNMENT REGULATIONS
Numerous federal, state and local laws, including those relating to
protection of the environment and worker safety, effect the Company's
operations. The transportation of fuel oil, diesel fuel, propane and gasoline is
subject to regulation by various federal, state and local agencies including the
U.S. Department of Transportation ("DOT"). These regulatory authorities have
broad powers, and the Company is subject to regulatory and legislative changes
that can effect the economies of the industry by requiring changes in operating
practices or influencing demand for, and the cost of providing, its services.
The regulations provide that, among other things, the Company's drivers must
possess a commercial driver's licence with a
35
<PAGE>
hazardous materials endorsement. The Company is also subject to the rules and
regulations concerning Hazardous Materials Transportation Act. For example, the
Company's drivers and their equipment must comply with the DOT's pre-trip
inspection rules, documentation regulations concerning hazardous materials (i.e.
certificates of shipments which describe the type, and amount of product
transported), and limitations on the amount of fuel transported, as well as
driver time limitations. Additionally, the Company is subject to DOT inspections
that occur at random intervals. Any material violation of DOT rules or the
Hazardous Materials Transportation Act may result in citations and/or fines upon
the Company. In addition, the Company depends upon the supply of petroleum
products from the oil and gas industry and, therefore, is affected by changing
taxes, price controls and other laws and regulations relating to the oil and gas
industry generally. The Company cannot determine the extent to which future
operations and earnings may be affected by new legislation, new regulations and
changes in existing regulations.
The technical requirements of these laws and regulations are becoming
increasingly expensive, complex and stringent. These laws may impose penalties
or sanctions for damages to natural resources or threats to public health and
safety. Such laws and regulations may also expose the Company to liability for
the conduct or conditions caused by others, or for acts of the Company that were
in compliance with all applicable laws at the time such acts were performed.
Sanctions for noncompliance may include revocation of permits, corrective action
orders, administrative or civil penalties and criminal prosecution. Certain
environmental laws provide for joint and several liabilities for remediation of
spills and releases of hazardous substances. In addition, companies may be
subject to claims alleging personal injury or property damages as a result of
alleged exposure to hazardous substances, as well as damage to natural
resources.
Although the Company believes that it is in compliance with existing laws
and regulations and carries adequate insurance coverage for environmental and
other liabilities, there can be no assurance that substantial costs for
compliance will not be incurred in the future or that the insurance coverage in
place will be adequate to cover future liabilities. There could be an adverse
affect upon the Company's operations if there were any substantial violations of
these rules and regulations. Moreover, it is possible that other developments,
such as more stringent environmental laws, regulations and enforcement policies
thereunder, could result in additional, presently unquantifiable, costs or
liabilities to the Company.
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceeding that could
have a material adverse effect on the results of operations or the financial
condition of the Company. From time to time, the Company may become a party to
litigation incidental to its business. There can be no assurance that any future
legal proceedings will not have a material adverse affect on the Company.
36
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the Directors
and Executive Officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Timothy Harrington................................... 31 Chief Executive Officer, Chairman of the Board and
Secretary
Christopher P. Westad................................ 45 President, Chief Financial Officer and Director
James Purcaro........................................ 37 Director (as of the Effective Date)
William F. Costa..................................... 48 Comptroller
</TABLE>
Set forth below is a biographical description of each director and executive
officer of the Company based on information supplied by each of them.
TIMOTHY HARRINGTON, as of the Effective Date of the Offering, will serve as
the Company's Chief Executive Officer, Chairman of the Board, and Secretary. In
1989, Mr. Harrington founded Able Oil Company, Inc., and since that time, has
served as Able Oil's President, Chief Executive Officer and Chairman of the
Board. Mr. Harrington has also served as the Chief Executive Officer and
Chairman of the Board of Directors of Able Energy, Able Melbourne and Able
Propane since their respective inception.
CHRISTOPHER P. WESTAD, as of the Effective Date, will serve as the
President, Chief Financial Officer and a Director of the Company. Since
September 1996, Mr. Westad has served as the President of Able Energy and Able
Propane. From 1991 through 1996, Mr. Westad was a market Manager for Ferrellgas
Partners, L.P., a company engaged in the retail distribution of liquefied
petroleum gas. From 1977 through 1991, Mr. Westad served in a number of
management positions with RJR Nabisco. In 1975, Mr. Westad received a Bachelor
of Arts in Business and Public Management from Long Island
University--Southampton.
JAMES PURCARO, has agreed to serve as a director following the completion of
the offering. Since 1986, Mr. Purcaro has served as the president and chief
executive officer of Kingsland Trade Print Group, Inc., a commercial printing
company.
WILLIAM F. COSTA, has served as the Controller of the Company since December
1998. Prior thereto, from 1997, and from 1993 to 1995, Mr. Costa was a
Management Consultant for Executive Life Insurance Company. From 1996 to 1997,
Mr. Costa was Senior Accountant for Aids Resource Foundation for Children. From
1991 to 1993, Mr. Costa was the Vice President and Controller for Executive Life
Insurance Company. Mr. Costa Received a Bachelor of Science Degree from St.
John's University of 1973 and is a Certified Public Accountant.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors intends to establish a Compensation Committee and an
Audit Committee on or before the Effective Date. The Compensation Committee and
the Audit Committee will consist of at least two directors who are not salaried
officers of the Company. Presently, there is only one of such independent
directors; however, the Company has undertaken to appoint an additional two
independent directors. The Company has not presently identified such candidates,
but anticipates that it will appoint such candidates within 60 days from the
Effective Date in accordance with Nasdaq rules.
The purpose of the Compensation Committee is to review the Company's
compensation of its executives, to make determinations relative thereto and to
submit recommendations to the Board of Directors with respect thereto. The
Compensation Committee will also select the persons to whom options
37
<PAGE>
to purchase shares of the Company's Common Stock under the 1999 Stock Option
Plan will be granted and to make various other determinations with respect to
such Plan.
The purpose of the Audit Committee is to provide general oversight of audit,
legal compliance and potential conflict of interest matters.
COMPENSATION OF DIRECTORS
The Company has not paid compensation to any director for acting in such
capacity. The Company is currently reviewing its policy on compensation of
outside directors and may pay outside directors in the future.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company during each of the last two fiscal years to the Company's
Chief Executive Officer and to each of the Company's executive officers who
earned in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------------
OTHER
SALARY ANNUAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) BONUS ($) ($)
- ------------------------------------------------------------- --------- --------- ----------- -----------------------
<S> <C> <C> <C> <C>
Timothy Harrington(1)........................................ 1998 103,000 -- --
Chief Executive Officer 1997 100,000 80,000 833
1996 80,000 100,000 719
</TABLE>
- ------------------------
(1) Reflects total compensation received from the Company's operating
subsidiaries.
EMPLOYMENT AGREEMENTS
On the Effective Date, Timothy Harrington and Christopher P. Westad will
enter into three year employment agreements with the Company. Timothy Harrington
will be retained as Chief Executive Officer of the Company at an annual salary
of $225,000. Christopher Westad will be retained as President of the Company at
an annual salary of $100,000. Each of the Messrs. Harrington and Westad are
entitled to bonuses pursuant to their employment agreements if the Company meets
certain financial targets based on sales, profitability and good management
goals as predetermined by the Board of Directors or compensation committee and
other subjective criteria as determined by the Board of Directors or
compensation committee. Such bonuses, plus all other bonuses payable to the
executive management of the Company, shall not exceed in the aggregate, a "bonus
pool" which shall equal up to 5% of the Company's earnings before taxes,
depreciation and amortization ("EBITDA") for 1999, provided the Company achieves
at least $800,000 in EBITDA, 10% of EBITDA for 2,000 and 2001, provided the
Company achieves at least $3,000,000 and $5,000,000, respectively, of EBITDA in
each of such years. The employment agreements shall also provide for
reimbursement of reasonable business expenses. Timothy Harrington shall also
receive additional compensation including Company automobile, insurance and
retirement savings matched contributions by the Company and such other
perquisites as are customary. The employment agreements for each of Messrs.
Harrington and Wested contain a covenant not to compete whereby Messrs.
Harrington and Wested agree, for the term of the employment agreements and until
one year following the termination of the agreements, not to (i) persuade any
customer of the Company to cease or reduce the amount of business it does with
the Company; (ii) solicit the Company's customers for their own benefit; or
(iii) persuade any of the Company's employees to leave the employ of the
Company.
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<PAGE>
In the event that there is a change in control of the Company, through an
acquisition where any person acquires more than 50% of the shares of the
Company, a consolidation or merger with another corporation resulting in at
least 50% of the voting shares of the surviving corporation being controlled by
a new acquirer or the sale directly or otherwise of all of the assets of the
Company to a third party in a non-distress situation, then the Company shall pay
to Timothy Harrington a lump sum payment equal to one year's salary.
EMPLOYEE BONUS POOL
The Company has adopted an Employee Bonus Pool, pursuant to which Management
may, at its own discretion, award employees for exemplary performance. The
Company has allocated $25,000, $40,000 and $50,000 for the years 1999, 2000 and
2001, respectively, for such purposes. Management may not, however, award
employees bonuses from the Employee Bonus Pool (i) if such bonuses would result
in negative earning before taxes for the year in which such bonuses are to be
granted, or (ii) if the Company does not have net profits in such year.
STOCK OPTION PLAN
Prior to the Effective Date the Company will adopt a Stock Option Plan (the
"1999 Plan"), pursuant to which 300,000 shares of Common Stock are reserved for
issuance.
The 1999 Plan will be administered by the board of directors, or by a
committee with at least two directors as delegated by the board of directors who
determine among other things, those individuals who shall receive options, the
time period during which the options may be partially or fully exercised, the
number of shares of Common Stock issuable upon the exercise of the options and
the option exercise price.
The 1999 Plan will be for a period of ten years. Options under the 1999 Plan
must be issued within ten years from the effective date of the 1999 Plan.
Options may be granted to officers, directors, consultants, key employees,
advisors and similar parties who provide their skills and expertise to the
Company. Options granted under the 1999 Plan may be exercisable for up to ten
years, may require vesting, and shall be at an exercise price all as determined
by the board. Options will be non-transferable except to an option holder's
personal holding company or registered retirement savings plan and except by the
laws of descent and distribution or a change in control of the Company, as
defined in the 1999 Plan, and are exercisable only by the participant during his
or her lifetime. Change in control includes (i) the sale of substantially all of
the assets of the Company and merger or consolidation with another, or (ii) a
majority of the board changes other than by election by the shareholders
pursuant to board solicitation or by vacancies filled by the board caused by
death or resignation of such person.
If a participant ceases affiliation with the Company by reason of death,
permanent disability or the retirement of an Optionee either pursuant to a
pension or retirement plan adopted by the Company or on the normal retirement
date prescribed from time to time by the Company, the option remains exercisable
for three months from such occurrence but not beyond the option's expiration
date. Other termination gives the participant three months to exercise, except
for termination for cause which results in immediate termination of the option.
Options granted under the 1999 Plan, at the discretion of the compensation
committee or the board, may be exercised either with cash, by certified check or
bank cashier's check, Common Stock having a fair market equal to the cash
exercise price, the participant's promissory note, or with an assignment to the
Company of sufficient proceeds from the sale of the Common Stock acquired upon
exercise of the Options with an authorization to the broker or selling agent to
pay that amount to the Company, or any combination of the above.
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<PAGE>
The exercise price of an option may not be less than the fair market value
per share of Common Stock on the date that the option is granted in order to
receive certain tax benefits under the Income Tax Act of United States (the
"ITA"). The exercise price of all future options will be at least 100% of the
fair market value of the Common Stock on the date of grant of the options. A
benefit equal to the amount by which the fair market value of the shares at the
time the employee acquires them exceeds the total of the amount paid for the
shares or the amount paid for the right to acquire the shares shall be deemed to
be received by the employee in the year the shares are acquired pursuant to
paragraph 7(1) of the ITA. Where the exercise price of the option is equal to
the fair market value of the shares at the time the option is granted, paragraph
110(1)(d) of the ITA allows a deduction from income equal to one quarter of the
benefit as calculated above. If the exercise price of the option is less than
the fair market value at the time it is granted, no deduction under paragraph
110(1)(d) is permitted. Options granted to any non-employees, whether directors
or consultants or otherwise will confer a tax benefit in contemplation of the
person becoming a shareholder pursuant to subsection 15(1) of the ITA.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the 1999 Plan.
The 1999 Plan may be terminated or amended at any time by the board of
directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the 1999 Plan may not be
increased without the consent of the shareholders of the Company.
INDEMNIFICATION OF DIRECTORS
The Company's Certificate of Incorporation eliminates, to the fullest extent
permitted by law, the liability of its directors to the Company and its
stockholders for monetary damages for breach of the directors' fiduciary duty.
This provision is intended to afford the Company's directors the benefit of the
Delaware General Corporation Law, which provides that directors of Delaware
corporations may be relieved of monetary liability for breach of their fiduciary
duty of care, except under certain circumstances involving breach of a
director's duty of loyalty, acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law or any transaction from
which the director derived an improper personal benefit.
The By-laws of the Company provide that the Company shall indemnify to the
fullest extent permitted by Delaware law directors and officers (and former
officers and directors) of the Company. Such indemnification includes all costs
and expenses and charges reasonably incurred in connection with the defense of
any civil, criminal or administrative action or proceeding to which such person
is made a party by reason of being or having been an officer or director of the
Company if such person was substantially successful on the merits in his or her
defense of the action and he or she acted honestly and in good faith with a view
to the best interests of the Company, and if a criminal or administrative action
that is enforced by a monetary penalty, such person had reasonable grounds to
believe his or her conduct was lawful.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
this Offering, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
and the Underwriters pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses,
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person or by the Underwriters in connection
with the securities being registered, the Company will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
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<PAGE>
PRINCIPAL STOCKHOLDERS AND SELLING SECURITYHOLDERS
The following table sets forth certain information, as of the date hereof,
and as adjusted to give effect to the sale of 1,000,000 Shares of Common Stock
by the Company with respect to the beneficial ownership of the Common Stock by
each beneficial owner of more than 5% of the outstanding shares thereof, by each
director, each nominee to become a director, each Selling Shareholder and each
executive named in the Summary Compensation Table and by all executive officers,
directors and nominees to become directors of the Company as a group, both
before and after giving effect to the Offering.
PERCENTAGE OF OUTSTANDING COMMON STOCK BENEFICIALLY OWNED
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY PERCENT OWNERSHIP AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED BEFORE OFFERING OFFERING(2)
- ---------------------------------------------------------- ----------------- --------------------- -------------------
<S> <C> <C> <C>
Timothy Harrington........................................ 1,000,000 100% 50%
All Executive Officers and Directors
as a Group (1 person)................................... 1,000,000 100% 50%
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the address is c/o Able Energy, Inc., 344 Route
46, Rockaway, New Jersey 7866.
(2) In the event the Underwriters elect to exercise its Over-Allotment-Option,
the Underwriters have agreed to use its best efforts to allow Mr. Harrington
to sell up to an aggregate of 75,000 shares of the Company's Common Stock
held by Mr. Harrington. If the Over-Allotment Option is exercised in full,
the number of shares of Common Stock beneficially owned by Mr. Harrington,
and by all executive officers and directors, as a group, would be 925,000
shares or 43% of the Common Stock outstanding after the offering.
CERTAIN TRANSACTIONS
In March 1997, Timothy Harrington exchanged his shares in the operating
subsidiaries for 1,000 shares of the Company's Common Stock. On or before the
effective date of the Offering, the Company will effectuate a 1,000-for-1 stock
split resulting in Mr. Harrington's ownership of 1,000,000 shares of the
Company's Common Stock.
All future transactions and loans between the Company and its officers,
directors and 5% shareholders will be on terms no less favorable than could be
obtained from unaffiliated third parties and will be approved by a majority of
the independent, disinterested directors of the Company who will have access to
counsel to the Company at the Company's cost.
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<PAGE>
DESCRIPTION OF SECURITIES
The total authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, $.001 par value, and 10,000,000 shares of Preferred
Stock, $.001 par value per share. The following descriptions contain all
material terms and features of the Securities of the Company, are qualified in
all respects by reference to the Certificate of Incorporation and By-laws of the
Company, copies of which are filed as Exhibits to the Registration Statement of
which this Prospectus is a part.
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock, $.001
par value per share, of which as of the date of this Prospectus 2,000,000 shares
of Common Stock are outstanding, not including the shares of Common Stock
offered herein.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Holders of Common
Stock are entitled to receive ratably dividends as may be declared by the board
of directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in all assets remaining, if any, after
payment of liabilities. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities.
PREFERRED STOCK
The Certificate of Incorporation authorizes the issuance of 10,000,000
shares of Preferred Stock, $.001 par value per share, with designations, rights
and preferences determined from time to time by its Board of Directors.
Accordingly, the Company's Board of Directors is empowered, without stockholder
approval, to issue classes of Preferred Stock with voting, liquidation,
conversion, or other rights that could adversely affect the rights of the
holders of the Common Stock. Although the Company has no present intention to
issue any shares of its Preferred Stock there can be no assurance that it will
not do so in the future. No Preferred Stock may be issued by the Company without
the Underwriters' consent for a period of 24 months following the Effective
Date. Furthermore, no Preferred Stock may be issued by the Company unless such
issue is approved by the Company's independent directors.
CERTAIN ANTI-TAKEOVER DEVICES
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which restricts certain transactions and business
combinations between a corporation and an "Interested Stockholder" owning 15% or
more of the corporation's outstanding voting stock for a periods of three years
from the date the stockholder becomes an Interested Stockholder. Subject to
certain exceptions, unless the transaction is approved by the Board of Directors
and the holders of at least 66-2/3% of the outstanding voting stock of the
corporation (excluding shares held by the Interested Stockholder), Section 203
prohibits significant business transactions such as a merger with, disposition
of assets to, or receipt of disproportionate financial benefits by the
Interested Stockholder, or any other transaction that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an Interested Stockholder, the
Interested Stockholder owns at least 85% of the outstanding voting stock of the
corporation (excluding shares held by persons who are both directors and
officers or by certain stock plans).
TRANSFER AGENT AND REGISTRAR
Continental Transfer & Trust Company has been appointed as the transfer
agent and registrar for the Company's Common Stock. Its address is 2 Broadway,
New York, New York 10004 and its telephone number is (212) 509-4000.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering, the Company will have 2,000,000
shares of Common Stock outstanding. In addition, the Company has reserved for
issuance 300,000 shares upon the exercise of options eligible for grant under
the 1999 Plan. Of the shares to be issued and outstanding after this Offering,
the 1,000,000 Shares offered hereby (plus any additional Shares sold upon
exercise of the Over-Allotment Option) will be freely tradeable without
restriction or further registration under the Act, except for any shares
purchased or held by an "affiliate" of the Company (in general, a person who has
a control relationship with the Company) which will be subject to the
limitations of Rule 144 adopted under the Act ("Rule 144"). In general, under
Rule 144, subject to the satisfaction of certain other conditions, a person,
including an affiliate of the Company, who has beneficially owned restricted
shares of Common Stock for at least one year is permitted to sell in a brokerage
transaction, within any three-month period, a number of shares that does not
exceed the greater of 1% of the total number of outstanding shares of the same
class, or if the Common Stock is quoted on Nasdaq or a stock exchange, the
average weekly trading volume during the four calendar weeks preceding the sale.
Rule 144 also permits a person who presently is not and who has not been an
affiliate of the Company for at least three months immediately preceding the
sale and who has beneficially owned the shares of Common Stock for at least two
years to sell such shares without regard to any of the volume limitations as
described above. The remaining 1,000,000 shares of Common Stock are held by
affiliates of the Company and are eligible for resale under Rule 144 and the
limitations thereunder. All 1,000,000 such shares are subject to a 24 month lock
up during which such shares may not be sold without the prior written consent of
the Underwriters.
Sales of the Company's Common Stock by certain of the present stockholders
in the future, under Rule 144, may have a depressive effect on the price of the
Company's Common Stock.
UNDERWRITING
The Company has agreed to sell, and the Underwriters have agreed, subject to
the time and conditions of the Underwriting Agreement, to purchase from the
Company on a firm commitment basis, the respective number of Shares of Common
Stock set forth opposite their names below:
<TABLE>
<CAPTION>
SHARES OF
UNDERWRITER COMMON STOCK
- ------------------------------------------------------------------------------ --------------
<S> <C>
Kashner Davidson Securities Corp.............................................. 500,000
Andrew, Alexander, Wise & Company, Incorporated............................... 500,000
--------------
Total....................................................................... 1,000,000
</TABLE>
The Underwriters have advised the Company that it proposes to offer the
Common Stock to the public at the public offering price set forth on the cover
page of this Prospectus and that they may allow to selected dealers who are
members of the NASD, concessions of not in excess of $. per share of Common
Stock, of which not more than $. per share of Common Stock may be
re-allowed to certain other dealers who are members of the National Association
of Securities Dealers, Inc. After completion of the public offering, the public
prices, concessions and reallowances may be changed by the Underwriters.
The Underwriting Agreement further provides that the Underwriters will
receive from the Company a non-accountable expense allowance of 3% of the
aggregate public offering price of the Common Stock sold (including any Common
Stock sold pursuant to the Underwriters' Over-Allotment Option), which allowance
amounts to $217,500 assuming an Offering price of $7.25 per share of Common
Stock (or $250,125 if the Underwriters' Over-Allotment Option is exercised in
full). The Company previously paid $15,000 to Walsh Manning Securities, LLC, the
previous underwriters of the Offering, for payment of its expenses.
43
<PAGE>
The Company has granted to the Underwriters the Over-Allotment Option, which
is exercisable for a period of 45 days after the Closing, to purchase up to an
aggregate of 150,000 additional shares of Common Stock (up to 15% of the Common
Stock being offered) at the public offering price, less underwriting discounts
and commissions, solely to cover over-allotments, if any. In the event the
Underwriters elect to exercise its Over-Allotment-Option, the Underwriters have
agreed to use its best efforts to allow Timothy Harrington, the Chief Executive
Officer of the Company, to sell up to an aggregate of 75,000 shares of the
Company's Common Stock held by Mr. Harrington.
The Underwriters have informed the Company that the Underwriters will not
make sales of the Common Stock offered by this Prospectus to accounts over which
they exercise discretionary authority.
The Company has agreed to sell to the Underwriters at a price of $.0001 per
warrant, Underwriters' Warrants to purchase 100,000 shares of Common Stock,
exclusive of the Over-Allotment Option. The Underwriters' Warrants will be
nonexercisable for one year after the date of this Prospectus. Thereafter, for a
period of four years, the Underwriters' Warrants will be exercisable at 165% the
Offering price per share of Common Stock. The Underwriters' Warrants may not be
sold, transferred, pledged, assigned or hypothecated for a period of one year
after the date of this Prospectus, except to officers or partners and
stockholders of the Underwriters and to members of the selling group and their
officers and partners. The Company has agreed to file, during the five (5) year
period commencing on the date of this Prospectus, on one occasion at the
Company's cost, at the request of the holders of a majority of the Underwriters'
Warrants and the underlying shares of Common Stock, and to use its best efforts
to cause to become effective, a post-effective amendment to the Registration
Statement or a new registration statement under the Securities Act, as required
to permit the public sale of Common Stock issued or issuable upon exercise of
the Underwriters' Warrants. In addition, the Company has agreed to give advance
notice to holders of the Underwriters' Warrants of its intention to file certain
registration statements commencing on the date of this Prospectus and ending
seven (7) years after the date of this prospectus, and in such case, holders of
such Underwriters' Warrants or underlying shares of Common Stock shall have the
right to require the Company to include all or part of such shares of Common
Stock underlying such Underwriters' Warrants in such registration statement at
the Company's expense.
For the life of the Underwriters' Warrants, the holders thereof are given,
at nominal costs, the opportunity to profit from a rise in the market price of
the Company's securities with a resulting dilution in the interest of other
shareholders. Further, the holders may be expected to exercise the Underwriters'
Option at a time when the Company would, in all likelihood, be able to obtain
equity capital on terms more favorable than those provided in the Underwriters'
Option.
The Company has agreed that upon closing of this Offering it will, for a
period of not less than five years, nominate and support the election of one
designee of the Underwriters as a member of the Board of Directors or
alternatively to have the Underwriters designate an advisor to the Board of
Directors. The Underwriters have not yet exercised their right to nominate
someone the Company's Board of Directors or to designate an advisor to the Board
of Directors.
The Company has agreed to retain the Managing Underwriter as a financial
consultant for a period of two years to commence on the closing of this
Offering, at a fee of $108,000 all of which shall be payable in advance on the
closing of the Offering. Pursuant to this agreement, the Managing Underwriters
will be obligated to provide general financial advisory services to the Company
on an "as needed" basis with respect to possible future financing or
acquisitions by the Company and related matters. The agreement does not require
the Managing Underwriter to provide any minimum number of hours of consulting
services to the Company. The agreement further provides that the Managing
Underwriter may act as a finder for certain business transactions. Under this
arrangement, the Company shall pay the Managing Underwriter a fee equal to 5% of
the first $1 million, 4% of the next $1 million, 3% of the next $1 million, 2%
of the next $1 million, and 1% thereafter of the consideration involved in any
non-financing related transactions (including mergers, acquisitions, joint
ventures and other business transactions) consummated by the Company with a
party introduced to the Company by The Managing Underwriter.
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<PAGE>
The public offering price of the Common Stock offered hereby has been
determined by negotiation between the Company and the Underwriters. Factors
considered in determining the offering price of the Common Stock offered hereby
included the business in which the Company is engaged, the Company's financial
condition, an assessment of the Company's management, the general condition of
the securities markets and the demand for similar securities of comparable
companies.
Except for certain circumstances provided for in the Underwriting Agreement,
the Company has agreed, for a period of one year from the date of this
Prospectus not to issue any shares of Common Stock, warrants or any options or
other rights to purchase Common Stock without the prior written consent of the
Underwriters.
In connection with this Offering, the Underwriters and selling group members
and their respective affiliates may engage in transactions that stabilize,
maintain or otherwise affect the market price of the Common Stock. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M, pursuant to which such persons may bid for or purchase
Common Stock for the purpose of stabilizing the market price. The Underwriters
also may create a short position for the account of the Underwriters by selling
more Common Stock in connection with the Offering than they are committed to
purchase from the Company, and in such case may purchase Common Stock in the
open market following completion of the Offering to cover all or a portion of
such short position. The Underwriters may also cover all or a portion of such
short position by exercising the Over-Allotment Option. In addition, the
Underwriters may impose "penalty bids" under contractual arrangements with the
Underwriters whereby it may reclaim from an Underwriters (or dealer
participating in the Offering) for the account of other Underwriters, the
selling concession with respect to Common Stock that is distributed in the
Offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are undertaken they may be
discontinued at any time.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
this Offering, including liabilities under the Securities Act.
The foregoing is a summary of the material terms of the Underwriting
Agreement, the Underwriters' Warrant Agreement and the Consulting Agreement.
Reference is made to the copies of the Underwriting Agreement, the Underwriters'
Warrant Agreement and the Consulting Agreement, which are filed as exhibits to
the Registration Statement of which this Prospectus forms a part.
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed upon
for the Company by its counsel, Sichenzia, Ross & Friedman LLP, 135 West 50th
Street, 20th Floor, New York, New York, 10020. The law firm Sichenzia, Ross &
Friedman LLP has represented, and continues to represent, the Underwriters in
matters which are unrelated to this offering.
Certain legal matters will be passed upon for the Underwriters by Gersten,
Savage & Kaplowitz, LLP, 10 East 52nd Street, New York, New York 10022.
EXPERTS
The financial statements of the Company at December 31, 1998, and for each
of the two fiscal years in the period ended December 31, 1997 and 1998,
appearing in this Prospectus and Registration Statement have been audited by
Simontacchi & Co. LLP, Certified Public Accountants, as set forth in their
reports thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
45
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under the
Act with respect to the securities offered hereby. This Prospectus omits certain
information contained in the Registration Statement and the exhibits thereto,
and reference is made to the Registration Statement and the exhibits thereto for
further information with respect to the Company and the securities offered
hereby. Each such statement is qualified in its entirety by such reference. The
Registration Statement, including exhibits and schedules filed therewith, may be
inspected without charge at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. At the
effective date of this Offering, the Company will be required to file reports
pursuant to the Securities Exchange Act of 1934. Copies of such materials may be
obtained from the Public Reference Section of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and its public
reference facilities in New York, New York and Chicago, Illinois upon payment of
the prescribed fees. Electronic registration statements filed through the
Electronic Data Gathering, Analysis, and Retrieval System are publicly available
through the Commission's Website (http://www.sec.gov). Following the Effective
Date hereof, the Company intends to be a reporting company under the Securities
Exchange Act of 1934, as amended.
46
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report (December 31, 1998)........................................................ F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1998 and March 31, 1999 (Unaudited)...................... F-3 -4
Consolidated Statements of Income and Retained Earnings for the years ended December 31, 1998 and 1997
and the three months ended March 31, 1999 and March 31, 1998 (Unaudited).............................. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1997 and the three
months ended March 31, 1999 and 1998 (Unaudited)...................................................... F-6
Notes to Financial Statements (December 31, 1998 and 1997).............................................. F-8 -19
</TABLE>
F-1
<PAGE>
TO THE SHAREHOLDER
ABLE ENERGY, INC.
ROCKAWAY, NEW JERSEY 07866
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of Able Energy,
Inc. and subsidiaries as of December 31, 1998, and the related consolidated
statements of income and retained earnings, and cash flows for the years ended
December 31, 1998 and 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Able Energy, Inc. and subsidiaries as of December 31, 1998, and the
results of their operations and their cash flows for the years ended December
31, 1998 and 1997 in conformity with generally accepted accounting principles.
Fairfield, New Jersey
March 26, 1999
May 10, 1999, as to Note 17
F-2
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash............................................................................... $ 125,844 $ 466,453
Accounts Receivable (Less Allowance for Doubtful Accounts of ($69,235) at 12/31/98
and 3/31/99...................................................................... 658,139 799,681
Inventory.......................................................................... 129,483 159,985
Notes Receivable--Current Portion.................................................. 36,651 33,733
Miscellaneous Receivable........................................................... 13,074 19,469
Prepaid Expense.................................................................... 51,709 58,283
Prepaid Expense--Income Taxes...................................................... 96,003 --
Deferred income Tax................................................................ 24,460 22,900
Due From Officer................................................................... 34,173 34,934
------------ ------------
TOTAL CURRENT ASSETS........................................................... 1,169,536 1,594,838
------------ ------------
PROPERTY AND EQUIPMENT:
Land............................................................................... 90,800 90,800
Building........................................................................... 150,000 150,000
Trucks............................................................................. 1,300,046 1,471,982
Fuel Tanks......................................................................... 487,677 547,842
Machinery and Equipment............................................................ 275,938 276,815
Leasehold Improvements............................................................. 160,429 125,360
Cylinders.......................................................................... 204,477 150,573
Office Furniture and Equipment..................................................... 9,313 10,514
------------ ------------
2,678,680 2,823,886
Less: Accumulated depreciation..................................................... 859,316 948,873
------------ ------------
NET PROPERTY AND EQUIPMENT..................................................... 1,819,364 1,875,013
------------ ------------
OTHER ASSETS:
Deposits........................................................................... 14,371 7,795
Notes Receivable--Less Current Portion............................................. 146,885 136,429
Customer List, Less Amortization of 1998 ($85,650), and 1999 ($95,167)............. 485,350 475,833
Covenant Not to Compete, Less Amortization of 1998 ($81,743) and 1997 ($90,920).... 104,020 94,843
------------ ------------
TOTAL OTHER ASSETS............................................................. 750,626 714,900
------------ ------------
TOTAL ASSETS................................................................... $3,739,526 $ 4,184,751
------------ ------------
------------ ------------
</TABLE>
See Accompanying Notes and Auditor's Report
F-3
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------
<S> <C> <C>
(UNAUDITED)
CURRENT LIABILITIES:
Accounts Payable................................................................... $ 689,246 $ 452,862
Note Payable--Bank................................................................. 100,434 60,871
Current Portion of Long-Term Debt.................................................. 651,817 665,424
Covenant Not To Compete............................................................ 36,714 36,713
Accrued Expenses................................................................... 62,244 34,652
Taxes Payable...................................................................... 15,298 26,401
Customer Advance Payments.......................................................... 355,983 356,520
Income Taxes Payable--Current...................................................... -- 278,487
Income Taxes Payable--Prior........................................................ 33,962 23,960
Current Portion of Deferred Income................................................. 14,548 14,548
Escrow Deposits.................................................................... 15,088 15,000
------------ ------------
TOTAL CURRENT LIABILITIES...................................................... 1,975,334 1,965,438
DEFERRED INCOME: less current portion................................................ 58,191 54,554
DEFERRED INCOME TAXES................................................................ 50,601 53,161
COVENANT NOT TO COMPETE: less current portion........................................ 67,308 58,130
LONG TERM DEBT: less current portion................................................. 1,043,209 952,372
------------ ------------
TOTAL LIABILITIES.............................................................. 3,194,643 3,083,655
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock
Authorized 10,000 Shares, Par Value $.001 per share Issued and Outstanding 1,000
shares........................................................................... 1 1
Paid in Surplus.................................................................... 3,999 3,999
Retained Earnings.................................................................. 540,883 1,097,096
------------ ------------
TOTAL STOCKHOLDERS' EQUITY..................................................... 544,883 1,101,096
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $3,739,526 $ 4,184,751
------------ ------------
------------ ------------
</TABLE>
See Accompanying Notes and Auditor's Report
F-4
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
UNAUDITED
---------------------------- --------------------------
<S> <C> <C> <C> <C>
<CAPTION>
1998 1997 1999 1998
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
NET SALES........................................... $ 16,317,668 $ 16,380,992 $ 6,180,935 $ 5,504,512
COST OF SALES....................................... 13,044,924 13,022,635 4,427,177 4,151,470
------------- ------------- ------------ ------------
GROSS PROFIT...................................... 3,272,744 3,358,357 1,753,758 1,353,042
------------- ------------- ------------ ------------
EXPENSES
Selling, General and Administrative Expenses...... 2,720,598 2,745,963 696,542 746,338
Depreciation and Amortization Expense............. 451,441 394,806 108,251 106,080
------------- ------------- ------------ ------------
TOTAL EXPENSES.................................. 3,172,039 3,140,769 804,793 852,418
------------- ------------- ------------ ------------
INCOME FROM OPERATIONS............................ 100,705 217,588 948,965 500,624
------------- ------------- ------------ ------------
OTHER INCOME (EXPENSES):
Insurance Proceeds................................ -- 2,285 -- --
Interest Income................................... 12,684 4,910 10,113 818
Gain on Sale of Equipment......................... 23,957 72,104 -- --
Leasing Income.................................... -- 26,574 -- --
Excess of Subsidiary Losses over Investment....... 54,404 -- -- --
Miscellaneous Income.............................. 24,623 13,078 4,172 4,168
Interest Expense.................................. (169,040) (211,133) (28,427) (52,092)
------------- ------------- ------------ ------------
TOTAL OTHER INCOME (EXPENSES)................... (53,372) (92,182) (14,142) (47,106)
------------- ------------- ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES.......... 47,333 125,406 934,823 453,518
PROVISION FOR INCOME TAXES.......................... 6,640 49,345 378,610 185,700
------------- ------------- ------------ ------------
NET INCOME........................................ 40,693 76,061 556,213 267,818
RETAINED EARNINGS--BEGINNING OF YEAR (RESTATED)..... 500,190 315,199 540,883 76,061
------------- ------------- ------------ ------------
RETAINED EARNINGS--END OF YEAR...................... $ 540,883 $ 391,260 $ 1,097,096 $ 343,879
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
NET INCOME PER SHARE................................ $ .041 $ .076 $ .556 $ .268
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING....................................... 1,000,000 1,000,000 1,000,000 1,000,000
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
NOTE: WEIGHTED AVERAGE SHARES HAVE BEEN RESTATED TO REFLECT THE 1,000
FOR 1 STOCK SPLIT TO BE EFFECTUATED BY THE COMPANY.
See Accompanying Notes
F-5
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
UNAUDITED
-------------------------- ------------------------
<S> <C> <C> <C> <C>
<CAPTION>
1998 1997 1999 1998
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.............................................. $ 40,693 $ 76,061 $ 556,213 $ 267,818
Adjustments to Reconcile Net Income to Cash used by
Operating Activities:
Depreciation and Amortization......................... 451,441 394,806 108,251 106,080
Gain on Sale of Equipment............................. (23,957) (72,104) -- --
Excess of Subsidiary Losses over Investment........... (54,404) -- -- --
(Increase) Decrease in:
Accounts Receivable................................. (10,408) (156,298) (141,542) 119,894
Inventory........................................... 55,172 8,906 (30,502) 29,468
Prepaid Expenses.................................... (140,888) 82,091 90,989 (31,041)
Deposits............................................ (12,575) 3,975 6,576 --
Increase (Decrease) in:
Accounts Payable.................................... 193,076 199,910 (236,384) 53,155
Accrued Expenses.................................... (22,709) (319,389) (27,680) 12,591
Other Taxes Payable................................. 1,450 (1,723) 11,103 (6,515)
Customer Advance Payments........................... 52,789 303,194 537 (197,545)
Income Taxes Payable................................ (53,188) 10,455 268,485 156,600
Deferred income Taxes............................... 31,776 12,850 2,560 2,300
Deferred Income......................................... -- -- (3,637) --
------------- ----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 508,268 542,734 604,969 512,805
------------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in Stockholders' Equity--Sale of............. 105,930 -- -- --
Subsidiary.............................................. 44,000 114,490 -- --
Sale of Equipment..................................... 140,000 -- -- --
Sale of Subsidiary.................................... (452,390) (197,609) (145,206) (70,181)
Purchase of Property and Equipment.................... 27,515 (42,000) -- --
Sale (Purchase) of Intangibles Subsidiary
Decrease (Increase) Note Receivable--Sale of
Equipment........................................... (43,536) 23,692 6,374 --
Reduction in Property and Equipment--Net Sale of...... 8,768 -- -- --
Subsidiary............................................ 8,354 -- (761) 38,336
(Increase) Decrease in Shareholder's Loan............. (1,415) (11,659) (6,395) 4,900
Increase in Other Receivables
Decrease (Increase) in Note Receivable--Sale of
Subsidiary.......................................... (140,000) -- 7,000 --
------------- ----------- ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES................. (302,774) (413,086) (138,988) (26,945)
------------- ----------- ----------- -----------
</TABLE>
F-6
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
1998 1997 1999 1998
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Notes Payable............................. 1,285,528 814,317 135,027 92,893
Decrease in Notes Payable............................. (1,521,082) (948,100) (260,399) (145,542)
Loan From Employee.................................... -- -- -- 14,000
------------- ----------- ----------- -----------
NET CASH USED BY FINANCING ACTIVITIES............. (235,554) (133,783) (125,372) (38,649)
------------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH......................... (30,060) (4,135) 340,609 447,211
Cash--Beginning of Year................................. 155,904 160,039 125,844 155,904
------------- ----------- ----------- -----------
Cash--End of Year....................................... $ 125,844 $ 155,904 $ 466,453 $ 603,115
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
The Company had Interest Cash Expenditures of:.......... $ 169,728 $ 211,133 $ 28,427 $ 52,092
The Company had Tax Cash Expenditures of:............... $ 108,188 $ 43,680 $ 10,202 $ 35,650
</TABLE>
See Accompanying Notes and Auditor's Report
F-7
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1998 AND 1997
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
the sole shareholder. In December 1998, the Company sold A & O Environmental
Services, Inc. and Able Oil Company Montgomery, Inc. (See note 15).
The combination was accounted for as an exchange between entities under
common control. The assets and liabilities so transferred were accounted for at
historical cost in a manner similar to a pooling of interest accounting (See
Note 14).
Able Energy, Inc. is a holding company with no operations, the subsidiaries
which were in operation the entire year of 1997 have been presented in the
accompanying financial statements for the year ended December 31, 1997.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Able Oil Company, Able Montgomery 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,
Montgomery, Pennsylvania and Melbourne, Florida. A & O Environmental Services
provides environment cleanup and related services in New Jersey and parts of
Pennsylvania and New York. Able Propane, which was incorporated in July 1996,
installs propane tanks which are owned by the company and sells propane for
heating and cooking. Able Propane was in the start-up phase of operation through
1997.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements included 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.
F-8
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Customer lists of $20,000 and Covenant Not To Compete of $22,000 related
to the McGuigan acquisition on November 6, 1997, by Able Oil Company
Montgomery, Inc. are being amortized over a straight line period of 15 and 3
years, respectively. The customer list and covenant were sold in December
1998 with the sale of this subsidiaty (See Note 15).
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.
Amortization expense was $88,800 in 1998 and $75,245 in 1997.
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 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.
F-9
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 INVENTORIES
<TABLE>
<CAPTION>
ITEMS 1998 1997
- ---------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Heating Oil........................................................... $ 38,733 $ 111,262
Diesel Fuel........................................................... 9,260 13,065
Kerosene.............................................................. 2,082 965
Propane............................................................... 70 2,273
Parts and Supplies.................................................... 79,338 57,090
---------- ----------
Total............................................................... $ 129,483 $ 184,655
---------- ----------
---------- ----------
</TABLE>
NOTE 4 ESCROW DEPOSIT
The Escrow Deposit of $15,000 consists of $10,000 for removing contaminated
soil and 55-gallon drums containing waste; and for grading the soil at the site
of the Real Property. The remaining $5,000 is for any unpaid tax liability that
may be owed to the State of New Jersey Division of Taxation. This was deposited
in conjunction with the purchase by Able Oil Company of Connell's Fuel Oil
Company in Newton, New Jersey on October 28, 1996.
NOTE 5 NOTE PAYABLE--BANK
Note payable to PNC Bank under a committed line of credit of $350,000 dated
October 23, 1997, has been amended under an agreement dated June 12, 1998 with
an expiring date of May 30, 1999 to $500,000 with interest at the rate of Prime
plus 1/2%. The line is collateralized by all personal property of Able Oil
Company, not otherwise collateralized. The loan is guaranteed by the Company and
the sole shareholder of the Company.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Credit Line Balance................................................... $ 100,434 $ 277,066
</TABLE>
NOTE 6 LONG TERM DEBT
Notes Payable to Orix Credit Alliance, Inc. at a range of interest rates
from 9.00% to 11.25% with an average monthly payment of $10,070 (1998) and
$10,945 (1997). The earliest of theses Notes; originated on October 1, 1993 and
the last Note matures on August 24, 2001. The Notes are collateralized by
various fuel oil trucks.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Notes Balance......................................................... $ 272,248 $ 403,412
</TABLE>
F-10
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
Note Payable to Chrysler Financial at an interest rate of 8.5% with a
monthly payment of $612.91. The Note originated on May 16, 1996 and matures on
May 17, 2001. This Note is collateralized by a 1996 Jeep Grand Cherokee.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 16,017 $ 21,284
</TABLE>
Note Payable to PNC Bank at an interest rate of 8.3% with a monthly payment
of $356.87. The note originated on May 28, 1995 and matures on May 28, 1999. The
Note is secured by a 1995 Dodge Truck. Note assumed by buyer in sale of
Subsidiary.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 0 $ 6,022
</TABLE>
Note Payable to World Omni at an interest rate of 8.869% with a monthly
payment of $234.99. The Note originated November 21, 1997 and matures December
21, 2000 with a final payment of $13,780. The Note is collateralized by a Ford
F-150 Pick-up Truck.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 16,587 $ 17,873
</TABLE>
Note Payable to Orix Leasing Corp. At an interest rate of 9.111% with a
monthly payment of $4,846. The Note originated on March 19, 1997 and matures on
March 19, 2001. The Note is collateralized by 254 propane cylinders and 2
propane delivery trucks.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 95,440 $ 124,883
</TABLE>
Note Payable to Summit Leasing Corp. At an interest rate of 8.50% with a
monthly payment of $1,124.52. The Note originated on November 10, 1997 and
matures on November 10, 2001. The Notes are collateralized by a 1998
Freightliner fuel oil truck.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 34,749 $ 44,011
</TABLE>
Note Payable to Case Credit at an interest rate of 7.9% with a monthly
payment of $1,157.83. The Note originated on May 20, 1995 and matures May 20,
1999. The Note is Collateralized by a backhoe. Note assumed by buyer in sale of
subsidiary.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ -0- $ 18,615
</TABLE>
F-11
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
Note Payable to Valley National Bank at an interest rate of 8.25% with a
monthly payment of $296.79. The Note originated on June 6, 1995 and matures on
June 6, 1999. The Note is collateralized by a 1995 Ford pick-up truck. Note
assumed by buyer in sale of subsidiary.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ -0- $ 4,958
</TABLE>
Note Payable to PNC Bank with a monthly payment of $1,250 plus interest at
1%, plus Prime. The Note originated on November 6, 1997 and matures October 30,
2000. Proceeds of the Note were used to buy two oil trucks, a customer list and
to fund a non-compete payout to the seller of these assets.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 28,750 $ 43,984
</TABLE>
The Company and Able Propane, LLC have a lease/purchase agreement with First
Sierra Financial, Inc. The agreement calls for 48 payments of $1,457.50,
including principal, interest and sales tax and a final purchase option payment
of $5,576.02 plus sales tax. The interest rate is approximately 8 1/2%. The
agreement is collateralized by the equipment purchase.
<TABLE>
<S> <C>
Balance Due........................................ $ 58,521
</TABLE>
Able Oil Company and Able Propane, LLC have a lease/purchase agreement with
Summit Leasing Corporation, Lease #002, collateralized by a 1998 Peterbilt Model
375 truck and a Trinity trailer. The lease and payments began August 20, 1998 at
$1,605.50 per month for 48 payments thereafter until all payments are made
through and including July 20, 2002.
<TABLE>
<S> <C>
Balance Due........................................ $ 58,229
</TABLE>
Able Oil Company and Able Propane have a lease/purchase agreement with
Summit Leasing Corporation, Lease #003, collateralized by a Freightliner truck.
The lease commenced November 10, 1998 and has 48 monthly payments of $1,286.12
until November 2002 with a final purchase option payment of $12,682.
<TABLE>
<S> <C>
Balance Due........................................ $ 62,024
</TABLE>
Notes Payable to Ford Credit at interest rates of 9.5% with an average
monthly payment of $430.47. The Notes originated on October 27, 1995 and mature
on November 17, 1999. The Notes are collateralized by two 1995 Ford Vans.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Notes Balance......................................................... $ 9,181 $ 16,894
</TABLE>
Notes Payable to Greentree Consumer Discount Company at an interest rate of
8.95% with an average monthly payment of $1,322.37. The Notes originated on
October 1, 1996 and December 10, 1996
F-12
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
and matures on October 1, and December 10, 2000. The Notes are collateralized by
two 1997 Freightliner Oil Trucks.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 55,445 $ 81,477
</TABLE>
Note Payable to Connell's Fuel Oil Company at an interest rate of 8.5% with
a monthly payment of $9,839.82. The Note originated on October 28, 1996 and
matures on November 1, 2001. The Note is collateralized by the real property and
the improvements at 38 Diller Avenue, Newton, New Jersey. The Note is guaranteed
by the sole Shareholder of the Company.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 296,389 $ 385,135
</TABLE>
Original Note Payable to PNC Bank at an interest rate of Prime plus 1% with
a monthly principal payment of $12,212.70. The Note originated on October 28,
1996. The Note is collateralized by all personal property of the Company and
guaranteed by all the subsidiaries. The Note is guaranteed by the sole
Shareholder of the Company. This loan was refinanced for a total of $675,000 on
June 12, 1998. The current payments are $18,750 per month with interest at a
rate of prime plus 1%. The note matures in 36 months, June 2001.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 562,500 $ 415,232
</TABLE>
In June 1998 the proceeds of the term loan were used to refinance existing
term debts and to term out the portion of the borrower's then owed working
capital loan at PNC Bank.
Notes payable to AEL Leasing Co., Inc. under a master lease agreement dated
March 3, 1997. During 1997 Able Propane, LLC was advanced $133,456, with no
principal payments. AEL had extended Able Propane a line of credit of $150,000
in 1997. In June 1998 the loan was finalized at $178,920 with 36 monthly
payments of $4,970, including principal and interest, with an interest rate of
8.25%. The note is collateralized by the tanks and equipment purchased. The note
matures in June 2001.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note Balance.......................................................... $ 128,972 $ 133,456
</TABLE>
The Note and Credit Line payable to PNC Bank contains certain financial
covenants as described in the agreement with the bank. The Company has either
met or received a written waiver from PNC Bank on these financial covenants.
F-13
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 6 LONG TERM DEBT (CONTINUED)
Maturities on the Notes Payable subsequent to December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING PRINCIPAL
DECEMBER 31, AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1999............................................................................ $ 651,842
2000............................................................................ 636,717
2001............................................................................ 359,007
2002............................................................................ 47,484
------------
TOTAL........................................................................... $ 1,695,050
------------
------------
</TABLE>
NOTE 7 COVENANT NOT TO COMPETE
On October 28, 1996, a Covenant Not To Compete was originated by the Able
Oil Company, Connell's Fuel Oil Company and William Toriello. The Covenant is to
last 5 years from the date of inception with a monthly installment of $3,059.44
starting December 1, 1996.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Covenant Balance...................................................... $ 104,020 $ 140,734
Current Liability..................................................... 36,714 36,714
---------- ----------
Due After One Year.................................................... $ 67,306 $ 104,020
---------- ----------
---------- ----------
</TABLE>
NOTE 8 OPERATING LEASES
Able Oil Company has an operating lease for its Rockaway, New Jersey
premises through August 30, 1999. The lease provides for a monthly payment of
$1,200 plus a one cent per gallon throughput, as per a monthly rack meter
reading.
Rent Expense for the current year was $99,310
Estimated future rents are $14,400 per year, plus the one cent per gallon
through-put charges per the monthly rack meter readings.
The following summarizes the month to month operating leases for the other
subsidiaries:
<TABLE>
<S> <C>
Able Propane, LLC $737.65, plus an escalation on expenses
Total 1998 rent expense, $9,059
Able Oil Montgomery $480.50, per month
Total 1998 rent expense, $5,766
Able Oil Melbourne $238.50, per month
Total 1998 rent expense, $2,862
</TABLE>
F-14
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 9 RELATED PARTY TRANSACTIONS
$34,173 is due from the sole Shareholder of the Company. This amount is
evidenced by a Note bearing interest at a rate of 8 1/2% between the sole
Shareholder and the Company.
NOTE 10 INCOME TAXES PAYABLE--PRIOR
Able Oil Company's tax returns have been examined by the Internal Revenue
Service for the years ending December 31, 1992, 1993, 1994 and 1995. The Company
has been assessed the following liabilities including interest and penalties:
<TABLE>
<S> <C>
1992 and 1993...................................................... $ 52,005
PAID............................................................. (5,000)
1994 and 1995...................................................... 6,805
---------
TOTAL DUE........................................................ $ 53,810
---------
---------
</TABLE>
The State of New Jersey, Division of Taxation has billed the Company based
upon information received from the Internal Revenue Service for the years 1992
and 1993, approximately $20,150. The above amounts are included on the balance
sheet in Income Taxes Payable--Prior. No payments were made in 1998.
<TABLE>
<S> <C>
Total Due December 31, 1997........................................ $ 73,960
</TABLE>
The above assessed income taxes resulted for years prior to the formation of
Able Energy, Inc. and has been charged to Able Oil Company's prior retained
earnings. They made payments to the Internal Revenue Service of $39,998 in 1998.
The liability of income taxes payable prior is $33,962 at December 31, 1998.
NOTE 11 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>
1998
-------------------- 1997
PERCENT ------------------------
OF PERCENT OF
PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Statutory Federal Income Tax............................................ $ 4,430 15.0% $ 34,295 34.0%
Increase resulting from State Income
Tax, net of Federal Tax benefit......................................... 2,210 6.5% 15,050 5.9%
--------- --------- ----------- ---
Income Taxes............................................................ $ 6,640 21.5% $ 49,345 39.9%
--------- --------- ----------- ---
--------- --------- ----------- ---
Income Taxes consist of:
Current................................................................. 6,020 47,215
Deferred................................................................ 620 2,130
--------- --------- ----------- ---
Total................................................................... $ 6,640 $ 49,345
--------- --------- ----------- ---
--------- --------- ----------- ---
</TABLE>
F-15
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 11 INCOME TAXES (CONTINUED)
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
</TABLE>
<TABLE>
<CAPTION>
1997
----------
TEMPORARY TAX
DIFFERENCE EFFECT
----------- ----------
<S> <C> <C>
Depreciation.......................................................... $ (59,314) $ (18,825)
Allowance for Doubtful Accounts....................................... 52,584 16,695
</TABLE>
NOTE 12 PROFIT SHARING PLAN
Effective January 1, 1997, Able Oil Company established a Qualified Profit
Sharing Plan under Internal Revenue Code Section 401-K. The Company matches 25%
of qualified employee contributions. The expense was $10,384 (1998) and $8,239
(1997).
NOTE 13 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 been examined by the Internal Revenue Service through
the year ended December 31, 1995 (see Note 10). The only open year for Able Oil
Company is December 31, 1996 and Able Energy, Inc., et al December 31, 1997.
F-16
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 14 RESTATEMENT OF FINANCIAL STATEMENTS
The following items on the December 31, 1997 financial statement have been
restated in relation to the combination of entities under common control.
<TABLE>
<CAPTION>
ORIGINALLY
STATED RESTATED
---------- ----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET
Paid in Surplus....................................................... $ 322,198 $ 6,999
Retained Earnings..................................................... 76,061 391,260
---------- ----------
Total............................................................. $ 398,259 $ 398,259
---------- ----------
---------- ----------
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Retained Earnings--Beginning of Year $ 0 $ 315,199
---------- ----------
Retained Earnings--End of Year $ 76,061 $ 391,260
---------- ----------
---------- ----------
</TABLE>
NOTE 15 SALE OF SUBSIDIARIES
The Company sold two of their wholly owned subsidiaries, one on December 29,
1998 and one on December 31, 1998. The Statement of Income reflects the
operations of these subsidiaries for the Calendar year 1998. These subsidiaries
have been eliminated from the Balance Sheet as of December 31, 1998.
One subsidiary, Able Oil Company Montgomery, Inc. was sold to an unrelated
third party for $140,000. The note receivable is payable in 60 monthly payments
of $2,940.26, including principal and interest. Interest is at 9.5% per annum.
The first payment was January 1, 1999 and the final payment is December 1, 2003.
As collateral to secure payment to the Company, the buyer has pledged the stock
and all of the assets of Able Oil Company Montgomery, Inc. A UCC-1 financing
statement has been filed in respect to the collateral.
<TABLE>
<S> <C>
Note Receivable................................................... $ 140,000
Current Portion................................................... 28,000
---------
Due After One Year................................................ $ 112,000
---------
---------
</TABLE>
The gain on the sale of $72,739 is shown on the balance sheet as deferred
income. The income will be recognized on an installment basis upon collection of
the notes receivable (see Note 17).
The Company has a ten year franchise agreement with the buyer. The buyer
will use the Able name, Able Oil Company is the exclusive supplier of #2 fuel
oil through its credit facility with major suppliers and also assists the buyer
with advertising and other marketing. The Company will receive an Administrative
Processing Fee equal to $0.04 per gallon of fuel sold to the franchisee and a
monthly fee equal to 1% of the franchisee's monthly gross sales (which can be
waived at the discretion of the Company based on the franchisee's sales volume).
The Company agreed to waive the $25,000 Initial Franchise Fee and the $15,000
Grand Opening Fee as an incentive for the purchaser to enter into the franchise
agreement.
The Company sold all its shares in A & O Environmental Services, Inc. on
December 31, 1998 to Owl Environmental, Inc. for a selling price of $10. The
buyer by purchasing the stock of the subsidiary assumed
F-17
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 15 SALE OF SUBSIDIARIES (CONTINUED)
all its assets and liabilities. An amount of $54,404 in the Statement of Income
and Retained Earnings was recorded as the excess of subsidiary losses over
investment.
All advances to the tow subsidiaries by Able Oil Company were transferred to
Able Energy, Inc. and recorded as investment in subsidiaries and these costs
were written off against the subsidiary sales.
Summary of Assets and Liabilities and Gain on Sale of Subsidiaries sold.
<TABLE>
<CAPTION>
A & O ENVIRONMENTAL ABLE OIL
SERVICES, INC. MONTGOMERY, INC.
-------------------- ----------------
<S> <C> <C>
Current Assets............................................................ $ 214,233 $ 29,190
Equipment--Net............................................................ 35,386 17,166
Intangible Assets--Net.................................................... -- 27,340
---------- --------
Total Assets............................................................ 249,619 73,696
---------- --------
Current Liabilities....................................................... 523,953 114,968
Long Term Debt (Less Current Portion)..................................... 8,038 13,750
---------- --------
Total Liabilities....................................................... 531,991 128,718
---------- --------
---------- --------
Liabilities in Excess of Assets....................................... $ (282,372) $ (55,022)
---------- --------
Sale Price................................................................ $ 10 $ 140,000
---------- --------
Cash Investment........................................................... (128,945) (115,385)
Negative Investment in
Subsidiaries--Prior Loss................................................ 183,339 48,124
---------- --------
Excess of Subsidiary Cumulative Losses
Over Investment 54,394 (67,261)
Total Gain $ 54,404 $ 72,739
---------- --------
---------- --------
</TABLE>
NOTE 16 PROFORM STATEMENT OF INCOME
The following shows the effect on the Statement of Income for the year ended
December 31, 1998 with the removal of the subsidiaries sold:
<TABLE>
<S> <C>
Net Income per Statement of Income and Retained Earnings........................... $ 40,693
Add: Losses on Subsidiaries sold, Net of Tax Savings
A & O Environmental Services, Inc. 97,123
Able Oil Montgomery, Inc. 11,434
Less: Excess of Subsidiary Losses over Investment
Recorded as Income............................................................... (54,404)
---------
Net Income-Removing effect of Subsidiaries Sold.................................... $ 94,846
---------
---------
</TABLE>
F-18
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE 17 SUBSEQUENT EVENTS
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 to be effectuated
by the Company.
NOTES RECEIVABLE
The Company has received payment from Able Oil Montgomery, Inc. For the
months of January 1999 through March 1999 on its notes receivable of $140,000
(see Note 15). The payments totaled $8,820.78, including interest of $1,820.78.
The Statement of Income and Retained Earnings as recognized income on this
installment sales of $3,637 for the three months ended March 31, 1999.
F-19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR
THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 15
Dividend Policy........................................................... 16
Capitalization............................................................ 17
Dilution.................................................................. 18
Selected Financial Data................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 20
Business.................................................................. 26
Management................................................................ 37
Principal Stockholders and Selling Securityholders........................ 41
Certain Transactions...................................................... 41
Description of Securities................................................. 42
Underwriting.............................................................. 43
Legal Matters............................................................. 45
Experts................................................................... 45
Additional Information.................................................... 46
Financial Statements...................................................... F-1
</TABLE>
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
[LOGO]
ABLE ENERGY, INC.
1,000,000 SHARES OF
COMMON STOCK
---------------------
PROSPECTUS
---------------------
KASHNER DAVIDSON SECURITIES CORP.
ANDREW, ALEXANDER, WISE &
COMPANY, INCORPORATED
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The by-laws of the Company provide that the Company shall indemnify
directors and officers of the Company. The pertinent section of Delaware
Corporation Law regarding indemnification of officers and directors is set forth
below. In addition, upon effectiveness of this registration statement,
management intends to obtain officers and directors liability insurance.
See the second and third paragraphs of Item 28 below for information
regarding the position of the Securities and Exchange Commission (the
"Commission") with respect to the effect of any indemnification for liabilities
arising under the Securities Act of 1933, as amended (the "Securities Act").
Section 102(b) (7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any brach of the director's duty of loyalty to the
corporatin or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
payments of unlawful dividends or unlawful stock repurchase or redemption, or
(iv) for any transaction from which the director derived an improper personal
benefit. The Company's Certificate of Incorpration contains such a provision.
The Company's Certificate of Incorporation provides, pursuant to the
authority granted by Seciton 145 of the Delaware General Corporation Law, that
the Company indemnify directors and officers against expenses (including
attorneys' fees) judgments, fines and suits or proceedings, whther civil,
criminal, administrative or investigative, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. Whle the statue provides
that it is not exclusive of other indemnification that may be granted by a
corporation's charter, by-laws, disinterested director vote, shareholder vote,
agreement or otherwise, neither the Company's Certificate of Incorporation nor
Bylaws nor any other agreement contains additional indemnification provisions.
(1) INDEMNIFICATION OF DIRECTORS--A corporation may indemnify a director or
officer of the corporation, a former director or officer of the corporation or a
person who acts or acted at the corporation's request as a director or officer
of a body corporate of which the corporation is or was a shareholder or
creditor, and his or her heirs and legal representatives, against all costs,
charges and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him or her in respect of any civil, criminal or
administrative action or proceeding to which he or she is a party by reason of
being or having been a director or officer of such corporation or body
corporate, if,
(a) he or she acted honestly and in good faith with a view to the best
interests of the corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he or she has reasonable grounds for
believing that his or her conduct was lawful.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities offered hereby.
<TABLE>
<S> <C>
SEC registration fee............................................ $4,446.20
NASD registration fee........................................... 2,007.19
Nasdaq SmallCap Market listing fee.............................. 15,000.00
Boston Stock Exchange listing fee............................... 7,500.00
Printing and engraving.......................................... 55,000.00
Accountants' fees and expenses.................................. 25,000.00
Legal fees...................................................... 100,000.00
Transfer agent's and warrant agent's fees and expenses.......... 5,000.00
Blue Sky fees and expenses...................................... 50,000.00
Underwriters' non-accountable expense allowance................. 232,500.00
Underwriters' consulting agreement.............................. 108,000.00
Miscellaneous................................................... 31,046.61
---------
Total....................................................... 635,500.00
---------
---------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In the past three years the Company has issued securities to a limited
number of persons as described below. Except as indicated, there were no
underwriters involved in the transactions and there were no underwriting
discounts or commissions paid in connection therewith:
In March 1997, Timothy Harrington received 1,000 shares of the Company's
Common Stock in consideration for his active participation in the founding of
the Company.
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement**
3.1 Articles of Incorporation of Registrant**
3.2 By-Laws of Registrant**
4.1 Form of Underwriters' Purchase Option**
4.2 Specimen Common Stock Certificate**
5.1 Opinion of Sichenzia, Ross & Friedman LLP**
10.1 Form of Consulting Agreement with the Managing Underwriter**
10.2 1999 Stock Option Plan**
10.3 Lease of Company's Facility at 344 Route 46, Rockaway, New Jersey**
10.4 Form of employment agreement between the Company and Timothy Harrington, to be
executed on or before the Effective Date**
10.5 Form of employment agreement between the Company and Christopher P. Wested, to be
executed on or before the Effective Date**
10.6 $600,000 Revolving Credit Facility and $350,000 Line of Credit with PNC Bank,
National Association dated October 23, 1996, and amendment thereto, dated June 12,
1998, extending the Line of Credit to $500,000**
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.7 $675,000 Term Loan Agreement dated June 11, 1998 by and between the Company and PNC
Bank, National Association and exhibits thereto, including Pledge Agreement by and
between Timothy Harrington and PNC Bank, Guaranty and Suretyship Agreement by and
between the Company and PNC Bank, and Pledge Agreement by and between the Company and
PNC Bank**
10.8 Marketing Alliance Agreement, dated March 1, 1998, between the Company and AllEnergy
Marketing Company, L.L.C., wherby the Company obtained the exclusive right to market
natural gas supplied by AllEnergy in specified areas**
10.9 In tank agreement between the Company and Mieco, Inc., dated May 11, 1998, for the
storage of the Mieco's petroleum products in the Company's tank facilities.**
10.10 Form of Company's Pre-Purchase Enrollment Form**
10.11 Oil Supply Agreement between the Company and Mieco, Inc., dated May 19, 1998**
10.12 Letter agreement, dated July 3, 1998, between the Company and Mieco, Inc. modifying
the Oil Supply Agreement, dated May 19, 1998, whereby the Company agreed to increase
the amount of oil purchased from Mieco**
10.13 Oil Supply Agreement between the Company and Amarada Hess Corporation, dated July 30,
1998**
10.14 Oil Supply Agreement between the Company and Bayway (TOSCO) Refining Company, dated
March 27, 1998**
10.15 Oil Supply Agreement between the Company and Koch Refining Company, L.P., dated March
17, 1998**
10.16 Fuel Purchase Agreement (Natural Gas) between the Company and Ferrellgas, dated
September 3, 1996**
10.17 Fuel Purchase Agreement (Propane) between the Company and Keystone Propane Service,
Inc., dated July 28, 1998**
10.18 Lease between the Company and Summit Leasing Corporation ("Summit"), dated December
3, 1997**
10.19 Franchise Agreement, dated December 31, 1998, between the Company and Andrew Schmidt
regarding sale of Able Oil Company Montgomery, Inc. as a franchise**
10.20 Stock Purchase Agreement, dated December 31, 1998, between the Company and Andrew
Schmidt regarding the sale of stock of Able Oil Company Montgomery, Inc. by the
Company to Mr. Schmidt**
10.21 Pledge and Security Agreement, dated December 31, 1998, between the Company and
Andrew Schmidt regarding the pledge of stock of Able Oil Company Montgomery, Inc.**
10.22 $140,000 principal amount, 9.5% Promissory Note, dated December 31, 1998, between the
Company and Andrew Schmidt regarding the sale of stock of Able Oil Company
Montgomery, Inc. by the Company to Mr. Schmidt**
10.23 Stock Sale Agreement, dated December 31, 1998, between the Company and Owl
Environmental, Inc. regarding the sale of stock of A&O Environmental Services, Inc.
by the Company to Owl Environmental, Inc.**
21.1 List of Subsidiaries of Registrant**
23.1 Consent of Simontacchi & Company LLP, the Company's Independent Auditors*
23.2 Consent of Sichenzia, Ross & Friedman LLP (incorporated in to Exhibit 5.1)**
23.3 Consent of James Purcaro to act as Director as of the Effective Date of the
Registration Statement**
27.1 Financial Data Schedule**
</TABLE>
- ------------------------
(*) Filed herewith
(**) Previously filed
(***) To be filed by amendment
II-3
<PAGE>
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to any charter provision, by-law, contract arrangements,
statute, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the small business issuer
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) To include
any Prospectus required by section 10(a)(3) of the Act; (ii) To reflect in
the Prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement; (iii) To include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the Offering of
such securities at that time shall be deemed to be the initial bona fide
Offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(4) For determining any liability under the Act, treat the information
omitted from the form of Prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of Prospectus
filed by the small business issuer under Rule 424(b)(1), or (4) or 497(h),
under the Act as part of this registration statement as of the time the
Commission declared it effective.
(5) For determining any liability under the Act, treat each
post-effective amendment that contains a form of Prospectus as a new
registration statement at that time as the initial bona fide Offering of
those securities.
(6) To provide to the Underwriters at the closing, as specified in the
underwriting agreement, certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirement for
filing on Form SB-2 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the State of New
Jersey on May 27, 1999.
ABLE ENERGY, INC.
/s/ TIMOTHY HARRINGTON /s/ CHRISTOPHER WESTAD
------------------------------ -----------------------------------
Timothy Harrington, Chief Christopher Westad, President
Executive Officer
By: By:
Pursuant to the requirements of the Act, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
We, the undersigned officers and directors of ABLE ENERGY, INC. hereby
severally constitute and appoint Timothy Harrington and Christopher Westad, our
true and lawful attorneys-in-fact and agents with full power of substitution for
us and in our stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing necessary or advisable
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitutes, may lawfully do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ TIMOTHY HARRINGTON Chairman of the Board of
- ------------------------------ Directors, Chief Executive May 27, 1999
Timothy Harrington Officer and Secretary
/s/ CHRISTOPHER WESTAD President and Director
- ------------------------------ May 27, 1999
Christopher Westad
/s/ WILLIAM F. COSTA Controller and Principal
- ------------------------------ Accounting Officer May 27, 1999
William F. Costa
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- --------- --------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
1.1 Form of Underwriting Agreement**
3.1 Articles of Incorporation of Registrant**
3.2 By-Laws of Registrant**
4.1 Form of Underwriters' Purchase Option**
4.2 Specimen Common Stock Certificate**
5.1 Opinion of Sichenzia, Ross & Friedman LLP**
10.1 Form of Consulting Agreement with Underwriter**
10.2 1999 Stock Option Plan**
10.3 Lease of Company's Facility at 344 Route 46, Rockaway, New Jersey**
10.4 Form of employment agreement between the Company and Timothy Harrington, to be executed on or
before the Effective Date**
10.5 Form of employment agreement between the Company and Christopher P. Wested, to be executed on or
before the Effective Date**
10.6 $600,000 Revolving Credit Facility and $350,000 Line of Credit with PNC Bank, National Association
dated October 23, 1996, and amendment thereto, dated June 12, 1998, extending the Line of Credit to
$500,000**
10.7 $675,000 Term Loan Agreement dated June 11, 1998 by and between the Company and PNC Bank, National
Association and exhibits thereto, including Pledge Agreement by and between Timothy Harrington and
PNC Bank, Guaranty and Suretyship Agreement by and between the Company and PNC Bank, and Pledge
Agreement by and between the Company and PNC Bank**
10.8 Marketing Alliance Agreement, dated March 1, 1998, between the Company and AllEnergy Marketing
Company, L.L.C., wherby the Company obtained the exclusive right to market natural gas supplied by
AllEnergy in specified areas**
10.9 In tank agreement between the Company and Mieco, Inc., dated May 11, 1998, for the storage of the
Mieco's petroleum products in the Company's tank facilities.**
10.10 Form of Company's Pre-Purchase Enrollment Form**
10.11 Oil Supply Agreement between the Company and Mieco, Inc., dated May 19, 1998**
10.12 Letter agreement, dated July 3, 1998, between the Company and Mieco, Inc. modifying the Oil Supply
Agreement, dated May 19, 1998, whereby the Company agreed to increase the amount of oil purchased
from Mieco**
10.13 Oil Supply Agreement between the Company and Amarada Hess Corporation, dated July 30, 1998**
10.14 Oil Supply Agreement between the Company and Bayway (TOSCO) Refining Company, dated March 27,
1998**
10.15 Oil Supply Agreement between the Company and Koch Refining Company, L.P., dated March 17, 1998**
10.16 Fuel Purchase Agreement (Natural Gas) between the Company and Ferrellgas, dated September 3, 1996**
10.17 Fuel Purchase Agreement (Propane) between the Company and Keystone Propane Service, Inc., dated
July 28, 1998**
10.18 Lease between the Company and Summit Leasing Corporation ("Summit"), dated December 3, 1997**
10.19 Franchise Agreement, dated December 31, 1998, between the Company and Andrew Schmidt regarding sale
of Able Oil Company Montgomery, Inc. as a franchise**
10.20 Stock Purchase Agreement, dated December 31, 1998, between the Company and Andrew Schmidt regarding
the sale of stock of Able Oil Company Montgomery, Inc. by the Company to Mr. Schmidt**
10.21 Pledge and Security Agreement, dated December 31, 1998, between the Company and Andrew Schmidt
regarding the pledge of stock of Able Oil Company Montgomery, Inc.**
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
10.22 $140,000 principal amount, 9.5% Promissory Note, dated December 31, 1998, between the Company and
Andrew Schmidt regarding the sale of stock of Able Oil Company Montgomery, Inc. by the Company to
Mr. Schmidt**
10.23 Stock Sale Agreement, dated December 31, 1998, between the Company and Owl Environmental, Inc.
regarding the sale of stock of A&O Environmental Services, Inc. by the Company to Owl
Environmental, Inc.**
21.1 List of Subsidiaries of Registrant**
23.1 Consent of Simontacchi & Company LLP, the Company's Independent Auditors*
23.2 Consent of Sichenzia, Ross & Friedman LLP (incorporated in to Exhibit 5.1)**
23.3 Consent of James Purcaro to act as Director as of the Effective Date of the Registration
Statement**
27.1 Financial Data Schedule**
</TABLE>
- ------------------------
(*) Filed herewith
(**) Previously filed
(***) To be filed by amendment
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the Caption "Experts" and to
the use of our report, dated March 26, 1999 (May 10, 1999 as to Note 17), in the
Registration Statement on Form SB-2 and related prospectus of Able Energy, Inc.
for the registration of 1,000,000 shares of common stock.
/s/ Simontacci & Company LLP
______________________________________
Simontacci & Company LLP
May 27, 1999
Fairfield, New Jersey
