SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------------------- ---------------
Commission file number: 333-59109
ABLE ENERGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 22-3520840
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
</TABLE>
344 Route 46
Rockaway, NJ 07866
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (973) 625-1012
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check X whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of August 10, 2000, 2,000,000 shares, $.001 par value per share, of
Able Energy, Inc. were issued and outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements (Unaudited)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Accountants' Report 3
Consolidated Balance Sheets as of December 31, 1999 and
June 30, 2000 4 - 5
Consolidated Statements of Income for the three and six
months ended June 30, 2000 and June 30, 1999 6
Consolidated Statement of Stockholders' Equity six months
ended June 30, 2000 7
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 8
Notes to Unaudited Financial Statements 9 - 18
</TABLE>
<PAGE>
Simontacchi & Company, LLP
170 East Main Street
Rockaway, New Jersey 07866
To the Board of Directors
Able Energy, Inc.
Rockaway, New Jersey 07866
Independent Accountants' Report
We have reviewed the condensed consolidated balance sheet of Able Energy, Inc.
and Subsidiaries as of June 30, 2000, and the related condensed consolidated
statements of income and cash flows for the three and six month periods ended
June 30, 2000 and 1999. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with the standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists primarily of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, retained earnings, and cash flows for
the year then ended (not presented herein); and in our report dated March 16,
2000, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
Rockaway, New Jersey
August 10, 2000
3
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) Audited
Current Assets:
<S> <C> <C>
Cash $ 2,266,980 $ 2,926,412
Accounts Receivable (Less Allowance for Doubtful
Accounts of ($157,974) at 12/31/99 and ($157,974) 6/30/00 2,201,840 1,996,500
Inventory 303,519 229,979
Notes Receivable - Current Portion 16,798 61,748
Miscellaneous Receivable 24,620 22,640
Prepaid Expense 82,410 48,826
Prepaid Expense - Income Taxes 3,301 119,951
Deferred income Tax 48,270 48,270
Due From Officer 44,690 44,690
---------- ----------
Total Current Assets 4,992,428 5,499,016
---------- ----------
Property and Equipment:
Land 451,925 451,925
Building 1,023,250 1,008,250
Trucks 2,264,345 2,236,508
Fuel Tanks 911,096 836,790
Machinery and Equipment 336,473 346,198
Leasehold Improvements 192,364 187,364
Cylinders 363,146 319,490
Office Furniture and Equipment 21,325 14,841
Web Site Development Costs 1,101,092 -
---------- ----------
6,665,016 5,401,366
Less: Accumulated depreciation 1,488,264 1,266,201
---------- -----------
Net Property and Equipment 5,176,752 4,135,165
---------- -----------
Other Assets:
Deposits 37,625 94,625
Notes Receivable - Less Current Portion 193,814 126,863
Customer List, Less Amortization of 1999 ($125,045), and
2000 ($146,070). 464,780 485,805
Covenant Not to Compete, Less Amortization of 1999
($125,123) and 2000 ($153,480). 130,087 158,444
---------- ----------
Total Other Assets 826,306 865,737
---------- ----------
Total Assets $10,995,486 $10,499,918
=========== ===========
</TABLE>
See Accompanying Notes
4
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont'd)
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Audited)
Current Liabilities:
<S> <C> <C>
Accounts Payable $ 1,942,296 $ 1,638 699
Note Payable - Bank 292,228 201,214
Current Portion of Long-Term Debt 680,020 789,978
Accrued Expenses 300,871 260,818
Customer Advance Payments - 156,738
Current Portion of Deferred Income 25,000 14,548
Escrow Deposits 35,000 15,000
------------ -----------
Total Current Liabilities 3,275,415 3,076,995
Deferred Income: less current portion 82,408 53,342
Deferred Income Taxes 60,201 56,201
Long Term Debt: less current portion 1,318,521 1,529,444
------------ -----------
Total Liabilities 4,736,545 4,715,982
------------ -----------
Stockholders' Equity:
Common Stock
Authorized 10,000,000 Shares, Par Value $.001 per
share Issued and Outstanding 2,000,000 shares 2,000 2,000
Paid in Surplus 5,662,775 5,662,775
Retained Earnings 594,166 119,161
------------ -----------
Total Stockholders' Equity 6,258,941 5,783,936
------------ -----------
Total Liabilities and Stockholders' Equity $10,995,486 $10,499,918
============ ===========
</TABLE>
See Accompanying Notes
5
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS JUNE 30, SIX MONTHS ENDED JUNE 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales ........................................ $ 4,851,781 $ 3,376,760 $ 15,966,984 $ 9,557,695
Cost of Sales .................................... 4,005,704 2,878,708 13,043,018 7,305,885
------------ ------------ ------------ ------------
Gross Profit .................................. 846,077 498,052 2,923,966 2,251,810
------------ ------------ ------------ ------------
Expenses
Selling, General and Administrative Expenses .. 1,110,955 638,427 1,995,190 1,339,000
Depreciation and Amortization Expense ......... 168,411 107,189 338,100 215,440
------------ ------------ ------------ ------------
Total Expenses ............................. 1,279,366 745,616 2,333,290 1,554,440
------------ ------------ ------------ ------------
Income (Loss) From Operations ................. (433,289) (247,564) 590,676 697,370
------------ ------------ ------------ ------------
Other Income (Expenses):
Interest and Other Income ..................... 102,210 28,963 145,285 48,054
Interest Expense .............................. (47,881) (48,513) (98,100) (76,940)
Loss on Abandonment of Fixed Assets ........... (42,206) (42,206)
------------ ------------ ------------ ------------
Total Other Income (Expenses) .............. 12,123 (19,550) 4,979 (28,886)
------------ ------------ ------------ ------------
Income (Loss) Before Provision for Income Taxes
and Extraordinary Item ....................... (421,166) (267,114) 595,655 668,484
Provision for Income Taxes ...................... (184,950) (106,600) 253,500 272,010
------------ ------------ ------------ ------------
Net Income (Loss) - Continuing Operations ..... (236,216) (160,514) 342,155 396,474
Extraordinary Item ............................ -- -- (132,850) --
------------ ------------ ------------ ------------
Net Income (Loss) ................................ $ (236,216) $ (106,514) $ 475,005 $ 396,474
============ ============ ============ ============
Net Income (Loss) Per Share - Continuing ......... $ (.118) $ (.154) $ .172 $ .380
------------ ------------ ------------ ------------
Operations
$ -- $ -- $ .066 $ --
------------ ------------ ------------ ------------
Extraordinary Item - Per Share
$ (.118) $ (.154) $ .238 $ .380
------------ ------------ ------------ ------------
Net Income (Loss) Per Share
Weighted Average Number of Common Shares ......... $ 2,000,000 $ 1,044,198 $ 2,000,000 $ 1,044,198
Outstanding ============ ============ ============ ============
</TABLE>
See Accompanying Notes
6
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
.001 Par Value
Additional Total
Paid-in Retained Stockholders'
Shares Amount Surplus Earnings Equity
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 2000 2,000,000 $ 2,000 $5,662,775 $ 119,161 $5,783,936
Net Income .............. 475,005 475,005
---------- ---------- ---------- ---------- ----------
Balance - June 30, 2000 . 2,000,000 $ 2,000 $5,662,775 $ 594,166 $6,258,941
========== ========== ========== ========== ==========
</TABLE>
See Accompanying Notes
7
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
UNAUDITED
2000 1999
---- ----
Cash Flows From Operating Activities
<S> <C> <C>
Net Income $ 475,005 $ 396,474
Adjustments to Reconcile Net Income to Cash
used by Operating Activities:
Depreciation and Amortization 338,100 215,440
Loss on Disposition of Equipment 42,206
(Increase) Decrease in:
Accounts Receivable (205,340) 5,237
Inventory (73,540) (14,098)
Prepaid Expenses (33,584) 84,419
Deposits 57,000 12,575
Prepaid Income Taxes 116,650 -
Increase (Decrease) in:
Accounts Payable 303,597 (98,785)
Accrued Expenses 40,053 82,273
Other Taxes Payable - 9,337
Customer Advance Payments (156,738) (289,510)
Income Taxes Payable - 154,735
Deferred income Taxes 4,000 7,780
Deferred Income 39,518 (4,850)
------------ --------------
Net Cash Provided by Operating Activities 946,927 561,027
------------ --------------
Cash Flows From Investing Activities
Purchase of Property and Equipment (271,419) (380,171)
Web Site Development Costs (1,101,092) -
(Increase) Decrease in Shareholder's Loan - (5,342)
Note and Other Receivables (23,981) (5,350)
------------ --------------
Net Cash Used By Investing Activities (1,396,492) (390,863)
------------ --------------
Cash Flows From Financing Activities
Increase in Notes Payable 91,014 525,032
Decrease in Long-Term Debt (320,881) (374,150)
Increase Escrow Deposit Payble 20,000 -
Funds from Sale of Common Stock - 5,660,775
------------ --------------
Net Cash (Used) Provided By Financing
Activities (209,867) 5,811,657
------------ --------------
Net (Decrease) Increase In Cash (659,432) 5,981,821
Cash - Beginning of Year 2,926,412 125,844
------------ --------------
Cash - End of Year $2,266,980 $6,107,665
============ ==============
The Company had Interest Cash Expenditures of: $ 98,100 $ 76,940
The Company had Tax Cash Expenditures of: $ - $ 10,002
</TABLE>
See Accompanying Notes
8
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 1 Basis of Presentation
Able Energy, Inc. was incorporated in the state of Delaware on March 13,
1997. Mr. Timothy Harrington exchanged his stock in the following companies:
Able Oil Company (a New Jersey corporation), Able Oil Company Montgomery, Inc.
(a Pennsylvania corporation), A & O Environmental Services, Inc. (a New Jersey
corporation), Able Oil Melbourne, Inc. (a Florida corporation) and his 99%
interest in Able Propane, LLC for 1,000 shares of Able Energy, Inc. and became
its sole shareholder. In December 1998, the Company sold A & O Environmental
Services, Inc. and Able Oil Company Montgomery, Inc.
On August 27, 1999, the Company, through a newly formed wholly owned
subsidiary, Able Energy - New York, Inc., purchased the assets of B & B Fuels of
Warrensburg, New York. This acquisition was treated as a purchase.
On August 31, 1999, the Company, through a newly formed wholly owned
subsidiary, Able Energy Terminal, LLC, purchased the facility on Route 46,
Rockaway, NJ. The facility has two tenants.
The Company is the majority owner of a newly formed subsidiary, Able
Energy.Com, which is in the process of establishing a Web Site for the sale of
energy products through a network of suppliers originally on the East coast of
the United States.
The consolidated interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that these
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's annual report for the
year ended December 31, 1999. The Company follows the same accounting policies
in preparation of interim reports.
Results of operations for the interim periods are not indicative of annual
results.
9
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (cont'd)
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 2 Summary of Significant Accounting Policies
Nature of Operations
Able Oil Company, Able Melbourne and Able Energy - New York, Inc. are full
service oil companies that market and distribute home heating oil, diesel fuel
and kerosene to residential and commercial customers operating in the northern
New Jersey and Melbourne, Florida, and Warrensburg, New York respectively. Able
Propane, which was incorporated in July 1996, installs propane tanks, which it
owns, and sells propane gas for heating and cooking along with other residential
and commercial uses.
The Company's operations are subject to seasonal fluctuations with a
majority of the Company's business occurring in the late fall and winter months.
Approximately 70% of the Company's revenues are earned and received from October
through March, and the overwhelming majority of such revenues are derived from
the sale of home heating oil. However, the seasonality of the Company's business
is offset, in part, by the increase in revenues from the sale of diesel and
gasoline fuels during the spring and summer months due to the increased use of
automobiles and construction apparatus.
Principles of Consolidation
The consolidated financial statements include the accounts of Able Energy,
Inc. and its subsidiaries. The minority interest of 1% in Able Propane, LLC is
so immaterial and has not been shown separately. All material intercompany
balances and transactions were eliminated in consolidation.
Inventories
Inventories are valued at the lower of cost (first in, first out method) or
market.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided by using the straight-line method based upon the
estimated useful lives of the assets (5 to 40 years).
For income tax basis, depreciation is calculated by a combination of the
straight-line and modified accelerated cost recovery systems established by the
Tax Reform Act of 1986.
Expenditures for maintenance and repairs are charged to expense as incurred
whereas expenditures for renewals and betterments are capitalized.
The cost and related accumulated depreciation of assets sold or otherwise
disposed of during the period are removed from the accounts. Any gain or loss is
reflected in the year of disposal.
10
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 2 Summary of Significant Accounting Policies (cont'd)
Web Site Development Costs
Costs of $1,101,092 incurred in the developmental stage for computer
hardware and software have been capitalized in accordance with accounting
pronouncement SOP98-1. The costs will be amortized on a straight line basis
during the estimated useful life.
Intangible Assets
Intangibles are stated at cost and amortized as follows: Customer Lists of
$571,000 and Covenant Not To Compete of $183,567 related to the Connell's Fuel
Oil Company acquisition on October 28, 1996, by Able Oil Company are being
amortized over a straight-line period of 15 and 5 years, respectively. The
current period amortization also includes a customer list of $39,850 and
Covenant Not To Compete of $100,000 relating to the acquisition from B & B Fuels
on August 27, 1999, is being amortized over a straight-line period of 10 and 5
years, respectively. The amortization for the six months ended June 30, 2000 is
$57,377.
For income tax basis, the Customer Lists and the Covenant Not To Compete
are being amortized over a straight-line method of 15 years as per the Tax
Reform Act of 1993.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results.
Income Taxes
Effective January 1, 1997, all the subsidiaries, which were S-Corporations,
terminated their S- Corporation elections. The subsidiaries are now filing a
consolidated tax return with Able Energy, Inc.
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.
11
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 2 Summary of Significant Accounting Policies (cont'd)
-----------------------------------------------------------------
Concentrations of Credit Risk
The Company performs on-going credit evaluations of its customers'
financial conditions and requires no collateral from its customers.
Financial instruments which potentially subject the Company to
concentrations of credit risk consists of checking and savings accounts with
several financial institutions in excess of insured limits. The excess above
insured limits is approximately $2,093,000. The Company does not anticipate
non-performance by the financial institution.
Cash
For the purpose of the statement of cash flows, cash is defined as balance
held in corporate checking accounts and money market accounts.
Note 3 Notes Receivable
The Company has a Receivable from Able Montgomery, Inc. and Andrew W.
Schmidt related to the sale of Able Montgomery, Inc. to Schmidt and a truck
financed by Able Energy, Inc. No payments of principal or interest have been
received for more than one year. A new note was drawn dated June 15, 2000 for
$170,000, including the prior balance, plus accrued interest. The Note bears
interest at 9.5% per annum and payments commence October 1, 2000. The payments
will be monthly with a final payment of $55,981.07 due September 1, 2010. The
note is secured by a pledge and security agreement and stock purchase agreement
(Stock of Able Montgomery, Inc.), dated December 31, 1998, and the assets of
Andrew W. Schmidt with the note dated June 15, 2000. The income on the sale of
the company in December 1998 and the accrued interest on the drawing of the new
note are shown as deferred income to be realized on collection of the notes. The
note and deferred income are being shown as non-current on the Balance Sheet at
June 30, 2000.
Note 4 Inventories
<TABLE>
<CAPTION>
Items 2000 1999
----- ---- ----
<S> <C> <C>
Heating Oil $155,953 $ 89,419
Diesel Fuel 32,730 37,596
Kerosene 7,047 4,709
Propane 8,045 5,541
Parts and Supplies 99,744 92,714
--------- ---------
Total $303,519 $229,979
========= =========
</TABLE>
12
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 5 Notes Payable Bank
The Agreement with Able Oil Company and PNC Bank, dated August 11, 1999,
was amended July 14, 2000. The amended is as follows:
1. The line of credit is increased from $500,000 to $750,000.
2. The current expiration date is June 30, 2001.
3. Security is hereby amended to reduce the required amount of pledged cash
collateral from $972,000 to $490,000. This is represented by a first priority
lien on collateral consisting of a Provident Institution Money Market Fund.
4. Security is added by a guaranty and suretyship agreement with Able
Energy, Inc., Able Propane, LLC, Able Energy Terminal, LLC, Able Oil Melbourne,
Inc. and Able Energy New York, Inc. and will unconditionally jointly and
severally guarantee payment to the Bank.
5. A security agreement granting the bank a first priority perfected lien
on the existing and future personal property of Able Oil Company and the
companies listed in item 4 above. Notwithstanding the aforesaid requirement, the
named entities may finance the acquisition of equipment with other financial
parties by way of true leases or financing leases having an aggregate
outstanding balance of $1,000,000 at any given time, providing to such third
party financers liens upon the equipment thus financed, which liens shall be
superior in priority to the lien of the bank in any such equipment.
6. The agreement calls for certain financial covenants commencing with the
fiscal year end 2000.
The line of credit bears an interest rate of Prime minus one-half (1/2%)
with an outstanding balance of $292,228 at June 30, 2000.
There is a term loan with PNC Bank which was refinanced for a total of
$675,000 on June 12, 1998 with a current interest rate of 8.15%. The balance at
June 30, 2000 is $225,000 and has one year to maturity.
Note 6 Long-Term Debt
Mortgage note payable dated, August 27, 1999, related to the purchase of B
& B Fuels facility and equipment. The total note is $145,000. The note is
payable in the monthly amount of principal and interest of $1,721.18 with and
interest rate of 7.5% per annum. The initial payment was made on September 27,
1999, and continues monthly until August 27, 2009 which is the final payment.
The note is secured by a mortgage made by Able Energy New York, Inc. on property
at 2 and 4 Green Terrace and 4 Horican Avenue, Town of Warrensburg, Warren
County, New York. The balance due on this Note at June 30, 2000 was $136,618.
13
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 6 Long-Term Debt (cont'd)
Mortgage note payable dated, August 31, 1999, related to the purchase of
the facility and equipment in Rockaway, New Jersey by Able Energy Terminal, LLC
("Terminal"). The note is in the amount of $650,000.
Pursuant to Section 4.4 of the Agreement of Sale to purchase the Terminal,
the Principal Sum of the $650,000 note shall be reduced by an amount equal to
one-half of all sums expended by Borrower on the investigation and remediation
of the property provided, however, that the amount of said reduction shall not
exceed $250,000 (the "Remediation Amount").
The "Principal Sum" less the "Remediation Amount" shall be an amount equal
to $400,000 (the "Reduced Principal Sum"). The Reduced Principal Sum shall bear
interest from the date hereof at the rate of 8.25% per annum. Any portion of the
Remediation Amount not utilized in the investigation and remediation of the
property shall not begin to accrue interest until such time that (i) a No
Further Action Letter" is obtained from the Department of Environmental
Protection, and (ii) an outstanding lawsuit concerning the property is resolved
through settlement or litigation (subject to no further appeals). All payments
on this Note shall be applied first to the payment of interest, with any balance
to the payment and reduction of the Reduced Principal Sum.
Interest shall be due and payable commencing on September 30, 1999 on the
Reduced Principal Sum of the note on the last day of each month up to and
including July 31, 2004.
The Note is collateralized by the property and equipment purchased and
assignment of the leases. The balance due on this Note at June 30, 2000 was
$650,000.
14
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 7 Income Taxes
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
The differences between the statutory Federal Income Tax and Income Taxes
Continuing Operation is accounted for as follows:
<TABLE>
<CAPTION>
2000
Percent of
Pretax
Amount Income
<S> <C> <C>
Statutory Federal Income Tax $199,200 34.0%
Increase resulting from State Income
Tax, net of Federal Tax benefit 54,300 5.9%
-------- -----
Income Taxes $253,500 39.9%
======== =====
Income Taxes consist of:
Current $249,500
Deferred 4,000
---------
Total $253,500
========
1999
Percent of
Pretax
Amount Income
Statutory Federal Income Tax $210,700 34.0%
Increase resulting from State Income
Tax, net of Federal Tax benefit 61,310 5.9%
-------- -----
Income Taxes $272,010 39.9%
======== =====
Income Taxes consist of:
Current $264,860
Deferred 7,150
---------
Total $272,010
========
</TABLE>
15
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 7 Income Taxes (cont'd)
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax liability and deferred tax asset and
their approximate tax effects are as follows at:
<TABLE>
<CAPTION>
2000
Temporary Tax
Difference Effect
<S> <C> <C>
Depreciation $ (189,389) $ (60,201)
Allowance for Doubtful Accounts 157,974 44,235
Gain on Sale of Subsidiary 18,766 4,035
1999
Temporary Tax
Difference Effect
Depreciation $(172,590) $(58,381)
Allowance for Doubtful Accounts 69,235 16,695
Gain on Sale of Subsidiary 18,766 4,275
</TABLE>
Note 8 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.
In accordance with the agreement on the purchase of the property on Route
46, Rockaway, New Jersey by Able Energy Terminal, LLC, the purchaser shall
commence after closing, the investigation and remediation of the property and
any hazardous substances emanating from the property in order to obtain a No
Further Action letter from the New Jersey Department of Environmental Protection
(NJDEP). The purchaser will also pursue recovery of all costs and damages
related thereto in the lawsuit by the seller against a former tenant on the
purchased property. Purchaser will assume all responsibility and direction for
the lawsuit, subject to the sharing of any recoveries from the lawsuit with the
seller, 50-50. The seller by reduction of its mortgage will pay costs related to
the above up to $250,000 (see Note 6). In the opinion of management, the Company
will not sustain costs in this matter which will have a material adverse effect
on its financial condition.
16
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ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 8 Commitments and Contingencies (cont'd)
Able Oil Company has been examined by the Internal Revenue Service through
the year ended December 31, 1995. The only open year for Able Oil Company is
December 31, 1996 and Able Energy, Inc., et al, open years are December 31,
1997, 1998 and December 31, 1999.
Note 9 Operating Lease
Able Energy Terminal, LLC, has acquired the following lease on the property
it purchased on Route 46 in Rockaway, New Jersey.
The lease with Able Oil Company, a wholly owned subsidiary of Able Energy,
Inc., has an expiration date of July 31, 2004. The lease provides for a monthly
payment of $1,200 plus a one cent per gallon through put, as per a monthly rack
meter reading.
Estimated future rents are $14,400 per year, plus the one cent per gallon
through put charges per the monthly rack meter readings.
The Company leased an additional facility on Route 46 in Rockaway, New
Jersey. The lease has a term of one year from September 1, 1999 to August 31,
2000. The rent is $1,300 per month, $15,600 for the year, plus 10% of the
increase in real estate taxes over the base year, 1999. The Company has the
option to renew for five additional one-year terms. The renewals are at an
increase of $100 per month during each renewal term. The estimated future rent
upon one year renewal is $16,800.
Note 10 Franchising
The Company has begun operations to sell franchises permitting the
operation of a franchised business specializing in residential and commercial
sales of fuel oil, diesel fuel, gasoline, propane and related services. The
Company will provide training, advertising and use of Able credit for the
purchase of product, among other things, as specified in the Agreement. The
franchisee has an option to sell the business back to the Company after two (2)
years of operations for a price calculated per the Agreement. The Company has
signed its first franchise agreement in June 2000. The franchisee has paid the
company the following:
1. A non-refundable franchise fee of $25,000 which is currently in deferred
income as operations are to begin in September 2000.
2. An advertizing deposit of $15,000 and a $5,000 escrow deposit. This
$20,000 is shown as an Escrow Deposit liability. The $15,000 will be charged to
advertising as the funds are used.
17
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ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND JUNE 30, 2000
Note 11 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 spilt by the
Company and its public offering of 1,000,000 shares.
Note 12 Extraordinary Item
The Company utilized a net operating loss carryforward from the year ended
December 31, 1999 of approximately $318,000 which resulted in a tax reduction of
approximately $132,850.
18
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ABLE ENERGY, INC. AND SUBSIDIARIES
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Statements in this Quarterly Report on Form 10-QSB concerning the Company's
outlook or future economic performance, anticipated profitability, gross
billings, expenses or other financial items, and statements concerning
assumption made or exceptions to any future events, conditions, performance or
other matter are "forward looking statements," as that term is defined under the
Federal Securities Laws. Forward-looking statements are subject to risks,
uncertainties, and other factors which would cause actual results to differ
materially from those stated in such statements. Such risks, and uncertainties
and factors include, but are not limited to: (i) changes in external competitive
market factors or trends in the Company's results of operation; (ii)
unanticipated working capital or other cash requirements and (iii) changes in
the Company's business strategy or an inability to execute its competitive
factors that may prevent the Company from competing successfully in the
marketplace.
Revenue Recognition
Sales of fuel and heating equipment are recognized at the time of delivery
to the customer, and sales of equipment are recognized at the time of
installation. Revenue from repairs and maintenance service is recognized upon
completion of the service. Payments received from customers for heating
equipment service contracts are deferred and amortized into income over the term
of the respective service contracts, on a straight line basis, which generally
do not exceed one year.
Results of Operations
Three months ended June 30, 2000, compared to the three months ended June
30, 1999.
The Company reported revenues of $4,851,781 for the three months ended June
30, 2000, an increase of 43.68% over the prior year's revenues of $3,376,760 for
the same three month period. This increase can be attributed to increased
customer base, increased sales as a result of cooler weather in the Northeast
during this quarter and an increase in the price of products sold by the Company
above the price of the prior year. The acquisition of B & B Fuels increased
sales for the quarter by approximately $238,000. Increased revenues can also be
attributable to increased marketing efforts.
Gross profit margin, as a percentage of revenues, for the three months
ended June 30, 2000, increased to 17.44% of net revenues, representing an
increase of 2.69% over a margin of 14.75% for the same quarter on year ago. The
increase in margin is primarily a result of increased customer base of home
heating oil customers and better control of cost/price relationship.
Selling, General and Administrative expenses increased by $472,528 or
74.01% from $638,427 for the three months ended June 30, 1999 to $1,110,955 for
the three months ended June 30, 2000. This increase was attributable to the
operations of two subsidiaries formed in August 1999 of approximately $101,000
and an increase in insurance, advertising, professional fees, labor costs and
benefits.
19
<PAGE>
Operating Loss for the three months ended June 30, 2000 was $433,289, an
increase of 75.02% over the Company's operating loss of $247,564 for the three
months ended June 30, 1999. This increase in operating loss was attributable to
the Company's marketing program, additional staff which was carried over from
the winter months and exploring new ventures which increased professional fees
and other costs.
Net Loss for the three months ended June 30, 2000 increased by $75,702 or
47.16% to $236,216 as compared to the previous year. This increase in net loss
was the result of greater marketing costs, sales promotion and higher staff
salaries which were carried over from the winter months that were more
productive than the prior year.
Six months ended June 30, 2000, compared to the six months ended June 30,
1999.
The Company reported revenues of $15,966,984 for the six months ended June
30, 2000, an increase of 67.06% over the prior year's revenues of $9,557,695 for
the same six month period. This increase can be attributed to increased sales as
a result of cooler weather in the Northeast during the March quarter and April
and an increase in the price of products sold by the Company above the price of
the prior year. The acquisition of B & B Fuels increases sales for the six
months by approximately $735,000. Increased revenues can also be attributable to
increased marketing efforts
Gross profit margin, as a percentage of revenues, for the six months ended
June 30, 2000 decreased to 18.31% of net revenues, representing a decrease of
5.25% over a margin of 23.56% for the same six month period one year ago. The
reduction in margin is primarily a result of unstable retail prices for home
heating oil caused by a large raise in product cost.
Selling, General and Administrative expenses increased by $656,190 or
49.01% from $1,339,000 for the six months ended June 30, 1999 to $1,995,190 for
the six months ended June 30, 2000. These expenses can be attributable to an
increase in the size of general operations of the Company, including the
operations of two subsidiaries formed in August 1999 of approximately $181,000
and an increase in marketing, insurance, wages and benefits.
Operating Income for the six months ended June 30, 2000 was $590,676, a
decrease of 15.30% over the Company's operating income of $697,370 for the six
months ended June 30, 1999. This decrease in operating income was attributable
to lower gross margin caused by unstable prices for home heating oil, increased
insurance, labor cost and benefits.
Net income for the six months ended June 30, 2000 increased by $78,531 or
19.81% as compared to the same period in the previous year. This increase in net
income is a direct result of continued sales growth which more than off-set the
increased product and operating cost. Income from the two new subsidiaries
formed in August 1999 was approximately $90,000.
Depreciation and amortization expense for the six months ended June 30,
2000 was $338,100, an increase of $122,660 for the six months ended June 30,
1999. Amortization relates to the amortization of customer lists, being
amortized over 15 years and two Non-Compete Agreements amortized over 5 years ,
per the agreements. The increased depreciation relates to the purchase of
additional trucks and other equipment in 1999 and the acquisition of equipment
on the B & B Fuels purchase and the purchase of the Company's facility in
Rockaway, New Jersey. Both acquisitions took place in August 1999.
<PAGE>
Interest expense for the six months ended June 30, 2000 was $98,100 as
compared to $76,940 for the six months ended June 30, 1999. This increase was
due to debt incurred in connection with the acquisitions of B & B Fuels (New
York), the property in Rockaway, New Jersey, and additional trucks and other
equipment.
Liquidity and Capital Resources
For the six months ended June 30, 2000, compared to the six months ended
June 30, 1999, the Company's cash position decreased by $3,840,685 from
$6,107,665 to $2,266,980. For the year ended December 31, 1999, cash of
$5,867,100 was generated from the Company's initial public offering. For the
year ended December 31, 1998, cash was generated through operations, net income
and collections of customer advance payments.
The Company has the following Agreement with its primary financial
institution. The company's credit line was increased by $250,000 to $750,000 at
1/2% below prime, the outstanding balance is $292,228 at June 30, 2000. The
Company has a three year term loan of $675,000 with a balance of approximately
$225,000 at June 30, 2000. The Agreement with the bank has a current expiration
date of June 30, 2001.
The Company received net proceeds from its initial public offering in an
amount of $5,867,100. The Company believes that the net proceeds of this
offering, coupled with the bank agreements and income from operations, will
fulfill the Company's working capital needs for the next 12 months. As the
Company continues to grow, investigate new ventures, and strengthens its
infrastructure to position itself for additional growth, bank borrowings, or
other debt placements and equity offerings may be considered, in part, or in
combination, as the Company's situation warrants.
Seasonality
The Company's operations are subject to seasonal fluctuations, with a
majority of the Company's business occurring in the late fall and winter months.
Approximately 70% of the Company's revenues are earned and received from October
through March, and the overwhelming majority of such revenues are derived from
the sale of home heating products including propane gas and fuel oil. However,
the seasonality of the Company's business is offset, in part, by an increase in
revenues from the sale of HVAC products and services, diesel and gasoline fuels
during the spring and summer months, due to the increased use of automobiles and
construction apparatus.
From May through September, Able Oil can experience considerable reduction
of retail heating oil sales. Similarly, Able Propane can experience up to 80%
decrease in heating related propane sales during the months of April to
September, which is offset somewhat by an increase of pool heating and cooking
fuel.
Over 90% of Able Melbourne's revenues are derived from the sale of diesel
fuel for construction vehicles, and commercial and recreational sea-going
vessels during Florida's fishing season which begins in April and ends in
November. Only a small percentage of Able Melbourne's revenues are derived from
the sale of home heating fuel. Most of these sales occur from December through
March, Florida's cooler months.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Securityholders
On June 23, 2000, the Company held its Annual Meeting of
stockholders. The stockholders re-elected all six members to
the Company's Board of Directors for the coming year, approved
the Company's 2000 Employee Stock Purchase Plan, approved the
Company's 2000 Employee Stock Bonus Plan, and ratified the
appointment of Simontacchi & Company LLP as the Company's
independent auditors for the fiscal year ending December 31,
2000.
ITEM 5. Other Events
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K
during the three month period ended June 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the Requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused the project to be signed on its behalf by the
undersigned thereto duly authorized
ABLE ENERGY, INC.
August 14, 2000 By: /s/Timothy Harrington
Timothy Harrington
Chief Executive Officer
