SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 November 7, 2000, 2,000,000 shares, $.001 Par value per share, of
Able Energy, Inc. were issued and outstanding.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
<S> <C>
Accountants' Report 3
Consolidated Balance Sheets as of December 31, 1999 and
September 30, 2000 4 - 5
Consolidated Statements of Operations for the three and nine
months ended September 30, 2000 and September 30, 1999 6
Consolidated Statement of Stockholders' Equity nine months
ended September 30, 2000 7
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999 8
Notes to Unaudited Financial Statements 9 - 19
</TABLE>
2
<PAGE>
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 September 30, 2000, and the related condensed
consolidated statements of operations and cash flows for the three and nine
month periods ended September 30, 2000 and 1999 and the consolidated statement
of stockholders' equity for the nine months ended September 30, 2000. 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
November 7, 2000
3
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
September December 31,
30, 2000 1999
(Unaudited) Audited
Current Assets:
<S> <C> <C>
Cash $ 2,708,560 $ 2,926,412
Accounts Receivable (Less Allowance for Doubtful
Accounts of ($157,974) at 12/31/99 and ($157,974) 9/30/00 2,289,457 1,996,500
Inventory 867,248 229,979
Notes Receivable - Current Portion 16,798 61,748
Miscellaneous Receivable 65,223 22,640
Prepaid Expense 64,631 48,826
Prepaid Expense - Income Taxes 119,951 119,951
Deferred income Tax 48,270 48,270
Due From Officer 44,690 44,690
---------- -----------
Total Current Assets 6,224,828 5,499,016
---------- -----------
Property and Equipment:
Land 451,925 451,925
Building 1,106,850 1,008,250
Trucks 2,265,545 2,236,508
Fuel Tanks 994,942 836,790
Machinery and Equipment 345,233 346,198
Leasehold Improvements 192,364 187,364
Cylinders 364,940 319,490
Office Furniture and Equipment 42,666 14,841
Web Site Development Costs 2,207,888 -
---------- -----------
7,972,353 5,401,366
Less: Accumulated depreciation 1,635,100 1,266,201
---------- -----------
Net Property and Equipment 6,337,253 4,135,165
---------- -----------
Other Assets:
Deposits 109,810 94,625
Notes Receivable - Less Current Portion 193,814 126,863
Customer List, Less Amortization of 1999 ($125,045), and
2000 ($156,594). 454,256 485,805
Covenant Not to Compete, Less Amortization of 1999
($125,123) and 2000 ($167,658). 115,909 158,444
------------ ------------
Total Other Assets 873,789 865,737
------------ ------------
Total Assets $13,435,870 $10,499,918
=========== ===========
</TABLE>
See Accompanying Notes
4
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont'd)
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited) (Audited)
Current Liabilities:
<S> <C> <C> <C>
Accounts Payable $ 1,795,923 $ 1,638 699
Note Payable - Bank 711,652 201,214
Current Portion of Long-Term Debt 567,195 789,978
Accrued Expenses 917,023 260,818
Customer Advance Payments 1,755,878 156,738
Current Portion of Deferred Income - 14,548
Escrow Deposits 35,000 15,000
------------ -----------
Total Current Liabilities 5,782,671 3,076,995
Deferred Income: less current portion 88,857 53,342
Deferred Income Taxes 59,191 56,201
Long Term Debt: less current portion 1,756,683 1,529,444
------------ -----------
Total Liabilities 7,687,402 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 83,693 119,161
------------ -----------
Total Stockholders' Equity 5,748,468 5,783,936
------------ -----------
Total Liabilities and Stockholders' Equity $13,435,870 $10,499,918
=========== ===========
</TABLE>
See Accompanying Notes
5
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months September 30, Nine Months Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 5,872,015 $ 3,382,508 $ 21,838,999 $ 12,940,203
Cost of Sales 5,268,106 3,334,807 18,311,124 10,640,692
------------ ------------ ------------ ------------
Gross Profit 603,909 47,701 3,527,875 2,299,511
------------ ------------ ------------ ------------
Expenses
Selling, General and Administrative Expenses 1,132,622 761,476 3,127,812 2,100,476
Depreciation and Amortization Expense 171,528 124,790 509,628 340,230
------------ ------------ ------------ ------------
Total Expenses 1,304,150 886,266 3,637,440 2,440,706
------------ ------------ ------------ ------------
Income (Loss) From Operations (700,241) (838,565) (109,565) (141,195)
------------ ------------ ------------ ------------
Other Income (Expenses):
Interest and Other Income 117,273 60,247 262,558 108,301
Interest Expense (45,165) (53,424) (143,265) (130,364)
Loss on Abandonment of Fixed Assets -- -- (42,206) --
------------ ------------ ------------ ------------
Total Other Income (Expenses) 72,108 6,823 77,087 (22,063)
------------ ------------ ------------ ------------
Income (Loss) Before Provision for Income Taxes
and Extraordinary Item (628,133) (831,742) (32,478) (163,258)
Provision (Reduction) for Income Taxes (250,510) (305,320) 2,990 (33,310)
------------ ------------ ------------ ------------
Net Income (Loss) - Continuing Operations (377,623) (526,422) (35,468) (129,948)
Extraordinary Item -- 55,019 -- 55,019
------------ ------------ ------------ ------------
Net Income (Loss) $ (377,623) $ (471,403) $ (35,468) $ (74,929)
============ ============ ============ ============
Net Income (Loss) Per Share - Continuing $ (.19) $ (.39) $ (.02) $ (.09)
------------ ------------ ------------ ------------
Operations
$ -- $ .04 $ -- $ .04
------------ ------------ ------------ ------------
Extraordinary Item - Per Share
$ (.19) $ (.35) $ (.02) $ (.05)
------------ ------------ ------------ ------------
Net Income (Loss) Per Share
Weighted Average Number of Common Shares 2,000,000 1,366,300 2,000,000 1,366,300
Outstanding ============ ============ ============ ============
</TABLE>
See Accompanying Notes
6
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 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 Loss (35,468) (35,468)
---------- ---------- ---------- ---------- ----------
Balance - September 30, 2000 2,000,000 $ 2,000 $5,662,775 $ 83,693 $5,748,468
========== ========== ========== ========== ==========
</TABLE>
See Accompanying Notes
7
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
UNAUDITED
2000 1999
---- ----
Cash Flows From Operating Activities
<S> <C> <C>
Net Income (Loss) - Continuing Operations $ (35,468) $ (129,948)
Adjustments to Reconcile Net Income to Cash
used by Operating Activities:
Depreciation and Amortization 509,628 340,230
Extraordinary Item - Net - 55,019
Loss on Disposition of Equipment 42,206 -
(Increase) Decrease in:
Accounts Receivable (292,957) (237,418)
Inventory (637,269) (123,115)
Prepaid Expenses (15,805) (21,595)
Deposits (15,185) 9,364
Increase (Decrease) in:
Accounts Payable 157,224 (249,509)
Accrued Expenses 656,205 259,270
Other Taxes Payable - 17,477
Customer Advance Payments 1,599,140 (43,916)
Income Taxes Payable - (10,002)
Deferred income Taxes 2,990 5,839
Deferred Income 20,967 (4,849)
------------ -------------
Net Cash Provided (Used) by Operating Activities 1,991,676 (133,153)
------------ -------------
Cash Flows From Investing Activities
Purchase of Property and Equipment (471,950) (1,957,099)
Web Site Development Costs (2,207,888) -
(Increase) Decrease in Shareholder's Loan - (10,517)
Note and Other Receivables (64,584) 1,286
Purchase of intangible Assets - (139,850)
------------ -------------
Net Cash Used By Investing Activities (2,744,422) (2,106,180)
------------ -------------
Cash Flows From Financing Activities
Increase in Notes Payable 510,438 1,371,591
Decrease in Long-Term Debt (495,544) (846,414)
Increase in Long-Term Debt 500,000 -
Increase Escrow Deposit Payable 20,000 -
Funds from Sale of Common Stock - 5,660,775
------------ -------------
Net Cash Provided By Financing
Activities 534,894 6,185,952
------------ ------------
Net (Decrease) Increase In Cash (217,852) 3,946,619
Cash - Beginning of Year 2,926,412 125,844
------------ ------------
Cash - End of Year $2,708,560 $4,072,463
========== ==========
The Company had Interest Cash Expenditures of: $ 143,265 $ 130,364
The Company had Tax Cash Expenditures of: $ - $ 25,002
</TABLE>
See Accompanying Notes
8
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1999 AND SEPTEMBER 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, Price
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 Web Site became active in October 2000.
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 SEPTEMBER 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.
Minority Interest
the minority interest in Price Energy.Com is a deficit and, in
accordance with Accounting Research Bulletin No. 51, subsidiary losses
should not be charged against the minority interest to the extent of
reducing it to a negative amount, as such, the losses have been charged
against the Company, the majority owner. The loss for the period ended
September 30, 2000 is $102,404.
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.
10
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
Note 2 Summary of Significant Accounting Policies (cont'd)
Property and Equipment (cont'd)
Expenditures for maintenance and repairs are charged to expense as
incurred whereas expenditures for renewals and betterments are capitalized.
The cost and related accumulated depreciation of assets sold or
otherwise disposed of during the period are removed from the accounts. Any
gain or loss is reflected in the year of disposal.
Web Site Development Costs
Costs of $2,207,888 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 nine months ended September 30, 2000 is $56,085.
For income tax basis, the Customer Lists and the Covenant Not To
Compete are being amortized over a straight-line method of 15 years as per
the Tax Reform Act of 1993.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Although these estimates are based on management's
knowledge of current events and actions it may undertake in the future,
they may ultimately differ from actual results.
11
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
Note 2 Summary of Significant Accounting Policies (cont'd)
Income Taxes
Effective January 1, 1997, all the subsidiaries, which were
S-Corporations, terminated their S- Corporation elections. The subsidiaries
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.
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 $1,737,235. 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.
Advertising Expense
Advertising costs are expensed at the time the advertisement appears
in various publications and other media. The expense was $305,615 for the
nine months ended September 30, 2000.
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.
12
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
Note 3 Notes Receivable (cont'd)
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 September 30,
2000.
Note 4 Inventories
<TABLE>
<CAPTION>
Items 2000 1999
----- ---- ----
<S> <C> <C>
Heating Oil $703,833 $ 89,419
Diesel Fuel 54,661 37,596
Kerosene 8,205 4,709
Propane 9,055 5,541
Parts and Supplies 91,494 92,714
--------- ---------
Total $867,248 $229,979
======== ========
</TABLE>
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 September 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 financiers liens upon the equipment thus
financed, which liens shall be superior in priority to the lien of the bank
in any such equipment.
13
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
Note 5 Notes Payable Bank (cont'd)
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 $711,652 at September 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 September 30, 2000 is $170,000 and has nine months 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 September 30, 2000 was $133,999.
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.
14
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
Note 6 Long-Term Debt (cont'd)
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 September 30,
2000 was $650,000.
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: 2000
<TABLE>
<CAPTION>
Percent of
Pretax
Amount Income
<S> <C> <C>
Statutory Federal Income Tax $1,950 15.0%
Increase resulting from State Income
Tax, net of Federal Tax benefit 1,040 7.6%
------- -----
Income Taxes $2,990 22.6%
====== =====
Income Taxes consist of:
Current $ -0-
Deferred 2,990
------
Total $2,990
======
</TABLE>
15
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
Note 7 Income Taxes (cont'd)
<TABLE>
<CAPTION>
1999
Percent of
Pretax
Amount Income
<S> <C> <C>
Statutory Federal Income Tax $(27,405) (15.0%)
Increase resulting from State Income
Tax, net of Federal Tax benefit (5,905) (7.6%)
-------- ------
Income Taxes $(33,310) (22.6%)
======== =======
Income Taxes consist of:
Current $(27,775)
Deferred (5,535)
---------
Total $(33,310)
========
</TABLE>
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 $ (192,389) $ (59,191)
Allowance for Doubtful Accounts 157,974 44,235
Gain on Sale of Subsidiary 18,766 4,035
</TABLE>
<TABLE>
1999
Temporary Tax
Difference Effect
<S> <C> <C>
Depreciation $(179,190) $(56,440)
Allowance for Doubtful Accounts 73,335 20,530
Gain on Sale of Subsidiary 18,766 4,035
</TABLE>
16
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
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.
Able Oil Company is under contract with Unocal to purchase #2 oil in
the months of November and December 2000, and January, February and March
2001. The total is 26,000 barrels or 1,092,000 gallons. The average price
which has been preset is $0.926 per gallon, or $1,011,654.
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.
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.
17
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
Note 9 Operating Lease (cont'd)
The Company leased 9,800 square feet in the Rockaway Business Centre
on Green Pond Road in Rockaway, New Jersey. The facility will be used as a
call center and will combine the administrative operations in New Jersey in
one facility. The lease has a term of five (5) years from August 1, 2000
through July 31, 2005. The rent for the first year is $7,145,83 per month
and the second through fifth year is $7,431.67 per month, plus 20.5% of the
building's annual operational costs and it's portion of utilities. The
monthly rent, including Common Area Charges, as of October 2000 is $9,084
per month. The lease does not contain any option for renewal. The rent
expense was $11,003 through September 30, 2000. The estimated future rents
are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C>
2000 $ 27,250
2001 110,000
2002 113,000
2003-2005 290,000
-------
Total $540,250
========
</TABLE>
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. The Company vacated this
leased facility in October 2000.
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
September 2000. The franchisee has paid the company the following:
1. A non-refundable franchise fee of $25,000 has been recorded as Other
income. Operations began in September 2000.
18
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
Note 10 Franchising (cont'd)
2. An advertising 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.
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.
19
<PAGE>
ABLE ENERGY, INC. AND SUBSIDIARIES
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Statements in this Quarterly Report on Form 10-QSB concerning the
Company's outlook or future economic performance, anticipated
profitability, gross billings, expenses or other financial items, and
statements concerning assumption made or exceptions to any future events,
conditions, performance or other matter are "forward looking statements,"
as that term is defined under the Federal Securities Laws. Forward-looking
statements are subject to risks, uncertainties, and other factors which
would cause actual results to differ materially from those stated in such
statements. Such risks, and uncertainties and factors include, but are not
limited to: (i) changes in external competitive market factors or trends in
the Company's results of operation; (ii) unanticipated working capital or
other cash requirements and (iii) changes in the Company's business
strategy or an inability to execute its competitive factors that may
prevent the Company from competing successfully in the marketplace.
Revenue Recognition
Sales of fuel and heating equipment are recognized at the time of
delivery to the customer, and sales of equipment are recognized at the time
of installation. Revenue from repairs and maintenance service is recognized
upon completion of the service. Payments received from customers for
heating equipment service contracts are deferred and amortized into income
over the term of the respective service contracts, on a straight line
basis, which generally do not exceed one year.
Results of Operations
Three months ended September 30, 2000, compared to the three months
ended September 30, 1999.
The Company reported revenues of $5,872,015 for the three months ended
September 30, 2000, an increase of 73.60% over the prior year's revenues
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 $267,000.
Increased revenues can also be attributable to increased marketing efforts.
Gross profit margin, as a percentage of revenues, for the three months
ended September 30, 2000, increased 8.87%, from 1.41% one year ago to
10.28% in 2000. The increase in margin is primarily a result of increased
customer base of home heating oil customer and better control of cost/price
relationship.
Selling, General and Administrative expenses increased by $371,146, or
48.74%, from $761,476 for the three months ended September 30, 1999 to
$1,132,622 for the three months ended September 30, 2000. This increase was
attributable to the operations of two subsidiaries formed in August 1999 of
approximately $71,000, start up costs of a new subsidiary, Price Energy.Com
of salaries and computer consulting costs of approximately $101,000, and an
increase in insurance, advertising, professional fees, labor costs, and
benefits.
Operating loss for the three months ended September 30, 2000 was
$700,241, a decrease of 16.50% over the Company's operating loss of
$838,565 for the three months ended September
<PAGE>
30, 1999. This operating loss was attributable to the Company's
marketing program, additional staff, and exploring and start-up of a new
venture which increased professional fees and other costs.
The unusual loss for the period was exacerbated by a number of events
and investments which should lead to longer term growth and efficiency of
operations for the Company. The Company centralized its administrative
operations in a new leased call center in Rockaway, New Jersey, in
preparation for its busy fall and winter months. The Company invested in a
new subsidiary Price Energy. Com for energy sales via the internet. The
Company has invested in higher advertising and wireless technology.
Net loss for the three months ended September 30, 2000 decreased by
$93,780, or 19.90%, to $377,623 as compared to the same period for the
previous year loss of $471,403. This net loss was the result of greater
marketing costs, sales promotion, higher staff salaries and start up costs
of a new subsidiary.
Nine months ended September 30, 2000, compared to the nine months
ended September 30, 1999.
The Company reported revenues of $21,838,999 for the nine months ended
September 30, 2000, an increase of 68.77% over the prior year's revenues of
$12,940,203 for the same nine 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 increased sales for the nine months by approximately $1,000,000.
Increased revenues can also be attributable to increased marketing efforts.
Gross profit margin, as a percentage of revenues, for the nine months
ended September 30, 2000, decreased to 16.15% of net revenues, representing
an decrease of 1.62% over a margin of 17.77% for the same nine month period
one year ago. This 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 $1,027,336,
or 48.91%, from $2,100,476 for the nine months ended September 30, 1999 to
$3,127,812 for the nine months ended September 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, start-up costs of a new subsidiary, Price Energy.Com, salaries and
computer consulting costs of approximately $102,000, and an increase in
marketing, insurance, wages and benefits.
Operating Loss for the nine months ended September 30, 2000 was $
109,565, in comparison to the Company's operating loss of $141,195 for the
nine months ended September 30, 1999. This operating loss was attributable
to lower gross margin caused by unstable prices for home heating oil,
start-up of a new venture, increased insurance, labor costs and benefits.
Net Loss for the nine months ended September 30, 2000 was $35,468 in
comparison to a loss of $74,929 for the same period in previous year. This
net loss was the result of a reduction in margin primarily a result of
unstable retail prices for home heating oil, additional marketing, start-up
of a new venture and increased operating expenses with concentration on
growth.
Depreciation and amortization expense for the nine months ended
September 30, 2000 was $509,628, an increase of $169,398 for the nine
months ended September 30, 1999.
<PAGE>
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.
Interest expense for the nine months ended September 30, 2000, was
$143,265 as compared to $130,364 for the nine months ended September 30,
1999. This increase was due to debt incurred in connection with the
acquisition of B & B Fuels (New York), the property in Rockaway, New
Jersey, and additional trucks and other equipment.
Liquidity and Capital Resources
For the nine month period ended September 30, 2000, compared to the
nine months ended September 30, 1999, the Company's cash position decreased
by $1,363,903 from $4,072,463 to $2,708,560. For the nine months ended
September 30, 1999, cash of $5,867,100 was generated from the Company's
initial public offering. For the nine months ended September 30, 2000, 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 $711,652 at
September 30, 2000. The Company has a three year term loan of $675,000 with
a balance of approximately $170,000 at September 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 9 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.
<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
None.
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 September 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.
November 14, 2000 By: /s/Timothy Harrington
Timothy Harrington
Chief Executive Officer
