UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
x
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the Fiscal Year Ended June 30, 2007
OR
o
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: 001-15035
ABLE
ENERGY, INC.
(Exact
name of registrant as specified in its charter)
|
|
Delaware
|
|
22-3520840
|
|
|
|
(State or other
jurisdiction of incorporation or organization)
|
|
(I.R.S. employer
identification
No.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198 Green Pond
Road
|
|
|
|
|
|
Rockaway,
NJ
|
|
07866
|
|
|
|
(Address of
principal executive offices)
|
|
(Zip
code)
|
|
Registrant's
telephone number, including area code: (973) 625-1012
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act:
Common Stock, Par value
$.001 Per Share
(Title of
class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Exchange Act. Yes
o
No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
o
No
x
Indicate
by check mark 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
o
No
x
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (Check one):
|
Large Accelerated
Filer
£
|
Accelerated
Filer
£
|
|
Non-Accelerated
Filer
S
(Do not
check if a smaller reporting company)
|
Smaller reporting
company
£
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes
o
No
x
The
aggregate market value of the common stock held by non-affiliates of the
registrant was approximately $2.1 million on December 31, 2006, based on the
last reported sales price of the registrant’s common stock on the Pink Sheets on
such date. All executive officers, directors and 10% or more beneficial owners
of the registrant’s common stock have been deemed, solely for the purpose of the
foregoing calculation, “affiliates” of the registrant.
As of
October 16, 2008, there were 14,965,389 shares of the registrant’s common stock,
$.001 par value, issued and outstanding.
ABLE ENERGY, INC. AND SUBSIDIARIES
FORM
10-K
For
the Years Ended
June
30, 2007 and 2006
TABLE
OF CONTENTS
|
|
|
Page
No.
|
|
|
PART I
|
|
|
|
|
|
|
|
Explanatory
Note
|
3
|
|
|
|
|
|
ITEM 1.
|
Business
|
4
|
|
ITEM
1A.
|
Risk
Factors
|
14
|
|
ITEM 1B.
|
Unresolved Staff
Comments
|
23
|
|
ITEM 2.
|
Properties
|
23
|
|
ITEM 3.
|
Legal
Proceedings
|
24
|
|
ITEM 4.
|
Submission of
Matters to a Vote of Security Holders
|
26
|
|
|
|
|
|
|
PART
II
|
|
|
|
|
|
|
ITEM 5.
|
Market for
Registrant’s Common Equity, Related Stockholder Matters
and
Issuer Purchases of Equity Securities
|
27
|
|
ITEM 6.
|
Selected Financial
Data
|
29
|
|
ITEM 7.
|
Management’s
Discussion and Analysis of Financial Condition and Results
of
Operation
|
29
|
|
ITEM 7A.
|
Quantitative and
Qualitative Disclosures About Market Risk
|
37
|
|
ITEM 8.
|
Financial Statements
and Supplementary Data
|
38
|
|
ITEM 9.
|
Changes In and
Disagreements With Accountants on Accounting and
Financial
Disclosure
|
38
|
|
ITEM 9A.
|
Controls and
Procedures
|
39
|
|
ITEM 9B.
|
Other
Information
|
39
|
|
|
|
|
|
|
PART
III
|
|
|
|
|
|
|
ITEM 10.
|
Directors and
Executive Officers of the Registrant
|
40
|
|
ITEM 11.
|
Executive
Compensation
|
|
|
ITEM 12.
|
Security Ownership
of Certain Beneficial Owners and Management and
Related
Stockholder Matters
|
|
|
ITEM 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
|
|
ITEM 14.
|
Principal Accountant
Fees and Services
|
|
|
|
|
|
|
|
PART
IV
|
|
|
|
|
|
|
ITEM 15.
|
Exhibits and
Financial Statement Schedules
|
|
|
|
|
|
|
Signatures
|
|
|
|
Exhibit
31.1
|
|
|
|
Exhibit
31.2
|
|
|
|
Exhibit
32.1
|
|
|
|
Exhibit
32.2
|
|
|
Explanatory
Note
The
consolidated financial statements for the year ended June 30, 2006 of the
Registrant contained in this Annual Report were audited by Marcum & Kliegman
LLP (“M&K”), the Registrants predecessor independent registered public
accounting firm whose report was dated April 4, 2007. M&K has not
withdrawn its report dated April 4, 2007 contained in the Company’s Annual
Report on Form 10-K filed with the SEC on April 12, 2007. However,
M&K, has not separately consented to reissue its report for the fiscal year
ended June 30, 2006 in this June 30, 2007 Annual Report on Form
10-K.
Furthermore,
the Registrant intends to withdraw its Registration Statement on Form S-8 (File
No. 333-50944), as amended, and will not deem securities issued listed in such
registration statement to be registered under the Securities Act of 1933, as
amended.
For
additional information regarding the Registrant’s current litigation with
M&K, please refer to Note 22 - Subsequent Events, Litigation to the
Consolidated Financial Statements in Item 8 of this Annual Report and Part II,
Item 9 (Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure) contained in this Annual Report.
PART
I
Item 1.
Business
Forward-Looking
Statements
Certain
matters discussed herein may constitute forward-looking statements and as such
may involve risks and uncertainties. In this Report, the words
“anticipates,” “believes,” “expects,” “intends,” “future” and similar
expressions identify certain forward-looking statements. These
forward-looking statements relate to, among other things, expectations of the
business environment in which we operate, projections of future performance,
perceived opportunities in the market and statements regarding our mission and
vision. Our actual results, performance, or achievements may differ
significantly from the results, performance or achievements expressed or implied
in such forward-looking statements. For discussion of the factors
that might cause such a difference, see “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operation”. We undertake no obligation to update or revise such
forward-looking statements.
General
Able
Energy, Inc. (“Able”) was incorporated on March 13, 1997, in the state of
Delaware. Its current subsidiaries are Able Oil Company, Inc. (“Able Oil”), Able
Energy New York, Inc. (“Able NY”), Able Oil Melbourne, Inc. (inactive, as of
February 8, 2008), (“Able Melbourne”), Able Energy Terminal, LLC,
PriceEnergy.com Franchising, LLC (inactive), Able Propane, LLC (inactive),
PriceEnergy.com, Inc. (“PriceEnergy”) and All American Plazas, Inc.
(“Plazas”). Able, together with its operating subsidiaries, are
hereby referred to as the Company.
Overview
During
the year ended June 30, 2007, the Company’s total revenues were $93.6
million. The Company is engaged in two primary business activities,
organized in two segments; the Oil Segment and the Travel Plaza
Segment.
The
Company’s Oil Segment, consisting of Able Oil, Able NY, Able Melbourne, Able
Energy Terminal, LLC and PriceEnergy, is engaged in the retail distribution of,
and the provision of services relating to, #2 home heating oil, propane gas,
kerosene and diesel fuels. In addition to selling liquid energy products, the
Company offers complete heating, ventilation and air conditioning (“HVAC”)
installation and repair and other services and also markets other petroleum
products to commercial customers, including on-road and off-road diesel fuel,
gasoline and lubricants. During the year ended June 30, 2007, the Oil
Segment accounted for $74.1 million of the Company’s net
revenues. Please refer to Note 22 - Subsequent Events, found in the
Notes to the Consolidated Financial Statements, for disclosure relating to the
February 8, 2008 sale of the Able Melbourne assets and liabilities and the July
22, 2008 sale of 49% of the common stock of Able NY and the Company’s Easton and
Horsham, Pennsylvania operations (“Able PA”) and the subsequent rights granted
to the Company on October 31, 2008 to repurchase those shares of stock in Able
NY and the interest in Able PA.
The
Company’s Travel Plaza Segment, operated by Plazas, is engaged in the retail
sale of food, merchandise, fuel, personal services, onsite and mobile vehicle
repair, services and maintenance to both the professional and leisure driver
through a current network of 10 travel plazas, located in Pennsylvania, New
Jersey, New York and Virginia. During the last one-month period in
the year ended June 30, 2007, in which the results of the Travel Plaza Segment
were included in the Company’s consolidated results, the Travel Plaza Segment
accounted for $19.6 million of the Company’s net revenues.
Oil
Segment
During
the year ended June 30, 2007, sales of heating oil accounted for approximately
70% of the Oil Segment’s net revenues. The remaining 30% of revenues were from
sales of gasoline, diesel fuel, kerosene, propane gas, home heating equipment
services, central air conditioning sales and service and related sales. As of
the date of this Annual Report, the Oil Segment currently serves approximately
29,000 home heating oil customers from three locations, which are located in
Rockaway, New Jersey, Easton, Pennsylvania and Warrensburg, New
York.
The Oil
Segment also provides installation and repair of heating equipment as a service
to its customers. The Oil Segment considers service and installation, repair and
other services to be an integral part of its business. Accordingly, the Oil
Segment regularly provides service incentives to obtain and retain customers.
The Oil Segment provides home heating equipment repair service on a 24
hour-a-day, seven day-a-week basis, generally within four hours of request.
Except in isolated instances, the Oil Segment does not provide service to any
person who is not a customer as an incentive to become a customer of the Oil
Segment.
The Oil
Segment believes that it obtains new customers and maintains existing customers
by offering full service home energy products at competitive 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 Oil Segment also regularly provides
service incentives to obtain and retain customers. The Oil Segment aggressively
promotes its services through a variety of direct marketing media, including
mail and telemarketing campaigns, by providing discounts to customers who refer
new customers to the Oil Segment, and through an array of advertising, including
television advertisements, newspaper advertising, refrigerator magnets and
billboards, which aim to increase brand name recognition.
The Oil
Segment intends to expand its operations by acquiring select operators in the
Oil Segment’s present markets as well as other markets, capturing market share
from competitors through increased advertising and other means, diversifying its
products, diversifying its customer base and replicating its marketing and
service formula in new geographic areas. The Oil Segment may also enter into
marketing alliances with other entities in product areas that are different from
the Oil Segment’s current product mix.
Retail
Fuel Oil Distribution
The Oil
Segment's retail fuel oil distribution business is conducted through the
Company’s subsidiaries Able Oil, Able NY and Able Melbourne (until February 8,
2008 at which time the Company sold the assets and certain of the liabilities of
the Melbourne operation). The Oil Segment serves both residential and commercial
fuel oil accounts. The Oil Segment sells premium quality #2 home heating oil to
its residential customers offering delivery seven days a week. To its commercial
customers, in addition to selling heating oil, the Oil Segment sells diesel
fuels, lubricants, gasoline and kerosene. The Oil Segment 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 Oil
Segment's service department; however, the Oil Segment does offer such service
contracts, if desired.
Approximately
41% of the Oil Segment's customers receive their home heating oil pursuant to an
automatic delivery system without the customer having to make an affirmative
purchase decision. Based on each customer’s historical consumption patterns and
prevailing weather conditions, the Oil Segment’s computers schedule these
deliveries. Customers can also order deliveries of home heating oil
through the Oil Segment's website located at www.ableenergy.com, or the website
of the Company's subsidiary, PriceEnergy at www.priceenergy.com. The Oil Segment
delivers home heating oil approximately six times each year to the average
customer. The Oil Segment bills customers promptly upon delivery or receives
payment upon delivery. The Oil Segment’s customers can pay for fuel deliveries
with cash, check, electronic account debit or credit card.
In
addition, approximately 14% of the Oil Segment’s customers have an agreement
that 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 Oil Segment has historically
purchased fuel oil for these customers in advance and at a fixed
cost.
The Oil
Segment delivers with its own fleet of 35 custom fuel oil trucks, 3 propane
trucks and 4 owner-operator fuel oil delivery trucks. The Oil Segment'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 Oil Segment also operates 23 Company-owned service vans and one
owner-operated service van, 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 primarily 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 Oil Segment subsidiary,
accounting for approximately 69% of the Oil Segment's total revenues for the
year ended June 30, 2007. Able Oil is headquartered in Rockaway, New
Jersey, and serves approximately 16,000 oil customer accounts throughout
northern New Jersey, primarily in Morris, Sussex, Warren, Passaic and Essex
counties, from its distribution terminal in Rockaway, New Jersey and in
Pennsylvania, primarily in Northampton and Lehigh counties and from its
distribution terminal in Easton, Pennsylvania. Of these accounts, approximately
92% are residential customers and 8% are commercial customers.
Of the
Oil Segment's 35 fuel oil trucks, 30 are reserved for use by Able Oil, of which
25 trucks operate from the Rockaway facility and 5 trucks operate from the
Easton, Pennsylvania facility. In addition, Able Oil utilizes the services of
five owner-operated trucks. Each owner-operator is under contract with the
Company, which provides that each owner operator is responsible for all
vehicle-operating expenses including insurance coverage. All of the
trucks, including the owner-operated trucks, are well marked with the Oil
Segment's logo and contact information.
Able
Oil's fuel oil delivery trucks, which operate from the Rockaway facility, and
the owner-operator trucks, acquire fuel inventory at the Company's terminal
facility in Rockaway, New Jersey. Dispatch of fuel oil trucks is conducted from
the Rockaway terminal facility. Billing is conducted from the Company’s
corporate headquarters in Rockaway.
The
Rockaway and Newton (which is currently out of service) facilities have the
capacity to store 3.0 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 high inventory turnover enables the Oil
Segment to rapidly respond to changes in market prices. Thus, management
typically employs a "just in time" inventory practice and rarely stores fuel to
capacity levels. Additional fuel oil purchases are made daily on the spot market
using electronic funds transfers. Able Oil transports its fuel purchases from
wholesale purchase sites to its Rockaway facility with two tractor-trailer
tankers owned by the Oil Segment, and by other outside vendors that are
contracted by the Oil Segment to provide additional fuel transport
capacity.
Able
Oil's oil burner service operates out of the Route 46 facility in Rockaway, New
Jersey. Able Oil dispatches a total of 19 service vans, plus one owner-operated
service van.
Please
refer to Note 22 - Subsequent Events, found in the Notes to the Consolidated
Financial Statements, for disclosure relating to the Company’s July 22, 2008
sale of 90% of its interest in Able Oil’s Easton and Horsham, Pennsylvania
operations and the subsequent right granted to the Company on October 31, 2008
to repurchase that interest.
Able
Melbourne
Able
Melbourne (currently inactive, see below) was established in July 1996, and was
located in Cape Canaveral, Florida. For the year ended June 30, 2007, revenues
from Able Melbourne accounted for approximately 6.4% of the Oil Segment's total
revenue. Able Melbourne was engaged primarily in the sale of diesel fuel for
commercial fleet fueling and other on-road vehicles, and dyed diesel fuel, which
was 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 revenue was generated from the sale of home
heating oil, lubricant and lubricant products.
Able Melbourne served
approximately 200 customer accounts in Brevard County, Florida, primarily in the
Cape Canaveral area.
Able
Melbourne delivered fuel with two fuel delivery trucks, which were capable of
storing 6,000 gallons of fuel, in the aggregate. Because Able Melbourne's peak
season was at the opposite time of the year than the rest of the Oil Segment’s,
during this season, Able Melbourne used one of Able Oil's trucks to meet its
demand. Able Melbourne did not have facilities to store fuel oil beyond what was
held on its trucks, and thus, purchased fuel inventory from local refineries.
However, since Able Melbourne is located only three miles from the bulk storage
facility, the lack of inventory capacity was not material to the Oil Segment's
operations or revenue.
Please
refer to Note 22 - Subsequent Events, found in the Notes to the Consolidated
Financial Statements, for disclosure relating to the February 8, 2008 sale of
the assets and certain liabilities of Able Melbourne.
Able
NY
Able NY
is engaged in the retail distribution of #2 home heating oil, in addition to
kerosene, propane gas and propane gas equipment and also provides related
services to its customer base in the Warren, northern Saratoga, and
southern Essex Counties of upstate New York.
The
retail and commercial heating oil and diesel fuel operations are similar to
those of Able Oil. Able NY has its office and storage located in an
industrial park off of Route 9 in Warrensburg, New York. There is
storage capacity for 67,500 gallons of heating oil, kerosene and
diesel. This is currently the only Oil Segment location that stores
and sells propane gas. Propane gas can be used for virtually all
household and business utility applications. Although burned as a gas, propane
is transported as a liquid and stored in tanks that vaporize the liquid for use.
Able NY provides its propane customers with such tanks, some at no charge, and
by doing so, remains such customers’ exclusive supplier of propane. Able NY
employs a delivery system similar to the Oil Segment'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. Based on each customer’s historical consumption patterns
and prevailing weather conditions, Able NY’s computers schedule these
deliveries. A small percentage of its customers prefer to order
refill deliveries on their own schedule and Able NY accommodates those requests
as appropriate.
Able NY
conducts its propane operations from its storage facility in Warrensburg, New
York, which has 60,000 gallons of propane storage capacity. The delivery trucks
have the capacity to deliver 3,000 gallons of propane, and can service
approximately 35 customers per day. Able NY purchases wholesale propane on the
spot market at local facilities and utilizes the services of contract carriers
to bring the product to its Warrensburg facility.
Please
refer to Note 22 - Subsequent Events, found in the Notes to the Consolidated
Financial Statements, for disclosure relating to the Company’s July 22, 2008
sale of 49% of the common stock of Able NY and the subsequent right granted to
the Company on October 31, 2008 to repurchase those shares of Able
NY.
PriceEnergy
PriceEnergy
started business in October 2000, and as of June 30, 2007 was a 67.3% owned
subsidiary of Able. As of the date of the filing of this Annual
Report, the Company owns 92% of PriceEnergy. Please refer to Note 22 –
Subsequent Events, found in the Notes to the Consolidated Financial Statements
in Item 8 of this Annual Report. PriceEnergy was developed in order
to bring about efficient transactions in the liquid fuels market by streamlining
the ordering and delivery process utilizing Internet technology. PriceEnergy has
developed a business technology platform that enables it to sell and deliver
liquid fuels and related energy products. This has been possible by utilizing a
branded distribution channel of dealers and the Oil Segment’s own delivery
network. By leveraging its proprietary Internet technology and wireless dispatch
platform, PriceEnergy has achieved cost leadership while providing it with a
competitive advantage in the industry.
As of the
date of this Annual Report, PriceEnergy has a network of 66 dealers in eight
states in the Northeast and Mid-Atlantic regions. PriceEnergy customers order
products and services from PriceEnergy over the Internet and then PriceEnergy
computers forward the orders to the local dealer to schedule delivery on behalf
of PriceEnergy.
During
the period from July 28, 2006 to August 15, 2006, PriceEnergy entered into
future contracts for #2 heating oil to hedge a portion of its forecasted heating
season requirements. PriceEnergy purchased 40 contracts through a broker for a
total of 1,680,000 gallons of #2 heating oil at an average call price of $2.20
per gallon. Due to warmer than average temperatures through the heating season,
as of June 30, 2007, PriceEnergy experienced a substantial drop in fuel
consumption and price, resulting in a loss on these
contracts. Through June 30, 2007, PriceEnergy deposited a total of
$923,017 in margin requirements with the broker and realized a loss of $923,017
on 40 closed contracts representing 1,680,000 gallons.
PriceEnergy
processed orders for approximately 9.2 million gallons of #2 home heating oil
over the Internet through PriceEnergy.com in the fiscal year ended June 30,
2007.
Travel Plaza
Segment
Acquisition
of Travel Plaza Assets
On May
30, 2007, Able completed its business combination with its largest shareholder,
All American Plazas, Inc., a Pennsylvania corporation. Subsequent to
the business combination, All American Plazas, Inc. changed its name to All
American Properties, Inc. (“Properties”). This business combination resulted in
Able acquiring the operating assets of eleven multi-use truck stop plazas,
formerly operated by Properties, and assuming certain of Properties debt. (One
of the acquired plazas, Strattanville, Pennsylvania, was subsequently shut-down
in April, 2008 due to unprofitable operations at that
site.) Properties retained ownership of the underlying real property
on which each of the acquired travel plazas was situated. Able formed
a new wholly-owned subsidiary, All American Plazas, Inc. (“Plazas”), a Delaware
corporation, to operate the acquired plazas. Able also acquired a ten
year option to acquire any of the travel plaza real estate owned by Properties,
providing that the Company assume all existing debt obligations related to the
applicable properties. The option has been valued at $5.0 million and
is exercisable as long as the Plaza’s leases relating to the applicable real
estate remain in effect. The Plaza leases automatically renew, upon
the mutual consent of Plazas and Properties, for consecutive one year terms so
that the total term of each lease shall be for a period of ten
years.
Able
issued to Properties 10 million restricted shares of its common stock in
consideration for the business combination, which was approved by more than 90%
of Able's disinterested stockholders at a special meeting of Able's stockholders
held on August 29, 2006.
In
addition, Able issued 1,666,667 shares in the name of Properties, held in
escrow. In the event that Able's Board, in exchange for additional consideration
from Properties, agrees to assume Properties obligations as to certain
convertible debentures it had previously issued, then the escrowed shares will
be issued to the debenture holders that elect to convert their debentures into
Able common stock, with any remaining escrowed shares to be released to
Properties. The Board's determination to assume the convertible debentures will
be based on whether or not the debenture holders elect to convert their
respective debentures into shares of Able's common stock and the additional
consideration to be provided by Properties. In the event that the debenture
holders do not elect to convert or the Board does not agree to assume the
debenture obligations, then all of the shares held in escrow will be released to
Properties.
As a
result of the closing of the business combination with Properties, as of May 30,
2007, Able had 14,808,090 shares of common stock issued and outstanding (which
includes the 1,666,667 shares held in escrow). As of May 30, 2007, Properties
was the owner of record of 12,666,667 shares of Able common stock, or
approximately 85.5% of Able's outstanding shares. The closing price of Able's
common stock on May 30, 2007 was $1.65.
Both
Properties and its controlling stockholder have agreed to a voting lock-up of
the shares that Properties holds in Able regarding election of member's of
Able's Board until such time as Properties and its majority stockholder no
longer hold a majority of Able's issued and outstanding shares of common
stock.
Approximately
85% of the common stock of Properties is owned by the Chelednik Family Trust, a
trust established by Frank Nocito, an officer of the Company, and his wife for
the benefit of their family members. In addition, pursuant to an
agreement between the Chelednik Family Trust and Gregory Frost, through an
entity controlled by him and his wife (Crystal Heights, LLC), Gregory Frost, the
Company’s Chief Executive Officer and Chairman of the Board of Directors, is the
beneficial holder of the balance of the outstanding common stock of
Properties.
Travel
Plaza Operations
The
Company’s Travel Plaza Segment is engaged in the retail provision of food,
merchandise, fuel, lodging (in select locations), personal services, onsite and
mobile vehicle repair, services and maintenance to both the professional and
leisure driver through a current network of 10 travel plazas, located in
Pennsylvania, New Jersey, New York and Virginia. Two of the
locations are operated under a Petro franchise, three operate under the Gables
brand name and the remaining travel plazas operate under the All American Plazas
banner. The Travel Plaza Segment’s operations range from full service
facilities, such as the Milton Petro in Milton Pennsylvania, to facilities with
more limited amenities, such as the Gables of Harrisburg, located in Harrisburg,
Pennsylvania. Full service facilities generally include separate gas
and diesel fueling islands, lodging, truck maintenance and repair services,
overnight parking with communication and entertainment pods, certified truck
weighing scales, restaurants and travel and convenience stores offering an array
of merchandise catering to the professional truck driver and other
motorists.
Related Parties
Financing
Properties
Financing
On June
1, 2005, Properties completed a financing that, may impact the Company. Pursuant
to the terms of the Securities Purchase Agreement (the "Agreement") among
Properties and certain purchasers (“Purchasers”), the Purchasers loaned
Properties an aggregate of $5,000,000, evidenced by Secured Debentures dated
June 1, 2005 (the "Debentures"). The Debentures were due and payable
on June 1, 2007, subject to the occurrence of an event of default, with interest
payable at the rate per annum equal to LIBOR for the applicable interest period,
plus 4% payable on a quarterly basis on April 1
st
, July
1
st
,
October 1
st
and
January 1
st
,
beginning on the first such date after the date of issuance of the
Debentures. Upon the May 30, 2007 completion of the business
combination with Properties and the Company’s board approving the transfer of
the debt that would also require the transfer of additional assets from
Properties as consideration for the Company to assume this debt, then the
Debentures are convertible into shares of our common stock at a conversion rate
of the lesser of (i) the purchase price paid by us for issuance of our
restricted common stock for the assets of Properties upon completion of the
business combination, or (ii) $3.00, subject to further adjustment as set forth
in the agreement.
The loan
is secured by real estate property owned by Properties in Pennsylvania and New
Hampshire. Pursuant to the Additional Investment Right (the “AIR
Agreement”) among Properties and the Purchasers, the Purchasers may loan
Properties up to an additional $5,000,000 of secured convertible debentures on
the same terms and conditions as the initial $5,000,000 loan, except that the
conversion price will be $4.00. Pursuant to the Agreement, these
Debentures are in default, as Properties did not complete the business
combination with the Company prior to the expiration of the 12-month anniversary
of the Agreement.
Subsequent
to the consummation of the business combination, we may assume the obligations
of Properties under the Agreement. However, the Company’s board of
directors must approve the assumption of this debt, which requires that
Properties transfer additional assets or consideration for such assumption of
debt. Based upon these criteria, it is highly unlikely the Company
will assume the obligations of Properties, including the Debentures and the AIR
Agreement, through the execution of a Securities Assumption, Amendment and
Issuance Agreement, Registration Rights Agreement, Common Stock Purchase Warrant
Agreement and Variable Rate Secured Convertible Debenture Agreement, each
between the Purchasers and us (the “Able Energy Transaction
Documents”). Such documents provide that Properties shall cause the
real estate collateral to continue to secure the loan, until the earlier of full
repayment of the loan upon expiration of the Debentures or conversion by the
Purchasers of the Debentures into shares of our common stock at a conversion
rate of the lesser of (i) the purchase price paid by us for issuance of our
restricted common stock for the assets of Properties upon the completion of the
business combination, or (ii) $3.00, (the “Conversion Price”), subject to
further adjustment as set forth in the Able Energy Transaction
Documents. However, the Conversion Price with respect to the AIR
Agreement shall be $4.00. In addition, the Purchasers shall have the
right to receive five-year warrants to purchase 2,500,000 of our common stock at
an exercise price of $3.75 per share. Pursuant to the Able Energy
Transaction Documents, the Company also has an optional redemption right (which
right shall be mandatory upon the occurrence of an event of default) to
repurchase all of the Debentures for 125% of the face amount of the Debentures
plus all accrued and outstanding interest, as well as a right to repurchase all
of the Debentures in the event of the consummation of a new financing in which
we sell securities at a purchase price that is below the Conversion
Price. The stockholders of Properties have agreed to escrow a
sufficient number of shares to satisfy the conversion of the $5,000,000 in
outstanding Debentures in full. As of the date of this Annual Report,
the Company has not assumed any of Properties’ obligations with respect to the
Debentures.
July
27, 2005 Loan to Properties
The
Company loaned Properties $1,730,000 as evidenced by a promissory note dated
July 27, 2005. As of June 30, 2007, this note is still outstanding with a
maturity date of June 15, 2007 which was extended on various dates until the
note was paid-in-full on March 12, 2008. The interest income related to this
note for the years ended June 30, 2007 and 2006 was $164,350 and $70,575,
respectively. The note and accrued interest receivable in the amount
of $1,964,525 have been classified as contra-equity on the Company’s
consolidated balance sheet as of June 30, 2007.
Manns
Haggerskjold of North America, Ltd. (“Manns”) Agreement
On May
19, 2006, the Company entered into a letter of interest agreement with Manns,
for a bridge loan to the Company in the amount of $35,000,000 and a possible
loan in the amount of $100 million based upon the business combination with
Properties ("Manns Agreement"). The terms of the letter of interest provided for
the payment of a commitment fee of $750,000, which was non-refundable to cover
the due-diligence cost incurred by Manns. On June 23, 2006, the Company advanced
to Manns $125,000 toward the Manns Agreement due diligence fee. During the
period from July 7, 2006 through November 17, 2006, the Company advanced an
additional $590,000 toward the Manns Agreement due diligence fee. The amount
outstanding relating to these advances as of June 30, 2007 was
$715,000. As a result of not obtaining the financing (see below), the
entire $715,000 was expensed to amortization of deferred financing costs in the
twelve month period ended June 30, 2007.
As a
result of the Company receiving a Formal Order of Investigation from the SEC on
September 7, 2006, the Company and Manns agreed that the commitment to fund
being sought under the Manns Agreement would be issued to Properties, since the
Company’s stockholders had approved a business combination with Properties and
since the collateral for the financing by Manns would be collateralized by real
estate owned by Properties. Accordingly, on September 22, 2006, Properties
agreed that in the event Manns funds a credit facility to Properties rather than
the Company, upon such funds being received by Properties, it will immediately
reimburse the Company for all expenses incurred and all fees paid to Manns in
connection with the proposed credit facility from Manns to the
Company. On or about February 2, 2007, Properties received a term
sheet from UBS Real Estate Investments, Inc. (“UBS”) requested by Manns as
co-lender to Properties. Properties rejected the UBS offer as not consistent
with the Manns’ commitment of September 14, 2006. Properties subsequently
demanded that Manns refund all fees paid to Manns by the Company and Properties.
In order to enforce its rights in this regard, Properties has retained legal
counsel and commenced an arbitration proceeding against Manns and its
principals. See, “
Item 3. Legal Proceedings
”.
The Company and Properties intend to pursue their remedies against Manns. All
recoveries and fees and costs of the litigation will be allocated between the
Company and Properties in proportion to the amount of the Manns due diligence
fees paid.
Laurus
Master Fund Ltd. (“Laurus”) Agreement
On July
5, 2006, the Company received $1,000,000 from Laurus in connection with the
issuance of a convertible term note. Of the proceeds received from
Laurus in connection with the issuance of the convertible term note, the Company
loaned $905,000 to Properties in exchange for a note
receivable. Properties used such proceeds to pay (i) certain
obligations of CCI Group, Inc. (“CCIG”) and its wholly-owner subsidiary, Beach
Properties Barbuda Limited (“BPBL”), which owned and operated an exclusive
Caribbean resort hotel known as the Beach House located on the island of
Barbuda, and (ii) a loan obligation owed by BPBL to Laurus which loan was used
by CCIG to acquire the Beach House. Properties had previously
acquired a 70% interest in CCIG pursuant to a Share Exchange
Agreement. The Company received from Laurus a notice of a claim of
default dated January 10, 2007. Laurus claimed default under section
4.1(a) of the Term Note as a result of non-payment of interest and fees in the
amount of $8,826 that was due on January 5, 2007, and a default under sections
6.17 and 6.18 of the securities purchase agreement for “failure to use best
efforts (i) to cause CCIG to provide Holder on an ongoing basis with evidence
that any and all obligations in respect of accounts payable of the project
operated by CCIG’s subsidiary, BPBL, have been met; and (ii) cause CCIG to
provide within 15 days after the end of each calendar month, unaudited/internal
financial statements (balance sheet, statements of income and cash flow) of the
Beach House and evidence that BPBL and the Beach House are current in all of
their ongoing operational needs”.
The
aforementioned interest and fees were paid by the Company on January 11, 2007.
Further, the Company has used its best efforts to cause CCIG to provide reports
and information to Laurus as provided for in the securities purchase
agreement.
In
connection with the claim of default, Laurus claimed an acceleration of maturity
of the principal amount of the Note of $1,000,000 and approximately $154,000 in
default payment (“Default Payment”) as well as accrued interest and fees of
approximately $12,000. On March 7, 2007, Laurus notified the Company that it
waived the event of default and that Laurus had waived the requirement for the
Company to make the Default Payment.
Effect of Change in 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; however, the
Company is affected by the cost of fuel it purchases for resale to its
residential and commercial customers.
Customer
Stability
The Oil
Segment has a relatively stable customer base due to the tendency of homeowners
to remain with their traditional distributors. In addition, a majority of the
homebuyers tend to remain with the previous owner's distributor. As a result,
the Oil Segment’s customer base each year includes most customers retained from
the prior year, or homebuyers who have purchased from such customers. Like many
other companies in the industry, the Oil Segment delivers fuel oil and propane
to each of its customers an average of 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 Oil Segment provides
home heating equipment repair service on a seven-days-a-week basis. No single
customer accounts for 10% or more of the Oil Segment’s consolidated
revenues.
The
Travel Plaza Segment also has a relatively stable customer base due to the
tendency of both the professional and leisure drivers to remain with their
traditional, familiar service providers. As a result, the Travel
Plaza’s customer base includes most customers retained from prior years. Like
many other companies in the industry, the Travel Plaza Segment’s operation
delivers fuel, food and related travel services and merchandise to their
customers 24 hour a day. No single customer accounts for 10% or more
of the Travel Plaza Segment’s consolidated revenues.
Product
Lines
In the
one month of consolidated operations prior to June 30, 2007, the Travel Plaza
Segment accounted for $19.6 million of the Company’s revenue. Of this
amount, approximately 85% related to fuel sales with the balance related to
lodging, food, services, maintenance and merchandise sales. The
Travel Plaza Segment facilities generally operate 24 hours a day,
seven-days-a-week.
In fiscal
year 2007, sales of #2 heating oil accounted for approximately 70% of the Oil
Segment's revenues. The remaining 30% of revenues were from sales of gasoline,
diesel fuel, kerosene, propane, home heating equipment services and related
sales. The Oil Segment installs heating equipment and repairs such equipment on
a 24 hours a day, seven-days-a-week basis, generally within four hours of
request.
Industry
Overview
The
Company's businesses are highly competitive.
In
addition to competition from alternative energy sources, the Oil Segment
competes with distributors offering a broad range of services and prices, from
full service distributors similar to the Oil Segment, 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 Oil Segment, 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 Oil
Segment, provide equipment repair service on a 24 hour-a-day basis, which tends
to build customer loyalty. As a result, the Oil Segment may experience
difficulty in acquiring new retail customers due to existing relationships
between potential customers and other fuel oil or propane
distributors.
In
addition to competition from much larger, better financed travel plaza
operators, the Travel Plaza Segment competes with operators offering a broad
range of services and prices, from full service establishments similar to the
Travel Plaza Segment, to deep discount operators offering only
fuel. Competition with other companies in the travel plaza industry
is based primarily on customer service, location, hours of operation and price.
Longstanding customer relationships are typical in the industry. In
addition, most travel Plaza operators, including the Travel Plaza Segment;
provide service on a 24 hour-a-day basis, which tends to build customer
loyalty. As a result, the Travel Plaza Segment may experience
difficulty in acquiring new customers due to existing relationships between
potential customers and their current providers, competitive pricing and new or
upgraded travel plaza operators.
Marketing, Sales and
Strategic Partnerships
The Oil
Segment believes that it obtains new customers and maintains existing customers
by offering its full service home energy products at discount prices, providing
quick response in 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 Oil Segment engages in direct
marketing campaigns, advertises regularly, offers employee incentives and
encourages referrals.
The Oil
Segment has successfully expanded its customer base by employing a variety of
direct marketing tactics, including telemarketing campaigns, billboards, mass
and direct mailings and by distributing hand-bills and promotional items, such
as refrigerator magnets, sweatshirts and hats. Additionally, the Oil Segment's
delivery personnel are 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 Oil Segment is not servicing accounts, and act as
salespersons for the Oil Segment.
The Oil
Segment 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 Oil Segment
utilizes its fleet of fuel delivery trucks and service vans as moving
advertisements by emblazoning them with the Oil Segment's logo.
Historically,
referrals have been an important part of the Oil Segment's efforts to expand its
business and the Oil Segment offers incentives to customers who refer business.
The Oil Segment also offers other special limited time promotions designed to
increase business in specific targeted business segments. The Company also
encourages civic and religious organizations to refer business to the Oil
Segment through group rate discounts.
The
Travel Plaza Segment utilizes numerous marketing, sales and partnership
arrangements to promote its products, services and merchandise. The
Travel Plaza Segment makes extensive use of partnerships and co-ops with
nationally known travel service providers. This approach provides our
travel plaza guests and customers with immediate comfort in knowing they are
receiving the best service and products from nationally recognized
providers. For example, our locations distribute nationally known
brand name products, welcome guests into nationally recognized, top quality
restaurants and fast food courts, offer market priced lodging accommodations in
our nationally recognized hotels (at selected locations), provide professional
drivers with innovative, cutting edge pod technology, including access to air
conditioning, telephone, cable, including on-demand programming, and Internet
access, all in the comfort of their cab. In addition, we provide our
guests with well-stocked merchandise and convenience stores and numerous
personal services.
In
addition to word-of-mouth advertising, the Travel Plaza Segment advertises our
services and locations on interstate highway billboards, the Internet, and
through trade association websites and newsletters. From time-to-time
we advertise restaurant or merchandise specials in local newspapers to both
maintain and grow our local customer base. We have also entered into
non-binding loyalty service agreements with regional and national corporations
and professional driver associations, offering special billing and credit terms,
discounts on products and services and cross promotional benefits that encourage
guests to visit our other travel plaza locations. Our roadside
service vehicles serve as moving advertisements, displaying the livery of their
home travel plaza location.
Patents and
Trademarks
The
Company owns the exclusive right and license to use, and to license others to
use, the proprietary marks, including the service marks "Able Energy” (and
design) ("Able Energy Proprietary Marks") and "Able Oil" (and design) ("Able Oil
Proprietary Marks").
Presently
there is no effective determination by the United States Patents and Trademarks
Office, (“USPTO”), Trademark Trial and Appeal Board, the trademark administrator
of any state, or court regarding the Able Energy or Able Oil 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 or Able Energy. There are no
agreements currently in effect that significantly limit the rights of Able Oil
or Able Energy to use or license the use of their respective Proprietary Marks
except that, in connection with the sale of the Able Melbourne assets, the
Company granted the purchaser a perpetual license to use the trademark “Able
Oil” solely within the State of Florida and solely in conjunction with the words
“Melbourne” or “Florida”.
PriceEnergy.com
owns the exclusive right and license to use, and to license others to use, the
proprietary marks, including the service mark "PriceEnergy.com" (and design) and
“PriceEnergy.com The energy hot spot” (and design) ("PriceEnergy Proprietary
Marks"). In addition, PriceEnergy established certain common law
rights to the PriceEnergy Proprietary Marks through its continuous, exclusive
and extensive public use and advertising. The PriceEnergy Proprietary Marks are
not registered in any state. PriceEnergy also owns the domain names
PriceEnergy.com, FuelOilPrices.net, HomeHeatingOilPrices.net,
HeatingOilPrices.net and PriceEnergy.net.
Environmental Considerations
and Regulations
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
consolidated operations or financial condition. This is primarily due to the
Company's general policies 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.
Other
than the following disclosures, management is not aware of any other
environmental incident or condition that would cause the potential for
environmental liability.
Environmental
matters relating to the Oil Segment include the following:
Related
to its 1999 purchase of the property on Route 46 in Rockaway, New Jersey, the
Company settled a lawsuit with a former tenant of the property and received a
lump sum settlement of $397,500. This sum was placed in an attorney’s escrow
account for payment of all environmental remediation costs. Through June 30,
2007, Able Energy Terminal, LLC has been reimbursed for approximately $310,500
of costs and another $87,000 are not reimbursed and are included in prepaid
expenses and other current assets in the accompanying consolidated balance sheet
included elsewhere in this filing and must be presented to the attorney for
reimbursement. The environmental remediation is currently in progress on this
property. The majority of the “free standing product” has been
extracted from the underground water table. The remainder of the
remediation will be completed over the course of the next eight to ten years
using natural attenuation and possible bacterial injection.
On
September 15, 2003, Able Oil received approval from the New Jersey Department of
Environmental Protection of 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. This plan has
received approval and will be in effect for three years. The State of New Jersey
requires companies which operate major 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 of New Jersey 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.
On
September 26, 2006, the New Jersey Department of Environmental Protection
(“NJDEP”) conducted a site update inspection, which included a review of the
Route 46 site and an update of the progress of the approved
remediation. The NJDEP Northern Office director who conducted the
inspection, concluded that the remediation progress was proceeding appropriately
and that the department approved of the Company’s continued plan to eliminate
the remaining underground product. 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.
Environmental
matters relating to the Travel Plaza Segment include the following:
Clarks Ferry All
American
This site
has been subject to an ongoing groundwater cleanup program since 1996 when a
claim was filed with the Pennsylvania Underground Storage Tank Indemnification
Fund (“USTIF”). The remedial action plan has been handled by a third
party contractor since 1998. Active remediation efforts ceased in
2004 and a three-year period of well monitoring was started in 2005 calling for
six semi-annual well sampling events.
USTIF
coverage for the site was approved at 65% of total remediation
costs. In 2004, cost estimates to complete the remediation project
were prepared by the third party contractor and Plazas accepted a lump sum
payout from USTIF of approximately $32,000 (65% of $48,000 estimate of
completion costs). In September 2007, the final sampling event was completed and
results were favorable. A “Post Remedial Care Plan Completion Report”
was submitted to the PA DEP in January 2008 and was accepted the following
month. Monitoring wells were closed in March 2008, and a final billing generated
for the remedial activities. At June 30, 2008, Plazas owed $8,000 for
completion of these activities.
Frystown All
American
This site
is subject to an ongoing groundwater cleanup program that started in 1998 when
the old tanks and fuel islands were replaced. Tanks were not leaking,
but lines in the fuel island area had leaked and created the need for soil
removal and groundwater cleanup. It is also believed that a heating
oil tank removed in the early 90’s was an additional source of
contamination. The site was accepted by USTIF for 100%
coverage. The groundwater pump and treat system was activated in
December, 2001 and was shut down in October, 2005, as the monitoring wells came
into compliance. The quarterly well monitoring period was started in
December, 2005 and has continued through June, 2007. The final well
sampling event in September 2007 was uneventful. The contractor
is currently preparing the final site closure report, which will be submitted to
the PA DEP for final closure and concurrence that no further remedial activities
are necessary.
Belmont All
American
This site
has been subject to an ongoing groundwater remediation since 2004, when a leak
was found in a flex hose at a dispenser. A groundwater filtration
system went online in November, 2005. Monthly well samples are taken
and good progress is being shown towards the attainment of
compliance. Full closure of the site is expected within the next
twelve (12) months, with an anticipated cost of approximately $35,000 to
Plazas.
Doswell All
American
This site
presently has no underground storage tanks (“UST's”) in use for storage of
petroleum products. Diesel fuel storage is in two above ground
storage tanks (“AST’s”); one 500,000 gallons and the other is 100,000
gallons.
In
November, 2005, the Virginia Department of Environmental Quality (“VA DEQ”)
issued a violation for an unknown release of petroleum product into a storm
water runoff pond at the site. Several source areas were identified
and ultimately ruled out, with the exception of an oil/water separator that was
found to have a faulty valve allowing oil runoff to bypass separator and drain
directly to the pond. A new oil/water separator was put in place in
December, 2005. On July 9, 2007, the VA DEQ issued a letter canceling
any further action relative to this violation.
In April,
2007, the VA DEQ notified Plazas that, due to a change in regulations with
respect to AST containment requirements, Plazas would be required to make
changes to the existing AST’s and/or containment berm by December 31,
2007. After consideration of various options to bring the site into
compliance, it was decided that the best alternative was to dismantle the
500,000 gallon AST.
In
November 2007, the 500,000 gallon AST was dismantled and removed from the site
at a cost of approximately $15,000. Soil borings in the area of the
tank and pad have been clean. No further cost is anticipated relative
to this project
Government
Regulations
Numerous
federal, state and local laws, including those relating to protection of the
environment and worker safety, 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 affect 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 license with a hazardous materials endorsement. The
Company is also subject to the rules and regulations concerning the 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 "hours of service" 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/or 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.
Employees
As of
June 30, 2007, the Company’s full-time employment totaled 645
individuals.
As of
June 30, 2007, the Oil Segment’s full-time employment totaled 95 individuals.
From October through March, the Oil Segment’s peak season, the Oil Segment
employs approximately 120 persons. From April through September, the Oil Segment
generally employs approximately 90 persons. Currently, there are no organized
labor unions representing any of the employees of the Oil Segment or any of its
related companies and management considers relations with its employees to be
good.
As of
June 30, 2007, the Travel Plaza Segment’s full-time employment totaled 550
individuals. Employment levels remain relatively stable throughout the
year. Currently, there are no organized labor unions representing any
of the employees of the Travel Plaza Segment or any of its related companies and
management considers relations with its employees to be good.
Item
1A.
Risk
Factors
Set forth
below are certain risks and uncertainties relating to our business.
You
should
carefully consider the following information about risks
described below, together with the
other information contained in this Annual
Report and in our other filings with
the SEC, before you decide to buy or maintain
an investment in our common stock. We believe the risks described below are the
risks that are material to us as of the filing date of this Annual
Report. If any of the following risks actually occur, our business
financial condition, operating results and future growth prospects would likely
be material and adversely affected. In these circumstances, the market price of
our common stock could decline, and you may lose all or part of the money you
paid to buy our common stock.
We do not
believe we have, and we are unsure whether we will be able to generate,
sufficient funds to sustain our operations through the next twelve
months.
Our
management believes
that currently available funds will not be
sufficient to sustain our operations at
current levels through the next twelve
months. The Company has incurred losses from continuing operations
during the years ended June 30, 2007, 2006 and 2005 of approximately, $6.6
million, $6.2 million and $2.2 million, respectively, resulting in an
accumulated deficit balance of approximately $17.7 million as of June 30, 2007.
At June 30, 2007, we had $3.0 million in cash and cash equivalents and a working
capital deficiency of $3.6 million. Our ability to continue to
operate at current levels depends upon, among
other things, our ability to
generate sufficient revenue from the sale of
our products and services
and the receipt
of continued funding from our existing
short-term and long-term financing sources.
In the
long-term, our ability to continue as a going concern is dependent on generating
sufficient revenue from product sales and the sale of our services. Our ability
to generate significant revenue from any of these or other sources is
uncertain. Historically, our operations have not generated sufficient
revenue to cover our costs. In the event that our operations do not
generate sufficient cash, we could be required to reduce our level of operations
while attempting to raise additional working capital. We can give no
assurance that additional financing will be available to us on acceptable terms
or at all. The failure to obtain any necessary additional financing
would have a material adverse effect on us. If adequate funds are not available
or are not available on
acceptable terms, our ability to
fund our operations and any intended
expansion, to take advantage of
business opportunities, to develop or enhance products or
services or to otherwise respond to competitive pressures
would be
significantly limited, and we might need to significantly restrict or
discontinue our operations.
The
report of our independent registered public accounting firm for the year ended
June 30, 2007 contains a qualification relating to our ability to continue as a
going concern.
The
report of our independent registered public accounting firm on our consolidated
financial statements as of June 30, 2007 and for the year then ended contains an
explanatory paragraph stating that there is substantial doubt as to our ability
to continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty. This
uncertainty may affect our ability to raise additional capital and may also
negatively impact our relationships with current and potential suppliers and
customers.
These are
not the only risks and uncertainties we face. Additional risks and uncertainties
not presently known to us or that we currently deem to be immaterial may also
impair our business. If any of the following risks actually occur, the business,
operating results or financial condition could be material adversely
affected.
We
have a history of operating losses and expect to sustain losses in the future
and may still sustain losses in the future even if we successfully and
efficiently integrate the assets of Properties into our business
We have
experienced significant operating losses in five out of the last six fiscal
years. For the year ended June 30, 2007, we had a loss of
approximately $6.6 million. We also expect to incur a loss for the
fiscal year ending June 30, 2008.
Managing
our growth may affect financial performance
Our
growth and expansion has required, and will continue to require, increased
investment in management and financial personnel, financial management systems
and controls, as well as facilities. We intend to continue to expand
our business and operations, including entry into new markets, which will place
additional strain on our management and operations. Our future operating results
will depend, in part, on our ability to continue to broaden our senior
management group and administrative infrastructure, and our ability to attract,
hire and retain skilled employees. Our success will also depend on the ability
of our officers and key employees to continue to implement and improve our
operational and financial control systems and to expand, train and manage our
employee base. In addition, our future operating results will depend on our
ability to expand our sales and marketing capabilities and expand our customer
support operations commensurate with our growth, should such growth occur. If
our revenues do not increase in proportion to our operating expenses, our
management systems do not expand to meet increasing demands, we fail to attract,
assimilate and retain qualified personnel, or our management otherwise fails to
manage our expansion effectively, there would be a material adverse effect on
our business, consolidated financial condition and operating
results.
Substantial
long-term debt may adversely impact our long-term ability to expand
As of
June 30, 2007, we had long-term liabilities of $4.4 million. Our ability to
satisfy such obligations will depend on our 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 our control.
There can be no assurance that we will be able to service our indebtedness. If
we are unable to service our indebtedness, we will be forced to examine
alternative strategies that may include actions such as reducing or delaying
capital expenditures, restructuring or refinancing our indebtedness, or the sale
of assets or seeking additional equity and/or debt
financing. There can be no assurance that we will be able to
implement any of these strategies even if the need arises.
Growth
dependent upon unspecified acquisitions and adequate financing
Our
growth strategy includes the acquisition of existing fuel distributors and truck
stops. There can be no assurance that we will be able to identify new
acquisition candidates or, even if a candidate is identified, that we will have
access to the capital necessary to consummate such acquisitions. Furthermore,
the acquisition of additional companies involves a number of additional risks.
These risks include the diversion of management's attention from our operations,
possible difficulties with the assimilation of personnel and operations of
acquired companies, the earnings impact associated with the amortization of
acquired intangible assets, and the potential loss of key employees of acquired
companies. The future success of our business will depend upon our ability to
manage our growth through acquisitions. The Company’s objective is to grow our
customer base through mergers and acquisitions. There can be no assurance that
we will have the financing or management and operating personnel to accomplish
this objective.
SEC
formal order of private investigation
On
September 7, 2006, we received a Formal Order of Private Investigation from the
SEC pursuant to which we, certain of our officers and a director, were served
with subpoenas requesting certain documents and information. The
Formal Order authorizes an investigation of possible violations of the
anti-fraud provisions of the federal securities laws with respect to the offer,
purchase and sale of our securities and our disclosures or failures to disclose
material information in our required filings. While we believe that we did not
violate any securities laws and we have cooperated fully with and assisted the
SEC in its inquiry, there can be no certainty with regard to the outcome of the
investigation and there can be no assurance that there will not be a material
adverse effect on us. The cost of complying with the SEC
investigation may affect our liquidity, consolidated results of operations, and
ability to raise cash through the sale of debt or equity
securities.
Trademarks
and service marks
We
believe that our trademarks and service marks have significant value and are
important to the marketing of our travel plaza operations, fuel distribution
products and services. There can be no assurance, however, that our
proprietary marks do not or will not violate the proprietary rights of others,
that our marks would be upheld if challenged or that we would not be
prevented from using our marks, any of which could have an adverse effect on us
and our results of operations. In addition, there can be no assurance that we
will have the financial resources necessary to enforce or defend
our trademarks and service marks against infringement. Should
there be an infringement, and the Company is unsuccessful in litigation, it may
negatively impact the Company’s revenue.
Liquidity
and Going Concern Uncertainty
Our net
loss for the year ended June 30, 2007, was $6.6 million, including non-cash
charges totaling approximately $4.9 million. The Company has been funding its
operations through an asset-based line of credit, the issuance of convertible
debentures and the proceeds from the exercise of options and warrants. The
Company will need some combination of new financing, restructuring of existing
financing, improved receivable collections and/or improved operating results in
order to maintain adequate liquidity over the course of the 2008 fiscal
year.
As of
June 30, 2008, the Company had a cash balance of approximately $2.4 million, of
which $1.5 million represents an obligation for funds received in advance under
the pre-purchase fuel program. At June 30, 2008, the Company had
available borrowings through its credit line facility of $0.8 million. In
order to meet our liquidity requirements, the Company continues to explore
financing opportunities available to it.
The
Company is pursuing other lines of business, which include expansion of its
current commercial business into other products and services such as bio-diesel,
solar energy and other energy related home services. The Company is also
evaluating all of its business segments for cost reductions, consolidation of
facilities and efficiency improvements. There can be no assurance that we
will be successful in our efforts to enhance our liquidity
situation.
The
accompanying consolidated financial statements included elsewhere in this filing
have been prepared in conformity with United States generally accepted
accounting principles, which contemplate continuation of the Company as a going
concern and assume realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred losses from continuing
operations during the years ended June 30, 2007, 2006 and 2005 of $6.6 million,
$6.2 million and $2.2 million, respectively. Net cash used in
operations during the years ended June 30, 2007 and 2006 was $1.3 million and
$1.7 million, respectively. At June 30, 2007, the Company has a
working capital deficiency of $3.6 million. These factors raise
substantial doubt about the Company’s ability to continue as a going
concern. The consolidated financial statements included elsewhere in
this filing do not include any adjustments relating to the recoverability of the
recorded assets or the classification of the liabilities that may be necessary
should the Company be unable to continue as a going concern.
The
Company will require some combination of new financing, restructuring of
existing financing, improved receivable collections and/or improved operating
results in order to maintain adequate liquidity over the course of the year
ending June 30, 2008. Also, see “Timeliness of future SEC
filings”, below.
There can
be no assurance that the financing or the cost saving measures as identified
above will be satisfactory in addressing the short-term liquidity needs of the
Company. In the event that these plans cannot be effectively
realized, there can be no assurance that the Company will be able to continue as
a going concern.
A
limited market for our common stock and "Penny Stock" rules may make buying or
selling our common stock difficult
Our
common stock presently trades on the pink sheets. As a result, an investor may
find it difficult to dispose of, or to obtain accurate quotations as to the
price of, our securities. In addition, our common stock is subject to
the penny stock rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors. The SEC regulations generally
define a penny stock to be an equity that has a market price of less than $5.00
per share, subject to certain exceptions. Unless an exception is
available, those 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 and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors (generally
institutions). In addition, the broker-dealer must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. Moreover, 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 transactions prior to
sale. Regulations on penny stocks could limit the ability of
broker-dealers to sell our common stock and thus the ability of purchasers of
our common stock to sell their shares in the secondary market.
Our share
price may decline due to a large number of shares of our common stock eligible
for sale in the public markets. As of June 30, 2008, we had
outstanding 14,965,389 shares of common stock and up to 7,127,524 shares
issuable upon exercise of the Company’s outstanding options, warrants and
convertible debentures. Of the Company’s 14,965,389 outstanding shares,
11,666,667 of these shares were issued in connection with the consummation of
the acquisition of the assets of Properties. These shares are
restricted and will be held pursuant to Rule 144. With such a
substantial number of shares eligible for future sale, our stock price may
decline and investors may find it difficult to sell their shares in the open
market at or above their basis in the stock.
Registration
rights agreements
On July
12, 2005, the Company consummated a financing with certain purchasers in the
sale of $2.5 million of Variable Rate Convertible Debentures (the "Debentures").
The Debentures may be converted at the option of the purchasers into shares of
our common stock at a conversion price of $6.50 per share. In addition, the
purchasers of these Debentures received five (5) year warrants to purchase an
aggregate of 192,308 of common stock at an exercise price of $7.15 per share
(the “2005 Warrants”). Pursuant to the Registration Rights Agreement
among the parties, the Company filed a registration statement covering the
shares of its common stock that may be issued through the conversion of the
Debentures and exercise of the 2005 Warrants. This registration
statement was declared effective on December 20, 2005. Since that
date, the purchasers converted into shares of the Company’s common stock
approximately $2.365 million of the principal of the Debentures. The
Company has an obligation to keep this registration statement effective on a
continuous basis, which obligation the Company breached when it failed to update
the registration statement with new audited consolidated financial statements by
October 31, 2006. As a result of this breach, the purchasers of the
Debentures are entitled to partial liquidated damages in the amount of 2% of the
aggregate purchase price of the Debentures then held by the purchasers (which
remaining balance of the Debentures at June 30, 2007 is $132,500) for each month
that our breach continues. There are no liquidated damages for not
maintaining an effective registration statement covering the 2005
Warrants. The unpaid liquidated damages accrue interest daily based
on the rate of 18% per annum. Additionally, the Company’s breach of
its registration obligations constitutes a default under the Debentures, which
enables the purchasers to declare the Debentures immediately due and
payable. As of June 30, 2008, the Company has not received any notice
from the purchasers of the Debentures regarding this registration rights
default.
On July
5, 2006, the Company closed a Securities Purchase Agreement entered into on June
30, 2006 whereby it sold a $1 million convertible term note to Laurus Master
Fund, Ltd. ("Laurus"). In conjunction with this issuance the Company
agreed that within sixty (60) days from the date of issuance of the convertible
term note payable and warrant that it would file a registration statement with
the SEC covering the resale of the shares of the Company's convertible term
common stock issuable upon conversion of the note and the exercise of the
warrant. This registration statement would also cover any additional shares of
common stock issuable to Laurus as a result of any adjustment to the fixed
conversion price of the note or the exercise price of the
warrant. The agreement does not provide any formula for
liquidated damages. The Company did not file a registration statement
by August 29, 2006 covering the common stock issuable upon conversion of the
convertible term note and the exercise of warrants issued to
Laurus. As of the filing date of this Annual Report, the Company has
yet to file that registration statement. Consequently, the Company is
in breach of its registration obligations to Laurus. As of June 30,
2008, the Company has not received any notice from Laurus regarding this
registration rights default and or the assessment of any penalties that might
have resulted therefrom.
On August
8, 2006, the Company issued $2,000,000 of convertible debentures to certain
investors. In conjunction with this issuance, the Company had agreed to file a
registration statement within forty-five (45) days, or by September 22, 2006,
covering the resale of the shares of common stock underlying the debentures and
warrants issued to the investors, and by October 15, 2006, to have such
registration statement declared effective. The registration rights
agreement with the investors provides for partial liquidated damages in the case
that these registration requirements are not met. From the
date of violation, the Company is obligated to pay liquidated damages of 2% per
month of the outstanding amount of the convertible debentures, up to a total of
24% of the initial investment, or $0.5 million. As of the filing date
of this Annual Report, the Company has not yet filed a registration statement
regarding these securities. Accordingly, through June 30, 2008, the
Company has incurred a liquidated damages obligation of $0.5 million, none of
which has been paid. In addition, the Company is obligated to
pay 18% interest per annum on any damage amount not paid in full within 7
(seven) days. Through June 30, 2008, the Company has incurred an
interest obligation of $0.1 million, none of which has been paid. As
of the filing date of this Annual Report, the holders have not waived their
rights under this agreement. Additionally, the Company’s breach of
its registration obligations constitutes a default under the agreement, which
enables the holders to declare the convertible debentures immediately due and
payable. As of the filing date of this Annual Report, the Company has
not received any notice from the purchasers of the convertible debentures
regarding this registration rights default or any other default
notice.
As of the
filing date of this June 30, 2007 Annual Report on From 10-K, , we are in
non-compliance with the registration rights requirements of certain financings
set forth above covering in the aggregate,
6,698,685 shares of our
common stock
.
Listing
of common stock
Our
common stock is currently quoted on the Pink Sheets under the symbol
(“ABLE.PK”). The Company will apply for eligibility for trading on the OTC
Bulletin Board as soon as it qualifies for listing after it is in
compliance with its required SEC filings. To continue such
eligibility, we must file our periodic reports with the SEC on a timely
basis. If we fail to file such reports within 10 days of their due
date, our stock will cease to be eligible for quotation on the OTC Bulletin
Board. There can be no assurance that our application for eligibility
for quotation on the OTC Bulletin Board will be accepted. If we fail
to have our common stock eligible for quotation on the OTC Bulletin Board, the
trading volume of our stock may be adversely affected and stockholders may not
able to sell any or all of their shares at or above their basis in such stock,
which would result in a loss for a selling stockholder.
Timeliness
of future SEC filings
The
Company was unable to file this Annual Report on Form 10-K, and the September
30, 2007, December 31, 2007, and March 31, 2008 Quarterly Reports on Form
10-Q and the June 30, 2008 Annual Report on Form 10-K on a timely basis. The
late filings of these documents may adversely affect our ability to raise
capital and erode investor confidence. The Company will continue to
make every effort to bring all our SEC filings up-to-date.
Seasonal
factors
Our
revenues and income are derived from the home heating oil business and our auto
and travel plaza service business. Our home heating oil business is
seasonal and is a material portion of our business. A substantial portion of the
home heating oil business is conducted during the fall and winter months.
Weather patterns during the winter months can have a material adverse impact on
our 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 affect the results of the Company's
fuel oil operations. Our travel plaza services business is much less
susceptible to the seasonality issues experienced in our heating oil
business.
Approximately
60% to 65% of our revenues from our Oil Segment business are earned and received
from October through March. 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.
Fuel
pricing and the effect on profitability
Disruption
of fuel supply and fuel pricing would adversely affect our profitability.
Increases in the pricing for fuel and home heating oil will also adversely
affect our profit margins associated with our businesses, since we may not be
able to pass on our proportional increases to our customers.
Other
factors which may have a significant effect on fuel prices include: natural
disasters, such as those which have devastated the Gulf Coast (areas that are
major producers, distributors or refiners of petroleum-based products); major
global conflicts, especially those involving the U.S. and/or oil producing
countries, strikes or political conflict in oil producing countries and the
stability of OPEC and its desire not to disrupt worldwide economies through poor
management of fuel supply and pricing.
In the
future, interruptions in the world fuel markets may cause shortages in, or total
curtailment of, fuel supplies. Moreover, a substantial portion of the oil
refining capacity in the United States is controlled by major oil companies.
These companies, for various reasons (e.g. for new standards imposed by EPA)
could in the future decide to limit the amount of fuel sold to independent
operators such as us. Any material decrease in the volume of fuel sold for any
extended period of time could have a material adverse effect on the results of
operations. Similarly, an extended period of instability in the price of fuel
could adversely affect our results.
Government
regulation
Federal,
state and local laws, particularly laws relating to the protection of the
environment and worker safety, can materially affect our operations. The
transportation and dispensing of fuel oil, diesel fuel, propane and gasoline is
subject to regulation by various federal, state and local agencies, including
the U.S. DOT. These regulatory authorities have broad powers and we are subject
to regulatory and legislative changes that can affect the economies of the
industry by requiring changes in operating practices or influencing demand for,
and the cost of providing, its services. Additionally, we are subject to random
DOT inspections. Any material violation of DOT rules or the Hazardous Materials
Transportation Act may result in citations and/or fines on us. In addition, we
depend on the supply of petroleum products from the oil and gas industry and,
therefore, we may be affected by changing taxes, price controls and other laws
and regulations relating to the oil and gas industry generally. We cannot
determine the extent to which future operations and earnings may be affected by
new legislation, new regulations or 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 us to liability for the conduct or
conditions caused by others. 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.
Potential
environmental liability
Our fuel
distribution is 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. We
face potential liability for, among other things, fuel spills, gas leaks and
negligence in performing environmental clean-ups for our customers.
Specifically, we maintain fuel storage facilities on sites owned or leased by
us, and could incur significant liability to third parties or governmental
entities for damages, 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 our financial condition or results of operations.
Although we believe that we are 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 our 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 us.
No
assurance of adequate insurance protection
We
maintain insurance policies in such amounts and with coverage and deductibles as
our management believes are reasonable and prudent. There can be no assurance,
however, that such insurance will be adequate to protect us from liabilities and
expenses that may arise from claims for personal and property damage arising in
the ordinary course of business or that such level of insurance will be
maintained by us at adequate levels or will be available at economic prices.
Should the Company not be able to negotiate additional coverage at economical
rates, it may negatively affect the Company’s consolidated results of
operations.
Competition
from alternative energy sources (for the home heating oil division)
Our
retail home heating business competes for customers with suppliers of alternate
energy products, principally natural gas and electricity. Every year, a small
percentage of our oil customers convert to other home heating sources, primarily
natural gas. In addition, we may lose additional customers due to conversions
during periods in which the cost of its services exceeds the cost of alternative
energy sources. If this trend continues and the Company is not able
to replace these lost customers through expansion or increased market share, it
could cause the Company to lose significant revenues. At this point, Able has
not suffered any significant loss as a result of conversion to these alternative
energy sources.
Concentration
of wholesale suppliers for heating oil
We
purchase our #2 heating oil fuel supplies on the spot market. We currently
satisfy our inventory requirements with ten different suppliers, the majority of
which have significant domestic fuel sources, and many of which have been
suppliers to us for over five years. Our current suppliers are Hess,
Conectiv Energy, Mirabito, Fossil Fuel, Burke Petroleum, Leighow Oil, BioHeat of
Colorado, Farm & Home, North Jersey Oil and Sunoco, Inc. (R&M). We
monitor the market each day and determine when to purchase our oil inventory and
from whom.
During
the year ended June 30, 2007, seven suppliers (Sunoco, Hess, Sprague
Energy, Catamount Petroleum, Petrocom Energy, Petron Oil Corp. and Valero
Supply and Marketing) provided Able Oil and Able NY with
approximately 87%
of its heating oil
requirements.
TransMontaigne
Product Services, Inc. provided Able Melbourne with approximately 96% of its
diesel fuel product requirements for the year ended June 30, 2007 and Fleetwing
provided Able Melbourne with all of its lubricant and related product
requirements for the year ended June 30, 2007.
Management
believes that if our supply of any of the foregoing products was interrupted, we
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 or that the
price the Company may be required to pay for such fuel or the credit terms for
such purchases will be acceptable to the Company. Furthermore,
currently these suppliers extend us credit toward the purchase of our fuel
supplies. There can be no assurance that these suppliers will continue to offer
us acceptable credit terms. Should the Company need to secure
alternative suppliers for these products, the pricing would be approximately the
same
.
Absence
of written agreements
Approximately
86% of our home heating customers do not have written agreements with us and can
terminate services at any time, for any reason. Although we have never
experienced a significant loss of our customers, if we were to experience a
high rate of terminations, our business and financial condition could be
adversely affected. While the Travel Plaza Segment has a number of
loyalty based supply and services agreements with commercial fleet customers,
none of these agreements require the commercial fleet operators to purchase
their fuel and services from the Travel Plaza Segment.
Risks
associated with expansion into new markets
A
significant element of our future growth strategy involves the expansion of our
business into new geographic and product markets. Expansion of our operations
depends, among other things, on the success of our 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.
Dependence
on and relative inexperience of key personnel
Our
future success will depend, to a significant extent, on the efforts of current
key management personnel, including Gregory D. Frost, Chairman and Chief
Executive Officer, Richard A. Mitstifer, President, Daniel L. Johnston, Chief
Financial Officer, William Roger Roberts, Chief Operating Officer, Frank Nocito,
Executive Vice-President, Louis Aponte, President, Home Heating Oil Segment and
John L.Vrabel, Chief Operating Officer, Price Energy Unit. On
May 24, 2007, Gregory D. Frost gave notice to the Board of Directors that he was
ending his leave of absence as Chief Executive Officer and Chairman of the Board
and was resuming his duties. Messrs Mitstifer, Johnston, Roberts,
Nocito and Westad were appointed to their current positions by the Board of
Directors on September 24, 2007. Mr. Aponte was appointed to his
position on October 22, 2008. The loss of one or more of these key employees
could have a material adverse effect on our business. In addition, we believe
that our future success will depend, in large part, upon our continued
ability to attract and retain highly qualified management, technical and sales
personnel. There can be no assurance that we will be able to attract and retain
the qualified personnel necessary for our business.
Competition
Our Oil
Segment business is highly competitive. In addition to competition from
alternative energy sources, we compete with distributors offering a broad range
of services and prices, from full service distributors similar to ours, to those
offering delivery of home heating fuel 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 home heating
industry. Many companies, including ours, 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 ours, provide equipment repair service on a
24 hour-a-day basis, which tends to build customer loyalty. We compete against
companies that may have greater financial resources than ours. As a result, we
may experience difficulty in acquiring new retail customers due to existing
relationships between potential customers and other retail home heating
distributors. If the Oil Segment cannot effectively compete, we would
suffer losses of revenue and net income.
In
addition to competition from much larger, better financed travel plaza
operators, the Travel Plaza Segment competes with operators offering a broad
range of services and prices, from full service establishments similar to the
operations of the Travel Plaza Segment, to deep discount operators offering only
fuel. Competition with other companies in the travel plaza industry
is based primarily on customer service, location, hours of operation and price.
Longstanding customer relationships are typical in the industry. In
addition, most travel plaza operators, including the Travel Plaza Segment,
provide service on a 24 hour-a-day basis, which tends to build customer
loyalty. As a result, the Travel Plaza Segment may experience
difficulty in acquiring new customers due to existing relationships between
potential customers and their current providers, competitive pricing and new or
upgraded travel plaza operators.
Weather
Weather
conditions can impact the demand for home heating fuel. Demand for
home heating oil is primarily seasonal, utilized in the colder months of the
fall, winter, and early spring. Demand is determined by weather
patterns and how cold the temperature gets. Ordinarily, most demand
is determined by the measurement of heating degree days, a measurement of the
average temperature for the day that is below the mean temperature of 65 degrees
fahrenheit. If weather patterns are such that temperatures are warmer
than normal, then less heating degree days will be used, and less of the
Company’s home heating products will be sold thereby negatively impacting our
revenues and net income (loss).
Heating
oil futures contracts
During
the period from July 28, 2006 to August 15, 2006, the Company’s PriceEnergy
subsidiary entered into futures contracts for #2 heating oil to hedge a portion
of its forecasted heating season requirements. The Company purchased 40
contracts through various suppliers for a total of 1,680,000 gallons of #2
heating oil at an average price of $2.20 per gallon. Due to warmer than average
temperatures through the heating season (lower than average degree days), as of
June 30, 2007, the Company has experienced a substantial drop in fuel
consumption and price, resulting in a loss on these contracts.
Through
June 30, 2007, the Company’s PriceEnergy subsidiary has deposited a total of
$923,017 in margin requirements with the broker. Through June 30,
2007, the Company has realized a loss of $926,170 on 40 closed contracts
representing 1,680,000 gallons.
Risks
Particular to the Travel Plaza Segment
We
are highly dependent on fuel sales which have low margins.
During
the year ended June 30, 2007, net revenues from our fuel sales accounted for
approximately 17.9% of our total net revenues. The volume of fuel sold by us and
the profit margins associated with these sales are affected by numerous factors
outside of our control, including the condition of the long-haul trucking
industry, the supply and demand for these products and the pricing policies of
competitors. Fuel sales generate very low gross margins.
The
U.S. truck stop industry is highly competitive and fragmented, and our
competitors may have greater resources or other competitive
advantages.
In
addition to competition from much larger, better financed travel plaza
operators, the Travel Plaza Segment competes with operators offering a broad
range of services and prices, from full service establishments similar to the
operations of the Travel Plaza Segment, to deep discount operators offering only
fuel. Competition with other companies in the travel plaza industry
is based primarily on customer service, location, hours of operation and price.
Longstanding customer relationships are typical in industry. In
addition, most travel Plaza operators, including the Travel Plaza Segment,
provide service on a 24 hour-a-day basis, which tends to build customer
loyalty. As a result, the Travel Plaza Segment may experience
difficulty in acquiring new customers due to existing relationships between
potential customers and their current providers, competitive pricing and new or
upgraded travel plaza operators.
The
truck stop industry is highly dependent on the financial condition of the
trucking industry.
Our
business is dependent upon the trucking industry in general and upon long-haul
trucks in particular. In turn, the trucking industry is dependent on economic
factors, such as the level of domestic economic activity and interest rates and
operating factors such as fuel prices and fuel taxes, over which we have no
control and which could contribute to a decline in truck travel. The long-haul
trucking business is also a mature industry that has historically been
susceptible to recessionary downturns. Available data indicate that diesel
consumption by the trucking industry has grown more slowly than trucking
ton-miles, as technological improvements in truck engines have increased their
fuel efficiency. In addition, many small trucking companies have filed for
bankruptcy protection in recent years. A decline in operations by the long-haul
trucking industry would adversely affect us.
Our
profitability can be significantly impacted by cyclical factors beyond our
control such as decreases in manufacturing output.
The
volume of truck shipments is in part dependent on changes in manufacturing
output. Sustained decreases in manufacturing production can significantly reduce
truck traffic, which in turn reduces fuel purchases and visits to our Plazas,
and negatively impacts our results of operations.
A
domestic terrorist incident affecting the trucking industry could adversely
affect our business.
A
domestic terrorist incident, particularly an incident involving a truck, could
produce adverse effects on our business in several ways, including:
|
|
•
|
|
a
reduction in the volume of truck traffic for more than a brief
period;
|
|
|
•
|
|
the
bankruptcy of certain trucking companies;
and
|
|
|
•
|
|
the
imposition of additional regulations affecting truck traffic, increasing
the expenses of truck operations and businesses that service trucks or
provide overnight facilities for trucks and truck drivers, such as our
business. For example, additional fences or other security for parked
trucks might be required.
|
The
occurrence of any of these effects could have a material negative impact on our
results of operations.
We
are subject to environmental laws and regulations and the cost of compliance
with these requirements could negatively impact the results of our
operations.
A
significant portion of our business consists of storing and dispensing petroleum
products, activities that are subject to increasingly stringent regulation by
both the federal and state governments. Moreover, governmental authorities can
impose significant fines and penalties on us for any alleged noncompliance with
environmental requirements. In addition, under certain environmental laws,
private parties can bring lawsuits against us for any property damage or
personal injury that allegedly is caused by our operations. We may incur
increased expenditures if additional requirements are imposed by federal and
state governments, or we fail to comply with environmental requirements and are
fined or penalized, or if we must defend or settle lawsuits that might be
brought by private parties.
In
addition, under various environmental laws, a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of hazardous or toxic substances (including petroleum and petroleum products)
on, under, in, or migrating from such property. Certain laws impose liability
whether or not the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. Moreover, under certain
environmental laws, persons who arrange, or are deemed to have arranged, for the
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at the disposal or
treatment site, regardless of whether such site is owned or operated by such
person and regardless of whether the original disposal or treatment activity
accorded with applicable requirements. As a result of our business and the
quantity of petroleum products we handle, there can be no assurance that
hazardous substance contamination does not exist or that material liability will
not be imposed in the future for the remediation of such
contamination.
A
disruption in the supply of fuel could adversely affect our
profitability.
We would
be adversely affected in the event of a disruption in our supply of fuel. In
addition, sharp increases in fuel prices at truck stop plazas have historically
tended to lead to temporary declines in fuel margins. Fuel prices have risen
sharply in the recent past and may continue to rise. Factors which
have had significant effects on fuel prices include: the interaction of several
factors including low inventories, high demand caused by a spike in the cost of
natural gas, major global conflicts, especially those involving the U.S. and/or
oil producing countries, strikes or political conflict in oil producing
countries, intervention by OPEC in the form of restricted output and changes in
output by domestic oil refineries.
In the
future, interruptions in world fuel markets may cause shortages in, or total
curtailment of, fuel supplies. Moreover, a substantial portion of the oil
refining capacity in the United States is controlled by major oil companies.
These companies could in the future decide to limit the amount of fuel sold to
independent operators like us. Although our current suppliers provide fuel to
us, a significant portion of our fuel needs continues to be supplied from
third-parties contracted by them. In addition, any new standards that the EPA
may impose on refiners that would necessitate changes in the refining process
could limit the volume of petroleum products available from refiners in the
future. A material decrease in the volume of fuel sold for an extended time
period would have a material adverse effect on our results of operations.
Similarly, an extended period of instability in the price of fuel could
adversely affect our results.
In
addition, our patronage by customers desiring to purchase fuel accounts for a
significant portion of customer traffic and has a direct impact on the revenues
and profitability of our other operations, including our restaurant and non-fuel
operations. Accordingly, any significant reductions in fuel supplies or other
reductions in fuel volume would materially adversely affect our
results.
Weather
or seasonal issues have an insignificant impact on the Company’s Travel Plaza
Segment. While leisure travel has a tendency to moderate somewhat in
the winter months in the geographic areas in which we operate, revenue related
to the leisure traveler is relatively insignificant compared to fuel and
services related revenue generated by our professional driver
customers.
Item
1B. Unresolved Staff Comments
Please
refer to
Item 3. Legal
Proceedings
for disclosure relating to matters involving the Securities
and Exchange Commission (“SEC”).
Item 2.
Properties
The
Company's administrative headquarters are located in a 9,800 square foot
facility in Rockaway, New Jersey. This facility accommodates the Company's
administrative, marketing and sales personnel. The lease expires on October 31,
2007 and carries an annual rent of $122,287, which includes common area charges.
The Company owns property located at 344 Route 46 in Rockaway, New Jersey. This
facility accommodates the Company's fuel terminal, including fuel storage tanks,
truck yard space and dispatch operations. The Company purchased the property in
August 1999, through a newly formed wholly-owned subsidiary, Able Energy
Terminal, LLC, at a purchase price of $1,150,000. The Company also owns a
building, totaling approximately 1,450 square feet, consisting of a wood frame
facility located at 38 Diller Avenue, Newton, New Jersey, that will serve as a
supply depot, storage area and administrative offices and service facility when
damage that occurred on March 14, 2003 in connection with a fire is
repaired. Please refer to Note 22 - Subsequent Events, found in the
Notes to the Consolidated Financial Statements for disclosure relating to the
lease of the Newton facility.
Able
Melbourne leases a 3,000 square foot concrete and aluminum facility that serves
as a storage and service facility and administrative offices, located at 79
Dover Avenue, Merritt Island, Florida, and is governed by an oral,
month-to-month lease with annual rent of $5,000. 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 located within three miles of its wholesale supplier.
The Company is responsible for maintaining all of its facilities in compliance
with all environmental rules and laws. Please refer to Note 22 -
Subsequent Events, found in the Notes to the Consolidated Financial Statements
for disclosure relating to the sale of the Able Melbourne assets and liabilities
on February 8, 2008
On July
1, 2006, Able NY moved into a brand new terminal located at 10 Industrial Park
in Warrensburg, NY. This 118,556 square foot property was purchased
by the Company in 2003, and accommodates Able NY fuel terminal, including liquid
fuel storage tanks, truck yard space, dispatch operations and a small office
staff.
Able
subleases an office located at 1140 Sixth Avenue in New York City. The lease
expires on April 29, 2009 and carries an annual rent increasing from $196,467 to
$208,432 over the term of the lease. This 4,569 square foot space is used as our
executive offices.
Effective June 1, 2007, Plazas executed ten leases
with Properties for ten of Plazas' travel plaza locations. The leases
expire on September 30, 2009 and provide for an initial aggregate annual lease
payment of $6.5 million. The Plaza leases are renewable annually,
upon the mutual consent of Plazas and Properties. The ten
properties and their location by state are:
Belmont-NY
Carney-NJ
Doswell-VA
Clarks
Ferry-PA
Frystown-PA
Gables of
Carlisle-PA
Gables of
Frystown-PA
Gables of
Harrisburg-PA
Milton-PA
Strattanville-PA
(Inactive)
In
addition, Plazas leases its Breezewood, PA travel plaza facility from
unaffiliated third parties. The primary facility lease was executed
on December 31, 2005, expires on December 31, 2010 and was assumed by Plazas
upon the completion of the business combination with Properties on May 30,
2007. The annual rent is $420,000. Plazas also lease an
adjacent parking area under a lease that expires February 28,
2009. The annual rent for the parking area is $98,000.
Typically,
these travel plazas include fuel islands, restaurants, retail and convenience
stores, maintenance services, game rooms, personal services, lodging (in certain
locations) and other amenities for both the professional and leisure
traveler.
In
connection with the business combination with Properties, Able acquired a ten
year option to acquire any of the travel plaza real estate owned by Properties,
providing that the Company assume all existing debt obligations related to the
applicable properties. The option has been valued at $5.0 million and
is exercisable as long as Plazas' leases relating to the applicable real estate
remain in effect. Plazas' leases automatically renew, upon the mutual
consent of Plazas and Properties, for consecutive one year terms so that the
total term of each lease shall be for a period of ten years.
Item
3. Legal Proceedings
Except as
described hereafter, as of June 30, 2007, the Company is not a party to any
pending material legal proceeding. To the knowledge of management, no
director, executive officer or affiliate of the Company or owner of record or
beneficially of more than 5% of the Company’s common stock is a party adverse to
the Company or has a material interest adverse to the Company in any
proceeding.
Following
an explosion and fire that occurred at the Company's Facility in Newton, NJ on
March 14, 2003, and through the subsequent clean up efforts, the Company has
cooperated fully with all local, state and federal agencies in their
investigations into the cause of this accident. A lawsuit (known as
Hicks vs. Able Energy,
Inc.
) has been filed against the Company by residents who allegedly
suffered property damages as a result of the March 14, 2003 explosion and fire.
The Company's insurance carrier is defending the Company as it relates to
compensatory damages. The Company has retained separate legal counsel to defend
the Company against the punitive damage claim. On June 13, 2005, the Court
granted a motion certifying a plaintiff class action which is defined as "All
Persons and Entities that on and after March 14, 2003, residing within a 1,000
yard radius of Able Oil Company's fuel depot facility and were damaged as a
result of the March 14, 2003 explosion". The Company sought and received Court
permission to serve interrogatories to all class members and in November 2007
answers to interrogatories were received by less than 125 families and less than
15 businesses. The Company successfully moved to exclude any and all persons and
entities from the class that did not previously provide answers to
interrogatories. The class certification is limited to economic loss
and specifically excludes claims for personal injury from the Class
Certification. The Company believes that the Class Claims for compensatory
damages is within the available limits of its insurance coverage. On September
13, 2006, the plaintiff’s counsel made a settlement demand of $10,000,000, which
the Company believes to be excessive and the methodology upon which it is based
to be fundamentally flawed. On May 7, 2008, this matter entered mediation. As of
the date of this Report, mediation has not been successful but the Company
remains open to reasonable settlement discussions with the plaintiffs. The
Company intends to vigorously defend the claim.
Relating
to the March 14, 2003 explosion and fire, a total of 227 claims have been filed
against the Company for property damages and 224 claims have been settled by the
Company's insurance carrier. In addition to the Hicks action, six property
owners, who were unable to reach satisfactory settlements with the Company's
insurance carrier, filed lawsuits for alleged property damages suffered as a
result of the March 14, 2003 explosion and fire. Subsequently, four of the
lawsuits were settled. Two of the lawsuits are pending. The Company's
insurance carrier is defending the Company as it relates to the Hicks action and
the remaining two property damage claims. The Company's counsel is defending
punitive damage claims. The Company believes that compensatory damage claims are
within the available limits of insurance and reserves for losses have been
established, as deemed appropriate, by the insurance carrier. The Company
believes the remaining three unsettled lawsuits will not have a material adverse
effect on the Company's consolidated financial condition or
operations.
As
previously disclosed, on September 7, 2006, the Company received a Formal Order
of Private Investigation from the SEC pursuant to which the Company, certain of
its officers and a director were served with subpoenas requesting certain
documents and information. The Formal Order authorizes an investigation of
possible violations of the anti-fraud provisions of the federal securities laws
with respect to the offer, purchase and sale of the Company's securities and the
Company's disclosures or failures to disclose material information. The Company
believes that it did not violate any securities laws and intends to cooperate
fully with and assist the SEC in its inquiry. The scope, focus and subject
matter of the SEC investigation may change from time to time and the Company may
be unaware of matters under consideration by the SEC. The Company has produced
and will, if required, continue to produce responsive documents and intends to
continue cooperating with the SEC in connection with the
investigation. On May 13, 2008, the Company received correspondence
from the SEC requesting the Company respond, in writing, to eleven questions
proffered by the SEC staff. The Company provided it’s responses to
the eleven questions in it’s response to the SEC, dated May 21,
2008. The responsive correspondence was signed by the Company’s
outside SEC counsel, Buchanan Ingersoll & Rooney, PC, after said
correspondence was reviewed by the Company’s senior management, as well as the
Company’s outside financial consultants.
On July
29 and 30, 2008, the Company’s CEO, Mr. Frost, and the Company’s Executive
Vice-President, Business Development, Mr. Nocito, were deposed by the
SEC. The Company has been advised by its SEC counsel, who also
attended the depositions, that the primary focus of the investigation is for the
Company to complete its outstanding, delinquent filings in order to obtain
filing compliance.
On June
26, 2007, the Company and its affiliate, All American Properties, Inc. (together
with the Company the “Claimants”), filed a Demand for Arbitration and Statement
of Claim in the Denver, Colorado office of the American Arbitration Association
against Manns Haggerskjold of North America, Ltd. (“Manns”), Scott Smith and
Shannon Coe (collectively the “Respondents”), Arbitration Case No. 77 148 Y
00236 07 MAV. The Statement of Claim filed seeks to recover fees of $1.2 million
paid to Manns to obtain financing for the Company and All American. The
Claimants commenced the Arbitration proceeding based upon the Respondents breach
of the September 14, 2006 Commitment letter from Manns to All American that
required Manns to loan All American $150 million. The Statement of Claim sets
forth claims for breach of contract, fraud and misrepresentation and lender
liability. On July 23, 2007, Respondents filed their answer to the Statement of
Claim substantially denying the allegations asserted therein and interposing
counterclaims setting forth claims against the Company for breach of the
Non-Circumvention Clause, breach of the Exclusivity Clause and unpaid expenses.
Respondents also assert counterclaims for fraudulent misrepresentation and
unjust enrichment. On Respondents’ counterclaim for breach of the
Non-Circumvention Clause, Respondents claim damages of $6,402,500. On their
counterclaim for breach of the Exclusivity Clause, Respondents claim damages of
$3,693,750, plus an unspecified amount related to fees on loans exceeding
$2,000,000 closed by All American or the Company over the next five years.
Respondents do not specify damages relative to their other
counterclaims.
On August
7, 2007, the Claimants filed their reply to counterclaims denying all of
Respondents material allegations therein. Respondents’ counterclaims were based
on the false statement that the Claimants had, in fact, received the financing
agreed to be provided by Manns from a third party. The
Respondents subsequently withdrew their counterclaims.
The
parties have selected an Arbitrator and are presently engaged in
discovery. Document production has been completed and depositions of
the parties have commenced. It is anticipated that these depositions
will be concluded by the end of November, 2008. The hearing is
currently scheduled to commence before the Arbitrator on December 8,
2008.
Please
refer to Note 22 – Subsequent Events – Litigation, found in the Notes to
the Consolidated Financial Statements in Item 8 of this Annual Report for
disclosure relating to other legal proceedings in which the Company is currently
involved which may have a material adverse effect on the consolidated operations
or financial results of the Company. On occasion, the Company may
become a party to litigation incidental to its business. There can be no
assurance that any legal proceedings will not have a material adverse affect on
the Company.
Item
4. Submission of Matters to a Vote of Security Holders
None
PART II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
(a)
Market Price and Dividend Information
Since
October 13, 2006, the Company's Common Stock has been quoted on the Pink Sheets
under the symbol "ABLE". From 1999 until October 13, 2006, the
Company’s common stock traded on the Nasdaq Capital Market (formerly the Nasdaq
Small Cap Market) under the symbol “ABLE”. The following table sets
forth the high and low bid prices of the Common Stock on a quarterly basis for
the 2006, 2007 and 2008 fiscal years as reported by Nasdaq or quoted through the
Pink Sheets:
|
Fiscal Year Ending June 30,
2008
|
|
High
|
|
|
Low
|
|
|
First
Quarter
|
|
$
|
2.25
|
|
|
$
|
1.35
|
|
|
Second
Quarter
|
|
|
1.50
|
|
|
|
0.60
|
|
|
Third
Quarter
|
|
|
0.94
|
|
|
|
0.60
|
|
|
Fourth
Quarter
|
|
|
0.70
|
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended June 30,
2007
|
|
High
|
|
|
Low
|
|
|
First
Quarter
|
|
$
|
7.70
|
|
|
$
|
4.43
|
|
|
Second
Quarter
|
|
|
4.55
|
|
|
|
1.80
|
|
|
Third
Quarter
|
|
|
2.80
|
|
|
|
1.82
|
|
|
Fourth
Quarter
|
|
|
2.30
|
|
|
|
1.35
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended June 30,
2006
|
|
High
|
|
|
Low
|
|
|
First
Quarter
|
|
$
|
18.22
|
|
|
$
|
11.45
|
|
|
Second
Quarter
|
|
|
12.75
|
|
|
|
6.25
|
|
|
Third
Quarter
|
|
|
9.69
|
|
|
|
6.50
|
|
|
Fourth
Quarter
|
|
|
|
|
|
|
4.20
|
|
(b) As of
June 30, 2008, the Company’s common stock was held beneficially by approximately
2,600 persons.
(c)
Dividends
We have
never paid a cash dividend on our common stock. It is the current
policy of our Board of Directors to retain any earnings to finance the
operations and expansion of our business. The payment of dividends in
the future will depend upon our earnings, financial condition and capital needs
and on other factors deemed pertinent by the Board of Directors.
(d)
Recent Sales of Unregistered Securities
On April
30, 2008, the Company issued 14,442 restricted shares of its common stock,
$0.001 par value, to a financial consultant, Hammond Associates, LLC, as partial
consideration for providing consulting services in connection with satisfying
the Company’s SEC reporting requirements.
Comparison
of Cumulative Total Returns
The
following table shows a comparison of cumulative total returns on the common
stock of the Company from June 28, 2002 through June 30, 2007 with the
cumulative total return on the NASDAQ Stock Market-U.S. and the cumulative total
return on a group of NASDAQ Fuel Oils Companies (SIC Code 5983) (the “Peer
Group”).
COMPARISON
OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES,
PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
|
|
|
FISCAL YEAR
ENDING
|
|
|
COMPANY/INDEX/MARKET
|
|
6/28/2002
|
|
|
6/30/2003
|
|
|
6/30/2004
|
|
|
6/30/2005
|
|
|
6/30/2006
|
|
|
6/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Able Energy,
Inc.
|
|
|
100.00
|
|
|
|
90.40
|
|
|
|
70.00
|
|
|
|
415.14
|
|
|
|
162.57
|
|
|
|
54.29
|
|
|
Peer Group
Index
|
|
|
100.00
|
|
|
|
134.18
|
|
|
|
157.43
|
|
|
|
25.35
|
|
|
|
20.67
|
|
|
|
31.73
|
|
|
NASDAQ Market
Index
|
|
|
100.00
|
|
|
|
111.20
|
|
|
|
141.42
|
|
|
|
141.27
|
|
|
|
150.36
|
|
|
|
180.25
|
|
Item 6. Selected Financial Data
The
following selected financial data presented for Able and its Subsidiaries on a
consolidated basis should be read in conjunction with the Consolidated Financial
Statements, including the related notes, and "
Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operation
".
|
|
|
For
the Year Ended June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Results
of Operation Data-Continuing Operations
|
|
|
|
|
|
|
|
(1)
|
|
|
(2)
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
93,641,548
|
|
|
$
|
75,093,104
|
|
|
$
|
61,872,623
|
|
|
$
|
42,847,123
|
|
|
$
|
43,365,028
|
|
|
Gross
Profit
|
|
|
8,538,014
|
|
|
|
7,467,895
|
|
|
|
6,150,470
|
|
|
|
5,579,654
|
|
|
|
6,459,633
|
|
|
Operating
(Loss)
Income
|
|
|
(4,007,513
|
)
|
|
|
(2,857,627
|
)
|
|
|
(1,928,309
|
)
|
|
|
(2,310,863
|
)
|
|
|
241,951
|
|
|
Net
(Loss) Income from
Continuing
Operations
|
|
|
(6,632,303
|
)
|
|
|
(6,241,559
|
)
|
|
|
(2,180,091
|
)
|
|
|
(1,732,959
|
)
|
|
|
26,342
|
|
|
Depreciation
and
Amortization
|
|
|
740,203
|
|
|
|
755,700
|
|
|
|
1,225,197
|
|
|
|
1,194,958
|
|
|
|
1,112,098
|
|
|
Interest
Expense
|
|
|
949,016
|
|
|
|
642,517
|
|
|
|
449,776
|
|
|
|
576,578
|
|
|
|
435,992
|
|
|
Basic
and Diluted Net
Loss
Per Share -
Continuing
Operations
|
|
|
(1.60
|
)
|
|
|
(2.23
|
)
|
|
|
(1.04
|
)
|
|
|
(0.86
|
)
|
|
|
0.01
|
|
|
Basic
and Diluted
Weighted
Average
Number
of Shares
Outstanding
|
|
|
4,133,090
|
|
|
|
2,800,476
|
|
|
|
2,094,629
|
|
|
|
2,013,250
|
|
|
|
2,012,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance
Sheet
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,034,183
|
|
|
$
|
2,144,729
|
|
|
$
|
1,754,318
|
|
|
$
|
1,309,848
|
|
|
$
|
400,033
|
|
|
Current
Assets
|
|
|
23,143,640
|
|
|
|
7,164,977
|
|
|
|
6,100,464
|
|
|
|
5,531,423
|
|
|
|
5,504,366
|
|
|
Current
Liabilities
|
|
|
26,768,567
|
|
|
|
7,597,294
|
|
|
|
6,853,089
|
|
|
|
5,500,095
|
|
|
|
5,652,767
|
|
|
Total
Assets
|
|
|
48,162,096
|
|
|
|
13,090,868
|
|
|
|
12,433,858
|
|
|
|
12,229,536
|
|
|
|
12,531,652
|
|
|
Long-Term
Liabilities
|
|
|
4,362,542
|
|
|
|
3,821,488
|
|
|
|
3,966,041
|
|
|
|
3,724,692
|
|
|
|
3,616,461
|
|
|
Total
Stockholders’
Equity
|
|
|
17,030,987
|
|
|
|
1,672,086
|
|
|
|
1,614,728
|
|
|
|
3,095,927
|
|
|
|
3,262,424
|
|
Notes
|
(1)
|
The
consolidated balance sheet data as of June 30, 2005 and 2004 and the
consolidated statement of operations data for the years ended June 30,
2005, 2004 and 2003 have been derived from the consolidated financial
statements for such periods.
|
|
(2)
|
The
consolidated results of operations data for the years ended June 30, 2004
and 2003 have been adjusted to reflect the discontinued operations of Able
Propane, LLC.
|
Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operation
The
following discussion should be read in conjunction with our Consolidated
Financial Statements, and Notes thereto, contained elsewhere in this Annual
Report.
Overview
Able was
incorporated in Delaware in 1997. Able Oil, a wholly-owned subsidiary of Able,
was established in 1989 and sells both residential and commercial heating oil,
diesel fuel and complete HVAC service to it heating oil customers. Able NY, a
wholly-owned subsidiary of Able, sells residential and commercial heating oil,
propane, diesel fuel and kerosene to customers in and around the Warrensburg, NY
area. Able Melbourne, a wholly-owned subsidiary of Able, was established in 1996
and sells various grades of diesel fuel around Cape Canaveral, FL. PriceEnergy,
Inc., a majority owned subsidiary of Able, was established in 1999 and has
developed a platform that has extended the Company’s ability to sell and deliver
liquid fuels and related energy products over the Internet. The Company’s newest
subsidiary, Plazas, was formed to operate eleven travel plazas acquired in
connection with the Company’s business combination with All American Plazas,
Inc. (now known as All American Properties, Inc.) which was consummated on
May 30, 2007. These plazas serve the professional and leisure
traveler in the mid-Atlantic and northeast regions of the United States of
America.
Management’s
Discussion and Analysis of Financial Condition and Results of Operation contains
forward-looking statements, which are based upon current expectations and
involve a number of risks and uncertainties. Investors are hereby
cautioned that these statements may be affected by the important factors, among
others, set forth below, and consequently, actual operations and results may
differ materially from those expressed in these forward-looking statements. The
important factors include:
|
·
|
Customers
Converting to Natural Gas
|
|
·
|
Alternative
Energy Sources
|
|
·
|
Winter
Temperature Variations (Loss of Heating Degree
Days)
|
|
·
|
Availability
of Financing
|
|
·
|
The
Availability (Or Lack of) Acquisition
Candidates
|
|
·
|
The
Success of Our Risk Management
Activities
|
|
·
|
The
Effects of Competition
|
|
·
|
Changes
in Environmental Law
|
We
undertake no obligation to update or revise any such forward-looking
statements.
Business
Strategy
Our
business plan calls for maximization of sales throughout our existing Oil
Segment and Travel Plaza Segment market areas by means of aggressive market
penetration to recapture lost business as well as to attract new customers who
have moved into or travel through our market areas. In addition, our
external strategy is to acquire related heating oil and travel plaza businesses,
which strengthen and expand our current service areas along with moving into
planned new areas. In this way, we can realize new residential and
commercial business and take advantage of expected population growth in new
market regions.
We also
are in the process of becoming more vertically integrated through
acquisition. In addition to acquiring businesses in the core #2
heating oil portion of our business, we are also developing relationships with
potential acquisitions in the area of diesel fuel distribution, truck stop
facilities, convenience store/gasoline fueling stations and alternative
fuels. Also, the Company is building its delivery coverage area in
the northeast by expanding its dealer network and volume capabilities through
Internet sales via our PriceEnergy.com platform.
Critical
Accounting Policies and Estimates
Our
significant accounting policies are described in Note 3 of the consolidated
financial statements included in this Annual Report on Form 10-K for the fiscal
year ended June 30, 2007. The consolidated financial statements are
prepared in accordance with United States generally accepted accounting
principles which require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
We
consider the following policies to be the most critical in understanding the
judgments involved in preparing the consolidated financial statements and the
uncertainties that could impact our results of consolidated operations,
financial condition and cash flows.
Revenue
Recognition, Unearned Revenue and Customer Pre-Purchase Payments
Sales of
travel plaza services, 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. Payments received from customers for the
pre-purchase of fuel are recorded as a current liability until the fuel is
delivered to the customer, at which time the payments are recognized as revenue
by the Company.
Depreciation,
Amortization and Impairment of Long-Lived Assets
We
calculate our depreciation and amortization based on estimated useful lives and
salvage values of our assets. When assets are put into service, we make
estimates with respect to useful lives that we believe are reasonable. However,
subsequent events could cause us to change our estimates, thus impacting the
future calculation of depreciation and amortization.
Additionally,
we assess our long-lived assets for possible impairment whenever events or
changes in circumstances indicate that the carrying value of the assets may not
be recoverable. Such indicators include changes in our business plans, a change
in the extent or manner in which a long-lived asset is being used or in its
physical condition, or a current expectation that, more likely than not, a
long-lived asset that will be sold or otherwise disposed of significantly before
the end of its previously estimated useful life. If the carrying value of an
asset exceeds the future undiscounted cash flows expected from the asset, an
impairment charge would be recorded for the excess of the carrying value of the
asset over its fair value. Determination as to whether and how much an asset is
impaired would necessarily involve numerous management estimates. Any impairment
reviews and calculations would be based on assumptions that are consistent with
our business plans and long-term investment decisions.
Allowance
for Doubtful Accounts
We
routinely review our receivable balances to identify past due amounts and
analyze the reasons such amounts have not been collected. In many instances,
such uncollected amounts involve billing delays and discrepancies or disputes as
to the appropriate price or volumes of oil delivered, received or exchanged. We
also attempt to monitor changes in the creditworthiness of our customers as a
result of developments related to each customer, the industry as a whole and the
general economy. Based on these analyses, we have established an allowance for
doubtful accounts that we consider to be adequate, however, there is no
assurance that actual amounts will not vary significantly from estimated
amounts.
Income
Taxes
As part
of the process of preparing consolidated financial statements, the Company is
required to estimate income taxes in each of the jurisdictions in which it
operates. Significant judgment is required in determining the income tax expense
provision. The Company recognizes deferred tax assets and liabilities based on
differences between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to be recovered. The Company assesses
the likelihood of our deferred tax assets being recovered from future taxable
income. The Company then provides a valuation allowance for deferred tax assets
when the Company does not consider realization of such assets to be more likely
than not. The Company considers future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the valuation allowance. Any
decrease in the valuation allowance could have a material impact on net income
in the year in which such determination is made.
Recent
Accounting Pronouncements
In June
2005, the Financial Accounting Standards Board (FASB) published Statement of
Financial Accounting Standards No. 154, “Accounting Changes and Error
Corrections” (“SFAS 154”). SFAS 154 establishes new standards on accounting for
changes in accounting principles. Pursuant to the new rules, all such changes
must be accounted for by retrospective application to the financial statements
of prior periods unless it is impracticable to do so. SFAS 154 completely
replaces Accounting Principles Bulletin No. 20 and SFAS 3, though it carries
forward the guidance in those pronouncements with respect to accounting for
changes in estimates, changes in the reporting entity and the correction of
errors. The requirements in SFAS 154 are effective for accounting changes made
in fiscal years beginning after December 15, 2005. The Company applied
these requirements to accounting changes made after the implementation date. The
Company believes the restatement of its 2005 financial results, as discussed in
Note 21 of the Notes to the Consolidated Financial Statements, reflects the
appropriate application of the guidance found in SFAS 154.
EITF
Issue No. 05-4 “The Effect of a Liquidated Damages Clause on a Freestanding
Financial Instrument Subject to EITF Issue No. 00-19, Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company's Own
Stock” (“EITF No. 05-4”) addresses financial instruments, such as stock purchase
warrants, which are accounted for under EITF 00-19 that may be issued at the
same time and in contemplation of a registration rights agreement that includes
a liquidated damages clause. The consensus of EITF No. 05-4 has not been
finalized. In July and August 2006, the Company entered into two private
placement agreements for convertible debentures and a note payable, a
registration rights agreement and issued warrants in connection with the private
placement (See Note 12). Based on the interpretive guidance in EITF Issue No.
05-4, view C, since the registration rights agreement includes provisions for
uncapped liquidated damages, the Company determined that the registration rights
is a derivative liability. The Company has measured this liability in
accordance with SFAS No. 5.
In
February 2006, the FASB issued SFAS No. 155 “Accounting for Certain Hybrid
Financial Instruments”, which eliminates the exemption from applying SFAS 133 to
interests in securitized financial assets so that similar instruments are
accounted for similarly regardless of the form of the instruments. SFAS 155 also
allows the election of fair value measurement at acquisition, at issuance or
when a previously recognized financial instrument is subject to a remeasurement
event. Adoption is effective for all financial instruments acquired or issued
after the beginning of the first fiscal year that begins after September 15,
2006. Early adoption is permitted. The adoption of SFAS 155 is not expected to
have a material effect on the Company's consolidated financial position, results
of operations or cash flows.
In March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets”, which amended SFAS No. 140, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities”, with respect to the
accounting for separately recognized servicing assets and servicing
liabilities. SFAS 156 permits an entity to choose either the
amortization method or the fair value measurement method for each class of
separately recognized servicing assets or servicing liabilities. The
application of this statement is not expected to have an impact on the Company’s
consolidated financial statements.
In July
2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"), which
clarifies the accounting for uncertainty in tax positions. This interpretation
requires that the Company recognize in its consolidated financial statements,
the impact of a tax position, if that position is more likely than not of being
sustained on audit, based on the technical merits of the position. The
provisions of FIN 48 are effective as of July 1, 2007, with the cumulative
effect of the change in accounting principle recorded as an adjustment to
opening retained earnings. The Company is currently evaluating the impact of
adopting FIN 48 on its consolidated financial statements.
In
September 2006, the FASB issued SFAS No.157, "Fair Value Measurements", which
defines fair value, establishes a framework for measuring fair value in United
States generally accepted accounting principles and expands disclosures about
fair value measurements. Adoption is required for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. Early adoption
of SFAS 157 is encouraged. The Company is currently evaluating the impact of
SFAS 157, and the Company will adopt SFAS 157 in the fiscal year beginning July
1, 2008.
In
September 2006, the staff of the SEC issued Staff Accounting Bulletin ("SAB")
No. 108, which provides interpretive guidance on how the effects of the
carryover or reversal of prior year misstatements should be considered in
quantifying a current year misstatement. SAB 108 became effective in fiscal
2007. Adoption of SAB 108 did not have a material impact on the Company's
consolidated financial position, results of operations or cash
flows.
In
September 2006, the FASB issued SFAS No. 158, “Employers Accounting for Defined
Pension and Other Postretirement Plans-an amendment of FASB No.’s 87, 88, 106
and 132(R).” SFAS 158 requires an employer and sponsors of one or
more single employer defined plans to recognize the funded status of a benefit
plan; recognize as a component of other comprehensive income, net of tax, the
gain or losses and prior service costs or credits that may arise during the
period; measure defined benefit plan assets and obligations as of the employer’s
fiscal year; and enhance footnote disclosure. For fiscal years ending
after December 15, 2006, employers with equity securities that trade on a public
market are required to initially recognize the funded status of a defined
benefit postretirement plan and to provide the enhanced footnote
disclosures. For fiscal years ending after December 15, 2008,
employers are required to measure plan assets and benefit
obligations. Management of the Company is currently evaluating the
impact of adopting this pronouncement on the consolidated financial
statements.
In
December 2006, the FASB issued FASB Staff Position ("FSP") EITF 00-19-2
"Accounting for Registration Payment Arrangements" ("FSP EITF 00-19-2") which
specifies that the contingent obligation to make future payments or otherwise
transfer consideration under a registration payment arrangement should be
separately recognized and measured in accordance with SFAS No. 5, "Accounting
for Contingencies." Adoption of FSP EITF 00-19-02 was required for fiscal years
beginning after December 15, 2006, and has not had a material impact on the
Company's consolidated financial position, results of operations or cash
flows.
In
February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial
Assets and Financial Liabilities-Including an amendment of FASB Statement No.
115", which permits entities to choose to measure many financial instruments and
certain other items at fair value. The fair value option established by this
Statement permits all entities to choose to measure eligible items at fair value
at specified election dates. A business entity shall report unrealized gains and
losses on items for which the fair value option has been elected in earnings at
each subsequent reporting date. Adoption is required for fiscal years beginning
after November 15, 2007. Early adoption is permitted as of the beginning of a
fiscal year that begins on or before November 15, 2007, provided the entity also
elects to apply the provisions of SFAS Statement No. 157, Fair Value
Measurements. The Company is currently evaluating the expected effect of SFAS
159 on its consolidated financial statements and is currently not yet in a
position to determine such effects.
In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements–an amendment of ARB No. 51.” SFAS
160 establishes accounting and reporting standards pertaining to ownership
interests in subsidiaries held by parties other than the parent, the amount of
net income attributable to the parent and to the noncontrolling interest,
changes in a parent’s ownership interest, and the valuation of any retained
noncontrolling equity investment when a subsidiary is
deconsolidated. This statement also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS 160 is
effective for fiscal years beginning on or after December 15,
2008. The Company is in the process of evaluating the effect that the
adoption of SFAS 160 will have on its consolidated results of operations,
financial position and cash flows.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (SFAS 141R). SFAS 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill
acquired. SFAS 141R also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. SFAS 141R is effective for financial statements issued
for fiscal years beginning after December 15, 2008. The Company
is currently evaluating the potential impact of adoption of SFAS 141R on its
consolidated financial statements.
In March
2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and
Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early adoption
encouraged. The Company is currently evaluating the impact of
adopting SFAS No. 161 on its consolidated financial statements.
In May
2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted
Accounting Principles”. The new standard identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). SFAS No. 162 will become
effective 60 days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411,
The Meaning of
Present Fairly
in Conformity With Generally Accepted Accounting Principles. Adoption
of SFAS No. 162, upon its effectiveness, is not expected to have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.
Results
of Operations - Fiscal 2007 Compared to Fiscal 2006
During
the year ended June 30, 2007, the Company’s total revenues were $93.6
million. The Company is engaged in two primary business activities,
organized in two segments; the Oil Segment and the Travel Plaza
Segment.
Please
refer to
Item 1A. Risk Factors
for disclosures related to market forces and risks and their impact on
the Company’s consolidated results of operations, in particular, the risks
identified under the heading “Fuel pricing and the effect on
profitability”.
Oil
Segment
Net sales
for the year ended June 30, 2007 were $74.1 million versus $75.1 million in the
same period last year, a decrease of $1.0 million, or 1.3%. Underlying the
relatively flat performance was a $4.7 million, or 9.9%, increase in #2 Heating
Oil sales, due primarily to price, a $2.3 million increase in gasohol sales, due
to volume, all of which was offset by a $7.5 million, or 54.1%, volume related
decrease in commercial fuel sales reflecting the loss of some of the Oil
Segment’s commercial fuel customers during the year ended June 30, 2007. While
we have initiated efforts to recover and or replace the lost commercial fuel
customers and their former net sales, there is no assurance that we will be
successful in our efforts.
Gross
profit increased $0.4 million and gross profit margin percent for year ended
June 30, 2007 increased to 10.6% from 9.9% last year. The increase in gross
profit margin percent was the result of improved fuel pricing, partially offset
by a loss on future contracts, included in cost of sales, of $0.9
million.
Selling,
general and administrative expense for the year ended June 30, 2007 increased by
$0.5 million, or 5.0%, compared to the same period in the prior year. Decreases
in employee compensation related expenses and bank fees were more than offset by
an increase in professional fees of $1.0 million, primarily audit and legal
expenses related to the Company’s efforts to regain SEC filing compliance and
the Company’s legal matters, respectively (see Note 20 regarding the Company’s
legal matters) .
Total
other expenses decreased to a net expense of $2.7 million in the year ended June
30, 2007 from $3.4 million last year. The change was primarily related to a $1.1
million decrease in financing costs related to the prior year amortization of
debt discounts on convertible debenture and notes payable, partially offset by
an increase in registration rights penalty of $0.4 million.
As a
result of the above noted performance for the year ended June 30, 2007, net loss
improved $0.2 million, or 3.2%, to a loss of $(6.0) million compared to $(6.2)
million in the same period last year.
Please
refer to Note 14 of the Consolidated Financial Statements included in Item 8 of
this Annual Report on Form 10-K for the fiscal year ended June 30, 2007 for
additional disclosures relating to the Oil Segment of our business.
Travel Plaza
Segment
Net sales
for the year ended June 30, 2007 were $19.6 million, reflecting the first month
of consolidated reporting of the Travel Plaza Segment, acquired May 30,
2007. Gross profit for the period was $1.1 million. Net
loss of the Travel Plaza Segment was $0.6 million for this period. No
comparable information existed for the period ended June 30, 2006 since the
transaction with All American Plazas, Inc., now known as All American
Properties, Inc., was not closed during that period.
Please
refer to
Item 1,
Business
of this Annual Report for additional disclosures relating to the
acquisition of the Travel Plaza Segment business and Note 14 of the Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K for
additional disclosures relating to the Travel Plaza Segment of our
business.
Depreciation
and Amortization
Depreciation
and amortization expense remained approximately unchanged for fiscal 2007 as
compared to fiscal 2006.
Results
of Operations - Fiscal 2006 Compared to Fiscal 2005
Revenue
for the year ended June 30, 2006 increased to $75.1 million producing a gross
profit of $7.5 million. The Company experienced a loss from operations of $2.9
million due mainly to a substantial increase in selling, general and
administrative (“SG&A”) expenses. In addition, financing related
expenses grew to $3.4 million producing a net loss from continuing operations of
$6.2 million.
Net sales
for fiscal 2006 increased by approximately $13.2 million or 21% to $75.1 million
from $61.9 million in fiscal 2005. This increase can be primarily attributed to
the substantial increase in the sales price of fuel oil, increasing the selling
price per gallon of home heating oil.
Our gross
profit for fiscal year ended June 30, 2006 and 2005 was 9.9% and 9.9%,
respectively. The gross profit for fiscal 2006 increased by $1.3
million or 21% to $7.5 million from $6.2 million in fiscal 2005. The increase in
gross profit was primarily due to increased gross profit in our PriceEnergy
subsidiary, increased gross profit from on-road diesel sales and from propane
sales at our Warrensburg N.Y. operation. In addition the Company experienced
decreased use of sub-contractors in our Rockaway, N.J. service
division.
SG&A
for fiscal 2006 increased by approximately $2.7 million or 40% compared to
fiscal 2005. The Company primarily attributes this increase to increase in
legal, consulting and accounting fees of $1.6 million due to professional fees
incurred for acquisition and financing related activities. In
addition, SG&A increased as a result of the hiring of a CEO, CFO, and a Vice
President of Business Development totaling $500,000; along with the
establishment of a New York City office at a cost of $100,000. The Company also
increased advertising expenditures by $200,000 in order to attempt to increase
the Company’s market share.
Liquidity and Capital Resources
We had a
net loss of $3.4 million for the three month period ended June 30, 2007, and we
incurred a net loss of $6.6 million and used cash in operations of $1.3 million
for the twelve month period ended June 30, 2007. Our principal sources of
working capital have been the proceeds from borrowing against the Company's
receivable and credit card sales and from public and private placements of
securities, primarily consisting of convertible debentures and notes payable.
During the three month period ended June 30, 2007, the Company raised no new
funds. During the twelve month period ended June 30, 2007, the
Company secured $4.2 million from the proceeds of convertible debentures and
notes payable and less than $0.1 million in proceeds from option
exercises. Other than for the day–to-day operations of the Company, less
than $0.1 million, net, was expended for advances to related parties and
repayment of loans during the twelve month period ended June 30,
2007.
We had a
working capital deficiency of $3.6 million at June 30, 2007 compared to a
working capital deficiency of $0.4 million at June 30, 2006. The working capital
decrease of $3.2 million was primarily due to an increase in the current
liability for notes payable and convertible debentures financings.
These
factors raise substantial doubt about the Company's ability to continue as a
going concern. These condensed consolidated financial statements do not include
any adjustments relating to the recoverability of the recorded assets or the
classification of the liabilities that may be necessary should the Company be
unable to continue as a going concern. The Company will need some
combination of the collection of notes receivable, new financing, restructuring
of existing financing, improved receivable collections and/or improved operating
results in order to maintain adequate liquidity.
The
Company is pursuing other lines of business, which include expansion of its
current commercial business into other products and services such as bio-diesel,
solar energy and other energy related home services. The Company is also
evaluating all of its business segments for cost reductions, consolidation of
facilities and efficiency improvements. There can be no assurance that we will
be successful in our efforts to enhance our liquidity situation.
As of
June 30, 2008, the Company had a cash balance of $2.4 million and $0.8 million
of available borrowings through its credit line facility, potentially offset by
$1.5 million in obligations for funds received in advance under the pre-purchase
fuel program. In order to meet our liquidity requirements, the Company continues
to explore financing opportunities available to it.
On March
20, 2007, the Company entered into a credit card receivable advance agreement
with Credit Cash, LLC ("Credit Cash") whereby Credit Cash agreed to loan the
Company $1.2 million. The loan is secured by the Company's existing and future
credit card collections. Terms of the loan call for a repayment of $1,284,000,
which includes a one-time finance charge of $84,000, over a seven-month period.
This will be accomplished through Credit Cash withholding 18% of Credit Card
collections of Able Oil Company and 10% of Credit Card collections of
PriceEnergy.com, Inc. over the seven-month period, which began on March 21,
2007. There are certain provisions in the agreement which allows Credit Cash to
increase the withholding, if the amount withheld by Credit Cash over the
seven-month period is not sufficient to satisfy the required repayment of
$1,284,000. Please refer to Note 22 - Subsequent Events, found in the
Notes to the Consolidated Financial Statements, for disclosure relating to
disclosure of additional transactions with Credit Cash, subsequent to June 30,
2007, that helped to improve or affected the Company’s liquidity.
On May
30, 2007, the Company completed its previously announced business combination
between Properties and the Company whereby the Company, in exchange for an
aggregate of 11,666,667 shares of the Company’s restricted common stock,
purchased the operating businesses of eleven truck stop plazas owned and
operated by Properties. 10 million shares were issued directly to Properties and
the remaining 1,666,667 shares were issued in the name of Properties in escrow
pending the decision by the Company’s Board of Directors relating to the
assumption of certain Properties secured debentures. The acquisition included
all assets comprising the eleven truck plazas other than the underlying real
estate and the buildings thereon. The Company anticipates that the
business combination will result in greater net revenue and reduce overall
operational expenses by consolidating positions and overlapping
expenses. The Company also expects that the combination will result
in the expansion of the Company’s home heating business by utilizing certain of
the truck plazas as additional distribution points for the sale of the Company’s
products. Additionally, the Company expects that the business combination will
lessen the impact on seasonality on the Company’s cash flow since the combined
Company will generate year-round revenues.
In order
to conserve its capital resources as well as to provide an incentive for the
Company’s employees and other service vendors, the Company will continue to
issue, from time to time, common stock and stock options to compensate employees
and non-employees for services rendered. The Company is also focusing on
its home heating-oil business by expanding distribution programs and developing
new customer relationships to increase demand for its products. In addition, the
Company is pursuing other lines of business, which include expansion of its
current commercial business into other products and services such as bio-diesel,
solar energy and other energy related home services.
On June
1, 2005, Properties completed a financing that may impact the
Company. Please refer to
Item 1, Business, Travel Plaza
Segment
for
disclosure relating to
this financing.
Please
refer to
Item 1A, Risk
Factors, Registration rights agreements
for additional disclosure of
prior year transactions that may eventually have a negative impact the Company’s
future liquidity.
Please
also refer to Notes 10, 11 and 12 of the Consolidated Financial Statements
included in this Annual Report on Form 10-K for additional disclosures relating
to the Company’s potential future payment obligations for notes payable, capital
leases and convertible debentures, respectively.
Subsequent
to June 30, 2007, the Company executed numerous financing agreements, sold
certain assets and engaged in other activities to enhance its
liquidity. Please refer to Note 22 - Subsequent Events, found in the
Notes to the Consolidated Financial Statements, for detailed disclosure of these
activities, subsequent to June 30, 2007, that helped to improve the Company’s
liquidity
The
Company must also bring current each of its SEC filings as part of a plan to
raise additional capital. In addition to the filing of this Form 10-K for the
year ended June 30, 2007, the Company must also complete and file its Reports on
Form 10-Q for the quarters ended September 30, 2007, December 31, 2007 and March
31, 2008 and Form 10-K for the year ended June 30, 2008.
There can
be no assurance that the financing or the cost saving measures as identified
above will be satisfactory in addressing the short-term liquidity needs of the
Company. In the event that these plans cannot be effectively realized, there can
be no assurance that the Company will be able to continue as a going concern.
Contractual
Obligations
The
following schedule summarizes our contractual obligations as of June 30, 2007 in
the periods indicated:
|
|
|
|
|
|
Less
Than
|
|
|
|
|
|
|
|
|
More
then
|
|
|
Contractual
Obligation
|
|
Total
|
|
|
1
Year
|
|
|
1-3
Years
|
|
|
3-5
years
|
|
|
5
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long
term debt
|
|
$
|
6,868,894
|
|
|
$
|
3,236,168
|
|
|
$
|
531,192
|
|
|
$
|
325,459
|
|
|
$
|
2,776,075
|
|
|
Capital
lease obligations
|
|
|
1,105,858
|
|
|
|
376,042
|
|
|
|
535,168
|
|
|
|
194,648
|
|
|
|
-
|
|
|
Operating
leases
|
|
|
9,899,603
|
|
|
|
7,236,730
|
|
|
|
2,662,872
|
|
|
|
-
|
|
|
|
-
|
|
|
Other
long term obligations
|
|
|
415,117
|
|
|
|
214,517
|
|
|
|
141,600
|
|
|
|
59,000
|
|
|
|
-
|
|
|
Total
contractual obligations
|
|
$
|
18,289,472
|
|
|
$
|
11,063,458
|
|
|
$
|
3,870,832
|
|
|
$
|
579,107
|
|
|
$
|
2,776,075
|
|
Excluded
from the table above are estimated interest payments on long-term debt and
capital lease obligations of approximately $617,000, $799,000, $377,000 and
$1,855,000 for the periods less than 1 year, 1-3 years, 3-5 years and more than
5 years, respectively. In addition, excluded from above are
unconditional purchase obligations of approximately $5.7 million that the
Company entered into subsequent to June 30, 2007.
Additional Factors That May Affect Future
Results
Loss
on Future Contracts
During the period from July 28, 2006 to
August 15, 2006, the Company entered into futures contracts for #2 heating oil
to hedge a portion of its forecasted heating season requirements. The Company
purchased 40 contracts through a broker for a total of 1,680,000 gallons of #2
heating oil at an average call price of $2.20 per gallon. Due to warmer than
average temperatures through the heating season as of March 31, 2007, the
Company has experienced a substantial drop in fuel consumption and price,
resulting in a loss on these contracts
.
Through
March 31, 2007, the Company has deposited a total of $923,017 in margin
requirements with the broker and has realized a loss of $923,017 on the 40
closed contracts above representing 1,680,000 gallons.
Purchase
of Horsham
On
December 13, 2006, the Company purchased the assets of its Horsham franchise
from Able Oil Montgomery, Inc., a non- related party, for $764,175. Able Oil
Montgomery is a full service retail fuel oil and service company located in
Horsham, Pennsylvania. Pursuant to the agreement, the Company paid cash at
closing of $128,000, issued a 5 year note payable bearing interest at a rate of
7% per annum in the amount of $345,615 and forgave an amount of $290,560 due
from the seller to the Company. Separately, the seller paid to the Company
$237,359 for monies collected in advance by Able Oil Montgomery from its
customers.
Seasonality
The
Company’s Oil Segment operations are subject to seasonal fluctuations, with a
majority of the Oil Segment’s business occurring in the late fall and winter
months. Approximately 60% to 65% of the Oil Segment’s revenues are earned and
received from October through March; most of such revenues are derived from the
sale of home heating products, primarily #2 home heating
oil. However, the seasonality of the Oil Segment’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 NY’s propane operations can experience up to
an 80% decrease in heating related propane sales during the months of April to
September, which is offset somewhat by increased sales of propane gas used for
pool heating, heating of domestic hot water in homes and fuel for outdoor
cooking equipment.
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. Please refer to Note 22 - Subsequent Events, found in
the Notes to the Consolidated Financial Statements, for disclosure relating to
the February 8, 2008, sale of the assets and liabilities of Able
Melbourne.
Seasonal
issues have an insignificant impact on the Company’s Travel Plaza
Segment. While leisure travel has a tendency to moderate somewhat in
the winter months in the geographic areas in which we operate, revenue related
to the leisure traveler is relatively insignificant compared to fuel and
services related revenue generated by our professional driving
customers.
Future
Operating Results
Future
operating results, which reflect management’s current expectations, may be
impacted by a number of factors that could cause actual results to differ
materially from those stated herein. These factors include worldwide
economic and political conditions, terrorist activities, industry specific
factors and governmental agencies.
During
the period from July 28, 2006 to August 15, 2006, the Company’s PriceEnergy
subsidiary entered into futures contracts for #2 heating oil to hedge a portion
of its forecasted heating season requirements. The Company purchased 40
contracts through a broker for a total of 1,680,000 gallons of #2 heating oil at
an average call price of $2.20 per gallon. Due to warmer than average
temperatures through the heating season, as of June 30, 2007, the Company has
experienced a substantial drop in fuel consumption and price, resulting in a
loss on these contracts.
Through
June 30, 2007, the Company’s PriceEnergy subsidiary deposited a total of
$923,017 in margin requirements with the broker and has realized a loss of
$923,017 on 40 closed contracts representing 1,680,000 gallons.
The
Company is obligated to purchase # 2 Heating Oil under various contracts with
its suppliers. As of June 30, 2007, total open commitments under these contracts
were approximately $5.7 million and expire on various dates through the end of
August 2008.
Exchange
Rate, Interest Rate and Supply Risks
The
Company has no exchange rate risks as we conduct 100% of our operations in the
United States of America, and we conduct our transactions in US
dollars. The Company is exposed to extensive market risk in the areas
of fuel cost, availability and related financing and interest
cost. Please refer to
Item
1A,
Risk
Factors
for
additional disclosure about risk. Increases in our borrowing rates,
as small as 100 basis points, could significantly increase our losses and hinder
our ability to purchase our fuels for resale. The slightest
disruption in the fuel supply chain could also significantly increase our losses
and hinder our ability to purchase our fuels for resale. The Company
has no protection against interest rate risk or supply
disruptions. Other than the above noted futures contracts, the
Company does not engage in any other sort of hedging activity and holds
no investments securities at June 30,
2007.
Off-Balance
Sheet Arrangements
The
Company does not have any off-balance sheet financing arrangements.
Item
8. Financial Statements and Supplementary Data
Our
consolidated financial statements and the related notes thereto called for by
this item appear under the caption “Consolidated Financial Statements” beginning
on page F-1 attached hereto of this Annual Report on Form 10-K.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
On August
13, 2007, the Company dismissed Marcum & Kliegman, LLP as its independent
registered public accounting firm. The report of Marcum & Kliegman, LLP on
the Company's financial statements for the fiscal year ended June 30, 2006 (“FY
2006”) was modified as to uncertainty regarding (1) the Company’s ability to
continue as a going concern as a result of, among other factors, a working
capital deficiency as of June 30, 2006 and possible failure to meet its short
and long-term liquidity needs, and (2) the impact on the Company’s financial
statements as a result of a pending investigation by the SEC of possible federal
securities law violations with respect to the offer, purchase and sale of the
Company’s securities and the Company’s disclosures or failures to disclose
material information.
The
Company’s Audit Committee unanimously recommended and approved the decision to
change independent registered public accounting firms.
In
connection with the audit of the Company’s financial statements for FY 2006, and
through August 13, 2007, there have been no disagreements with Marcum &
Kliegman, LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Marcum & Kliegman, LLP would have caused it
to make reference to the subject matter of such disagreements in connection with
its audit report. There were no reportable events as defined in Item
304(a)(1)(v) of Regulation S-K. On August 24, 2007, Marcum & Kliegman, LLP
sent a responsive letter to the Current Report on Form 8-K dated August 13,
2007, filed by the Company, which discussed the Company’s termination of Marcum
and Kliegman, LLP as its auditors. This responsive letter claimed that there
were two reportable events. The Company filed an amended Form 8-K
Report acknowledging one reportable event that Marcum and Kliegman, LLP had
advised the Company of material weaknesses in the Company’s internal controls
over financial reporting. The Company added disclosure in the Amended 8-K to
reflect this reportable event. This reportable event occurred in conjunction
with Marcum & Kliegman’s audit of the consolidated financial statements for
the year ended June 30, 2006 and not, as stated in the Auditor’s Letter, in
conjunction with Marcum & Kliegman’s “subsequent reviews of the Company’s
condensed consolidated financial statements for the quarterly periods ended
September 30, 2006 and December 31, 2006.” In June 2007, when Marcum &
Kliegman began its review of the Company quarterly financial statements for the
periods ended September 30, 2006 and December 31, 2006, the Company had already
disclosed the material weakness in its internal controls over financial
reporting in the Company’s Annual Report on Form 10-K for the year ended June
30, 2006 (filed on April 12, 2007). Further, no such advice of these material
weaknesses over internal controls was discussed, in writing or orally, with the
Company by representatives of Marcum & Kliegman during the review of such
quarterly financial statements.
Subsequent
to their dismissal, the Company and its Chief Executive Officer (“CEO”) filed an
action in New York state court against Marcum & Kliegman, LLP. See, Note 22
- Subsequent Events - Litigation found in the Notes to the Consolidated
Financial Statements in Item 8 of this Annual Report on Form 10-K.
The
Company engaged Lazar Levine & Felix, LLP (“LLF”) as its new independent
registered public accounting firm as of September 21, 2007. Prior to its
engagement, LLF had been serving as independent auditors for Properties, an
affiliate and the largest stockholder of the Company. Please refer to
Note 22 – Subsequent Events found in the Notes to the Consolidated Financial
Statements in Item 8 of this Annual Report on Form 10-K.
Item
9A. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
An
evaluation of the Company's disclosure controls and procedures (as defined in
Section13a-15(e) of the Securities Exchange Act of 1934 (the "Act")) was carried
out under the supervision and with the participation of the Company's Chief
Executive Officer and Acting Chief Financial Officer and several other members
of the Company's senior management at June 30, 2007. Based on this evaluation,
and as noted below, the Company's Chief Executive Officer and Acting Chief
Financial Officer concluded that as of June 30, 2007, the Company's
disclosure controls and procedures were not effective, for the reasons discussed
below, at a reasonable level of assurance, in ensuring that the information
required to be disclosed by the Company in the Reports it files or submits under
the Act is (i) accumulated and communicated to the Company's management
(including the Chief Executive Officer and Acting Chief Financial Officer) in a
timely manner, and (ii) recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms. The Company identified
a weakness during the preparation of the June 30, 2006 Form 10-K. The weakness
related to the Company’s loss of its then Chief Financial Officer and the
appointment of an Acting Chief Financial Officer. As a result of the
SEC’s Formal Order of Private Investigation and the subpoenas issued in
connection therewith and the change of the Company’s auditors, the Company
became delinquent in filing its SEC reports.
During the preparation of
the June 30, 2006 Form 10-K and during the twelve months ended June 30, 2007,
the Company retained independent consultants with experience in public company
disclosure requirements to assist the Chief Executive Officer and the acting
Chief Financial Officer in their respective duties during the review,
preparation and disclosures required in SEC rules and regulations.
Changes
in Disclosure Controls and Procedures
A new
Chief Financial Officer was appointed as of September 24, 2007, and the Company
continues to engage independent consultants with experience in public company
disclosure requirements to assist such officers in their respective duties
during the review, preparation and disclosures required in SEC rules and
regulations. The Company believes that its appointment of its
new Chief Financial Officer, along with the continued retention of independent
consultants, will result in its disclosure controls and procedures being
sufficiently effective to insure that the Company will become compliant with its
SEC reporting requirements.
Item
9B. Other Information
This 2007 Annual Report on Form 10-K, our June 30, 2008
Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for the
quarters ended September 30, 2007, December 31, 2007 and March 31, 2008 will be
filed beyond the applicable filing deadlines.
ABLE
ENERGY, INC. AND SUBSIDIARIES
Consolidated
Financial Statements
For the
Years Ended
June 30,
2007 and 2006
|
|
Page
|
|
|
|
|
Report of
Independent Registered Public Accounting Firm - Lazar Levine & Felix,
LLP
|
F-2
|
|
Report of
Independent Registered Public Accounting Firm - Marcum & Kliegman,
LLP
|
F-3
|
|
Report of
Independent Registered Public Accounting Firm – Simontacchi & Company,
LLP
|
F-4
|
|
Consolidated Balance
Sheets as of June 30, 2007 and 2006
|
F-5
|
|
Consolidated
Statements of Operations for the Years Ended June 30, 2007, 2006 and
2005
|
F-6
|
|
Consolidated
Statements of Stockholders' Equity for the Years Ended June 30, 2007, 2006
and
2005
|
F-7
|
|
Consolidated
Statements of Cash Flows for the Years Ended June 30, 2007, 2006 and
2005
|
F-8 -
F-9
|
|
Notes to
Consolidated Financial Statements
|
F-10 -
F-56
|
Lazar
Levine & Felix LLP
CERTIFIED
PUBLIC ACCOUNTANT & BUSINESS CONSULTANTS
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Stockholders and Board of Directors
Able
Energy, Inc and Subsidiaries
Rockaway,
New Jersey
We have
audited the accompanying consolidated balance sheet of Able Energy, Inc. and
Subsidiaries (the "Company") as of June 30, 2007 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year
ended June 30, 2007. We have also audited the financial statement schedule
listed in the accompanying index. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audit. The June 30, 2006 financial
statements were audited by other auditors whose report dated April 4, 2007, on
those statements included explanatory paragraphs describing conditions that
raised substantial doubt about the Company's ability to continue as a going
concern and potential financial statement adjustments that might result from the
outcome of a Formal Order of Private Investigation from the Securities and
Exchange Commission ("SEC").
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements and financial statement schedule are free of
material misstatement. We were not engaged to perform an audit of the Company's
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial statement schedule,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In
our
opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of the Company as of June 30, 2007 and the results of its
operations and its cash flows for the year ended June 30, 2007, in conformity
with accounting principles generally accepted in the United States of America.
Also, in our opinion, the financial statement schedule presents fairly, in all
material respects, the information set forth therein.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As more fully described in Note 2,
the Company has incurred losses from continuing operations of approximately
$6,632,000, $6,242,000 and $2,180,000 during the years ended June 30, 2007, 2006
and 2005, respectively, resulting in an accumulated deficit of $17,671,264 at
June 30, 2007. In addition, the Company has used cash from operations of
approximately $1,272,000 for the year ended June 30, 2007 and has a working
capital deficiency of approximately $3,625,000 at June 30, 2007. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
As
discussed in Note 1 to the consolidated financial statements, Marcum &
Kliegman ("M&K") was the Company's predecessor independent registered public
accounting firm for fiscal 2006. M&K has not consented to reissue its report
dated April 4, 2007 included with the Company's June 30, 2006 Annual Report on
Form, 10-K filed with the SEC on April 12, 2007. Accordingly, the consolidated
balance sheet as of June 30, 2006 and the related consolidated statements of
operations, stockholders' equity and cash flows for the year ended June 30, 2006
contained in the accompanying consolidated financial statements and footnotes
are not covered by a report of an independent registered public accounting firm
report as required by the standards of the Public Company Accounting Oversight
Board (United States) and the rules and regulations of the SEC.
LAZAR
LEVINE
& FELIX
LLP
Morristown,
New Jersey
October
16, 2008
REPORTS
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Stockholders and Board
of Directors
Able Energy, Inc. and
Subsidiaries
Report of
Independent Registered Public Accoun
ting Firm - Marcum &
Kliegman, LLP
Please
refer to Explanatory Note at page 3 of this Annual Report and Note 1 - Nature of
Operations to these Consolidated Financial Statements regarding the Report of
Marcum & Kliegman for the fiscal year ended June 30, 2007.
|
SIMONTACCHI
& COMPANY, LLP
CERTIFIED
PUBLIC ACCOUNTANTS
|
170
E. MAIN STREET
ROCKAWAY,
NEW JERSEY 07866
TEL: (973)
664-1140
FAX: (973)
664-1145
|
To
The Board of Directors
Able
Energy, Inc.
Rockaway,
New Jersey 07866
Report of Independent
Registered Public Accounting Firm
We have
audited the accompanying consolidated balance sheets of Able Energy, Inc. and
subsidiaries as of June 30, 2005 and the related consolidated statements of
operations, Stockholders' equity, and cash flows for the year ended June 30,
2005. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We
conducted our audit in accordance with the Standards of the Public Company
Accounting Oversite Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. 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, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Able Energy, Inc. and
subsidiaries as of June 30, 2005, and the results of their operations and their
cash flows for the year ended June 30, 2005 in conformity with accounting
principles generally accepted in the United States of America.
Simontacchi
&
Company, LLP
Rockaway,
New Jersey
September
14, 2005
MEMBER,
AMERICAN INSTITUTE OR CERTIFIED PUBLIC ACCOUNTANTS
ABLE
ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
|
|
|
JUNE
30,
|
|
|
|
|
2007
|
|
|
*2006
|
|
|
|
|
(audited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash
and cash equvalents
|
|
$
|
3,034,183
|
|
|
$
|
2,144,729
|
|
|
Accounts
receivable, net of allowance for doubtful accounts
of
|
|
|
|
|
|
|
|
|
|
$744,253
and $462,086, at June 30, 2007 and 2006, respectively
|
|
|
5,648,996
|
|
|
|
3,414,894
|
|
|
Advances
to related party
|
|
|
8,374,496
|
|
|
|
-
|
|
|
Inventories
|
|
|
4,191,790
|
|
|
|
675,987
|
|
|
Notes
receivable-current portion
|
|
|
725,000
|
|
|
|
400,579
|
|
|
Prepaid
expenses and other current assets
|
|
|
1,169,175
|
|
|
|
528,788
|
|
|
Total
Current Assets
|
|
|
23,143,640
|
|
|
|
7,164,977
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
7,603,263
|
|
|
|
4,414,051
|
|
|
Notes
receivable-less current portion
|
|
|
-
|
|
|
|
725,000
|
|
|
Goodwill
|
|
|
11,139,542
|
|
|
|
-
|
|
|
Intangible
assets, net
|
|
|
5,970,303
|
|
|
|
326,658
|
|
|
Deferred
financing costs, net
|
|
|
225,430
|
|
|
|
150,264
|
|
|
Prepaid
acquisition costs
|
|
|
-
|
|
|
|
225,000
|
|
|
Security
deposits
|
|
|
79,918
|
|
|
|
84,918
|
|
|
Total
Assets
|
|
$
|
48,162,096
|
|
|
$
|
13,090,868
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
Line
of credit
|
|
$
|
481,602
|
|
|
$
|
1,231,640
|
|
|
Notes
payable, current portion
|
|
|
3,236,168
|
|
|
|
76,181
|
|
|
Capital
leases payable, current portion
|
|
|
376,042
|
|
|
|
314,145
|
|
|
Convertible
debentures and notes payable,
|
|
|
|
|
|
|
|
|
|
net
of unamortized debt discounts of
|
|
|
|
|
|
|
|
|
|
$1,784,233
and $70,368 as of June 30, 2007 and
2006, respectively
|
|
|
1,348,267
|
|
|
|
62,132
|
|
|
Accounts
payable and accrued expenses
|
|
|
17,711,401
|
|
|
|
2,298,937
|
|
|
Customer
pre-purchase payments and unearned revenue
|
|
|
3,615,087
|
|
|
|
3,614,259
|
|
|
Total
Current Liabilities
|
|
|
26,768,567
|
|
|
|
7,597,294
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable, less current portion
|
|
|
3,632,726
|
|
|
|
3,176,175
|
|
|
Capital
leases payable, less current portion
|
|
|
729,816
|
|
|
|
645,313
|
|
|
Total
Long-Term Liabilities
|
|
|
4,362,542
|
|
|
|
3,821,488
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
31,131,109
|
|
|
|
11,418,782
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
|
Preferred
stock; par value $.001, authorized 10,000,000 shares;
|
|
|
|
|
|
|
|
|
|
issued-none
|
|
|
-
|
|
|
|
-
|
|
|
Common
stock; $.001 par value; 75,000,000 and 10,000,000 shares
|
|
|
|
|
|
|
|
|
|
authorized
at June 30, 2007 and 2006, respectively;
|
|
|
|
|
|
|
|
|
|
14,950,947
and 3,128,923 shares issued and outstanding
|
|
|
|
|
|
|
|
|
|
at
June 30, 2007 and 2006, respectively
|
|
|
14,951
|
|
|
|
3,129
|
|
|
Additional
paid in capital
|
|
|
37,840,498
|
|
|
|
14,812,723
|
|
|
Accumulated
deficit
|
|
|
(17,671,264
|
)
|
|
|
(11,038,961
|
)
|
|
Notes
and loans receivable-related parties
|
|
|
(3,153,198
|
)
|
|
|
(2,104,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
17,030,987
|
|
|
|
1,672,086
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
48,162,096
|
|
|
$
|
13,090,868
|
|
* June 30, 2006 not
covered by a report of an independent registered public accounting firm - See
Note 1.
See
accompanying notes to the consolidated financial statements
ABLE
ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
For
the years ended June 30,:
|
|
|
|
|
2007
|
|
|
*2006
|
|
|
2005
|
|
|
|
|
(audited)
|
|
|
|
|
|
(audited)
|
|
|
Net
Sales
|
|
$
|
93,641,548
|
|
|
$
|
75,093,104
|
|
|
$
|
61,872,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
(exclusive
of depreciation and amortization
shown separately
below)
|
|
|
85,103,534
|
|
|
|
67,625,209
|
|
|
|
55,722,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
8,538,014
|
|
|
|
7,467,895
|
|
|
|
6,150,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
11,805,324
|
|
|
|
9,569,822
|
|
|
|
6,853,582
|
|
|
Depreciation
and amortization
|
|
|
740,203
|
|
|
|
755,700
|
|
|
|
1,225,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
12,545,527
|
|
|
|
10,325,522
|
|
|
|
8,078,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(4,007,513
|
)
|
|
|
(2,857,627
|
)
|
|
|
(1,928,309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and other income
|
|
|
554,767
|
|
|
|
155,068
|
|
|
|
340,697
|
|
|
Interest
income - related parties
|
|
|
280,048
|
|
|
|
82,305
|
|
|
|
-
|
|
|
Interest
expense
|
|
|
(937,345
|
)
|
|
|
(625,018
|
)
|
|
|
(427,277
|
)
|
|
Interest
expense - related party
|
|
|
(11,671
|
)
|
|
|
(17,499
|
)
|
|
|
(22,499
|
)
|
|
Note
conversion expense
|
|
|
-
|
|
|
|
(125,000
|
)
|
|
|
-
|
|
|
Amortization
of deferred financing costs
|
|
|
(814,088
|
)
|
|
|
(424,156
|
)
|
|
|
(121,790
|
)
|
Amortization
of debt discounts on convertible debentures
and note
payable
|
|
|
(1,286,135
|
)
|
|
|
(2,429,632
|
)
|
|
|
-
|
|
|
Registration
rights penalty
|
|
|
(381,542
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Total
Other Expenses
|
|
|
(2,595,966
|
)
|
|
|
(3,383,932
|
)
|
|
|
(230,869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(6,603,479
|
)
|
|
|
(6,241,559
|
)
|
|
|
(2,159,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
28,824
|
|
|
|
-
|
|
|
|
20,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(6,632,303
|
)
|
|
$
|
(6,241,559
|
)
|
|
$
|
(2,180,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per common share
|
|
$
|
(1.60
|
)
|
|
$
|
(2.23
|
)
|
|
$
|
(1.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic
and diluted
|
|
|
4,133,090
|
|
|
|
2,800,476
|
|
|
|
2,094,629
|
|
* June 30, 2006 not
covered by a report of an independent registered public accounting firm - See
Note 1.
See
accompanying notes to the consolidated financial statements
ABLE
ENERGY, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For The Years Ended June 30,
2007, 2006 and 2005
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
Notes
and Loans
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid - in Capital
|
|
|
Accumulated
Deficit
|
|
|
Receivable
Related Parties
|
|
|
Stockholders'
Equity
|
|
|
Balance
June 30, 2004
|
|
|
2,013,250
|
|
|
$
|
2,013
|
|
|
$
|
5,711,224
|
|
|
$
|
(2,617,311
|
)
|
|
$
|
-
|
|
|
$
|
3,095,926
|
|
Common
stock issued in connection
with option and
warrant exercise
|
|
|
291,213
|
|
|
|
291
|
|
|
|
478,392
|
|
|
|
-
|
|
|
|
-
|
|
|
|
478,683
|
|
Options
granted to employees-below
market
price
|
|
|
-
|
|
|
|
-
|
|
|
|
117,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
117,000
|
|
Restricted
common stock granted
to board
members
|
|
|
10,000
|
|
|
|
10
|
|
|
|
103,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
103,210
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,180,091
|
)
|
|
|
-
|
|
|
|
(2,180,091
|
)
|
|
Balance
June 30, 2005
(audited)
|
|
|
2,314,463
|
|
|
|
2,314
|
|
|
|
6,409,816
|
|
|
|
(4,797,402
|
)
|
|
|
-
|
|
|
|
1,614,728
|
|
|
Discounts
on convertible debentures
|
|
|
-
|
|
|
|
-
|
|
|
|
2,500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,500,000
|
|
Common
stock issued in connection
with option and
warrant exercise
|
|
|
385,000
|
|
|
|
385
|
|
|
|
2,427,365
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,427,750
|
|
Common
stock issued upon
conversion of note
payable
|
|
|
57,604
|
|
|
|
58
|
|
|
|
624,942
|
|
|
|
-
|
|
|
|
-
|
|
|
|
625,000
|
|
Common
stock issued upon
conversion of
convertible debt and related accrued interest
|
|
|
371,856
|
|
|
|
372
|
|
|
|
2,416,691
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,417,063
|
|
|
Options
granted to employees
|
|
|
-
|
|
|
|
-
|
|
|
|
31,787
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,787
|
|
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
402,122
|
|
|
|
-
|
|
|
|
-
|
|
|
|
402,122
|
|
Loan
receivable from stockholder
for payment of
certain prepaid financing costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(125,000
|
)
|
|
|
(125,000
|
)
|
Notes
receivable from related party
and related interest
receivable for reimbursement of certain fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(179,230
|
)
|
|
|
(179,230
|
)
|
Issuance
of note receivable
and related interest
receivable upon advance to stockholders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,800,575
|
)
|
|
|
(1,800,575
|
)
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,241,559
|
)
|
|
|
-
|
|
|
|
(6,241,559
|
)
|
|
Balance
June 30, 2006
*
|
|
|
3,128,923
|
|
|
|
3,129
|
|
|
|
14,812,723
|
|
|
|
(11,038,961
|
)
|
|
|
(2,104,805
|
)
|
|
|
1,672,086
|
|
|
Options
granted to outside directors
|
|
|
-
|
|
|
|
-
|
|
|
|
439,825
|
|
|
|
-
|
|
|
|
-
|
|
|
|
439,825
|
|
Common
stock issued in
connection with
option exercise
|
|
|
12,500
|
|
|
|
12
|
|
|
|
54,488
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,500
|
|
Common
stock issued in
connection with
Summit settlement
|
|
|
142,857
|
|
|
|
143
|
|
|
|
171,286
|
|
|
|
|
|
|
|
|
|
|
|
171,429
|
|
Discounts
on convertible
debentures and note
payable
|
|
|
-
|
|
|
|
-
|
|
|
|
3,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,000,000
|
|
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
123,843
|
|
|
|
-
|
|
|
|
-
|
|
|
|
123,843
|
|
Notes
receivable from related parties
for reimbursement of
certain fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(590,000
|
)
|
|
|
(590,000
|
)
|
Issuance
of notes receivable
and related accrued
interest receivable upon advance to stockholders and related
party
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(458,393
|
)
|
|
|
(458,393
|
)
|
Issuance
of stock for the purchase
of the assets of All
American Plaza, Inc.
|
|
|
11,666,667
|
|
|
|
11,667
|
|
|
|
19,238,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,250,000
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,632,303
|
)
|
|
|
-
|
|
|
|
(6,632,303
|
)
|
|
Balance
June 30, 2007
(audited)
|
|
|
14,950,947
|
|
|
$
|
14,951
|
|
|
$
|
37,840,498
|
|
|
$
|
(17,671,264
|
)
|
|
$
|
(3,153,198
|
)
|
|
$
|
17,030,987
|
|
* June 30, 2006
not covered by a report of an independent registered public accounting firm -
See Note 1.
See
accompanying notes to the consolidated financial statements
ABLE
ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
For
the years ended June 30,
|
|
|
|
|
|
2007
|
|
|
*2006
|
|
|
2005
|
|
|
Cash
flows from operating activities:
|
|
(audited)
|
|
|
|
|
|
(audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(6,632,303
|
)
|
|
$
|
(6,241,559
|
)
|
|
|
(2,180,091
|
)
|
|
|
Adjustments
to reconcile net loss to net cash
used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
740,203
|
|
|
|
755,700
|
|
|
|
1,206,315
|
|
|
|
Write-off
of capital project
|
|
|
-
|
|
|
|
57,447
|
|
|
|
-
|
|
|
|
Provision
for bad debts
|
|
|
107,167
|
|
|
|
296,021
|
|
|
|
163,663
|
|
|
|
Amortization
of debt discounts
|
|
|
1,286,135
|
|
|
|
2,429,632
|
|
|
|
-
|
|
|
|
Amortization
of deferred financing costs
|
|
|
814,088
|
|
|
|
424,156
|
|
|
|
15,881
|
|
|
|
Accrual
of interest income on note receivable and loan-related
parties
|
|
|
(182,942
|
)
|
|
|
(82,305
|
)
|
|
|
-
|
|
|
|
Stock
- based compensation
|
|
|
735,096
|
|
|
|
433,909
|
|
|
|
220,210
|
|
|
|
Gain
on sale of property and equipment
|
|
|
(11,964
|
)
|
|
|
(6,300
|
)
|
|
|
-
|
|
|
|
Derivative
losses
|
|
|
926,170
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Note
conversion expense
|
|
|
-
|
|
|
|
125,000
|
|
|
|
-
|
|
|
|
(Increase)
decrease in operating assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
585,218
|
|
|
|
(888,644
|
)
|
|
|
(438,958
|
)
|
|
|
Advances
to related parties
|
|
|
(8,374,496
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
Inventories
|
|
|
180,046
|
|
|
|
51,000
|
|
|
|
(167,662
|
)
|
|
|
Prepaid
expenses and other current assets
|
|
|
(1,255,675
|
)
|
|
|
4,541
|
|
|
|
220,423
|
|
|
|
Security
deposits
|
|
|
5,000
|
|
|
|
(30,000
|
)
|
|
|
82,097
|
|
|
|
Increase
(decrease) in operating liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
10,042,856
|
|
|
|
78,631
|
|
|
|
225,968
|
|
|
|
Customer
pre-purchase payments and unearned revenue
|
|
|
(236,711
|
)
|
|
|
880,578
|
|
|
|
277,721
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,272,112
|
)
|
|
|
(1,712,193
|
)
|
|
|
(374,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(843,112
|
)
|
|
|
(474,547
|
)
|
|
|
(725,087
|
)
|
|
|
Cash
acquired in purchase of Horsham Franchise, net of $128,000 cash
paid
|
|
|
109,539
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Cash
acquired in purchase of All American Plazas, Inc.
|
|
|
2,201,977
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Advances
to related parties
|
|
|
(1,580,451
|
)
|
|
|
(2,022,500
|
)
|
|
|
-
|
|
|
|
Prepaid
acquisition costs
|
|
|
-
|
|
|
|
(225,000
|
)
|
|
|
-
|
|
|
|
Collection
of notes receivable
|
|
|
231,878
|
|
|
|
256,682
|
|
|
|
320,718
|
|
|
|
Proceeds
from sale of property and equipment
|
|
|
13,884
|
|
|
|
6,300
|
|
|
|
270,412
|
|
|
|
Net
cash used in investing activities
|
|
|
133,715
|
|
|
|
(2,459,065
|
)
|
|
|
(133,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(repayments) borrowings under line of credit
|
|
|
(750,038
|
)
|
|
|
216,172
|
|
|
|
316,232
|
|
|
|
Proceeds
from notes payable
|
|
|
1,200,000
|
|
|
|
-
|
|
|
|
3,750,000
|
|
|
|
Repayments
of notes payable
|
|
|
(1,043,617
|
)
|
|
|
(71,358
|
)
|
|
|
(3,079,052
|
)
|
|
|
Repayments
of capital leases payable
|
|
|
(350,787
|
)
|
|
|
(293,721
|
)
|
|
|
(243,236
|
)
|
|
|
Proceeds
from the exercise of options and warrants
|
|
|
54,500
|
|
|
|
2,427,750
|
|
|
|
478,683
|
|
|
|
Deferred
financing costs
|
|
|
(82,207
|
)
|
|
|
(217,174
|
)
|
|
|
(269,767
|
)
|
|
|
Proceeds
from issuance of convertible debentures and note payable
|
|
|
3,000,000
|
|
|
|
2,500,000
|
|
|
|
-
|
|
|
|
Net
cash provided by financing activities
|
|
|
2,027,851
|
|
|
|
4,561,669
|
|
|
|
952,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents:
|
|
|
889,454
|
|
|
|
390,411
|
|
|
|
444,470
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
2,144,729
|
|
|
|
1,754,318
|
|
|
|
1,309,848
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
3,034,183
|
|
|
$
|
2,144,729
|
|
|
$
|
1,754,318
|
|
* June 30, 2006 not
covered by a report of an independent registered public accounting firm - See
Note 1.
See
accompanying notes to the consolidated financial statements
ABLE
ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)
|
|
|
For
the years ended June 30,
|
|
|
|
|
2007
|
|
|
*2006
|
|
|
2005
|
|
|
Supplemental
disclosure of cash flow information:
|
|
(audited)
|
|
|
|
|
|
(audited)
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
949,015
|
|
|
$
|
517,286
|
|
|
$
|
432,849
|
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
17,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
non - cash investing and financing activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of Horsham franchise from Able Oil Montgomery, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
acquired and liabilities assumed(preliminary):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
28,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Property
and equipment
|
|
|
39,000
|
|
|
|
-
|
|
|
|
-
|
|
|
Intangible
assets - Customer lists
|
|
|
697,175
|
|
|
|
-
|
|
|
|
-
|
|
|
Customer
pre - purchase payments
|
|
|
(237,539
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
combination with All American Plazas, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
acquired and liabilities assumed (preliminary):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable-net
|
|
|
2,947,566
|
|
|
|
-
|
|
|
|
-
|
|
|
Inventories
|
|
|
3,667,849
|
|
|
|
-
|
|
|
|
-
|
|
|
Property
and equipment
|
|
|
2,443,767
|
|
|
|
-
|
|
|
|
-
|
|
|
Intangible
assets-franchise agreements
|
|
|
64,156
|
|
|
|
-
|
|
|
|
-
|
|
|
Intangible
asset-option to acquire Properties real estate
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
Prepaid
expenses and other current assets
|
|
|
503,708
|
|
|
|
-
|
|
|
|
-
|
|
|
Goodwill
|
|
|
11,139,542
|
|
|
|
-
|
|
|
|
-
|
|
|
Accounts
payable and accrued expenses
|
|
|
(5,604,025
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Notes
payable
|
|
|
(3,114,540
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued upon conversion of notes payable
|
|
$
|
-
|
|
|
$
|
500,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued upon conversion of convertible debt and accrued
interest
|
|
$
|
-
|
|
|
$
|
2,417,063
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment acquired through the assumption of
capital lease
obligations
|
|
$
|
402,775
|
|
|
$
|
276,781
|
|
|
$
|
446,725
|
|
* June 30, 2006 not
covered by a report of an independent registered public accounting firm - See
Note 1.
See
accompanying notes to the consolidated financial statements
Able Energy,
Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Information
with respect to the period ended June 30, 2006 are not covered by a report of an
independent registered public accounting firm.)
Note
1 - Nature of Operations
The
accompanying financial information for the year ended June 30, 2006 was audited
by Marcum & Kliegman LLP (“M&K”), the Company’s predecessor independent
registered public accounting firm. M&K has not withdrawn its report dated
April 4, 2007 contained in the Company’s fiscal 2006 Annual Report on Form 10-K
filed with the Securities and Exchange Commission ( “SEC”) on April
12, 2007 but has not consented to reissue its report in connection with the
Company’s fiscal 2007 Annual Report on Form 10-K. Accordingly, no report of an
independent registered accounting firm is included on page F-3 in this filing
for June 30, 2006. In addition, the accompanying consolidated balance sheet as
of June 30, 2006 and related consolidated statements of operations,
stockholders’ equity and cash flows for the year ended June 30, 2006
are not covered by a report of independent registered public accounting firm as
required by the rules and regulations of the Public Company Accounting Oversight
Board (United States) and SEC. In addition, any financial and non-financial
information related to the year ended June 30, 2006 included in the accompanying
notes to consolidated financial statements are also not covered by a report of
an independent registered public accounting firm. (See note 22 for
information related to ongoing litigation between the Company and
M&K)
Able
Energy, Inc. (“Able”) was incorporated on March 13, 1997, in the state of
Delaware. Its current wholly-owned subsidiaries are Able Oil Company Inc. (“Able
Oil”), Able Energy New York, Inc. (“Able NY”), Able Oil Melbourne, Inc.
(inactive, as of February 8, 2008), (“Able Melbourne”), Able Energy Terminal,
LLC, PriceEnergy.com Franchising, LLC (inactive), Able Propane, LLC (inactive),
and its majority owned (67.3% as of June 30, 2007) subsidiary, PriceEnergy.com,
Inc. (“PriceEnergy”) and All American Plazas, Inc. (“Plazas”). Able,
together with its operating subsidiaries, are hereby also referred to as the
Company.
Since the
Company’s business combination with All American Plazas, Inc. now known as
All American Properties, Inc. on May 30, 2007 (See, Note 4), the Company is
engaged in two primary business activities, organized in two segments; the Oil
segment and the Travel Plaza segment.
The
Company’s Oil Segment, consisting of Able Oil, Able NY, Able Melbourne, Able
Energy Terminal, LLC and PriceEnergy, is engaged in the retail distribution of,
and the provision of services relating to, #2 home heating oil, propane gas,
kerosene and diesel fuels. In addition to selling liquid energy products, the
Company offers complete heating, ventilation and air conditioning (“HVAC”)
installation and repair and other services and also markets other petroleum
products to commercial customers, including on-road and off-road diesel fuel,
gasoline and lubricants. Please refer to Note 22 - Subsequent Events,
for disclosure relating to the February 8, 2008 sale of the Able Melbourne
assets and liabilities and the July 22, 2008 sale of 49% of the common stock of
Able NY and the Company’s Easton and Horsham, Pennsylvania operations (“Able
PA”) and the subsequent rights granted to the Company on October 31, 2008 to
repurchase those shares of stock in Able NY and the interest in Able PA.
.
The
Company’s Travel Plaza Segment, operated by Plazas, is engaged in the retail
sale of food, merchandise, fuel, personal services, onsite and mobile vehicle
repair, services and maintenance to both the professional and leisure driver
through a current network of ten travel plazas, located in Pennsylvania, New
Jersey, New York and Virginia.
Note
2 - Going Concern and Management’s Plans
The
accompanying consolidated financial statements have been prepared in conformity
with United States generally accepted accounting principles, which contemplate
continuation of the Company as a going concern and assume realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company has incurred losses from continuing operations during the years ended
June 30, 2007, 2006 and 2005 of approximately, $6.6 million, $6.2 million and
$2.2 million, respectively, resulting in an accumulated deficit balance of
approximately $17.7 million as of June 30, 2007. Net cash used in
operations during the years ended June 30, 2007, 2006 and 2005 was approximately
$1.3 million, $1.7 million and $ 0.4 million, respectively. At June
30, 2007, the Company has a working capital deficiency of $3.6
million. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. These consolidated financial
statements do not include any adjustments relating to the recoverability of the
recorded assets or the classification of the liabilities that may be necessary
should the Company be unable to continue as a going concern.
On May
30, 2007, the Company completed a business combination with All American Plazas,
Inc., now known as All American Properties, Inc. (“Properties”) (See Note
20). The Company is pursuing sales initiatives, cost savings and
credit benefits as contemplated in the business combination including
consolidation of business operations where management of the Company deems
appropriate for the combined entity. In order to conserve its capital resources
and to provide incentives for the Company’s employees and other service vendors,
the Company expects to continue to issue, from time to time, common stock and
stock options to compensate employees and non-employees for services
rendered. The Company is focusing on expanding its distribution programs
and new customer relationships to increase demand for its products. In addition,
the Company is pursuing other lines of business, which include expansion of its
current commercial business into other products and services such as bio-diesel,
solar energy and other energy related home services. The Company is also
evaluating, on a combined basis, all of its product lines for cost reductions,
consolidation of facilities and efficiency improvements. There can be no
assurance, however, that the Company will be successful in achieving its
operational improvements which would enhance its liquidity situation.
Note 2 - Going Concern and
Management’s Plans – continued
The
Company’s net loss for the year ended June 30, 2007 was approximately $6.6
million, including non-cash charges totaling approximately $4.4 million. The
Company has been funding its operations through an asset-
based
line of credit, the issuance of convertible debentures, and the proceeds from
the exercise of options and warrants.
The
Company is pursuing other lines of business, which include expansion of its
current commercial business into other products and services such as bio-diesel,
solar energy and other energy related home services. The Company is also
evaluating all of its business segments for cost reductions, consolidation of
facilities and efficiency improvements. There can be no assurance that the
Company will be successful in its efforts to enhance its liquidity
situation.
During
the year ended June 30, 2007, the Company issued notes receivable and made loans
to its largest stockholder, Properties, with a balance at June 30, 2007 of
approximately $2.7 million, including accrued interest of approximately $0.2
million (See Note 19). The Company has granted Properties a series of
extensions of the maturity of these obligations. These obligations
were recorded as contra equity within these consolidated financial
statements. In addition, during June 2007, the Company paid $8.4
million of fuel invoices on behalf of Properties. This advance was
reflected in current assets at June 30, 2007 (See Note 19).
The
Company will require some combination of the collection of Properties notes
receivable and loans, new financing, restructuring of existing financing,
improved receivable collections and/or improved operating results in order to
maintain adequate liquidity over the course of the year ending June 30,
2008. The Company must also bring current each of its
Securities and Exchange Commission (“SEC”) filings as part of a plan to raise
additional capital. In addition to the filing of this Form 10-K for
the year ended June 30, 2007, the Company must also complete and file its Form
10-Q for the quarters ended September 30, 2007, December 31, 2007 and March 31,
2008 and its Annual Report on Form 10-K for the year ended June 30,
2008.
There can
be no assurance that the financing or the cost saving measures as identified
above will be satisfactory in addressing the short-term liquidity needs of the
Company. In the event that these plans cannot be effectively
realized, there can be no assurance that the Company will be able to continue as
a going concern.
Note
3 - Summary of Significant Accounting Policies
Principles
of Consolidation
The
consolidated financial statements include the accounts of Able Energy, Inc. and
its subsidiaries. All material inter-company balances and
transactions were eliminated in consolidation.
Cash
and Cash Equivalents
All
highly liquid investments purchased with a maturity of three months or less at
the time of purchase are considered cash equivalents.
Note
3 - Summary of Significant Accounting Policies – continued
Inventories
Inventories
consist principally of heating oil, diesel fuel, kerosene, propane and heating
equipment, related parts and supplies, and are valued at the lower of cost
(first in, first out method) or market.
|
|
|
June
30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
#2
heating oil
|
|
$
|
327,757
|
|
|
$
|
335,485
|
|
|
Diesel
fuel
|
|
|
59,086
|
|
|
|
42,567
|
|
|
Kerosene
|
|
|
10,176
|
|
|
|
9,125
|
|
|
Propane
|
|
|
15,980
|
|
|
|
33,444
|
|
|
Parts,
supplies and equipment
|
|
|
213,484
|
|
|
|
255,366
|
|
|
Fuels
|
|
|
1,260,653
|
|
|
|
-
|
|
|
Non-fuel
|
|
|
2,304,654
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand
Total
|
|
$
|
4,191,790
|
|
|
$
|
675,987
|
|
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 as
follows:
|
Trucks,
Machinery and Equipment, Office Furniture,
Fixtures
and Equipment
|
5-10
years
|
|
Fuel
Tanks
|
10
years
|
|
Cylinders
– Propane
|
20
years
|
|
Buildings
|
20-40
years
|
|
Building
Improvements
|
20
years
|
|
Leasehold
Improvements
|
Lesser
of useful life or
life
of lease
|
Upon
retirement or other disposition of these assets, the cost and related
accumulated depreciation and amortization of these assets are removed from the
accounts and the resulting gains or losses are reflected in the consolidated
results of operations. Expenditures for maintenance and repairs are charged to
operations as incurred. Renewals and betterments are capitalized.
Intangible
Assets
Intangible
assets include customer lists, website development costs and an option to
purchase real estate from Properties. Costs incurred in the
developmental stage for computer hardware and software have been capitalized in
accordance with Emerging Issues Task force (“EITF”) 00-2, “Accounting for Web
Site Development Costs,” and are amortized on a straight-line basis over the
estimated useful life of 5 years.
Customer
lists related to various acquisitions are being amortized over lives of 10-15
years.
The
option to purchase the real estate of properties is being amortized over 10
years, the life of the leases including the automatic renewal
options.
Note
3 - Summary of Significant Accounting Policies – continued
Impairment
of Long-Lived Assets
Long-lived
assets, including property and equipment and intangible assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Recoverability
of assets to be held and used is measured by comparison of the carrying value of
an asset to the undiscounted future cash flows expected to be generated by the
asset. If the carrying value of an asset exceeds its estimated
undiscounted future cash flows, an impairment provision is recognized to the
extent the book value of the asset exceeds estimated fair
value. Assets to be disposed of are reported at the lower of the
carrying amount or the fair value of the asset, less all associated costs of
disposition.
Based
upon an assessment in accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, there has
been no impairment of the intangible assets.
Deferred
Financing Costs
In
connection with the Company’s issuance of convertible debentures, notes payable
and obtaining a line of credit, the Company incurred certain costs, which were
capitalized and are being amortized over the life of the related debt
obligation. For convertible debentures that are converted into common
stock, the pro-rata portion of the deferred financing cost is amortized
immediately upon conversion.
Goodwill
Goodwill
information is as follows:
|
|
|
Year
Ended
|
|
|
|
|
June
30, 2007
|
|
|
|
|
|
|
|
Goodwill-beginning
of year
|
|
$
|
-
|
|
|
Acquired
|
|
|
11,139,542
|
|
|
Goodwill-end
of year
|
|
$
|
11,139,542
|
|
Statement
of Financial Accounting Standard No. 142, “
Goodwill and Other Intangible
Assets
” (“SFAS No. 142”) requires that purchased goodwill and
indefinite-lived intangibles not be amortized. Rather, goodwill and
indefinite-lived intangible assets are subject to at least an annual assessment
for impairment by applying a fair value-based test.
SFAS No.
142 requires a two-step approach to testing goodwill for impairment for each
reporting unit. Our reporting units are determined by the components
that constitute a business for which both, (1) discreet financial information is
available and, (2) management of the reporting segment regularly reviews the
operating results of that component. The first step tests for
impairment by applying fair value-based tests at the reporting segment
level. The second step (if necessary) measures the amount of
impairment by applying fair value-based tests to individual assets and
liabilities within each reporting unit. We completed the first step
of the annual goodwill impairment testing in the fourth quarter of fiscal 2007
and found no indicators of impairment of our recorded goodwill.
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with United
States generally accepted accounting principles requires the use of estimates
that affect the reported amounts of assets, liabilities, revenues and
expenses. These estimates are based on historical experience and
various other factors that we believe to be reasonable under the circumstances,
the results of which form the basis for our conclusions. We
continually evaluate the information used to make these estimates as the
business and economic environment changes. Actual results may differ
from these estimates under different assumptions or conditions. Such
differences could have a material impact on our future financial position,
results of operations and cash flows.
Note
3 - Summary of Significant Accounting Policies – continued
Minority
Interest
The
Company records adjustments to the minority interests in PriceEnergy for the
allocable portion of income or loss that the minority interest holders are
entitled to. The Company suspends allocation of losses to minority
interest holders when the minority interest balance for a particular minority
interest holder is reduced to zero. Any excess loss above the
minority interest holder’s balance is not charged to minority interests as the
minority interest holders have no obligation to fund such
losses. Thus, the Company suspended the allocation of minority
interest in fiscal 2007, 2006 and 2005.
Joint
Ventures
The
Company may from time to time enter into joint venture arrangements with third
parties. For 50% or less joint venture interests, the
Company will reflect its investment in the joint venture as investments in
non-consolidating subsidiaries on the consolidated balance sheet.
For 51% or more interests, the Company consolidates the joint venture
results with that of the Company. The Company has not entered into
any joint ventures during the three year period ended June 30, 2007 (See Note
20).
Income
Taxes
The
Company provides 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. Valuation allowances are provided against deferred tax
assets to the extent that it is more likely than not that the deferred tax
assets will not be realized.
Deferred
tax assets pertaining to windfall tax benefits on exercise of non-qualified
stock options and the corresponding credit to additional paid-in capital are
recorded if the related tax amount either reduces income taxes payable or
results in an income tax refund. The Company has elected the “with
and without approach” regarding ordering of windfall tax benefits to determine
whether the windfall tax benefit did reduce income taxes payable or resulted in
an income tax refund in the current year. Under this approach, the
windfall tax benefits would be recognized in additional paid-in capital only if
an incremental income tax benefit is realized after considering all other income
tax benefits presently available to the Company.
The Tax
Reform Act of 1986 limits the use of net operating loss and tax credit carry
forwards in certain situations where disqualifying changes occur in the stock
ownership of a company. In the event the Company experiences a
disqualifying change in ownership, utilization of the carry forwards could be
restricted.
Concentrations
of Credit Risk
Cash: The
Company maintains its cash with various financial institutions in excess of the
federally insured limit. At June 30, 2007 and 2006, the Company had
cash on deposit of approximately $1.6 million and $1.9 million, respectively, in
excess of federally insured limits.
Accounts
Receivable: The number of clients that comprise the Company's client base limits
concentrations of credit risk with respect to accounts receivable. The Company
does not generally require collateral or other security to support client
receivables. The Company has established an allowance for doubtful
accounts based upon facts surrounding the credit risk of specific clients and
past collections history. Credit losses have been within management's
expectations.
Advertising
Advertising
costs are expensed at the time the advertisement takes
place. Advertising expense was approximately $500,000, $500,000 and
$300,000 for the years ended June 30, 2007, 2006 and 2005,
respectively.
Note
3 - Summary of Significant Accounting Policies – continued
Shipping
and Handling Costs
Shipping
and handling costs incurred by the Company in connection with the purchase and
delivery of fuel oil inventory and fuels were approximately $351,000, $300,000
and $300,000 for the years ended June 30, 2007, 2006 and 2005, respectively, and
are recognized as a component of cost of sales within the consolidated statement
of operations.
Revenue
Recognition and Unearned Revenue and Customer Pre-Purchased
Payments
Sales of
travel plaza services, 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 recognized
over the term of the respective service contracts, on a straight-line basis,
which generally do not exceed one year. Payments received from customers for the
pre-purchase of fuel is recorded as a current liability until the fuel is
delivered to the customer, at which time it is recognized as revenue by the
Company.
Derivative
Contracts
The
Company uses derivative instruments (futures contracts) to manage the commodity
price risk inherent in the purchase and sale of #2 heating oil. Derivative
instruments are required to be marked to market under SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (“SFAS 133”), as amended.
These contracts are designated as cash flow hedges in accordance with SFAS 133
and are recorded at fair value as a liability entitled “fuel derivative
contracts” on the Company's consolidated balance sheet.
The
Company believes that these futures contracts for fuel oil have been effective
during their term to offset changes in cash flow attributable to the hedged
risk. The Company performs a prospective and retrospective assessment of the
effectiveness of the futures contracts at least on a quarterly basis. All
unrealized gains or losses on the futures contracts at each reporting date are
included in accumulated other comprehensive loss in the equity section of the
condensed consolidated balance sheet and in comprehensive loss until the related
fuel purchases being hedged are sold at which time such gains or losses are
recorded in cost of sales in the consolidated statements of operations. However,
if the Company expects at any time that continued reporting of a loss in
accumulated other comprehensive income would lead to recognizing a net loss on
the combination of the futures contracts and the hedged transaction in one or
more future periods, a loss is reclassified into cost of goods sold for the
amount that is not expected to be recovered. All contracts were closed as of
June 30, 2007. As of June 30, 2007, all realized losses on futures
contracts were recorded in cost of goods sold in the consolidated statement of
operations in the amount of approximately $900,000. There were no such
gains or losses in the prior two fiscal years.
Net
Loss per Share
Basic net
loss per common share is computed based on the weighted average number of shares
of common stock outstanding during the periods presented. Common stock
equivalents, consisting of stock options, warrants, and convertible notes and
debentures as further discussed in the notes to the consolidated financial
statements, were not included in the calculation of diluted loss per share
because their inclusion would have been anti-dilutive.
The total
common shares issuable upon the exercise of stock options and warrants, and
conversion of convertible debentures excluded from comparative diluted loss per
share was 7,102,524 shares, 5,452,520 shares and 238,000 shares at June 30,
2007, 2006 and 2005, respectively.
Presentation
of
Motor Fuel Taxes
Remitted to Government Authorities
The
Company’s Travel Plaza Segment is charged motor fuel taxes by its suppliers, and
these suppliers remit these taxes to government agencies. The Travel
Plaza Segment then collects these taxes from consumers at the time of
sale. Net sales and cost of sales in our consolidated statements
of operations included fuel taxes of $3,354,265 for the year ended June 30,
2007.
Note
3 - Summary of Significant Accounting Policies – continued
Recent
Accounting Pronouncements
In June
2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”
(“SFAS 154”). SFAS 154 establishes new standards on accounting for changes in
accounting principles. Pursuant to the new rules, all such changes must be
accounted for by retrospective application to the financial statements of prior
periods unless it is impracticable to do so. SFAS 154 completely replaces APB
No. 20 and SFAS 6, though it carries forward the guidance in those
pronouncements with respect to accounting for changes in estimates, changes in
the reporting entity, and the correction of errors. The requirements in SFAS 154
are effective for accounting changes made in fiscal years beginning after
December 15, 2005. The Company applied these requirements to any accounting
changes after the implementation date. The application of SFAS 154 did not have
an impact on the Company’s consolidated financial position, results of
operations or cash flows.
In June
2005, the FASB ratified Emerging Issues Task Force (“EITF”) No. 05-1,
“Accounting for the Conversion of an Instrument That Becomes Convertible upon
the Issuer’s Exercise of a Call Option” (“EITF No. 05-1”) which addresses that
no gain or loss should be recognized upon the conversion of an instrument that
becomes convertible as a result of an issuer’s exercise of a call option
pursuant to the original terms of the instrument. EITF No. 05-1 is effective for
periods beginning after June 28, 2006. The adoption of this pronouncement did
not have an effect on the Company’s consolidated financial position, results of
operations or cash flows.
In June
2005, the FASB ratified EITF Issue No. 05-2, “The Meaning of ‘Conventional
Convertible Debt Instrument’ in EITF Issue No. 00-19, “Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock”, which addresses when a convertible debt instrument should be considered
conventional for the purpose of applying the guidance in EITF No. 00-19. EITF
No. 05-2 also retained the exemption under EITF No. 00-19 for conventional
convertible debt instruments and indicated that convertible preferred stock
having a mandatory redemption date may qualify for the exemption provided under
EITF No. 00-19 for conventional convertible debt if the instrument’s economic
characteristics are more similar to debt than equity. EITF No. 05-2 is effective
for new instruments entered into and instruments modified in periods beginning
after
June 29,
2005. The Company has applied the requirements of EITF No. 05-2 since the
required implementation date. The adoption of this pronouncement did not have an
effect on the Company’s consolidated financial position, results of operations
or cash flows.
EITF
Issue No. 05-4 “The Effect of a Liquidated Damages Clause on a Freestanding
Financial Instrument Subject to EITF Issue No. 00-19, ‘Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock”, addresses financial instruments, such as stock purchase warrants, which
are accounted for under EITF 00-19 that may be issued at the same time and in
contemplation of a registration rights agreement that includes a liquidated
damages clause. The consensus of EITF No. 05-4 has not been
finalized.
In
February 2006, the FASB issued SFAS No. 155 - Accounting for Certain Hybrid
Financial Instruments, which eliminates the exemption from applying SFAS 133 to
interests in securitized financial assets so that similar instruments are
accounted for similarly regardless of the form of the instruments. SFAS 155 also
allows the election of fair value measurement at acquisition, at issuance, or
when a previously recognized financial instrument is subject to a remeasurement
event. Adoption is effective for all financial instruments acquired or issued
after the beginning of the first fiscal year that begins after
September 15, 2006. Early adoption is permitted. The adoption of SFAS 155
is not expected to have a material effect on the Company’s consolidated
financial position, results of operations or cash flows.
In March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets”, which amended SFAS No. 140, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities”, with respect to the
accounting for separately recognized servicing assets and servicing
liabilities. SFAS 156 permits an entity to choose either the
amortization method or the fair value measurement method for each class of
separately recognized servicing assets or servicing liabilities. The
application of this statement is not expected to have an impact on the Company’s
consolidated financial statements.
Note
3 - Summary of Significant Accounting Policies – continued
Recent
Accounting Pronouncements – continued
In July
2006, the FASB issued FASB Interpretation No.
48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109" ("FIN 48"), which
clarifies the accounting for uncertainty in tax
positions. This interpretation requires that the Company
recognize in its consolidated financial statements, the impact
of a tax position, if that position is more likely
than not of being sustained on audit, based on
the technical merits of the position. The
provisions of FIN 48 are effective as of the beginning of the
Company's year ending June 30, 2007, with the cumulative effect of the change in
accounting principle recorded as an adjustment to opening retained
earnings. The Company is currently evaluating the impact of adopting
FIN 48 on its consolidated financial statements.
In
September 2006, the FASB issued SFAS No.157, “Fair Value Measurements”, which
defines fair value, establishes a framework for measuring fair value in United
States generally accepted accounting principles, and expands disclosures about
fair value measurements. Adoption is required for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years.
Early adoption of SFAS 157 is encouraged. The Company is currently
evaluating the impact of SFAS 157 and the Company will adopt SFAS 157 in the
fiscal year beginning July 1, 2008.
In
September 2006, the staff of the SEC issued Staff Accounting Bulletin (“SAB”)
No. 108, which provides interpretive guidance on how the effects of the
carryover or reversal of prior year misstatements should be considered in
quantifying a current year misstatement. SAB 108 becomes effective in
fiscal 2007. Adoption of SAB 108 is not expected to have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.
In
December 2006, the FASB issued FASB Staff Position (“FSP”) EITF 00-19-2
“Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”) which
specifies that the contingent obligation to make future payments or otherwise
transfer consideration under a registration payment arrangement should be
separately recognized and measured in accordance with SFAS No. 5, “Accounting
for Contingencies.” Adoption of FSP EITF 00-19-02 is required for
fiscal years beginning after December 15, 2006, and is not expected to have a
material impact on the Company’s consolidated financial position, results of
operations or cash flows. In February 2007, the FASB issued SFAS No. 159 "The
Fair Value Option for Financial Assets and Financial Liabilities - Including an
amendment of FASB Statement No. 115", which permits entities to choose to
measure many financial instruments and certain other items at fair
value. The fair value option established by this Statement permits
all entities to choose to measure eligible items at fair value at specified
election dates. A business entity shall report unrealized gains and losses on
items for which the fair value option has been elected in earnings at each
subsequent reporting date. Adoption is required for fiscal years
beginning after November 15, 2007. Early adoption is permitted as of the
beginning of a fiscal year that begins on or before November 15, 2007, provided
the entity also elects to apply the provisions of SFAS Statement No. 157, Fair
Value Measurements. The Company is currently evaluating the
expected effect of SFAS 159 on its consolidated financial statements and is
currently not yet in a position to determine such effects.
In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements–an amendment of ARB No. 51.” SFAS
160 establishes accounting and reporting standards pertaining to ownership
interests in subsidiaries held by parties other than the parent, the amount of
net income attributable to the parent and to the noncontrolling interest,
changes in a parent’s ownership interest and the valuation of any retained
noncontrolling equity investment when a subsidiary is
deconsolidated. This statement also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS 160 is
effective for fiscal years beginning on or after December 15,
2008. The
Company is in the
process of evaluating the effect that the adoption of SFAS 160 will have on its
consolidated results of operations, financial position and cash
flows.
Note
3 - Summary of Significant Accounting Policies – continued
Recent
Accounting Pronouncements – continued
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (SFAS 141R). SFAS 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill
acquired. SFAS 141R also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. SFAS 141R is effective for financial statements issued
for fiscal years beginning after December 15, 2008. The Company
is currently evaluating the potential impact of adoption of SFAS 141R on its
consolidated financial statements.
In March
2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and
Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early adoption
encouraged. The Company is currently evaluating the impact of
adopting SFAS No. 161 on its consolidated financial statements.
In May
2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted
Accounting Principles”. The new standard identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). SFAS No. 162 will become
effective 60 days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411,
The Meaning of
Present Fairly
in Conformity With Generally Accepted Accounting Principles. Adoption
of SFAS No. 162, upon its effectiveness, is not expected to have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.
Reclassifications
The
Company has reclassified certain components of the stockholders’ equity section
to reflect the elimination of deferred compensation arising from unvested
share-based compensation pursuant to the requirements of SAB No. 107, regarding
SFAS No. 123(R), “Share-Based Payment.” This deferred compensation was
previously recorded as an increase to additional paid-in capital with a
corresponding reduction to stockholders’ equity for such deferred compensation.
This reclassification has no effect on consolidated net loss or total
consolidated stockholders’ equity as previously reported. The Company will
record an increase to additional paid-in capital as the share-based payments
vest.
Certain
other reclassifications have been made to prior year’s consolidated financial
statements in order to conform to the current year presentation.
Stock-Based
Compensation
Prior to
July 1, 2005, the Company accounted for its stock options issued to employees
pursuant to APB 25, "Accounting for Stock Issued to
Employees”. Accordingly, the Company would recognize employee
stock-based compensation expense only if it granted options at a price lower
than the closing price of the Company’s common stock on the date of grant. Any
resulting compensation expense would then have been recognized ratably over the
associated service period. The Company provided proforma disclosure amounts
in accordance with SFAS
No. 148,
"Accounting for Stock-Based Compensation -Transition and Disclosure", as if the
fair value method defined by SFAS 123 had been applied to its stock-based
compensation.
Effective
July 1, 2005, the Company adopted the fair value recognition provisions of SFAS
123R, using the modified prospective transition method and therefore has not
restated prior periods' results. Under this transition method, employee
stock-based compensation expense for the year ended June 30, 2006 has included
compensation expense for all stock-based compensation awards granted, but not
yet fully vested, prior to July 1, 2005, utilizing the fair value of the options
as determined at the original grant date in accordance with the provisions of
SFAS 123. Stock-based compensation expense for all share-based payment
awards granted after June 30, 2005 is based on the grant-date fair value
estimated in accordance with the provisions of SFAS 123R.
Note
3 - Summary of Significant Accounting Policies – continued
Stock-Based
Compensation – continued
The
Company recognizes these compensation costs over the requisite service period of
the award, which is generally the vesting term of the options.
Stock-based
employee compensation expense relating to the Company’s stock option plan (See
Note 13) reflected in net loss for the years ended June 30, 2007, 2006 and 2005
was zero, $31,787, and $117,000, respectively.
Because
all outstanding stock options were vested at June 30, 2005, there was no
incremental impact to the consolidated financial statements for the year ended
June 30, 2006 as a result of adopting SFAS 123R, as compared to what the
stock-based compensation would have been under APB 25. At June 30,
2007, there was no unamortized value of employee stock options under SFAS 123R
because all outstanding stock options at June 30, 2007 were fully
vested.
The
Company accounts for equity instruments issued to non-employees in accordance
with the provisions of SFAS 123 and the EITF Issue No. 96-18,
“Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or In
Conjunction with Selling, Goods or Services” which require that such
equity instruments are measured at the fair value of the consideration received
or the fair value of the equity instruments issued, whichever is more reliably
measured. The fair value determined is then amortized over the applicable
service period. Stock-based compensation for non-employees accounted
for under EITF 96-18 was $171,429, $402,122 and zero for the years ended June
30, 2007, 2006 and 2005, respectively (See Note 13). At June 30, 2007, there was
no unamortized value of non-employee stock options.
Option
valuation models require the input of highly subjective assumptions including
the expected life of the option. Because the Company's stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
Due to
the acquisition of certain assets and liabilities from Properties on May 30,
2007, the Company has elected to use the “simplified “method in determining the
expected life, and ultimately, the value assigned to these options due to the
lack of available, sufficient historical option exercise data. The
Company has not previously elected to use the “simplified” method in valuing any
of its option grants, and depending on data available at the time, may or may
not elect to use the “simplified” method when valuing future grants of
options.
Note
3 - Summary of Significant Accounting Policies – continued
Stock-Based
Compensation – continued
The
following table illustrates the proforma effect on net loss and loss per common
share for the years ended June 30, 2005 if the Company had applied the
fair value recognition provisions of SFAS 123 to stock-based employee
compensation.
|
|
|
For
the
Year
Ended
June
30
,
|
|
|
|
|
2005
|
|
|
Net
loss from continuing operations, as reported
|
|
$
|
(2,180,091
|
)
|
|
Deduct:
Total stock-based employee compensation expense determined under fair
value based method for all awards, net of related tax
effects
|
|
|
858,324
|
|
|
|
|
|
|
|
|
Pro
forma net loss from continuing operations
|
|
$
|
(3,038,415
|
)
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding,
basic and
diluted
|
|
|
2,094,629
|
|
|
|
|
|
|
|
|
Loss
per common share:
|
|
|
|
|
|
Basic
and diluted from continuing operations,
as
reported
|
|
$
|
(1.04
|
)
|
|
|
|
|
|
|
|
Basic
and diluted from continuing operations,
pro
forma
|
|
$
|
(1.45
|
)
|
Note
4 – Acquisitions
On
December 13, 2006, the Company purchased certain of the assets and assumed
certain liabilities of its Horsham franchise from Able Oil Montgomery, Inc., a
non-related party, for $764,175. Able Oil Montgomery is a full service retail
fuel oil and service company located in Horsham, Pennsylvania, which until this
acquisition, was a franchise operation of the Company and an entity to whom the
Company sold #2 heating oil. This acquisition was accounted for
pursuant to SFAS No. 141, “Business Combinations” (“SFAS 141”) which requires
that the total purchase price be allocated to the fair value of the assets
acquired, including the intangible assets and liabilities, if any, assumed based
on their fair values at the acquisition date. Accordingly, under the
purchase method of accounting, the assets acquired by the Company were recorded
at their respective preliminary fair values as of the date of acquisition,
summarized as follows:
|
Purchase
of Horsham franchise from Able Oil Montgomery, Inc.:
|
|
|
|
|
Assets
acquired and liabilities assumed(preliminary):
|
|
|
|
|
Cash
|
|
$
|
237,539
|
|
|
Inventories
|
|
|
28,000
|
|
|
Property
and equipment
|
|
|
39,000
|
|
|
Intangible
assets - Customer lists
|
|
|
697,175
|
|
|
Customer
pre - purchase payments
|
|
|
(237,539
|
)
|
|
Total
purchase price
|
|
|
764,175
|
|
|
Less:
Cash paid to purchase Horsham Franchise
|
|
|
(128,000
|
)
|
|
Non-cash
consideration due to seller
|
|
$
|
636,175
|
|
|
Non
- cash consideration consisted of:
|
|
|
|
|
|
Note
payable due to seller
|
|
$
|
345,615
|
|
Forgiveness
of note receivable, accrued interest receivable and other
receivable due from seller
|
|
|
290,560
|
|
|
|
|
$
|
636,175
|
|
The
accompanying consolidated financial statements include the results of Horsham
franchise operations from December 13, 2006, the effective date of acquisition,
to June 30, 2007.
On May
30, 2007, Able completed the purchase of certain of the assets and assumed
certain liabilities of its largest shareholder, All American Plazas, Inc., a
Pennsylvania corporation, for a purchase price of $19,250,000. The consideration
for the purchase price was the issuance of 11, 666,667 shares of the Company’s
common stock at a price of $1.65 per share, the market price of the Company’s
common stock on the day of issuance. Prior to the purchase
transaction, All American Plazas, Inc. owned approximately 31.8% of the
Company’s common stock. After consummation of the purchase
transaction, All American Plazas, Inc., owned approximately 85.5% of the
Company’s outstanding common stock. Approximately 85% of the
outstanding stock of All American Plazas, Inc. is beneficially held by the
Chelednik Family Trust by Mr. Frank Nocito, our Vice President of Business
Development, and his wife, Sharon Chelednik, for the benefit of their family
members, including seven children. Mr. Nocito is also a Vice
President of All American Plazas, Inc. In addition, pursuant to an
agreement between the Chelednik Family Trust and Gregory Frost, Our Chief
Executive Officer (“CEO”) and Chairman, through an entity controlled by him
(Crystal Heights, LLC), is the beneficial holder of approximately 15% of the
outstanding common stock of All American Plazas, Inc. Subsequent to
the business combination, All American Plazas, Inc. changed its name to All
American Properties, Inc. (“Properties”). This business combination resulted in
Able acquiring the operating assets of eleven multi-use truck stop plazas,
formerly operated by Properties, and assuming certain of Properties
debt. Properties retained ownership of the underlying real property
on which each of the acquired travel plazas was situated. Able formed
a new wholly-owned subsidiary, All American Plazas, Inc. (“Plazas”), a Delaware
corporation, to operate the acquired plazas which constitute the Company’s
Travel Plaza Segment.
The
Company’s Travel Plaza Segment is engaged in the retail provision of food,
merchandise, fuel, lodging (in select locations), personal services, onsite and
mobile vehicle repair, services and maintenance to both the professional and
leisure driver through a current network of 10 travel plazas, located in
Pennsylvania, New Jersey, New York and Virginia. Two of the
locations are operated under a Petro franchise, three operate under the Gables
brand name and the remaining travel plazas operate under the All American Plazas
banner. The Travel Plaza Segment’s operations range from full service
facilities, such as the Milton Petro in Milton Pennsylvania, to facilities with
more limited amenities, such as the Gables of Harrisburg, located in Harrisburg,
Pennsylvania. Full service facilities generally include separate gas
and diesel fueling islands, lodging, truck maintenance and repair services,
overnight parking with communication and entertainment pods, certified truck
weighing scales, restaurants and travel and convenience stores offering an array
of merchandise catering to the professional truck driver and other
motorists.
Note
4 – Acquisitions-continued
This
acquisition was also accounted for pursuant to SFAS 141 which requires that the
total purchase price be allocated to the fair value of the assets acquired,
including the intangible assets and liabilities, if any, assumed based on their
fair values at the acquisition date. Accordingly, under the purchase
method of accounting, the assets acquired by the Company were recorded at their
respective preliminary fair values as of the date of acquisition, summarized as
follows:
|
Business
combination with All American Plazas, Inc.:
|
|
|
|
|
Assets
acquired and liabilities assumed (preliminary):
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,201,977
|
|
|
Accounts
receivable-net
|
|
|
2,947,566
|
|
|
Inventories
|
|
|
3,667,849
|
|
|
Property
and equipment
|
|
|
2,443,767
|
|
|
Intangible
assets-franchise agreements
|
|
|
64,156
|
|
|
Intangible
asset-option to acquire Properties real estate
|
|
|
5,000,000
|
|
|
Prepaid
expenses and other current assets
|
|
|
503,708
|
|
|
Goodwill
|
|
|
11,139,542
|
|
|
Accounts
payable and accrued expenses
|
|
|
(5,604,025
|
)
|
|
Notes
payable
|
|
|
(3,114,540
|
)
|
|
Total
purchase price
|
|
$
|
19,250,000
|
|
The
accompanying consolidated financial statements include the results of Plaza’s
operations from June 1, 2007, the effective date of acquisition, to June 30,
2007.
The
following unaudited proforma statements of operations represent consolidated
results of operations of the Company had the acquisition of All American Plazas,
Inc. and Able Oil Montgomery, Inc. occurred for the current and proceeding
fiscal years, summarized as follows:
|
(Unaudited)
|
|
For
the Years Ending June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
282,241,850
|
|
|
$
|
260,983,819
|
|
|
Net
loss
|
|
$
|
(12,291,420
|
)
|
|
$
|
(7,100,966
|
)
|
|
Basic
and diluted (loss) per share
|
|
$
|
(0.83
|
)
|
|
$
|
(0.49
|
)
|
The above
unaudited proforma information does not purport to be indicative of what would
have occurred had the acquisitions been made as of such date or the results
which may occur in the future.
Note
5 - Notes Receivable
On March
1, 2004, the Company entered into two notes receivable totaling $1.4 million
related to the sale of its subsidiary, Able Propane, LLC. The notes are secured
by substantially all the assets of Able Propane, LLC. One note for $500,000
bears interest at a rate of 6% per annum and the other note for $900,000 is
non-interest bearing. Principal is payable in annual installments and interest
is paid quarterly with the final maturity date of March 1, 2008 for both
notes. The balance outstanding of these two notes as of June 30, 2007
and 2006 was $725,000 and $950,000, respectively. Interest earned on the
interest-bearing note for the years ended June 30 2007, 2006 and 2005 was
$30,000 per year. The principal and interest due on the notes was
paid-in-full in March, 2008.
Note 5 - Notes
Receivable-continued
The
Company had a note receivable from Able Montgomery, Inc. (“Able Montgomery”) and
Andrew
Schmidt
(the owner of Able Montgomery) related to the sale of Able Montgomery and
certain assets to Mr. Schmidt. The note was dated June 15, 2000 for $170,000.
The note bore interest at 9.5% per annum and payments commenced October 1, 2000.
The note was secured by the stock of Able Montgomery, Able Montgomery’s assets,
as well as a personal guarantee of Mr. Schmidt. The balance outstanding on this
note at June 30, 2007 and 2006 was zero and $168,701,
respectively. On December 13, 2006, the Company purchased the assets
of Able Montgomery (See Note 4). Included in the purchase
consideration was the forgiveness of the principal balance due and accrued
interest on the above noted note.
The
Company had a note receivable related to the sale of oil delivery trucks to an
independent driver. This independent driver also delivers oil for the Company.
The note bears interest at the rate of 12% per annum. This note was issued in
February 1999 and is payable in twelve monthly installments each year. The
balance on this note at June 30, 2007 and 2006 was zero and $6,878,
respectively.
Note
6 - Property and Equipment
Property
and equipment was comprised of the following at June 30, 2007 and
2006:
|
|
|
June
30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Land
|
|
$
|
479,346
|
|
|
$
|
479,346
|
|
|
Buildings
|
|
|
1,674,124
|
|
|
|
1,656,106
|
|
|
Building
improvements
|
|
|
906,685
|
|
|
|
251,401
|
|
|
Trucks
and autos
|
|
|
4,552,651
|
|
|
|
3,826,414
|
|
|
Machinery
and equipment
|
|
|
1,988,777
|
|
|
|
1,028,769
|
|
|
Office
furniture, fixtures and equipment
|
|
|
1,359,242
|
|
|
|
219,778
|
|
|
Fuel
tanks
|
|
|
1,008,129
|
|
|
|
872,096
|
|
|
Cylinders
- propane
|
|
|
486,309
|
|
|
|
385,450
|
|
|
|
|
$
|
12,455,263
|
|
|
$
|
8,719,360
|
|
|
Less:
accumulated depreciation
|
|
|
(4,852,000
|
)
|
|
|
(4,305,309
|
)
|
|
Property
and equipment, net
|
|
$
|
7,603,263
|
|
|
$
|
4,414,051
|
|
At June
30, 2007 and 2006 equipment held under the capital leases, included above, had a
net book value of $1,398,361 and $1,001,291, respectively.
Depreciation
of property and equipment, including the depreciation of equipment held under
capital leases, was $622,518, $560,228 and $697,780 for the years ended June 30,
2007, 2006 and 2005, respectively.
Note
7 - Intangible Assets
Intangible
assets were comprised of the following:
|
|
|
For
theYear Ended June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Life
(Yrs)
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
Net
|
|
|
Customer
lists
|
|
|
8.3
|
|
|
$
|
1,308,025
|
|
|
$
|
464,374
|
|
|
$
|
843,651
|
|
|
$
|
215,642
|
|
|
Website
development costs
|
|
|
3.0
|
|
|
|
2,394,337
|
|
|
|
2,331,324
|
|
|
|
63,013
|
|
|
|
111,016
|
|
|
Franchise
agreements
|
|
|
9.1
|
|
|
|
64,155
|
|
|
|
516
|
|
|
|
63,639
|
|
|
|
-
|
|
|
Option
to purchase real estate
|
|
|
10.0
|
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
5,000,000
|
|
|
|
-
|
|
|
Total
|
|
|
9.7
|
|
|
$
|
8,766,517
|
|
|
$
|
2,796,214
|
|
|
$
|
5,970,303
|
|
|
$
|
326,658
|
|
The
estimated amortization of customer lists, website development costs and
franchise agreements for the five years ending June 30, 2012 and thereafter, is
as follows:
|
|
|
|
|
|
Website
|
|
|
|
|
|
Option
to
|
|
|
|
|
|
|
|
Customer
|
|
|
Development
|
|
|
Franchise
|
|
|
Purchase
|
|
|
|
|
|
For the years ending June
30,
|
|
Lists
|
|
|
Costs
|
|
|
Agreements
|
|
|
Real
Estate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
88,530
|
|
|
$
|
37,964
|
|
|
$
|
6,200
|
|
|
$
|
541,667
|
|
|
$
|
674,361
|
|
|
2009
|
|
|
88,530
|
|
|
|
17,893
|
|
|
|
6,200
|
|
|
|
500,000
|
|
|
|
612,623
|
|
|
2010
|
|
|
85,209
|
|
|
|
7,156
|
|
|
|
6,200
|
|
|
|
500,000
|
|
|
|
598,565
|
|
|
2011
|
|
|
84,545
|
|
|
|
-
|
|
|
|
6,200
|
|
|
|
500,000
|
|
|
|
590,745
|
|
|
2012
|
|
|
59,167
|
|
|
|
-
|
|
|
|
5,811
|
|
|
|
500,000
|
|
|
|
564,978
|
|
|
Thereafter
|
|
|
437,670
|
|
|
|
-
|
|
|
|
33,029
|
|
|
|
2,458,333
|
|
|
|
2,929,032
|
|
|
|
|
$
|
843,651
|
|
|
$
|
63,013
|
|
|
$
|
63,639
|
|
|
$
|
5,000,000
|
|
|
$
|
5,970,303
|
|
Information
related to intangible assets for the years ended June 30, 2007 and 2006 is as
follows:
|
|
|
Twelve
Months Ended June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Balance-Beginning
of year
|
|
$
|
326,658
|
|
|
$
|
518,381
|
|
|
Amounts
capitalized
|
|
|
5,761,330
|
|
|
|
3,749
|
|
|
Amortization
|
|
|
(117,685
|
)
|
|
|
(195,472
|
)
|
|
Balance-End
of year
|
|
$
|
5,970,303
|
|
|
$
|
326,658
|
|
Amortization
expense for intangible assets was $117,685, and $195,472 for the years ended
June 30, 2007 and 2006, respectively. In connection with the purchase of
Horsham, the Company recorded a customer list asset with a preliminary value of
$697,175. In conjunction with the acquisition of Plazas, the Company
also recognized a franchise agreement intangible asset of $64,155.
Also in
conjunction with the acquisition of Plazas, Able acquired a ten-year option to
acquire any of the travel plaza real estate owned by Properties, providing that
the Company assume all existing debt obligations related to the applicable
properties. The option has been valued at $5.0 million and is
exercisable as long as the Plaza’s leases relating to the applicable real estate
remain in effect. The Plaza leases automatically renew, upon the
mutual consent of Plazas and Properties, for consecutive one year terms so that
the total term of each lease shall be for a period of ten years.
At June
30, 2007, the weighted average remaining life of the intangible assets was 9.7
years.
Note
8 - Deferred Financing Costs and Debt Discounts
The
Company incurred deferred financing costs in conjunction with the sale of
convertible debentures on July 12, 2005, July 5, 2006 and August 8, 2006 (See
Note 12), notes payable on May 13, 2005 (See Note 10), and a line of credit on
May 13, 2005 (See Note 9). These costs were capitalized to deferred
financing costs and are being amortized over the term of the related
debt. Amortization of deferred financing costs was $814,088, $424,156
and $121,790 for the years ended June 30, 2007, 2006 and 2005, respectively. The
2007 amount includes $715,000 charged to amortization of deferred financing
costs since the financing did not occur.
Additionally,
in accordance with EITF 00-27, “Application of Issue 98-5 to Certain Convertible
Instruments”, the Convertible Debentures issued on July 12, 2005, July 5, 2006
and August 8, 2006 were considered to have a beneficial conversion premium
feature. The Company recorded a debt discount of $5,500,000 related to this
conversion premium and warrants issued in connection with the
financing. The Company amortized $1,286,135, $2,429,632 and zero of
debt discount during the years ended June 30, 2007, 2006 and 2005,
respectively.
Note
9 - Line of Credit
On May
13, 2005, the Company entered into a $1,750,000 line-of-credit agreement (the
“Agreement”) with Entrepreneur Growth Capital, LLC (“EGC”). The loan is secured
by certain eligible accounts receivable, inventory and certain other assets as
defined in the agreement. The line bears interest at Citibank's prime rate, plus
4% per annum (12.25% and 11.25% at June 30, 2007 and 2006, respectively) not to
exceed 24%, with a minimum interest of $11,000 per month. The line also requires
an annual facility fee and monthly collateral management fees equal to 2% and
0.025%, respectively. In addition, deposits were not credited to our account
until four business days after receipt by EGC. Therefore, the
effective interest rate for the year ended June 30, 2007 was 21.0% and the
average amount outstanding against the line of credit for the year was
$730,689. The balance due as of June 30, 2007 and 2006 was $481,602
and $1,231,640, respectively, and $1,268,398 was available under the line of
credit at June 30, 2007. The Agreement renews annually unless
terminated by either party, as provided for in the Agreement.
Note
10 - Notes Payable and Notes Payable-Related Party
On
February 22, 2005, the Company borrowed $500,000 from Able Income Fund, LLC
("Able Income"), which is partially owned by the Company’s former CEO, Timothy
Harrington. The loan from Able Income bears interest at the rate of 14% per
annum payable interest only in the amount of $5,833 per month with the principal
balance and any accrued unpaid interest due and payable on May 22,
2005. The Note was secured by a mortgage on property located in
Warrensburg Industrial Park, Warrensburg, New York, owned by Able Energy New
York, Inc. Able Income agreed to surrender the note representing this
loan as of September 30, 2005, in exchange for 57,604 shares of Able common
stock (based on a conversion price equal to 80% of the average closing price of
our common stock during the period October 3, 2005 to October 14,
2005). Note conversion expense of $125,000 was recorded during the
year ended June 30, 2006 related to this transaction. Interest expense related
to the note payable paid to Able Income Fund during the fiscal year ended June
30, 2006 was $17,499. No balance was outstanding at June 30, 2007 and
2006.
On May
13, 2005, the Company entered into a term loan with Northfield Savings Bank for
$3,250,000. Principal and interest are payable in monthly
installments of approximately $21,400, commencing on July 1,
2005. The note is secured by Company owned real property located in
Rockaway, New Jersey with a net book value of $875,591at June 30, 2007 and an
assignment of leases and rents at such location. The initial interest rate is
6.25% per annum on the unpaid principal balance for the first five (5) years, to
be redetermined every fifth anniversary date (reset date) at 300 basis points
over the five (5) year United States Treasury rate, but not lower than the
initial rate; at that time the monthly payment will be redetermined. The
interest rate on default is 4% per annum, charged at the bank’s option, above
the interest rate then in effect. At the maturity date of June 1,
2030, all amounts owed are due and payable. As of June 30, 2005 the Company was
in default of two non-financial covenants under this agreement for which the
Company received a waiver on February 13, 2006. As of June 30, 2007, the Company
was in default of two non-financial covenants under the agreement for which the
Company has received a waiver. The balance outstanding on this note
at June 30, 2007 and 2006 was $3,134,990 and $3,194,299,
respectively.
On August
27, 1999, the Company entered into a note related to the purchase of equipment
and facilities from B&B Fuels Inc. The total original principal
balance of the note was $145,000. The note is payable in the monthly
amount of principal and interest of $1,721 with an interest rate of 7.5% per
annum through August 27, 2009. The note is secured by a mortgage
granted by Able Energy New York, Inc. on properties at 2 and 4 Green Terrace and
4 Horicon Avenue, Town of Warrensburg, Warren County, New
York. The balance due on this note at June 30, 2007 and 2006 was
$41,186 and $58,057, respectively.
Note 10 - Notes Payable and Notes
Payable-Related Party-continued
On August
31, 2006, Plazas entered into a loan agreement with EGC/Credit Cash, relating to
the processing of its credit card transactions, in the initial amount of
$1,000,000. The interest rate is prime plus 3.75%. The
balance due on this note at June 30, 2007 was $1,160,235.
On
December 13, 2006, the Company entered into a 5 year note agreement relating to
the purchase of the Horsham Franchise in the amount of $345,615 (See Note
4). The interest rate is 7.0% per annum and principal and interest is
payable in monthly installments of $6,844 which commenced on January 13, 2007.
The balance due on this note at June 30, 2007 was $316,225.
On
January 8, 2007, Plazas entered into an Account Purchase Agreement with Crown
Financial (“Crown”) whereby Crown advanced $1,444,775 to Plazas in exchange for
certain existing accounts receivables and taking ownership of new accounts
originated by Plazas. Repayment of the loan is to be made from the
direct payments to Crown from the accounts it purchased from Plazas and a fee
equal to 2.5% of the outstanding advance for the preceding period payable on the
15
th
and 30
th
day of
each month. The Crown loan is secured by the mortgages on the real
property and improvements thereon owned by Properties known as the Strattanville
and Frystown Gables truck stop plazas and a personal guarantee by Frank
Nocito. Subsequent to the May 2007 closing of the business
combination between the Company and Properties, on July 1, 2007 the Account
Purchase Agreement between Plazas and Crown Financial has been amended and
modified from “Eligible Accounts having a 60 day aging” to a “90 day aging that
are not reasonably deemed to be doubtful for collections” and the fee of 2.5%
payable on the 15
th
and
30
th
day of each month has been modified to 1.375%. The Company has assumed this
obligation based on the business combination; however, Properties has agreed to
continue to secure this financing with the aforementioned real estate mortgages.
The balance due on this note at June 30, 2007 was $1,324,775.
On March
20, 2007, the Company entered into a credit card receivable advance agreement
with Credit Cash whereby Credit Cash agreed to loan the Company $1,200,000. The
loan is secured by the Company's existing and future credit card
collections. Terms of the loan call for a repayment of $1,284,000,
which includes the one-time finance charge of $84,000, over a seven-month
period. This will be accomplished through Credit Cash withholding 18% of credit
card collections of Able Oil Company and 10% of credit card collections of
PriceEnergy.com, Inc. over the seven-month period which began on March 21, 2007.
There are certain provisions in the agreement which allows Credit Cash to
increase the withholding, if the amount withheld by Credit Cash over the
seven-month period is not sufficient to satisfy the required repayment of
$1,284,000. The balance due on this note at June 30, 2007 was
$493,521.
In
addition, the Company has entered into 16 miscellaneous loan agreements and
notes that, as of June 30, 2007, the total amount due on all 16 items was
$397,962 with interest rates ranging from 0.97% to 15.2% and maturity dates
ranging from October 2009 to July 2011.
Maturities
on notes payable as of June 30, 2007 are as follows:
|
For
the Year Ending June 30, 2007
|
|
|
Year
|
|
Amount
|
|
|
2008
|
|
$
|
3,236,168
|
|
|
2009
|
|
|
272,279
|
|
|
2010
|
|
|
258,912
|
|
|
2011
|
|
|
202,688
|
|
|
2012
|
|
|
122,771
|
|
|
Thereafter
|
|
|
2,776,075
|
|
|
Total
|
|
$
|
6,868,894
|
|
|
Less
current portion
|
|
|
3,236,168
|
|
|
Net,
long-term portion
|
|
$
|
3,632,726
|
|
Note
11 - Capital Leases Payable
The
Company has entered into various capital leases for equipment expiring through
December 2012. The capital leases bear interest at rates ranging between 8% and
12% per annum. During the years ended June 30, 2007, 2006 and 2005, the Company
purchased equipment under five capital leases amounting to $402,775, $276,781
and $446,725, respectively.
The
following is a schedule of future minimum lease payments under capital leases
together with the present value of the net minimum lease payments as of June 30,
2007
|
For
the Year
|
|
|
|
|
Ending
June 30,
|
|
Amount
|
|
|
|
|
|
|
|
2008
|
|
$
|
455,060
|
|
|
2009
|
|
|
385,346
|
|
|
2010
|
|
|
223,062
|
|
|
2011
|
|
|
144,328
|
|
|
2012
|
|
|
63,367
|
|
|
Total
minimum lease payments
|
|
$
|
1,271,164
|
|
|
Less:
amounts representing interest
|
|
|
165,306
|
|
|
Present
value of net minimum lease payments
|
|
$
|
1,105,858
|
|
|
Less:
current portion
|
|
|
376,042
|
|
|
Long
- term portion
|
|
$
|
729,816
|
|
Note
12 - Convertible Debentures
On July
12, 2005, the Company consummated a financing in the amount of $2,500,000
through the sale of Variable Rate Convertibles Debentures (the "Convertible
Debentures"). The Convertible Debentures had a term of two years from the date
of issuance, which term was amended on November 16, 2005, to 25 months, subject
to the occurrence of an event of default, with interest payable at the rate per
annum equal to LIBOR for the applicable interest period, plus 4%, payable on a
quarterly basis. The Convertible Debentures may be converted at the option of
the holders into shares of the Company’s common stock at a conversion price of
$6.50 per share. In addition, the purchasers received five-year warrants to
purchase 192,308 shares of common stock at an exercise price of $7.15 per
share. These warrants are not exchangeable for
cash. The Company has an optional redemption right (which right shall
be mandatory upon the occurrence of an event of default) to repurchase all of
the Convertible Debentures for 125% of the face amount of the Convertible
Debentures plus all accrued and outstanding interest, as well as a right to
repurchase all of the Convertible Debentures in the event of the consummation of
a new financing in which the Company sells securities at a purchase price that
is below the $6.50 conversion price. Deferred financing costs related
to this transaction totaled approximately $217,000, including an $82,000 broker
fee and $135,000 in various legal expenses.
The
Company allocated the proceeds from the issuance of the Convertible Debentures
and warrants based on their respective fair values. As such, the Company
discounted the balance of the Convertible Debentures as of the date of issuance
and recorded $900,000 as an adjustment to additional paid-in capital related to
the warrants. In addition, the conversion feature of the Convertible Debentures
is characterized as a beneficial conversion feature. Pursuant to EITF No. 00-27,
the Company has determined that the value of the beneficial conversion feature
is $1,600,000. Accordingly, the Company has further discounted the balance of
the Convertible Debentures as of the date of issuance and recorded an adjustment
of $1,600,000 to additional paid-in capital.
During
the year ended June 30, 2006, Convertible Debentures totaling $2,367,500 in
principal amount, plus accrued interest totaling $49,563, were converted into
371,856 shares of the Company’s common stock. Amortization of the debt discounts
on this Convertible Debenture for the years ended June 30, 2007 and June 30,
2006 were $63,016 and $2,429,632, respectively.
As of
June 30, 2007, the convertible debt outstanding on the Convertible Debentures
was $132,500, which was then offset by an unamortized debt discount of
$7,353.
Note
12 - Convertible Debentures-continued
The
Company also originally granted to the purchasers who acquired the Convertible
Debentures an additional investment right, exercisable for a period of eighteen
months from the original investment date of July 18, 2005, to purchase units
consisting of convertible debentures in the aggregate amount of up to
$15,000,000 (the "Additional Debentures") and common stock purchase warrants
equal to 50% of the face amount of such Additional Debentures (the "Additional
Warrants"). Upon exercise of the additional investment right, the Additional
Debentures are convertible into and the Additional Warrants could be exercised
for unregistered, restricted shares of the Company’s common stock.
As part
of a negotiated amendment of the purchase agreement, however, the rights of the
Company and the purchasers relating to the Additional Debentures and Additional
Warrants were eliminated as of November 16, 2005, and the purchase agreement was
amended to issue the purchasers a series of warrants (the "New Warrants") with
an exercise price of $7.50 per share. In the aggregate, the New Warrants permit
the holders to acquire up to 5.25 million shares of the Company's common stock
upon proper exercise. Notwithstanding the foregoing, until the required
stockholder approvals are obtained, the purchasers have agreed not to convert
any Convertible Debentures and the Company has the right not to honor any
request to convert, or exercise any Additional Warrants or New Warrants, which
in the aggregate would involve the issuance of a number of shares that would not
exceed 19.999% of the total number of shares of the Company's common stock
outstanding on the trading day prior to the date of the purchase
agreement.
In
connection with the issuance of the Convertible Debenture and the additional
investment right, the Company entered into a Registration Rights Agreement with
the Holders relating to the underlying securities. Based on the interpretive
guidance in EITF No. 05-4, view C, since the registration rights agreement
includes provisions for uncapped liquidated damages, the Company determined that
the registration rights is a derivative liability. However, due to various
factors including substantial conversion of these Convertible Debentures and the
registration statement becoming effective in December 2005, the value of the
registration rights was deemed to be de minimis and therefore no liability was
recorded in the consolidated financial statements.
On July
5, 2006, the Company closed a Securities Purchase Agreement entered into on June
30, 2006 whereby it sold a non-redeemable $1,000,000 convertible term note, due
June 30, 2009, to Laurus Master Fund, Ltd. ("Laurus") and issued a 5 year
warrant for 160,000 shares of the Company’s common stock. The Company paid fees
of $49,000 to Laurus and received net proceeds of $951,000. The Company incurred
escrow fees of $1,500. In conjunction with this issuance, the
Company agreed that within sixty (60) days from the date of issuance of the
convertible term note payable and warrant that it would file a registration
statement with the SEC covering the resale of the shares of the Company's
convertible term common stock issuable upon conversion of the note and the
exercise of the warrant. This registration statement would also cover any
additional shares of common stock issuable to Laurus as a result of any
adjustment to the fixed conversion price of the note or the exercise price of
the warrant. The agreement does not provide any formula for
liquidated damages. The Company did not file a registration statement
by August 29, 2006 covering the common stock issuable upon conversion of the
convertible term note and the exercise of warrants issued to
Laurus. As of June 30, 2007, the Company had yet to file that
registration statement. Consequently, the Company is in breach of its
registration obligations to Laurus although the Company has not received any
notice from Laurus regarding this registration rights default and or the
assessment of any penalties that might have resulted therefrom. The
Company’s breach of its registration obligations constitutes a default under the
agreement, which enables the holders to declare the convertible debentures
immediately due and payable. Therefore, as of June 30, 2007, this
debt is classified as short-term on the Company’s consolidated balance
sheet.
In
accordance with EITF 00-27 “Application of Issue #98-5 to Certain Convertible
Instruments” and EITF 98-5, "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjusted Conversion Ratios", on a
relative fair value basis, the warrants were recorded at a value of $472,000.
The conversion feature, utilizing an effective conversion price and market price
of the common stock on the date of issuance of $3.00 and $7.70, per share,
respectively, was valued at $723,000, which was then limited to $528,000, the
remaining undiscounted value of the proceeds of the convertible term note.
Accordingly, the Company has recorded a debt discount related to the warrants of
$472,000 and a beneficial conversion feature of the convertible term note of
$528,000, which amounts are amortizable utilizing the interest method over the
three year term of the convertible term note. Amortization of debt discounts on
this convertible note payable amounted to approximately $330,000 for the year
ended June 30, 2007 and the unamortized portion was approximately $670,000
at June 30, 2007.
Note
12 - Convertible Debentures-continued
The note
is convertible at the option of Laurus into shares of the Company's common
stock, at an initial fixed conversion price of $6.50 per share. The
conversion rate of the note is subject to certain adjustments and limitations as
set forth in the note
.
As of June 30,
2007, the convertible debt principal outstanding on the Laurus note was
$1,000,000, which was then offset by an unamortized debt discount of
$670,027.
On August
8, 2006, the Company issued $2,000,000 of convertible debentures to certain
investors, due August 8, 2008 and issued 5 year non-redeemable warrants to
purchase 672,667 shares of the Company’s common stock. While no formal notice of
default has been received, the Company is currently negotiating an amendment to
the agreement. In conjunction with this issuance, the Company had
agreed to file a registration statement within forty-five (45) days, or by
September 22, 2006, covering the resale of the shares of common stock underlying
the debentures and warrants issued to the investors, and by October 15, 2006, to
have such registration statement declared effective. The registration
rights agreement with the investors provides for partial liquidated damages in
the case that these registration requirements are not met.
From the date of violation, the Company is obligated to
pay liquidated damages of
2% per month of the outstanding amount of the convertible debentures, up to a
total of 24% of the initial investment, or $0.5 million. As of June
30, 2007, the Company had not yet filed a registration statement regarding these
securities. Accordingly, through June 30, 2007, the Company incurred
and recorded a liquidated damages obligation of $0.4 million, none of which has
been paid. In addition, the Company is obligated to pay 18%
interest per annum on any damage amount not paid in full within 7 (seven)
days. Through June 30, 2007, the Company has incurred an interest
obligation of less than $0.1 million, none of which has been
paid. The holders have not waived their rights under this
agreement. Additionally, the Company’s breach of its registration
obligations constitutes a default under the agreement, which enables the holders
to declare the convertible debentures immediately due and
payable. Therefore, as of June 30, 2007, this debt is classified as
short-term on the Company’s consolidated balance sheet. The Company
has not received any notice from the purchasers of the convertible debentures
regarding this registration rights default or any other default
notice.
The
convertible debentures are convertible into shares of the Company's common stock
at a conversion price of $6.00 per share, which was the market value of the
Company's common stock on the date of issuance. The Company received net
proceeds of $1,820,000 and incurred expenses of legal fees of $40,000 and broker
fees of $140,000 in connection with this financing that were recorded as
deferred financing costs and amortized on a straight-line basis over the two
year term of the convertible debentures. The convertible debentures bear
interest at the greater of either LIBOR (5.4% as of March 31, 2007) plus 6.0%,
or 12.5%, per annum, and such interest is payable quarterly to the holder either
in cash or in additional convertible debentures at the Company’s
option.
At any
time, the holder may convert the convertible debenture into shares of common
stock at $6.00 per share, or into 333,333 shares of common stock, which
represents a conversion at the face value of the convertible
debenture.
On May
30, 2007, upon consummation by the Company of the business combination
transaction with All American Properties, the Company may redeem the convertible
debentures at a price of 120% of the face amount, plus any accrued but unpaid
interest and any unpaid liquidated damages or under certain conditions, the
Company may redeem the amount at 120% of the face amount in cash, or redeem
through the issuance of shares of common stock at the lower of the existing
conversion price or 90% of the volume weighted average price, as stipulated in
the agreement.
The
investors may elect to participate in up to 50% of any subsequent financing of
the Company by providing written notice of intention to the
Company.
The
investors also were issued 333,333, 166,667 and 172,667 five-year warrants to
purchase additional shares of the Company's common stock at $4.00, $6.00 and
$7.00 per share, respectively. These warrants were valued at $3,143,000 using
the Black-Scholes model, applying an interest rate of 4.85%, volatility of
98.4%, dividends of 0% and a term of five years. In accordance with EITF 00-27
and EITF 98-5, on a relative fair value basis, the warrants were recorded at a
value of $1,222,000. The beneficial conversion feature, utilizing an effective
conversion price and market price of the common stock on the date of issuance of
$2.00 and $6.00, per share, respectively, was valued at $1,333,000 which, was
then limited to $778,000, the remaining undiscounted value of the convertible
term note. Accordingly, the Company has recorded a debt discount related to the
warrants of $1,222,000, the beneficial conversion feature of the convertible
term note of $778,000, which amounts are amortizable over the two-year term of
the convertible debenture. Amortization of debt discount on these
convertible debentures was approximately $893,000 for the year ended June 30,
2007 and the unamortized portion was approximately $1,107,000 at June 30,
2007. As of June 30, 2007, the convertible debt principal outstanding
on this debt was $2,000,000, which was then offset by an unamortized debt
discount of $1,106,853.
Note 12 - Convertible
Debentures-continued
As of
June 30, 2007, the Company’s future debt discount to be amortized
was:
|
Year
|
|
Amount
|
|
|
2008
|
|
$
|
1,364,073
|
|
|
2009
|
|
|
420,160
|
|
|
2010
|
|
|
-
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,784,233
|
|
Note
13 - Stockholders Equity
Stock-Based
Compensation
On March
29, 2005, the Company issued an aggregate of 10,000 shares of restricted stock
to its Board of Directors. The restricted stock was valued at $103,200, using
the market price of $10.32 on the date of grant and was immediately recorded as
stock-based compensation.
On
December 15, 2005, the Company entered into a consulting agreement, which
included the issuance of options to purchase 25,000 shares of the Company’s
common stock at an exercise price of $8.09, the market price on the date of the
agreement. The options were valued at $174,430 using the Black-Scholes
option-pricing model and are being amortized over the 3-year life of the
consulting agreement. Stock-based compensation was $115,607 and
$31,493 for the years ended June 30, 2007 and 2006, respectively, relating to
this agreement. The Company terminated this consulting agreement in
December, 2006.
On
February 23, 2006, the Company issued options to the outside members of its
Board of Directors to purchase an aggregate of 24,000 shares of the Company’s
common stock at an exercise price of $8.32, the market price on the day of
grant. The options were valued at $175,593 using the Black-Scholes
option-pricing model and were being amortized over the board members term
through June 2006.
On March
10, 2006, the Company entered into a consulting arrangement for prior services
rendered, which included the issuance of options to purchase 75,000 shares of
the Company’s common stock at an exercise price of $7.13, the market price on
the effective date of the arrangement. The options were valued at
$195,036 using the Black-Scholes option-pricing model and was recorded as
stock-based compensation immediately as the options were fully vested upon
grant. During the year ended June 30, 2007, the Company revalued these
options. Stock based compensation related to the revaluation was
$8,236 for the year ended June 30, 2007.
On June
23, 2006, the Company entered into a severance agreement with its former Chief
Financial Officer, which included the issuance of options to purchase 12,500
shares of the Company’s common stock at an exercise price of $4.36, the market
price on the date of grant. The options were valued at $31,787 using the
Black-Scholes option-pricing model and were recorded as stock-based compensation
immediately as the options were fully exercisable upon grant.
On July
31, 2006, an option was granted to Frank Nocito, a Vice President and
stockholder of the Company, to purchase 50,000 shares of common stock of the
Company at a price of $4.55 per share. Thereafter, in error, the Company issued
the shares to Mr. Nocito. Mr. Nocito had not formally exercised the option, nor
had he paid the Company the cash consideration for the shares. Mr. Nocito
returned the stock certificates to the Company and the shares were cancelled by
the transfer agent. On October 7, 2006, Mr. Nocito and the Company
agreed to cancel the option and further, Mr. Nocito agreed in writing to waive
any and all rights that he had to the option. The option was then cancelled and
deemed null and void and the statements reflect no expense related to the
cancelled grant.
Note
13 - Stockholders Equity-continued
Stock-Based
Compensation-continued
On August
25, 2006, Steven Vella, the Company's former Chief Financial Officer, elected to
exercise 12,500 options with an exercise price of $4.36 that were granted to him
on June 23, 2006, as part of a negotiated severance package. As a result of the
option exercise, the Company received proceeds of $54,500. Black
Scholes variables used were 3 year term, risk free interest rate of 5.23% and
volatility of 86.9%.
On August
29, 2006, the stockholders approved an increase in the authorized shares of
common stock from 10.0 million shares to 75.0 million shares.
On June
29, 2007, the Company issued options to four outside members of its Board of
Directors to purchase an aggregate of 321,040 shares of the Company’s common
stock at an exercise price of $1.90, the market price on the day of
grant. The options were valued at $439,825 using the Black-Scholes
option-pricing model and were fully vested when issued. Black
Scholes variables used were 5 year term, risk free interest rate of 4.30% and
volatility of 91%.
Stock
Options
A summary
of the Company's stock option activity and related information for the years
ended June 30, 2005, 2006 and 2007 is as follows:
|
|
|
Number
of Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
Outstanding
June 30, 2004
|
|
|
288,000
|
|
|
|
3.03
|
|
|
Granted
|
|
|
200,000
|
|
|
|
5.34
|
|
|
Exercised
|
|
|
(198,000
|
)
|
|
|
2.42
|
|
|
Forfeited
|
|
|
(52,000
|
)
|
|
|
5.00
|
|
|
Outstanding
June 30, 2005
|
|
|
238,000
|
|
|
|
4.92
|
|
|
Granted
|
|
|
136,500
|
|
|
|
7.26
|
|
|
Exercised
|
|
|
(275,000
|
)
|
|
|
5.83
|
|
|
Forfeited
|
|
|
(8,000
|
)
|
|
|
2.25
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
June 30, 2006
|
|
|
91,500
|
|
|
|
5.92
|
|
|
Granted
|
|
|
371,040
|
|
|
|
2.26
|
|
|
Exercised
|
|
|
(12,500
|
)
|
|
|
4.36
|
|
|
Forfeited
|
|
|
(50,000
|
)
|
|
|
4.55
|
|
|
Outstanding
June 30, 2007
|
|
|
400,040
|
|
|
$
|
2.74
|
|
During
the years ended June 30, 2007, 2006 and 2005, 12,500 options, 275,000 options
and 198,000 options were exercised for proceeds of $54,500, $1,602,750 and
$478,683, respectively.
Note
13 - Stockholders Equity-continued
Stock-Based
Compensation-continued
Options
exercisable are as follows:
|
|
|
Number
of Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
June
30, 2005
|
|
|
238,000
|
|
|
$
|
4.92
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2006
|
|
|
91,500
|
|
|
$
|
5.92
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2007
|
|
|
400,040
|
|
|
$
|
2.74
|
|
The
weighted-average fair value of options granted during the years ended June 30,
2007, 2006 and 2005 were $1.67, $4.26 and $2.05, respectively.
The
following is a summary of stock options outstanding and exercisable at June 30,
2007 by exercise price range:
|
Exercise
Price Range
|
|
|
Number
of Options
|
|
|
Weighted-Average
Remaining Contractual Life (Years)
|
|
|
Weighted-Average
Exercise
Price
|
|
|
Intrinsic
Value
|
|
|
$2.55
- $ 4.36
|
|
|
|
30,000
|
|
|
1.5
|
|
|
$
|
2.86
|
|
|
$
|
101,675
|
|
|
$8.09
- $ 8.32
|
|
|
|
49,000
|
|
|
3.6
|
|
|
|
8.20
|
|
|
|
-
|
|
|
$1.90
|
|
|
|
321,040
|
|
|
10.0
|
|
|
|
1.90
|
|
|
|
536,137
|
|
|
Totals
|
|
|
|
400,040
|
|
|
8.6
|
|
|
$
|
2.74
|
|
|
$
|
637,812
|
|
The
estimated weighted average fair values of the options at the date of grant using
the Black-Scholes option-pricing model as promulgated by SFAS 123 and the
related assumptions used to develop the estimates are as follows:
|
|
|
Years
Ended June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Risk-free
interest rate
|
|
|
4.3%
|
|
|
|
4.3%
|
|
|
|
4.0%
|
|
|
Expected
volatility
|
|
|
91.0%
|
|
|
|
90.9%
|
|
|
|
185.9%
|
|
|
Dividend
yield
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expected
life
|
|
5
years
|
|
|
3.5
years
|
|
|
5.0
years
|
|
The
weighted average fair value of options granted during the years ended June 30,
2007, 2006 and 2005 was $2.74, $5.92 and $4.92, respectively.
Equity
Plans
The Able
Energy, Inc.’s 1999 Employee Stock Option Plan, as amended, permits stock option
awards up to 700,000 shares of the Company's common stock to be granted to
directors, employees and consultants of the Company. This plan states
that unless otherwise determined by the Board of Directors, an option shall be
exercisable for ten years after the date on which it was
granted. Vesting terms are set by the Board of
Directors. There are 84,250 options remaining available for issuance
under this plan at June 30, 2007.
Note
13 - Stockholders Equity-continued
Equity
Plans-continued
The Able
Energy, Inc. 2000 Employee Stock Purchase Plan, which was approved by the
stockholders on June 23, 2000, permits stock option awards up to 350,000 shares
of the Company's common stock to be granted to employees of the Company. There
are 350,000 shares remaining available for issuance under this plan at June 30,
2007.
The Able
Energy, Inc. 2000 Stock Bonus Plan, which was approved by the stockholders on
June 23, 2000, permits restricted stock awards up to 350,000 shares of the
Company's common stock to be granted to directors, employees and consultants of
the Company. There are 338,000 shares remaining available for issuance under
this plan at June 30, 2007.
The Able
Energy, Inc. 2005 Incentive Stock Plan, which was approved by the stockholders
on May 25, 2005, permits stock option, common stock, and restricted common stock
purchase offer awards of up to 1,000,000 shares of the Company's common stock to
be granted to directors, employees and consultants of the
Company. There are 678,960 shares remaining available for issuance
under this plan at June 30, 2007.
Convertible
Debenture Conversion
During
the year ended June 30, 2006, 371,856 shares of common stock, valued at
$2,417,063, were issued in connection with the conversion of Convertible
Debentures and the related accrued interest (See Note 12).
Warrants
A summary
of the Company’s stock warrant activity, and related information for the years
ended June 30, 2005, 2006 and 2007 is as follows:
|
|
|
Number
of Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
Outstanding
June 30, 2004
|
|
|
280,000
|
|
|
$
|
4.97
|
|
|
Exercised
|
|
|
(91,213
|
)
|
|
|
5.25
|
|
|
Expired
|
|
|
(188,787
|
)
|
|
|
4.83
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
June 30, 2005
|
|
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
5,442,309
|
|
|
|
7.49
|
|
|
Exercised
|
|
|
(110,000
|
)
|
|
|
7.49
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
June 30, 2006
|
|
|
5,332,309
|
|
|
|
7.49
|
|
|
Granted
|
|
|
832,667
|
|
|
|
5.32
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
June 30, 2007
|
|
|
6,164,976
|
|
|
$
|
7.20
|
|
During
the years ended June 30, 2007, 2006 and 2005, zero, 110,000 and 91,213 warrants
were exercised for proceeds of zero, $825,000 and zero,
respectively. No warrants were exercised in fiscal 2007.
Note
13 - Stockholders Equity-continued
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 the 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. To date, no
preferred stock has been issued.
Voluntary
NASDAQ Delisting
On
October 4, 2006, the Company announced its intention to voluntarily delist the
Company's common stock from the NASDAQ Capital Market, effective as of the start
of trading on October 13, 2006. The Company's common stock is currently quoted
on the Pink Sheets. The management of the Company has indicated that the Company
will seek to have its common stock quoted on the OTC Bulletin Board as soon as
practical following the filing of this June 30, 2007 Report on Form 10-K, the
September 30, 2007 Report on Form 10-Q, the December 31, 2007 Report on Form
10-Q, the March 31, 2008 Report on Form 10-Q and the June 30, 2008 Report on
Form 10-K.
Note
14 - Segment reporting
Since the
Company’s business combination with All American Plazas, Inc. now known as All
American Properties, Inc. on May 30, 2007, the Company is engaged in two primary
business activities, organized in two reporting segments; the Oil Segment and
the Travel Plaza Segment. The Company’s senior management manages the
businesses and the expected long-term financial performance of each
segment. The accounting policies of the segments are the same as
those described in Note 3 - Summary of Significant Accounting
Policies. There are no intersegment sales for any of the periods
presented below.
The
Company’s Oil Segment, consisting of Able Oil, Able NY, Able Melbourne, Able
Energy Terminal, LLC and PriceEnergy, is engaged in the retail distribution of,
and the provision of services relating to, #2 home heating oil, propane gas,
kerosene and diesel fuels. In addition to selling liquid energy products, the
Company offers complete heating, ventilation and air conditioning (“HVAC”)
installation and repair and other services and also markets other petroleum
products to commercial customers, including on-road and off-road diesel fuel,
gasoline and lubricants.
The
Company’s Travel Plaza Segment, operated by its wholly-owned subsidiary, All
American Plazas, Inc., is engaged in the retail sale of food, merchandise, fuel,
personal services, onsite and mobile vehicle repair, services and maintenance to
both the professional and leisure driver through a current network of ten travel
plazas, located in Pennsylvania, New Jersey, New York and Virginia.
Note
14 - Segment reporting-continued
|
|
|
Year
Ended June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Segment:
|
|
|
|
|
|
|
|
|
|
|
#2
heating oil
|
|
$
|
51,848,720
|
|
|
$
|
47,168,493
|
|
|
$
|
38,681,369
|
|
|
Gasoline,
diesel fuel, kerosene, propane & other lubricants
|
|
|
19,508,552
|
|
|
|
24,882,677
|
|
|
|
20,057,040
|
|
|
Equipment,
sales & installation
|
|
|
2,712,048
|
|
|
|
3,041,934
|
|
|
|
3,134,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Oil Segment
|
|
$
|
74,069,320
|
|
|
$
|
75,093,104
|
|
|
$
|
61,872,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel
Plaza Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuels
|
|
$
|
16,721,454
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Non-Fuels
|
|
|
2,850,774
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Travel Plaza Segment
|
|
$
|
19,572,228
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
$
|
93,641,548
|
|
|
$
|
75,093,104
|
|
|
$
|
61,872,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation &
amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Segment
|
|
$
|
692,754
|
|
|
$
|
755,700
|
|
|
$
|
1,225,197
|
|
|
Travel
Plaza Segment
|
|
|
47,449
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
depreciation and amortization
|
|
$
|
740,203
|
|
|
$
|
755,700
|
|
|
$
|
1,225,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Segment
|
|
$
|
862,034
|
|
|
$
|
642,517
|
|
|
$
|
449,776
|
|
|
Travel
Plaza Segment
|
|
|
86,982
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest expense
|
|
$
|
949,016
|
|
|
$
|
642,517
|
|
|
$
|
449,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit
(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Segment
|
|
$
|
(6,019,591
|
)
|
|
$
|
(6,241,559
|
)
|
|
$
|
(2,180,091
|
)
|
|
Travel
Plaza Segment
|
|
|
(612,712
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segment loss
|
|
$
|
(6,632,303
|
)
|
|
$
|
(6,241,559
|
)
|
|
$
|
(2,180,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Oil Segment
|
|
$
|
626,483
|
|
|
$
|
675,987
|
|
|
$
|
726,987
|
|
|
Total
Travel Plaza Segment
|
|
|
3,565,307
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
$
|
4,191,790
|
|
|
$
|
675,987
|
|
|
$
|
726,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Segment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Travel
Plaza Segment
|
|
|
11,139,542
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
goodwill
|
|
$
|
11,139,542
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Segment
|
|
$
|
11,176,463
|
|
|
$
|
12,414,881
|
|
|
$
|
11,706,871
|
|
|
Travel
Plaza Segment
|
|
|
21,654,301
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
all other assets
|
|
$
|
32,830,764
|
|
|
$
|
12,414,881
|
|
|
$
|
11,706,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
Segment
|
|
$
|
11,802,946
|
|
|
$
|
13,090,868
|
|
|
$
|
12,433,858
|
|
|
Travel
Plaza Segment
|
|
|
36,359,150
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
48,162,096
|
|
|
$
|
13,090,868
|
|
|
$
|
12,433,858
|
|
The
Company did not have any operations outside the United States of
America. Accordingly, all revenues were generated from domestic
transactions, and the Company has no long-lived assets outside the United States
of America.
Note
15 - Franchising
The
Company has franchise agreements with two franchised businesses specializing in
residential and commercial sales of fuel oil, diesel fuel, gasoline, propane and
related services. The Company provides training, operational support
and use of Company credit for the purchase of product, among other things, as
specified in the agreements.
The
Company signed its first franchise agreement in December 1998. As of June 30,
2007, there was one Able Energy franchise in operation, located in East
Stroudsburg, Pennsylvania.
On June
29, 2001, PriceEnergy.com Franchising, L.L.C. signed its first franchise
agreement. As of June 30, 2007, PriceEnergy.com Franchising, L.L.C.
has one franchise in operation in Norwalk, Connecticut.
The
Company stopped actively selling franchises in March 2002 and has not sold any
franchises since that time. Franchise fee revenues were $14,783,
$75,693 and $72,888 for the years ended June 30 2007, 2006 and 2005,
respectively.
Note
16 - Unreimbursed Expenses
On March
14, 2003, a fire and explosion occurred at the Company’s facility in Newton, New
Jersey. The Company submitted expenses for reimbursement to its insurance
carrier. The Company was reimbursed approximately $1,041,000. Unreimbursed
expenses for clean-up, etc., totaling $318,236, were reflected in selling,
general and administrative expenses in the consolidated statement of operations
during the year ended June 30, 2005.
Note
17 - Income Taxes
Components
of the provision for income taxes associated with continuing operations are as
follows:
|
|
|
For
the Years Ended June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
State
|
|
|
28,824
|
|
|
|
-
|
|
|
|
20,913
|
|
|
|
|
|
28,824
|
|
|
|
|
|
|
|
20,913
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
State
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,824
|
|
|
$
|
-
|
|
|
$
|
20,913
|
|
The
provision for (benefit from) income taxes associated with continuing operations
using the statutory federal tax rate as compared to the Company’s effective tax
rate is summarized as follows:
|
|
For
the Years Ended June 30,
|
|
|
2007
|
|
2006
|
|
2005
|
|
Federal
income taxes at statutory rate
|
(34.0)
|
%
|
|
(34.0)
|
%
|
|
(34.0)
|
%
|
|
State
income taxes, net of federal benefit
|
(5.0)
|
%
|
|
(5.4)
|
%
|
|
(10.8)
|
%
|
|
Permanent
differences
|
9.6
|
%
|
|
3.3
|
%
|
|
(28.1)
|
%
|
|
Change
in valuation allowance
|
29.4
|
%
|
|
36.1
|
%
|
|
74.1
|
%
|
|
Other
|
-
|
%
|
|
-
|
%
|
|
(0.2)
|
%
|
|
Effective
income tax rate
|
-
|
%
|
|
-
|
%
|
|
1.0
|
%
|
Note
17 - Income Taxes-continued
Temporary
differences between the tax bases of assets and liabilities and their financial
reporting amounts that give rise to deferred tax assets and liabilities and
their approximate tax effects are as follows:
|
|
|
June
30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Net
operating loss carry forwards
|
|
$
|
5,642,722
|
|
|
$
|
4,748,243
|
|
|
Allowance
for doubtful accounts
|
|
|
293,365
|
|
|
|
192,260
|
|
|
Stock-based
compensation
|
|
|
294,000
|
|
|
|
95,406
|
|
|
Deferred
tax assets - gross
|
|
|
6,230,087
|
|
|
|
5,035,909
|
|
|
Property
and equipment
|
|
|
(194,718
|
)
|
|
|
(490,969
|
)
|
|
Goodwill
and intangibles
|
|
|
(19,000
|
)
|
|
|
-
|
|
|
Deferred
tax asset - net
|
|
|
6,016,369
|
|
|
|
4,544,940
|
|
|
Less:
Valuation allowance
|
|
|
(6,016,369
|
)
|
|
|
(4,544,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Increase
in valuation allowance
|
|
$
|
1,471,429
|
|
|
$
|
2,252,333
|
|
The
Company has federal net operating loss (“NOL”) carry forwards of approximately
$14,455,000 and $11,715,000 as of June 30, 2007 and 2006, respectively. The
federal NOL carry forwards expire between June 30, 2020 and
2027. Able Energy, Inc, Able Oil Company and PriceEnergy.Com, Inc.
have aggregate New Jersey NOL carry forwards of approximately $13,732,000 and
$12,683,000 as of June 30, 2007 and 2006, respectively. The New
Jersey net operating loss carry forwards expire between June 30, 2008 and
2014. The federal and state NOL carry forwards at June 30, 2007 and
2006 include approximately $3,933,000 related to windfall tax deductions for
which a benefit will be recorded to additional paid-in capital when
realized. The Company’s ability to use its federal NOL carry forwards
may be subject to an annual limitation in future years pursuant to Section 382
of the Internal Revenue Code (“IRC”).
These
carry forward losses are available to offset future taxable income, if
any. The Company’s utilization of this carry forward against future
taxable income is subject to the Company having profitable operations or a
profitable sale of Company assets, which creates taxable income. Due to the
uncertainty surrounding the realization of the benefits associated with the
carry forward losses and the other temporary differences, the Company has
provided a valuation allowance for the entire amount of the net deferred tax
assets as of June 30, 2007 and 2006.
Note
18 - 401(k) Plan
Able Oil
Company, included in the Oil Segment, established a Qualified Profit Sharing
Plan under IRC Section 401(k). The Able Oil Company is obligated to
match 25% of qualified employee contributions up to 6% of salary. The
401(k) matching contribution expense was approximately $29,300, $30,700 and
$27,500 for the years ended June 30, 2007, 2006 and 2005,
respectively.
While the
Travel Plaza Segment’s 401(k) Savings Plan provides for matching contributions,
at managements discretion, no such matching contributions have been made since
the inception of the plan in 2005.
Note
19 - Related Party Transactions
PriceEnergy.com
A total
of four current officers, a former officer and a related party of the Company
own 32.7% of the common stock of the subsidiary, PriceEnergy.com, which was
incorporated in November 1999. The remaining shares of PriceEnergy.com are held
by Able Energy, Inc., a wholly-owned subsidiary of the Company.
Note
19 - Related Party Transactions-continued
Acquisition
of Assets of Properties
At June
30, 2007, Properties owns approximately 85% of the Company’s outstanding common
stock. Approximately 85.0% of the common stock of Properties is owned
by the Chelednik Family Trust, a trust established by Mr. Nocito, an officer of
the Company and his wife for the benefit of their family. The
balance of the outstanding common stock of Properties is owned by a limited
liability company owned by Gregory D. Frost, a Director of the Company, who, as
of June 30, 2007, was on an indefinite leave of absence as Chief Executive
Officer and Chairman of the Board, and his wife.
The
Company entered into a Stock Purchase Agreement on June 16, 2005 (which was
subsequently amended and restated into the Asset Purchase Agreement as of the
same date) ("Purchase Agreement") with all of the stockholders (and then with
Properties with respect to the Purchase Agreement) (the "Sellers") of Plazas in
connection with the Company’s acquisition of the assets of Properties. This
transaction was approved on August 29, 2006 at a special meeting of the
Company’s stockholders. The closing occurred on May 30,
2007. Under the terms of the Purchase Agreement, the Company
delivered to the Sellers 11,666,667 shares of the Company’s restricted common
stock, par value $.001 per share, at $1.65 per share for an aggregate purchase
price of approximately $19.3 million. The Company also acquired
a ten-year option to acquire any of the travel plaza real estate owned by
Properties, providing that the Company assume all existing debt obligations
related to the applicable properties. The option has been valued at
$5.0 million and is exercisable as long as the Plaza’s leases relating to the
applicable real estate remain in effect. The Plaza leases
automatically renew, upon the mutual consent of Plazas and Properties, for
consecutive one year terms so that the total term of each lease shall be for a
period of ten years.
Properties
Financing
On July
5, 2006, the Company received $1,000,000 from Laurus in connection with the
issuance of a convertible term note. Of the proceeds received from
Laurus in connection with the issuance of the convertible term note, the Company
loaned $905,000 to Properties in exchange for a note
receivable. Properties used such proceeds to pay (i) certain
obligations of CCIG Group, Inc. (“CCIG”) and its wholly-owner subsidiary, Beach
Properties Barbuda Limited (“BPBL”), which owned and operated an exclusive
Caribbean resort hotel known as the Beach House located on the island of
Barbuda, and (ii) a loan obligation owed by BPBL to Laurus which loan was used
by CCIG to acquire the Beach house. Properties had previously
acquired a 70% interest in CCIG pursuant to a Share Exchange
Agreement. The Company received from Laurus a notice of a claim of
default dated January 10, 2007. Laurus claimed default under section
4.1(a) of the Term Note as a result of non-payment of interest and fees in the
amount of $8,826 that was due on January 5, 2007, and a default under sections
6.17 and 6.18 of the securities purchase agreement for “failure to use best
efforts (i) to cause CCIG to provide Holder on an ongoing basis with evidence
that any and all obligations in respect of accounts payable of the project
operated by CCIG’s subsidiary, BPBL, have been met; and (ii) cause CCIG to
provide within 15 days after the end of each calendar month, unaudited/internal
financial statements (balance sheet, statements of income and cash flow) of the
Beach House and evidence that BPBL and the Beach House are current in all of
their ongoing operational needs”.
The
aforementioned interest and fees were paid by the Company on January 11, 2007.
Further, the Company has used its best efforts to cause CCIG to provide reports
and information to Laurus as provided for in the securities purchase
agreement.
In
connection with the claim of default, Laurus claimed an acceleration of maturity
of the principal amount of the Note of $1,000,000 and approximately $154,000 in
default payment (“Default Payment”) as well as accrued interest and fees of
approximately $12,000. On March 7, 2007, Laurus notified the Company that it
waived the event of default and that Laurus had waived the requirement for the
Company to make the Default Payment.
In
consideration for the loan, Properties has granted the Company an option, (the
“Option") exercisable in the Company's sole discretion, to acquire 80% of the
CCIG stock Properties acquired from CCIG pursuant to a Share Exchange Agreement.
In addition, in the event that the Company exercises the Option, 80% of the
outstanding principal amount of the Properties note will be cancelled and shall
be deemed fully paid and satisfied. The remaining principal balance of the
Properties note and all outstanding and accrued interest on the loan shall be
due and payable one-year from the exercise of the Option. The Option must be
exercised in whole and not in part and the Option expires on July 5, 2008.
The Company did not exercise the Option prior to its expiration. In
the event the Company does not exercise the Option, the Properties note shall be
due in two years, on July 6, 2008, unless the Company has issued a declaration
of intent not to exercise the Option, in which case the Properties note shall be
due one year from
such
declaration. The Company has determined that given the lack of liquidity in the
shares of CCIG and the lack of information in regard to the financial condition
of CCIG, this option has no value and has not been recorded by the
Company.
Note
19 - Related Party Transactions-continued
Properties
Financing-continued
The
Company loaned Properties $1,730,000 as evidenced by a promissory note dated
July 27, 2005 with a maturity date of June 15, 2007. As of June 30, 2007, the
Company was in discussions to renegotiate the maturity date or repayment of this
note (See Note 22). The interest income related to this note for the
years ended June 30, 2007 and 2006 was $164,350 and $70,575,
respectively. The note and accrued interest receivable in the amount
of $1,964,925 have been classified as contra-equity on the Company’s
consolidated balance sheet as of June 30, 2007.
On August
14, 2006, the Company loaned Plazas $600,000. On August 30, 2006, Plazas repaid
the $600,000 plus interest in the amount of $2,684.
During
December 2006, the Company entered into a Fuel Purchase agreement with
Properties. Under the agreement, the Company pre-paid $350,000 to Properties in
exchange for fuel purchased pursuant to this agreement to be provided by
Properties at a $.05 per gallon discount from the Newark, New Jersey daily spot
market price. Properties has satisfied $338,942 of its obligations under this
agreement as of June 30, 2007. The prepaid balance under the agreement at June
30, 2007 was $11,058 and is included as a receivable from a related party in the
condensed consolidated balance sheet at June 30, 2007.
The
Company receives rent from Properties for office space occupied by Properties in
the Company’s New York City offices. The Company has reduced gross
rent expense included in sales, general and administrative expenses in the
condensed consolidated statements of operations in the amount of $110,615 for
the year ended June 30, 2007. Of this amount, $74,394 of rental
payments remain outstanding and were classified as contra-equity on the
Company's condensed consolidated balance sheet as of June 30, 2007.
On June
1, 2005, Properties completed a financing that may impact the Company. Pursuant
to the terms of the Securities Purchase Agreement (the "Agreement") among
Properties and certain purchasers (“Purchasers”), the Purchasers loaned
Properties an aggregate of $5,000,000, evidenced by Secured Debentures dated
June 1, 2005 (the "Debentures"). The Debentures were due and payable
on June 1, 2007, subject to the occurrence of an event of default, with interest
payable at the rate per annum equal to LIBOR for the applicable interest period,
plus 4% payable on a quarterly basis on April 1
st
, July
1
st
,
October 1
st
and
January 1
st
,
beginning on the first such date after the date of issuance of the
Debentures. Upon the May 30, 2007 completion of the business
combination with Properties and the Company’s board approving the
transfer of the debt that would also require the transfer of additional assets
from Properties as consideration for the Company to assume this debt, then the
Debentures are convertible into shares of our common stock at a conversion rate
of the lesser of (i) the purchase price paid by us for issuance of our
restricted common stock for the assets of All American upon completion of the
business combination, or (ii) $3.00, subject to further adjustment as set forth
in the agreement.
The loan
is secured by real estate property owned by Properties in Pennsylvania and New
Hampshire. Pursuant to the Additional Investment Right (the “AIR
Agreement”) among Properties and the Purchasers, the Purchasers may loan
Properties up to an additional $5,000,000 of secured convertible debentures on
the same terms and conditions as the initial $5,000,000 loan, except that the
conversion price will be $4.00. Pursuant to the Agreement, these
Debentures are in default, as Properties did not complete the business
combination with the Company prior to the expiration of the 12-month anniversary
of the Agreement.
Subsequent
to the consummation of the business combination, we may assume the obligations
of Properties under the Agreement. However, the Company’s board of
directors must approve the assumption of this debt, which requires that
Properties transfer additional assets or consideration for such assumption of
debt. Based upon these criteria, it is highly unlikely the Company
will assume the obligations of Properties, including the Debentures and the AIR
Agreement, through the execution of a Securities Assumption, Amendment and
Issuance Agreement,
Note
19 - Related Party Transactions-continued
Properties
Financing-continued
Registration
Rights Agreement, Common Stock Purchase Warrant Agreement and Variable Rate
Secured Convertible Debenture Agreement, each between the Purchasers and us (the
“Able Energy Transaction Documents”). Such documents provide that
Properties shall cause the real estate collateral to continue to secure the
loan, until the earlier of full repayment of the loan upon expiration of the
Debentures or conversion by the purchasers of the Debentures into shares of our
common stock at a conversion rate of the lesser of (i) the purchase price paid
by us for each share of AAP common stock in the acquisition, or (ii) $3.00, (the
“Conversion Price”), subject to further adjustment as set forth in the Able
Energy Transaction Documents. However, the Conversion Price with
respect to the AIR Agreement shall be $4.00. In addition, the
Purchasers shall have the right to receive five-year warrants to purchase
2,500,000 of our common stock at an exercise price of $3.75 per
share. Pursuant to the Able Energy Transaction Documents, we also
have an optional redemption right (which right shall be mandatory upon the
occurrence of an event of default) to repurchase all of the Debentures for 125%
of the face amount of the Debentures plus all accrued and outstanding interest,
as well as a right to repurchase all of the Debentures in the event of the
consummation of a new financing in which we sell securities at a purchase price
that is below the Conversion Price. The stockholders of Properties
have agreed to escrow a sufficient number of shares to satisfy the conversion of
the $5,000,000 in outstanding Debentures in full.
During
June 2007, the Company paid $8.4 million of fuel invoices on behalf of
Properties to TransMontaigne Product Services, Inc.
(“TransMontaigne”). This advance was reflected in current assets at
June 30, 2007. As a result of an October, 2007 series of transactions
involving Properties, Plazas and TransMontaigne, these amounts were
offset and Plazas executed a $1.6 million note payable
to TransMontaigne for amounts then due TransMontaigne by
Plazas.
Manns
Haggerskjold of North America, Ltd. (“Manns”) Agreement
On May
19, 2006, the Company entered into a letter of interest agreement with Manns,
for a bridge loan to the Company in the amount of $35,000,000 and a possible
loan in the amount of $100 million based upon the business combination with
Properties ("Manns Agreement"). The terms of the letter of interest provided for
the payment of a commitment fee of $750,000, which was non-refundable to cover
the due-diligence cost incurred by Manns. On June 23, 2006, the Company advanced
to Manns $125,000 toward the Manns Agreement due diligence fee. During the
period from July 7, 2006 through November 17, 2006, the Company advanced an
additional $590,000 toward the Manns Agreement due diligence fee. The amount
outstanding relating to these advances as of June 30, 2007 was
$715,000. As a result of not obtaining the financing (see below), the
entire $715,000 was expensed to amortization of deferred financing costs in the
year ended June 30, 2007.
As a
result of the Company receiving a Formal Order of Private Investigation from the
SEC on September 22, 2006, the Company and Manns agreed that the commitment to
fund being sought under the Manns Agreement would be issued to Properties, since
the Company’s stockholders had approved a business combination with Properties
and since the collateral for the financing by Manns would be collateralized by
real estate owned by Properties. Accordingly, on September 22, 2006, Properties
agreed that in the event Manns funds a credit facility to Properties rather than
the Company, upon such funds being received by Properties, it will immediately
reimburse the Company for all expenses incurred and all fees paid to Manns in
connection with the proposed credit facility from Manns to the
Company. On or about February 2, 2007, Properties received a term
sheet from UBS Real Estate Investments, Inc. (“UBS”) requested by Manns as
co-lender to Properties. Properties rejected the UBS offer as not consistent
with the Manns’ commitment of September 14, 2006. Properties subsequently
demanded that Manns refund all fees paid to Manns by Able and Properties. In
order to enforce its rights in this regard, Properties has retained legal
counsel and commenced an arbitration proceeding against Manns and its
principals. The Company and Properties intend to pursue their remedies against
Manns. All recoveries and fees and costs of the litigation will be allocated
between the Company and Properties in proportion to the amount of the Manns due
diligence fees paid. See
Item
3, Legal Proceedings.
Note
Receivable-Related Parties
In
connection with two loans entered into by the Company in May 2005, fees in the
amount of $167,500 were paid to Unison Capital Corporation (“Unison”), a company
controlled by Mr. Nocito, an officer of the Company. This individual also has a
related-party interest in Properties. Subsequent to the payments
being made and based on
Note
19 - Related Party Transactions-continued
Note
Receivable-Related Parties -continued
discussions
with Unison, it was determined the $167,500 was an inappropriate payment and
Unison agreed to reimburse this amount to the Company over a twelve month period
beginning in October 2005. As of June 30, 2007 no payments have been made and
this note is still outstanding. The Company has extended the maturity
date of the note to January 15, 2008, which is in the process of being further
extended, and the note has been personally guaranteed by Mr. Nocito.
The interest of $21,780
has been accrued through June 30, 2007. The note and accrued interest
have been classified as contra-equity in the accompanying consolidated balance
sheet.
Notes
and Loans Receivable Related Parties
Years Ending June 30, 2006 and
2007
|
|
|
Beginning
Balance
|
|
|
Additions
|
|
|
Payments
|
|
|
Adjustments
|
|
|
Ending
Balance
|
|
|
|
|
2006
|
|
|
Notes
Receivable-Properties
|
|
$
|
-
|
|
|
$
|
1,730,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,730,000
|
|
|
Interest
Receivable-Properties
|
|
|
-
|
|
|
|
70,575
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70,575
|
|
|
Notes
Receivable-Unison Capital
|
|
|
-
|
|
|
|
167,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
167,500
|
|
|
Interest
Receivable Unison Note
|
|
|
-
|
|
|
|
11,730
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,730
|
|
|
Laurus
Notes Receivable-Properties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Interest
Receivable- Laurus Note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Fuel
Supply Contract-Properties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Manns
Agreement-Properties
|
|
|
-
|
|
|
|
125,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
New
York Office Rent-Properties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
2,104,805
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,104,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
Notes
Receivable-Properties
|
|
$
|
1,730,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,730,000
|
|
|
Interest
Receivable-Properties
|
|
|
70,575
|
|
|
|
164,350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
234,925
|
|
|
Notes
Receivable-Unison Capital
|
|
|
167,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,500
|
|
|
Interest
Receivable Unison Note
|
|
|
11,730
|
|
|
|
10,050
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,780
|
|
|
Laurus
Notes Receivable-Properties
|
|
|
-
|
|
|
|
905,000
|
|
|
|
|
|
|
|
|
|
|
|
905,000
|
|
|
Interest
Receivable- Laurus Note
|
|
|
-
|
|
|
|
102,784
|
|
|
|
(94,242
|
)
|
|
|
-
|
|
|
|
8,542
|
|
|
Fuel
Supply Contract-Properties
|
|
|
-
|
|
|
|
361,058
|
|
|
|
(350,000
|
)
|
|
|
-
|
|
|
|
11,058
|
|
|
Manns
Agreement-Properties
|
|
|
125,000
|
|
|
|
590,000
|
|
|
|
-
|
|
|
|
(715,000
|
)
|
|
|
-
|
|
|
New
York Office Rent-Properties
|
|
|
-
|
|
|
|
110,615
|
|
|
|
(36,221
|
)
|
|
|
-
|
|
|
|
74,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,104,805
|
|
|
$
|
2,243,857
|
|
|
$
|
(480,463
|
)
|
|
$
|
(715,000
|
)
|
|
$
|
3,153,198
|
|
Prior to
fiscal 2001, the Company had advanced approximately $67,000 to a stockholder and
former Chief Executive Officer (“CEO”). At June 30, 2006, the Company
charged the above to consulting fees and the amount is reflected in selling,
general and administrative expense for the year ended June 30,
2006.
Note
19 - Related Party Transactions-continued
Legal
Fees
During
the year ended June 30, 2005, the Company paid $20,000 in legal fees to a law
firm in which one of the members of the Board of Directors was a partner which
is included in selling, general and administrative expenses on the accompanying
consolidated statement of operations.
The
Company entered into a consulting agreement with its former CEO, Timothy
Harrington, on February 16, 2005. The agreement is for two years and provides
for annual fees of $60,000 to be paid in monthly installments.
In
addition, the former CEO received options, which were fully vested upon grant,
to purchase 100,000 shares of the Company's common stock at $4.00 per share. The
options were exercised on July 7, 2005. The former CEO was paid $40,000 related
to this agreement during the year ended June 30, 2007.
On
February 27, 2006, the Company entered into a consulting agreement with Able
Income Fund, LLC, a company for which the former CEO, Timothy Harrington, is an
owner. Consulting expense related to this agreement for the year ended June 30,
2006 was $17,833, which is included in selling, general and administrative
expenses on the accompanying consolidated statement of
operations. There were no such expenses incurred in the year ended
June 30, 2007.
During
the year ended June 30, 2006, the Company paid consulting fees to a company
owned by a member of the Company’s Board of Directors amounting to approximately
$54,000, which is included in selling, general and administrative expenses on
the accompanying consolidated statement of operations. There were no
such expenses incurred in the year ended June 30, 2007.
Change
in Officers Status
On
September 28, 2006, Gregory Frost, gave notice to the Board of Directors that he
was taking an indefinite leave of absence as Chief Executive Officer of the
Company and resigned as Chairman of the Board. Mr. Christopher P.
Westad, the acting Chief Financial Officer of the Company, was designated by the
Board to serve as acting Chief Executive Officer. In connection with Mr.
Westad's service as acting Chief Executive Officer, Mr. Westad stepped down,
temporarily, as acting Chief Financial Officer. The Board designated Jeffrey S.
Feld, the Company's Controller, as the acting Chief Financial Officer. Mr. Feld
has been with the Company since September 1999. Mr. Frost resumed his
duties as Chief Executive Officer effective May 24, 2007. Mr. Westad
remained the President of the Company and Mr. Feld continued in his role as
acting Chief Financial Officer. The Company had further management changes on
September 24, 2007 and October 22, 2008 (See Note 22).
Note
20 - Commitments and Contingencies
Employment
Agreements
On July
1, 2004, the Company entered into a three-year employment agreement with
Christopher Westad, the Company’s President and acting CEO. Pursuant to the
agreement, he will be compensated at an annual salary of $141,600 and will be
eligible for an annual bonus and stock option grants, which will be separately
determined by the Compensation Committee of the Board of
Directors. The term of the agreement may be extended by mutual
consent of the Company and Mr. Westad, and the annual salary is subject to
periodic increases at the discretion of the Board of Directors. On
November 26, 2006, the Compensation Committee of the Board of Directors renewed
Mr. Westad’s employment agreement for a period of three years until November 25,
2009. As of June 30, 2007, the total commitment under this employment
agreement was $342,200.
On July
1, 2004, the Company entered into a three-year employment agreement with John
Vrabel, the President of PriceEnergy.com, Inc. Pursuant to the agreement, he
will be compensated at an annual salary of $141,600 and will be eligible for an
annual bonus and stock option grants, which will be separately determined by the
Compensation Committee of the Board of Directors. The term of the
agreement may be extended by mutual consent of the Company and Mr. Vrabel, and
the annual salary is subject to periodic increases at the discretion of the
Board of Directors. While the term of the employment agreement was
allowed to expire on July 1, 2007, Mr. Vrabel remains an employee of the
Company.
Note
20 - Commitments and Contingencies-continued
Employment
Agreements-continued
On
October 12, 2005, the Company entered into a one-year employment agreement with
Gregory Frost, the Company’s CEO (who was on a paid leave of absence from
September 28, 2006 through May 23, 2007). Pursuant to the agreement, he was
compensated at an annual salary of $250,000 and will be eligible for an annual
bonus and stock option grants, which will be separately determined by the
Compensation Committee of the Board of Directors. Pursuant to the agreement, the
employment with Mr. Frost was automatically renewed through October 11,
2008. As of June 30, 2007, the total commitment under this employment
agreement was approximately $323,000.
Operating
Leases
The
Company is obligated under certain property and equipment non-cancelable
operating lease agreements. The rental properties include a lease of
the Company’s headquarters in Rockaway, New Jersey, office space in New York
City, office space in Easton, Pennsylvania and eleven full service travel plaza
facilities located in Pennsylvania, New York, New Jersey and Virginia. These
leases currently expire at various dates through May, 2010 but automatically
renew for consecutive one-year terms so that the total term of each lease shall
be for a period of ten years. Rent expense was $881,829, $185,181 and
$165,565 for the years ended June 30, 2007, 2006 and 2005, respectively. Future
minimum payments due under these leases are as follows:
|
For
the Year Ending June 30,
|
|
Amount
|
|
|
2008
|
|
$
|
7,221,247
|
|
|
2009
|
|
|
2,273,963
|
|
|
2010
|
|
|
385,000
|
|
|
Total
minimum lease payments
|
|
$
|
9,880,210
|
|
Purchase
Commitments
The
Company’s Oil Segment is obligated to purchase #2 heating oil under various
contracts with its suppliers. As of June 30, 2007 total open commitments under
these contracts are approximately $5.7 million and expire on various dates
through the end of August 2008. The Company’s Travel Plaza Segment
has no open commitments for purchases.
Major
Vendors
The
Company’s Oil Segment purchases fuel supplies on the spot market. During the
year ended June 30, 2007, the Oil Segment satisfied its inventory requirements
through seven different suppliers, the majority of which have significant
domestic fuel sources, and many of which have been suppliers to us for over five
years.
The
Company’s Travel Plaza Segment is also subject to spot market pricing and its
fluctuations. It utilizes three major suppliers for its fuel source
needs.
Litigation
Following
an explosion and fire that occurred at the Company's facility in Newton, New
Jersey on March 14, 2003, and through the subsequent clean up efforts, the
Company has cooperated fully with all local, state and federal agencies in their
investigations into the cause of this accident (See Note 16). A
lawsuit (known as Hicks vs. Able Energy, Inc.) was filed against the Company by
residents who allegedly suffered property damages as a result of the March 14,
2003 explosion and fire. The Company's insurance carrier is defending the
Company as it related to compensatory damages. The Company has retained separate
legal counsel to defend the Company against the punitive damage claims. On June
13, 2005, the Court granted a motion certifying a plaintiff class action which
is defined as "All Persons and Entities that on and after March 14, 2003,
residing within a 1,000 yard radius of Able Oil Company's fuel depot facility
and were damaged as a result of the March 14, 2003 explosion". The
Company sought and received Court permission to serve interrogatories to all
class members and in November 2007 answers to interrogatories were received by
less than 125 families and less than 15 businesses. The Company successfully
moved to exclude any and all persons and entities form the class that did not
previously provide answers to interrogatories. The class certification is
limited to economic loss and specifically excludes claims for personal injury
from the Class Certification. The Company believes that the Class claims for
compensatory damages are within the available limits of its insurance. On
September 13, 2006, the plaintiff’s counsel made a settlement demand of
$10,000,000, which the Company believes to be excessive and the methodology upon
which is fundamentally flawed. On May 7, 2008, this matter entered mediation.
Mediation has not been successful, but the Company remains open to reasonable
settlement discussions with the plaintiffs. The Company intends to vigorously
defend the claim.
Note
20 - Commitments and Contingencies-continued
Litigation-continued
In
addition to the class action, seven property owners, who were unable to reach
satisfactory settlements with the Company’s insurance carrier, filed lawsuits
for alleged property damages suffered as a result of the March 14, 2003
explosion and fire. Subsequently, the Company’s insurance carrier has entered
into settlement agreements with four of the property owners. The
Company's insurance carrier is defending the Company as it related to the
remaining three property damage claims. The Company’s counsel is defending
punitive damage claims. The Company believes that compensatory damage claims are
within the available limits of insurance and reserves for losses have been
established, as deemed appropriate, by the insurance carrier. There were a total
of 227 claims filed against the Company for property damages and 224 claims have
been settled by the Company’s insurance carrier resulting in the remaining three
lawsuits as described in this paragraph. The Company believes the remaining
three unsettled lawsuits will not have a material adverse effect on the
Company’s consolidated financial condition or operations.
Management
believes it has adequate insurance coverage to cover material legal settlements,
if any, and material litigation expenses. Management does not believe
that legal accruals are required at June 30, 2007, and none have been
recorded. The Company has been involved in non-material lawsuits in
the normal course of business. These matters are handled by the Company’s
insurance carrier. The Company believes that the outcome of the above
mentioned legal matters will not have a material effect on the Company’s
consolidated financial statements.
Environmental
Contingencies
Environmental
matters relating to the Oil Segment include the following:
Related
to its 1999 purchase of the property on Route 46 in Rockaway, New Jersey, the
Company settled a lawsuit with a former tenant of the property and received a
lump sum settlement of $397,500. This sum was placed in an attorney’s escrow
account for payment of all environmental remediation costs. Through June 30,
2007, Able Energy Terminal, LLC has been reimbursed for approximately $310,500
of costs and another $87,000 are not reimbursed and are included in prepaid
expenses and other current assets in the accompanying consolidated balance sheet
included elsewhere in this filing and must be presented to the attorney for
reimbursement. The environmental remediation is currently in progress on this
property. The majority of the “free standing product” has been
extracted from the underground water table. The remainder of the
remediation will be completed over the course of the next eight to ten years
using natural attenuation and possible bacterial injection.
On
September 15, 2003, Able Oil received approval from the New Jersey Department of
Environmental Protection of 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. This plan has
received approval and will be in effect for three years. The State of New Jersey
requires companies which operate major 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 of New Jersey 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.
On
September 26, 2006, the New Jersey Department of Environmental Protection
(“NJDEP”) conducted a site update inspection, which included a review of the
Route 46 site and an update of the progress of the approved
remediation. The NJDEP Northern Office director who conducted the
inspection, concluded that the remediation progress was proceeding appropriately
and that the department approved of the Company’s continued plan to eliminate
the remaining underground product. 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.
Environmental
matters relating to the Travel Plaza Segment include the following:
Note
20 - Commitments and Contingencies-continued
Environmental
Contingencies-continued
Clarks Ferry All
American
This site
has been subject to an ongoing groundwater cleanup program since 1996 when a
claim was filed with the Pennsylvania Underground Storage Tank Indemnification
Fund (“USTIF”). The remedial action plan has been handled by a third
party contractor since 1998. Active remediation efforts ceased in
2004 and a three-year period of well monitoring was started in 2005 calling for
six semi-annual well sampling events.
USTIF
coverage for the site was approved at 65% of total remediation
costs. In 2004, cost estimates to complete the remediation project
were prepared by the third party contractor and Properties accepted a lump sum
payout from USTIF of approximately $32,000 (65% of $48,000 estimate of
completion costs). In September 2007, the final sampling event was completed and
results were favorable. A “Post Remedial Care Plan Completion Report”
was submitted to the PA DEP in January 2008 and was accepted the following
month. Monitoring wells were closed in March 2008, and a final billing generated
for the remedial activities. At June 30, 2008, Plazas owed $8,000 for
completion of these activities.
Frystown All
American
This site
is subject to an ongoing groundwater cleanup program that started in 1998 when
the old tanks and fuel islands were replaced. Tanks were not leaking,
but lines in the fuel island area had leaked and created the need for soil
removal and groundwater cleanup. It is also believed that a heating
oil tank removed in the early 90’s was an additional source of
contamination. The site was accepted by USTIF for 100%
coverage. The groundwater pump and treat system was activated in
December, 2001 and was shut down in October, 2005, as the monitoring wells came
into compliance. The quarterly well monitoring period was started in
December, 2005 and has continued through June, 2007. The final well
sampling event in September 2007 was uneventful. The contractor
is currently preparing the final site closure report, which will be submitted to
the PA DEP for final closure and concurrence that no further remedial activities
are necessary.
Belmont All
American
This site
has been subject to an ongoing groundwater remediation since 2004, when a leak
was found in a flex hose at a dispenser. A groundwater filtration
system went online in November, 2005. Monthly well samples are taken
and good progress is being shown towards the attainment of
compliance. Full closure of the site is expected within the next
twelve (12) months, with an anticipated cost of approximately $35,000 to
Plazas.
Doswell All
American
This site
presently has no underground storage tanks (“UST's”) in use for storage of
petroleum products. Diesel fuel storage is in two above ground
storage tanks (“AST’s”); one 500,000 gallons and the other is 100,000
gallons.
In
November, 2005, the Virginia Department of Environmental Quality (“VA DEQ”)
issued a violation for an unknown release of petroleum product into a storm
water runoff pond at the site. Several source areas were identified
and ultimately ruled out, with the exception of an oil/water separator that was
found to have a faulty valve allowing oil runoff to bypass separator and drain
directly to the pond. A new oil/water separator was put in place in
December, 2005. On July 9, 2007, the VA DEQ issued a letter canceling
any further action relative to this violation.
In April,
2007, the VA DEQ notified Plazas that, due to a change in regulations with
respect to AST containment requirements, Plazas would be required to make
changes to the existing AST’s and/or containment berm by December 31,
2007. After consideration of various options to bring the site into
compliance, it was decided that the best alternative was to dismantle the
500,000 gallon AST.
In
November 2007, the 500,000 gallon AST was dismantled and removed from the site
at a cost of approximately $15,000. Soil borings in the area of the
tank and pad have been clean. No further cost is anticipated relative
to this project.
Note
20 - Commitments and Contingencies-continued
USA
Biodiesel, LLC Joint Venture
On August
9, 2006, the Company entered into a joint venture agreement with BioEnergy of
America, Inc. ("BEA"), a privately-held Delaware corporation, for the purpose of
producing biodiesel fuel using BEA's exclusive production process at plants to
be constructed at truck stop plazas, home heating depots and terminals used to
house petroleum products for distribution or resale. The joint venture will
operate through USA Biodiesel, LLC ("USA"), a New Jersey limited liability
company in which the Company and BEA will each have a 50% membership interest.
Each plant, when fully operational, will produce 15 million gallons of biodiesel
fuel per year. USA will pay all of the operating, production and processing
expenses for each plant, including an annual use fee to the Company for use of
the plant in the amount of $258,000, payable quarterly, commencing ninety days
after the plant is fully operational. USA will operate the plants and the
Company shall have the exclusive right to purchase all bio-diesel fuel produced
at the plants.
The
Company's initial contribution to USA will be: (i) the costs of construction of
each of the plants (estimated to be $1.5 million each) and related equipment
necessary for operating the plants, all of which, after construction of the
plants shall be owned by the Company; (ii) initial capital by means of a loan to
USA for funding the operations of USA; (iii) the facilities at which the plants
are to be constructed; and (iv) office facilities and access to office
technology for the Company. BEA's initial contribution to USA will be: (i) the
license design, engineering plans and technology and related costs and expenses
necessary to construct and operate the plants at the facilities; (ii) access to
equipment supplier purchase agreements for equipment for the plants; (iii)
access to soy oil, methanol and other material purchasing agreements; (iv) for
each plant constructed, nine months of training consisting of three months
during the construction of each of the plants and three months during initial
full production; and (v) exclusive territorial rights to the manufacturing
process to be used at the plants. There were no contributions to USA by the
Company through the date of this Annual Report, and the Company has been advised
that BEA is no longer in business.
Other
Contingencies
During
the year ended June 30, 2006, certain officers of the Company exercised stock
options for the purchase of 100,000 shares of the Company’s stock at an exercise
price of $6.68 per share that would have resulted in additional compensation to
them if, at the time of exercise, the stock was either not subject to a
substantial risk of forfeiture or transferable. The Company has
concluded that the stock received upon exercise was subject to a substantial
risk of forfeiture and not transferable until the time of sale. Since
the sales price of the stock was less than the exercise price, the Company has
further concluded that there is no additional compensation that would be subject
to income tax withholdings for inclusion in payroll tax returns. There can be no
assurance that the Internal Revenue Service (“IRS”) will agree with the
Company’s position. In the event that the IRS does not agree, the
Company estimates that its maximum exposure for income tax withholdings will not
exceed $85,000, excluding any potential interest and penalties. Based
on the foregoing, the Company has not recorded any liability related to this
matter and, in the absence of any notice from the IRS, considers the matter
closed.
On
December 8, 2006, the Company commenced an action in the Superior Court of
California, for the County of Los Angeles against Summit Ventures, Inc.
(“Summit”), Mark Roy Anderson (“Anderson”), the principal of Summit and four
other companies controlled by Anderson, Camden Holdings, Inc., Summit Oil and
Gas, Inc. d/b/a Nevada Summit Oil and Gas, Harvest Worldwide, LLC and Harvest
Worldwide, Inc. seeking to compel the return of 142,857 shares (the “Shares”) of
the Company’s common stock issued to Summit. On October 10, 2007, the
Company settled the Anderson Litigation (See Note 22).
SEC
Formal Order of Private Investigation
On
September 7, 2006, the Company received a Formal Order of Private Investigation
from the SEC pursuant to which the Company, certain of its officers and a
director were served with subpoenas requesting certain documents and
information. The Formal Order authorizes an investigation of possible violations
of the anti-fraud provisions of the federal securities laws with respect to the
offer, purchase and sale of the Company's securities and the Company's
disclosures or failures to disclose material information. The Company believes
that it did not violate any securities laws and intends to cooperate fully with
and assist the SEC in its inquiry. The scope, focus and subject matter of the
SEC investigation may change from time to time and the Company may be unaware of
matters under consideration by the SEC. The Company has produced and continues
to produce responsive documents and intends to continue cooperating with the SEC
in connection with the investigation (See Note 22).
Note
21 - Selected Quarterly Financial Data (Unaudited and Restated)
The
following tables set forth our unaudited consolidated financial results for the
last eight fiscal quarters ended June 30, 2007:
|
|
|
For
the Year Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
Net
sales as previously reported
|
|
$
|
12,835,553
|
|
|
$
|
19,266,016
|
|
|
$
|
29,366,596
|
|
|
$
|
32,173,383
|
|
|
Adjustments
|
|
N.A.
|
|
|
N.A.
|
|
|
N.A.
|
|
|
N.A.
|
|
|
Restated
total revenues
|
|
$
|
12,835,553
|
|
|
$
|
19,266,016
|
|
|
$
|
29,366,596
|
|
|
$
|
32,173,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit as previously reported
|
|
$
|
1,193,930
|
|
|
$
|
1,723,192
|
|
|
$
|
3,665,916
|
|
|
$
|
1,954,976
|
|
|
Adjustments
|
|
N.A.
|
|
|
N.A.
|
|
|
N.A.
|
|
|
N.A.
|
|
|
Restated
gross profit
|
|
$
|
1,193,930
|
|
|
$
|
1,723,192
|
|
|
$
|
3,665,916
|
|
|
$
|
1,954,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) as previously reported
|
|
$
|
(1,639,875
|
)
|
|
$
|
(1,462,397
|
)
|
|
$
|
553,030
|
|
|
$
|
(3,368,061
|
)
|
|
Adjustments
|
|
|
(540,000
|
)
|
|
|
(175,000
|
)
|
|
N.A.
|
|
|
N.A.
|
|
|
Restated
net income (loss)
|
|
$
|
(2,179,875
|
)
|
|
$
|
(1,637,397
|
)
|
|
$
|
553,030
|
|
|
$
|
(3,368,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) as previously reported
|
|
$
|
(0.52
|
)
|
|
$
|
(0.47
|
)
|
|
$
|
0.18
|
|
|
$
|
(0.47
|
)
|
|
Adjustments
|
|
|
(0.18
|
)
|
|
$
|
(0.05
|
)
|
|
N.A.
|
|
|
N.A.
|
|
|
Net
income (loss) as restated
|
|
$
|
(0.70
|
)
|
|
$
|
(0.52
|
)
|
|
$
|
0.18
|
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted average number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported
|
|
|
3,133,731
|
|
|
|
3,141,423
|
|
|
|
3,141,423
|
|
|
|
7,117,352
|
|
|
Adjustments
|
|
N.A.
|
|
|
N.A.
|
|
|
N.A.
|
|
|
N.A.
|
|
|
As
restated
|
|
|
3,133,731
|
|
|
|
3,141,423
|
|
|
|
3,141,423
|
|
|
|
7,117,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(N.A.-not
applicable)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the
table above, earnings (loss) per share from continuing operations for each
quarter was computed using the weighted-average number of shares outstanding
during the quarter. However, earnings (loss) per share from
continuing operations for the year were computed using the weighted-average
number of shares outstanding during the year. As a result, the sum of
the loss per share for the four quarters may not equal the full year earnings
(loss) per share.
The
selected quarterly financial data for the periods within the fiscal year ended
June 30, 2006, as presented below, have been restated and correct errors
relating to (1) the amortization of a customer list; (2) the deferral of revenue
recognition associated with certain twelve month service contracts; (3) the
improper accrual of audit fees; (4) the issuance and cancellation of common
stock in regard to non-performance by a consultant under its consulting
agreement with the Company; (5) the timing of the recording of directors’ fees;
(6) the timing of the recording of bad debt expense; and (7) the deferral of
previously recorded revenue.
Note
21 - Selected Quarterly Financial Data (Unaudited and
Restated)-continued
|
|
|
For
the Year Ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
(Restated)
|
|
|
|
|
|
Net
sales as previously reported
|
|
$
|
13,131,413
|
|
|
$
|
22,340,176
|
|
|
$
|
26,265,365
|
|
|
$
|
13,239,212
|
|
|
Adjustments
|
|
|
1,652
|
|
|
|
115,286
|
|
|
|
-
|
|
|
N.A.
|
|
|
Restated
total revenues
|
|
$
|
13,133,065
|
|
|
$
|
22,455,462
|
|
|
$
|
26,265,365
|
|
|
$
|
13,239,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit as previously reported
|
|
$
|
923,169
|
|
|
$
|
2,026,410
|
|
|
$
|
2,454,557
|
|
|
$
|
1,164,893
|
|
|
Adjustments
|
|
|
200,322
|
|
|
|
369,842
|
|
|
|
328,702
|
|
|
N.A.
|
|
|
Restated
gross profit
|
|
$
|
1,123,491
|
|
|
$
|
2,396,252
|
|
|
$
|
2,783,259
|
|
|
$
|
1,164,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss as previously reported
|
|
$
|
(1,342,032
|
)
|
|
$
|
(1,900,507
|
)
|
|
$
|
(1,521,016
|
)
|
|
$
|
(1,629,084
|
)
|
|
Adjustments
|
|
|
(120,458
|
)
|
|
|
86,277
|
|
|
|
185,262
|
|
|
N.A.
|
|
|
Restated
net loss
|
|
$
|
(1,462,490
|
)
|
|
$
|
(1,814,230
|
)
|
|
$
|
(1,335,754
|
)
|
|
$
|
(1,629,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss as previously reported
|
|
$
|
(0.59
|
)
|
|
$
|
(0.74
|
)
|
|
$
|
(0.52
|
)
|
|
$
|
(0.53
|
)
|
|
Adjustments
|
|
|
(0.01
|
)
|
|
|
0.04
|
|
|
|
0.07
|
|
|
N.A.
|
|
|
Net
loss as restated
|
|
$
|
(0.60
|
)
|
|
$
|
(0.70
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted average number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported
|
|
|
2,285,756
|
|
|
|
2,579,754
|
|
|
|
2,939,379
|
|
|
|
3,100,758
|
|
|
Adjustments
|
|
|
159,685
|
|
|
|
(1,549
|
)
|
|
|
-
|
|
|
N.A.
|
|
|
As
restated
|
|
|
2,445,441
|
|
|
|
2,578,205
|
|
|
|
2,939,379
|
|
|
|
3,100,758
|
|
(N.A.–not
applicable)
In the
table above, earnings (loss) per share for each quarter were computed
independently using the weighted-average number of shares outstanding during the
quarter. However, earnings (loss) per share for the year were
computed using the weighted-average number of shares outstanding during the
year. As a result, the sum of the earnings per share for the four
quarters may not equal the full-year earnings (loss) per share.
Note
22 - Subsequent Events (Unaudited)
Purchase
Commitments
The
Company’s Oil Segment is obligated to purchase #2 heating oil under various
contracts with its suppliers. Subsequent to June 30, 2007, the Company entered
into additional contracts in the amount of $3,299,000, which expire at various
dates through May, 2008. See Note 20 for contracts entered into prior to June
30, 2007.
Note
22 - Subsequent Events (Unaudited)-continued
Change
of Officers
On
September 24, 2007, the Company’s Board of Directors appointed (i) Richard A.
Mitstifer, the former President of Properties as President of the
Company; (ii) William Roger Roberts, the former Chief Operating Officer of
Properties, as the Company’s Chief Operating Officer; (iii) Daniel L. Johnston,
the former Controller of Properties, as Chief Financial Officer of the Company;
and (iv) Louis Aponte, the President of All American Industries, Inc. and all
American Realty and Construction Corp., which are affiliates
of Properties specializing in real estate development and
construction, as the Company’s Vice-President of Special Projects. The Board
also promoted Frank Nocito, the Company’s Vice-President of Business
Development, to Executive Vice-President and expanded his duties to include
heading the Company’s expansion into alternative and clean energy fuels and
products. Mr. Nocito is the controlling person of the Cheldnick Family Trust,
the largest shareholder of Properties which, in turn, is the largest shareholder
of the Company. Messrs. Mitstifer, Roberts and Aponte were officers of
Properties in June 2005 when the Company entered into an asset purchase
agreement with Properties, pursuant to which the Company agreed to acquire
substantially all of Properties’ assets and assume all liabilities of Properties
other than mortgage debt liabilities. They were also officers of Properties at
the time the transaction closed in May 2007. Effective September 24, 2007,
Christopher P. Westad stepped down as President of the Company and Jeffrey Feld
stepped down as Acting Chief Financial Officer of the Company. The Board
subsequently appointed Mr. Westad as the President of the Company’s home heating
oil subsidiaries, Able Oil, Inc., Able Energy New York, Inc. and Able Oil
Melbourne, Inc.
On
October 22, 2008, Louis Aponte was appointed as President of the Company’s home
heating oil subsidiaries. Mr. Aponte will be responsible for the daily
operations of Able’s home heating business, as well as the operation of Able’s
Rockaway Terminal. Mr. Aponte is taking the place of Christopher Westad who will
remain with the Company working in its New York offices in charge of special
projects for the Company.
Line
of Credit
On
December 28, 2007 and February 11, 2008 the Company received over advances in
the amount of $250,000 on both dates on its line of credit with EGC. Terms on
the over advance were thirty days each.
Credit
Card Receivable Financing
On July
18, 2007, August 3, 2007, November 9, 2007, January 18, 2008, February 14, 2008,
April 11, 2008, August 14, 2008 and November 5, 2008, the Company, in accordance
with its agreement with Credit Cash, refinanced the loan in the amounts of
$250,000, $300,000, $1,100,000, $500,000, $500,000, $800,000, $500,000 and
$250,000, respectively (see Note 10). The outstanding Credit Cash loan as of
October 31, 2008 was $453,729.
Prior to
the business combination between Properties and the Company, Properties entered
into a loan agreement with Credit Cash, which was an advance against credit card
receivables at the truck stop plazas then operated by Properties. As
a result of the business combination, this obligation was assumed by the
Company’s newly formed, wholly-owned subsidiary, Plazas as it became the
operator of the truck stop plazas. Credit Cash, while acknowledging the business
combination, has continued to obligate both Properties and Plazas in their loan
documents as obligors of the loan.
On July
16, 2007, Credit Cash agreed to extend further credit of $400,000 secured by the
credit card receivables at the truck stops operated by Plazas. This
July 16, 2007 extension of credit agreement was in addition to and supplemented
all previous agreements with Credit Cash. Terms of the original loan and
extensions called for repayment of $1,010,933 plus accrued interest which will
be repaid through Credit Cash withholding 15% of credit card collections from
the operations of the truck stop plazas until the loan balance is paid in full.
The interest rate is prime plus 3.75% (12% at March 31, 2007). There are certain
provisions in the agreement, which allows the Lender to increase the
withholding, if the amount it is withholding is not sufficient to satisfy the
loan in a timely manner. However, on November 2, 2007, January 18, 2008 and
August 14, 2008 Credit Cash again agreed to extend an additional credit in the
amount of $1,100,000, $600,000 and $900,000, respectively. Terms of the
agreement are the same as the prior July 16, 2007 financing. The outstanding
balance of the loan as of October 31, 2008 was $651,517.
Note
22 - Subsequent Events (Unaudited)-continued
Accounts
Receivable Financing
On
January 8, 2007, Properties entered into an Account Purchase Agreement with
Crown Financial, LLC (“Crown”) whereby Crown advanced $1,275,000 to Properties
in exchange for certain existing accounts receivables and taking ownership of
new accounts originated by Properties.
Repayment
of the loan is to be made from the direct payments to Crown from the accounts it
purchased from Properties and a fee equal to 2.5% of the outstanding advance for
the preceding period payable on the 15
th
and
30
th
day of each month.
The Crown
loan is secured by the mortgages on the real property and improvements thereon
owned by Properties known as the Strattanville and Frystown Gables truck stop
plazas and a personal guarantee by Frank Nocito.
Subsequent
to the May 2007 closing of the business combination between the Company and
Properties, on July 1, 2007 the Account Purchase Agreement between Properties
and Crown Financial was amended and modified from “Eligible Accounts having a 60
day aging” to a “90 day aging that are not reasonably deemed to be doubtful for
collections” and the fee of 2.5% payable on the 15
th
and
30
th
day of each month has been modified to 1.375%. The Company has assumed this
obligation based on the business combination; however, Properties has agreed to
continue to secure this financing with the aforementioned real estate
mortgages.
Related
Party Transactions
On
December 10, 2007, Properties concluded a refinancing allowing them to repay
$910,000 on their note to the Company (See Note 19).
Subsequent
to June 30, 2007, related party receivables from Properties were reduced by
approximately $2.6 million. This reduction occurred from offsets of
rent owed to Properties by the Company’s wholly-owned subsidiary, Plazas, in
connection with its leasing of the real property underlying the truck stops
operated from July 2007 through June 2008 in the amount of approximately $1.1
million, and from cash payments made by Properties in the amount of $1.5 million
resulting from refinancing and settlements by Properties in December, 2007,
January, 2008 and March, 2008 (See Note 19).
Fuel
Financing
On
October 17, 2007, the Company entered into a loan agreement with S&S NY
Holdings, Inc. (“S&S”) for $500,000 to purchase #2 heating fuel. The term of
the agreement is for 90 days with an option to refinance at the end of the
90-day period for an additional 90 days. The repayment of the principal amount
will be $.10 cents per gallon of fuel sold to the Company’s customers excluding
pre-purchase gallons. An additional $.075 per gallon will be paid as interest.
The agreement also provides that in each 30-day period the interest amount can
be no less than $37,500.00. As of January 17, 2008 the Company had
repaid $100,000 and exercised its right to refinance the amount until March 31,
2008. The Company has provided for repayment of this loan in exchange
for granting S&S a 49% interest in Able Energy NY, Inc., a wholly owned
subsidiary of the Company, and a 90% interest in the Company’s Easton and
Horsham, PA operations (“Albe PA”). Thereafter, on October 31, 2008, the Company
was granted the right to repurchase S&S's interests in Able NY and Able PA.
See, “S&S Settlement Agreement” and “Amendment to the S&S Settlement
Agreement”, below.
On
October 5, 2007, Properties reclassified all outstanding trade payables with
TransMontaigne, a supplier of fuel to a note payable in the amount of $15.0
million. Interest at the rate of 8% is being accrued on all past due
amounts as of October 5, 2007. In addition, an amount of
$1,550,000.00 was added to the note to begin a prepaid purchase program whereby
Plazas will prepay for its fuel prior to delivery. Repayment of this
note is to commence on or about March 15, 2008 with a 25-year amortization
schedule with a maturity of November 15, 2009. If a threshold payment is made on
or before March 15, 2008 and before August 15, 2008 (after initial 25-year
amortization begins) in the amount of $3.0 million then a new 25-year
amortization schedule will commence effective July 31, 2009 and mature on March
31, 2011. Collateral on this note are certain properties owned by
Properties. The Company is currently in the process of renegotiating the terms
of this agreement.
Note
22 - Subsequent Events (Unaudited)-continued
Fuel
Financing-continued
On
December 20, 2007, the Company entered in to a second loan agreement with
S&S for $500,000 to purchase #2 heating fuel. The term of the
agreement is through March 31, 2008. The repayment of principle is
not due until the maturity date. An additional $0.075 per gallon will
be paid as interest. The agreement also provides that in each 30-day period the
interest amount can be no less than $37,500. The Company has provided
for repayment of this loan in exchange for granting S&S a 49% interest in
Able Energy NY, Inc. (“Albe NY”), a wholly owned subsidiary of the
Company, and a 90% interest in the Company’s Easton and Horsham, PA operations
(“Albe PA”). Thereafter, on October 31, 2008, the Company was granted the right
to repurchase S&S's interests in Able NY and Able PA. See, “S&S
Settlement Agreement” and “Amendment to the S&S Settlement Agreement”,
below.
On
February 25, 2008, the Company increased an existing credit line by executing a
Fuel Purchase Loan (“FPL”) agreement with Entrepreneur Growth Capital
(“EGC”). The increase, in the amount of $0.5 million, is a further
extension of credit under an existing May 13, 2005 agreement between the Company
and EGC (the “Loan Agreement”) (See Note 13). In addition to the
general terms of the Loan Agreement, under the repayment terms of the FPL, EGC
will reduce the loan amount outstanding by applying specific amounts from the
Company’s availability under the Loan Agreement. These amounts start
at $2,500 per business day, commencing March 1, 2008, gradually increasing to
$10,000 per business day on June 1, 2008 and thereafter until the FPL is paid in
full. In further consideration for making the FPL, commencing
February 22, 2008, EGC shall be entitled to receive a revenue share of four
cents ($0.04) per gallon of fuel purchased with the FPL funds, subject to a
$5,000 per week minimum during the first seven weeks of the
program.
On May 8,
2008, Plazas entered into a Fuel Supply Agreement (“FSA”) with Atlantis
Petroleum, LLC (“Atlantis”). The FSA provides that for a term of
three years, Atlantis will be the sole and exclusive diesel fuel supplier to
eight (8) of the truck stop plazas operated by Plazas located in Pennsylvania.
The price per gallon of the diesel fuel supplied by Atlantis provides Plazas
with a favorable wholesale rate. The price per gallon is based upon the delivery
of a full transport truckload of product. All prices charged by Atlantis are
subject to the provisions of applicable law. It is estimated that pursuant to
the FSA, Atlantis will supply at least 44,000,000 gallons of diesel fuel for the
first year and increase thereafter as Plazas increases its market
share.
The
obligations of Plaza under the FSA have been guaranteed by Properties, which
guaranty is limited to a thirty day period beginning thirty days prior to
Atlantis’ written notice to Properties of Plazas’ breach of the
FSA.
On
October 31, 2008, Plazas entered into agreements with UCP Capital Management,
LLC (“UCP”) pursuant to which UCP will arrange for the consignment and
distribution of gasoline obtained from Gulf Oil or Valero Oil terminals and
motor diesel fuel at the travel plazas operated by Plazas. Once delivered,
Plazas will have complete control over the product delivered including the
retail prices at which the gasoline is sold. UCP will retain the cost of the
fuel as determined by the Gulf or Valero Branded Rack price for the gasoline or
its cost of the diesel fuel plus two cents plus all applicable taxes and
delivery charges per gallon for each gallon of gasoline delivered by UCP and
sold by Plazas in a given month. Plazas will retain the difference between the
amount retained by UCP and the price per gallon of gasoline or diesel fuel sold.
Pursuant to this agreement the gasoline islands at the travel plazas operated by
Plazas will be branded with either the Gulf or Valero trade name. The term of
the agreements shall be effective on November 1, 2008 and run through October
31, 2013.
Litigation
On
December 8, 2006, the Company commenced an action in the Superior Court of
California, for the County of Los Angeles against Summit Ventures, Inc.
(“Summit”), Mark Roy Anderson (“Anderson”), the principal of Summit and four
other companies controlled by Anderson, Camden Holdings, Inc., Summit Oil and
Gas, Inc. d/b/a Nevada Summit Oil and Gas, Harvest Worldwide, LLC and Harvest
Worldwide, Inc. seeking to compel the return of 142,857 shares (the “Shares”) of
the Company’s common stock issued to Summit. The Shares were issued
to Summit in connection with a consulting agreement the Company had entered into
with Summit in January 2005. The complaint also sought damages as a result of
Summit’s and Anderson’s breach of contract, fraud and misrepresentation with
respect to the consulting agreement. On June 28, 2007, Summit and
Anderson interposed a cross-complaint against the Company, Greg Frost, the
Company’s Chief Executive Officer and Chairman, Chris Westad, the Company’s
President, Frank Nocito, Vice President of Business Development for the Company,
Stephen Chalk, a Director of the Company and Timothy Harrington, the former
Chief Executive Officer of the Company. On October 10, 2007, the Company settled
the Anderson Litigation, which included the issuance of 142,857 shares of the
Company’s common stock to Summit. The issuance of the shares was
recorded at June 30, 2007.
Note 22 - Subsequent Events
(Unaudited)-continued
Litigation-continued
On June
26, 2007, the Company and its affiliate, Properties (together with the Company
the “Claimants”), filed a Demand for Arbitration and Statement of Claim in the
Denver, Colorado office of the American Arbitration Association against Manns
Haggerskjold of North America, Ltd. (“Manns”), Scott Smith and Shannon Coe
(collectively the “Respondents”), Arbitration Case No. 77 148 Y 00236 07 MAV.
The Statement of Claim filed seeks to recover fees of $1.2 million paid to Manns
to obtain financing for the Company and Properties. The Claimants commenced the
Arbitration proceeding based upon the Respondents breach of the September 14,
2006 Commitment letter from Manns to Plazas that required Manns to loan Plazas
$150 million. The Statement of Claim sets forth claims for breach of contract,
fraud and misrepresentation and lender liability. On July 23, 2007, Respondents
filed their answer to the Statement of Claim substantially denying the
allegations asserted therein and interposing counterclaims setting forth claims
against the Company for breach of the Non-Circumvention Clause, breach of the
Exclusivity Clause and unpaid expenses. Respondents also assert counterclaims
for fraudulent misrepresentation and unjust enrichment. On Respondents’
counterclaim for breach of the Non-Circumvention Clause, Respondents claim
damages of $6,402,500. On their counterclaim for breach of the Exclusivity
Clause, Respondents claim damages of $3,693,750, plus an unspecified amount
related to fees on loans exceeding $2,000,000 closed by Properties or the
Company over the next five years. Respondents do not specify damages relative to
their other counterclaims.
On August
7, 2007, the Claimants filed their reply to counterclaims denying all of
Respondents material allegations therein. Respondents’ counterclaims were based
on the false statement that the Claimants had, in fact, received the financing
agreed to be provided by Manns from a third party. The Respondents
subsequently withdrew all of their counterclaims.
The
parties have selected an Arbitrator and are presently engaged in
discovery. The parties have exchanged documents and the depositions
of the parties have commenced and are scheduled to be concluded by the end of
November, 2008. The hearing of the parties’ claims is scheduled to
commence before the Arbitrator on December 8, 2008.
Subsequent
to their dismissal on August 13, 2007, on October 10, 2007, on October 1, 2007,
the Company and its Chief Executive Officer (“CEO”) filed an action in New York
state court against Marcum & Kliegman, LLP (the Company’s former auditors)
and several of its partners for numerous claims, including breach of contract,
gross negligence and defamation. The Company and its CEO are seeking
compensatory damages in the amount of at least $1 million and punitive damages
of at least $20 million. The claims asserted by the Company and its CEO arise
out of Marcum & Kliegman’s conduct with respect to the preparation and
filing of the Company’s SEC Reports. On November 26, 2007, Marcum
& Kliegman and its partners filed a motion to dismiss the complaint on the
ground that it fails to state a claim for relief as a matter of
law. On May 5, 2008, the Court issued a written decision and order
sustaining the Company’s claims against Marcum & Kliegman for breach of
contract and defamation, but dismissed the Company’s claims for negligence,
gross negligence, breach of fiduciary duty and breach of covenant of good faith
and fair dealing against Marcum & Kliegman and the defamation claim against
the individual defendants. Both the Company and Marcum & Kliegman
have filed appeals from the decision and order. Discovery proceedings
have commenced and the Company intends to vigorously prosecute this
action.
On
January 7, 2008, the Company, its Chief Executive Officer, Gregory D. Frost, and
its Vice-President of Business Development, Frank Nocito, were served with a
summons and complaint in a purported class action complaint filed in the United
States District Court, District of New Jersey. This action, which seeks class
certification, was brought by shareholders of CCI Group, Inc. (“CCIG”). The
complaint relates to a Share Exchange Agreement (the “Share Exchange
Agreement”), dated July 7, 2006, between Properties and CCIG, pursuant to which
seventy percent (70%) of the outstanding and issued shares of CCIG were
exchanged for 618,557 shares of the Company’s common stock which were owned by
Properties of which 250,378 shares were to be distributed to the shareholders of
CCIG and the balance of the shares were to be used to pay debts of
CCIG. Neither the Company nor Messrs. Frost or Nocito were parties to
the Share Exchange Agreement. Properties remain the largest shareholder of the
Company. The Share Exchange Agreement was previously disclosed by the Company in
its Current Report on Form 8-K filed with the SEC on July 7, 2006 as part of a
disclosure of a loan by the Company to Properties.
Note 22 - Subsequent Events
(Unaudited)-continued
Each of
the Company and Messrs. Frost and Nocito believes it/he has defenses against the
alleged claims and intends to vigorously defend itself/himself against this
action and have filed a motion to dismiss the compliant. The motion
has been fully briefed and submitted to the Court. As of the date of
this Report, no decision has been issued with respect to the
motion.
On
September 17, 2008 an action was commenced in the Common Court of Pleas in
Northumberland County, Pennsylvania against Plazas by SCC3, LLC. The action
arises out of a note (the “Note”) made by Milton Properties, Inc. (“Milton”),
the owner of the real property (the “Property”) underlying the Milton travel
plaza which is leased to, and operated by, Plazas, to Silar Special
Opportunities Fund, L.P.(“Silar”) and a mortgage (the “Mortgage”) granted by
Milton to Silar on the Property to secure the Note. Silar subsequently assigned
the Note and Mortgage to the plaintiff, SCC3, LLC. As further
security for Milton’s obligations under the Note, Milton assigned to Silar its
lease with Plazas for the Property and the rents therefor (the “Assignment of
Leases and Rent”). The lease (the “Lease”) for the property expires in
2013. Silar also assigned its rights under the Assignment of Leases
and Rents to the plaintiff. The complaint alleges that Milton is in
default of its obligations under the Note and Mortgage. As a result, plaintiff
alleges that it has exercised its rights under the Assignment of Lease and Rents
and revoked Milton’s right to collect rent for the Property. The plaintiff
further alleges that Plazas is in default of its obligations under the Lease and
that pursuant to the Assignment of Lease and Rents plaintiff has the right to
enforce the Lease and declare all rent for the remainder of the term of the
Lease to be due and payable. Plaintiff is seeking damages in the amount of
$17,855,024 representing the balance of rent due under the term of the
Lease. Plazas has filed an answer denying the allegations of the
complaint. Plazas intends to vigorously defend this action and will make a
motion shortly to dismiss the complaint.
On
October 7, 2008 a complaint was filed in the United States District Court for
the Western District of Texas by Petro Franchise Systems, LLC and TA Operating
LLC, (collectively the “Plaintiffs”), against Properties, Plazas and The
Chelednik Family Trust (the “Trust”), (collectively the “Defendants”). The
complaint seeks monetary damages and injunctive relief arising out of
Properties’ and Plazas’ alleged breach of Petro franchise agreements for the
Petro travel centers located in Breezewood and Milton, Pennsylvania and the
Trust’s guaranty of the Milton franchise agreement. Plaintiffs are
seeking damages in the amounts of $149,851 and $154,585 for the alleged breach
of the Breezewood and Milton franchise agreements, respectively. In addition,
the complaint is requesting damages for violations of the Lanham Act, including
the continued purported improper use by Properties and Plazas of the registered
Petro trademarks and the dilution of those trademarks; unfair competition and
unjust enrichment; trademark infringement under Texas state law; and,
conversion. As of the date of this Annual Report, the complaint has not been
served upon the defendants.
Consulting
Agreement
On August
27, 2007, the Company entered into a service agreement with Axis Consulting
Services, LLC. The agreement calls for Axis Consulting to develop marketing plan
(phase 1) and manage (phase 2) “The Energy Store” (an e-commerce retail sales
portal for energy products and services). During phase 1, the terms are $2,750
per month and once phase 2 commences an amount of $5,600 per month. This
agreement ends on December 31, 2008. Axis Consulting’s President (Joe
Nocito) has a direct relationship as the son of the Company’s Executive
Vice-President Frank Nocito.
SEC
Formal Order of Private Investigation
On August
31, 2007, the Company was served with a second subpoena duces tecum (the “Second
Subpoena”) from the SEC pursuant to the Formal Order of Investigation issued by
the SEC on September 7, 2006. The Company continues to gather, review and
produce documents to the SEC and is cooperating fully with the SEC in complying
with the Second Subpoena. As of the date of this Report, the Company has
produced and will, if required, continue to produce responsive documents and
intends to continue cooperating with the SEC in connection with the
investigation. On May 13, 2008, the Company received correspondence
from the SEC requesting the Company respond, in writing, to eleven questions
proffered by the SEC staff. The Company provided its responses to the
eleven questions to the SEC on May 21, 2008.
On July
29 and 30, 2008, the Company’s CEO, Mr. Frost and the Company’s Executive
Vice-President, Business Development, Mr. Nocito, were deposed by the
SEC. The Company has been advised by its SEC counsel, who also
attended the depositions, that it believes the primary focus of the
investigation is for the Company to complete its outstanding, delinquent SEC
filings in order to obtain filing compliance.
Note
22 - Subsequent Events (Unaudited)-continued
Changes
in Registrant's Certifying Accountant
On August
13, 2007, the Company dismissed Marcum & Kliegman, LLP as its independent
registered public accounting firm. The report of Marcum & Kliegman, LLP on
the Company's financial statements for the fiscal year ended June 30, 2006 (“FY
2006”) was modified as to uncertainty regarding (1) the Company’s ability to
continue as a going concern as a result of, among other factors, a working
capital deficiency as of June 30, 2006 and possible failure to meet its short
and long-term liquidity needs, and (2) the impact on the Company’s financial
statements as a result of a pending investigation by the SEC of possible federal
securities law violations with respect to the offer, purchase and sale of the
Company’s securities and the Company’s disclosures or failures to disclose
material information.
The
Company’s Audit Committee unanimously recommended and approved the decision to
change independent registered public accounting firms.
In
connection with the audit of the Company’s financial statements for FY 2006, and
through August 13, 2007, there have been no disagreements with Marcum &
Kliegman, LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Marcum & Kliegman, LLP would have caused it
to make reference to the subject matter of such disagreements in connection with
its audit report. There were no reportable events as defined in Item
304(a)(1)(v) of Regulation S-K. On August 24, 2007, Marcum & Kliegman, LLP
sent a responsive letter to the Current Report on Form 8-K dated August 13,
2007, filed by the Company, which discussed the Company’s termination of Marcum
and Kliegman, LLP as its auditors. This responsive letter claimed that there
were two reportable events. The Company filed an amended Form 8-K
Report acknowledging one reportable event that Marcum and Kliegman, LLP had
advised the Company of material weaknesses in the Company’s internal controls
over financial reporting. The Company added disclosure in the Amended 8-K to
reflect this reportable event. This reportable event occurred in conjunction
with Marcum & Kliegman’s audit of the consolidated financial statements for
the year ended June 30, 2006 and not, as stated in the Auditor’s Letter, in
conjunction with Marcum & Kliegman’s “subsequent reviews of the Company’s
condensed consolidated financial statements for the quarterly periods ended
September 30, 2006 and December 31, 2006.” In June 2007, when Marcum &
Kliegman began its review of the Company quarterly financial statements for the
periods ended September 30, 2006 and December 31, 2006, the Company had already
disclosed the material weakness in its internal controls over financial
reporting in the Company’s Annual Report on Form 10-K for the year ended June
30, 2006 (filed on April 12, 2007). Further, no such advice of these material
weaknesses over internal controls was discussed, in writing or orally, with the
Company by representatives of Marcum & Kliegman during the review of such
quarterly financial statements.
The
Company engaged Lazar Levine & Felix, LLP (“LLF”) as its new independent
registered public accounting firm as of September 21, 2007. Prior to its
engagement, LLF had been serving as independent auditors for Properties, an
affiliate and the largest stockholder of the Company.
Engagement
of Consultant
On
January 11, 2008, the Company executed a consulting agreement with Hammond
Associates, LLC to provide consulting services in connection with satisfying the
Company’s SEC reporting requirements. On April 30, 2008, the Company
issued 14,442 restricted shares of its common stock, $0.001 par value, as
partial consideration for services provided by the consultant.
Sale
of Able Melbourne Assets
On
February 8, 2008 (the “Closing Date”), the Company and Able Melbourne executed
an Asset Purchase Agreement (“APA”) with Able Oil of Brevard, Inc. (“Able
Brevard”), a Florida corporation, owned by a former employee of Able
Melbourne. For consideration in the amount of $375,000, the APA
provided for the sale to Able Brevard of all of the tangible and intangible
assets (excluding corporate books and records), liabilities and lease
obligations of Able Melbourne, as is, on the Closing Date.
Note
22 - Subsequent Events (Unaudited)-continued
Closure
of Strattanville Travel Plaza
One of
the Travel Plazas Segments facilities, Strattanville, Pennsylvania, was
shut-down in April, 2008 due to unprofitable operations at that
site. Management is exploring business opportunities relating to this
site.
Doswell
Sale Agreement
On May
12, 2008, the Company entered into a sale agreement with T.S.O, Inc. (“TSO”) for
the sale of the Company’s assets located at its leased Doswell, VA travel
plaza. In exchange for total consideration to the Company of
approximately $0.4 million, the Company has agreed to transfer to TSO title to
all tangible and intangible assets (excluding corporate records) and liabilities
relating to the operations of the Doswell, VA travel plaza. TSO has
until October 12, 2008 to obtain and deliver a firm commitment letter for the
purchase price. During the period July 12, 2008 through closing of
the purchase, TSO is obligated to pay the Company rent in the amount of $75,000
per month. By letter dated November 6, 2008, the owner of the real property
underlying the Doswell Travel Plaza sent a notice to TSO terminating the
contract of sale.
Lease
of Newton Facility
On July
14, 2008, the Company executed a triple net lease agreement with North Jersey
Oil, Inc. (North Jersey) for the use of the Company’s idled Newton, NJ fuel
terminal facility. The term of the lease is for thirty years. Upon
execution, the lease agreement provides for a $250,000 cash payment to the
Company and the receipt of a $250,000 Tenant’s Promissory Note (together, the
“Basic Rent”). The note provides for interest at 8% and twelve monthly
payments. Payments are to commence on the date that North Jersey
receives all of the necessary permits to conduct its operations at the Newton
site. If within six months of the execution date of the lease
agreement North Jersey is unable to secure the necessary operating permits or
during the same time North Jersey is advised that its applications for the
necessary operating permits have been denied, the Company will be obligated to
return the Basic Rent to North Jersey and terminate the lease
agreement. The lease agreement also provides both the Company and
North Jersey with storage and throughput rights at their respective terminals at
a cost to the user of $0.05 per gallon. In addition, North Jersey is
obligated to provide the Company with an initial six-month, $0.5 million fuel
purchase credit facility at a cost to the Company of $0.02 per gallon
financed. The lease agreement also provides North Jersey with a $1.00
purchase option, which North Jersey can exercise upon payment in full, in cash,
of all the Basic Rent.
S&S
Settlement Agreement
Effective
July 22, 2008, the Company and S&S NY Holdings, Inc (“S&S) executed a
settlement agreement. In exchange for total consideration of
approximately $1.0 million, consisting of principal and interest due S&S,
S&S assumption of a specific liability and the purchase of existing
inventory, the Company transferred to S&S 49% of the common stock of its
subsidiary, Able NY, and 90% of its interest in its Easton and Horsham, PA
operations. Under specific situations, the Company’s filing for
bankruptcy or default on payment of specific debt, S&S has a call option on
the remaining 51% of Able NY for an additional $1.0 million and other valuable
consideration. For a period of one year from the execution of the
settlement agreement, S&S has an option to purchase the remaining 10% of
Easton and Horsham operations for $50,000 and other valuable
consideration. Able NY has also entered into a consulting agreement
with S&S under which S&S will be paid five percent of Able NY’s gross
profit for its management services provided to Able NY.
Note
22 - Subsequent Events (Unaudited)-continued
Amendment To The S&S
Settlement Agreement
On
October 31, 2008, the Company and S&S NY Holdings, Inc. entered into an
agreement amending (the “Amendment”) the Settlement Agreement. The Amendment
provides that the Company has the right to repurchase S&S’s interest in Able
PA for the sum of $548,910 payable $250,000 upon the signing of the Amendment
and the balance ten business days thereafter. In the event that the balance is
not paid within the time period specified, S&S shall retain the initial
payment of $250,000 and its interest in Able PA. The Amendment
further provides that the Company may repurchase S&S’s 49% interest in Able
NY for the sum of $550,000 payable $150,000 within thirty days after the
repurchase of Able PA; commencing thirty days after such payment, eight (8)
equal monthly installments each in the amount of $30,000; and the balance of
$160,000 to be made thirty days after the final monthly installment is paid.
S&S shall retain its interest in Able NY as security for such payments.
However, as long as Able is not in default of such payments, S&S shall have
no rights whatsoever with respect to its shares of stock in Able NY, including,
but not limited to any distribution of any revenues, profits or net profits of
Able NY. In the event that Able defaults in making such payments and
fails to timely cure such default, S&S shall retain full ownership with all
attendant shareholder rights thereto of its shares of stock in Able NY,
provided, however, S&S’s ownership percentage of Able NY will be reduced by
the percentage of payments made to Able NY prior to the default as applied to
the total purchase price for S&S’s interest in Able NY. The Amendment also
cancelled the Consulting Agreement which was to be entered into pursuant to the
terms of the Settlement Agreement between Able NY and S&S in exchange for a
payment of $60,000 to be made at the time the final payment is due for payment
of the Able NY shares.
PriceEnergy.com,
Inc.
On
September 22, 2008, the Company was granted additional shares of common stock of
its majority owned subsidiary, Price Energy.com, Inc., in exchange for
satisfaction of $3.8 million of debt owed to the Company, increasing
its ownership interest in Price Energy to 92%.
Sublease of Travel
Plazas
Effective
November 1, 2008, All American Plazas, Inc. subleased the operation of the
Carlisle Gables, Harrisburg and Frystown Gables plazas to independent third
parties each for a term of three years. Plazas determined the sublease of these
facilities would cut its costs, but Plazas also maintained the right to supply
the fuel to these plazas on a cost plus basis, which it believes, will result in
a net profit to the Company. Each of the subleases provides for the purchase of
the existing inventory and the Frystown Gables sublease provides for a three
month abatement of rent.
PART
III
Item
10. Directors and Executive Officers of the Registrant
DIRECTORS
AND EXECUTIVE OFFICERS
As of
June 30, 2008, the directors and executive officers of the Company are as
follows:
|
Name
|
Age
|
Title
|
Compensation
Committee
|
Audit
Committee
|
Governance
and Nominating
Committee
|
|
Gregory
D. Frost, Esq.
|
61
|
Chairman,
Chief Executive Officer & Director
|
|
|
|
|
Richard
A. Mitstifer
|
51
|
President
|
|
|
|
|
William
Roger Roberts
|
55
|
Chief
Operating Officer
|
|
|
|
|
Daniel
L. Johnston
|
46
|
Chief
Financial Officer
|
|
|
|
|
Frank
Nocito
|
61
|
Executive
Vice-President
|
|
|
|
|
Christopher
P. Westad
|
55
|
President,
Home Heating Oil Unit
|
|
|
|
|
John
L.Vrabel
|
56
|
Chief
Operating Officer, Price Energy Unit
|
|
|
|
|
Stephen
Chalk
|
63
|
Director
|
|
|
|
|
Solange
Charas
|
46
|
Director
|
**
|
*
|
|
|
Edward
C. Miller, Jr.
|
41
|
Director
|
|
*
|
|
|
Patrick
O'Neill
|
48
|
Director
|
*
|
|
*
|
|
Alan
E. Richards
|
71
|
Director
|
|
**
|
*
|
*
Member
**
Chair
Note: On October 22, 2008,
Louis Aponte was appointed as President of the Company's home heating oil
subsidiaries in place of Christopher P. Westad. See, Note 22 - Subsequent Events
to the Consolidated Financial Statements in Item 8 to this Annual
Report.
Background
Set forth
below is a brief background of the executive officers and directors of the
Company, based on information supplied by them.
GREGORY
D. FROST, ESQ. became General Counsel and a Director of the Company in April
2005. Mr. Frost served as CEO and Chairman from October 2005
until September 28, 2006, when he took a leave of absence. Mr. Frost
returned as CEO and Chairman on May 24, 2007, and has continued to serve in
those positions to-date. From 1974 to the present, he has been a practicing
attorney in the State of New York and from 1999 until October of 2005, he was a
partner of the law firm of Ferber Frost Chan & Essner, LLP (formally known
as Robson Ferber Frost Chan & Essner, LLP) which has in the past performed,
and continues to perform, legal services for the Company. Mr. Frost's
main areas of practice have been and continue to be mergers and acquisitions,
and general corporate and securities matters. From 1975 through 1980,
he was Assistant General Counsel at The Singer Company and RH Macy &
Co. Thereafter, Mr. Frost spent approximately 12 years as a partner
of the law firm of Bower & Gardner, managing their corporate and securities
department. In 1970, Mr. Frost received a B.A. degree from New York
University (Stern School). He received his Juris Doctorate in 1973
from New York Law School, and in 1979 obtained a Master of Law Degree (LLM) in
Corporate Law from New York University Law School.
RICHARD
A. MITSTIFER became President of the Company on September 24,
2007. Mr. Mitstifer graduated from Muhlenberg College in 1979 with
degrees in Business Administration and Accounting. He entered the banking
industry in 1979, where he had a sixteen-year career in commercial lending,
gaining exposure to several types of businesses from retail to manufacturing. He
joined All American Properties, Inc., formerly doing business as All American
Plazas, Inc., in 1995 as Vice-President of Finance, where he oversaw all
banking, insurance, human resources and accounting functions. He became
President of All American Properties, Inc. in 2003.
WILLIAM
ROGER ROBERTS became the Company’s Chief Operating Officer on September 24,
2007. Mr. Roberts has over thirty years of experience in various
capacities, including ten years of restaurant management with Food Franchises,
Inc. from 1974 to 1978 and then from 1981 to 1985 as General Manager,
and twenty years of multi-Segment supervision in the Travel
Center/Convenience store industry with Pantry Convenient Stores, from 1978 to
1981 as a district manager, Benton Service Oil Company from 1985 to 1990 as
Vice-President of Operations, Interstate Facilities from 1990 to 1995 as General
Manager, Coleman Oil Company from 1995 to 1998 as Vice-President of Operations,
Cross Road Travel Plaza from 1998 to 2002 as General Manager, and from
September, 2007 to present as Vice-President and Chief Operating Officer of All
American Properties, Inc.
DANIEL L.
JOHNSTON became the Company’s Chief Financial Officer on September 24,
2007. Mr. Johnston graduated from Westminster College in 1984 with a
degree in Business Administration/Accounting. He worked for Price Waterhouse
from August 20, 1984 to December 28, 1988 where he became Senior Accountant in
June 1987, responsible for various audits of several large companies. He entered
his family’s travel plaza business in 1989 in an executive capacity as
Vice-President and later Treasurer, handling all Accounting, IT, Human Resource
and Administrative functions, as well as Garage and Sanitary Operations for the
two travel plazas owned by his father, brother and himself. From 1991 to 1993,
he served on the executive committee that acted in an advisory capacity to an
investment group and truck stop operators, who acquired the chain of Unocal 76
Truck Stops. In addition to his involvement in his family’s travel plaza
business, from 1991 to present Mr. Johnston maintains a private CPA practice
providing accounting and payroll services, software installation and technical
support for independent travel plazas and restaurant chains. Mr. Johnston joined
All American Properties, Inc., in 2004 and became its Controller in early
2006.
FRANK
NOCITO became Vice President Business Development of the Company in April 2005
and was appointed Executive Vice-President, Business Development on September
24, 2007. Previously, from 2003 and through April 2005, Mr.
Nocito was Vice President of All American Plazas, Inc., which is now doing
business as All American Properties, Inc. (“Properties”), which owned and
operated ten truck plazas located in Pennsylvania, New York, New Jersey and
Virginia. On May 30, 2007, the Company acquired the operating assets
of these plazas and Properties retained ownership of the underlying real estate
upon which the plazas are located, together with any buildings and improvements
on the respective properties. Properties own approximately 74% of the
outstanding common stock of our Company. In 2003, Mr. Nocito, as Vice
President of All American Industries Corp., acquired all of the issued and
outstanding stock of Properties. In 2004, Mr. Nocito and his wife
created, for the benefit of their family members, including seven children, the
Chelednik Family Trust, and approximately 85% of the issued and outstanding
stock of Properties is beneficially owned by the Trust. In 2002, as a
consultant to two start-up corporations, American Truck Stop of Belmont Inc. and
American Truck Stop of Carney Inc., Mr. Nocito assisted the new entities in
acquiring two truck plazas located in the Northeast. Subsequent to
the purchase of these two truck plazas, he became in November 2003, and remains,
a vice president of both corporations. In 2001, Mr. Nocito was
employed by WDF/Keyspan, Inc., as a supervisor in charge of multi-million dollar
conversion projects for the New York City School System, converting school
facilities from coal to oil and gas systems. In 1996, under cover of
a 1994 sealed indictment that had never been acted upon, an indictment was
issued against Mr. Nocito for conspiracy to commit money
laundering. The charge was the result of his political activities as
part of the Republican Party and events arising out of the United States
Government's support of the Nicaraguan Government under the Sandinista
regime. In late 1998, Mr. Nocito accepted a plea offer that resulted
in his serving a 19-month detention plus three years probation, which ended May
2004. Mr. Nocito's educational background includes his attending
Syracuse University, Marymount College/Fordham University and Nova
University.
CHRISTOPHER
P. WESTAD became President of the Company in 1998, and a Director when the
Company went public in 1999. His current employment contract runs
through November 25, 2009. From September 28, 2006 to May 23, 2007,
he served as Acting Chief Executive Officer of the Company. He also
served as the Company’s Chief Financial Officer from 2000 to August 2005, and
again from July 2006 through September 2006. Since September 1996,
Mr. Westad had also served as the President of Able Propane until the sale of
that subsidiary in March, 2004. From 1991 through 1996, Mr. Westad
was Market Manager and Area Manager for Ferrellgas Partners, L.P., a company
engaged in the retail sale and 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, New York.
JOHN L.
VRABEL became Chief Operating Officer of the Company in August
2003. His current employment contract runs through July 1,
2007. From 2000 through the present, he has served as Vice President
Business Development of the Company’s PriceEnergy subsidiary. From
1996 to 2000, Mr. Vrabel was Vice President of Business Development of
Connective Holdings Vital Services, LLC, a subsidiary of Connective Holdings in
the energy products and services sector. He received a B.A. from the
University of Houston in 1976, and participated in an Executive MBA from
Baldwin-Wallace College in 1982 and 1983.
STEPHEN
CHALK became a Director of the Company in February 2005. From 1981 to
the present, Mr. Chalk has served as the President of the Pilgrim Corporation,
where he has obtained a strong background in financial management, as well as
over 25 years of hotel, resort, restaurant, and real estate development
experience. Mr. Chalk is a graduate of Philadelphia University with a
BS in Engineering and Design.
SOLANGE
CHARAS became a director of the Company in May 2005. In 2000, Ms.
Charas founded Charas Consulting, Inc., which provides human resources
consulting services. From 2002 though 2005, Ms. Charas was the Head
of Human Resources for Benfield, Inc. In her role, she was
responsible for all aspects of human resources for this
organization. She is currently a retained consultant to
Benfield. From 1999 to 2000, Ms. Charas was the Head of Human
Resources for EURO RSCG Worldwide, an advertising firm, which is the largest
division of France-based Havas Advertising. As Head of Human
Resources, she was responsible for the creation and management of all HR
programs on a worldwide basis for over 200 agencies, which made up EURO
RSCG. From 1996 to 1999, Ms. Charas was the National Director at
Arthur Andersen, where she led all activities promoting a consulting product she
was instrumental in creating for the firm. From 1995 to 1996, Ms.
Charas was the leader of the International Compensation Team at Towers Perrin
and a Senior Consultant with respect to international compensation at the Hay
Group. Ms. Charas received an undergraduate degree in International
Political Economy from University of California at Berkeley in 1982 and an MBA
in Accounting and Finance from Cornell University's Johnson School of Management
in 1988.
EDWARD C.
MILLER, JR. has served as a Director of the Company since 1999. Mr.
Miller has served in several marketing positions since 1999 and currently serves
as the Chief Marketing Officer for the law firm of Norris, McLaughlin &
Marcus, P.A., located in Somerville, New Jersey. From 1991 to 1999,
Mr. Miller served as Marketing Coordinator at the Morristown, New Jersey, law
firm of Riker, Danzig, Scherer, Hyland & Perretti, LLP. Mr.
Miller received a B.S. in Marketing Management from Syracuse University School
of Management in 1991.
PATRICK
O'NEILL has served as a Director of the Company since 1999. Mr.
O'Neill has been involved in the management of real estate development and
construction management for over 20 years, and has served as the President of
Fenix Investment and Development, Inc., a real estate company based in
Morristown, New Jersey, for the past ten years. Prior to that, Mr.
O'Neill served as Vice President of Business Development for AvisAmerica, a
Pennsylvania-based home manufacturer. Mr. O'Neill holds a B.S. from
the United States Military Academy.
ALAN E.
RICHARDS became a Director of the Company in February 2005. Mr.
Richards has served as the President of Sorrento Enterprises Incorporated, a
forensic accounting firm, from its inception in 1979 to the
present. Mr. Richards brings a diverse background and over 25 years
of experience in financial services, including work with government agencies
such as the United States Internal Revenue Service. Mr. Richards is a
graduate of Iona College with a BBA in Finance.
Family
and Other Relationships
There are
no family relationships between any of the present directors or executive
officers of the Company.
Involvement in Certain Legal
Proceeding
s
To the
knowledge of management, no director, executive officer or affiliate of the
Company or owner of record or beneficially of more than 5% of the Company's
common stock is a party adverse to the Company or has a material interest
adverse to the Company in any proceeding.
To the
knowledge of management, during the past five years, no present director,
executive officer or person nominated to become a director or an executive
officer of the Company:
|
(1)
|
Filed
a petition under the federal bankruptcy laws or any state insolvency law,
nor had a receiver, fiscal agent or similar officer appointed by a court
for the business or property of such person, or any partnership in which
he or she was a general partner at or within two years before the time of
such filing, or any corporation or business association of which he or she
was an executive officer at or within two years before the time of such
filing;
|
|
|
|
|
(2)
|
Was
convicted in a criminal proceeding or named the subject of a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
|
|
(3)
|
Was
the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining him or her from or otherwise limiting his or her
involvement in any type of business, commodities, securities or banking
activities;
|
|
(4)
|
Was
the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any Federal or State authority barring,
suspending or otherwise limiting him or her for more than 60 days from
engaging in, or being associated with any person engaging in, any type of
business, commodities, securities or banking
activities;
|
|
(5)
|
Was
found by a court of competent jurisdiction in a civil action or by the SEC
or the Commodity Futures Trading Commission (“CFTC”) to have violated any
federal or state securities law or Federal commodities law, and the
judgment in such civil action or finding by the SEC or CFTC has not been
subsequently reversed, suspended or
vacated.
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities to file reports of ownership on Form 3 and
changes in ownership on Form 4 or Form 5 with the Securities and Exchange
Commission ("SEC"). Such officers, directors and 10% stockholders are
also required by SEC rules to furnish the Company with copies of all Section
16(a) forms they file.
Based
solely on a review of copies of the Forms 3, 4 and 5 received by the Company or
representations from certain reporting persons, the Company believes that,
during the year ended June 30, 2007, all Section 16(a) filing requirements
applicable to its officers, directors and 10% stockholders were met in a timely
manner except that All American Properties, Inc., failed to timely file a Report
on Form 3 indicating the acquisition of shares it received in connection
with the business combination with the Company consummated on May 30, 2007. This
Report has now been filed.
CODE
OF ETHICS
The
Company's Board of Directors has adopted a Code of Ethics that applies to the
Company's financial officers and executive officers, including its Chief
Executive Officer and Chief Financial Officer. The Company’s Board of
Directors has also adopted a Code of Conduct and Ethics for Directors, Officers
and Employees including the Company’s Chief Executive Officer and Chief
Financial Officer. A copy of this code can be found at the Company's
Internet website at www.ableenergy.com. The Company intends to
disclose any amendments to its Code of Ethics, and any waiver from a provision
of the Code of Ethics granted to the Company's President, Chief Financial
Officer or persons performing similar functions, on the Company's Internet
website within five business days following such amendment or
waiver. A copy of the Code of Ethics can be obtained free of charge
by writing to: Christopher P. Westad, Secretary, Able Energy, Inc., 198 Green
Pond Road, Rockaway, New Jersey 07866.
COMPENSATION
OF DIRECTORS
In fiscal
2007, for their service on the Board of Directors, the Company paid aggregate
compensation in the amount of $84,167 in cash and granted stock options for
321,040 shares of the Company’s common stock to its outside directors: Mr.
O’Neill, Mr. Miller, Mr. Richards and Ms. Charas.
AUDIT
COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
We have a
separately designated standing Audit Committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). In fiscal 2007, the members of the Audit Committee
were Mr. Richards (chair), Mr. Miller and Ms. Charas. The Board of
Directors has determined that each of the members of the Audit Committee is
independent as defined by Section 10A(m)(3) of the Exchange Act. In
addition, the Board of Directors has determined that Mr. Richards is an “audit
committee financial expert,” as that term is defined in Item 407(d)(5) of
Regulation S-K under the Exchange Act. The Audit Committee adopted an
Audit Committee Charter during fiscal 2006, a copy of which is available on the
Company’s Internet website, www.ableenergy.com. The Audit Committee reviews and
reassesses the Audit Committee Charter annually.
REPORT OF
THE AUDIT COMMITTEE
The
following Report of the Audit Committee does not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent the Company specifically incorporates this Report
by reference therein. The charter of the Audit Committee of the Board
specifies that the purpose of the Committee is to assist the Board in its
oversight of:
|
·
|
The
integrity of the Company's consolidated financial
statements;
|
|
·
|
The
adequacy of the Company's system of internal
controls;
|
|
·
|
The
Company's compliance with legal and regulatory
requirements;
|
|
·
|
The
qualifications and independence of the Company's independent registered
public accountants; and
|
|
·
|
The
performance of the Company's independent registered public accountants and
of the Company's internal audit
function.
|
In
carrying out these responsibilities, the Audit Committee, among other
things:
|
·
|
Monitors
preparation of quarterly and annual financial reports by the Company's
management;
|
|
·
|
Supervises
the relationship between the Company and its independent registered public
accountants, including: having direct responsibility for their
appointment, compensation and retention; reviewing the scope of their
audit services; approving audit and non-audit services; and confirming the
independence of the independent registered public accountants;
and
|
|
·
|
Oversees
management's implementation and maintenance of effective systems of
internal and disclosure controls, including review of the Company's
policies relating to legal and regulatory compliance, ethics and conflicts
of interests and review of the Company's internal auditing
program.
|
The
Committee met three times during fiscal 2007. The Committee schedules its
meetings with a view to ensuring that it devotes appropriate attention to all of
its tasks. The Committee's meetings include, whenever appropriate, executive
sessions with the Company's independent registered public accountants without
the presence of the Company's management.
The Audit
Committee serves in an oversight capacity and is not intended to be part of the
Company's operational or managerial decision-making process. The Company's
management is responsible for preparing the consolidated financial statements,
and its independent registered public accountants are responsible for auditing
those consolidated financial statements. The Audit Committee's principal purpose
is to monitor these processes. In this context, the Audit Committee reviewed and
discussed the audited consolidated financial statements with management and the
independent registered public accountants. Management represented that the
Company's consolidated financial statements were prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis, and the Audit Committee has reviewed and discussed the quarterly and
annual earnings and consolidated financial statements with management and the
independent registered public accountants. The Audit Committee also discussed
with the independent auditors matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees), as
amended.
The Audit
Committee discussed with the independent registered public accountants their
independence from the Company and its management, including the matters, if any,
in the written disclosures required by Independence Standards Board Standard No.
1 (Independence Discussions With Audit Committees) and received from the
independent registered public accountants. The Audit Committee also considered
whether the independent registered public accountant’s provision of audit and
non-audit services to the Company is compatible with maintaining the auditors'
independence. The Audit Committee discussed with the Company's independent
registered public accountants the overall scope and plans for their audit. The
Audit Committee met with the independent registered public accountants, with and
without management present, to discuss the results of their audit, the
evaluations of the Company's internal controls, disclosure controls and
procedures and the overall quality and integrity of the Company's financial
reporting. Based on the reviews and discussions referred to above, the Audit
Committee has recommended to the Board, and the Board has approved, that the
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the year ended June 30, 2007, for filing with the
Securities and Exchange Commission.
Members
of the Audit Committee
Alan E.
Richards, Chairman
Edward C.
Miller, Jr.
Solange
Charas
Governance
and Nominating Committee
In Fiscal
2007, the members of the Committee were Mr. O’Neil and Mr. Richards. As the
Company is not listed on a national exchange it has determined to be guided by
the independence requirements of the American Stock Exchange (“AMEX”). See, Item
13, “Director Independence”, below. Using the AMEX rules as a guideline the
Company believes that each member of the Committee is independent. The
Governance and Nominating Committee, among other duties, determines the slate of
director candidates to be presented for election at the Company’s annual meeting
of shareholders.
The
Company has adopted a nominating committee charter, a copy of which is available
on the Company’s Internet website,
www.ableenergy.com
.
The Governance and Nominating Committee’s process for recruiting and selecting
nominees is for the committee members to attempt to identify individuals who are
thought to have the business background and experience, industry specific
knowledge and general reputation and expertise that would allow them to
contribute as effective directors to the Company's governance, and who are
willing to serve as directors of a public company. To date, the Company has not
engaged any third party to assist in identifying or evaluating potential
nominees. After a possible candidate is identified, the individual meets with
various members of the Committee and is sounded out concerning their possible
interest and willingness to serve, and Governance and Nominating Committee
members discuss amongst themselves the individual's potential to be an effective
Board member. If the discussions and evaluation are positive, the individual is
invited to serve on the Board.
As of
June 30, 2007, there were no material changes to the procedures by which
security holders may recommend nominees to the Company's Board of
Directors.
T
o date, no
stockholder has presented any candidate for Board membership to
the Company
for consideration, and the Company, although it will consider nominees submitted
by stockholders, does not have a specific policy on stockholder-recommended
director candidates. However, the Governance and Nominating Committee believes
its process for evaluation of nominees proposed by stockholders would be no
different from the process of evaluating any other candidate. In
evaluating candidates, the Committee will require that candidates possess, at a
minimum, a desire to serve on the Company's Board, an ability to contribute to
the effectiveness of the Board, an understanding of the function of the Board of
a public company and relevant industry knowledge and experience. In addition,
while not required of any one candidate, the Committee would consider favorably
experience, education, training or other expertise in business or financial
matters and prior experience serving on boards of public companies.
The other
function of the Governance and Nominating Committee is to oversee the Company’s
compliance with the corporate governance requirements of the SEC and the NASDAQ
Marketplace Rules.
Item
11. Executive Compensation
Compensation
Discussion and Analysis
The
objectives of the Company’s compensation programs are twofold: (i) to attract
and retain qualified and talented professional individuals to perform the duties
of the Company’s executive offices and (ii) to fairly reward the Company’s
executive officers for their overall performance in long term management of the
affairs of the Company.
The
Compensation Committee's goal is to develop executive compensation policies that
offer competitive compensation opportunities for all executives which are based
on personal performances, individual initiative and achievement, as well as
assisting the Company in attracting and retaining qualified executives. The
Compensation Committee also endorses the position that stock ownership by
management and stock-based compensation arrangements are beneficial in aligning
managements’ and stockholders’ interests in the enhancement of stockholder
value.
Compensation
paid to the Company's executive officers generally consists of the following
elements: base salary, annual bonus and long-term compensation in the form of
stock options and matching contributions under the Company’s 401(k) Savings
Plan. Compensation levels for executive officers of the Company was determined
by a consideration of each officer's initiative and contribution to overall
corporate performance and the officer's managerial abilities and performance in
any special projects that the officer may have undertaken. Competitive base
salaries that reflect the individual's level of responsibility are important
elements of the Compensation Committee's executive compensation philosophy.
Subjective considerations of individual performance are considered in
establishing annual bonuses and other incentive compensation. In addition, the
Compensation Committee considers the Company's financial position and cash flow
in making compensation decisions.
The
Company has certain broad-based employee benefit plans in which all employees,
including the named executives, are permitted to participate on the same terms
and conditions relating to eligibility and subject to the same limitations on
amounts that may be contributed. During the year ended June 30, 2007, the Oil
Segment also made matching contributions to the 401(k) Savings Plan for its
employees. While the Travel Plaza Segment’s 401(k) Savings Plan
provides for matching contributions at managements discretion, no such matching
contributions have been made since the inception of the plan in
2005.
The
Company chooses to pay each element of compensation in order to best meet the
Company’s goal of attracting and retaining qualified and talented professional
individuals. The salary component of the compensation is
important and the Company attempts to be competitive with what it believes to be
the compensation of other companies of similar size and scope of
operations. To date, the Company has not engaged the services of a
compensation review consultant or service in view of the cost of such services
compared to the size and revenues of the Company. The stock option
element of compensation is paid in order to provide additional compensation in
the long term commensurate with growth of the Company and increased share value
that may result from the performance of the executive receiving the
options. The award of a bonus upon review of Company performance
provides an additional incentive. The lack of other compensation
elements such as other insurance, retirement or retirement savings plans focuses
the importance of the salary and stock option elements of the Company’s
compensation plan.
The
Company determines the amount (and, where applicable, the formula) for each
element to pay by reviewing annually the compensation levels of the Company’s
executive officers and determining from the performance of the Company during
that time since the last review what appropriate compensation levels may be
during the upcoming annual period. The Company has no existing formula for
determination of the salary, stock options or bonus elements of
compensation.
Each
compensation element and the Company’s decisions regarding that element fit into
the Company’s overall compensation objectives and affect decisions regarding
other elements in this manner: the salary and stock option elements
(being the significant elements of overall compensation) are intended to serve
primarily as current and long-term compensation respectively. Review
of salary levels and consideration of bonus awards on an annual basis and
vesting of options over a forward period serve to allow the Company to attempt
to meet its objectives of attracting and maintaining qualified and talented
professional individuals in service as the Company’s executive
officers.
Summary
Compensation Table
The
following table sets forth certain summary information with respect to the
compensation paid to the Company's former Chief Executive Officer, current
Acting Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer for services rendered in all capacities to the Company for the fiscal
years ended June 30, 2007, 2006, 2005 and 2004. Other than as listed below, the
Company had no executive officers whose total annual salary and bonus exceeded
$100,000 for that fiscal year:
Summary
Compensation Table
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards ($)
|
|
|
Option
Awards ($)
|
|
|
Non-equity
incentive
plan compensation ($)
|
|
|
Change in pension value and
nonqualified deferred compensation
earnings
($)
|
|
|
All
Other
Compensation
($)(1)
|
|
|
Total
($)
|
|
|
Gregory
D. Frost,
|
|
2007
|
|
|
254,808
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
7,701
|
(1)
|
|
|
262,509
|
|
|
Chief
Executive
|
|
2006
|
|
|
216,900
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
4,200
|
(1)
|
|
|
221,100
|
|
|
Officer
and Director (3)
|
|
2005
|
|
|
27,700
|
|
|
|
--
|
|
|
|
--
|
|
|
|
50,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
77,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
P. Westad,
|
|
2007
|
|
|
144,323
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
144,323
|
|
|
President
and Acting Chief
|
|
2006
|
|
|
141,600
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
141,600
|
|
|
Executive
Officer (4)
|
|
2005
|
|
|
136,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,225
|
(2)
|
|
|
179,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
Vrabel,
|
|
2007
|
|
|
144,323
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
6,708
|
(1)
|
|
|
151,031
|
|
|
Chief
Operating Officer
|
|
2006
|
|
|
141,600
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
6,000
|
(1)
|
|
|
147,600
|
|
|
|
|
2005
|
|
|
138,046
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
6,000
|
(1)
|
|
|
144,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeff
Feld, Acting Chief Financial Officer
|
|
2007
|
|
|
140,688
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
140,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
Nocito,
|
|
2007
|
|
|
122,308
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
122,308
|
|
|
Vice
President of Business
|
|
2006
|
|
|
120,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
120,000
|
|
|
Development
|
|
2005
|
|
|
27,700
|
|
|
|
--
|
|
|
|
--
|
|
|
|
50,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
77,700
|
|
Notes:
|
(1)
|
Represents
car allowance and travel expense reimbursements pursuant to his employment
agreement with the Company.
|
|
(2)
|
Represents
amounts paid to Mr. Westad related to board compensation of $20,000 and
the market value of 2,000 shares issued to Mr. Westad of the Company’s
common stock valued on the date of issue and car allowance pursuant his
employment agreement with the
Company.
|
|
(3)
|
Mr.
Frost served as Chief Executive Officer from August 13, 2005 to September
28, 2006 and May 24, 2007 to
present.
|
|
(4)
|
Mr.
Westad served as Acting Chief Financial Officer from June 23, 2006 to
September 28, 2006. Mr. Westad has served as Acting Chief
Executive Officer since September 28,
2006.
|
|
(5)
|
Mr.
Vella served as Chief Financial Officer from Aug 15, 2005 to June 23,
2006.
|
1.
Grants of Plan-Based
Awards.
|
Name
|
Grant
date
|
Estimated
future payouts under non-equity incentive plan awards
|
Estimated
future payouts under
equity
incentive plan awards
|
All
other
stock
awards: Number of shares of
stock
or
units
(#)
|
All
other option
awards:
Number
of
securities
underlying
options
(#)
|
Exercise
or
base
price
of
option
awards
($/Sh)
|
Grant
date
fair
value
of
stock
and
option awards
|
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
(l)
|
|
PEO
|
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
PFO
|
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
A
|
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
B
|
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
C
|
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
No equity
or non-equity incentive plan awards or options were granted during fiscal year
2007 to the Company’s Chief Executive Officer, Chief Financial Officer or any of
the Company’s most highly compensated executive officers whose compensation
exceeded $100,000 for Fiscal 2007.
2.
Outstanding equity awards
at fiscal year-end table.
|
Name
|
Option
awards
|
Stock
awards
|
|
Number
of
securities
underlying
unexercised
options
(#)
exercisable
|
Number
of
securities
underlying
unexercised
options
(#)
unexercisable
|
Equity
incentive
plan
awards:
number
of
securities
underlying
unexercised
unearned
options
(#)
|
Option
exercise
price
($)
|
Option
expiration
date
|
Number
of
shares
or
units of
stock
that
have
not
vested
(#)
|
Market
value
of
shares
or
units
of
stock
that
have
not
vested
(#)
|
Equity
incentive
plan awards:
number
of
unearned
shares,
units
or
other
rights
that
have
not
vested
(#)
|
Equity
incentive
plan awards:
market
or
payout
value
of
unearned
shares,
units
or
other
rights
that
have
not
vested
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
PEO
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
PFO
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
Westad
|
15,000
|
--
|
--
|
$2.55
|
June
30, 2009
|
--
|
--
|
--
|
--
|
|
|
15,000
|
|
|
$3.16
|
June
30, 2008
|
|
|
|
|
|
B
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
C
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
|
|
|
3.
Option exercises and stock vested
table.
|
Name
|
Option
awards
|
Stock
awards
|
|
Number
of shares
acquired
on
exercise
(#)
|
Value
realized
on
exercise
($)
|
Number
of shares
acquired
on
vesting
(#)
|
Value
realized
on
vesting
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|
PEO
|
--
|
--
|
--
|
--
|
|
PFO
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
A
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
B
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
C
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
No option
exercises occurred or shares vested during fiscal year 2007 to the Company’s
Chief Executive Officer, Chief Financial Officer or any of the Company’s most
highly compensated executive officers whose compensation exceeded $100,000 for
Fiscal 2007.
4.
Pension
benefits.
|
Name
|
Plan
name
|
Number
of years credited service
(#)
|
Present
value of
accumulated
benefit
($)
|
Payments
during last fiscal year
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|
PEO
|
--
|
--
|
--
|
--
|
|
PFO
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
A
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
B
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
C
|
|
--
|
--
|
--
|
|
|
|
|
|
|
There
were no pension plans in-place during fiscal year 2007 for the Company’s Chief
Executive Officer, Chief Financial Officer or any of the Company’s most highly
compensated executive officers whose compensation exceeded $100,000 for Fiscal
2007.
5.
Nonqualified defined
contribution and other nonqualified deferred compensation plans.
|
Name
|
Executive
contributions
in
last FY
($)
|
Registrant
contributions
in
last FY
($)
|
Aggregate
earnings
in
last FY
($)
|
Aggregate
withdrawals/distributions
($)
|
Aggregate
balance at
last
FYE
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|
PEO
|
--
|
--
|
--
|
--
|
--
|
|
PFO
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
A
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
B
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
|
C
|
--
|
--
|
--
|
--
|
--
|
There
were no
n
onqualified
defined contribution and other nonqualified deferred compensation plans in place
during fiscal year 2007 for the Company’s Chief Executive Officer, Chief
Financial Officer or any of the Company’s most highly compensated executive
officers whose compensation exceeded $100,000 for Fiscal 2007.
6.
Director
Compensation.
|
Name
|
Fees
Earned
or
Paid
in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-equity
incentive
plan
compensation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All
Other
Compens
-ation
($)
|
Total
($)
|
|
Gregory
D. Frost
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
Christopher
P. Westad
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|
Patrick
O'Neill
|
$25,000
|
--
|
$109,956
|
--
|
--
|
--
|
$134,956
|
|
Edward
C. Miller, Jr.
|
$25,000
|
--
|
$109,956
|
--
|
--
|
--
|
$134,956
|
|
Steven
Chalk
|
-
|
--
|
-
|
--
|
--
|
--
|
--
|
|
Alan
E. Richards
|
$20,000
|
--
|
$109,956
|
--
|
--
|
--
|
$129,956
|
|
Solange
Charas
|
$20,000
|
--
|
$109,956
|
--
|
--
|
--
|
$129,956
|
|
Mark
Barbera
|
$60,644
|
--
|
-
|
--
|
--
|
--
|
$60,644
--
|
Directors
who are employed as executive officers receive no additional compensation for
service on the board. All directors are reimbursed for travel and
other expenses relating to attendance at board and committee meetings. For the
2007 fiscal year, each non-employee director received an annual retainer of
$15,000 (payable monthly), a $5,000 annual retainer for each committee on which
a director serves as a chair and the annual grant of a ten-year option to
purchase 3,000 shares of the Company’s common stock and an additional grant of a
ten-year option to purchase 3,000 shares of the Company’s common stock to each
director who serves as a committee chair, which vests on the date of
grant.
EMPLOYMENT
ARRANGEMENTS
Gregory
D. Frost, on October 12, 2005, entered into a one-year employment agreement, as
Chief Executive Officer of the Company at an annual salary of
$250,000. The term of the agreement is automatically renewable and
has been renewed through October 11, 2008. The annual salary is
subject to periodic increases at the discretion of the Board of
Directors. Mr. Frost is entitled to bonuses pursuant to his
employment agreement if the Company meets certain financial targets based on
sales, profitability and the achievement of certain goals as established by the
Board of Directors or the 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 20% of the
Company's earnings before taxes (“EBT”), provided the Company achieves at least
$1,000,000 of EBT in such bonus year. If the Company meets or exceeds
$1,000,000 of EBT for that fiscal year, then the executive shall be entitled to
20% of such Bonus Pool. The employment agreement also provides for
reimbursement of reasonable business expenses. In the event the
agreement is terminated by Mr. Frost for reason, or by the Company for other
than cause, death or disability, Mr. Frost shall receive a lump sum severance
payment of one year’s salary, and any unvested stock options shall be deemed to
have vested at the termination date.
Christopher
P. Westad has a three-year employment agreement, effective through November 25,
2009, as President of the Oil Segment at an annual salary of
$141,600. The term of the agreement may be extended by mutual consent
of the Company and Mr. Westad, and the annual salary is subject to periodic
increases at the discretion of the Board of Directors. Mr. Westad is
entitled to bonuses pursuant to his employment agreements if the Company meets
certain financial targets based on sales, profitability and the achievement of
certain goals as established by the Board of Directors or the 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 20% of the Company's earnings before taxes (“EBT”),
provided the Company achieves at least $1,000,000 of EBT in such bonus
year. If the Company meets or exceeds $1,000,000 of EBT for that
fiscal year, then the executive shall be entitled to 20% of such Bonus
Pool. The employment agreement also provides for reimbursement
of reasonable business expenses. In the event the agreement is
terminated by Mr. Westad for reason, or by the Company for other than cause,
death or disability, Mr. Westad shall receive a lump sum severance payment of
one year’s salary, and any unvested stock options shall be deemed to have vested
at the termination date.
John L.
Vrabel has a three-year employment agreement, effective through July 1, 2007, as
Chief Operating Officer of the Company at an annual salary of
$141,600. The term of the agreement may be extended by mutual consent
of the Company and Mr. Vrabel, and the annual salary is subject to periodic
increases at the discretion of the Board of Directors. Mr. Vrabel is
entitled to bonuses pursuant to his employment agreements if the Company meets
certain financial targets based on sales, profitability and the achievement of
certain goals as established by the Board of Directors or the 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 20% of the Company's earnings before taxes (“EBT”),
provided the Company achieves at least $1,000,000 of EBT in such bonus
year. If the Company meets or exceeds $1,000,000 of EBT for that
fiscal year, then the executive shall be entitled to 20% of such Bonus
Pool.
The
employment agreement also provides for reimbursement of reasonable business
expenses. In the event the agreement is terminated by Mr. Vrabel for
reason, or by the Company for other than cause, death or disability, Mr. Vrabel
shall receive a lump sum severance payment of one year’s salary, and any
unvested stock options shall be deemed to have vested at the termination date.
While the term of the employment agreement was allowed to expire on July 1,
2007, Mr. Vrabel remains an employee of the Company.
COMPENSATION
COMMITTEE
The
members of the Compensation Committee are Solange Charas and Patrick O'Neill
with Ms. Solange acting as Chairperson. The Company believes that both Ms.
Charas and Mr. Richards meet the applicable independence requirements. The
Compensation Committee has the authority to fix the Company's compensation
arrangements with the Chief Executive Officer, Chief Operating Officer and the
Chief Financial Officer and has the exclusive authority to grant options and
make awards under the Company's equity compensation plans.
Although the Committee may
seek the input of the Company’s Chief Executive Officer in determining the
compensation of the Company’s other executive officers, the Chief Executive
Officer may not be present during the voting or deliberations with respect to
his compensation. Consistent with the Delaware General Corporation
Law, the Compensation Committee, from time to time, delegates to the Company's
Chief Executive, Chief Operating Officer and the Chief Financial Officer the
authority to grant a specified number of options to non-executive officers. The
Compensation Committee also reviews the Company's compensation policies relating
to all executive officers.
Compensation Committee Interlocking
And Insider Participation
No
interlocking relationship existed or exists between any member of the Company's
Compensation Committee and any member of the compensation committee of any other
company, nor has any such interlocking relationship existed in the past. No
member or nominee of the Compensation Option Committee is an officer or an
employee of the Company.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis set forth below under the heading “Executive Compensation –
Compensation Discussion and Analysis” with management. Based on this review and
discussion, the Compensation Committee recommended
to the Company’s Board
of Directors that the Compensation Discussion and Analysis be included in this
Annual Report on Form 10-K for the fiscal year ended June 30, 2007.
|
|
The
Members of the Compensation Committee
Solange
Charas, Chairperson
Patrick
O’Neil
|
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The
following table shows, as of June 30, 2007, the amount of the Company’s common
stock beneficially owned (unless otherwise indicated) by (i) each person known
by the Company to own 5% or more of the Company’s stock, (ii) each Director,
(iii) each executive officer named in the Summary Compensation Table
in Item 11 above and
(iv) all Directors and executive officers as a group.
|
Name and Address
*
|
|
Aggregate
Number of Shares Beneficially
Owned
(1)
|
|
Percent
of Class
Outstanding (2)
|
|
Gregory
D. Frost
|
|
-
|
(3)(10)
|
-%
|
|
Frank
Nocito
|
|
12,666,667
|
(5)
|
84.7%
|
|
Christopher
P. Westad
|
|
35,000
|
(4)
|
**
|
|
Solange
Charas
|
|
85,260
|
(8)
|
0.6%
|
|
Alan
E. Richards
|
|
85,260
|
(8)
|
0.6%
|
|
Stephen
Chalk
|
|
3,000
|
(8)
|
**
|
|
Edward
C. Miller, Jr.
|
|
85,260
|
(8)
|
0.6%
|
|
Patrick
O'Neill
|
|
85,260
|
(8)
|
0.6%
|
|
John
L.Vrabel
|
|
2,300
|
(6)
|
**
|
|
All
American Properties, Inc.
|
|
-
|
(9)(10)
|
-%
|
|
Officers
and Directors as a Group (9 persons)
|
|
13,048,007
|
(7)
|
87.3%
|
|
* Unless
otherwise indicated, the address for each stockholder is c/o Able Energy,
Inc., 198 Green Pond Road,
Rockaway,
New Jersey 07866.
|
|
**
Represents less than 1% of the outstanding common
stock.
|
|
(1)
|
The
number of shares of common stock beneficially owned by each stockholder is
determined under rules promulgated by the SEC. Under these
rules, a person is deemed to have “beneficial ownership” of any shares
over which that person has or shares voting or investing power, plus any
shares that the person has the right to acquire within 60 days, including
through the exercise of stock options. To our knowledge, unless
otherwise indicated, all of the persons listed above have sole voting and
investment power with respect to their shares of common stock, except to
the extent authority is shared by spouses under applicable
law.
|
|
(2)
|
The
percentage ownership for each stockholder is calculated by dividing (a)
the total number of shares beneficially owned by the stockholder on June
30, 2007 by (b) 14,950,947 shares (the number of shares of our common
stock outstanding on June 30, 2007), plus any shares that the stockholder
has the right to acquire within 60 days after June 30,
2007.
|
|
(3)
|
Includes
12,666,667 shares owned by Properties, of which Mr. Frost disclaims
beneficial ownership. Approximately 85% of the outstanding
common stock of Properties is beneficially held by the Chelednik Family
Trust. In addition, pursuant to an agreement between Mr. Frost
and the Chelednik Family Trust, Mr. Frost, through Crystal Heights, LLC,
an entity controlled by Mr. Frost and his wife, is the beneficial holder
of the balance of the outstanding common stock of
Properties. See Note (9)
below.
|
|
(4)
|
Includes
5,000 shares owned outright and 30,000 shares, which may be acquired upon
the exercise of outstanding stock
options.
|
|
(5)
|
Includes
12,666,667 shares of Properties, of which Mr. Nocito disclaims beneficial
ownership. Mr. Nocito is Vice President of Properties, and
approximately 85% of the outstanding common stock of Properties, is
beneficially held by the Chelednik Family Trust, a trust established by
Mr. Nocito and his wife for the benefit of their family
members. See Note (9),
below.
|
|
(6)
|
Includes
2,300 shares owned outright.
|
|
(7)
|
Includes
7,300 shares owned by the officers and directors and 54,000 shares, which
may be obtained upon the exercise of outstanding options held by the
officers and directors. Also includes 11,666,667 shares owned
by Properties of which Messrs. Frost and Nocito disclaim beneficial
ownership. See Note (9)
below.
|
|
(8)
|
Shares
which may be acquired pursuant to currently exercisable stock options (or
options that will become exercisable within sixty (60) days of June 30,
2007).
|
|
|
|
|
(9)
|
Includes
12,666,667 shares owned by Properties. Approximately 85% of the
outstanding common stock of Properties is beneficially held by the
Chelednik Family Trust, a trust established by Mr. Nocito and his wife for
the benefit of their family members. In addition, pursuant to
an agreement between Mr. Frost and the Chelednik Family Trust, Mr. Frost,
through Crystal Heights, LLC an entity controlled by Mr. Frost and his
wife, is the beneficial owner of the balance of the outstanding common
stock of Properties.
|
|
|
|
|
(10)
|
Gregory
D. Frost and All American Properties, Inc. are also beneficial owners of
the 12,666,667 shares beneficially owned by Frank
Nocito.
|
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth the
information regarding the Company’s equity compensation plans as of June 30,
2007
:
|
Plan
Category
|
Number
of securities to
be
issued upon exercise
of
outstanding options,
warrants
and rights
|
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected in
column
(a))
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity
compensation
plans
not approved
by
security holders
|
-0-
|
|
Not
applicable
|
|
-0-
|
|
Equity
compensation
plans
approved by
security
holders (1)
|
30,000
|
|
$2.86
|
|
1,833,750
|
|
Total
|
30,000
|
|
$2.86
|
|
1,833,750
|
(1)
Includes the 1999 Employee Stock Option Plan, the 2000 Stock Bonus Plan, the
2000 Employee Stock Purchase Plan and the 2005 Stock Option Plan.
Item
13. Certain Relationships and Related Transactions, and Director
Independence
Except as
set forth hereafter, there have been no material transactions, series of similar
transactions or currently proposed transactions during 2006 and 2007, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeds the lesser of $120,000 or one percent of the average of
the Company’s total assets at year-end for its last two completed fiscal years
in which any director or executive officer or any security holder who is known
to the Company to own of record or beneficially more than 5% of the Company's
common stock, or any member of the immediate family of any of the foregoing
persons, had a material interest.
Business
Combination with Properties
We
entered into an asset purchase agreement with All American Plazas, Inc., now
doing business as All American Properties, Inc. (“Properties”) in June 2005,
pursuant to which we agreed to acquire substantially all of Properties assets
and assume all liabilities of Properties other than mortgage debt
liabilities. In exchange for these assets, we issued Properties
11,666,667 restricted shares of our common stock. Our
stockholders approved this transaction with Properties at a special meeting held
on August 29, 2006, and the transaction closed on May 30, 2007. The
acquisition was completed upon the Company’s issuance of 11.7 million shares of
common stock at $1.65 per share for total consideration of $19.3
million.
Properties
currently own approximately 85% of our outstanding
shares. Approximately 85% of the outstanding stock of Properties is
beneficially held by the Chelednik Family Trust by Mr. Frank Nocito, our
Executive Vice- President of Business Development, and his wife, Sharon
Chelednik, for the benefit of their family members, including seven
children. Mr. Nocito is also President of Properties. In
addition, pursuant to an agreement between the Chelednik Family Trust and
Gregory Frost, one of our directors and our Chief Executive Officer ("CEO") and
Chairman, through an entity controlled by him (Crystal Heights, LLC), is also
the beneficial holder of the balance of the outstanding common stock of
Properties.
Properties
Financing
On June
1, 2005, Properties completed a financing that may impact the Company. Pursuant
to the terms of the Securities Purchase Agreement (the "Agreement") among
Properties and certain purchasers (“Purchasers”), the Purchasers loaned
Properties an aggregate of $5,000,000, evidenced by Secured Debentures dated
June 1, 2005 (the "Debentures"). The Debentures were due and payable
on June 1, 2007, subject to the occurrence of an event of default, with interest
payable at the rate per annum equal to LIBOR for the applicable interest period,
plus 4% payable on a quarterly basis on April 1
st
, July
1
st
,
October 1
st
and
January 1
st
,
beginning on the first such date after the date of issuance of the
Debentures. Upon the May 30, 2007 completion of the business
combination with Properties and the Company’s board approving the
transfer of the debt that would also require the transfer of additional assets
from Properties as consideration for the Company to assume this debt, then the
Debentures are convertible into shares of our common stock at a conversion rate
of the lesser of (i) the purchase price paid by us for issuance of our
restricted common stock for the assets of Properties upon completion of the
business combination, or (ii) $3.00, subject to further adjustment as set forth
in the agreement.
The loan
is secured by real estate property owned by Properties in Pennsylvania and New
Hampshire. Pursuant to the Additional Investment Right (the “AIR
Agreement”) among Properties and the Purchasers, the Purchasers may loan
Properties up to an additional $5,000,000 of secured convertible debentures on
the same terms and conditions as the initial $5,000,000 loan, except that the
conversion price will be $4.00. Pursuant to the Agreement, these
Debentures are in default, as Properties did not complete the business
combination with the Company prior to the expiration of the 12-month anniversary
of the Agreement.
Subsequent
to the consummation of the business combination, we may assume the obligations
of Properties under the Agreement. However, the Company’s board of
directors must approve the assumption of this debt, which requires that
Properties transfer additional assets or consideration for such assumption of
debt. Based upon these criteria, it is highly unlikely the Company
will assume the obligations of Properties, including the Debentures and the AIR
Agreement, through the execution of a Securities Assumption, Amendment and
Issuance Agreement, Registration Rights Agreement, Common Stock Purchase Warrant
Agreement and Variable Rate Secured Convertible Debenture Agreement, each
between the Purchasers and us (the “Able Energy Transaction
Documents”). Such documents provide that Properties shall cause the
real estate collateral to continue to secure the loan, until the earlier of full
repayment of the loan upon expiration of the Debentures or conversion by the
Purchasers of the Debentures into shares of our common stock at a conversion
rate of the lesser of (i) the purchase price paid by us for issuance of our
restricted common stock for the assets of Properties upon the completion of the
business combination, or (ii) $3.00, (the “Conversion Price”), subject to
further adjustment as set forth in the Able Energy Transaction
Documents. However, the Conversion Price with respect to the AIR
Agreement shall be $4.00. In addition, the Purchasers shall have the
right to receive five-year warrants to purchase 2,500,000 of our common stock at
an exercise price of $3.75 per share. Pursuant to the Able Energy
Transaction Documents, we also have an optional redemption right (which right
shall be mandatory upon the occurrence of an event of default) to repurchase all
of the Debentures for 125% of the face amount of the Debentures plus all accrued
and outstanding interest, as well as a right to repurchase all of the Debentures
in the event of the consummation of a new financing in which we sell securities
at a purchase price that is below the Conversion Price. The
stockholders of Properties have agreed to escrow a sufficient number of shares
to satisfy the conversion of the $5,000,000 in outstanding Debentures in
full. As of the date of this Annual Report, the Company has not
assumed any of Properties obligations with respect to the
Debentures.
July
27, 2005 Loan to Properties
The
Company loaned Properties $1,730,000 as evidenced by a promissory note dated
July 27, 2005. As of June 30, 2007, this note is still outstanding with a
maturity date of June 15, 2007. The interest income related to this note for the
years ended June 30, 2007 and 2006 was $164,350 and $70,575,
respectively. The note and accrued interest receivable in the amount
of $1,964,525 have been classified as contra-equity on the Company’s
consolidated balance sheet as of June 30, 2007.
Manns
Haggerskjold of North America, Ltd. (“Manns”) Agreement
On May
19, 2006, the Company entered into a letter of interest agreement with Manns,
for a bridge loan to the Company in the amount of $35,000,000 and a possible
loan in the amount of $1.5 million based upon the business combination with
Properties ("Manns Agreement"). The terms of the letter of interest provided for
the payment of a commitment fee of $750,000, which was non-refundable to cover
the due-diligence cost incurred by Manns. On June 23, 2006, the Company advanced
to Manns $125,000 toward the Manns Agreement due diligence fee. During the
period from July 7, 2006 through November 17, 2006, the Company advanced an
additional $590,000 toward the Manns Agreement due diligence fee. The amount
outstanding relating to these advances as of June 30, 2007 was
$715,000. As a result of not obtaining the financing (see below), the
entire $715,000 was expensed to amortization of deferred financing costs in the
twelve month period ended June 30, 2007.
As a
result of the Company receiving a Formal Order of Investigation from the SEC on
September 7, 2006, the Company and Manns agreed that the commitment to fund
being sought under the Manns Agreement would be issued to Properties, since the
Company’s stockholders had approved a business combination with Properties and
since the collateral for the financing by Manns would be collateralized by real
estate owned by Properties. Accordingly, on September 22, 2006, Properties
agreed that in the event Manns funds a credit facility to Properties rather than
the Company, upon such funds being received by Properties, it will immediately
reimburse the Company for all expenses incurred and all fees paid to Manns in
connection with the proposed credit facility from Manns to the
Company. On or about February 2, 2007, Properties received a term
sheet from UBS Real Estate Investments, Inc. (“UBS”) requested by Manns as
co-lender to Properties. Properties rejected the UBS offer as not consistent
with the Manns’ commitment of September 14, 2006. Properties subsequently
demanded that Manns refund all fees paid to Manns by the Company and Properties.
In order to enforce its rights in this regard, Properties has retained legal
counsel and commenced an arbitration proceeding against Manns and its
principals. See, “
Item 3. Legal Proceedings
”.
The Company and Properties intend to pursue their remedies against Manns. All
recoveries and fees and costs of the litigation will be allocated between the
Company and Properties in proportion to the amount of the Manns due diligence
fees paid.
Laurus
Master Fund Ltd. (“Laurus”) Agreement
On July
5, 2006, the Company received $1,000,000 from Laurus in connection with the
issuance of a convertible term note. Of the proceeds received from
Laurus in connection with the issuance of the convertible term note, the Company
loaned $905,000 to Properties in exchange for a note
receivable. Properties used such proceeds to pay (i) certain
obligations of CCI Group, Inc. (“CCIG”) and its wholly-owned subsidiary, Beach
Properties Barbuda Limited (“BPBL”), which owned and operated an exclusive
Caribbean resort hotel known as the Beach House located on the island of
Barbuda, and (ii) a loan obligation owed by BPBL to Laurus which loan was used
by CCIG to acquire the Beach House. Properties had previously
acquired a 70% interest in CCIG pursuant to a Share Exchange
Agreement. The Company received from Laurus a notice of a claim of
default dated January 10, 2007. Laurus claimed default under section
4.1(a) of the Term Note as a result of non-payment of interest and fees in the
amount of $8,826 that was due on January 5, 2007, and a default under sections
6.17 and 6.18 of the securities purchase agreement for “failure to use best
efforts (i) to cause CCIG to provide Holder on an ongoing basis with evidence
that any and all obligations in respect of accounts payable of the project
operated by CCIG’s subsidiary, BPBL, have been met; and (ii) cause CCIG to
provide within 15 days after the end of each calendar month, unaudited/internal
financial statements (balance sheet, statements of income and cash flow) of the
Beach House and evidence that BPBL and the Beach House are current in all of
their ongoing operational needs”.
The
aforementioned interest and fees were paid by the Company on January 11, 2007.
Further, the Company has used its best efforts to cause CCIG to provide reports
and information to Laurus as provided for in the securities purchase
agreement.
In
connection with the claim of default, Laurus claimed an acceleration of maturity
of the principal amount of the Note of $1,000,000 and approximately $154,000 in
default payment (“Default Payment”) as well as accrued interest and fees of
approximately $12,000. On March 7, 2007, Laurus notified the Company that it
waived the event of default and that Laurus had waived the requirement for the
Company to make the Default Payment.
Also,
please refer to Note 19 – Related party transactions and
Note
22 - Subsequent Events,
found in the Notes to the Consolidated Financial Statements for
disclosures relating to
related parties financing.
Other
Transactions
We
entered into a two-year consulting agreement with our former CEO, Timothy
Harrington, on February 16, 2005, which provides for annual fees to our former
CEO of $60,000, paid in equal monthly installments. Harrington was paid $60,000
related to this agreement during the year ended June 30, 2006. Under
this consulting agreement, we also granted to Harrington options immediately
exercisable to purchase 100,000 shares of our common stock at $4.00 per share.
The former CEO was paid $40,000 related to this agreement during the year ended
June 30, 2007.
On
February 22, 2005, we borrowed $500,000 from Able Income Fund, LLC ("Able
Income"), which is partially-owned by our former CEO, Timothy Harrington. The
loan from Able Income bears interest at the rate of 14% per annum payable
interest only in the amount of $5,833 per month with the principal balance and
any accrued unpaid interest due and payable on May 22, 2005. The Note
was secured by a mortgage on property located in Warrensburg Industrial Park,
Warrensburg, New York, owned by Able Energy New York, Inc. Note conversion
expense of $125,000 was recorded during the year ended June 30, 2006 related to
this transaction. Interest expense related to the note payable paid to Able
Income Fund during the fiscal years ended June 30, 2006 and 2005 was $17,499 and
$22,499, respectively. Able Income agreed to surrender the note representing
this loan as of September 30, 2005, in exchange for 57,604 shares of our common
stock (based on a conversion price equal to 80% of the average closing price of
our common stock during the period October 3, 2005 to October 14,
2005).
On
February 27, 2006 the Company entered into a consulting agreement with Able
Income Fund, LLC of which Timothy Harrington (former CEO) is an owner.
Consulting expense related to this agreement for fiscal year ended 2007 was
$40,000.
In
connection with two loans agreements entered into in May 2005, we paid fees of
$167,500 to Unison Capital Corporation, which is owned by Frank Nocito, a
beneficial stockholder and our Executive Vice President, Business Development.
Subsequently, Unison agreed to reimburse the fees to us in monthly installments
plus interest at 6% per annum, under a note due on September 29, 2006. The note
maturity has been extended to May 2, 2007. As of June 30, 2007,
interest is due in the amount of $21,780 with the principal being due in full on
May 2, 2007. The principal and interest due on these loans was paid
in-full on March 12, 2008.
During
the year ended June 30, 2006, the Company paid consulting fees amounting to
approximately $54,000 to a company owned by Stephen Chalk, a member of our Board
of Directors. No such services were rendered or payments made during
the year ended June 30, 2007.
Director
Independence
As the
Company is not listed on a national exchange it has determined to be guided by
the independence requirements of the American Stock Exchange (“AMEX”). The Board
of Directors has determined that four of six director, Solange Charas, Edward C.
Miller, Jr., Patrick O’Neil and Alan E. Richards, are independent as defined by
the listing standards of the AMEX, Section 10A(m)(3) of the Securities Exchange
Act of 1934 and the rules and regulations of the Securities and Exchange
Commission. In reaching its determination, the Board of Directors reviewed
certain categorical independence standards to provide assistance in the
determination of director independence. The categorical standards are set forth
below and provide that a director will not qualify as an independent director
under the Rules of the AMEX if:
|
·
|
The
Director is, or has been during the last three years, an employee or an
officer of the Company or any of its
affiliates;
|
|
·
|
The
Director has received, or has an immediate family member
1
who has received, during any twelve
consecutive months in the last three years any compensation from the
Company in excess of $100,000, other than compensation for service on the
Board of Directors, compensation to an immediate family member who is an
employee other than an executive officer, benefits under a tax-qualified
retirement plan or non-discretionary
compensation;
|
|
·
|
The
Director is a member of the immediate family of an individual who is, or
has been in any of the past three years, employed by the Company or any of
its affiliates as an executive
officer;
|
|
·
|
The
Director, or an immediate family member, is a partner in, or controlling
shareholder or an executive officer of, any for-profit business
organization to which the Company made, or received, payments (other than
those arising solely from investments in the Company’s securities) that
exceed 5% of the Company’s or business organization’s consolidated gross
revenues for that year, or $200,000, whichever is more, in any of the past
three years; or
|
|
·
|
The
Director, or an immediate family member, is employed as an executive
officer of another entity where at any time during the most recent three
fiscal years any of the Company’s executives serve on that entity’s
compensation committee.
|
|
·
|
The
Director, or an immediate family member, is a current partner of the
Company’s outside auditors, or was a partner or employee of the Company’s
outside auditors who worked on the Company’s audit at any time during the
past three years.
|
___________________________
1
Under
these categorical standards “immediate family member” includes a person’s
spouse, parents, children, siblings, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, daughter-in-law and anyone who
resides in such person’s home.
The
following additional categorical standards were employed by the Board in
determining whether a director qualified as independent to serve on the Audit
Committee and provide that a director will not qualify if:
|
·
|
The
Director directly or indirectly accepts any consulting, advisory, or other
compensatory fee from the Company or any of its subsidiaries;
or
|
|
·
|
The
Director is an affiliated person of the Company or any of its
subsidiaries
|
Item
14. Principal Accounting Fees and Services
The
following table presents fees for professional services rendered by the
independent public accounting firms of Marcum & Kliegman, LLP and
Simontacchi & Company, LLP paid for by the Company during the years ended
June 30, 2007 and 2006
|
|
|
For the Year Ended June 30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Audit
Fees (1)
|
|
$
|
618,024
|
|
|
$
|
655,147
|
|
|
Audit-Related
Fees (2)
|
|
|
-
|
|
|
|
-
|
|
|
Tax
Fees (3)
|
|
|
4,350
|
|
|
|
15,000
|
|
|
All
Other Fees (4)
|
|
|
22,830
|
|
|
|
129,302
|
|
|
Total
|
|
$
|
645,204
|
|
|
$
|
799,449
|
|
|
(1)
|
These
are fees for professional services performed for the audit of the
Company’s annual consolidated financial statements and services that are
normally provided in connection with statutory and regulatory filings or
engagements.
|
|
(2)
|
These
are fees for assurance and related services by the principal accountants
that are reasonably related to the performance of the audit or review of
the Company’s financial statements.
|
|
(3)
|
Principally
fees for preparation of the Company’s federal and state corporate tax
returns.
|
|
(4)
|
Principally
fees for SEC inquiries.
|
The Audit
Committee reviews and pre-approves all audit, review or attest engagements of,
and non-audit services to be provided by, the independent registered public
accounting firm (other than with respect to the de minimis exception permitted
by the Sarbanes-Oxley Act of 2002 and the SEC rules promulgated
thereunder). The Audit Committee pre-approved all auditing services
and permitted non-audit services rendered by Marcum & Kliegman, LLP and
Simontacchi & Company, LLP paid for during the years ended June 30, 2007 and
2006.
PART
IV
Item
15. Exhibits and Financial Statement Schedules
EXHIBITS
The
following Exhibits are filed as part of this Report:
|
Exhibit
Number
|
Description
|
|
|
|
|
3.1
|
Articles
of Incorporation of Registrant (incorporated herein by reference to
Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, SEC File
No. Number 333-51909, filed with the Securities and Exchange Commission
(“SEC”) on July 15, 1998 (the “1998 Form SB-2”)).
|
|
|
|
|
3.2
|
By-Laws
of Registrant (incorporated herein by reference to Exhibit 3.2 to the 1998
Form SB-2).
|
|
|
|
|
3.3
|
Certificate
of Amendment to the Certificate of Amendment of Registrant dated May 30,
2007 (incorporated herein by reference to Exhibit 99.1 to the Company’s
Current Report on Form 8-K dated May 24, 2007, filed with the SEC on May
30, 2007).
|
|
|
|
|
4.1
|
Specimen
Common Stock Certificate (incorporated herein by reference to Exhibit 4.21
to Amendment No. 3 to the Company’s Registration Statement on Form SB-2,
SEC File No. Number 333-51909, filed with the SEC on May 17, 1999 (the
“Amendment No. 3 to the 1998 Form SB-2”)).
|
|
|
|
|
4.2
|
Able
Energy, Inc. 2000 Employee Stock Purchase Plan (incorporated herein by
reference to the Company’s Definitive Proxy Statement on Schedule 14A
filed with the SEC on May 30, 2000).
|
|
|
|
|
4.3
|
Able
Energy, Inc. 2005 Incentive Stock Plan (incorporated herein by reference
to Exhibit 4.1 to the Company’s Current Report on Form 8-K. dated May 25,
2005, filed with the SEC on June 1, 2005 (the “May 2005 Form
8-K”)).
|
|
|
|
|
4.4
|
Form
of Incentive Stock Option Agreement (incorporated herein by reference to
Exhibit 10.1 to the May 2005 Form 8-K).
|
|
|
|
|
4.5
|
Form
of Employee Nonstatutory Stock Option Agreement (incorporated herein by
reference to Exhibit 10.2 to the May 2005 Form 8-K).
|
|
|
|
|
4.6
|
Form
of Nonstatutory Stock Option Agreement (incorporated herein by reference
to Exhibit 10.3 to the May 2005 Form 8-K).
|
|
|
|
|
4.7
|
Form
of Consultant Nonstatutory Stock Option Agreement (incorporated herein by
reference to Exhibit 10.4 to the May 2005 Form 8-K).
|
|
|
|
|
4.8
|
Form
of Stock Award Agreement (incorporated herein by reference to Exhibit 10.5
to the May 2005 Form 8-K).
|
|
|
|
|
4.9
|
Form
of Restricted Stock Purchase Agreement (incorporated herein by reference
to Exhibit 10.6 to the May 2005 Form 8-K).
|
|
|
|
|
4.10
|
Form
of Secured Debenture, made as of June 1, 2005, by All American Plazas,
Inc., Yosemite Development Corp. and Mountainside Development, LLC in
favor of the Purchasers named therein (incorporated herein by reference to
Exhibit 99.2 to the Company’s Current Report on Form 8-K, dated June 7,
2005, filed with the SEC on June 10, 2005 (the “June 2005 Form
8-K”)).
|
|
|
|
|
4.11
|
Additional
Investment Right (incorporated herein by reference to Exhibit 99.3 to the
June 2005 Form 8-K).
|
|
|
|
|
4.12
|
Form
of Registration Rights Agreement by and among the Purchasers named therein
and the Company (incorporated herein by reference to Exhibit 99.5 to the
June 2005 Form 8-K).
|
|
4.13
|
Form
of Common Stock Purchase Warrant Agreement (incorporated herein by
reference to Exhibit 99.6 to the June 2005 Form 8-K).
|
|
|
|
|
4.14
|
Form
of Variable Rate Secured Convertible Debenture made by the Company in
favor of the holder thereof (incorporated herein by reference to Exhibit
99.7 to the June 2005 Form 8-K).
|
|
|
|
|
4.15
|
Warrant
Agreement between the Company and Continental Stock Transfer & Trust
Company (incorporated herein by reference to Exhibit 4.2 to the 1998 Form
SB-2).
|
|
|
|
|
4.16
|
Able
Energy, Inc. 2000 Employee Stock Bonus Plan (incorporated herein by
reference to the Company’s Definitive Proxy Statement on Schedule 14A
filed with the SEC on May 30, 2000).
|
|
|
|
|
4.17
|
Form
of Variable Rate Convertible Debenture, dated July 12, 2005, made by the
Company in favor of the holder thereof (incorporated herein by reference
to Exhibit 99.2 to the Company’s Current Report on Form 8-K, dated July
14, 2005, filed with the SEC on July 15, 2005 (the “July 2005 Form
8-K”)).
|
|
|
|
|
4.18
|
Form
of Registration Rights Agreement, dated as of July 12, 2005, by and among
the Company and the purchasers signatory thereto (incorporated herein by
reference to Exhibit 99.3 to the July 2005 Form 8-K).
|
|
|
|
|
4.19
|
Form
of Common Stock Purchase Warrant Agreement (incorporated herein by
reference to Exhibit 99.4 to the July 2005 Form 8-K).
|
|
|
|
|
4.20
|
Promissory
Note dated July 21, 2005 made by All American Plazas, Inc.
in favor of the Company (incorporated herein by reference to
Exhibit 10.5 to the Company’s quarterly report on Form 10-Q for the
quarter ended September 30, 2005 (the “2005 First Quarter Form
10-Q”).
|
|
|
|
|
4.21
|
Subscription
Agreement, dated as of September 30, 2005, between the Company and the
holder of a promissory note, dated February 22, 2005, issued to the
Subscriber by the Company (incorporated herein by reference to Exhibit
10.7 to the 2005 First Quarter Form 10-Q).
|
|
|
|
|
4.22
|
Form
of Secured Debenture, dated January 20, 2006, made by All American in
favor of the Purchasers (incorporated herein by reference to Exhibit 99.2
to the Company’s Current Report on Form 8-K, dated January 20, 2006, filed
with the SEC on January 23, 2006 (the “January 2006 Form
8-K”)).
|
|
|
|
|
4.23
|
Form
of Additional Investment Right (incorporated herein by reference to
Exhibit 99.3 to the January 2006 Form 8-K).
|
|
|
|
|
4.24
|
Promissory
Note, dated July 6, 2006, made by All American Plazas, Inc. in favor of
the Company (incorporated herein by reference to Exhibit 10.9 to the
Current Report on Form 8-K, dated June 30, 2006, filed with the SEC on
July 7, 2006 (the “June 2006 Form 8-K”)).
|
|
|
|
|
4.25
|
Common
Stock Purchase Warrant, dated June 30, 2006, issued by Able Energy, Inc.
to Laurus Master Fund, Ltd. (incorporated herein by reference to Exhibit
10.3 to the June 2006 Form 8-K).
|
|
|
|
|
4.26
|
Convertible
Term Note, dated June 30, 2006, made by Able Energy, Inc. in favor of
Laurus Master Fund, Ltd. (incorporated herein by reference to Exhibit 10.2
to the June 2006 Form 8-K).
|
|
|
|
|
4.27
|
Registration
Rights Agreement, dated June 30, 2006, between Able Energy, Inc. and
Laurus Master Fund, Ltd. (incorporated herein by reference to Exhibit 10.4
to the June 2006 Form 8-K).
|
|
|
|
|
4.28
|
Form
of Variable Rate Secured Debenture (incorporated herein by reference to
Exhibit 4.1 to the Current Report on Form 8-K, dated August 8, 2006, filed
with the SEC on August 14, 2006 (the “August 2006 Form
8-K”)).
|
|
4.29
|
Registration
Rights Agreement, dated as of August 8, 2006, by and among the Company and
the Purchasers named therein (incorporated herein by reference to Exhibit
4.2 to the August 2006 Form 8-K).
|
|
|
|
|
4.30
|
Form
of Common Stock Purchase Warrant (incorporated herein by reference to
Exhibit 4.3 to the August 2006 Form 8-K).
|
|
|
|
|
10.1
|
Lease
of Company's Facility at 344 Route 46, Rockaway, New Jersey (incorporated
herein by reference to Exhibit 10.3 to the 1998 Form
SB-2).
|
|
|
|
|
10.2
|
Form
of employment agreement between the Company and Christopher P. Westad
(incorporated herein by reference to Exhibit 10.5 to Amendment No. 2 to
the Company’s Registration Statement on Form SB-2, SEC File No. Number
333-51909, filed with the SEC on April 15, 1999 (“Amendment No. 2 to the
1998 Form SB-2”).
|
|
|
|
|
10.3
|
Franchise
Agreement, dated December 31, 1998, between the Company and Andrew Schmidt
(incorporated herein by reference to Exhibit 10.19 to Amendment No. 2 to
the 1998 Form SB-2).
|
|
|
|
|
10.4
|
Stock
Purchase Agreement, dated as of December 31, 1998, between the Company and
Andrew Schmidt (incorporated herein by reference to Exhibit 10.20 to
Amendment No. 2 to the 1998 Form SB-2).
|
|
|
|
|
10.5
|
Pledge
and Security Agreement, dated December 31, 1998, between the Company and
Andrew Schmidt (incorporated herein by reference to Exhibit 10.21 to
Amendment No. 2 to the 1998 Form SB-2).
|
|
|
|
|
10.6
|
9.5%
Promissory Note, dated December 31, 1998, made by Andrew Schmidt in favor
of the Company (incorporated herein by reference to Exhibit 10.22 to
Amendment No. 2 to the 1998 Form SB-2).
|
|
|
|
|
10.7
|
Employment
Agreement with Christopher P. Westad, dated as of July 1, 2004
(incorporated herein by reference to Exhibit 10.5 to the Company’s Annual
Report on Form 10-K for the year ended June 30, 2004 (the “2004 Form
10-K”)).
|
|
|
|
|
10.8
|
Employment
Agreement with John Vrabel, dated as of July 1, 2004 (incorporated herein
by reference to Exhibit 10.4 to the 2004 Form 10-K).
|
|
|
|
|
10.9
|
Consulting
Agreement, dated as of February 16, 2005, by and between the Company and
Timothy Harrington (incorporated herein by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K, dated February 16, 2005, filed with
the SEC on February 23, 2005).
|
|
|
|
|
10.10
|
Loan
and Security Agreement, dated as of May 13, 2005, between the Company,
Able Oil Company, Able Energy New York, Inc. Able Oil Melbourne, Inc.,
Able Energy Terminal, LLC and Able Propane, LLC (as borrowers) and
Entrepreneur Growth Capital, LLC (incorporated herein by reference to
Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the year
ended June 30, 2005 (the “2005 Form 10-K”)).
|
|
|
|
|
10.11
|
Promissory
Note, dated May 13, 2005, made by the Company in favor of Northfield
Savings Bank, (incorporated herein by reference to Exhibit 10.27 to the
2005 Form 10-K).
|
|
|
|
|
10.12
|
Securities
Purchase Agreement, by and among All American Plazas, Inc., dated as of
June 1, 2005 (incorporated herein by reference to Exhibit 99.1 to the June
2005 Form 8-K).
|
|
|
|
|
10.13
|
Form
of Securities Assumption, Amendment and Issuance Agreement by and among
the Purchasers named therein and the Company (incorporated herein by
reference to Exhibit 99.4 to the June 2005 Form 8-K).
|
|
|
|
|
10.14
|
Stock
Purchase Agreement, by and between the Sellers named therein and the
Company, dated as of June 16, 2005 (incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated June 16,
2005, filed with the SEC on June 16,
2005).
|
|
10.15
|
USA
Biodiesel, LLC Operating Agreement (incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated August 9,
2006, filed with the SEC on August 15, 2006).
|
|
|
|
|
10.16
|
1999
Employee Stock Option Plan (incorporated herein by reference to Exhibit
10.2 to Amendment No. 2 to the 1998 Form SB-2).
|
|
|
|
|
10.17
|
Asset
Purchase Agreement, dated March 1, 2004, by and among the Company, Able
Propane Co., LLC, Christopher Westad, and Timothy Harrington, Liberty
Propane, L.P. and Action Gas Propane Operations, LLC (incorporated herein
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
dated March 16, 2004, filed with the SEC on March 16,
2004).
|
|
|
|
|
10.18
|
Employment
Agreement with Timothy Harrington, dated as of July 1, 2004 (incorporated
herein by reference to Exhibit 10.6 to the 2004 Form
10-K).
|
|
|
|
|
10.19
|
Securities
Purchase Agreement, dated as of July 12, 2005, among the Company and the
purchasers signatory thereto (incorporated herein by reference to Exhibit
99.1 to the July 2005 Form 8-K).
|
|
|
|
|
10.20
|
Employment
Agreement, dated as of October 13, 2005, between the Company and Gregory
D. Frost (incorporated herein by reference to Exhibit 99.1 to the
Company’s Current Report on Form 8-K, dated October 13, 2005, filed with
the SEC on October 19, 2005).
|
|
|
|
|
10.21
|
Amendment
Agreement, dated as of November 16, 2005, by and among the Company and the
holders signatory thereto (incorporated herein by reference to Exhibit
99.1 to the Company’s Current Report on Form 8-K, dated November 14, 2005,
filed with the SEC on November 18, 2005).
|
|
|
|
|
10.22
|
Securities
Purchase Agreement, by and among All American and the Purchasers, dated as
of January 20, 2005 (incorporated herein by reference to Exhibit 99.1 to
the January 2006 Form 8-K).
|
|
|
|
|
10.23
|
Form
of Security Agreement, dated as of January 20, 2006, by and between St.
John's Realty Corporation and Lilac Ventures Master Fund, Ltd., as agent
for the Secured Parties listed therein (incorporated herein by reference
to Exhibit 99.4 to the January 2006 Form 8-K).
|
|
|
|
|
10.24
|
Loan
Agreement, dated as of January 20, 2006, by and between All American
Plazas, Inc., St. John's Realty Corporation, Lilac Master Ventures Fund,
Ltd. and the Purchasers listed there (incorporated herein by reference to
Exhibit 99.5 to the January 2006 Form 8-K).
|
|
|
|
|
10.25
|
Securities
Purchase Agreement between Able Energy, Inc. and Laurus Master Fund, Ltd.
dated June 30, 2006 (incorporated herein by reference to Exhibit 10.1 to
the June 2006 Form 8-K).
|
|
|
|
|
10.26
|
Subsidiary
Guaranty dated June 30, 2006 of Able Oil Co., Able Propane Co, LLC, Able
Energy New York, Inc., Abel Oil Melbourne, Inc., Able Energy Terminal,
Inc., Priceenergy.com, Inc. and Priceenergy.com and Franchising, LLC
(incorporated herein by reference to Exhibit 10.5 to the June 2006 Form
8-K).
|
|
|
|
|
10.27
|
Loan
Agreement, dated July 5, 2006, by and between the Company and All American
Plazas, Inc. (incorporated herein by reference to Exhibit 10.8 to the June
2006 Form 8-K).
|
|
|
|
|
10.28
|
Securities
Purchase Agreement, dated as of August 8, 2006, by and among the Company
and the Purchasers (incorporated herein by reference to Exhibit 10.1 to
the August 2006 Form 8-K).
|
|
|
|
|
10.29
|
Security
Agreement, dated as of August 8, 2006, by and among the Company, the
Company's subsidiaries and the Purchasers (incorporated herein by
reference to Exhibit 10.2 to the August 2006 Form 8-K).
|
|
|
|
|
14.1
|
Code
of Business Conduct and Ethics (incorporated herein by reference to
Appendix C to the Company’s Definitive Proxy Statement on Schedule 14A
filed with the SEC on June 17,
2004).
|
|
16.1
|
Letter
to SEC from Simontacchi & Company, LLP, dated January 9, 2006
(incorporated herein by reference to Exhibit 16.1 to the Company’s Current
Report on Form 8-K, dated January 4, 2006, filed with the SEC on January
9, 2006).
|
|
|
|
|
16.2
|
Letter
to SEC from Simontacchi & Company, LLP, dated July 26, 2006
(incorporated herein by reference to Exhibit 16.2 to Amendment No. 2 on
Form 8-K/A to the Company’s Current Report on Form 8-K, dated January 4,
2006, filed with the SEC July 26, 2006).
|
|
|
|
|
21
|
List
of Subsidiaries of Registrant*
|
|
|
|
|
31.1
|
Certification
by Chief Executive Officer pursuant to Sarbanes-Oxley Section
302*
|
|
|
|
|
31.2
|
Certification
by Chief Financial Officer pursuant to Sarbanes-Oxley Section
302*
|
|
|
|
|
32.1
|
Certification
by Chief Executive Officer pursuant to 18 U.S. C. Section
1350*
|
|
|
|
|
32.2
|
Certification
by Chief Financial Officer pursuant to 18 U.S. C. Section
1350*
|
FINANCIAL
STATEMENT SCHEDULES
Schedule
II-Valuation and Qualifying Accounts
_________
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
Able
Energy, Inc.
|
|
|
|
|
|
|
|
Dated:
November 13, 2008
|
By:
|
/s/ Gregory
D. Frost
|
|
|
|
|
Gregory
D. Frost
|
|
|
|
|
Chairman
& Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Daniel
L. Johnston
|
|
|
|
|
Daniel
L. Johnston
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
|
Signature
|
Title
|
Date
|
|
|
|
|
|
/s/
Gregory D. Frost
|
Chairman & Chief
Executive Officer
|
November 13,
2008
|
|
Gregory D.
Frost
|
(Principal Executive
Officer)
|
|
|
|
|
|
|
|
|
|
|
/s/
Daniel L. Johnston
|
Chief Financial
Officer
|
November 13,
2008
|
|
Daniel L.
Johnston
|
(Principal
Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
/s/
Stephen Chalk
|
Director
|
November 14,
2008
|
|
Stephen
Chalk
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Solange Charas
|
Director
|
November 14,
2008
|
|
Solange
Charas
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Edward C. Miller, Jr.
|
Director
|
November 14,
2008
|
|
Edward C. Miller,
Jr.
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Patrick O'Neill
|
Director
|
November 14,
2008
|
|
Patrick
O'Neill
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Alan E. Richards
|
Director
|
November 13,
2008
|
|
Alan E.
Richards
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Christopher P. Westad
|
Director
|
November 14,
2008
|
|
Christopher P.
Westad
|
|
|
Able
Energy, Inc. and Subsidiaries
Schedule
II-Valuation and Qualifying Accounts
|
|
|
|
|
|
|
Additions
|
|
|
Deductions
|
|
|
|
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax asset valuation allowance
|
|
$
|
-
|
|
|
$
|
6,016,369
|
|
|
$
|
(6,016,369
|
)
|
|
$
|
-
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
462,086
|
|
|
$
|
455,157
|
|
|
$
|
(172,990
|
)
|
|
$
|
744,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax asset valuation allowance
|
|
$
|
-
|
|
|
|
4,544,940
|
|
|
$
|
(4,544,940
|
)
|
|
$
|
-
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
238,049
|
|
|
$
|
296,021
|
|
|
$
|
(71,984
|
)
|
|
$
|
462,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax asset valuation allowance
|
|
$
|
-
|
|
|
|
2,292,607
|
|
|
$
|
(2,292,607
|
)
|
|
$
|
-
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
192,222
|
|
|
$
|
163,663
|
|
|
$
|
(117,836
|
)
|
|
$
|
238,049
|
|
Able Energy (CE) (USOTC:ABLE)
Historical Stock Chart
From Oct 2024 to Nov 2024
Able Energy (CE) (USOTC:ABLE)
Historical Stock Chart
From Nov 2023 to Nov 2024
