-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, STmqZ/kczzRs62IJNDcCKiCwAJp3VGeao/jNJbEAsZP8/3zOFGB4TR82rlN7/9pO XdGUoDzV6rUmqe3mwOpXrg== 0001188112-05-002040.txt : 20051121 0001188112-05-002040.hdr.sgml : 20051121 20051121161023 ACCESSION NUMBER: 0001188112-05-002040 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051121 DATE AS OF CHANGE: 20051121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABLE ENERGY INC CENTRAL INDEX KEY: 0001065728 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 223520840 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-15035 FILM NUMBER: 051218159 BUSINESS ADDRESS: STREET 1: 344 ROUTE 46 CITY: ROCKAWAY STATE: NJ ZIP: 07866 BUSINESS PHONE: 9736251012 MAIL ADDRESS: STREET 1: 344 ROUTE 46 CITY: ROCKWAY STATE: NJ ZIP: 07866 10-Q/A 1 t10qa-8283.txt 10-Q/A ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A AMENDMENT NO. 2 (Mark One) |X| Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: SEPTEMBER 30, 2005 or |_| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to _______________ Commission file number: 001-15035 ABLE ENERGY, INC. (An exact name of registrant as specified in its charter) DELAWARE 22-3520840 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 198 GREEN POND ROAD ROCKAWAY, NJ 07866 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (973) 625-1012 NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the 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. |X| Yes |_| No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). |_| Yes |X| No Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |_| Yes |X| No As of October 20, 2005, 2,572,067 shares of common stock, $.001 Par value per share, of Able Energy, Inc. were issued and outstanding. ================================================================================ EXPLANATORY NOTE On November 14, 2005, the Company's Chief Financial Officer and Chief Executive Officer concluded that the Company's previously issued financial statements for the three-month period ended September 30, 2005, as filed with the Company's Quarterly Report on Form 10-Q and as amended by the Company's Amendment Number 1 on Form 10-Q/A to its Quarterly Report on Form 10-Q for such period, should no longer be relied upon because of an error in such financial statements. The error relates to the allocation of proceeds from, and recognition of a beneficial conversion feature relating to, the convertible debentures and warrants sold by the Company in a private placement on July 12, 2005. The Company has corrected the error and has restated its consolidated financial statements for the three-month period ended September 30, 2005. This Amendment Number 2 on Form 10-Q/A to the Company's Form 10-Q for the three-month period ended September 30, 2005 includes a restatement of the consolidated financial statements for such period.
ABLE ENERGY, INC. AND SUBSIDIARIES FORM 10-Q/A For the Quarter Ended September 30, 2005 INDEX PAGE ---------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 2005 and June 30, 2005....................... 1 Consolidated Statements of Operations for the Three Months Ended September 30, 2005 and 2004.......................................................................... 3 Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended September 30, 2005..................................................................... 4 Consolidated Statements of Cash Flows for the Three Months Ended September 30 2005 and 2004......................................................................... 5 Notes to Financial Statements................................................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk................................... 17 Item 4. Controls and Procedures...................................................................... 17 PART II OTHER INFORMATION Item 1. Legal Proceedings............................................................................ 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.................................. 18 Item 5. Other Information............................................................................ 19 Item 6. Exhibits..................................................................................... 20 SIGNATURES ....................................................................................................... 21
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ABLE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS SEPTEMBER 30, JUNE 30, 2005 2005 (As restated -- see Note 1) ---------------- ----------------- (UNAUDITED) CURRENT ASSETS: Cash $ 4,668,493 $ 1,754,318 Accounts Receivable (Less Allowance for Doubtful Accounts of $238,049 and $238,049, respectively 3,109,808 2,876,900 Inventory 1,636,457 726,987 Notes Receivable - Current Portion 1,791,143 57,826 Other Receivable - Non-Compete - Current Portion 225,000 225,000 Other Receivables 93,628 38,596 Prepaid Expenses 437,247 485,904 Deferred Income Tax 64,776 64,776 Due from Officers and Employees 271,189 - ---------------- ----------------- TOTAL CURRENT ASSETS 12,297,741 6,230,307 ---------------- ----------------- PROPERTY AND EQUIPMENT: Land 479,346 479,346 Buildings 946,046 946,046 Trucks 3,489,465 3,594,218 Fuel Tanks 826,442 824,738 Machinery and Equipment 1,004,462 999,315 Building Improvements 899,132 790,424 Cylinders 338,015 295,476 Office Furniture and Equipment 205,319 205,319 Website Development Costs 2,390,589 2,390,589 ---------------- ----------------- 10,578,816 10,525,471 Less: Accumulated Depreciation and Amortization 6,137,524 5,980,636 ---------------- ----------------- NET PROPERTY AND EQUIPMENT 4,441,292 4,544,835 ---------------- ----------------- OTHER ASSETS: Deferred Income Taxes 45,091 45,091 Deposits 59,918 54,918 Other Receivable - Non-Compete - Less Current Portion 450,000 450,000 Notes Receivable - Less Current Portion 646,118 649,435 Customer List, Less Accumulated Amortization of $188,122 422,728 422,728 Development Costs - Franchising 6,893 9,191 Deferred Closing Costs - Financing 439,287 348,055 Discount on Debt 2,221,467 - Prepaid Acquisition Costs 150,000 - ---------------- ----------------- TOTAL OTHER ASSETS 4,441,502 1,979,418 ---------------- ----------------- TOTAL ASSETS $ 21,180,535 $ 12,754,560 ================ ================= See accompanying notes to consolidated financial statements
1
ABLE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) LIABILITIES & STOCKHOLDERS' EQUITY SEPTEMBER 30, JUNE 30, 2005 2005 (As restated -- see Note 1) ---------------- ----------------- (UNAUDITED) CURRENT LIABILITIES: Accounts Payable $ 1,941,267 $ 1,863,841 Note Payable - Line of Credit 1,066,490 1,015,468 Note Payable - Other - 432,660 Current Portion of Long-Term Debt 338,420 338,212 Accrued Expenses 356,512 184,097 Accrued Taxes 39,500 112,064 Employee Income Tax Withheld 11,000 146,624 Customer Pre-Purchase Payments 5,849,854 2,226,655 Customer Credit Balances 231,873 230,729 ---------------- ----------------- TOTAL CURRENT LIABILITIES 9,834,916 6,550,350 Convertible Debentures 2,500,000 Deferred Income 79,679 79,679 Deferred Income Taxes 107,852 104,517 Long Term Debt: less current portion 3,874,004 3,961,899 ---------------- ----------------- TOTAL LIABILITIES 16,396,451 10,696,445 STOCKHOLDERS' EQUITY: Preferred Stock Authorized 10,000,000 Shares Par Value $.001 per share Issued - None Common Stock Authorized 10,000,000 Par Value $.001 per share Issued and Outstanding Shares 2,714,924 and 2,457,320, respectively 2,715 2,457 Paid in Surplus 10,548,845 6,481,102 Retained Earnings (Deficit) (5,767,476) (4,425,444) ---------------- ----------------- TOTAL STOCKHOLDERS' EQUITY 4,784,084 2,058,115 ---------------- ----------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,180,535 $ 12,754,560 ================ ================= See accompanying notes to consolidated financial statements
2
ABLE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) THREE MONTHS SEPTEMBER 30, 2005 2004 (As restated -- see Note 1) ----------------- ----------------- NET SALES $ 13,131,413 $ 8,221,845 COST OF SALES 12,208,244 7,609,858 ----------------- ----------------- GROSS PROFIT 923,169 611,987 ----------------- ----------------- EXPENSES Selling, General and Administrative Expenses 1,502,147 1,104,700 Depreciation and Amortization Expense 295,208 297,591 ----------------- ----------------- TOTAL EXPENSES 1,797,355 1,402,291 ----------------- ----------------- LOSS FROM OPERATIONS (874,186) (790,304) ----------------- ----------------- OTHER INCOME (EXPENSES): Interest and Other Income 45,986 50,876 Interest Expense (169,891) (77,824) Amortization of Discount on Debt (278,533) - Loss on Sale of Assets - (31,437) Legal Fees Relating to Accident (62,073) (21,950) ----------------- ----------------- TOTAL OTHER INCOME (EXPENSES) (464,511) (80,335) ----------------- ----------------- LOSS BEFORE PROVISION FOR INCOME TAXES (1,338,697) (870,639) PROVISION FOR INCOME TAXES 3,335 2,260 ----------------- ----------------- NET LOSS $ (1,342,032) $ (872,899) ================= ================= BASIC AND DILUTED PER COMMON SHARE WEIGHTED AVERAGE SHARES OUTSTANDING 2,285,756 2,013,250 ================= ================= BASIC AND DILUTED LOSS PER SHARE $ (.59) $ (.43) ================= ================= See accompanying notes to consolidated financial statements
3
ABLE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY THREE MONTHS ENDED SEPTEMBER 30, 2005 (As restated -- see Note 1) (unaudited) COMMON STOCK $.001 PAR VALUE TOTAL PAID-IN RETAINED STOCKHOLDERS' SHARES AMOUNT SURPLUS EARNINGS EQUITY --------------- -------------- -------------- -------------- --------------- Balance - July 1, 2005 2,457,320 $ 2,457 $ 6,481,102 $ (4,425,444) $ 2,058,115 Warrant Issuance - - 900,000 -- 900,000 Beneficial Conversion Feature of Convertible Debt - - 1,600,000 -- 1,600,000 Option Exercise 200,000 200 1,067,801 -- 1,068,001 Note Conversion 57,604 58 499,942 -- 500,000 Net Loss - - - (1,342,032) (1,342,032) --------------- -------------- -------------- -------------- --------------- Balance - September 30, 2005 2,714,924 $ 2,715 $ 10,548,845 $ (5,767,476) $ 4,784,084 =============== ============== ============== ============== ================ See accompanying notes to consolidated financial statements
4
ABLE ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOW (unaudited) THREE MONTHS ENDED SEPTEMBER 30, ----------------------------------- 2005 2004 (As restated - see Note 1) ---------------- ----------------- Income (Loss) - Continuing Operations $ (1,342,032) $ (872,899) Adjustments to Reconcile Net Income (Loss) to Net Cash used by Operating Activities: Depreciation and Amortization 295,208 297,591 Amortization of Discount on Debt 278,533 - Loss on Disposal of Equipment - 31,437 (Increase) Decrease in: Accounts Receivable (232,908) (279,867) Inventory (909,470) (179,360) Prepaid Expenses 48,657 (133,176) Prepaid Income Taxes - 2,063 Deposits - 34,097 Miscellaneous - (689) Increase (Decrease) in: Accounts Payable 77,426 312,487 Accrued Expenses (35,773) 14,517 Customer Advance Payments 3,623,199 1,028,247 Customer Credit Balance 1,144 390,807 Deferred Income Taxes 3,335 2,260 Deferred Closing Costs - 1,813 Deferred Income - (2,333) ---------------- ----------------- NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES 1,807,319 646,995 ---------------- ----------------- CASH FLOW FROM INVESTING ACTIVITIES - ----------------------------------- Purchase of Property and Equipment (158,098) (226,926) Receivable - Officer (167,500) 468 Notes Receivable - Related Party (1,730,000) - Prepaid Acquisition Costs (150,000) - Web Site Development Costs - (12,693) Cash Received on Sale of Property - 226,499 Disposition of Equipment - 10,687 Other 13,619 68,695 ---------------- ----------------- NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (2,201,979) 66,730 ---------------- ----------------- CASH FLOW FROM FINANCING ACTIVITIES - ----------------------------------- Net barrowings under line of Credit 51,022 - Decrease in Long-Term Debt (87,687) (77,496) Increase in Long-Term Debt 122,501 79,641 Exercise of Options 968,001 - Sale of Convertible Debentures 2,500,000 - ---------------- ----------------- NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 3,308,835 2,145 ---------------- ----------------- NET (DECREASE) INCREASE IN CASH Cash - Beginning of Year 2,914,175 715,870 Cash - End of Period 1,754,318 1,309,848 ---------------- ----------------- $ 4,668,493 $ 2,025,718 ================ ================= The Company had Interest Cash Expenditures of: $ 128,741 $ 62,611 The Company had Tax Cash Expenditures of: $ - $ 4,749 See accompanying notes to consolidated financial statements
5 ABLE ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - INTERIM FINANCIAL REPORTING The accompanying unaudited consolidated financial statements of Able Energy, Inc. and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required by generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending June 30, 2006. These consolidated financial statements include the accounts of Able Energy, Inc. and its wholly owned subsidiaries (Able Oil Company, Able Melbourne, Able Energy New York, Inc., Able Terminal LLC and PriceEnergy Fanchising LLC) and majority owned (70.6%) subsidiary (PriceEnergy.com Inc.). These consolidated financial statements should be read in conjunction with the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2005. RESTATEMENT OF FIRST QUARTER 2006 FINANCIAL STATEMENTS FOR THE ALLOCATION OF PROCEEDS FROM ISSUANCE OF CONVERTIBLE DEBENTURES AND WARRANTS AND RECOGNITION OF BENEFICIAL CONVERSION FEATURE This amendment to the Company's Form 10-Q for the period ended September 30, 2005 includes a restatement of the consolidated financial statements for the quarter then ended. The restatement relates to the allocation of proceeds from issuance of Convertible Debentures and warrants and recognition of beneficial conversion feature as follows: The Company allocated the proceeds from the issuance of the Convertible Debentures and warrants based on their respective fair values and included $900,000 in additional paid in surplus related to the warrants. In addition, the conversion feature of the Convertible Debentures is characterized as a "beneficial conversion feature." Pursuant to Emerging Issues Task Force Issue No. 00-27, the Company has determined that the value of the beneficial conversion feature is $1,600,000. Accordingly, the Company has discounted the balance of the Convertible Debenture as of the date of issuance and included $1,600,000 in additional paid in surplus. The beneficial conversion feature is amortized from the date of issuance to the stated redemption date of July 12, 2007, of which $278,533 was amortized to expense during the three months ended September 30, 2005. The table below reflects the effect of the allocation of proceeds from issuance of Convertible Debentures and warrants and recognition of beneficial conversion feature on net income and earnings per share as originally reported. Quarter Ended September 30, Items 2005 ---------------- Net (loss) As previously reported $ (1,063,499) Amortization of Discount on Debt 278,533 ---------------- As restated $ (1,342,032) ================ Basic and Diluted loss per share As previously reported $ (.47) Amortization of Discount on Debt (.12) ---------------- As restated $ (.59 ) ================ Restated Selected Balance Sheet Data September 30, Items 2005 (unaudited) Discount on Debt As previously reported $ - Recognition of discount on convertible debt net of accumulated amortization 2,221,467 ---------------- As restated $ 2,221,467 ================ Total assets As previously reported $ 18,959,068 Recognition of discount on convertible debt net of accumulated amortization 2,221,467 ---------------- As restated $ 21,180,535 ================ Paid In Surplus As previously reported $ 8,048,845 Allocation of proceeds from issuance of Convertible Debentures and warrants and recognition of beneficial conversion feature 2,500,000 ---------------- As restated $ 10,548,845 ================ Total Stockholders' Equity As previously reported $ 2,562,617 Allocation of proceeds from issuance of Convertible Debentures and warrants and recognition of beneficial conversion feature net of amortization of discount on debt 2,221,467 ---------------- As restated $ 4,784,084 ================ A summary of the significant effects of the restatement follows:
For the Quarter Ended September 30, 2005 ------------------------------------------------ As previously reported As restated ---------------------- ----------------------- Amortization of Debt Discount $ - $ 278,533 Net loss (1,063,499) (1,342,032) Basic and Diluted loss per share (.47) (.59) Discount on Debt - 2,221,467 Other Assets 2,220,035 4,441,502 Total assets 18,959,068 21,180,535 Paid In Surplus 8,048,845 10,548,845 Total Stockholders' Equity 2,562,617 4,784,084
NOTE 2 - REVENUE RECOGNITION Sales of fuel and heating equipment are recognized at the time of delivery to the customer, and sales of equipment are recognized at the time of installation. Revenue from repairs and maintenance service is recognized upon completion of the service. Payments received from customers for heating equipment service contracts are deferred and amortized into income over the term of the respective service contracts, on a straight-line basis, which generally do not exceed one year. NOTE 3 - USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of deferral, 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. NOTE 4 - MINORITY INTEREST The minority interest in PriceEnergy.Com, Inc. is a deficit and, in accordance with Accounting Research Bulletin No. 51, subsidiary losses should not be charged against the minority interest to the extent of reducing it to a negative amount. As such, the losses have been charged against the Company, the majority owner. The loss for three months ended September 30, 2005 is $187,666. NOTE 5 - NOTES RECEIVABLE A. The Company has a Note from Able Montgomery, Inc. and Andrew W. Schmidt related to the sale of Able Montgomery, Inc. and certain assets to Mr. Schmidt. No payments of principal or interest have been received for more than one year. A new note was drawn dated June 15, 2000 for $170,000, including the prior balance, plus accrued interest. The note bears interest at 9.5% per annum and payments commence October 1, 2000. The payments will be monthly in varying amount each year with a final payment of $55,981.07 due September 1, 2010. No payments were received in the year ended December 31, 2000. In February 2001, two (2) payments were received in the amount $2,691.66, interest only. In September 2001, $15,124.97 was received covering payments from December 2000 through October 2001, for interest of $14,804.13 and principal of $320.84. Payments were received in November and December 2002, representing December 2001 and January 2002, in the aggregate amount of $3,333.34, including interest of $2,678.88, and principal of $654.46. No payments have been received in more than 30 months. The note is secured by stock of Able Montgomery, Inc. and the assets of Andrew W. Schmidt. The income from the sale of the company and the accrued interest on the new note are shown as deferred income and amounted to $79,679 which will be realized on collection of the note. Andrew Schmidt and the Company have reached an agreement related to the recovery of this note whereby the liability will be paid by an additional $.04 per gallon charge on oil purchased from the Company. The Company believes the value of the collateral will cover the amount due if foreclosure is required. 6 NOTE 5 - NOTES RECEIVABLE (CONTINUED) B. The Company has three Notes Receivable related to the sale of oil delivery trucks to independent drivers. These independent drivers also deliver oil for the Company. Two notes bear interest at the rate of 12% per annum and one at a rate of 9% per annum. These three notes were made in December 1998, February 1999 and January 2004. The notes are payable eight (8) months per year September through April, the oil delivery season. C. On July 27, 2005, the Company made a loan in the amount of $1,730,000 to All American Plazas, Inc. ("All American"), and All American executed and delivered a promissory note for the full amount of the loan in favor of the Company. Under the terms of the promissory note, the outstanding principal of the loan bears interest at the rate of 3.5% per annum. All payments of principal and accrued interest are payable ninety days after the date of the Promissory Note. The promissory note is secured by a lien on 1,000,000 shares of the Company's common stock held by All American. These shares have a pre-existing lien held by the Company's former Chief Executive Officer. Maturities of the Note Receivable are as follows: For the 12 Months Principal Ending September 30, Amount ----------------------------- ------------- 2006 $ 1,791,143 2007 26,074 2008 21,627 2009 23,731 2010 18,708 Thereafter 55,971 ------------- Total $ 1,937,261 ============= NOTE 6 - INVENTORIES September 30, June 30, Items 2005 2005 -------------- -------------- Heating Oil $ 1,241,629 $ 335,245 Diesel Fuel 36,772 34,409 Kerosene 10,207 3,025 Propane 21,859 28,020 Parts, Supplies and Equipment 326,290 326,290 -------------- -------------- Total $ 726,987 $ 726,987 ============== ============== NOTE 7 - LINE OF CREDIT On May 13, 2005, the Company entered into a $1,750,000 Line-Of-Credit with Entrepreneur Growth Capital, LLC. The loan is secured by accounts receivable and inventory. In addition to accounts receivable and inventory the line is collateralized by deposit accounts, books and records, computer programs general intangibles (including customer lists, trademarks, etc.),and rights, title and interest in any and all assets and personal property owned by third parties. The line carries interest at Citibank's prime rate, plus 4% per annum not to exceed 24% with a minimum interest of $11,000 per month. The line also requires an annual facility fee of 2% of the total available facility limit and monthly collateral management fees equal to .025%. The balance due as of September 30, 2005 is $1,066,490. NOTE 8 - NOTES PAYABLE BANK 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 July 1, 2005. The initial interest rate is 6.25% per annum on the unpaid principal balance for the first five years, to be reset every fifth anniversary date at 3 percent over the five year treasury rate, but not lower than the initial rate; at that time the monthly payment will be reset. At the maturity date of June 1, 2030, all remaining amounts are due. The Note is secured by Company-owned real property located at 344 Route 46, Rockaway, New Jersey and an assignment of leases and rents at such location. The interest rate on default is 4% per annum above the interest rate then in effect. 7 NOTE 8 - NOTES PAYABLE BANK (CONTINUED) Maturities of the Note Payable Bank are as follows: For the 12 Months Principal Ending September 30, Amount ----------------------------- ------------- 2006 $ 56,600 2007 60,240 2008 64,115 2009 68,239 2010 72,628 Thereafter 2,914,594 ------------- Total $ 3,236,416 ============= Management believes that the carrying value of its long-term debt approximates fair value in accordance with SFA 107. NOTE 9 - NOTES PAYABLE A. Note payable dated, August 27, 1999, related to the purchase of B & B Fuels facility and equipment. The total principal of the Note was $145,000. The Note is payable in the monthly amount of principal and interest of $1,721.18 with an interest rate of 7.5% per annum. The initial payment was made on September 27, 1999, and continues monthly until August 27, 2009, which is the final payment. The Note is secured by a mortgage granted by Able Energy New York, Inc. on property at 2 and 4 Green Terrace and 4 Horicon Avenue, Town of Warrensburg, Warren County, New York. The balance due on this Note at September 30, 2005 was $ 69,908. B. The following notes are all collateralized by the equipment and/or furniture purchased. The capitalized leases payable are lease/purchase agreements with a small purchase price at the end of the lease:
Interest Rate at Outstanding Debt September 30, 2005 Maturities At 9/30/2005 ---------------------- ------------------ ---------------------- Notes Payable - Collateralized By Trucks and Vans 2.90 - 12.506% 10/20/05-8/10/06 $ 12,447 Capital Leases Payable - Collateralized by Trucks, Vans and Oil Tanks 4.075 - 9.498% 12/8/06-4/5/10 873,964 Notes and Capital Leases Payable - Collateralized by Office and Computer Equipment 10.995 - 16.196% 12/15/06-7/19/07 19,688 ---------------------- $ 906,099 ======================
Maturities on the Notes Payable at September 30, 2005 are as follows: For the 12 Months Principal Ending September 30, Amount ----------------------------- ------------- 2006 $ 265,868 2007 247,200 2008 231,865 2009 141,849 2010 19,317 ------------- Total $ 906,099 ============= 8 NOTE 10 - CONVERTIBLE DEBENTURES On July 12, 2005, the Company consummated a financing in the amount of $2.5 million. Under such financing the Company sold debentures evidenced by a Variable Rate Convertible Debenture (the "Convertible Debentures"). The Convertible Debentures have a term of two years from the date of issuance, 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 Debentures may be converted at the option of the selling security holders into shares of our common stock at a conversion price of $6.50 per share. In addition, the security holders received five year warrants to purchase 192,308 shares of common stock at an exercise price of $7.15 per share. 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 and expenses, 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. The Company allocated the proceeds from the issuance of the Convertible Debentures and warrants based on their respective fair values and included $900,000 in additional paid in surplus related to the warrants. In addition, the conversion feature of the Convertible Debentures is characterized as a "beneficial conversion feature." Pursuant to Emerging Issues Task Force Issue No. 00-27, the Company has determined that the value of the beneficial conversion feature is $1,600,000. Accordingly, the Company has discounted the balance of the Convertible Debenture as of the date of issuance and included $1,600,000 in additional paid in surplus. The beneficial conversion feature is amortized from the date of issuance to the stated redemption date of July 12, 2007, of which $278,533 was amortized to expense during the three months ended September 30, 2005. The Company also originally granted to the security holders who acquired the Convertible Debentures an additional investment right, for a period of eighteen months from the date the resale prospectus is declared effective, 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"). As described in further detail in the Company's Current Report on Form 8-K filed on November 18, 2005, 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 Agreement was amended to issue the Purchasers a series of warrants (the "New Warrants") at various exercise prices. 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. The Company has agreed to register 600,000 shares of common stock which may be obtained through the exercise of the New Warrants in addition to the registration rights described above relating to the Debentures. Notwithstanding the foregoing, until the required shareholder approvals are obtained, the Purchasers have agreed not to convert any Debentures or exercise any Additional Warrants or New Warrants which in the aggregate would exceed 19.999% of the number of shares of the Company's common stock on trading day prior to the date of the Agreement. NOTE 11- COMMITMENTS AND CONTINGENCIES Able Oil Company is under contract to purchase #2 oil as follows:
GALLONS OPEN OPEN DOLLAR COMMITMENT COMMITMENT COMPANY PERIOD TOTAL GALLONS AT 6/30/04 AT 6/30/04 - ------------------------------ ----------------------- ----------------- ----------------- ----------------- Petrocom 10/1/05-3/31/06 252,000 252,000 $ 413,910 Conectiv Energy 11/1/05-2/28/06 168,000 168,000 257,754 Petrocom 10/1/05-4/30/06 294,000 294,000 430,962 Center Oil 10/1/05-4/30/06 588,000 588,000 930,829 Gulf Oil 11/1/05-2/28/06 168,000 168,000 251,454 Petrocom 10/1/05-4/30/06 588,000 588,000 1,057,434 Petrocom 10/1/05-4/30/06 294,000 294,000 571,696 Petrocom 10/1/05-4/30/06 294,000 294,000 636,510 Petrocom 10/1/05-4/30/06 294,000 294,000 564,316 Gulf Oil 10/1/05-4/30/06 294,000 294,000 577,689 ----------------- ----------------- ----------------- Total 3,234,000 3,234,000 $ 5,692,554 ----------------- ----------------- -----------------
The Company is subject to laws and regulations relating to the protection of the environment. While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, in the opinion of management, compliance with the present environmental protection laws will not have a material adverse effect on the financial condition, competitive position, or capital expenditures of the Company. 9 NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED) Related to its purchase of the property on Route 46, Rockaway, New Jersey the Company commenced an investigation and remediation of the property and any hazardous substances emanating from the property in order to obtain a No Further Action letter from the New Jersey Department of Environmental Protection (NJDEP). The Company is pursuing recovery of all costs and damages related thereto in the lawsuit by the seller against a former tenant on the purchased property. The Company has assumed all responsibility and direction for the lawsuit, subject to the sharing of any recoveries from the lawsuit with the seller, 50-50 after first $397,500 has been satisfied. In exchange the Company will receive a reduction of the outstanding mortgage in order to compensate for related costs up to $250,000. A settlement has been reached by the Company with regard to the lawsuit. The settlement provides for a lump sum payment of $397,500 from the defendants to the Company. In return, the defendants receive a release and indemnification from the Company. Pursuant to the original agreement, the seller receives 50% of the settlement amount, net of attorney fees. This has been amended by an agreement dated November 5, 2001. The entire settlement, net of attorney fees, was collected and placed in an attorney's escrow account for payment of all investigation and remediation costs. Able Energy Terminal, LLC has incurred costs of $102,956 to June 30, 2005, which are included in prepaid expenses and must be presented to the attorney for reimbursement. The New Jersey Department of Environmental Protection (NJDEP) has issued an approval for treated water run-off. The ruling is for a 180-day period, which can be renewed for an additional 180 days, per management, during which a valid permit must be obtained. When approval is received and contract invoice wording is sufficient for the attorney, reimbursement can be made upon approval of the attorney and the Estate. 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. All violation charges with the New Jersey Department of Community Affairs and OSHA have been settled and paid. The Sussex County, New Jersey, Prosecutor's Office is conducting an investigation as a result of the March 14, 2003 explosion and fire. At a hearing on July 27, 2005, the President and former CFO pleaded guilty and received community service. The Company will pay a fine of $20,000 as a result of sentencing which occurred on October 6, 2005. A lawsuit (known as Hicks vs. Able Energy, Inc.) has been filed against the Company by property owners who allegedly suffered property damages as a result of the March 14, 2003 explosion and fire. The Company's insurance carrier is defending as related to compensatory damages. Legal counsel is defending on 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 claim is limited to economic loss and claims for personal injury have been specifically excluded from the Class Certification. The insurer has settled approximately 2190 claims against the Company. The Company believes that the Class Claims for compensatory damages is within the available limits of its insurance. After the March 14, 2003, fire and explosion, the town of Newton changed its zoning requirements and made fuel oil and propane distribution prohibited uses. The Company is appealing a denial of a request for building permits to reconstruct damaged and destroyed buildings and sought a Non-Conforming Use Certificate to permit the fuel oil distribution use only. On August 20, 2004, the Superior Court of New Jersey ruled that the Company may continue to use the site as a non-conforming use, but stayed its decision subject to Newton's appellate rights. The decision was upheld in May 2005 by the court upon the appeal of the Town of Newton. The Company is planning to use the property in the manner approved by the decision. As a result of the March 14, 2003 explosion and fire, various claims for property damage have been submitted to the Company's insurance carrier. These claims are presently being handled and, in many cases, settled by the insurance carrier's adjuster. There were 227 claims being handled of which 219 have been handled and adjusted with reserves for losses established as deemed appropriate by the insurance carrier. Two lawsuits have been filed by homeowners in Newton, New Jersey who allegedly suffered property damages as a result of the March 14, 2003 explosion and fire. The Company's insurance carrier is defending as related to the property damage claims. As to Punitive Damages, one case is being defended by an outside attorney and one by the insurance carrier. It appears that compensatory damage claims are within the available limits of insurance. As a result of the March 14, 2003 fire at the Newton, New Jersey, terminal, a subsidiary of the Company entered a guilty plea in July 2005 to one count of negligently damaging property, a fourth-degree crime in New Jersey. In connection with the plea agreement, the Company will pay a fine of $20,000, and its guilty plea cannot be used against the company in any civil lawsuits. 10 NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED) The Company in the normal course of business has been involved in lawsuits. Current suits are being defended by the insurance carrier and should be covered by insurance and legal counsel is defending on punitive damage claims as noted above. NOTE 12 - RELATED PARTY TRANSACTIONS The following officers of this Company own stock in the subsidiary, PriceEnergy.Com, Inc., which they incorporated in November 1999: Former Chief Executive Officer 23.5% President 3.6% Chief Operating Officer 2.3% No capital contributions have been made by these officers (See Notes 1 and 7). The Company has entered into a consulting agreement with its former Chief Executive Officer ("CEO") on February 16, 2005 (see note 20). 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 to purchase 100,000 shares of the Company's common stock at $4.00 per share. The options were exercised on July 7, 2005, at which time the closing price was $16.89. The former CEO was paid $15,000 related to this agreement during the period ended September 30, 2005. On February 22, 2005, the Company borrowed the sum of $500,000 from Able Income Fund, LLC ("Able Income"). The loan was evidenced by a promissory note (the "Note") issued by the Company to the order of Able Income in the principal amount of $500,000 bearing interest at the rate of 14% per annum payable interest only in the amount of $5,833.33 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., a wholly owned subsidiary of the Company. One of the owners of Able Income is Timothy Harrington, the former Chief Executive Officer of the Company. The maturity date of the Note was extended to August 22, 2005. Able Income subsequently agreed to surrender the Note as of September 30, 2005, in exchange for 57,604 shares of the Company's common stock, $.001 par value. The number of shares exchanged was determined by dividing the principal balance of the Note, together with all accrued and unpaid interest thereon as of September 30, 2005, by $8.68, representing a 20% discount off the average closing price of the Company's stock as listed on the Nasdaq SmallCap Market for the period from October 3, 2005 through October 14, 2005. The shares were offered only to Able Income in connection with the surrender of the Note and, thus, were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as not being a part of any public offering. On September 19, 2005 an officer of the Company exercised options to acquire 50,000 shares of the Company's common stock at a price of $6.68 per share. In connection with this exercise the officer entered into a one year $100,000 promissory note collateralized by the common stock of the Company held by the officer and secured by the officer's wages. It was subsequently determined that it was improper for the Company to accept a promissory note from such officer, and the promissory note was repaid in full, with accrued interest, by the officer as of November 18, 2005. The Company entered into a Stock Purchase Agreement in June 2005 ("Purchase Agreement") with all of the shareholders (the "Sellers") of All American Plazas, Inc. ("All American") in connection with the Company's acquisition of All American. The transaction is expected to be consummated in November 2005, upon receipt of the required approval by our stockholders. All American currently owns approximately 40% of the Company's outstanding shares. The Company's CEO, Chairman and General Counsel, Gregory D. Frost, formerly served as a director and the General Counsel of All American until his resignation on March 31, 2005, and the Company's Vice President Business Development, Frank Nocito, is Vice President of All American. In addition, one of the Company's directors, Stephen Chalk, performs certain paid consulting services in the area of real estate development for All American. At the closing, the Company will deliver to the Sellers 11,666,667 shares of our restricted common stock, par value $.001 per share, at $3.00 per share for an aggregate purchase price of $35,000,000. In addition, at the closing, the Company will deliver to certain of the Sellers a number of shares of its restricted common stock equal to the number of shares of its common stock owned by All American as of the closing date. All American recently consummated a financing that, if the acquisition of All American is consummated, will impact the Company. Pursuant to the terms of the Securities Purchase Agreement dated June 1, 2005 (the "Agreement") between All American and certain purchasers, the purchasers loaned All American an aggregate of $5,000,000, evidenced by Secured Debentures also dated June 1, 2005 (the "Debentures"). 11 NOTE 12 - RELATED PARTY TRANSACTIONS (CONTINUED) If the Company consummates the acquisition of All American, upon such consummation, the Company will assume the obligations of All American under the Agreement, 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 the Company. On July 27, 2005, the Company made a loan in the amount of $1,730,000 to All American, and All American executed and delivered a Promissory Note for the full amount of the loan in favor of the Company (see note 5). In connection with two loans entered into by the company in May 2005 (see note 4), fees in the amount of $167,500 were paid to Unison Capital Corporation, a company in which a vice president of the Company has a related interest. This individual also has a related party interest to All American, the Company's largest shareholder. Subsequent to the payments being made and based on discussions with Unison Capital Corporation it was determined the $167,500 was an inappropriate payment to a related party and Unison Capital Corporation has agreed to reimburse this amount to the Company over a twelve month period beginning in October 2005. The charge had been appropriately classified as deferred finance charges in the balance sheet and therefore will have no effect on the Company's statement of operations. NOTE 13 - BUSINESS SEGMENT INFORMATION The Company sells several types of products and provides services. Following are revenues by product groups and services: CONTINUING OPERATIONS QUARTER ENDED SEPTEMBER 30, -------------------------------- 2005 2004 --------------- --------------- Home Heating Oil #2 $ 5,108 746 $ 1,842,254 Commercial Oil #2 1,689,717 1,557,659 Gasoline, Diesel Fuel, Kerosene, Propane & Lubricants 5,610,500 4,127,047 Equipment Sales & Services 254,386 285,329 Installation Repairs & Services 468,064 409,556 --------------- --------------- Net Sales $ 13,131,413 $ 8,221,845 =============== =============== NOTE 14 - RECENTLY ISSUED ACCOUNTING STANDARDS SHARE-BASED PAYMENT In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation." Statement 123(R) supersedes Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and amends SFAS No. 95, "Statement of Cash Flows." Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Statement is effective for fiscal years beginning after June 15, 2005. 12 NOTE 14 - RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED) Statement 123(R) permits public companies to adopt its requirements using one of two methods: A. "Modified prospective" method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement 123 for all awards granted to employees prior to the effective date of Statement 123(R) that remain unvested on the effective date. B. "Modified retrospective" method which includes the requirements of the modified prospective method described above, but also permits entities to restate, based on the amounts previously recognized under Statement 123 for purposes of pro forma disclosures, either (a) all prior periods presented or (b) prior interim periods of the year of adoption. The Company adopted Statement 123(R) on July 1, 2005 using the modified prospective method. The impact of this Statement was immaterial to our consolidated financial statements. NOTE 21 - SUBSEQUENT EVENTS On March 1, 2005, the Company entered into an amendment (the "Agreement") to an existing consultant agreement with Summitt Ventures, Inc. ("Summitt"). The value of the consideration contemplated to be rendered by Summitt to the Company under the Agreement was approximately $71,000, and the Company issued 142,857 shares of the Company's common stock (the "Shares"), valued at $0.50 per share, as payment. The Shares at the time of issue were unregistered, restricted shares of the Company and not subject to any registration requirement. The shares were offered only to Summitt in connection with the Agreement and, thus, were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as not being a part of any public offering. The Shares are not convertible into any other class or series of equity of the Company. No proceeds were received by the Company at the time of issuance of the Shares and no proceeds have been received by the Company on account of the Agreement. On September 22, 2005, the Company terminated the Agreement with Summitt, with cause, and on October 13, 2005, the Company notified Summitt that it was canceling the certificate evidencing the Shares on the grounds that, among other things, Summitt induced the Company to enter into the Agreement through misrepresentation. On October 13, 2005, the Company received a letter from the Nasdaq Listing Qualifications Staff ("Nasdaq"), notifying the Company that it was not in compliance with Marketplace Rule 4310(c)(2)(B)(ii) (the "Rule"). The Rule requires the Company to have a minimum $35 million in market value of listed securities, or $2.5 million in shareholders' equity or $500,000 in net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years. Nasdaq informed the Company that it would be provided 30 calendar days, or until November 14, 2005, to regain compliance with the Rule. The Company was required to demonstrate compliance with the Rule by November 14, 2005 by either: o showing aggregate market value of its common stock in excess of $35 million for a minimum of 10consecutive business days, or o increasing its shareholders' equity to an amount which exceeds $2.5 million. The shareholders' equity reported in this Quarterly Report on Form 10-Q/A is $4,784,084, which exceeds the $2.5 million required under the Rule. Nasdaq has determined that the matters set forth in its October 13, 2005 letter to the Company have been closed. On September 19, 2005, Gregory D. Frost, the Company's current CEO, Chairman and General Counsel, exercised options to acquire 50,000 shares of the Company's common stock at a price of $6.68 per share. In connection with this exercise Mr. Frost entered into a one year $100,000 promissory note in favor of the Company, which was collateralized by the common stock of the Company owned by Mr. Frost and secured by his wages. The note was payable on the one-year anniversary of its issuance, together with interest thereon at the prime rate. Monthly interest payments were to begin in November 2005. It was subsequently determined that it was improper for the Company to accept a promissory note from Mr. Frost due to his status as director of the Company at the time of the option exercise, and the promissory note was repaid in full, together with accrued interest, by Mr. Frost as of November 18, 2005. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Statements in this Quarterly Report on Form 10-Q/A concerning the Company's outlook or future economic performance, anticipated profitability, gross billings, expenses or other financial items, and statements concerning assumptions made or exceptions to any future events, conditions, performance or other matters are "forward looking statements," as that term is defined under the Federal Securities Laws. Forward-looking statements are subject to risks, uncertainties, and other factors that would cause actual results to differ materially from those stated in such statements. Such risks, and uncertainties and factors include, but are not limited to: (i) changes in external competitive market factors or trends in the Company's results of operation; (ii) unanticipated working capital or other cash requirements and (iii) changes in the Company's business strategy or an inability to execute its competitive factors that may prevent the Company from competing successfully in the marketplace. OVERVIEW Able Energy Inc. ("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 and complete HVAC service to it heating oil customers. Able Energy NY, a wholly owned subsidiary of Able, sells residential and commercial heating oil, propane diesel fuel, and kerosene to customers 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 an internet platform that has extended the Company's ability to sell and deliver liquid fuels and related energy products. 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. In order for us to utilize the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, 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: o Commodity Supply o Commodity Pricing o Customers Converting to Natural Gas o Alternative Energy Sources o Winter Temperature Variations (Degree Days) o Customers Moving Out of The Area o Legislative Changes o The Availability (Or Lack of) Acquisition Candidates o The Success of Our Risk Management Activities o The Effects of Competition o Changes in Environmental Law o General Economic, Market, or Business Conditions We undertake no obligation to update or revise any such forward-looking statements. CRITICAL ACCOUNTING POLICIES Our accounting policies are described in Note 2 of the condensed consolidated financial statements included in this Report on Form 10-Q/A for the quarter ended September 30, 2005. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which requires 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. 14 We consider the following policy to be the most critical in understanding the judgments involved in preparing the financial statements and the uncertainties that could impact our results of operations, financial condition and cash flows. REVENUE RECOGNITION Sales of fuel and heating equipment are recognized at the time of delivery to the customer, and sales of equipment are recognized at the time of installation. Revenue from repairs and maintenance service is recognized upon completion of the service. Payments received from customers for heating equipment service contracts are deferred and amortized into income over the term of the respective service contracts, on a straight-line basis, which generally do not exceed one year. RESULTS OF OPERATIONS The following table presents the percentage of total revenues for the periods indicated and changes from period to period of certain items included in our Condensed Consolidated Statements of Operations.
% FOR THREE MONTHS ENDED PERIOD-TO-PERIOD SEPTEMBER 30, SEPTEMBER 30, % CHANGES 2005 2004 2005 (as restated) (as restated) VS. 2004 Net sales 100.0% 100.0% 59.7% Cost of sales 93.0 92.6 60.4 ---------------- ---------------- Gross profit 7.0 7.4 50.8 ---------------- ---------------- Selling, general and administrative expenses 11.4 13.4 36.0 Depreciation and Amortization Expense 2.2 3.6 (0.8) ---------------- ---------------- Loss from operations (6.6) (9.6) 10.7 Interest and Other Income 0.4 0.6 (9.6) Interest Expense (1.3) (0.9) 118.3 Amortization of Discount on Debt (2.1) - * Loss on sale of assets - (0.4) * Legal Fees Relating to Accident (0.5) (0.3) 182.8 ---------------- ---------------- Loss before income tax provision (10.2) (10.6) 53.8 Income tax provision (0.0) (0.0) * ---------------- ---------------- Net loss (10.2) (10.6) 53.8 ---------------- ----------------
* Not meaningful THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2004 Revenue for the three months ended September 30, 2005 increased approximately $4.9 million or 59.7% over the three months ended September 30, 2004. This increase can be attributed primarily to the pass-through of fuel oil costs to customers and a total increase of liquid fuel product sales of approximately 9.3% offset by the impact of marketing changes in the way the Company sells to its discount customers. Gross profit margins for the three months ended September 30, 2005 decreased to 7.0% from 7.4% for the three months ended September 30, 2004. The decrease in margin was the result of the dramatically rising product costs during the period. Retail pricing was adjusted as necessary to cover most of the increases while continuing to maintain the Company's competitive position in the marketplace. Gross profit margin was also affected by a strong increase in sales of our PriceEnergy subsidiary in our present market area. Selling, general and administrative expenses for the three months ended September 30, 2005 increased by approximately $397,000 or 36.0% compared to the three months ended September 30, 2004. The Company attributes this increase primarily to an increase in professional fees of approximately $175,000 related to general corporate matters including SEC filings and potential acquisitions, an increase in payroll related to the addition of key management positions of approximately $122,000, and an increase in credit card processing fees of approximately $90,000 which relates partly to the increase in revenue and the shift of customer payment methods to more credit card based payment. Depreciation and amortization expense remained relatively flat for the three months ended September 30, 2005 as compared to the three months ended September 30, 2004. Other income (expenses) increased to a net expense of $464,511 in the three months ended September 30, 2005 from $80,355 in the three months ended September 30, 2004. The increase of approximately $384,000 is primarily related to an increase in interest expense of approximately $92,000 related to debt financing and issueance of convertible debentures entered into 15 during July 2005 and a non-cash charge of approximately $279,000 related to the amortization of the beneficial value ascribed to conversion rights of the convertible debentures and value of warrants issued in connection with the convertible. Operating loss for the three months ended September 30, 2005 was $874,186 compared to $790,031 for the three months ended September 30, 2004. The net increase in the operating loss for the period was directly related to an increase in selling, general and administrative expenses partially offset by an overall improvement in gross margin dollars. Our effective tax rate for the three months ended September 30, 2005 and the three months ended September 30, 2004 is negligible. The difference in the Company's effective tax rate from the federal statutory rate is primarily due to a 100% valuation allowance provided for all deferred tax assets. Net loss for the three months ended September 30, 2005 was approximately $1.3 million compared to $872,626 for the three months ended September 30, 2004. The net increase directly related to an increase in selling, general and administrative expenses and the increase in interest and other expenses, partially offset by an overall improvement in gross margin dollars. LIQUIDITY AND CAPITAL RESOURCES To date, our principal sources of working capital have been the proceeds from public and private placements of securities and notes payable. Since our inception, sales of securities, including the proceeds from the exercise of outstanding options and warrants, have generated approximately $8.1 million less applicable expenses. We had working capital of approximately $2.5 million at September 30, 2005 compared to a working capital deficit of approximately $(320,000) at June 30, 2005 and ratios of current assets to current liabilities of 1.25:1 as of September 30, 2005 and .95:1 as of June 30, 2005. The working capital increase of approximately $2.8 was primarily due to issuance of convertible debentures of $2.5 million, the sale of common stock through the exercise of outstanding options and warrants of approximately $0.8 million, and the conversion of note payable into equity of $0.5 million. This increase was partially offset by a net loss of approximately $1.1. In May 2005 we entered into a $1,750,000 line of credit agreement with Entrepreneurs Growth Capital, LLC. The line is collateralized by accounts receivable and inventories. Outstanding balances under the loan bear interest at an annual rate equal to the Citibank's prime rate plus 4%. As of September 30, 2005 approximately $1.1 million was outstanding and $684,000 was available under this credit line. On July 12, 2005, the Company consummated a financing with a group of lenders. Pursuant to the terms of the Securities Purchase Agreement, the Company sold variable rate convertible debentures in the amount of $2.5 million. The debentures shall be repaid within two years from the date of issuance with interest payable at a rate per annum equal to Libor, plus 4%, which on July 12, 2005 was 3.57% plus 4%, or 7.57%. The interest is payable quarterly on the first of January, April, July, and October. The debentures may be converted at the option of the purchasers into shares of the Company's Common Stock at a conversion price of $6.50 per share. The amount of shares to be issued at such conversion will be 384,618. In addition, the purchasers shall have the right to receive five-year warrants to purchase 192,308 shares of Common Stock at $7.15 per share. The market value of the Company's Common Stock on July 12, 2005 was $17.90 per share. The debenture conversion price of $6.50 is 36.31% of the market value. Closing expenses related to this transaction totaled $315,000, including a $250,000 broker fee and $65,000 in various legal expenses. On July 27, 2005, the Company made a loan of $1,730,000 to All American Plazas, Inc. which is the largest shareholder of the Company. The funds were disbursed from the financing proceeds of $2.5 million described above. Under the note, the loan bears interest at 3.50% per annum and is secured by the 1,000,000 shares of Able Energy, Inc. Common Stock owned by All American Plazas, Inc. The interest rate of the Company on its $2.5 million of convertible debentures is currently 7.57%, as noted above. We anticipate that funds generated from operations, together with cash and investments, and availability under our credit line will be sufficient to fund our current level of growth and our existing commitments at least through fiscal 2006. However, to the extent the expansion of our operations requires significant additional resources, we may be required to seek additional financing. No assurance can be given that such financing would be available on terms that would be acceptable to us. 16 MATERIAL COMMITMENTS The following schedule summarizes our contractual cost obligations as of September 30, 2005 in the periods indicated.
- ---------------------------------------- ------------------------------------------------------------------------------------ PAYMENTS DUE BY PERIOD ------------------------------------------------------------------------------------ CONTRACTUAL LESS THAN MORE THAN OBLIGATIONS TOTAL 1 YEAR 1-3 YEARS 3-5 YEARS 5 YEARS - ---------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- Long-Term Debt $ 4,391,000 $ 1,155,000 $ 162,000 $ 159,000 $ 2,915,000 - ---------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- - ---------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- Capital Lease Obligations 888,000 250,000 619,000 19,000 - - ---------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- Operating Leases 89,000 89,000 - - - - ---------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- Unconditional Purchase Obligations 5,693,000 5,693,000 - - - - ---------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- Other Long-Term Obligations 2,500,000 - 2,500,000 - - - ---------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Contractual Cash Obligations $ 13,561,000 $ 7,187,000 $ 3,281,000 $ 178,000 $ 2,915,000 - ---------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- - ---------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
Excluded from the table above is estimated interest payments on long-long term debt and capital lease obligations of approximately $369,000, $766,000, $368,000 and $1,987,000 for the periods less than 1 year, 1-3 years, 3-5 years, and more than 5 years, respectively. SEASONALITY The Company's business is directly related to the heating needs of its customers. Accordingly, the weather can have a material effect on the Company's sales in any particular year. Generally, however, the temperatures in the past thirty years have been relatively stable, and as a result, have not had a significant impact on the Company's performance, except on a short-term basis. In the years 1997 and 2001, "El Nino" caused two of the warmest winters on record, which impacted home heating oil sales during the 1997-1998 and 2001-2002 winter seasons. The winter of 2004-2005 recorded temperatures for the season, which were normal for New Jersey, the Company's primary delivery area. Approximately 65% of the Company's revenues are earned and received from October through March, and the overwhelming majority of such revenues are derived from the sale of home heating oil. During the spring and summer months, revenues from the sale of diesel and gasoline fuels increase due to the increased use of automobiles and construction apparatus. Each of the Company's divisions is seasonal. From May through September, Able Oil experiences considerable reduction of retail heating oil sales. Able Energy NY's propane operation can experience up to 80% decrease in heating related propane sales during the months of April to September, which is offset somewhat by an increase of pool heating and cooking fuel. Over 90% of Able Melbourne's revenues are derived from the sale of diesel fuel for construction vehicles, and commercial and recreational sea-going vessels during Florida's fishing season, which begins in April and ends in November. Only a small percentage of Able Melbourne's revenues are derived from the sale of home heating fuel. Most of these sales occur from December through March, Florida's cooler months. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not issue or invest in financial instruments or derivatives for trading or speculative purposes. All of the operations of the Company are conducted in the United States, and, as such, are not subject to material foreign currency exchange rate risk. At September 30, 2005, the Company had approximately $6.7 million of outstanding long-term debt and convertible debentures. Although the Company's assets included approximately $4.7 million in cash and cash equivalents, the market rate risk associated with changing interest rates in the United States is not material. ITEM 4. CONTROLS AND PROCEDURES An evaluation was performed under the supervision and with the participation of the Company's management, including the acting chief executive officer ("Acting CEO") (who ceased performing the duties of Acting CEO on October 13, 2005) and chief financial officer ("CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that 17 evaluation, the Company's management, including the Acting CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2005. There were no significant changes in the Company's internal control over financial reporting in the first fiscal quarter of 2006 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As a result of the March 14, 2003 fire at the Newton, New Jersey, terminal, a subsidiary of the Company entered a guilty plea in July 2005 to one count of negligently damaging property, a fourth-degree crime in New Jersey. In connection with the plea agreement, the Company will pay a fine of $20,000, and its guilty plea cannot be used against the Company in any civil lawsuits. In addition, Christopher P. Westad, the Company's President, entered into a pre-trial intervention agreement, conditioned upon 250 hours of community service over a two-year period, which he is currently performing. The Company is not currently involved in any legal proceeding that is likely to have a material adverse effect on the results of operations or the financial condition of the Company. From time to time, the Company may become a party to litigation incidental to its business. There can be no assurance that any financial legal proceedings will not have a material adverse affect on the Company. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS (a) 1. On July 12, 2005, the Company consummated a financing with certain purchasers identified in the Securities Purchase Agreement dated as of July 12, 2005 (collectively the "Purchasers"), in a transaction permitted under section 4(2) of the Securities Act of 1933, in the amount of $2.5 Million Dollars. Pursuant to the terms of the Securities Purchase Agreement dated as of July 12, 2005 (the "Agreement") among Able Energy, Inc., and the Purchasers, the Purchasers purchased Debentures in the aggregate amount of $2.5 Million Dollars evidenced by a Variable Rate Convertible Debenture also dated July 12, 2005 (the "Debenture"). The Debentures shall be repaid within two years from the date of issuance, 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 1st, July 1st, October 1st and January 1st, beginning on the first such date after the date of issuance of 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 shall have the right to receive five (5) year warrants to purchase 192,308 of common stock at an exercise price of $7.15 per share. Pursuant to the Agreement, we shall 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 and expenses, 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. Pursuant to the Registration Rights Agreement among the parties, the Purchasers shall have demand registration rights with respect to all shares of our common stock obtained by them through the conversion of the Debentures. The Purchasers originally had an additional investment right, for a period of nine months after the initial registration statement is filed by us with the Securities and Exchange Commission (the "SEC") is first declared effective by the SEC, 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"). As described in further detail in the Company's Current Report on Form 8-K filed on November 18, 2005, 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 Agreement was amended to issue the Purchasers a series of warrants (the "New Warrants") at various exercise prices. 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. The Company has agreed to register 600,000 shares of common stock which may be obtained through the exercise of the New Warrants in addition to the registration rights described above relating to the Debentures. Notwithstanding the foregoing, until the required shareholder approvals are obtained, the Purchasers have agreed not to convert any Debentures or exercise any Additional Warrants or New Warrants which in the aggregate would exceed 19.999% of the number of shares of the Company's common stock on trading day prior to the date of the Agreement. 18 2. On February 22, 2005, the Company borrowed the sum of $500,000 from Able Income Fund, LLC ("Able Income"). The loan was evidenced by a promissory note (the "Note") issued by the Company to the order of Able Income in the principal amount of $500,000 bearing interest at the rate of 14% per annum payable interest only in the amount of $5,833.33 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., a wholly owned subsidiary of the Company. One of the owners of Able Income is Timothy Harrington, the former Chief Executive Officer of the Company. The maturity date of the Note was extended to August 22, 2005. Able Income subsequently agreed to surrender the Note as of September 30, 2005, in exchange for 57,604 shares of the Company's common stock, $.001 par value. The number of shares exchanged was determined by dividing the principal balance of the Note, together with all accrued and unpaid interest thereon as of September 30, 2005, by $8.68, representing a 20% discount off the average closing price of the Company's stock as listed on the Nasdaq SmallCap Market for the period from October 3, 2005 through October 14, 2005. The shares were offered only to Able Income in connection with the surrender of the Note and, thus, were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as not being a part of any public offering. (b) Non-applicable (c) None ITEM 3 DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION (a) 1. On March 1, 2005, the Company entered into an amendment (the "Agreement") to an existing consultant agreement with Summitt Ventures, Inc. ("Summitt"). The value of the consideration contemplated to be rendered by Summitt to the Company under the Agreement was $71,428.50, and the Company issued 142,857 shares of the Company's common stock (the "Shares"), valued at $0.50 per share, as payment. The Shares at the time of issue were unregistered, restricted shares of the Company and not subject to any registration requirement. The shares were offered only to Summitt in connection with the Agreement and, thus, were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as not being a part of any public offering. The Shares are not convertible into any other class or series of equity of the Company. No proceeds were received by the Company at the time of issuance of the Shares and no proceeds have been received by the Company on account of the Agreement. On September 22, 2005, the Company terminated the Agreement with Summitt, with cause, and on October 13, 2005, the Company notified Summitt that it was canceling the certificate evidencing the Shares on the grounds that, among other things, Summitt induced the Company to enter into the Agreement through misrepresentation. 2. On October 13, 2005, the Company received a letter from the Nasdaq Listing Qualifications Staff ("Nasdaq"), notifying the Company that it was not in compliance with Marketplace Rule 4310(c)(2)(B)(ii) (the "Rule"). The Rule requires the Company to have a minimum $35 million in market value of listed securities, or $2.5 million in shareholders' equity or $500,000 in net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years. Nasdaq informed the Company that it would be provided 30 calendar days, or until November 14, 2005, to regain compliance with the Rule. The Company was required to demonstrate compliance with the Rule by November 14, 2005 by either: 19 o showing aggregate market value of its common stock in excess of $35 million for a minimum of 10 consecutive business days, or o increasing its shareholders' equity to an amount which exceeds $2.5 million. The shareholders' equity reported in this Quarterly Report on Form 10-Q/A is $4,784,084, which exceeds the $2.5 million required under the Rule. Nasdaq has determined that the matters set forth in its October 13, 2005 letter to the Company have been closed. (b) None. ITEM 6. EXHIBITS 10.1 Securities Purchase Agreement dated as of July 12, 2005, between Able Energy, Inc., and the purchasers identified on the signature pages thereto (incorporated by reference to exhibit 99.1 to the Able Energy, Inc., Current Report on Form 8-K filed July 15, 2005). 10.2 Registration Rights Agreement dated as of July 12, 2005, between Able Energy, Inc., and the purchasers signatory thereto (incorporated by reference to exhibit 99.3 to the Able Energy, Inc., Current Report on Form 8-K filed July 15, 2005). 10.3 Form of Variable Rate Convertible Debenture dated July 12, 2005 (incorporated by reference to exhibit 99.2 to the Able Energy, Inc., Current Report on Form 8-K filed July 15, 2005). 10.4 Form of Common Stock Purchase Warrant (incorporated by reference to exhibit 99.4 to the Able Energy, Inc., Current Report on Form 8-K filed July 15, 2005). 10.5 Promissory Note of All American Plazas, Inc., in favor of Able Energy, Inc., dated July 27, 2005. (Incorporated by reference to exhibit 10.5 to the Able Energy, Inc. Current Report filed October 19, 2005.) 10.6 Letter of Intent between Able Energy, Inc., and PHS Group, Inc., dated September 8, 2005. (Incorporated by reference to exhibit 10.6 to the Able Energy, Inc. Current Report filed October 19, 2005.) 10.7 Subscription Agreement between Able Income Fund LLC and Able Energy, Inc., dated as of September 30, 2005. 31.1 Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a). 31.2 Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14(a) and Rule 15d-14(a). 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Able Energy, Inc. By: /s/ Gregory D. Frost -------------------- Gregory D. Frost Chief Executive Officer, Chairman and General Counsel By: /s/ Steven M. Vella ------------------- Steven M. Vella Chief Financial Officer November 21, 2005 21 EX-10.7 2 tex10_7-8283.txt EX-10.7 SHARES OF ABLE ENERGY, INC. --------------------------- SUBSCRIPTION AGREEMENT ---------------------- TO: ABLE ENERGY, INC. GENTLEMEN: 1. SUBSCRIPTION. The undersigned, hereinafter sometimes referred to as the "Subscriber", does hereby subscribe to surrender as of September 30, 2005 a promissory note issued to the Subscriber by Able Energy, Inc., a Delaware corporation (the "Company") dated February 22, 2005 in the principal amount of Five Hundred Thousand Dollars ($500,000) (the "Note") in exchange for shares of the Company's common stock, $.001 par value. The number of shares to be exchanged and issued to the Subscriber (the "Shares") shall be determined by dividing the principal balance of the Note together with all accrued and unpaid interest thereon as of September 30, 2005 by $8.68, the average closing price of Able's stock as listed on the Nasdaq SmallCap Market for the period from October 3, 2005 through October 14, 2005 less a 20% discount. The Company, at its sole expense, shall cause the Shares as soon as practicable (but in any event not more than 45 days after the date hereof) to be registered with the Securities Exchange Commission a registration statement covering the resale of the Shares under prospectus as set forth by the rules and regulations promulgated under the Securities Act of 1933, as amended, or applicable law. 2. REPRESENTATIONS AND WARRANTIES. By executing this Subscription Agreement, the undersigned further: (a) acknowledges that the undersigned has received and carefully read the following Reports filed by the Company with the Securities and Exchange Commission: (i) Annual Report on Form 10-K for the year ended June 30, 2005, (ii) Registration Statement on Form S-1 , SEC File No. 333-127573 and all amendments thereto; and (iii) Preliminary Notice of Special Meeting of Stockholders and Proxy Statement on Schedule 14A filed October 4, 2005 (hereinafter collectively referred to as the "Reports"). The undersigned also acknowledges that it has carefully read the material Risk Factors hereinafter contained in this Subscription Agreement, has based its decision to exchange the Note for the Shares on the information contained in the Reports and this Subscription Agreement and has not been furnished with any other offering literature or prospectus. (b) represents and warrants that it is acquiring the Shares for its own account as a principal, for investment purposes only and not with a view to, or for, resale or distribution and no other person has a direct or indirect beneficial interest in such Shares. Further, the undersigned does not have any contract, understanding, agreement or arrangement with any person to sell or transfer to such person or to any third person, with respect to any of the Shares. 1 (c) represents and warrants that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the prospective investment. (d) represents and warrants that it is able to bear the economic risk of losing its entire investment in the Shares and is not relying on the Company with respect to advice as to the economic considerations of this exchange. (e) understands that no Federal or state agency has approved or disapproved the Shares, passed upon or endorsed the merits of the offering thereof, or made any finding or determination as to the fairness of the Shares for investment. (f) acknowledges that all material documents, records, and books pertaining to this investment have on request been made available to it and/or to its advisers. (g) acknowledges that if it is acquiring the Shares subscribed for hereby in a fiduciary capacity, the above representations and warranties shall be deemed to have been made on behalf of the person or persons for whom it is so purchasing. (h) acknowledges that the Company has made available to it or its purchaser representative, if any, the opportunity to ask questions of, and receive answers from the Company or its representatives regarding its proposed business operations and has been given the opportunity for a reasonable time prior to the date hereof to review such additional information necessary to verify the accuracy of the Reports or such other information which was provided to the undersigned in order to evaluate the merits and risks of a purchase of the Shares to the extent the Company could acquire it without unreasonable effort or expense. (i) acknowledges that if it has used the services of a purchase representative in connection with its investment in the Company, its purchaser representative has disclosed any material relationship which exists between each purchaser representative or his affiliates and the Company and its affiliates, which now exists or mutually is understood to be contemplated or which has existed at any time during the previous two years, and setting forth any compensation received or to be received as a result of such relationship. (j) no representative or warranties have been made to the undersigned by the Company, or any officer, employee, agent, affiliate or subsidiary of the Company, other than the representations of the Company contained in the written Reports, and in subscribing for the Shares the undersigned is not relying upon any representations other than those contained in such Reports. (k) any information which the undersigned furnishes to the Company with respect to his or her financial position and business experience is correct and complete as of the date of this Subscription Agreement and if there should be any material change in 2 such information he or she will immediately furnish such revised or corrected information to the Company. (l) the undersigned, if an individual, is a citizen of the United States, and is at least 21 years of age, or if a partnership, corporation or trust, the members, shareholders or beneficiaries thereof are all citizens of the Unites States and each is at least 21 years of age. The address set forth below is the undersigned's correct home address, or if the undersigned is other than an individual, the undersigned's correct home address, or if the undersigned is other than an individual, the undersigned's correct principal office and the undersigned has no present intention of changing such address. (m) the undersigned understands that the purchase of the Shares is a speculative investment which involves a high degree of risk of loss of the entire investment in the Company. (n) the foregoing representations, warranties and agreements shall survive the date of acceptance of this Agreement by the Company and that the information set forth herein regarding the undersigned is true and correct. (o) The Subscriber acknowledges that it understands the meaning of the representations made by it in this Subscription Agreement. 4. RISK FACTORS THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR TOTAL INVESTMENT. PROSPECTIVE INVESTORS OF THE SHARES OFFERED HEREIN SHOULD GIVE CAREFUL CONSIDERATION, IN ADDITION TO THE OTHER INFORMATION IN THIS MEMORANDUM, TO THE FOLLOWING RISK FACTORS. (a) LIMITED OPERATING HISTORY; MANAGEMENT OF GROWTH; SUBSTANTIAL LONG-TERM DEBT. The Company was incorporated in March 1997 to act as a holding company for its operating subsidiaries. Able Oil, the Company's major operating subsidiary, has been in business since 1989 and currently accounts for approximately 80% of the Company's total revenue. The Company's remaining subsidiaries have limited operating histories upon which evaluation of their prospects can be made. There can be no assurance that the subsidiaries, other than Able Oil, will generate substantial revenues or attain profitable operations. The Company plans to continue to pursue an aggressive growth strategy through its operating subsidiaries, and anticipates significant change in its business activities and operations. The Company's growth has required, and will continue to require, increased investment in management personnel, financial and management systems and controls and facilities. The Company's past expansion has placed, and any future expansion would place, significant demands on the Company's administrative, 3 operational, financial and other resources. The Company intends to continue to expand its business and operations, including entry into new markets, that will place additional strain on the Company's management and operations. The Company's future operating results will depend, in part, on its ability to continue to broaden the Company's senior management group and administrative infrastructure, and its ability to attract, hire and retain skilled employees. The Company's success will also depend on the ability of its officers and key employees to continue to implement and improve the Company's operational and financial control systems and to expand, train and manage its employee base. In addition, the Company's future operating results will depend on its ability to expand its sales and marketing capabilities and expand its customer support operations commensurate with its growth, should such growth occur. If the Company's revenues do not increase in proportion to its operating expenses, the Company's management systems do not expand to meet increasing demands, the Company fails to attract, assimilate and retain qualified personnel, or the Company's management otherwise fails to manage the Company's expansion effectively, there would be a material adverse effect on the Company's business, financial condition and operating results. As of June 30, 2005, the Company had long term liabilities of $4,146,095. The Company's ability to satisfy such obligations will depend on the Company's future operating performance, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, many of which are beyond the Company's control. There can be no assurance that the Company will be able to service its indebtedness. If the Company is unable to service its indebtedness, it will be forced to examine alternative strategies that may include actions such as reducing or delaying capital expenditures, restructuring or refinancing its indebtedness, or the sale of assets or seeking additional equity and/or debt financing. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all. (b) SEASONAL FACTORS. To date substantially all of the Company's revenues and income have been derived from the home heating oil business. The Company's home heating oil business is seasonal, as a substantial portion of its business is conducted during the fall and winter months. Weather patterns during the winter months can have a material adverse impact on its revenues. Although temperature levels for the heating season have been relatively stable over time, variations can occur from time to time, and warmer than normal winter weather will adversely effect the results of the Company's fuel oil operations. (c) FUEL PRICING: EFFECT ON PROFITABILITY. Gasoline, heating oil and diesel fuel are commodities and, as such, their wholesale prices are subject to changes in supply or other market conditions over which the Company has no control. While, in the past, the Company has been able to pass on any increases in commodities prices to its customers, there can be no assurance that the Company may be able to fully pass on future increases in the wholesale prices of these commodities to its customers and still be competitive. Additionally, approximately 7% of the Company's total sales are made to customers pursuant to an agreement which pre-establishes the maximum sales price of fuel oil over a twelve-month period. Such prices are renegotiated in April of each year and the Company has historically purchased fuel oil for these customers in advance and at a fixed cost. Should the Company be unable to make such advance purchases of fuel oil, any future increase in wholesale fuel oil prices could have an adverse affect on the 4 Company. Because the Company sells fuel to its customers at fixed amounts over its wholesale cost, the Company's gross profit as a percentage of gross revenue may not fluctuate as a result of changes in the wholesale prices of these goods. The Company does not engage in derivatives or futures trading to hedge fuel price movements. (d) GROWTH DEPENDENT UPON UNSPECIFIED ACQUISITIONS. The Company's growth strategy includes the acquisition of existing fuel distributors. There can be no assurance that the Company will be able to identify new acquisition candidates or, even if a candidate is identified, that the Company 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 the operations of the Company, possible difficulties with the assimilation of personnel and operations of acquired companies, the amortization of acquired intangible assets, and the potential loss of key employees of acquired companies. The future success of the Company's business will depend upon the Company's ability to manage its growth through acquisitions. (e) GOVERNMENT REGULATION. Federal, state and local laws, particularly laws relating to the protection of the environment and worker safety, can materially affect the Company's operations. The transportation of fuel oil, diesel fuel, propane and gasoline is subject to regulation by various federal, state and local agencies, including the U.S. Department of Transportation ("DOT"). These regulatory authorities have broad powers and the Company is subject to regulatory and legislative changes that can effect the economies of the industry by requiring changes in operating practices or influencing demand for, and the cost of providing, its services. Additionally, the Company is subject to random DOT inspections. Any material violation of DOT rules or the Hazardous Materials Transportation Act may result in citations and/or fines upon the Company. In addition, the Company depends on the supply of petroleum products from the oil and gas industry and, therefore, is affected by changing taxes, price controls and other laws and regulations relating to the oil and gas industry generally. The Company cannot determine the extent to which future operations and earnings may be affected by new legislation, new regulations or changes in existing regulations. (f) POTENTIAL ENVIRONMENTAL LIABILITY. The Company's operations are subject to all of the operating hazards and risks that are normally incidental to handling, storing, transporting and delivering fuel oils, gasoline, diesel and propane, which are classified as hazardous materials. The Company faces potential liability for, among other things, fuel spills, gas leaks and negligence in performing environmental clean-ups for its customers. Specifically, the Company maintains fuel storage facilities on sites owned or leased by the Company, and could incur significant liability to third parties or governmental entities for damages, clean-up costs and/or penalties in the event of certain discharges into the environment. Such liability can be extreme and could have a material adverse effect on the Company's financial condition or results of operations. Although the Company believes that it is in compliance with existing laws and regulations, there can be no assurance that substantial costs for compliance will not be incurred in the future. Any substantial violations of these rules and regulations could have an adverse affect upon the Company's operations. Moreover, it is possible that other developments, such as 5 more stringent environmental laws, regulations and enforcement policies thereunder, could result in additional, presently unquantifiable, costs or liabilities to the Company. (g) NO ASSURANCE OF ADEQUATE INSURANCE PROTECTION. The Company maintains insurance policies in such amounts and with coverage and deductibles as the Company' management believes are reasonable and prudent. There can be no assurance, however, that such insurance will be adequate to protect the Company from liabilities and expenses that may arise from claims for personal and property damage arising in the ordinary course of business or that such levels of insurance will be maintained by the Company or will be available at economic prices. (h) FRANCHISING. The Company intends to expand franchise arrangements to expand its operations and revenue base. The Company's future growth may be dependent upon new franchisees and the manner in which they operate and develop their Able Energy locations to promote and develop the Company's concept and its reputation for quality and value. In addition, because the Company believes that a potential franchisee's total estimated investment relating to an Able Energy location is generally low, the Company may be more likely to attract franchisees with limited franchise experience and limited financial resources. As a result of its franchising activity, the Company is be subject to Federal Trade Commission ("FTC") regulation and various state laws that govern the offer, sale and termination of, and refusal to renew, franchises. Several state laws also regulate substantive aspects of the franchisor-franchisee relationship. The FTC requires the Company to furnish prospective franchisees a franchise offering circular containing prescribed information. A number of states in which the Company might consider franchising also regulate the sale of franchises and require registration of the franchise offering circular with state authorities. Substantive state laws that regulate the franchisor-franchisee relationship presently exist in many states, and bills have been introduced in Congress from time to time which would provide for federal regulation of the franchisor-franchisee relationship in certain respects. The state laws often limit, among other things, the duration and scope of non-competition provisions and the ability of a franchisor to terminate or refuse to renew a franchise. (i) TRADEMARKS AND SERVICE MARKS. The Company believes that its trademarks and service marks have significant value and are important to the marketing of its products and services, especially if the Company is successful in implementing its franchise program. There can be no assurance, however, that the Company's proprietary marks do not or will not violate the proprietary rights of others, that the Company's marks would be upheld if challenged or that the Company would not be prevented from using its marks, any of which could have an adverse effect on the Company. In addition, there can be no assurance that the Company will have the financial resources necessary to enforce or defend its trademarks and service marks against infringement. (j) COMPETITION FROM ALTERNATE ENERGY SOURCES. The Company is engaged primarily in the retail home heating business and competes for customers with suppliers of alternate energy products, principally natural gas and electricity. Every year, a small percentage 6 of the Company's oil customers convert to other home heating sources, primarily natural gas. In addition, the Company may lose additional customers due to conversions during periods in which the cost of its services exceeds the cost of alternative energy sources. (k) COMPETITION FOR NEW CUSTOMERS. The Company's business is highly competitive. In addition to competition from alternative energy sources, the Company competes with distributors offering a broad range of services and prices, from full service distributors similar to the Company, to those offering delivery only. Competition with other companies in the retail home heating industry is based primarily on customer service and price. Longstanding customer relationships are typical in the industry. Many companies, including the Company, deliver fuel to their customers based upon weather conditions and historical consumption patterns without the customers making an affirmative purchase decision each time fuel is needed. In addition, most companies, including the Company, provide equipment repair service on a 24 hour a day basis, which tends to build customer loyalty. The Company competes against companies that may have greater financial resources than the Company. As a result, the Company may experience difficulty in acquiring new retail customers due to existing relationships between potential customers and other retail home heating distributors. (l) ABSENCE OF WRITTEN AGREEMENTS. Approximately 50% of the Company's customers do not have written agreements with the Company and can terminate services at any time, for any reason. Although the Company has never experienced a significant loss of its customers, if the Company were to experience a high rate of terminations, the Company's business and financial condition could be adversely affected. (m) RISKS ASSOCIATED WITH EXPANSION INTO NEW MARKETS. A significant element of the Company's future growth strategy involves the expansion of the Company's business into new geographic and product markets. Expansion of the Company's operations depend, among other things, the success of the Company's marketing strategy in new markets, successfully establishing and operating new locations, hiring and retaining qualified management and other personnel, and obtaining adequate financing for vehicle and site purchases and working capital purposes. (n) DEPENDENCE ON KEY PERSONNEL. The Company's future success will depend, to a significant extent, on the efforts of key management personnel, including Gregory D. Frost, the Company's Chief Executive Officer, Chairman and General Counsel, Christopher P. Westad, the Company's President, and Steven M. Vella, the Company's Chief Financial Officer. The loss of one or more of these key employees could have a material adverse effect on the Company's business. In addition, the Company believes that its future success will depend, in large part, upon its continued ability to attract and retain highly qualified management, technical and sales personnel. There can be no assurance that the Company will be able to attract and retain the qualified personnel necessary for its business. (o) LIMITED MARKET FOR COMMON STOCK. Although the Company's common stock is presently traded on the Nasdaq SmallCap Market, there can be no assurance that it will 7 continue or be maintained. As a result of the limited market, the Subscriber may have difficulty in effecting sales of the Shares and/or obtaining a satisfactory price for those shares. Any market price for shares of common stock of the Company is likely to be very volatile, and factors such as success or lack thereof in the Company's operations, competition and governmental regulation may all have a significant effect. In addition, the stock markets generally have experienced, and continue to experience, extreme price and volume fluctuations which have affected the market price of many small capital companies and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions, may adversely affect the market price of the Company's common stock. (p) GENERAL ECONOMIC RISKS/POTENTIAL VOLATILITY OF STOCK PRICE. The Company's current and future business plans are dependent, in large part, on the state of the general economy. Adverse changes in general and local economic conditions may cause high volatility in the market price of the Company's securities and may adversely affect an investment in these securities. Oil and gas prices are extremely volatile and are subject to substantial seasonal, political, world wide supply of oil and gas and other fluctuations and risks, all of which are beyond the Company's control. 5. GENERAL INFORMATION ABOUT THE SUBSCRIBER (a) Name of Subscriber: (b) Address and telephone number of Subscriber: (c) Social Security or Tax ID Number of Subscriber: (d) Can Subscriber afford to hold Subscriber's investment in the Company for an indefinite period of time? (Answer yes or no) Yes ___ No ___ (e) Can Subscriber afford a loss of its prospective investment in the Company? (Answer yes or no) Yes ___ No ___ (f) If Subscriber is not an individual: (1) Is Subscriber's principal place of business located, or does Subscriber have substantial amounts of assets, in any other state(s)? If yes, which state(s)? (2) In which state(s), if any, does Subscriber file state or local franchise, business or other tax returns? (3) In which state(s) is Subscriber authorized to do business? 8 (4) Subscriber is (check appropriate type and give the requested information): __________ Corporation (jurisdiction and date of incorporation): __________ Partnership (jurisdiction and date where original Certificate filed or date of Partnership Agreement if filing not required): __________ Trust (jurisdiction and date of Trust Agreement): __________ Other (Describe): (5) Was Subscriber organized for the specific purpose of acquiring the Shares? (Answer yes or not) Yes ___ No ___ (g) Subscriber is an "accredited investor" because it falls within the applicable category (ies) checked below: __________ (1) Any employee benefit plan (a "Qualified Plan") within the meaning of ERISA, if a self-directed plan, with investment decisions made solely by persons that are "accredited investors"; or if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5 million; or __________ (2) Any bank as defined in section 3(a)(2) of the Act, or any savings or loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958, any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if such plan has total assets in excess of $5 million; or __________ (3) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; or 9 __________ (4) Any organization described in section 501(c)(3) of the Internal Revenue Code of 1986, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Shares, with total assets in excess of $5,000,000; or __________ (5) Any natural person whose individual net worth, or joint net worth that persons' spouse, at the time of his purchase exceeds $1,000,000; or __________ (6) Any natural person who had an income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current Year; or __________ (7) Any trust with total assets in excess of $5,000,000, not formed for the specific purpose of purchasing the Shares, whose purchase is directed by a "Sophisticated" person; or __________ (8) Any entity in which all of the equity owners are "accredited investors." 7. MISCELLANEOUS. (a) INDEMNIFY. The undersigned agrees to indemnify and hold harmless the Company, its officers and directors, employees, agents and affiliates against any loss, liability, claim damage and expense whatsoever (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defined against any litigation commenced or threatened or any claim whatsoever) arising out of or based upon any false representation or warranty or breach or failure by the undersigned to comply with any covenant or agreement made by the undersigned herein or in any other document furnished by or on behalf of the undersigned to any of the foregoing in connection with this transaction. (b) MODIFICATION. Neither this Subscription Agreement nor any provisions hereof shall be modified, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge of termination is sought. (c) NOTICES. Any notice, demand, or other communication which any party hereto may be required, or may elect, to give to anyone interested hereunder shall be sufficiently given if (a) deposited, postage prepaid, in a United States mail letter box, registered or certified mail, return receipt requested, addressed to such address as may be given herein, or (b) delivered personally at such address. (d) COUNTERPARTS. This Subscription Agreement may be executed through the use of separate signature pages or in any number of counterparts, and each of such counterparts shall, for all purposes, constitute one agreement binding on all parties, notwithstanding that all parties are not signatories to the same counterpart. 10 (e) BINDING EFFECT. Except as otherwise herein, this Subscription Agreement shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and assigns. If the undersigned is more than one person, the obligations of the undersigned shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each person and his heirs, executors, administrators and successors. (f) ENTIRE AGREEMENT. This instrument contains the entire agreement of the parties and there are no representations or other agreements except as states or referred to herein. (g) ASSIGNABILITY. This Subscription Agreement is not transferable or assignable by the undersigned. (h) LAW GOVERNING. This Subscription Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the State of New York, without giving effect to its conflicts of law principles. 11 ENTITY SUBSCRIPTION ------------------- Number of Shares Subscribed for: 57,604 - ------ ENTITY OWNERSHIP -- Check form or organization of entity subscriber. _____ CORPORATION _____ LLC _____ PARTNERSHIP _____ TRUST PLEASE TYPE OR PRINT THE FOLLOWING INFORMATION EXACTLY AS YOU WISH IT TO APPEAR ON THE COMPANY RECORDS. - -------------------------------------------------------------------------------- Name of Subscriber (Taxpayer ID Number) - -------------------------------------------------------------------------------- Address - Street, City, State, Zip Code (Telephone No.) SIGNATURE The undersigned corporate officer, general partner, trustee, or member certifies and warrants that he/she has full power and authority from and on behalf of the entity named below and its shareholders, partners, or beneficiaries and is permitted by applicable law to complete, execute, and deliver this Subscription Agreement on its behalf and to make the statements, representations, warranties, and agreements made herein on its behalf, and that investment in the Company has been affirmatively authorized by the governing board or body of the entity and is not prohibited by law or the governing documents of the entity. IN WITNESS WHEREOF, the undersigned has executed this Agreement on the date set forth below. ------------------------------------ (Type or Print Name of Entity) By:_________________________________ Name; Title 12 ACCEPTED AND AGREED: ABLE ENERGY, INC. By:________________________ Name: Title: 13 EX-31.1 3 tex31_1-8283.txt EX-31.1 Exhibit 31.1 CERTIFICATIONS I, Gregory D. Frost, certify that: 1. I have reviewed this quarterly report on Form 10-Q/A of Able Energy Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. November 21, 2005 /s/ Gregory D. Frost - -------------------- Gregory D. Frost Chief Executive Officer EX-31.2 4 tex31_2-8283.txt EX-31.2 Exhibit 31.2 CERTIFICATIONS I, Steven M. Vella certify that: 1. I have reviewed this quarterly report on Form 10-Q/A of Able Energy Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. November 21, 2005 /s/ Steven M. Vella - ------------------- Steven M. Vella Chief Financial Officer EX-32.1 5 tex32_1-8283.txt EX-32.1 Exhibit 32.1 CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the Quarterly Report of Able Energy Inc. (the "Company"), on Form 10-Q/A for the quarter ended September 30, 2005, as filed with the Securities and Exchange Commission (the "Report"), Gregory D. Frost, Chief Executive Officer of the Company and Steven M. Vella, Chief Financial Officer of the Company, do each hereby certify, pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that to his knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Gregory D. Frost - -------------------- Gregory D. Frost Chief Executive Officer November 21, 2005 /s/ Steven M. Vella - ------------------- Steven M. Vella Chief Financial Officer November 21, 2005 [A signed original of this written statement required by Section 906 has been provided to Able Energy Inc. and will be retained by Able Energy Inc. and furnished to the Securities and Exchange Commission or its staff upon request.] -----END PRIVACY-ENHANCED MESSAGE-----