SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
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.
(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 X whether registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
As of May 7, 2003, 2,013,250 shares, $.001 Par value per share, of Able
Energy, Inc. were issued and outstanding.
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets as of June 30, 2002 and
March 31, 2003 3 - 4
Consolidated Statements of Income for the three and nine
months ended March 31, 2003 and March 31, 2002 5
Consolidated Statement of Stockholders' Equity nine months
ended March 31, 2003 6
Consolidated Statements of Cash Flow for the nine months
ended March 31, 2003 and 2002 7 - 8
Notes to Unaudited Financial Statements 9 - 26
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
March 31, June 30,
2003 2002
(Unaudited) (Audited)
----------- ---------
Current Assets:
Cash $ 11,890 $ 258,560
Accounts Receivable - Less Allowance for Doubtful
Accounts of $397,358 (2003) and $242,358 (2002) 4,362,891 1,933,526
Inventory 955,377 405,424
Notes Receivable - Current Portion 45,590 32,756
Miscellaneous Receivables 90,944 113,905
Prepaid Expenses 303,336 228,839
Prepaid Expense - Income Taxes 4,796 2,733
Deferred Income Tax 269,083 65,703
Due From Officer 44,690 44,690
Insurance Claim Receivable (Note 21) 577,416 -
----------- -----------
Total Current Assets 6,666,013 3,086,136
----------- -----------
Property and Equipment:
Land 451,925 451,925
Buildings 946,046 1,096,046
Trucks 2,950,873 3,037,192
Fuel Tanks 1,432,126 1,190,153
Machinery and Equipment 694,817 576,123
Leasehold Improvements 579,187 578,792
Cylinders 755,496 731,692
Office Furniture and Equipment 200,640 200,640
Website Development Costs 2,242,335 2,200,511
----------- -----------
10,253,445 10,063,074
Less: Accumulated Depreciation and Amortization 4,030,602 3,461,342
----------- -----------
Net Property and Equipment 6,222,843 6,601,732
----------- -----------
Other Assets:
Deposits 144,415 70,570
Notes Receivable - Less Current Portion 189,780 216,628
Customer List, Less Accumulated Amortization of ($188,122) at
March 31, 2003, and June 30, 2002 422,728 422,728
Covenant Not to Compete, Less Accumulated Amortization of
($71,667) at March 31, 2003 and ($56,667) at June 30, 2002 28,333 43,333
Development Costs - Franchising, Less accumulated
Amortization of ($16,084) at March 31, 2003 and ($9,191)
at June 30, 2002 29,871 36,764
----------- -----------
Total Other Assets 815,127 790,023
----------- -----------
Total Assets $13,703,983 $10,477,891
=========== ===========
See Accompanying Notes
3
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont'd)
LIABILITIES & STOCKHOLDERS' EQUITY
March 31, June 30,
2003 2002
(Unaudited) (Audited)
----------- -----------
Current Liabilities:
Accounts Payable $ 2,353,807 $ 1,159,341
Note Payable - Bank 1,270,000 1,470,000
Notes Payable - Other 1,350,000 500,000
Current Portion of Long-Term Debt 540,146 584,384
Accrued Expenses 666,749 309,363
Accrued Taxes 196,879 24,673
Customer Pre-Purchase Payments 385,552 880,111
Customer Credit Balances 172,503 548,336
Escrow Deposits 16,072 28,472
Note Payable - Officer 368,604 55,000
----------- -----------
Total Current Liabilities 7,320,312 5,559,680
Deferred Income 79,679 79,679
Deferred Income Taxes 65,222 54,712
Long Term Debt: less current portion 1,677,883 1,522,680
----------- -----------
Total Liabilities 9,143,096 7,216,751
----------- -----------
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 2,013,250 Shares March 31, 2003, and
2,007,250 at June 30, 2002 2,014 2,008
Paid in Surplus 5,711,224 5,687,230
Retained Earnings (Deficit) (1,152,351) (2,428,098)
----------- -----------
Total Stockholders' Equity 4,560,887 3,261,140
----------- -----------
Total Liabilities and Stockholders' Equity $13,703,983 $10,477,891
=========== ===========
See Accompanying Notes
4
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months March 31, Nine Months Ended March 31,
------------------ --- ---------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net Sales $19,490,580 $ 8,800,243 $38,177,651 $21,368,992
Cost of Sales 15,879,981 6,688,842 31,217,309 17,133,434
----------- ----------- ----------- -----------
Gross Profit 3,610,599 2,111,401 6,960,342 4,235,558
----------- ----------- ----------- -----------
Expenses
Selling, General and Administrative Expenses 1,747,490 1,367,605 4,178,008 3,934,343
Depreciation and Amortization Expense 317,251 290,824 911,922 858,631
----------- ----------- ----------- -----------
Total Expenses 2,064,741 1,658,429 5,089,930 4,792,974
----------- ----------- ----------- -----------
Income (Loss) From Operations 1,545,858 452,972 1,870,412 (557,416)
----------- ----------- ----------- -----------
Other Income (Expenses):
Interest and Other Income 60,554 45,446 126,668 171,225
Interest Expense (151,137) (81,531) (340,223) (213,527)
Other Expense (Note 22) (414,000) - (414,000) -
----------- ----------- ----------- -----------
Total Other Income (Expenses) (504,583) (36,085) (627,555) (42,302)
----------- ----------- ----------- -----------
Income (Loss) Before Provision for Income Taxes 1,041 275 416,887 1,242,857 (599,718)
Provision (Reduction) for Income Taxes (39,890) (3,585) (32,890) (2,885)
----------- ----------- ----------- -----------
Net Income (Loss) $ 1,081,165 $ 420,472 $ 1,275,747 $ (596,833)
=========== =========== =========== ===========
Basic Income (Loss) Per Common Share $ .54 $ .21 $ .63 $ (.30)
----------- ----------- ----------- -----------
Diluted Income (Loss) Per Common Share $ .53 $ .20 $ .62 $ (.30)
----------- ----------- ----------- -----------
Weighted Average Number of Common Shares
Outstanding - Used in Basic 2,009,814 2,000,921 2,009,814 2,000,921
=========== =========== =========== ===========
Weighted Average Number of Common Shares
Outstanding - Used in Diluted 2,052,751 2,055,812 2,052,751 2,000,921
=========== =========== =========== ===========
See Accompanying Notes
5
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 2003
(UNAUDITED)
COMMON STOCK
.001 PAR VALUE
--------------
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SURPLUS EARNINGS EQUITY
------ ------ ------- -------- ------
Balance - July 1, 2002 2,007,250 $ 2,008 $5,687,230 $(2,428,098) $3,261,140
Shares Issued 6,000 6 23,994 24,000
Net Income 1,275,747 1,275,747
----------- ----------
Balance - March 31, 2003 2,013,250 $ 2,014 $5,711,224 $(1,152,351) $4,560,887
========= ======= ========== =========== ==========
See Accompanying Notes
6
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
NINE MONTHS ENDED MARCH 31,
UNAUDITED
---------
2003 2002
---- ----
Cash Flow From Operating Activities
-----------------------------------
Net Income (Loss) - Continuing Operations $1,275,747 $(596,833)
Adjustments to Reconcile Net Income (Loss) to Net Cash
used by Operating Activities:
Depreciation and Amortization 911,922 858,631
Other Expense 414,000 -
Directors' Fees 24,000 -
Gain on Disposal of Equipment (44) -
(Increase) Decrease in:
Accounts Receivable (2,429,365) (310,670)
Inventory (549,953) (190,404)
Prepaid Expenses (76,560) 29,937
Insurance Claim Receivable (238,099) -
Deposits (65,000) -
Deferred Income Tax - Asset (43,400) -
Increase (Decrease) in:
Accounts Payable 1,194,466 (224,083)
Accrued Expenses (44,288) (205,224)
Customer Advance Payments (494,559) (738,352)
Customer Credit Balance (375,833) 61,101
Deferred Income Taxes 10,510 (2,885)
Escrow Deposits (12,400) 5,000
---------- ----------
Net Cash (Used) Provided by Operating Activities (498,856) (1,313,782)
---------- ----------
Cash Flow From Investing Activities
-----------------------------------
Purchase of Property and Equipment (810,415) (683,592)
Web Site Development Costs (41,824) 63,629
Increase in Deposits (8,845) (14,829)
Sale of Equipment 1,726 -
Payment on Notes Receivable - Sale of Equipment 13,359 11,646
Note Receivable - Montgomery 655 644
Other Receivables 22,961 (17,784)
---------- ----------
Net Cash (Used) Provided By Investing Activities $ (822,383) $ (640,286)
========== ==========
See Accompanying Notes
7
ABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW (CONT'D)
(UNAUDITED)
NINE MONTHS ENDED MARCH 31,
UNAUDITED
---------
2003 2002
---- ----
Cash Flow From Financing Activities
-----------------------------------
Increase in Notes Payable - Bank $ - $ 1,370,000
(Decrease) in Notes Payable - Bank (200,000) (449,720)
Increase in Notes Payable - Other 850,000 -
Decrease in Long-Term Debt (496,824) (496,872)
Increase in Long-Term Debt 607,789 408,745
Note Payable - Officer 313,604 -
Sale of Common Stock - 4,063
---------- -----------
Net Cash (Used) Provided By Financing Activities 1,074,569 836,216
---------- -----------
Net (Decrease) Increase In Cash (246,670) (1,117,852)
Cash - Beginning of Year 258,560 1,489,018
---------- -----------
Cash - End of Year $ 11,890 $ 371,166
========== ===========
The Company had Interest Cash Expenditures of: $ 315,223 $ 208,275
The Company had Tax Cash Expenditures of: $ 22,167 $ 10,200
See Accompanying Notes
8
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
Principles of Consolidation
The consolidated financial statements include the accounts of Able
Energy, Inc. and its subsidiaries. The minority interest of 1% in Able
Propane, LLC is immaterial and has not been shown separately. All
material inter-company balances and transactions were eliminated in
consolidation.
Majority Ownership
The Company is the majority owner, owning 70.6% of the issued shares
of a subsidiary, PriceEnergy.Com, Inc. in which their capital
investment is $25,000. The subsidiary has established a Web Site for
the sale of products through a network of suppliers originally on the
East Coast of the United States. The Web Site became active in October
2000 (See Notes 8 and 13)
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 nine
months ended March 31, 2003 is $534,089 (See Notes 8 and 13).
The consolidated interim financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments which, in the opinion of management, are
necessary for fair presentation of the information contained therein.
It is suggested that these consolidated financial statements be read
in conjunction with the financial statements and notes thereto
included in the Company's annual report for the year ended June 30,
2002. The Company follows the same accounting policies in preparation
of interim reports.
9
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
------------------------------------------------------------
Results of operations for the interim periods are not indicative of
annual results.
Nature of Operations
Able Oil Company, Able Melbourne and Able Energy New York, Inc. are
full service oil companies that market and distribute home heating
oil, diesel fuel and kerosene to residential and commercial customers
operating in the northern New Jersey, Melbourne, Florida, and
Warrensburg, New York respectively. Able Propane, installs propane
tanks which it owns and sells propane for heating and cooking, along
with other residential and commercial uses.
The Company's operations are subject to seasonal fluctuations with a
majority of the Company's business occurring in the late fall and
winter months. Approximately 70% of the Company's revenues are earned
and received from October through March, and the overwhelming majority
of such revenues are derived from the sale of HVAC products and
services and home heating fuel. However, the seasonality of the
Company's business is offset, in part, by the increase in revenues
from the sale of diesel and gasoline fuels during the spring and
summer months due to the increased use of automobiles and construction
apparatus.
Inventories
Inventories are valued at the lower of cost (first in, first out
method) or market.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is provided by using the straight-line
method based upon the estimated useful lives of the assets (5 to 40
years). Depreciation expense for the nine months ended March 31, 2003
and 2002 amounted to $557,915 and $507,438, respectively.
For income tax basis, depreciation is calculated by a combination of
the straight-line and modified accelerated cost recovery systems
established by the Tax Reform Act of 1986.
Expenditures for maintenance and repairs are charged to expense as
incurred whereas expenditures for renewals and betterments are
capitalized.
The cost and related accumulated depreciation of assets sold or
otherwise disposed of during the period are removed from the accounts.
Any gain or loss is reflected in the year of disposal.
10
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
------------------------------------------------------------
Web Site Development Costs
Costs of $2,242,335 incurred in the developmental stage for computer
hardware and software have been capitalized in accordance with
accounting pronouncement SOP98-1. The costs are included in Property
and Equipment and will be amortized on a straight line basis during
the estimated useful life, 5 years. Operations commenced in October
2000. Amortization for the nine months ended March 31, 2003 and 2002
amounted to $332,114 and $326,152, respectively.
Intangible Assets
Intangibles are stated at cost and amortized as follows: Customer
Lists of $571,000 related to the Connell's Fuel Oil Company
acquisition on October 28, 1996, by Able Oil Company is being
amortized over a straight-line period of 15 years. The current period
amortization also includes a customer list of $39,850 and Covenant Not
To Compete of $100,000 relating to the acquisition from B & B Fuels on
August 27, 1999, is being amortized over a straight-line period of 10
and 5 years, respectively. The amortization for the nine months ended
March 31, 2003 and 2002 are $15,000 and $25,041, respectively.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"). SFAS 142 requires goodwill and
other intangible assets to be tested for impairment under certain
circumstances, and written off when impaired, rather than being
amortized as previous standards required, as such, effective July 1,
2001, the Customer List will no longer be amortized for financial
statement purposes.
For income tax basis, the Customer Lists and the Covenant Not To
Compete are being amortized over a straight-line method of 15 years as
per the Tax Reform Act of 1993.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although these estimates are based
on management's knowledge of current events and actions it may
undertake in the future, they may ultimately differ from actual
results.
11
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
------------------------------------------------------------
Income Taxes
Effective January 1, 1997, all the subsidiaries, which were
S-Corporations, terminated their S-Corporation elections. The
subsidiaries are filing a consolidated tax return with Able Energy,
Inc.
Effective January 1, 1997, the Company has elected to provide for
income taxes based on the provisions of Financial Accounting Standards
Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes", which requires recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial
statements and tax returns in different years. Under this method,
deferred income tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.
Concentrations of Credit Risk
The Company performs on-going credit evaluations of its customers'
financial conditions and requires no collateral from its customers.
Financial instruments which potentially subject the Company to
concentrations of credit risk consists of checking and savings
accounts with several financial institutions in excess of insured
limits. The excess above insured limits is approximately $186,316. The
Company does not anticipate non-performance by the financial
institutions.
Cash
For the purpose of the statement of cash flows, cash is defined as
balances held in corporate checking accounts and money market
accounts.
Advertising Expense
Advertising costs are expensed at the time the advertisement appears
in various publications and other media. The expense was $341,961 and
$343,342 for the nine months ended March 31, 2003 and 2002,
respectively.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, accrued compensation, and other
accrued liabilities, approximate fair value because of their short
maturities.
12
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
------------------------------------------------------------
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.
Computation of Net Income (Loss) per Share
Basic net income (loss) per share is computed using the
weighted-average number of common shares outstanding during the
period. Diluted net income per share is computed using the
weighted-average number of common and dilutive potential common shares
outstanding during the period. Diluted net loss per share is computed
using the weighted-average number of common shares and excludes
dilutive potential common shares outstanding, as their effect is
anti-dilutive. Dilutive potential common shares primarily consist of
employee stock options.
Impairment of Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable. Measurement of an
impairment loss for long-lived assets that management expects to hold
and use is based on the fair value of the asset. Long-lived assets to
be disposed of are reported at the lower of carrying amount or fair
value less costs to sell.
Recent Accounting Pronouncements
In June 2001, FASB approved two new pronouncements: SFAS No. 141,
"Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 141 applies to all business combinations
with a closing date after June 30, 2001. This Statement eliminates the
pooling-of-interests method of accounting and further clarifies the
criteria for recognition of intangible assets separately from
goodwill.
SFAS No. 142 eliminates the amortization of goodwill and
indefinite-lived intangible assets and initiates an annual review for
impairment. Identifiable intangible assets with a determinable useful
life will continue to be amortized. The amortization provisions apply
to goodwill and other intangible assets acquired after June 30, 2001.
Goodwill and other intangible assets acquired prior to June 30, 2001
will be affected upon adoption. The Company has adopted SFAS No. 142
effective July 1, 2001, which will require the Company to cease
amortization of its remaining net customer lists balance and to
perform an impairment test of its existing customer lists and any
other intangible assets based on a fair value concept.
13
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
------------------------------------------------------------
Recent Accounting Pronouncements (cont'd)
The Company has reviewed the provisions of these Statements. It is
management's assessment that customer lists impairment will not result
upon adoption. As of June 30, 2001, the Company has net unamortized
customer lists of $422,728. Amortization expense of the customer list
was $20,125 for the six month short year ended June 30, 2001 and
$42,052 for the full year ended December 31, 2000.
NOTE 2 NOTES RECEIVABLE
-------------------------
A. The Company has a Receivable from Able Montgomery, Inc. and Andrew
W. Schmidt related to the sale of Able Montgomery, Inc. to Schmidt,
and truck financed by Able Energy, Inc. No payments of principal or
interest had 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,
representing interest of $14,804.13 and principal of $320.84. Payments
were received in November and December 2002, representing December
2001 and January 2002, a total of $3,333.34; interest of $2,678.88,
and principal of $654.46.
The note is secured by a pledge and security agreement and stock
purchase agreement (Stock of Able Montgomery, Inc.), dated December
31, 1998, and the assets of Andrew W. Schmidt with the note dated June
15, 2000. The income on the sale of the company in December 1998 and
the accrued interest on the drawing of the new note are shown as
deferred income in the amount of $79,679.18 to be realized on
collection of the notes.
Maturities of the Note Receivable are as follows:
For the 12 Months Ending
March 31, Principal Amount
--------- ----------------
2003 $ 17,544
2004 11,116
2005 12,219
2006 13,432
2007 14,764
Balance 99,626
---------
Total $ 168,701
=========
14
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 2 NOTES RECEIVABLE (CONT'D)
----------------------------------
B. Able Oil Company has three (3) Notes Receivable for the sale of oil
delivery trucks to independent drivers who also deliver oil for the
Company. The Notes bear interest at the rate of 12% per annum. Two
notes began December 1998 and one began February 1999. The Notes are
payable eight (8) months per year September through April, the oil
delivery season.
Maturities of these Notes Receivable are as follows:
For the 12 Months Ending
March 31, Principal Amount
--------- ----------------
2004 $ 28,046
2005 21,844
2006 7,091
2007 7,712
2008 1,976
---------
Total $ 66,669
=========
NOTE 3 INVENTORIES
Items March 31, June 30,
----- 2003 2002
---- ----
Heating Oil $ 304,704 $ 141,114
Diesel Fuel 39,868 21,642
Kerosene 15,557 6,220
Propane 11,790 12,343
Parts, Supplies and Equipment 583,458 224,105
--------- ---------
Total $ 955,377 $ 405,424
========= =========
NOTE 4 NOTES PAYABLE BANK
On October 22, 2001, the Company and its subsidiaries, either as
Borrower or Guarantor, entered into a loan and security Agreement with
Fleet National Bank. The bank is providing the following credit
facility.
A borrowing base of 75% of Eligible Accounts Receivable, as defined in
the Agreement, plus $500,000 against the value of the Company's
customer list, for a total amount of $1,500,000. The revolving credit
may also be used for Letters of Credit, with the lender's approval.
15
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 4 NOTES PAYABLE BANK (CONT'D)
The Letters of Credit will have an annual fee of 1.25% of the face
value of each Letter of Credit. The applicable interest rate on the
revolving credit advances will be the bank's prime rate or Libor
interest rate, plus 2.75%, see below increase in interest rate.
Interest is to be paid on the amount advanced on the last day of each
month.
As security for the performance of this Agreement, the other Loan
Documents and the payment of the Liabilities, each Borrower and
Guarantor grants, pledges and assigns to Lender a security interest in
all assets of such Borrower or Guarantor, whether now owned or
hereafter acquired including, without limitation, (a) all Accounts,
Goods, Chattel Paper, Equipment, Documents, Deposits, Instruments,
General Intangibles and Payment Intangibles (including, but not
limited to, any and all interests in trademarks, service marks,
patents, licenses, permits, and copyrights), (b) all inventory of
Borrowers, if any, held by any Borrowers for sale or lease or to be
furnished under contracts of service, (c) all Books and Records, (d)
any Account maintained by any Borrower with Lender and all cash held
therein, and (e) all proceeds and products of the foregoing, including
casualty insurance thereon (collectively, the "Collateral").
The Agreement provides for covenants as follows:
1. Use of proceeds only for Working Capital, Letters of Credit and
for acquisitions with Lender's prior written consent.
2. Financial information to be furnished either annually, quarterly
or monthly.
3. Financial covenants to be tested as of the end of each fiscal
quarter.
4. Limitations on loans and investments.
5. Compliance with laws and environmental matters.
6. Limitations on Borrowing.
7. Can not declare or pay any dividends.
All of the above and other items as per article VI of the Agreement.
The Agreement has a current expiration date of November 30, 2002.
Fleet Bank did not renew the credit facility upon expiration of the
Agreement on November 30, 2002. Effective December 1, 2002, the bank
is charging an additional annual interest of 4% as the Note is in
default. The total current interest rate charged is currently 8.25%
per annum. The Company and Lender have entered into a Forbearance
Agreement, where the Lender is willing to forbear until May 31, 2003
from exercising its rights and remedies. The Lender will receive a
forbearance fee of $50,000 at May 31, 2003, reduced by $2,500 for each
week prior to May 31, 2003, that the credit facility and all charges
are paid in full, with a minimum forbearance fee of $15,000. The
interest charged is at 8.25% per annum. The principal amount
outstanding is $1,270,000. Interest for the nine months ended March
31, 2003 was $63,207.
16
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 5 NOTES PAYABLE
A. The Company has borrowed $500,000 from an unrelated individual. The
Note was dated June 26, 2001 with interest at 12% per annum. The
interest will be paid monthly at $5,000 per month commencing on August
1, 2001. The Note will mature on June 26, 2002 unless the borrower
(the Company), at its option, elects to extend the maturity date to
December 26, 2002. The Company has exercised its option and has
extended the Note to December 26, 2002. The lender has granted the
Company an additional extension at the same terms to June 26, 2003.
The Note may be prepaid in whole or part from time-to-time without
penalty. No principal payments have been made on the Note. At the
maturity date, a final payment of the unpaid principal and interest
shall be due and payable. In connection with this Note, the Company
has issued the lender warrants to purchase 40,000 shares of its common
stock at $4 per share. The warrants vest immediately and must be
exercised no later than June 26, 2004. The warrants have not been
registered under the Securities Act of 1933. On January 3, 2003, the
Company borrowed an additional $100,000 from the same individual. The
$100,000 plus $7,000 interest was repaid on April 21, 2003.
B. The Company has borrowed $750,000 from an unrelated company. The
mortgage and note are dated September 13, 2002. The term of the note
is for one (1) year. Payments of interest only on the outstanding
principal balance shall be paid monthly at a rate of 10%. The first
payment was paid on November 1, 2002 and on the first day of each
month thereafter until October 1, 2003, when the Note shall mature and
all principal and accrued interest shall be due and payable in full.
Prepayment Penalty - in the event borrower makes a voluntary principal
payment during the term of this note, borrower shall pay to the lender
a premium equal to three (3) monthly payments of interest on the note.
The note is collateralized by a mortgage dated September 13, 2002 from
Able Energy Terminal, LLC, a wholly owned subsidiary, which is a
second mortgage on the property at 344 Route 46, Rockaway, NJ and also
by all leases and rents related to the property. The lender has been
issued a stock purchase warrant for 100,000 shares at $4 per share.
The warrant has not been registered under the Securities Act of 1933.
The Company has granted the holder piggy-back registration rights for
the Common Stock underlying the warrant on its next registration
statement. This warrant does not entitle the holder to any of the
rights of a stockholder of the Company. Unless previously exercised,
the warrants will expire on September 13, 2004.
NOTE 6 LONG-TERM DEBT
Mortgage note payable dated, August 27, 1999, related to the purchase
of B & B Fuels facility and equipment. The total note was $145,000.
The note is payable in the monthly amount of principal and interest of
$1,721.18 with and interest rate of 7.5% per annum. The initial
payment was made on September 27, 1999, and continues monthly until
August 27, 2009 which is the final payment. The note is secured by a
mortgage made by Able Energy New York, Inc. on property at 2 and 4
Green Terrace and 4 Horicon Avenue, Town of Warrensburg, Warren
County, New York. The balance due on this Note at March 31, 2003 was
$104,940.
17
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 6 LONG-TERM DEBT (CONT'D)
--------------------------------
Mortgage note payable dated, August 31, 1999, related to the purchase
of the facility and equipment in Rockaway, New Jersey by Able Energy
Terminal, LLC ("Terminal"). The note is in the amount of $650,000.
Pursuant to Section 4.4 of the Agreement of Sale to purchase the
Terminal, , the Principal Sum of the $650,000 Note shall be reduced by
an amount equal to one-half of all sums expended by Borrower on the
investigation and remediation of the property provided, however, that
the amount of said reduction shall not exceed $250,000 (the
"Remediation Amount").
The "Principal Sum: Less the "Remediation Amount" shall be an amount
equal to $400,000 (the "Reduced Principal Sum"). The Reduced Principal
Sum shall bear interest from the date hereof at the rate of 8.25% per
annum. Any portion of the Remediation Amount not utilized in the
investigation and remediation of the property shall not begin to
accrue interest until such time that (i) a "No Further Action Letter"
is obtained from the Department of Environmental Protection and (ii)
an outstanding lawsuit concerning the property is resolved through
settlement or litigation (subject to no further appeals). All payments
on this Note shall be applied first to the payment of interest, with
any balance to the payment to reduction of the reduced Principal Sum.
Based upon an amendment, dated November 5, 2001, and commencing with
interest due December 1, 2001, interest will be paid at the rate of
8.25% on the principal sum of $650,000. Only interest is required to
be paid and the principal is due on July 31, 2004 (See Note 10).
The Note is collateralized by the property and equipment purchased and
assignment of the leases. The balance due on this Note at March 31,
2003 was $650,000.
18
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 7 INCOME TAXES
---------------------
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
The differences between the statutory Federal Income Tax and Income
Taxes Continuing Operation is accounted for as follows:
2003
----
Amount Percent
------ -------
Statutory Federal Income Tax $ 513,619 34.0%
Federal Income Tax Reduction due to Carryforward
loss (536,639)
State Income Tax (Note X) 159,980 5.9
State Income Tax Reduction due to Carryforward
loss (169,850)
----------
Income Taxes $ (32,890) 39.9%
========== ====
Income Taxes consist of:
Current $ -
Deferred (32,890)
----------
Total $ (32,890)
==========
2003
----
Percent of
Pretax
Amount Income
------ ------
Statutory Federal Income Tax $ (2,020) 15.0%
State Income Tax (865) 6.5
----------
Income Taxes $ (2,885) 21.5%
========== ====
Income Taxes consists of:
Current $ -
Deferred (2,885)
----------
Total $ (2,885)
==========
(Note X) The State of New Jersey has suspended the use of carryforward losses
for the years 2002 and 2003. As such, state income taxes have been
shown as a deferred asset and as income taxes payable. The Company has
a New Jersey carryforward of approximately $3,140,000. Under current
New Jersey law, the carryforward will be available after 2003, the
Company's fiscal year ending June 30, 2005.
19
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 7 INCOME TAXES (CONT'D)
------------------------------
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax liability and deferred tax
asset and their approximate tax effects are as follows at:
March 31, 2003
--------------
Temporary Tax
Difference Effect
---------- ------
Depreciation and Amortization $ (206,980) $(65,222)
Allowance for Doubtful Accounts 397,358 105,068
Gain on Sale of Subsidiary 18,766 4,035
New Jersey Net Operating Loss Carryforward 1,777,505 159,980
(See Note X, Prior Page)
June 30, 2002
-------------
Temporary Tax
Difference Effect
---------- ------
Depreciation and Amortization $ (169,441) $ (54,712)
Allowance for Doubtful Accounts 242,358 61,668
Gain on Sale of Subsidiary 18,766 4,035
Able Energy, Inc., et al, open years are December 31, 1999, 2000 and
June 30, 2001 and 2002. The Company has a Federal net operating loss
carryforward of approximately $2,740,000. The net operating loss
expires between June 30, 2019 and 2021.
These carryforward losses are available to offset future taxable
income, if any. The Company's utilization of this carryforward against
future taxable income is subject to the Company having profitable
operations or sale of Company assets which create taxable income. For
the nine months ended March 31, 2003, $1,510,644 of net income has
been utilized against the net operating loss carry froward. At this
time, the Company believes that a full valuation allowance should be
provided. The component of the deferred tax asset as of March 31, 2003
are as follows:
Net Operating Loss Carryforward - Tax Effect $430,740
Valuation Allowance (430,740)
---------
Net Deferred Tax based upon Net
Operating Loss Carryforward $ - 0 -
=========
20
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 8 NOTE RECEIVABLE - SUBSIDIARY
-------------------------------------
The Company has a Note Receivable from PriceEnergy.Com, Inc. for
advances made in the development of the Website, including hardware
and software costs. All of PriceEnergy.Com, Inc.'s assets are pledged
as collateral to Able Energy, Inc. The amount of the note is
$1,350,000 dated November 1, 2000 with interest at 8% per annum
payable quarterly. Principal payments to begin two years after the
date of the Note, November 1, 2002. Through March 31, 2003, no
principal has been paid. Interest, in the amount of $54,000 has been
accrued for the nine months ended March 31, 2003. No interest was
accrued for the three months ended March 31, 2003 as the note is non
performing. Unpaid accrued interest due through March 31, 2003 is
$234,000. The Note, accrued interest and interest expense have been
eliminated in the consolidated financial statements (See Notes 1 and
13). Able Oil Company has a Note Receivable originally dated September
30, 2002 in the amount of $1,510,372.73 from PriceEnergy.Com, Inc. The
Note has been updated for transactions during the six months ended
March 31, 2003, resulting in a balance of $1,914,054.91 with interest
at 8% per annum, to be paid quarterly, and was paid in the amount of
$30,000. Principal payments to begin one year after date of Note,
October 1, 2003, and continue monthly thereafter. The Note is the
result of the transference of the unpaid accounts receivable which
resulted from the sale of heating oil through PriceEnergy.Com, Inc.
Able Oil Company has a second position as collateral in all of the
assets of PriceEnergy.Com, Inc. to Able Energy, Inc. Interest in the
amount of $30,000 has been recorded at March 31, 2003. No interest has
been recorded for the quarter ended March 31, 2003. Any payments will
go to pay principal. The note receivable accrued interest and interest
income have been eliminated in consolidation against the amounts on
PriceEnergy.Com, Inc.
NOTE 9 PROFIT SHARING PLAN
----------------------------
Effective January 1, 1997, Able Oil Company established a Qualified
Profit Sharing Plan under Internal Revenue Code Section 401-K. The
Company matches 25% of qualified employee contributions. The expense
was $18,219 (2003) and $23,331 (2002), for the nine months ended March
31.
NOTE 10 COMMITMENTS AND CONTINGENCIES
--------------------------------------
The Company is subject to laws and regulations relating to the
protection of the environment. While it is not possible to quantify
with certainty the potential impact of actions regarding environmental
matters, in the opinion of management, compliance with the present
environmental protection laws will not have a material adverse effect
on the financial condition, competitive position, or capital
expenditures of the Company.
21
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 10 COMMITMENTS AND CONTINGENCIES (CONT'D)
-----------------------------------------------
In accordance with the agreement on the purchase of the property on
Route 46, Rockaway, New Jersey by Able Energy Terminal, LLC, the
purchaser shall commence after the closing, the investigation and
remediation of the property and any hazardous substances emanating
from the property in order to obtain a No Further Action letter from
the New Jersey Department of Environmental Protection (NJDEP). The
purchaser will also pursue recovery of all costs and damages related
thereto in the lawsuit by the seller against a former tenant on the
purchased property. Purchaser will assume all responsibility and
direction for the lawsuit, subject to the sharing of any recoveries
from the lawsuit with the seller, 50-50.
The seller by reduction of its mortgage will pay costs related to the
above up to $250,000 (see Note 6). A settlement has been achieved 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 require a release from the Estate (the Seller)
and a release and indemnification from the Company. The defendants
will provide a release to Able Energy and the Estate. Pursuant to the
original agreement, the Estate 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
$60,667 to March 31, 2003 which are included in Prepaid Expenses and
must be presented to the attorney for reimbursement.
The costs of the cleanup pursuant to the Agreement of Sale must be
shared equally (50/50) by the seller and purchaser up to Seller's cap
of $250,000. Seller's contribution to the cleanup is in the form of a
reduction to the Note and not by direct payments. In the opinion of
management, the Company will not sustain costs in this matter which
will have a material adverse effect on its financial condition.
Price Energy.Com, Inc., a subsidiary, has commenced suit against
ThinkSpark Corporation on Consulting Services Agreement, dated June 2,
2000. ThinkSpark has filed a counterclaim. On January 11, 2002, Price
Energy and ThinkSpark agreed to settle their dispute. Price Energy
will pay ThinkSpark $30,000 and there will be mutual releases of all
claims as well as dismissals of the pending actions in New Jersey and
Texas. The liability as of March 31, 2003 has been paid in full.
Following an explosion and fire that occurred at the Able Energy
Facility in Newton, NJ on March 14, (see Note 20), and through the
subsequent clean up efforts, Able Energy has cooperated fully with all
local, state and federal agencies in their investigations into the
cause of this accident.
22
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 10 COMMITMENTS AND CONTINGENCIES (CONT'D)
-----------------------------------------------
On April 3, 2003, Able Energy received a Notice Of Violation from the
New Jersey Department of Community Affairs ("DCA") citing a total of
13 violations to the New Jersey Administrative Code, Liquefied
Petroleum Gas. Twelve of the violations were assessed a penalty of
$500 each. One of the violations, regarding the liquid transfer from
one truck to another truck, was assessed a penalty of $408,000, for a
total of $414,000.
The DCA document is currently under review by counsel. Based upon
initial review, the company disagrees with many of the findings of the
report and disputes many of the allegations. The company intends to
contest the DCA Notice of Violation and the assessed penalties.
The Company in the normal course of business has been involved in
several suits. Suits in which the company was involved have been
settled out of court at agreeable terms, according to management. No
suits are currently in litigation.
NOTE 11 OPERATING LEASE
------------------------
Able Energy Terminal, LLC, has acquired the following lease on the
property it purchased on Route 46 in Rockaway, New Jersey.
The lease with Able Oil Company, a wholly owned subsidiary of Able
Energy, Inc., has an expiration date of July 31, 2004. The lease
provides for a monthly payment of $1,200 plus a one cent per gallon
through put, as per a monthly rack meter reading.
Estimated future rents are $14,400 per year, plus the one cent per
gallon through put charges per the monthly rack meter readings.
The Company leased 9,800 square feet in the Rockaway Business Centre
on Green Pond Road in Rockaway, New Jersey. The facility will be used
as a call center and will combine the administrative operations in New
Jersey in one facility. The lease has a term of five (5) years from
August 1, 2000 through July 31, 2005.
The rent for the first year is $7,145.83 per month and the second
through fifth year is $7,431.67 per month, plus 20.5% of the
building's annual operational costs and it's portion of utilities. The
current monthly rent, including
Common Area Charges, is $9,799.04 per month.
23
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 11 OPERATING LEASE
------------------------
The lease does not contain any option for renewal. The rent expense
was $86,901 for the nine months ended March 31, 2003. The estimated
future rents are as follows:
Year Ended June 30,
2003 $ 29,397
2004 117,588
2005 117,588
July 2005 9,799
--------
Total $274,372
========
The following summarizes the month to month operating leases for the
other subsidiaries:
Able Oil Melbourne $500.00, per month
Total rent expense, $4,500
Able Energy New York $600.00, per month
Total rent expense, $5,400
NOTE 12 FRANCHISING
The Company sells franchises permitting the operation of a franchised
business specializing in residential and commercial sales of fuel oil,
diesel fuel, gasoline, propane and related services. The Company will
provide training, advertising and use of Able credit for the purchase
of product, among other things, as specified in the Agreement. The
franchisee has an option to sell the business back to the Company
after two (2) years of operations for a price calculated per the
Agreement. The Company signed its first franchise agreement in
September 2000. On June 29, 2001, PriceEnergy.Com franchising, LLC, a
subsidiary, signed its first franchise agreement. The franchisee will
operate a B-franchised business, using the proprietary marks and a
license from PriceEnergy.Com, Inc. and will establish the presence of
the franchisee's company on the PriceEnergy Internet Website. The
franchisee will have the exclusive territory of Fairfield County,
Connecticut as designated in the agreement. The franchisee paid the
following amounts in July 2001:
1. A non-refundable franchise fee of $25,000.
2. An advertising deposit of $15,000 and a $5,000 escrow
deposit.
24
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 12 FRANCHISING (CONT'D)
-----------------------------
The non-refundable fee of $25,000 has been recorded as Other Income in
the period ended December 31, 2001. The advertising deposit was
credited to advertising expense in the year ended June 30, 2002. The
$5,000 Escrow Deposit was returned in September 2002.
NOTE 13 RELATED PARTY TRANSACTIONS
-----------------------------------
$44,690 is due from the major Shareholder/Officer of the Company. This
amount is evidenced by a Note bearing interest at a rate of 6% between
the Shareholder and the Company. This Shareholder has loaned the
Company a total of $380,000 as of March 31, 2003, as evidenced by a
Demand Note with interest at 6% per annum, which can be paid all or in
part at any time without penalty. The balance of the new note is
$368,604 at March 31, 2003
The following officers of this Company own stock in the subsidiary,
PriceEnergy.Com, Inc., which they incorporated in November 1999.
Chief Executive Officer 23.5%
President 3.6%
No capital contributions have been made by these officers (See Notes 1
and 8).
NOTE 14 EARNINGS PER SHARE
---------------------------
The shares used in the computation of the Company's basic and diluted
Earnings Per Common Share are as follows:
March 31, March 31,
2003 2002
---- ----
Weighted Average of Common Shares Outstanding
Used in Basic Earnings Per Share 2,009,814 2,000,921
Dilutive Effect of:
Employee Stock Options 42,937 54,891
Stock Warrants - -
--------- ---------
Weighted Average Common Shares Outstanding
Used in Diluted Earnings Per Share 2,052,751 2,055,812
========= =========
NOTE 15 STOCK OPTION PLANS
---------------------------
The Company has stock option plans under which stock options may be
issued to officers, key employees, and non-employee directors to
purchase shares of the Company's authorized but unissued common stock.
The Company also has a stock option plan under which stock options may
be granted to employees and officers.
25
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 15 STOCK OPTION PLANS
---------------------------
Options granted currently expire no later than 3 to 5 years from the
grant and have vesting periods from none to 25% at grant and 25% each
anniversary.
Outstanding Options
-------------------
Number of Shares Exercise Price Term
---------------- -------------- ----
January 6, 2000
Grants 56,000 $5.00 5 years
Exercises 0
December 1, 2000
Grants 48,090 $3.25 3 years
Exercises 1,250
December 21, 2000
Grants 60,000 $1.80 5 years
Exercises 0
Grants 23,000 $2.25 5 years
Exercises 0
16 STOCK WARRANTS
-----------------------
The Company has issued stock warrants as follows:
1. 60,000 Common Stock Purchase Warrants at $4.81 per share, effective
August 31, 2000, and expiring August 31, 2005, to Andrew Alexander
Wise & Company in connection with an investment banking advisory
agreement with the Company, dated July 1, 2000.
2. 40,000 Common Stock Purchase Warrants at $4.00 per share, effective
June 26, 2001 and expiring June 26, 2004, in connection with a
$500,000 Note Payable (See Note 5). These warrants have not been
registered under the Securities Act of 1933.
3. 100,000 Common Stock Purchase Warrants at $4.00 per share, effective
September 13, 2002, and expiring September 13, 2004, in connection
with a $750,000 Note Payable (see Note 5).
The 200,000 warrants to purchase shares of common stock were
outstanding during the fourth quarter of 2002 and were not included in
the computation of diluted EPS as the warrants' have not been
registered under the Securities Act of 1933.
26
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 17 STOCK ISSUANCE
-----------------------
During the quarter ended September 30, 2002, 6000 shares of Common
Stock were issued to the directors for services rendered during the
year 2001, and charged at the fair market value as Directors' Fees.
The share price was $4.00
per share for a total Directors' Fees of $24,000.
NOTE 18 COMPENSATED ABSENCES
------------------------------
There has been no liability accrued for compensated absences; as in
accordance with Company policy, all compensated absences, accrued
vacation and sick payment must be used by December 31st. At March 31,
2003, any amount for accrual of the above is not material and has not
been computed.
NOTE 19 CASH FLOW INFORMATION
-------------------------------
The Directors received Common Stock as payment of Directors' Fees. No
cash was received or paid. The Company lost fixed assets in the
explosion at its Newton, NJ facility. As of March 31, 2003, there is
no direct effect on cash (See Note 21).
NOTE 20 OTHER EVENTS
----------------------
On March 14, 2003, Able Energy experienced an explosion and fire at
its Newton, New Jersey facility that resulted in the destruction of an
office building on the site, as well as damage to 18 company vehicles
and neighboring properties. Fortunately, there were no serious
physical injuries.
The preliminary results of the company's investigation indicate that
the explosion was an accident that occurred as a result of a
combination of human error and mechanical malfunction.
The Company was able to resume operations the following morning from
other company facilities, avoiding any interruption of service to
customers. Based upon current loss information, the company believes
that the amount of its insurance coverage is sufficient to cover its
potential liabilities for losses and damage.
Final clean-up of the site has concluded. Future plans for the Newton
facility have not yet been determined.
27
ABLE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
JUNE 30, 2002 AND MARCH 31, 2003
NOTE 21 INSURANCE CLAIM
------------------------
The Company suffered a loss of a building, trucks, leasehold
improvements, product inventory and equipment as well as cost of
cleanup and restoration. The Company has filed an insurance claim. The
insurance adjusters are in the process of finalizing the amounts to be
paid to the Company. The estimated costs are $577,416 and is currently
shown as an Insurance Claim Receivable on the balance sheet.
Management anticipates the insurance recovery will cover the company
costs.
NOTE 22 OTHER EXPENSE
----------------------
The Company has been assessed a penalty by the New Jersey Department
of Community Affairs (DCA) (see Note 10). The total amount of $414,000
has been recorded as Other Expense and an accrued liability.
-28-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ABLE ENERGY, INC. AND SUBSIDIARIES
Statements in this Quarterly Report on Form 10-Q 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.
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
NINE MONTHS ENDED MARCH 31, 2003, COMPARED TO THE NINE MONTHS ENDED
MARCH 31, 2002.
The Company reported revenues of $38,177,651 for the nine months ended
March 31, 2003, an increase of 78.66% over the prior year's revenues
for the same nine-month period. The sales increased by $16,808,659.
This increase can be attributed primarily to the Company's continued
aggressive sales activities, which resulted in a larger customer base
as well as an increase in the sales of commercial diesel fuels and
gasoline. The Company's primary delivery territory also experienced
much colder weather and higher margins via a more favorable pricing
structure. A higher commodity cost during this past season due to
economic unrest, and the fear that war could disrupt the world's oil
supply also impacted revenues. The Company experienced a sales
increase in its two main commodities during the nine-month period
ended March 31. Sales of #2 heating oil, the Company's main product
line, grew in revenue dollars by 58.7%. Propane Gas sales, in dollars,
grew by 64.0% for the first nine months over the same period in the
prior year. In addition, the Company increased its sales of new
equipment and HVAC services for the nine months by 67.0%. In addition,
sales of on-road diesel, off-road diesel, and gasoline also
experienced strong revenue growth. Sustained growth in these
non-heating related products and services will also help even out the
seasonality of the Company's business when heating related sales are
generally down. Management has also committed to a realistic gross
margin percentage on these off-season products to allow for maximum
profitability.
Gross profit margin, as a percentage of revenues, for the nine months
ended March 31, 2003, decreased by 1.59%, but Gross Profit in dollars
increased $2,724,784 above the prior year's nine-month results. The
increase in Gross Profit is primarily a result of the Company's margin
management policy, which was put into effect in September of 2001, and
is designed to maintain margins, by product segment, on each of the
products and services that it markets to the consumer. This program is
designed to promote product pricing that is in line with the specific
type and degree of service provided.
Selling, General, and Administrative expenses, as a percent of sales,
decreased by 7.47% from 18.41% in nine months ending March 31, 2002 to
10.94% during the same period in 2003. The Company attributes this
decrease to its continued commitment to controlling expenses,
insurance, telephone, and advertising. Management will continue to
monitor the fiscal budget against actual results on an ongoing basis
in an effort to further reduce SG&A as a percentage of sales.
Operating income for the nine months ended March 31, 2003 was
$1,870,412, as compared to the Company's operating loss of ($557,416)
for the nine months ended March 31, 2002. This operating profit for
nine months was directly related to the increase in sales and gross
margins, and lower percentage of operating costs in comparison to
sales.
Net income for the nine months ended March 31, 2003 was $1,275,747 as
compared to the same period for the previous year loss of ($596,833).
This net income was the result of an increase in the sale of heating
oil, propane, and heating related products, higher gross margins and
lower percentage of operating costs as compared to sales.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003, COMPARED TO THREE MONTHS
ENDED MARCH 31, 2002:
March 31, 2003 March 31, 2002 % Inc / (Dec)
-------------- -------------- -------------
Sales $19,490,580 $8,800,243 121.48%
Gross Profit Margin 3,610,599 2,111,401 71.00%
Selling General & 1,747,490 1,367,605 27.78%
Administrative Expense
Income From Operations 1,545,858 452,972 241.27%
Net Income 1,081,165 420,472 159.13%
The sales increases can be attributed to the Company's continued
aggressive sales activities, which resulted in a larger customer base,
colder weather during the reporting period, more sales of all product
lines, and an increase in service work. The increased margin is the
result of the Company's margin management policy instituted in
September of 2001. Colder weather during this current quarter
including temperatures that were 32% lower than the same period a year
ago, a more favorable pricing structure as discussed earlier, and
lower operating costs all contributed to the Company's operating
profit and net income. The Company reported revenues for the third
quarter of $19,490,580, an increase of 121.48% over the revenues of
the third quarter a year ago. Sales increased by $10,690,337 due to an
increase in heating degree days for the period as compared to the same
quarter one year earlier, increased sales dollars per unit (gallon)
due to an increase in the cost of the commodity, and the Company's
continued uncompromising sales efforts.
Total gross profit margin increased 71.00 % from the same period a
year earlier from $2,111,401 in 2002 to $3,610,599 in the third fiscal
quarter this year. The increase can be attributed to the dramatic
increase in sales for the corresponding period along with continued
focus on proper margin management.
Selling, General, and Administrative expenses, as a percent of sales,
decreased by 6.57% for the third quarter compared to last year. The
Company experienced SG&A of $1,747,490 for the
period ending March 31, 2003 against $1,367,605 the same quarter for
the year prior. This percentage decrease was due to continued efforts
to contain expenses in key areas such as telecommunications,
advertising, and insurance while handling a significant increase in
sales for the period.
Operating Income for the three-month period increased by $1,092,886
from the quarter ending March 31, 2002. The Company had an operating
income for the quarter ending March 31, 2002 of $452,972 as compared
to operating income of $1,545,858 for the quarter ended March 31,
2003. This operating income is due to the increased sales, increased
gross profit, and expense containment efforts as noted above.
OPERATIONAL EFFICIENCIES
The Company believes that it will continue to increase the utilization
of existing personnel and equipment, thus continuing to reduce
expenses as a percent of sales, and increasing profitability, within
its current business configuration.
This current fiscal year represents the Company's second year of its
margin management program designed to increase profitability without
sacrificing customer appeal. The Company believes that there is value
to the products and services that it provides to its consumers in
varying levels based upon the specific needs of the consumer and the
products provided. As evidenced by the margin performance this year to
date, coupled with the increase in sales this program is working and
has been expanded to include equipment sales/service.
The Company will begin service billing utilizing a methodology known
as "Flat Rate Pricing", an approach similar to that used in the
automobile repair field. Flat rate pricing will be introduced in
stages with the first phase beginning in the 2nd fiscal quarter of the
current year. This system will give sales and service personnel the
ability to offer the customer an easy to understand, "package
approach" to repairs and equipment installations with one or two line
billings per invoice. This system will interface with the Company's
automated dispatch communications program that was introduced last
year. It is anticipated that this system will be fully implemented
within one year.
RECENTLY IMPLEMENTED TECHNOLOGICAL PROCEDURES
The Company has established goals, which will be accomplished through
the implementation of some modern technologies that are currently
being installed into the Company's existing infrastructure.
The Company has introduced additional customer service technology to
its Rockaway call and administrative center during the third fiscal
quarter of 2002/2003. Able Energy management believes that by
providing enhancements to its existing telephony hardware and in-house
management, the Company's call center environment will be provided
with the ability to respond to changing call patterns, both higher and
lower, without the expense of clerical over-staffing to meet
unrealized needs. New software now provides the customer with the
option of placing an order via a voice activated technology. This will
enable customers who simply wish to refill their fuel tank, the
opportunity to quickly place an order 24 hours a day without the help
of a live customer service representative.
The Company is now beginning full implementation of the recently
announced automated dispatch technology, which provides management
with the ability to communicate with service technicians
instantaneously. This system also is now performing billing functions
at the customer's location as well as documenting payment data
instantaneously. Additionally, management is now aware of the status
of every on-duty worker and obtains real time reporting for stand-by,
en route, and service work time. This enables the Company to maximize
scheduling opportunities and eliminating service technician down time.
OPERATING SUBSIDIARY
The company's new operating subsidiary, PriceEnergy with it state of
the art order-processing platform, is now in its second full year of
operation. This revolutionary proprietary technology is fully
automated and allows for the removal of the inefficiencies associated
with traditional heating oil companies within this industry. For the
first nine months of this fiscal year, PriceEnergy generated 2,042,191
incremental gallons, which were delivered by PriceEnergy's dealer
network, which also includes Able Energy as a participating dealer. In
November of 2002, PriceEnergy signed a contract with BJ's Wholesale
Club to sell heating oil and other services in their club stores. On
December 16th 2002, PriceEnergy began sales of Home Heating Oil in the
initial BJ's stores. Gallons sold through this new venue have been
increasing with each week. The Company is very pleased with these
recent developments and the joint progress that has been made with
this new "Channel Partner". The Company believes that this is the
first of many prime retail opportunities to utilize the PriceEnergy
operating platform to open new markets for the sales of heating oil,
diesel fuel, and propane gas.
EXPLOSION AND FIRE
On March 14, 2003, Able Energy experienced an explosion and fire at
its Newton, New Jersey facility that resulted in the destruction of an
office building on the site, as well as damage to 18 company vehicles
and neighboring properties. Fortunately, due to the immediate response
by employees at the site, a quick evacuation of all personnel occurred
prior to the explosion, preventing any serious injuries.
The preliminary results of the company's investigation indicate that
the explosion was an accident that occurred as a result of a
combination of human error, mechanical malfunction, as well as the
failure to follow prescribed state standards for propane delivery
truck loading. On April 3, 2003, Able Energy received a Notice of
Violation from the New Jersey Department of Community Affairs. The
dollar amount of the assessed penalty totaled $414,000. Able Energy
has contested the Notice of Violation as well as the assessed
penalties with the State of New Jersey and is awaiting a hearing date.
Able Energy has worked closely, and cooperated fully with all local
and state officials in the clean up phase, tank testing process, and
subsequent investigations. Strict and clear employee communications
have taken place to reinforce compliance with all governmental
regulations as well as company policy. The company has retained the
assistance of Boyer Safety Services, experts in the propane industry;
to hold safety-training sessions for all propane related employees.
This training will be ongoing and will upgrade employee training to
the most modern and up-to-date levels as well as reinforce Able
Energy's commitment to operate all aspects of the company in a
professional, responsible, and safe manner.
Company operations have continued throughout the aftermath of the
incident and management believes that it can fully recover to normal
delivery operations this quarter from its alternate site in Rockaway,
New Jersey.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended March 31, 2003, compared to the nine months
ended March 31, 2002, the Company's cash position decreased by
$359,276 from $371,166 to $11,890. For the year ended June 30, 2002,
cash was generated through collections of customer advance payments,
and an increased loan from the bank. In the nine months ending March
31, 2003, the Company entered into an agreement and received a loan of
$750,000 from a private company and a loan in excess of $300,000 from
the C.E.O. The Company is in discussions with a financial institution
to obtain a term loan of $3 million to consolidate a large portion of
its existing debt and also obtain a working capital line of credit of
$2 million. This will enable the Company to continue to grow while
strengthening its infrastructures.
SEASONALITY
The Company's operations are subject to seasonal fluctuations, with a
majority of the Company's business occurring in the late fall and
winter months. Approximately 70% of the Company's revenues are earned
and received from October through March, most of such revenues are
derived from the sale of home heating products including propane gas
and home heating oil. However the seasonality of the Company's
business is offset, in part, by an increase in revenues from the sale
of HVAC products and services, diesel and gasoline fuels during the
spring and summer months, due to the increased use of automobiles and
construction apparatus
From May through September, Able Oil can experience considerable
reduction of retail heating oil sales. Similarly, Able Propane can
experience up to an 80% decrease in heating related propane sales
during the months of April to September, this is offset somewhat by
increased sales of propane gas used for pool heating, heating of
domestic hot water in homes and fuel for outdoor cooking equipment.
Over 90% of Able Melbourne's revenues are derived from the sale of
diesel fuel for construction vehicles, and commercial and recreational
sea-going vessels during Florida's fishing season, which begins in
April and ends in November. Only a small percentage of Able
Melbourne's revenues are derived from the sale of home heating fuel.
Most of these sales occur from December through March, Florida's
cooler months.
ABLE ENERGY, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
Nine Months Ended March 31, Three Months Ended March 31,
2003 2002 2003 2002
---- ---- ---- ----
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
Sales $38,177,651 $21,368,992 $19,490,580 $ 8,800,243
Gross Profit 6,960,342 4,235,558 3,610,599 2,111,401
Operating Income (Loss) 1,870,412 (557,416) 1,545,858 452,972
Net Income (Loss) 1,242,857 (596,833) 1,041,275 420,472
Basic Net Income (Loss) Per Share .63 (.30) .54 .21
EBITDA (1) 2,368,334 301,215 1,449,109 743,796
CONSOLIDATED BALANCE SHEET AT MARCH 31, AT MARCH 31,
--------------------------
2003 2002
---- ----
Cash $ 11,890 $ 371,166
Current Assets 6,666,013 3,418,986
Current Liabilities 7,320,312 5,076,281
Total Assets 13,703,983 10,891,470
Long Term Liabilities 1,822,784 1,649,027
Total Stockholders' Equity 4,560,887 4,166,162
(1) Earnings Before Interest, Income Taxes, Depreciation and Amortization
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES
As of March 31, 2003, an evaluation was performed under the supervision and
with the participation of the Company's management, including the Principal
Executive Officer and the Principal Accounting Officer, of the effectiveness of
the design and operation of the Company's disclosure controls and procedures.
Based on that evaluation, the Company's management, including the Principal
Executive Officer and the Principal Accounting Officer, concluded that the
Company's disclosure controls and procedures were effective as of March 31,
2003. There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect internal controls subsequent
to March 31, 2003.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None for period ending March 31, 2003.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On November 30, 2002, our note with Fleet Bank was due in the amount of
$1,270,000. Effective December 1, 2002, the bank is charging an additional
annual interest of 4%. We are currently in the process of negotiating an
extension with the lender.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On March 14, 2003, Able Energy experienced an explosion and fire at
its Newton, New Jersey facility that resulted in the destruction of an
office building on the site, as well as damage to 18 company vehicles
and neighboring properties. On April 3, 2003, Able Energy received a
Notice of Violation from the New Jersey Department of Community
Affairs. The dollar amount of the assessed penalty totaled $414,000.
Able Energy has contested the Notice of Violation as well as the
assessed penalties with the State of New Jersey and is awaiting a
hearing date.
On April 7, 2003, Able Energy, Inc., Able Propane, LLC, and Able Oil
Company, LLC and Able Oil Company were named as defendants in a class
action complaint filed with the Superior Court of New Jersey, Sussex
County. The plaintiffs allege negligence, gross negligence, trespass,
private nuisance and strict liability. In addition, the plaintiffs
seek recovery of punitive damages. We intend to defend the suit
vigorously.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended March 31, 2003.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on this 15th day of May 2003.
ABLE ENERGY, INC.
/s/ Timothy Harrington
Timothy Harrington, Chief
Executive Officer, Secretary, and
Chairman
/s/ Christopher P. Westad
Christopher P. Westad, President,
Chief Financial Officer, and
Director
CERTIFICATION
I, Timothy Harrington, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Able Energy, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
May 15, 2003
/s/ Timothy Harrington
Timothy Harrington
Chief Executive Officer
CERTIFICATION
I, Christopher P. Westad, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Able Energy, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
May 15, 2003
/s/ Christopher P. Westad
Christopher P. Westad
Chief Financial Officer