Item 1A. Risk Factors

  

Set forth below are certain risks and uncertainties relating to our business that the Company has elected to disclose, although not required to do so because we are a Smaller Reporting Company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

You should carefully  consider  the  following  information  about  risks described below, together with the other  information  contained in this Annual Report  and in our  other  filings  with the SEC,  before  you  decide to buy or maintain an investment in our common stock. We believe the risks described below are the risks that are material to us as of the filing date of this Annual Report.  If any of the following risks actually occur, our business financial condition, operating results and future growth prospects would likely be material and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of the money you paid to buy our common stock.

We do not believe we have, and we are unsure whether we will be able to generate, sufficient funds to sustain our operations through the next twelve months.

 Our management believes that  currently  available  funds  will  not  be sufficient  to sustain our  operations  at current  levels  through the next twelve months.  The Company has incurred losses from continuing operations during the years ended June 30, 2008 and 2007 of approximately, $12.9 million and $6.6 million, resulting in an accumulated deficit balance of approximately $30.6 million as of June 30, 2008. At June 30, 2008, we had $3.0 million in cash and cash equivalents and a working capital deficiency of $12.9 million.  Our ability to continue to operate at current levels depends  upon,  among other  things,  our ability to generate  sufficient  revenue from  the sale of our  products  and services and  the  receipt of  continued  funding  from our existing short-term and long-term financing sources.

In the long-term, our ability to continue as a going concern is dependent on generating sufficient revenue from product sales and the sale of our services. Our ability to generate significant revenue from any of these or other sources is uncertain.  Historically, our operations have not generated sufficient revenue to cover our costs.  In the event that our operations do not generate sufficient cash, we could be required to reduce our level of operations while attempting to raise additional working capital.  We can give no assurance that additional financing will be available to us on acceptable terms or at all.  The failure to obtain any necessary additional financing would have a material adverse effect on us. If adequate funds are not available or are not available on acceptable terms, our ability to fund our operations and any intended expansion, to take advantage of business opportunities, to develop or enhance products or services or to otherwise respond to competitive pressures would be significantly limited, and we might need to significantly restrict or discontinue our operations.

 

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The report of our independent registered public accounting firm on our consolidated financial statements as of June 30, 2008 and for the year then ended contains explanatory paragraphs stating that there is substantial doubt as to our ability to continue as a going concern and to indicate that the June 30, 2006 auditors did not consent to reissue its report in the filing of the June 30, 2007 Annual Report on Form 10-K. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. This uncertainty may affect our ability to raise additional capital and may also negatively impact our relationships with current and potential suppliers and customers.

These are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial may also impair our business. If any of the following risks actually occur, the business, operating results or financial condition could be material adversely affected.

We have a history of operating losses and expect to sustain losses in the future and may still sustain losses in the future even if we successfully and efficiently integrate the assets of Properties into our business

We have experienced significant operating losses in five out of the last seven fiscal years.  For the year ended June 30, 2008, we had a loss of approximately $12.9 million.  We also expect to incur a loss for the fiscal year ending June 30, 2009.

Managing our growth may affect financial performance

Our growth and expansion has required, and will continue to require, increased investment in management and financial personnel, financial management systems and controls, as well as facilities.  We intend to continue to expand our business and operations, including entry into new markets, which will place additional strain on our management and operations. Our future operating results will depend, in part, on our ability to continue to broaden our senior management group and administrative infrastructure, and our ability to attract, hire and retain skilled employees. Our success will also depend on the ability of our officers and key employees to continue to implement and improve our operational and financial control systems and to expand, train and manage our employee base. In addition, our future operating results will depend on our ability to expand our sales and marketing capabilities and expand our customer support operations commensurate with our growth, should such growth occur. If our revenues do not increase in proportion to our operating expenses, our management systems do not expand to meet increasing demands, we fail to attract, assimilate and retain qualified personnel, or our management otherwise fails to manage our expansion effectively, there would be a material adverse effect on our business, consolidated financial condition and operating results.

Substantial long-term debt may adversely impact our long-term ability to expand

As of June 30, 2008, we had long-term liabilities of $3.9 million. Our ability to satisfy such obligations will depend on our future operating performance, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, many of which are beyond our control. There can be no assurance that we will be able to service our indebtedness. If we are unable to service our indebtedness, we will be forced to examine alternative strategies that may include actions such as reducing or delaying capital expenditures, restructuring or refinancing our indebtedness, or the sale of assets or seeking additional equity and/or debt financing.   There can be no assurance that we will be able to implement any of these strategies even if the need arises.

Growth dependent upon unspecified acquisitions and adequate financing

 

Our growth strategy includes the acquisition of existing fuel distributors and truck stops. There can be no assurance that we will be able to identify new acquisition candidates or, even if a candidate is identified, that we will have access to the capital necessary to consummate such acquisitions. Furthermore, the acquisition of additional companies involves a number of additional risks. These risks include the diversion of management's attention from our operations, possible difficulties with the assimilation of personnel and operations of acquired companies, the earnings impact associated with the amortization of acquired intangible assets, and the potential loss of key employees of acquired companies. The future success of our business will depend upon our ability to manage our growth through acquisitions. The Company’s objective is to grow our customer base through mergers and acquisitions. There can be no assurance that we will have the financing or management and operating personnel to accomplish this objective.

 

SEC formal order of private investigation

On September 7, 2006, we received a Formal Order of Private Investigation from the SEC pursuant to which we, certain of our officers and a director were served with subpoenas requesting certain documents and information.  The Formal Order authorizes an investigation of possible violations of the anti-fraud provisions of the federal securities laws with respect to the offer, purchase and sale of our securities and our disclosures or failures to disclose material information in our required filings. While we believe that we did not violate any securities laws and we have cooperated fully with and assisted the SEC in its inquiry, there can be no certainty with regard to the outcome of the investigation and there can be no assurance that there will not be a material adverse effect on us.   The cost of complying with the SEC investigation may affect our liquidity, consolidated results of operations, and ability to raise cash through the sale of debt or equity securities.

 

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Trademarks and service marks

 

We believe that our trademarks and service marks have significant value and are important to the marketing of our travel plaza operations, fuel distribution products and services. There can be no assurance, however, that our proprietary marks do not or will not violate the proprietary rights of others, that our marks would be upheld if challenged or that we would not be prevented from using our marks, any of which could have an adverse effect on us and our results of operations. In addition, there can be no assurance that we will have the financial resources necessary to enforce or defend our trademarks and service marks against infringement.  Should there be an infringement, and the Company is unsuccessful in litigation, it may negatively impact the Company’s revenue.

Liquidity and going concern uncertainty

Our net loss for the year ended June 30, 2008, was $12.9 million, including non-cash charges totaling approximately $3.8 million. The Company has been funding its operations through financing its receivables and credit card receivables, an asset-based line of credit, the issuance of convertible debentures and the proceeds from the exercise of options and warrants.  The Company will need some combination of new financing, restructuring of existing financing, improved receivable collections and/or improved operating results in order to maintain adequate liquidity over the course of the 2009 fiscal year.  

As of June 30, 2008, the Company had a cash balance of approximately $3.0 million, of which $1.5 million represents an obligation for funds received in advance under the pre-purchase fuel program.  At June 30, 2008, the Company had available borrowings through its credit line facility of $0.8 million.  In order to meet our liquidity requirements, the Company continues to explore financing opportunities available to it.

The Company is attempting to expand the customer base of its Oil Segment and is pursuing other lines of business, which include expansion of its current commercial business into other products and services such as bio-diesel, solar energy and other energy related home services.  The Company is also evaluating all of its business segments for cost reductions, consolidation of facilities and efficiency improvements.  There can be no assurance that we will be successful in our efforts to enhance our liquidity situation.

The accompanying Consolidated Financial Statements included elsewhere in this filing have been prepared in conformity with United States generally accepted accounting principles, which contemplate continuation of the Company as a going concern and assume realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses from continuing operations during the years ended June 30, 2008 and 2007 of $12.9 and $6.6 million, respectively.  Net cash used in operations during the years ended June 30, 2008 and 2007 was $3.6 million and $1.3 million, respectively.  At June 30, 2008, the Company has a working capital deficiency of $12.9 million.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  The Consolidated Financial Statements included elsewhere in this filing do not include any adjustments relating to the recoverability of the recorded assets or the classification of the liabilities that may be necessary should the Company be unable to continue as a going concern.

The Company will require some combination of new financing, restructuring of existing financing, improved receivable collections and/or improved operating results in order to maintain adequate liquidity over the course of the year ending June 30, 2009.   Also, see “Timeliness of future SEC filings”, below.

There can be no assurance that the financing or the cost saving measures as identified above will be satisfactory in addressing the short-term liquidity needs of the Company.  In the event that these plans cannot be effectively realized, there can be no assurance that the Company will be able to continue as a going concern.

A limited market for our common stock and "Penny Stock" rules may make buying or selling our common stock difficult

Our common stock presently trades on the pink sheets. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the price of, our securities.  In addition, our common stock is subject to the penny stock rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors.  The SEC regulations generally define a penny stock to be an equity that has a market price of less than $5.00 per share, subject to certain exceptions.  Unless an exception is available, those regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions).  In addition, the broker-dealer must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account.  Moreover, broker-dealers who recommend such securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to transactions prior to sale.  Regulations on penny stocks could limit the ability of broker-dealers to sell our common stock and thus the ability of purchasers of our common stock to sell their shares in the secondary market.

 

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Our share price may decline due to a large number of shares of our common stock eligible for sale in the public markets.  As of June 30, 2008, we had outstanding 14,965,389 shares of common stock and up to 7,127,524 shares issuable upon exercise of the Company’s outstanding options, warrants and convertible debentures. Of the Company’s 14,965,389 outstanding shares, 11,666,667 of these shares were issued in connection with the consummation of the acquisition of the assets of Properties.  These shares are restricted and will be held pursuant to Rule 144.  With such a substantial number of shares eligible for future sale, our stock price may decline and investors may find it difficult to sell their shares in the open market at or above their basis in the stock.

Registration rights agreements

On July 12, 2005, the Company consummated a financing with certain purchasers in the sale of $2.5 million of Variable Rate Convertible Debentures (the "Debentures"). The Debentures may be converted at the option of the purchasers into shares of our common stock at a conversion price of $6.50 per share. In addition, the purchasers of these Debentures received five (5) year warrants to purchase an aggregate of 192,308 of common stock at an exercise price of $7.15 per share (the “2005 Warrants”).  Pursuant to the Registration Rights Agreement among the parties, the Company filed a registration statement covering the shares of its common stock that may be issued through the conversion of the Debentures and exercise of the 2005 Warrants.  This registration statement was declared effective on December 20, 2005.  Since that date, the purchasers converted into shares of the Company’s common stock approximately $2.4 million of the principal of the Debentures.  The Company has an obligation to keep this registration statement effective on a continuous basis, which obligation the Company breached when it failed to update the registration statement with new audited consolidated financial statements by October 31, 2006.  As a result of this breach, the purchasers of the Debentures are entitled to partial liquidated damages in the amount of 2% of the aggregate purchase price of the Debentures then held by the purchasers (which remaining balance of the Debentures at June 30, 2008 is $132,500) for each month that our breach continues.  There are no liquidated damages for not maintaining an effective registration statement covering the 2005 Warrants.  The unpaid liquidated damages accrue interest daily based on the rate of 18% per annum.  Additionally, the Company’s breach of its registration obligations constitutes a default under the Debentures, which enables the purchasers to declare the Debentures immediately due and payable.  As of June 30, 2008, the Company has not received any notice from the purchasers of the Debentures regarding this registration rights default.

On July 5, 2006, the Company closed a Securities Purchase Agreement entered into on June 30, 2006 whereby it sold a $1 million convertible term note to Laurus Master Fund, Ltd. ("Laurus").  In conjunction with this issuance the Company agreed that within sixty (60) days from the date of issuance of the convertible term note payable and warrant that it would file a registration statement with the SEC covering the resale of the shares of the Company's convertible term common stock issuable upon conversion of the note and the exercise of the warrant. This registration statement would also cover any additional shares of common stock issuable to Laurus as a result of any adjustment to the fixed conversion price of the note or the exercise price of the warrant.   The agreement does not provide any formula for liquidated damages.  The Company did not file a registration statement by August 29, 2006 covering the common stock issuable upon conversion of the convertible term note and the exercise of warrants issued to Laurus.  As of the filing date of this Annual Report, the Company has yet to file that registration statement.  Consequently, the Company is in breach of its registration obligations to Laurus.  As of June 30, 2008, the Company has not received any notice from Laurus regarding this registration rights default and or the assessment of any penalties that might have resulted therefrom.

On August 8, 2006, the Company issued $2,000,000 of convertible debentures to certain investors. In conjunction with this issuance, the Company had agreed to file a registration statement within forty-five (45) days, or by September 22, 2006, covering the resale of the shares of common stock underlying the debentures and warrants issued to the investors, and by October 15, 2006, to have such registration statement declared effective.  The registration rights agreement with the investors provides for partial liquidated damages in the case that these registration requirements are not met.    From the date of violation, the Company is obligated to pay liquidated damages of 2% per month of the outstanding amount of the convertible debentures, up to a total of 24% of the initial investment, or $0.5 million.  As of the filing date of this Annual Report, the Company has not yet filed a registration statement regarding these securities.   Accordingly, through June 30, 2008, the Company has incurred a liquidated damages obligation of $0.5 million, none of which has been paid.    In addition, the Company is obligated to pay 18% interest per annum on any damage amount not paid in full within 7 (seven) days.  Through June 30, 2008, the Company has incurred an interest obligation of $0.1 million, none of which has been paid.  As of the filing date of this Annual Report, the holders have not waived their rights under this agreement.  Additionally, the Company’s breach of its registration obligations constitutes a default under the agreement, which enables the holders to declare the convertible debentures immediately due and payable.  As of the filing date of this Annual Report, the Company has not received any notice from the purchasers of the convertible debentures regarding this registration rights default or any other default notice.

 

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As of the filing date of this June 30, 2008 Annual Report on Form 10-K, we are in non-compliance with the registration rights requirements of certain financings set forth above covering in the aggregate, 6,698,685 shares of our common stock.

Listing of common stock

Our common stock is currently quoted on the Pink Sheets under the symbol (“ABLE.PK”). The Company will apply for eligibility for trading on the OTC Bulletin Board as soon as it qualifies for listing after it is in compliance with its required SEC filings.  To continue such eligibility, we must file our periodic reports with the SEC on a timely basis.  If we fail to file such reports within 10 days of their due date, our stock will cease to be eligible for quotation on the OTC Bulletin Board.  There can be no assurance that our application for eligibility for quotation on the OTC Bulletin Board will be accepted.  If we fail to have our common stock eligible for quotation on the OTC Bulletin Board, the trading volume of our stock may be adversely affected and stockholders may not able to sell any or all of their shares at or above their basis in such stock, which would result in a loss for a selling stockholder.

Timeliness of future SEC filings

The Company was unable to file this Annual Report on Form 10-K on a timely basis. The late filing of this document may adversely affect our ability to raise capital and erode investor confidence.  The Company will continue to make every effort to keep all our SEC filings up-to-date.

Seasonal factors

 

Our revenues and income are derived from the home heating oil business and our auto and travel plaza service business.  Our home heating oil business is seasonal and is a material portion of our business. A substantial portion of the home heating oil business is conducted during the fall and winter months. Weather patterns during the winter months can have a material adverse impact on our revenues. Although temperature levels for the heating season have been relatively stable over time, variations can occur from time to time, and warmer than normal winter weather will adversely affect the results of the Company's fuel oil operations.  Our travel plaza services business is much less susceptible to the seasonality issues experienced in our heating oil business.

Approximately 60% to 65% of our revenues from our Oil Segment business are earned and received from October through March. During the spring and summer months, revenues from the sale of diesel and gasoline fuels increase, due to the increased use of automobiles and construction apparatus.

 

Fuel pricing and the effect on profitability

 

Disruption of fuel supply and fuel pricing would adversely affect our profitability. Increases in the pricing for fuel and home heating oil will also adversely affect our profit margins associated with our businesses, since we may not be able to pass on our proportional increases to our customers.

 

Other factors which may have a significant effect on fuel prices include: natural disasters, such as those which have devastated the Gulf Coast (areas that are major producers, distributors or refiners of petroleum-based products); major global conflicts, especially those involving the U.S. and/or oil producing countries, strikes or political conflict in oil producing countries and the stability of OPEC and its desire not to disrupt worldwide economies through poor management of fuel supply and pricing.

In the future, interruptions in the world fuel markets may cause shortages in, or total curtailment of, fuel supplies. Moreover, a substantial portion of the oil refining capacity in the United States is controlled by major oil companies. These companies, for various reasons (e.g. for new standards imposed by EPA) could in the future decide to limit the amount of fuel sold to independent operators such as us. Any material decrease in the volume of fuel sold for any extended period of time could have a material adverse effect on the results of operations. Similarly, an extended period of instability in the price of fuel could adversely affect our results.

 

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Government regulation

 

Federal, state and local laws, particularly laws relating to the protection of the environment and worker safety, can materially affect our operations. The transportation and dispensing of fuel oil, diesel fuel, propane and gasoline is subject to regulation by various federal, state and local agencies, including the U.S. DOT. These regulatory authorities have broad powers and we are subject to regulatory and legislative changes that can affect the economies of the industry by requiring changes in operating practices or influencing demand for, and the cost of providing, its services. Additionally, we are subject to random DOT inspections. Any material violation of DOT rules or the Hazardous Materials Transportation Act may result in citations and/or fines on us. In addition, we depend on the supply of petroleum products from the oil and gas industry and, therefore, we may be affected by changing taxes, price controls and other laws and regulations relating to the oil and gas industry generally. We cannot determine the extent to which future operations and earnings may be affected by new legislation, new regulations or changes in existing regulations.

The technical requirements of these laws and regulations are becoming increasingly expensive, complex and stringent. These laws may impose penalties or sanctions for damages to natural resources or threats to public health and safety. Such laws and regulations may also expose us to liability for the conduct or conditions caused by others. Sanctions for noncompliance may include revocation of permits, corrective action orders, administrative or civil penalties and criminal prosecution. Certain environmental laws provide for joint and several liabilities for remediation of spills and releases of hazardous substances. In addition, companies may be subject to claims alleging personal injury or property damages as a result of alleged exposure to hazardous substances, as well as damage to natural resources.

 

Potential environmental liability

 

Our fuel distribution is subject to all of the operating hazards and risks that are normally incidental to handling, storing, transporting and delivering fuel oils, gasoline, diesel and propane, which are classified as hazardous materials. We face potential liability for, among other things, fuel spills, gas leaks and negligence in performing environmental clean-ups for our customers. Specifically, we maintain fuel storage facilities on sites owned or leased by us, and could incur significant liability to third parties or governmental entities for damages, clean-up costs and/or penalties in the event of certain discharges into the environment. Such liability can be extreme and could have a material adverse effect on our financial condition or results of operations. Although we believe that we are in compliance with existing laws and regulations, there can be no assurance that substantial costs for compliance will not be incurred in the future. Any substantial violations of these rules and regulations could have an adverse affect upon our operations. Moreover, it is possible that other developments, such as more stringent environmental laws, regulations and enforcement policies thereunder, could result in additional, presently unquantifiable, costs or liabilities to us.

 

No assurance of adequate insurance protection

 

We maintain insurance policies in such amounts and with coverage and deductibles as our management believes are reasonable and prudent. There can be no assurance, however, that such insurance will be adequate to protect us from liabilities and expenses that may arise from claims for personal and property damage arising in the ordinary course of business or that such level of insurance will be maintained by us at adequate levels or will be available at economic prices. Should the Company not be able to negotiate additional coverage at economical rates, it may negatively affect the Company’s consolidated results of operations.

Competition from alternative energy sources (for the home heating oil division)

 

Our retail home heating business competes for customers with suppliers of alternate energy products, principally natural gas and electricity. Every year, a small percentage of our oil customers convert to other home heating sources, primarily natural gas. In addition, we may lose additional customers due to conversions during periods in which the cost of its services exceeds the cost of alternative energy sources.  If this trend continues and the Company is not able to replace these lost customers through expansion or increased market share, it could cause the Company to lose significant revenues. At this point, Able has not suffered any significant loss as a result of conversion to these alternative energy sources.

 

Concentration of wholesale suppliers for heating oil

We purchase our #2 heating oil fuel supplies on the spot market. We currently satisfy our inventory requirements with ten different suppliers, the majority of which have significant domestic fuel sources, and many of which have been suppliers to us for over five years. Our current suppliers are Hess, Conectiv Energy, Mirabito, Fossil Fuel, Burke Petroleum, Leighow Oil, BioHeat of Colorado, Farm & Home, North Jersey Oil and Sunoco, Inc.  We monitor the market each day and determine when to purchase our oil inventory and from whom.

 

During the year ended June 30, 2008, eleven suppliers (Sunoco, Hess, Sprague Energy, Catamount Petroleum, Petrocom Energy, Petron Oil Corp., Gulf Oil Corporation, Royal North Jersey Oil, Farm & Home Oil Company, Burke Petroleum, and Valero Supply and Marketing) provided Able Oil and Able NY with approximately 89 % of its heating oil requirements. 

 

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TransMontaigne Product Services, Inc. provided Able Melbourne with 100% of its diesel fuel product requirements for the year ended June 30, 2008 and Fleetwing provided Able Melbourne with all of its lubricant and related product requirements for the year ended June 30, 2008. 

Management believes that if our supply of any of the foregoing products was interrupted, we would be able to secure adequate supplies from other sources without a material disruption in its operations. However, there can be no assurance that adequate supplies of such products will be readily available in the future or that the price the Company may be required to pay for such fuel or the credit terms for such purchases will be acceptable to the Company.  Furthermore, currently these suppliers extend us credit toward the purchase of our fuel supplies. There can be no assurance that these suppliers will continue to offer us acceptable credit terms.  Should the Company need to secure alternative suppliers for these products, the pricing would be approximately the same.

Absence of written agreements

 

Approximately 86% of our home heating customers do not have written agreements with us and can terminate services at any time, for any reason. Although we have never experienced a significant loss of our customers, if we were to experience a high rate of terminations, our business and financial condition could be adversely affected.  While the Travel Plaza Segment has a number of loyalty based supply and services agreements with commercial fleet customers, none of these agreements require the commercial fleet operators to purchase their fuel and services from the Travel Plaza Segment.

 

Risks associated with expansion into new markets

 

A significant element of our future growth strategy involves the expansion of our business into new geographic and product markets. Expansion of our operations depends, among other things, on the success of our marketing strategy in new markets, successfully establishing and operating new locations, hiring and retaining qualified management and other personnel and obtaining adequate financing for vehicle and site purchases and working capital purposes.

Dependence on and relative inexperience of key personnel

 

Our future success will depend, to a significant extent, on the efforts of current key management personnel, including Gregory D. Frost, Chairman and Chief Executive Officer, Richard A. Mitstifer, President, Daniel L. Johnston, Chief Financial Officer, William Roger Roberts, Chief Operating Officer, Frank Nocito, Executive Vice-President, Louis Aponte, President, Home Heating Oil Segment and John L.Vrabel, Chief Operating Officer, Price Energy Unit.   On May 24, 2007, Gregory D. Frost gave notice to the Board of Directors that he was ending his leave of absence as Chief Executive Officer and Chairman of the Board and was resuming his duties.  Messrs Mitstifer, Johnston, Roberts and Nocito were appointed to their current positions by the Board of Directors on September 24, 2007.  Mr. Aponte was appointed to his position on October 22, 2008.  The loss of one or more of these key employees could have a material adverse effect on our business. In addition, we believe that our future success will depend, in large part, upon our continued ability to attract and retain highly qualified management, technical and sales personnel. There can be no assurance that we will be able to attract and retain the qualified personnel necessary for our business.

Competition

Our Oil Segment business is highly competitive. In addition to competition from alternative energy sources, we compete with distributors offering a broad range of services and prices, from full service distributors similar to ours, to those offering delivery of home heating fuel only. Competition with other companies in the retail home heating industry is based primarily on customer service and price. Longstanding customer relationships are typical in the home heating industry. Many companies, including ours, deliver fuel to their customers based upon weather conditions and historical consumption patterns without the customers making an affirmative purchase decision each time fuel is needed. In addition, most companies, including ours, provide equipment repair service on a 24 hour-a-day basis, which tends to build customer loyalty. We compete against companies that may have greater financial resources than ours. As a result, we may experience difficulty in acquiring new retail customers due to existing relationships between potential customers and other retail home heating distributors.  If the Oil Segment cannot effectively compete, we would suffer losses of revenue and net income.

 

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Weather

Weather conditions can impact the demand for home heating fuel.  Demand for home heating oil is primarily seasonal, utilized in the colder months of the fall, winter, and early spring.  Demand is determined by weather patterns and how cold the temperature gets.  Ordinarily, most demand is determined by the measurement of heating degree days, a measurement of the average temperature for the day that is below the mean temperature of 65 degrees fahrenheit.  If weather patterns are such that temperatures are warmer than normal, then less heating degree days will be used, and less of the Company’s home heating products will be sold thereby negatively impacting our revenues and net income (loss).

Heating oil futures contracts

During the period from July 28, 2006 to August 15, 2006, the Company’s PriceEnergy subsidiary entered into futures contracts for #2 heating oil to hedge a portion of its forecasted heating season requirements. The Company purchased 40 contracts through various suppliers for a total of 1,680,000 gallons of #2 heating oil at an average price of $2.20 per gallon. Due to warmer than average temperatures through the heating season (lower than average degree days), as of June 30, 2007, the Company experienced a substantial drop in fuel consumption and price, resulting in a loss on these contracts.

 

Through June 30, 2007, the Company’s PriceEnergy subsidiary deposited a total of $923,017 in margin requirements with the broker.  Through June 30, 2007, the Company realized a loss, including fees, of $926,170 on 40 closed contracts representing 1,680,000 gallons.  The Company entered into no futures contracts in fiscal 2008.

Risks Particular to the Travel Plaza Segment

We are highly dependent on fuel sales which have low margins.

During the year ended June 30, 2008, net revenues from fuel sales of the Travel Plaza Segment accounted for approximately 65% of the Company’s total net revenues. The volume of fuel sold by us and the profit margins associated with these sales are affected by numerous factors outside of our control, including the condition of the long-haul trucking industry, the supply and demand for these products and the pricing policies of competitors. Fuel sales generate very low gross margins.

  

The U.S. truck stop industry is highly competitive and fragmented, and our competitors may have greater resources or other competitive advantages.

In addition to competition from much larger, better financed travel plaza operators, the Travel Plaza Segment competes with operators offering a broad range of services and prices, from full service establishments similar to the operations of the Travel Plaza Segment, to deep discount operators offering only fuel.  Competition with other companies in the travel plaza industry is based primarily on customer service, location, hours of operation and price. Longstanding customer relationships are typical in industry.  In addition, most travel Plaza operators, including the Travel Plaza Segment, provide service on a 24 hour-a-day basis, which tends to build customer loyalty.  As a result, the Travel Plaza Segment may experience difficulty in acquiring new customers due to existing relationships between potential customers and their current providers, competitive pricing and new or upgraded travel plaza operators.

The Travel Plaza Segment is highly dependent on the financial condition of the trucking industry.

Our business is dependent upon the trucking industry in general and upon long-haul trucks in particular. In turn, the trucking industry is dependent on economic factors, such as the level of domestic economic activity and interest rates and operating factors such as fuel prices and fuel taxes, over which we have no control and which could contribute to a decline in truck travel. The long-haul trucking business is also a mature industry that has historically been susceptible to recessionary downturns. Available data indicate that diesel consumption by the trucking industry has grown more slowly than trucking ton-miles, as technological improvements in truck engines have increased their fuel efficiency. In addition, many small trucking companies have filed for bankruptcy protection in recent years. A decline in operations by the long-haul trucking industry would adversely affect us.

Our profitability can be significantly impacted by cyclical factors beyond our control such as decreases in manufacturing output.

The volume of truck shipments is in part dependent on changes in manufacturing output. Sustained decreases in manufacturing production can significantly reduce truck traffic, which in turn reduces fuel purchases and visits to our travel plazas, and negatively impacts our results of operations. 

 

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A domestic terrorist incident affecting the trucking industry could adversely affect our business.

A domestic terrorist incident, particularly an incident involving a truck, could produce adverse effects on our business in several ways, including:

•

a reduction in the volume of truck traffic for more than a brief period;

•

the bankruptcy of certain trucking companies; and

•

the imposition of additional regulations affecting truck traffic, increasing the expenses of truck operations and businesses that service trucks or provide overnight facilities for trucks and truck drivers, such as our business. For example, additional fences or other security for parked trucks might be required.

The occurrence of any of these effects could have a material negative impact on our results of operations.

We are subject to environmental laws and regulations and the cost of compliance with these requirements could negatively impact the results of our operations.

A significant portion of our business consists of storing and dispensing petroleum products, activities that are subject to increasingly stringent regulation by both the federal and state governments. Moreover, governmental authorities can impose significant fines and penalties on us for any alleged noncompliance with environmental requirements. In addition, under certain environmental laws, private parties can bring lawsuits against us for any property damage or personal injury that allegedly is caused by our operations. We may incur increased expenditures if additional requirements are imposed by federal and state governments, or we fail to comply with environmental requirements and are fined or penalized, or if we must defend or settle lawsuits that might be brought by private parties.

In addition, under various environmental laws, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances (including petroleum and petroleum products) on, under, in, or migrating from such property. Certain laws impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Moreover, under certain environmental laws, persons who arrange, or are deemed to have arranged, for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at the disposal or treatment site, regardless of whether such site is owned or operated by such person and regardless of whether the original disposal or treatment activity accorded with applicable requirements. As a result of our business and the quantity of petroleum products we handle, there can be no assurance that hazardous substance contamination does not exist or that material liability will not be imposed in the future for the remediation of such contamination.

A disruption in the supply of fuel could adversely affect our profitability.

We would be adversely affected in the event of a disruption in our supply of fuel. In addition, sharp increases in fuel prices at truck stop plazas have historically tended to lead to temporary declines in fuel margins. Fuel prices have risen sharply in the recent past and may continue to rise.  Factors which have had significant effects on fuel prices include: the interaction of several factors including low inventories, high demand caused by a spike in the cost of natural gas, major global conflicts, especially those involving the U.S. and/or oil producing countries, strikes or political conflict in oil producing countries, intervention by OPEC in the form of restricted output and changes in output by domestic oil refineries.

In the future, interruptions in world fuel markets may cause shortages in, or total curtailment of, fuel supplies. Moreover, a substantial portion of the oil refining capacity in the United States is controlled by major oil companies. These companies could in the future decide to limit the amount of fuel sold to independent operators like us. Although our current suppliers provide fuel to us, a significant portion of our fuel needs continues to be supplied from third-parties contracted by them. In addition, any new standards that the EPA may impose on refiners that would necessitate changes in the refining process could limit the volume of petroleum products available from refiners in the future. A material decrease in the volume of fuel sold for an extended time period would have a material adverse effect on our results of operations. Similarly, an extended period of instability in the price of fuel could adversely affect our results.

 

24

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In addition, our patronage by customers desiring to purchase fuel accounts for a significant portion of customer traffic and has a direct impact on the revenues and profitability of our other operations, including our restaurant and non-fuel operations. Accordingly, any significant reductions in fuel supplies or other reductions in fuel volume would materially adversely affect our results.

Weather or seasonal issues have an insignificant impact on the Company’s Travel Plaza Segment.  While leisure travel has a tendency to moderate somewhat in the winter months in the geographic areas in which we operate, revenue related to the leisure traveler is relatively insignificant compared to fuel and services related revenue generated by our professional driver customers.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

The Company's administrative headquarters are located in a 9,800 square foot facility in Rockaway, New Jersey. This facility accommodates the Company's administrative, marketing and sales personnel. The lease expired on October 31, 2007 and carries an annual rent of $122,287, which includes common area charges. We continue to occupy the space on a month-to-month basis.  The Company owns property located at 344 Route 46 in Rockaway, New Jersey. This facility accommodates the Company's fuel terminal, including fuel storage tanks, truck yard space and dispatch operations. The Company purchased the property in August 1999, through a newly formed wholly-owned subsidiary, Able Energy Terminal, LLC, at a purchase price of $1,150,000. The Company also owns a building, totaling approximately 1,450 square feet, consisting of a wood frame facility located at 38 Diller Avenue, Newton, New Jersey, that will serve as a supply depot, storage area and administrative offices and service facility when damage that occurred on March 14, 2003 in connection with a fire is repaired.  Please refer to Note 21 - Subsequent Events found in the notes to the Consolidated Financial Statements in Item 8 of this Annual Report for disclosure relating to the lease of the Newton facility.

On July 1, 2006, Able NY moved into a brand new terminal located at 10 Industrial Park in Warrensburg, NY.  This 118,556 square foot property was purchased by the Company in 2003, and accommodates Able NY fuel terminal, including liquid fuel storage tanks, truck yard space, dispatch operations and a small office staff.

Able subleases an office located at 1140 Sixth Avenue in New York City. The lease expires on April 29, 2009 and carries an annual rent increasing from $196,467 to $208,432 over the term of the lease. This 4,569 square foot space is used as our executive offices.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet financing arrangements.

 

39

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Contractual Obligations

The following schedule summarizes our contractual obligations as of June 30, 2008 in the periods indicated:

						Less Than												More then
Contractual Obligation		Total				1 Year				1-3 Years				3-5 years				5 years
Long term debt		$	7,492,942			$	4,123,602			$	467,576			$	211,923			$	2,689,842
Capital lease obligations			687,694				366,804				259,186				61,704				-
Operating leases			9,193,883				7,183,883				2,010,000				-				-
Other long term obligations			214,517				141,600				-				-				-
Total contractual obligations		$	17,589,035			$	11,815,888			$	2,736,762			$	273,627			$	2,689,842

 

Excluded from the table above are estimated interest payments on long-term debt and capital lease obligations of approximately $534,000, $463,000, $350,000 and $1,684,000 for the periods less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively.   In addition, excluded from above are unconditional purchase obligations of approximately $0.3 million that the Company entered into subsequent to June 30, 2008.

Additional Factors That May Affect Future Results

Purchase of Horsham

On December 13, 2006, the Company purchased the assets of its Horsham franchise from Able Oil Montgomery, Inc., a non- related party, for $764,175. Able Oil Montgomery is a full service retail fuel oil and service company located in Horsham, Pennsylvania. Pursuant to the agreement, the Company paid cash at closing of $128,000, issued a 5 year note payable bearing interest at a rate of 7% per annum in the amount of $345,615 and forgave an amount of $290,560 due from the seller to the Company. Separately, the seller paid to the Company $237,359 for monies collected in advance by Able Oil Montgomery from its customers.

Seasonality

The Company’s Oil Segment operations are subject to seasonal fluctuations, with a majority of the Oil Segment’s business occurring in the late fall and winter months. Approximately 60% to 65% of the Oil Segment’s revenues are earned and received from October through March; most of such revenues are derived from the sale of home heating products, primarily #2 home heating oil.  However, the seasonality of the Oil Segment’s business is offset, in part, by an increase in revenues from the sale of HVAC products and services, diesel and gasoline fuels during the spring and summer months due to the increased use of automobiles and construction apparatus.

From May through September, Able Oil can experience considerable reduction of retail heating oil sales. Similarly, Able NY’s propane operations can experience up to an 80% decrease in heating related propane sales during the months of April to September, which is offset somewhat by increased sales of propane gas used for pool heating, heating of domestic hot water in homes and fuel for outdoor cooking equipment.

Seasonal issues have an insignificant impact on the Company’s Travel Plaza Segment.  While leisure travel has a tendency to moderate somewhat in the winter months in the geographic areas in which we operate, revenue related to the leisure traveler is relatively insignificant compared to fuel and services related revenue generated by our professional driving customers.

Future Operating Results

Future operating results, which reflect management’s current expectations, may be impacted by a number of factors that could cause actual results to differ materially from those stated herein.  These factors include worldwide economic and political conditions, terrorist activities, industry specific factors and governmental agencies.

 

40

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

Our consolidated financial statements and the related notes thereto called for by this item appear under the caption “Consolidated Financial Statements” beginning on page F-1 attached hereto of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

On August 13, 2007, the Company dismissed Marcum & Kliegman, LLP as its independent registered public accounting firm. The report of Marcum & Kliegman, LLP on the Company's financial statements for the fiscal year ended June 30, 2006 (“FY 2006”) was modified as to uncertainty regarding (1) the Company’s ability to continue as a going concern as a result of, among other factors, a working capital deficiency as of June 30, 2006 and possible failure to meet its short and long-term liquidity needs, and (2) the impact on the Company’s financial statements as a result of a pending investigation by the SEC of possible federal securities law violations with respect to the offer, purchase and sale of the Company’s securities and the Company’s disclosures or failures to disclose material information.

The Company’s Audit Committee unanimously recommended and approved the decision to change independent registered public accounting firms.

In connection with the audit of the Company’s financial statements for FY 2006, and through August 13, 2007, there have been no disagreements with Marcum & Kliegman, LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Marcum & Kliegman, LLP would have caused it to make reference to the subject matter of such disagreements in connection with its audit report. There were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K. On August 24, 2007, Marcum & Kliegman, LLP sent a responsive letter to the Current Report on Form 8-K dated August 13, 2007, filed by the Company, which discussed the Company’s termination of Marcum and Kliegman, LLP as its auditors. This responsive letter claimed that there were two reportable events.  The Company filed an amended Form 8-K Report acknowledging one reportable event that Marcum and Kliegman, LLP had advised the Company of material weaknesses in the Company’s internal controls over financial reporting. The Company added disclosure in the Amended 8-K to reflect this reportable event. This reportable event occurred in conjunction with Marcum & Kliegman’s audit of the consolidated financial statements for the year ended June 30, 2006 and not, as stated in the Auditor’s Letter, in conjunction with Marcum & Kliegman’s “subsequent reviews of the Company’s condensed consolidated financial statements for the quarterly periods ended September 30, 2006 and December 31, 2006.” In June 2007, when Marcum & Kliegman began its review of the Company quarterly financial statements for the periods ended September 30, 2006 and December 31, 2006, the Company had already disclosed the material weakness in its internal controls over financial reporting in the Company’s Annual Report on Form 10-K for the year ended June 30, 2006 (filed on April 12, 2007). Further, no such advice of these material weaknesses over internal controls was discussed, in writing or orally, with the Company by representatives of Marcum & Kliegman during the review of such quarterly financial statements.

Subsequent to their dismissal on August 13, 2007, on October 1, 2007, the Company and its Chief Executive Officer (“CEO”) filed an action in New York state court against Marcum & Kliegman, LLP. See, Item 3, “Litigation” of this Report.

The Company engaged Lazar Levine & Felix, LLP (“LLF”) as its new independent registered public accounting firm as of September 21, 2007. Prior to its engagement, LLF had been serving as independent auditors for Properties, an affiliate and the largest stockholder of the Company.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

 

An evaluation of the Company's disclosure controls and procedures (as defined in Section13a-15(e) of the Securities Exchange Act of 1934 (the "Act")) was carried out under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer and several other members of the Company's senior management at June 30, 2008. Based on this evaluation, and as noted below, the Company's Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2008, the Company's disclosure controls and procedures were not effective, for the reasons discussed below, at a reasonable level of assurance, in ensuring that the information required to be disclosed by the Company in the Reports it files or submits under the Act is (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

 

41

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The Company had previously identified a weakness during the preparation of its June 30, 2006 Form 10-K. The weakness related to the Company’s loss of its then Chief Financial Officer and the appointment of an Acting Chief Financial Officer. As a result of the SEC’s Formal Order of Private Investigation and the subpoenas issued in connection therewith and the change of the Company’s auditors, the Company became delinquent in filing its SEC Reports During the preparation of the June 30, 2006 Form 10-K, the Company retained independent consultants with experience in public company disclosure requirements to assist the Chief Executive Officer and the then acting Chief Financial Officer in their respective duties during the review, preparation and disclosures required in SEC rules and regulations.  A new Chief Financial Officer was appointed as of September 24, 2007 and the Company continues to engage independent consultants with experience in public company disclosure requirements to assist such officers in their respective duties during the review, preparation and disclosures required in SEC rules and regulations. The Company believes that its appointment of its new Chief Financial Officer, along with the continued retention of independent consultants, will result in its disclosure controls and procedures being sufficiently effective to insure that the Company will become compliant with its SEC reporting requirements.

Management’s Report on Internal Control over Financial Reporting

 

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Internal control over financial reporting refers to the process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

·	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

·

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

·	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

Under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Chief Financial Officer, the Company's management conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of June 30, 2008 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In makinig this assessment, the Company's management used the criteria set forth in the framework in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring organizations of the Treadway Commission ("COSO"). Based on the evaluation conducted under the framework in "Internal Control - Integrated Framework" issued by COSO the Company's management concluded that the Company's internal control over financial reporting was not effective as of June 30, 2008. The previously identified weakness pertaining to timely filing of the Company's annual and interim periodic SEC filings has not been remediated as of June 30, 2008. Remediation of the weakness will not occur until the Company is in compliance with all of its periodic filings and has the ability to file future filings on a timely basis.

 

42

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This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report on Form 10-K.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness into future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Controls

There have been no changes to the Company’s system of internal control over financial reporting during the year ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s system of controls over financial reporting.

 

As part of a continuing effort to improve the Company’s business processes management is evaluating its internal controls and may update certain controls to accommodate any modifications to its business processes or accounting procedures.

 

Item 9B. Other Information

 

Credit Card Receivable Financing

On April 11, 2008 the Oil Segment of the Company and its subsidiary, PriceEnergy.com, refinanced their loans with Credit Cash, in the aggregate amount of $800,000 with similar terms to that of the original financing..

Fuel Supply

On May 8, 2008, Plazas entered into a Fuel Supply Agreement (“FSA”) with Atlantis Petroleum, LLC (“Atlantis”).  The FSA provides that for a term of three years, Atlantis will be the sole and exclusive diesel fuel supplier to eight (8) of the travel plazas operated by Plazas located in Pennsylvania. The price per gallon of the diesel fuel supplied by Atlantis provides Plazas with a favorable wholesale rate. The price per gallon is based upon the delivery of a full transport truckload of product. All prices charged by Atlantis are subject to the provisions of applicable law. It is estimated that pursuant to the FSA, Atlantis will supply at least 44,000,000 gallons of diesel fuel for the first year and increase thereafter as Plazas increases its market share.

The obligations of Plaza under the FSA have been guaranteed by Properties, which guaranty is limited to a thirty day period beginning thirty days prior to Atlantis’ written notice to Properties of Plazas’ breach of the FSA.

Doswell Sale Agreement

On May 12, 2008, Plazas entered into a sale agreement with T.S.O., Inc. (“TSO”) for the sale of Plaza’s assets located at its leased Doswell, VA travel plaza.  In exchange for total consideration to Plazas of approximately $0.4 million, Plazas has agreed to transfer to TSO title to all tangible and intangible assets (excluding corporate records) and liabilities relating to the operations of the Doswell, VA travel plaza.  Under the sale agreement, TSO had until October 12, 2008 to obtain and deliver a firm commitment letter for the purchase price. By letter dated November 6, 2008, the owner of the real property underlying the Doswell travel plaza sent a notice to TSO terminating the contract of sale.  During the period July 12, 2008 through termination of the contract of sale, TSO is obligated to pay the Company rent in the amount of $75,000 per month.

 

43

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Filing Requirements

This Annual Report on Form 10-K for the year ended June 30, 2008 was filed beyond the applicable filing deadline.

 

44

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ABLE ENERGY, INC. AND SUBSIDIARIES

Consolidated Financial Statements

 

For the Years Ended

June 30, 2008 and 2007

 

	Page
Report of Independent Registered Public Accounting Firm - Lazar Levine & Felix, LLP	F-2
Consolidated Balance Sheets as of June 30, 2008 and 2007	F-3
Consolidated Statements of Operations for the Years Ended June 30, 2008 and 2007	F-4
Consolidated Statements of Stockholders' Equity for the Years Ended June 30, 2008 and 2007	F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 2008 and 2007	F-6
Notes to Consolidated Financial Statements	F-8

 

 

F-1

---

 

Lazar Levine & Felix LLP

CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS CONSULTANTS

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Able Energy, Inc and Subsidiaries

Rockaway, New Jersey

We have audited the accompanying consolidated balance sheets of Able Energy, Inc. and Subsidiaries (the “Company”) as of June 30, 2008 and 2007 and the related consolidated statements of operations, stockholders' equity, and cash flows for the each of the two years in the period ended June 30, 2008.  We have also audited the financial statement schedule listed in the accompanying index.  These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements and financial statement schedule are free of material misstatement.  We were not engaged to perform an audit of the Company’s internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial statement schedule, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits  provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2008 and 2007 and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2008, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the financial statement schedule presents fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As more fully described in Note 2, the Company has incurred losses from continuing operations of approximately $12,900,000 and $6,600,000 during the years ended June 30, 2008 and 2007, respectively, resulting in an accumulated deficit of approximately $30,600,000 at June 30, 2008.  In addition, the Company has used cash from operations of approximately $3,600,000 and $1,272,000 for the years ended June 30, 2008 and 2007, respectively, and has a working capital deficiency of approximately $12,900,000 at June 30, 2008.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans in regard to this matter are described in Note 2.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

LAZAR LEVINE & FELIX LLP

Morristown, New Jersey

November 14, 2008

 

F-2

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ABLE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		June 30,
		2008				2007
ASSETS
Current Assets:
Cash and cash equivalents		$	3,025,577			$	3,034,183
Accounts receivable, net of  allowance for doubtful accounts of
$1,283,013 and $744,253, at June 30, 2008 and 2007,  respectively			4,088,377				5,648,996
Inventories			2,724,315				4,191,790
Notes receivable - current portion			-				725,000
Advances to related parties			-				8,374,496
Prepaid expenses and other current assets			1,676,658				1,169,175
Total Current Assets			11,514,927				23,143,640
Property and equipment, net			6,414,011				7,603,263
Goodwill			11,046,179				11,139,542
Intangible assets, net			5,531,345				5,970,303
Deferred financing costs, net			159,718				225,430
Security deposits			76,818				79,918
Total Assets		$	34,742,998			$	48,162,096
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit		$	979,818			$	481,602
Notes payable, current portion			4,123,602				3,236,168
Capital leases payable, current portion			366,804				376,042
Convertible debentures and notes payable, net of unamortized
debt discounts of $623,962 and $1,784,233 as of June 30, 2008
and 2007, respectively			2,164,094				1,348,267
Accounts payable and accrued expenses			15,152,749				17,711,401
Customer pre-purchase payments and unearned revenue			1,636,911				3,615,087
Total Current Liabilities			24,423,978				26,768,567
Notes payable, less current portion			3,369,340				3,632,726
Capital leases payable, less current portion			320,890				729,816
Deferred income taxes			247,000				-
Total Long Term Liabilities			3,937,230				4,362,542
Total Liabilities			28,361,208				31,131,109
COMMITMENTS AND CONTINGENCIES
Stockholders' Equity:
Preferred Stock; par value $.001, authorized 10,000,000 shares;
issued - none			-				-
Common Stock; $.001 par value; 75,000,000 and 10,000,000 shares authorized;
at June 30, 2008 and 2007, respectively;
14,965,389 and 14,950,947 shares issued and outstanding
at June 30, 2008 and  2007, respectively			14,966				14,951
Additional paid in capital			37,856,321				37,840,498
Accumulated deficit			(30,584,497	)			(17,671,264	)
Notes and loans receivable - related parties			(905,000	)			(3,153,198	)
Total Stockholders' Equity			6,381,790				17,030,987
Total Liabilities and Stockholders' Equity		$	34,742,998			$	48,162,096

 

See accompanying notes to the consolidated financial statements

 

F-3

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ABLE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		For the years ended June 30,
		2008				2007
Net Sales		$	276,440,588			$	93,641,548
Cost of Sales (exclusive of depreciation and amortization shown separately below)			258,857,934				85,103,534
Gross Profit			17,582,654				8,538,014
Operating Expenses:
Selling, general and administrative			25,442,782				11,805,324
Depreciation and amortization			1,888,906				740,203
Total Operating Expenses			27,331,688				12,545,527
Loss from Operations			(9,749,034	)			(4,007,513	)
Other Income (Expenses)
Interest and other income			518,744				554,767
Interest income - related parties			235,938				280,048
Interest expense			(2,213,955	)			(937,345	)
Interest expense-related party							(11,671	)
Amortization of deferred financing costs			(65,712	)			(814,088	)
Amortization of debt discounts on convertible debentures and note payable			(1,160,271	)			(1,286,135	)
Registration rights penalty			(203,263	)			(381,542	)
Total Other Income (Expenses), Net			(2,888,519	)			(2,595,966	)
Loss before provision for income taxes			(12,637,553	)			(6,603,479	)
Provision for income taxes			275,680				28,824
Net Loss		$	(12,913,233	)		$	(6,632,303	)
Basic and diluted loss per common share		$	(0.86	)		$	(1.60	)
Weighted average number of common shares outstanding-basic and diluted			14,953,440				4,133,090

 

See accompanying notes to the consolidated financial statements

 

F-4

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ABLE ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For The Years Ended June 30, 2008 and  2007

 

		Common Stock
		Shares				Amount				Additional Paid - in Capital				Accumulated Deficit				Notes and Loans Receivable-Related Parties				Total Stockholders' Equity
Balance June 30, 2006			3,128,923			$	3,129			$	14,812,723			$	(11,038,961	)		$	(2,104,805	)		$	1,672,086
Options granted to outside directors			-				-				439,825				-				-				439,825
Common stock issued in
connection with option exercise			12,500				12				54,488				-				-				54,500
Common stock issued in
connection with Summit settlement			142,857				143				171,286												171,429
Discounts on convertible
debentures and note payable			-				-				3,000,000				-				-				3,000,000
Amortization of deferred compensation			-				-				123,843				-				-				123,843
Notes receivable from related parties
for reimbursement of certain fees			-				-				-				-				(590,000	)			(590,000	)
Issuance of notes receivable			-
and related accrued interest
receivable upon advance to
stockholders and related party			-				-				-				-				(458,393	)			(458,393	)
Issuance of stock for the purchase
of the assets of All American
Plaza, Inc.			11,666,667				11,667				19,238,333				-				-				19,250,000
Net loss			-				-				-				(6,632,303	)			-				(6,632,303	)
Balance June 30, 2007			14,950,947				14,951				37,840,498				(17,671,264	)			(3,153,198	)			17,030,987
Repayment of notes receivable from
related party																			2,473,079				2,473,079
Interest related to notes receivable from
related party																			(224,881	)			(224,881	)
Common stock and warrants issued in
conjunction with consulting
agreement			14,442				15				15,823												15,838
Net loss															(12,913,233	)							(12,913,233	)
Balance June 30, 2008			14,965,389			$	14,966			$	37,856,321			$	(30,584,497	)		$	(905,000	)		$	6,381,790

 

See accompanying notes to consolidated financial statements

 

F-5

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ABLE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the years ended June 30,
		2008				2007
Cash flow from operating activities:
Net loss		$	(12,913,233	)		$	(6,632,303	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization			1,888,906				740,203
Provision for bad debts			564,551				107,167
Amortization of discounts on convertible debentures and notes payable			1,160,271				1,286,135
Amortization of deferred financing costs			65,712				814,088
Accrual of interest income on note receivable and loan-related parties			(224,881	)			(182,942	)
Loss on sale of Able Melbourne assets			121,634				-
Stock - based compensation			-				735,096
Gain on sale of property and equipment			-				(11,964	)
Derivative losses			-				926,170
Noncash consulting fees			15,838				-
(Increase) decrease in operating assets:
Accounts receivable			392,507				585,218
Advances to related parties			-				(8,374,496	)
Inventories			1,433,805				180,046
Receivable from related parties			-				-
Prepaid expenses and other current assets			(509,409	)			(1,255,675	)
Security deposits			3,100				5,000
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses			6,127,936				10,042,855
Customer pre - purchase payments unearned revenue			(1,978,178	)			(236,711	)
Deferred income taxes			247,000				-
Net cash used in operating activities			(3,604,441	)			(1,272,113	)
Cash flows from investing activities:
Purchases of property and equipment			(343,836	)			(843,112	)
Cash acquired in purchase of Horsham Franchise, net of $128,000 cash paid			-				109,539
Cash acquired in purchase of All American Plazas, Inc			-				2,201,977
Advances\(repayments) (to)\from related parties			2,473,079				(1,580,451	)
Collection of notes receivable			725,000				231,878
Net Cash recived on sale of Able Melbourne assets			306,217
Cash received on sale of property and equipment			-				13,884
Net cash provided by investing activities			3,160,460				133,715
Cash flows from financing activities:
Net (repayments) borrowings under line of credit			498,216				(750,038	)
Proceeds from notes payable			7,150,000				1,200,000
Repayment of notes payable			(6,501,591	)			(1,043,617	)
Repayment of capital leases payable			(366,806	)			(350,787	)
Proceeds from exercise of options			-				54,500
Deferred financing costs			-				(82,207	)
Proceeds from sale of convertible debentures and notes payable			-				3,000,000
Repayments of convertible debentures			(344,444	)			-
Net cash provided by financing activities			435,375				2,027,851
Net increase in cash and cash equivalents			(8,606	)			889,453
Cash and cash equivalents at beginning of period			3,034,183				2,144,729
Cash and cash equivalents at end of period		$	3,025,577			$	3,034,182

 

See accompanying notes to the consolidated financial statements

 

F-6

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ABLE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED

 

		For the years ended
		June 30,
		2008				2007
Supplemental disclosure of cash flow information:
Cash paid during the year for interest		$	2,075,398			$	949,015
Reduction in goodwill since certain liabilities were not assumed by Plazas		$	93,363			$	-
Transfer of Work in Progress in Property and Equipment from a previous period to Intangible Assets		$	312,538			$	-
Advance to related party utilized to settle trade payables		$	8,374,495			$	-
Sale of Melbourne Subsidiary
Net cash selling price		$	306,217			$	-
Less assets sold (carrying value):
Accounts receivable, net of allowance		$	603,561			$	-
Inventory			33,670				-
Property, plant and equipment, net			84,977				-
Accounts payable			(218,638	)			-
Notes payable			(24,361	)			-
Capital lease			(51,358	)			-
Net assets sold		$	427,851			$	-
Non-cash loss on sale of assets		$	121,634			$	-
Purchase of Horsham franchise from Able Oil Montgomery, Inc.:
Assets acquired and liabilities assumed:
Inventories		$	-			$	28,000
Property and equipment			-				39,000
Intangible assets-Customer lists			-				697,175
Customer pre-purchase payments			-				(237,539	)
Business combination with All American Plazas, Inc.:
Assets acquired and liabilities assumed:
Accounts receivable-net		$	-			$	2,947,566
Inventories			-				3,667,849
Property and equipment			-				2,443,767
Intangible assets-franchise agreements			-				64,156
Intangible asset-option to acquire Properties real estate			-				5,000,000
Prepaid expenses and other current assets			-				503,708
Goodwill			-				11,139,542
Accounts payable and accrued expenses			-				(5,604,025	)
Notes payable			-				(3,114,540	)
Property and equipment acquired through the assumption of capital lease obligations		$	-			$	402,775.00

 

See accompanying notes to condensed consolidated financial statements

 

F-7

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Note 1 - Nature of Operations

Able Energy, Inc. (“Able”) was incorporated on March 13, 1997, in the state of Delaware. Its current wholly-owned subsidiaries are Able Oil Company, Inc. (“Able Oil”), Able Energy New York, Inc. (“Able NY”), Able Oil Melbourne, Inc. (inactive, as of February 8, 2008), (“Able Melbourne”), Able Energy Terminal, LLC, PriceEnergy.com Franchising, LLC (inactive), Able Propane, LLC (inactive), and its majority owned (67.3% as of June 30, 2008) subsidiary, PriceEnergy.com, Inc. (“PriceEnergy”) and All American Plazas, Inc. (“Plazas”).  Able, together with its operating subsidiaries, are hereby also referred to as the Company.

On February 8, 2008, (the “Closing Date”) the Company and Able Melbourne executed an Asset Purchase Agreement (“APA”) with Able Oil of Brevard, Inc. (“Able Brevard”), a Florida corporation, owned by a former employee of Able Melbourne.  For consideration in the amount of $375,000, (net of cash retained of $68,783) the APA provided for the sale to Able Brevard of all of the tangible and intangible assets (excluding corporate books and records), liabilities and lease obligations of Able Melbourne, as is, on the Closing Date resulting in a loss of $121,634.

Since the Company’s business combination with All American Plazas, Inc. (now known as All American Properties, Inc.) on May 30, 2007 (see Note 4), the Company is engaged in two primary business activities, organized in two segments; the Oil segment and the Travel Plaza segment.

The Company’s Oil Segment, consisting of Able Oil, Able NY, Able Energy Terminal, LLC and PriceEnergy, is engaged in the retail distribution of, and the provision of services relating to, #2 home heating oil, propane gas, kerosene and diesel fuels. In addition to selling liquid energy products, the Company offers complete heating, ventilation and air conditioning (“HVAC”) installation and repair and other services and also markets other petroleum products to commercial customers, including on-road and off-road diesel fuel, gasoline and lubricants.  Please refer to Note 21 - Subsequent Events, for disclosure relating to the July 22, 2008 sale of 49% of the common stock of Able NY and the sale of a portion of the Company’s Oil Segment operations in Easton and Horsham PA (“Able PA”) and the October 31, 2008 agreement pursuant to which the Company was granted the right to repurchase those shares of stock in Able NY and the interest in Able PA.

The Company’s Travel Plaza Segment, operated by Plazas, is engaged in the retail sale of food, merchandise, fuel, personal services, onsite and mobile vehicle repair, services and maintenance to both the professional and leisure driver through a current network of ten travel plazas, located in Pennsylvania, New Jersey, New York and Virginia.

Note 2 - Going Concern and Management’s Plans

The accompanying consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles, which contemplate continuation of the Company as a going concern and assume realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses from continuing operations during the years ended June 30, 2008 and 2007 of approximately, $12.9 million and $6.6 million, respectively, resulting in an accumulated deficit balance of approximately $30.6 million as of June 30, 2008.  Net cash used in operations during the years ended June 30, 2008 and 2007 was approximately $3.6 million and $1.3 million, respectively.  At June 30, 2008, the Company has a working capital deficiency of $12.9 million.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  These consolidated financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of the liabilities that may be necessary should the Company be unable to continue as a going concern.

On May 30, 2007, the Company completed a business combination with All American Plazas, Inc., now known as All American Properties, Inc. (“Properties”) (See Note 14).  The Company is pursuing sales initiatives, cost savings and credit benefits as contemplated in the business combination including consolidation of business operations where management of the Company deems appropriate for the combined entity. In order to conserve its capital resources and to provide incentives for the Company’s employees and other service vendors, the Company expects to continue to issue, from time to time, common stock and stock options to compensate employees and non-employees for services rendered. The Company is focusing on expanding its distribution programs and new customer relationships to increase demand for its products. In addition, the Company is pursuing other lines of business, which include expansion of its current commercial business into other products and services such as bio-diesel, solar energy and other energy related home services. The Company is also evaluating, on a combined basis, all of its product lines for cost reductions, consolidation of facilities and efficiency improvements. There can be no assurance, however, that the Company will be successful in achieving its operational improvements which would enhance its liquidity situation.

 

F-8

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Note 2 - Going Concern and Management’s Plans – continued

The Company’s net loss for the year ended June 30, 2008 was approximately $12.9 million, including non-cash charges totaling approximately $3.8 million. The Company has been funding its operations through an asset-based line of credit and the issuance of notes payable. 

The Company is pursuing other lines of business, which include expansion of its current commercial business into other products and services such as bio-diesel, solar energy and other energy related home services.  The Company is also evaluating all of its business segments for cost reductions, consolidation of facilities and efficiency improvements.  There can be no assurance that the Company will be successful in its efforts to enhance its liquidity situation.

The Company will require some combination of the collection of Properties notes receivable, new financing, restructuring of existing financing, improved receivable collections and/or improved operating results in order to maintain adequate liquidity over the course of the year ending June 30, 2009.   The Company must also bring current each of its Securities and Exchange Commission (“SEC”) filings as part of a plan to raise additional capital.  In addition to the filing of this Form 10-K for the year ended June 30, 2008, the Company must also complete and timely file its Form 10-Q for the quarter ended September 30, 2008.

There can be no assurance that the financing or the cost saving measures as identified above will be satisfactory in addressing the short-term liquidity needs of the Company.  In the event that these plans cannot be effectively realized, there can be no assurance that the Company will be able to continue as a going concern.

Note 3 - Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Able Energy, Inc. and its subsidiaries.  All material inter-company balances and transactions were eliminated in consolidation.

Cash and Cash Equivalents

All highly liquid investments purchased with a maturity of three months or less at the time of purchase are considered cash equivalents.

Inventories

Inventories consist principally of heating oil, diesel fuel, kerosene, propane and heating equipment, related parts and supplies, and are valued at the lower of cost (first in, first out method) or market.

		June 30,
Product		2008				2007
#2 heating oil		$	131,418			$	327,757
Diesel fuel			36,351				59,086
Kerosene			20,115				10,176
Propane			37,632				15,980
Parts, supplies, equipment and other			201,823				213,484
Fuels			791,674				1,260,653
Non-fuel, merchandise, etc.