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.			1,505,302				2,304,654
Total		$	2,724,315			$	4,191,790

 

F-9

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Note 3 - Summary of Significant Accounting Policies-continued

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation.  Depreciation is provided by using the straight-line method based upon the estimated useful lives of the assets as follows:

Vehicles, Machinery and Equipment, Office Furniture, Fixtures and Equipment	5-10 years
Fuel Tanks	10 years
Cylinders – Propane	20 years
Buildings	20-40 years
Building Improvements	20 years
Leasehold Improvements	Lesser of useful life or life of lease

Upon retirement or other disposition of these assets, the cost and related accumulated depreciation and amortization of these assets are removed from the accounts and the resulting gains or losses are reflected in the consolidated results of operations. Expenditures for maintenance and repairs are charged to operations as incurred. Renewals and betterments are capitalized.

 

Intangible Assets

 

Intangible assets include customer lists, website development costs and an option to purchase real estate from Properties.  Costs incurred in the developmental stage for computer hardware and software have been capitalized in accordance with Emerging Issues Task force (“EITF”) 00-2, “Accounting for Web Site Development Costs,” and are amortized on a straight-line basis over the estimated useful life of 5 years.

 

Customer lists related to various acquisitions are being amortized over lives of 10-15 years.

 

The option to purchase the real estate of Properties is being amortized over 10 years, the life of the lease, including automatic renewal options.

 

Impairment of Long-Lived Assets

 

Long-lived assets, including property and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  Recoverability of assets to be held and used is measured by comparison of the carrying value of an asset to the undiscounted future cash flows expected to be generated by the asset.  If the carrying value of an asset exceeds its estimated undiscounted future cash flows, an impairment provision is recognized to the extent the book value of the asset exceeds estimated fair value.  Assets to be disposed of are reported at the lower of the carrying amount or the fair value of the asset, less all associated costs of disposition.

 

Based upon an assessment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, there has been no impairment of the intangible assets.

 

Deferred Financing Costs

 

In connection with the Company’s issuance of convertible debentures, notes payable and obtaining a line of credit, the Company incurred certain costs, which were capitalized and are being amortized over the life of the related debt obligation.  For convertible debentures that are converted into common stock, the pro-rata portion of the deferred financing cost is amortized immediately upon conversion.  

 

F-10

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Note 3 - Summary of Significant Accounting Policies – continued

 

Goodwill

 

Goodwill information is as follows:

 

		Year ended June 30,
		2008				2007
Goodwill-beginning of year		$	11,139,542			$	-
Acquired			-				11,139,542
Adjustments			(93,363	)			-
Goodwill-end of year		$	11,046,179			$	11,139,542

 

Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”) requires that purchased goodwill and indefinite-lived intangibles not be amortized.  Rather, goodwill and indefinite-lived intangible assets are subject to at least an annual assessment for impairment by applying a fair value-based test.

 

SFAS No. 142 requires a two-step approach to testing goodwill for impairment for each reporting unit.  Our reporting units are determined by the components that constitute a business for which both, (1) discreet financial information is available and, (2) management of the reporting Segment regularly reviews the operating results of that component.  The first step tests for impairment by applying fair value-based tests at the reporting Segment level.  The second step (if necessary) measures the amount of impairment by applying fair value-based tests to individual assets and liabilities within each reporting unit.  We completed our annual goodwill impairment testing as of June 30, 2008 and found no indicators of impairment of our recorded goodwill.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with United States generally accepted accounting principles requires the use of estimates that affect the reported amounts of assets, liabilities, revenues and expenses.  These estimates are based on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our conclusions.  We continually evaluate the information used to make these estimates as the business and economic environment changes.  Actual results may differ from these estimates under different assumptions or conditions.  Such differences could have a material impact on our future financial position, results of operations and cash flows.

 

The Company records adjustments to the minority interests in PriceEnergy for the allocable portion of income or loss to which the minority interest holders are entitled.  The Company suspends allocation of losses to minority interest holders when the minority interest balance for a particular minority interest holder is reduced to zero.  Any excess loss above the minority interest holder’s balance is not charged to minority interests as the minority interest holders have no obligation to fund such losses.  Thus, the Company suspended the allocation of minority interest in fiscal 2008 and 2007.

 

Joint Ventures

 

The Company may from time to time enter into joint venture arrangements with third parties.   For 50% or less joint venture interests, the Company will reflect its investment in the joint venture as investments in non-consolidating subsidiaries on the consolidated balance sheet.   For 51% or more interests, the Company consolidates the joint venture results with that of the Company.  The Company has not entered into any joint ventures during the two year period ended June 30, 2008.   

 

F-11

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Note 3 - Summary of Significant Accounting Policies – continued

 

Income Taxes

 

The Company provides for income taxes based on the provisions of Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements and tax returns in different years.  Under this method, deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are provided against deferred tax assets to the extent that it is more likely than not that the deferred tax assets will not be realized.

 

Deferred tax assets pertaining to windfall tax benefits on exercise of non-qualified stock options and the corresponding credit to additional paid-in capital are recorded if the related tax amount either reduces income taxes payable or results in an income tax refund.  The Company has elected the “with and without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce income taxes payable or resulted in an income tax refund in the current year.  Under this approach, the windfall tax benefits would be recognized in additional paid-in capital only if an incremental income tax benefit is realized after considering all other income tax benefits presently available to the Company.

 

The Tax Reform Act of 1986 limits the use of net operating loss and tax credit carry forwards in certain situations where disqualifying changes occur in the stock ownership of a company.  In the event the Company experiences a disqualifying change in ownership, utilization of the carry forwards could be restricted.

 

Concentrations of Credit Risk

 

Cash: The Company maintains its cash with various financial institutions in excess of the federally insured limit.  At June 30, 2008 and 2007, the Company had cash on deposit of approximately $1.4 million and $1.6 million, respectively, in excess of federally insured limits.

 

Accounts Receivable: The number of clients that comprise the Company's client base limits concentrations of credit risk with respect to accounts receivable. The Company does not generally require collateral or other security to support client receivables.  The Company has established an allowance for doubtful accounts based upon facts surrounding the credit risk of specific clients and past collections history. Credit losses have been within management's expectations.

 

Advertising

 

Advertising costs are expensed at the time the advertisement takes place.  Advertising expense was approximately $908,000 and $500,000 for the years ended June 30, 2008 and 2007, respectively.

 

Shipping and Handling Costs

 

Shipping and handling costs incurred by the Company in connection with the purchase and delivery of fuel oil inventory and fuels were approximately $1,520,000 and $351,000 for the years ended June 30, 2008 and 2007, respectively, and are recognized as a component of cost of sales within the consolidated statement of operations.

 

F-12

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Note 3 - Summary of Significant Accounting Policies – continued

Revenue Recognition and Unearned Revenue and Customer Pre-Purchased Payments

 

Sales of travel plaza services, fuel and heating equipment are recognized at the time of delivery to the customer, and sales of equipment are recognized at the time of installation.  Revenue from repairs and maintenance service is recognized upon completion of the service.  Payments received from customers for heating equipment service contracts are deferred and recognized over the term of the respective service contracts, on a straight-line basis, which generally do not exceed one year. Payments received from customers for the pre-purchase of fuel is recorded as a current liability until the fuel is delivered to the customer, at which time it is recognized as revenue by the Company.

 

Derivative Contracts

 

The Company uses derivative instruments (futures contracts) to manage the commodity price risk inherent in the purchase and sale of #2 heating oil. Derivative instruments are required to be marked to market under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (“SFAS 133”), as amended. These contracts are designated as cash flow hedges in accordance with SFAS 133 and are recorded at fair value as a liability entitled “fuel derivative contracts” on the Company's consolidated balance sheet.

 

The Company believes that these futures contracts for fuel oil have been effective during their term to offset changes in cash flow attributable to the hedged risk. The Company performs a prospective and retrospective assessment of the effectiveness of the futures contracts at least on a quarterly basis. All unrealized gains or losses on the futures contracts at each reporting date are included in accumulated other comprehensive loss in the equity section of the condensed consolidated balance sheet and in comprehensive loss until the related fuel purchases being hedged are sold at which time such gains or losses are recorded in cost of sales in the consolidated statements of operations. However, if the Company expects at any time that continued reporting of a loss in accumulated other comprehensive income would lead to recognizing a net loss on the combination of the futures contracts and the hedged transaction in one or more future periods, a loss is reclassified into cost of goods sold for the amount that is not expected to be recovered. All contracts were closed as of June 30, 2007.  As of June 30, 2007, all realized losses on futures contracts were recorded in cost of goods sold in the consolidated statement of operations in the amount of approximately $900,000. There were no such gains or losses in the year ended June 30, 2008.

 

Net Loss per Share

 

Basic net loss per common share is computed based on the weighted average number of shares of common stock outstanding during the periods presented. Common stock equivalents, consisting of stock options, warrants, and convertible notes and debentures as further discussed in the notes to the consolidated financial statements, were not included in the calculation of diluted loss per share because their inclusion would have been anti-dilutive.

 

The total common shares issuable upon the exercise of stock options and warrants, and conversion of convertible debentures (along with related accrued interest) excluded from comparative diluted loss per share was 7,127,524 and 7,102,524 shares at June 30, 2008 and  2007, respectively.

 

Presentation of Motor Fuel Taxes Remitted to Government Authorities

 

The Company’s Travel Plaza Segment is charged motor fuel taxes by its suppliers, and these suppliers remit these taxes to government agencies.  The Travel Plaza Segment then collects these taxes from consumers at the time of sale.  Net sales and cost of sales in our consolidated statements of operations included fuel taxes of $30.0 million and $3.4 million for the years ended June 30, 2008 and 2007, respectively. 

F-13

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Note 3 - Summary of Significant Accounting Policies – continued

Recent Accounting Pronouncements

 

In June 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”). SFAS 154 establishes new standards on accounting for changes in accounting principles. Pursuant to the new rules, all such changes must be accounted for by retrospective application to the financial statements of prior periods unless it is impracticable to do so. SFAS 154 completely replaces APB No. 20 and SFAS 6, though it carries forward the guidance in those pronouncements with respect to accounting for changes in estimates, changes in the reporting entity, and the correction of errors. The requirements in SFAS 154 are effective for accounting changes made in fiscal years beginning after December 15, 2005. The Company applied these requirements to any accounting changes after the implementation date. The application of SFAS 154 did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

 

In June 2005, the FASB ratified Emerging Issues Task Force (“EITF”) No. 05-1, “Accounting for the Conversion of an Instrument That Becomes Convertible upon the Issuer’s Exercise of a Call Option” (“EITF No. 05-1”) which addresses that no gain or loss should be recognized upon the conversion of an instrument that becomes convertible as a result of an issuer’s exercise of a call option pursuant to the original terms of the instrument. EITF No. 05-1 is effective for periods beginning after June 28, 2006. The adoption of this pronouncement did not have an effect on the Company’s consolidated financial position, results of operations or cash flows.

 

In June 2005, the FASB ratified EITF Issue No. 05-2, “The Meaning of ‘Conventional Convertible Debt Instrument’ in EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”, which addresses when a convertible debt instrument should be considered conventional for the purpose of applying the guidance in EITF No. 00-19. EITF No. 05-2 also retained the exemption under EITF No. 00-19 for conventional convertible debt instruments and indicated that convertible preferred stock having a mandatory redemption date may qualify for the exemption provided under EITF No. 00-19 for conventional convertible debt if the instrument’s economic characteristics are more similar to debt than equity. EITF No. 05-2 is effective for new instruments entered into and instruments modified in periods beginning after June 29, 2005. The Company has applied the requirements of EITF No. 05-2 since the required implementation date. The adoption of this pronouncement did not have an effect on the Company’s consolidated financial position, results of operations or cash flows.

 

EITF Issue No. 05-4 “The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No. 00-19, ‘Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”, addresses financial instruments, such as stock purchase warrants, which are accounted for under EITF 00-19 that may be issued at the same time and in contemplation of a registration rights agreement that includes a liquidated damages clause. The consensus of EITF No. 05-4 has not been finalized.

 

In February 2006, the FASB issued SFAS No. 155 - “Accounting for Certain Hybrid Financial Instruments”, which eliminates the exemption from applying SFAS 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. SFAS 155 also allows the election of fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a remeasurement event. Adoption is effective for all financial instruments acquired or issued after the beginning of the first fiscal year that begins after September 15, 2006. Early adoption is permitted. The adoption of SFAS 155 has not had a material effect on the Company’s consolidated financial position, results of operations or cash flows. 

 

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets”, which amended SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, with respect to the accounting for separately recognized servicing assets and servicing liabilities.  SFAS 156 permits an entity to choose either the amortization method or the fair value measurement method for each class of separately recognized servicing assets or servicing liabilities.  Adoption is effective after the beginning of the first fiscal year that begins after September 15, 2006.  The application of this statement has not had a material impact on the Company’s consolidated financial statements.

F-14

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Note 3 - Summary of Significant Accounting Policies – continued

 

Recent Accounting Pronouncements – continued

 

In July 2006,  the FASB  issued  FASB  Interpretation  No. 48,  "Accounting  for Uncertainty in Income Taxes - an  interpretation  of FASB Statement No. 109" ("FIN 48"),  which  clarifies the accounting  for  uncertainty  in tax positions.  This interpretation requires  that the Company recognize in its consolidated financial  statements,  the impact of a tax  position,  if that  position  is more  likely than not of being sustained  on  audit,  based  on  the  technical  merits  of the  position.  The provisions of FIN 48 are effective as of the beginning of the Company's year ending June 30, 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings.  The application of this statement has not had a material impact on the Company’s consolidated financial statements.

 

In September 2006, the FASB issued SFAS No.157, “Fair Value Measurements”, which defines fair value, establishes a framework for measuring fair value in United States generally accepted accounting principles, and expands disclosures about fair value measurements.  This statement does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information.  SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and all interim periods within those fiscal years.  In February 2008, the FASB released FASB Staff Position (FSP FAS 157-2 – Effective Date of FASB Statement No. 157) which delays the effective date of SFAS No. 157 for all non-financial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years.  The Company is currently evaluating the impact of adoption of this statement on its financial and nonfinancial assets and liabilities.

 

In December 2006, the FASB issued FASB Staff Position (“FSP”) EITF 00-19-2 “Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”) which specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement should be separately recognized and measured in accordance with SFAS No. 5, “Accounting for Contingencies.”  Adoption of FSP EITF 00-19-02 is required for fiscal years beginning after December 15, 2006, and did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

 

In February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115", which permits entities to choose to measure many financial instruments and certain other items at fair value.  The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  Adoption is required for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS Statement No. 157, Fair Value Measurements.   The application of this Statement has not had a material impact on the Company’s consolidated financial statements.

 

In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements–an amendment of ARB No. 51.”  SFAS 160 establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated.  This statement also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.  SFAS 160 is effective for fiscal years beginning on or after December 15, 2008.  The Company is in the process of evaluating the effect that the adoption of SFAS 160 will have on its consolidated results of operations, financial position and cash flows.

 

F-15

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Note 3 - Summary of Significant Accounting Policies – continued

 

Recent Accounting Pronouncements – continued

 

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141R).  SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired.  SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination.  SFAS 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008.   The Company is currently evaluating the potential impact of adoption of SFAS 141R on its consolidated financial statements.

 

In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities”.  The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged.  The Company is currently evaluating the impact of adopting SFAS No. 161 on its consolidated financial statements.

 

In May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles”.  The new standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy).  SFAS No. 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.  Adoption of SFAS No. 162, upon its effectiveness, is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

 

Reclassifications

 

Certain reclassifications have been made to the June 30, 2007 consolidated financial statements in order to conform to the current year presentation.

 

Stock-Based Compensation

 

Prior to July 1, 2005, the Company accounted for its stock options issued to employees pursuant to APB 25, "Accounting for Stock Issued to Employees”.  Accordingly, the Company would recognize employee stock-based compensation expense only if it granted options at a price lower than the closing price of the Company’s common stock on the date of grant. Any resulting compensation expense would then have been recognized ratably over the associated service period. The Company provided proforma disclosure amounts in accordance with SFAS No. 148, "Accounting for Stock-Based Compensation -Transition and Disclosure", as if the fair value method defined by SFAS 123 had been applied to its stock-based compensation.

 

Effective July 1, 2005, the Company adopted the fair value recognition provisions of SFAS 123R, using the modified prospective transition method and therefore has not restated prior periods' results. Under this transition method, employee stock-based compensation expense for the year ended June 30, 2006 has included compensation expense for all stock-based compensation awards granted, but not yet fully vested, prior to July 1, 2005, utilizing the fair value of the options as determined at the original grant date in accordance with the provisions of SFAS 123.  Stock-based compensation expense for all share-based payment awards granted after June 30, 2005 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R.

 

F-16

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Note 3 - Summary of Significant Accounting Policies – continued

Stock-Based Compensation – continued

 

The Company recognizes these compensation costs over the requisite service period of the award, which is generally the vesting term of the options.

 

The Company recorded no stock-based employee compensation expense relating to the Company’s stock option plan (See Note 13) for either of the years ended June 30, 2008 and 2007.  At June 30, 2008, there was no unamortized value of employee stock options under SFAS 123R because all outstanding stock options at June 30, 2007 were fully vested.

 

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS 123 and the EITF Issue No.  96-18,  “Accounting  for  Equity  Instruments  That Are Issued to Other Than  Employees  for  Acquiring,  or In  Conjunction  with Selling,  Goods or Services” which require that such equity instruments are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. The fair value determined is then amortized over the applicable service period.  The Company recorded no stock-based compensation for non-employees accounted for under EITF 96-18 in either of the years ended June 30, 2008 and 2007 (See Note 13). At June 30, 2008, there was no unamortized value of non-employee stock options.

 

Option valuation models require the input of highly subjective assumptions including the expected life of the option. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. Due to the acquisition of certain assets and liabilities from Properties on May 30, 2007, the Company has elected to use the “simplified “method in determining the expected life, and ultimately, the value assigned to these options due to the lack of available, sufficient historical option exercise data.  The Company has not previously elected to use the “simplified” method in valuing any of its option grants, and depending on data available at the time, may or may not elect to use the “simplified” method when valuing future grants of options.

 

F-17

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Note 4 - Acquisitions

On December 13, 2006, the Company purchased certain of the assets and assumed certain liabilities of its Horsham franchise from Able Oil Montgomery, Inc., a non-related party, for $764,175. Able Oil Montgomery is a full service retail fuel oil and service company located in Horsham, Pennsylvania, which until this acquisition, was a franchise operation of the Company and an entity to whom the Company sold #2 heating oil.  This acquisition was accounted for pursuant to SFAS No. 141, “Business Combinations” (“SFAS 141”) which requires that the total purchase price be allocated to the fair value of the assets acquired, including the intangible assets and liabilities, if any, assumed based on their fair values at the acquisition date.  Accordingly, under the purchase method of accounting, the assets acquired by the Company were recorded at their respective preliminary fair values as of the date of acquisition, summarized as follows:

 

Purchase of Horsham franchise from Able Oil Montgomery, Inc.:
Assets acquired and liabilities assumed:
Cash		$	237,539
Inventories			28,000
Property and equipment			39,000
Intangible assets - Customer lists			697,175
Customer pre - purchase payments			(237,539	)
Total purchase price		$	764,175
Less: Cash paid to purchase Horsham Franchise			(128,000	)
Non-cash consideration due to seller		$	636,175
Non - cash consideration consisted of:
Note payable due to seller		$	345,615
Forgiveness of note receivable, accrued interest receivable and other receivable due from seller			290,560
		$	636,175

 

The accompanying consolidated financial statements include the results of Horsham franchise operations from December 13, 2006, the effective date of acquisition, to June 30, 2008.

 

On May 30, 2007, the Company completed the purchase of certain of the assets and assumed certain liabilities of its largest shareholder, All American Plazas, Inc., a Pennsylvania corporation, for a purchase price of $19,250,000. The consideration for the purchase price was the issuance of 11,666,667 shares of the Company’s common stock at a price of $1.65 per share, the market price of the Company’s common stock on the day of issuance.  Prior to the purchase transaction, All American Plazas, Inc. owned approximately 31.8% of the Company’s common stock.  After consummation of the purchase transaction, All American Plazas, Inc., owned approximately 85.5% of the Company’s outstanding common stock.  Approximately 85% of the outstanding stock of All American Plazas, Inc. is beneficially held by the Chelednik Family Trust by Mr. Frank Nocito, our Vice President of Business Development, and his wife, Sharon Chelednik, for the benefit of their family members, including seven children.  Mr. Nocito is also a Vice President of All American Plazas, Inc.  In addition, pursuant to an agreement between the Chelednik Family Trust and Gregory Frost, Our Chief Executive Officer (“CEO”) and Chairman, through an entity controlled by him (Crystal Heights, LLC), is the beneficial holder of approximately 15% of the outstanding common stock of All American Plazas, Inc.  Subsequent to the business combination, All American Plazas, Inc. changed its name to All American Properties, Inc. (“Properties”). This business combination resulted in the Company acquiring the operating assets of eleven multi-use truck stop plazas, formerly operated by Properties, and assuming certain of Properties debt.  Properties retained ownership of the underlying real property on which each of the acquired travel plazas was situated.  The Company formed a new wholly-owned subsidiary, All American Plazas, Inc. (“Plazas”), a Delaware corporation, to operate the acquired plazas which constitute the Company’s Travel Plaza Segment.

 

F-18

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Note 4 - Acquisitions-continued

The Company’s Travel Plaza Segment is engaged in the retail provision of food, merchandise, fuel, lodging (in select locations), personal services, onsite and mobile vehicle repair, services and maintenance to both the professional and leisure driver through a current network of 10 travel plazas, located in Pennsylvania, New Jersey, New York and Virginia.   Two of the locations are operated under a Petro franchise, three operate under the Gables brand name and the remaining travel plazas operate under the All American Plazas banner.  The Travel Plaza Segment’s operations range from full service facilities, such as the Milton Petro in Milton Pennsylvania, to facilities with more limited amenities, such as the Gables of Harrisburg, located in Harrisburg, Pennsylvania.  Full service facilities generally include separate gas and diesel fueling islands, lodging, truck maintenance and repair services, overnight parking with communication and entertainment pods, certified truck weighing scales, restaurants and travel and convenience stores offering an array of merchandise catering to the professional truck driver and other motorists.

 

This acquisition was also accounted for pursuant to SFAS 141 which requires that the total purchase price be allocated to the fair value of the assets acquired, including the intangible assets and liabilities, if any, assumed based on their fair values at the acquisition date.  Accordingly, under the purchase method of accounting, the assets acquired by the Company were recorded at their respective fair values as of the date of acquisition, as adjusted during the year ended June 30, 2008, summarized as follows:

 

Business combination with All American Plazas, Inc.:
Assets acquired and liabilities assumed :
Cash and cash equivalents		$	2,201,977
Accounts receivable-net			2,947,566
Inventories			3,667,849
Property and equipment			2,443,767
Intangible assets-franchise agreements			64,156
Intangible asset-option to acquire Properties real estate			5,000,000
Prepaid expenses and other current assets			503,708
Goodwill			11,046,179
Accounts payable and accrued expenses			(5,519,662	)
Notes payable			(3,114,540	)
Total purchase price		$	19,250,000

 

The accompanying consolidated financial statements include the results of Plaza’s operations from June 1, 2007, the effective date of acquisition, to June 30, 2008.

 

The following unaudited proforma statements of operations represent consolidated results of operations of the Company had the acquisition of All American Plazas, Inc. and Able Oil Montgomery, Inc. occurred for the current and proceeding fiscal years, summarized as follows:

 

(Unaudited)		For the Year Ending
		June 30, 2007
Net revenue		$	282,241,850
Net loss		$	(12,291,420	)
Basic and diluted loss per share		$	(0.83	)

 

The above unaudited proforma information does not purport to be indicative of what would have occurred had the acquisitions been made as of such date or the results which may occur in the future.

 

F-19

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Note 5 - Notes Receivable

On March 1, 2004, the Company entered into two notes receivable totaling $1.4 million related to the sale of its subsidiary, Able Propane, LLC. The notes are secured by substantially all the assets of Able Propane, LLC. One note for $500,000 bears interest at a rate of 6% per annum and the other note for $900,000 is non-interest bearing. Principal is payable in annual installments and interest is paid quarterly with the final maturity date of March 1, 2008 for both notes.  The balance outstanding of these two notes as of June 30, 2008 and 2007 was zero and $725,000, respectively. Interest earned on the interest-bearing note for the years ended June 30, 2008 and 2007 was $20,000 and $30,000, respectively.  The principal and interest due on the notes was paid-in-full on March 6, 2008.

 

The Company had a note receivable from Able Montgomery, Inc. (“Able Montgomery”) and Andrew Schmidt (the owner of Able Montgomery) related to the sale of Able Montgomery and certain assets to Mr. Schmidt. The note was dated June 15, 2000 for $170,000. The note bore interest at 9.5% per annum and payments commenced October 1, 2000. The note was secured by the stock of Able Montgomery, Able Montgomery’s assets, as well as a personal guarantee of Mr. Schmidt. The balance outstanding on this note at June 30, 2007 was zero.  On December 13, 2006, the Company purchased the assets of Able Montgomery (See Note 4).  Included in the purchase consideration was the forgiveness of the principal balance due and accrued interest on the above noted note receivable.

Note 6 - Property and Equipment

Property and equipment was comprised of the following at June 30, 2008 and 2007:

 

		June 30,
		2008				2007
Land		$	479,346			$	479,346
Buildings			1,674,124				1,674,124
Building improvements			791,166				906,685
Trucks and autos			4,349,790				4,552,651
Machinery and equipment			1,848,895				1,988,777
Office furniture, fixtures and equipment			1,371,183				1,359,241
Fuel tanks			984,461				1,008,129
Cylinders - propane			525,501				486,309
Construction in progress			219,829				-
		$	12,244,295			$	12,455,263
Less: accumulated depreciation			(5,830,284	)			(4,852,000	)
Property and equipment, net		$	6,414,011			$	7,603,263

 

At June 30, 2008 and 2007 equipment held under the capital leases, included above, had a net book value of $1,152,967 and $1,398,361, respectively.

 

Depreciation of property and equipment, including the depreciation of equipment held under capital leases, was $1,143,609 and $622,518 for the years ended June 30, 2008 and 2007, respectively.

 

F-20

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Note 6 - Property and Equipment-continued

 

Closure of Strattanville Travel Plaza

 

One of the Travel Plazas Segments facilities, Strattanville, Pennsylvania, was shut-down in April, 2008 due to unprofitable operations at that site.  Management is exploring business opportunities relating to this site.  All of the equipment at this facility could be transferred and utilized at other locations.  As of June 30, 2008, $158,520 of equipment has been classified as an idle asset and is no longer being depreciated.

 

Doswell Sale Agreement

 

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

Note 7 - Intangible Assets

 

Intangible assets were comprised of the following:

 

		For theYear Ended June 30,
		2008																2007
		Weighted																Weighted
		Average																Average
		Remaining																Remaining
		Useful				Carrying				Accumulated								Useful				Carrying				Accumulated
		Life (Yrs)				Amount				Amortization				Net				Life (Yrs)				Amount				Amortization				Net
Customer lists			7.7			$	1,308,025			$	552,903			$	755,122				8.3			$	1,308,025			$	464,374			$	843,651
Website development costs			4.2				312,538				52,086				260,452				3.0				2,394,337				2,331,324				63,013
Franchise agreements			9.1				64,155				6,717				57,438				9.1				64,155				516				63,639
Option to purchase real estate			9.0				5,000,000				541,667				4,458,333				10.0				5,000,000				-				5,000,000
Total			8.6			$	6,684,718			$	1,153,373			$	5,531,345				9.7			$	8,766,517			$	2,796,214			$	5,970,303

 

The estimated amortization of customer lists, website development costs, franchise agreements and the option to purchase real estate for the five years ending June 30, 2013 and thereafter, is as follows:

						Website								Option to
		Customer				Development				Franchise				Purchase
For the years ending June 30,		Lists				Costs				Agreements				Real Estate				Total
2009		$	88,530			$	62,508			$	6,200			$	500,000			$	657,238
2010			85,209				62,508				6,200				500,000				653,917
2011			84,545				62,508				6,200				500,000				653,253
2012			59,167				62,508				5,811				500,000				627,486
2013			46,478				10,420				4,595				500,000				561,493
Thereafter			391,193				-				28,432				1,958,333				2,377,958
		$	755,122			$	260,452			$	57,438			$	4,458,333			$	5,531,345

F-21

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Note 7 - Intangible Assets - continued

 

Information related to intangible assets for the years ended June 30, 2008 and 2007 is as follows:

 

		Twelve Months Ended June 30,
		2008				2007
Balance-Beginning of year		$	5,970,303			$	326,658
Amounts capitalized			312,538				5,761,330
Amortization			(751,496	)			(117,685	)
Balance-End of year		$	5,531,345			$	5,970,303

 

Amortization expense for intangible assets was $751,496 and $117,685 for the years ended June 30, 2008, and 2007, respectively. In fiscal 2008, the Company capitalized from work in progress $312,538 of software development costs.  In connection with the purchase of Horsham, the Company recorded a customer list asset with a preliminary value of $697,175.  In connection with the All American Plazas, Inc. now known as All American Properties, Inc. (“Properties”) business combination in May 2007, the Company assigned a fair value of $5.0 million for the contractual right to purchase certain travel plaza real estate assets and the assumption of real estate mortgages.  The Company also recognized a franchise agreement intangible asset of $64,155 in conjunction with the business combination with Properties.

 

Also in conjunction with the business combination with Properties, the Company acquired a ten-year option to acquire any of the travel plaza real estate owned by Properties, providing that the Company assume all existing debt obligations related to the applicable properties.  The option has been valued at $5.0 million and is exercisable as long as the leases held by the Company's subsidiary, All American Plazas, Inc. (“Plazas”), relating to the applicable real estate remain in effect.  Plazas’ leases automatically renew, upon the mutual consent of Plazas and Properties, for consecutive one-year terms so that the total term of each lease shall be for a period of ten years.

 

At June 30, 2008, the weighted average remaining life of the intangible assets was 8.6 years.

Note 8 - Deferred Financing Costs and Debt Discounts

The Company incurred deferred financing costs in conjunction with the sale of convertible debentures on July 12, 2005, July 5, 2006 and August 8, 2006 (See Note 12), notes payable on May 13, 2005 (See Note 10), and a line of credit on May 13, 2005 (See Note 9).  These costs were capitalized to deferred financing costs and are being amortized over the term of the related debt.  Amortization of deferred financing costs was $65,712 and $814,088 for the years ended June 30, 2008 and 2007, respectively. The 2007 amount includes $715,000 charged to amortization of deferred financing costs since the financing did not occur.

 

Additionally, in accordance with EITF 00-27, “Application of Issue 98-5 to Certain Convertible Instruments”, the Convertible Debentures issued on July 12, 2005, July 5, 2006 and August 8, 2006 were considered to have a beneficial conversion premium feature. The Company recorded a debt discount of $5,500,000 related to this conversion premium and warrants issued in connection with the financing.  The Company amortized $1,160,271 and $1,286,135 of debt discount during the years ended June 30, 2008 and 2007, respectively.

 

F-22

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Note 9 - Line of Credit

On May 13, 2005, the Company entered into a $1,750,000 line-of-credit agreement (the “Agreement”) with Entrepreneur Growth Capital, LLC (“EGC”). The loan is secured by certain eligible accounts receivable, inventory and certain other assets as defined in the agreement. The line bears interest at Citibank's prime rate, plus 4% per annum (9.0% and 12.25% at June 30, 2008 and 2007, respectively) not to exceed 24%, with a minimum interest of $9,000 per month. The line also requires an annual facility fee and monthly collateral management fees equal to 2% and 0.025%, respectively. In addition, deposits were not credited to our account until four business days after receipt by EGC.  On December 28, 2007 and February 11, 2008 the Company received over advances on this line in the amounts of $250,000 for each date.  Repayment of these advances were each 30 days.  Therefore, the effective interest rate for the year ended June 30, 2008 and 2007 was 29.4% and 21.0%, respectively, and the average amount outstanding against the line of credit at June 30, 2008 and 2007 was $549,396 and $730,689, respectively.  The balance due as of June 30, 2008 and 2007 was $979,818 and $481,602, respectively, and $770,182 was available under the line of credit at June 30, 2008.  The Agreement renews annually unless terminated by either party, as provided for in the Agreement.

 

On February 25, 2008, the Company increased an existing credit line by executing a Fuel Purchase Loan (“FPL”) agreement with EGC.  The increase, in the amount of $0.5 million, is a further extension of credit under an existing May 13, 2005 agreement between the Company and EGC (the “Loan Agreement”) (See Note 13).  In addition to the general terms of the Loan Agreement, under the repayment terms of the FPL, EGC will reduce the loan amount outstanding by applying specific amounts from the Company’s availability under the Loan Agreement.  These amounts start at $2,500 per business day, commencing March 1, 2008, gradually increasing to $10,000 per business day on June 1, 2008 and thereafter until the FPL is paid in full.

 

In further consideration for making the FPL, commencing February 22, 2008, EGC shall be entitled to receive a revenue share of four cents ($0.04) per gallon of fuel purchased with the FPL funds, subject to a $5,000 per week minimum during the first seven weeks of the program.

Note 10 - Notes Payable and Notes Payable-Related Party

On May 13, 2005, the Oil Segment entered into a term loan with Northfield Savings Bank for $3,250,000.  Principal and interest are payable in monthly installments of approximately $21,400, commencing on July 1, 2005.  The note is secured by Company owned real property located in Rockaway, New Jersey with a net book value of $839,057 at June 30, 2008 and an assignment of leases and rents at such location. The initial interest rate is 6.25% per annum on the unpaid principal balance for the first five (5) years, to be redetermined every fifth anniversary date (reset date) at 300 basis points over the five (5) year United States Treasury rate, but not lower than the initial rate; at that time the monthly payment will be redetermined. The interest rate on default is 4% per annum, charged at the bank’s option, above the interest rate then in effect.  At the maturity date of June 1, 2030, all amounts owed are due and payable. As of June 30, 2008 and 2007, the Company was in default of two non-financial covenants under the agreement for which the Company has received a waiver.  The balance outstanding on this note at June 30, 2008 and 2007 was $3,071,844 and $3,134,990, respectively.

 

On August 27, 1999, the Oil Segment entered into a note related to the purchase of equipment and facilities from B&B Fuels, Inc.  The total original principal balance of the note was $145,000.  The note is payable in the monthly amount of principal and interest of $1,721 with an interest rate of 7.5% per annum through August 27, 2009.  The note is secured by a mortgage granted by Able Energy New York, Inc. on properties at 2 and 4 Green Terrace and 4 Horicon Avenue, Town of Warrensburg, Warren County, New York.  The balance due on this note at June 30, 2008 and 2007 was $23,003 and $41,186, respectively.

 

On December 13, 2006, the Oil Segment entered into a 5 year note agreement relating to the purchase of the Horsham Franchise in the amount of $345,615 (See Note 4).  The interest rate is 7.0% per annum and principal and interest is payable in monthly installments of $6,844 which commenced on January 13, 2007. The balance due on this note at June 30, 2008 and 2007 was $254,275 and $316,225, respectively.

F-23

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Note 10 - Notes Payable and Notes Payable-Related Party – continued

On January 8, 2007, Plazas entered into an Account Purchase Agreement with Crown Financial (“Crown”) whereby Crown advanced $1,444,775 to Plazas in exchange for certain existing accounts receivables and taking ownership of new accounts originated by Plazas.  Repayment of the loan is to be made from the direct payments to Crown from the accounts it purchased from Plazas and a fee equal to 2.5% of the outstanding advance for the preceding period payable on the 15th and 30th day of each month.  The Crown loan is secured by the mortgages on the real property and improvements thereon owned by Properties known as the Strattanville and Frystown Gables truck stop plazas and a personal guarantee by Frank Nocito.  Subsequent to the May 2007 closing of the business combination between the Company and Properties, on July 1, 2007 the Account Purchase Agreement between Plazas and Crown Financial has been amended and modified from “Eligible Accounts having a 60 day aging” to a “90 day aging that are not reasonably deemed to be doubtful for collections” and the fee of 2.5% payable on the 15th and 30th day of each month has been modified to 1.375%. The Company has assumed this obligation based on the business combination; however, Properties has agreed to continue to secure this financing with the aforementioned real estate mortgages. The balance due on this note at June 30, 2008 and 2007 was $817,367 and $1,324,775, respectively.

 

On March 20, 2007, the Oil Segment entered into a credit card receivable advance agreement with Credit Cash whereby Credit Cash agreed to loan the Company $1,200,000. The loan is secured by the Company's existing and future credit card collections.  Terms of the loan call for a repayment of $1,284,000, which includes the one-time finance charge of $84,000, over a seven-month period. This will be accomplished through Credit Cash withholding 18% of credit card collections of Able Oil Company and 10% of credit card collections of PriceEnergy.com, Inc. over the seven-month period which began on March 21, 2007. There are certain provisions in the agreement which allows Credit Cash to increase the withholding, if the amount withheld by Credit Cash over the seven-month period is not sufficient to satisfy the required repayment of $1,284,000. On July 18, 2007, August 3, 2007, November 7, 2007, January 18, 2008, February 14, 2008 and April 11, 2008, the Company, in accordance with its agreement with Credit Cash, refinanced the loan in the amounts of $250,000, $300,000, $1,100,000, $500,000, $500,000 and $800,000, respectively (see Note 10). The outstanding Credit Cash loan as of June 30, 2008 and 2007 was $292,619 and $493,521, respectively.  Please refer to Note 21 - Subsequent Events, below for disclosure relating to disclosure of additional transactions with Credit Cash, subsequent to June 30, 2008, that helped to improve or affected the Company’s liquidity.  

 

Prior to the business combination between Properties and the Company, Properties entered into a loan agreement with Credit Cash, which was an advance against credit card receivables at the truck stop plazas then operated by Properties.  As a result of the business combination, this obligation was assumed by the Company’s newly formed, wholly-owned subsidiary, Plazas as it became the operator of the truck stop plazas. Credit Cash, while acknowledging the business combination, has continued to obligate both Properties and Plazas in their loan documents as obligors of the loan.

 

On August 31, 2006, Plazas entered into a loan agreement with EGC/Credit Cash, relating to the processing of its credit card transactions, in the initial amount of $1,000,000.  The interest rate is prime plus 3.75%.  The balance due on this note at June 30, 2008 and 2007 was $328,474 and $1,160,235, respectively.

 

On July 16, 2007, Credit Cash agreed to extend further credit of $400,000 secured by the credit card receivables at the truck stops operated by Plazas.  This July 16, 2007 extension of credit agreement was in addition to and supplemented all previous agreements with Credit Cash. Terms of the original loan and extensions called for repayment of $1,010,933 plus accrued interest which will be repaid through Credit Cash withholding 15% of credit card collections from the operations of the truck stop plazas until the loan balance is paid in full. The interest rate is prime plus 3.75% (12% at June 30, 2008). There are certain provisions in the agreement, which allows the Lender to increase the withholding, if the amount it is withholding is not sufficient to satisfy the loan in a timely manner. However, on November 2, 2007 and again on January 18, 2008, Credit Cash again agreed to extend an additional credit in the amount of $1,100,000 and $600,000, respectively. Terms of the agreement are the same as the prior July 16, 2007 financing. On January 18, 2008 the Travel Plaza segment of the Company refinanced its loan with Credit Cash for an additional amount of $600,000.  There are certain provisions in the agreement, which allows Credit Cash to increase the withholding, if the amount it is withholding is not sufficient to satisfy the loan in a timely manner. This repayment percentage was increased to 20% in April 2008 due to suspension of diesel sales in several locations due to pricing and cash flow issues.  This 20% was renegotiated in August 2008 down to 12%.

 

F-24

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Note 10 - Notes Payable and Notes Payable-Related Party - continued

The outstanding balance of the loan as of June 30, 2008 was $328,474 plus accrued interest. Please refer to Note 21 - Subsequent Events, below for disclosure relating to disclosure of additional transactions with Credit Cash, subsequent to June 30, 2008, that helped to improve or affected the Company’s liquidity.  

From June 1, 2007 through June 30, 2007, during the post-closing period of the business combination between the Company and Properties, Plazas made $8,374,495 in payments to its fuel supplier, TransMontaigne, on behalf of Properties.  These payments were not made from any capital infusion or advances made by Plazas, but rather were generated from revenues from the ongoing operations of the Travel Plaza Segment. These payments of $8.4 million were included in the advances to related parties balance at June 30, 2007. On October 5, 2007, Plazas along with Properties entered into an agreement with TransMontaigne to provide for the continued supply of fuel for the travel plazas, to extend a credit facility of $2.0 million to Plazas to purchase fuel on a pre-paid basis and for Properties to provide certain real property as collateral for its outstanding obligation to TransMontaigne for its fuel purchases prior to the closing of the business combination. As a result of this agreement, trade payables of $8.4 million owed by Plazas to TransMontaigne for fuel purchased after the closing of the business combination, as well as payments made by Plazas during that time period for obligations to TransMontaigne owed by Properties for fuel purchases prior to the closing, were reclassified and booked as obligations of Properties. This reclassification correspondingly reduced Plazas obligations to TransMontaigne by the amount of the payments it had made to TransMontaigne during the period from June 1, 2007 through June 30, 2007 on behalf of Properties referred to above. Thereafter, on November 30, 2007, the parties amended their agreement and entered into an Amended and Restated Note Agreement (the “Agreement”), which reduced Plazas’ line of credit for the purchase of fuel on a cash delivery basis to $1,550,000. This reduced line of credit was evidenced by a promissory note (the “Note”) in that amount and is outstanding at June 30, 2008. The Note does not accrue interest until November 15, 2009 at which point, if the Note is not paid, it accrues interest at 8% per annum. In addition to Plazas’ obligation to TransMontaigne pursuant to the Note, as of November 30, 2007, Plazas owed TransMontaigne the sum of $1.6 million in trade payables for additional fuel it purchased from TransMontaigne after the closing of the business combination. Any payment of these trade payables will correspondingly reduce Properties obligations to TransMontaigne under the Agreement. As part of the Agreement, Properties also made a note to TransMontaigne in an amount, which in accordance with the reclassification, included the payments made by Plazas to TransMontaigne on behalf of Properties during the post-closing transition period. Collateral for the Note and Properties’ obligations to TransMontaigne under the Agreement are certain real property owned by Properties. The Company and Properties are currently in the process of renegotiating the terms of the Agreement.

 

On October 17, 2007, the Oil Segment entered into a loan agreement with S&S NY Holdings, Inc. (“S&S”) for $500,000 to purchase #2 heating fuel. The term of the agreement was for 90 days with an option to refinance at the end of the 90-day period for an additional 90 days. The repayment of the principal amount was $0.10 cents per gallon of fuel sold to the Company’s customers excluding pre-purchase gallons. An additional $0.075 per gallon was paid as interest. The agreement also provides that in each 30-day period the interest amount can be no less than $37,500. As of February 15, 2008 the Company had repaid $137,180 and exercised its right to refinance the amount until March 31, 2008. The amount outstanding on this note at June 30, 2008 was $362,820. 

 

On December 20, 2007, the Oil Segment entered in to a second loan agreement with S&S for $500,000 to purchase #2 heating fuel.  The term of the agreement was through March 31, 2008.  The repayment of principle was not due until the maturity date.  An additional $0.075 per gallon was paid as interest. The agreement also provides that in each 30-day period the interest amount can be no less than $37,500.  The outstanding balance on this note was $500,000 at June 30, 2008.  On July 22, 2008, the Company entered into an agreement with S&S which provided for repayment of the loans from S&S in exchange for granting S&S a 49% interest in Able Energy New York, Inc. (“Able NY”), a wholly owned subsidiary of the Company, and a 90% interest in the Company’s Able PA operations (“Able PA”).  This agreement was amended on October 31, 2008, granting the Company the right to repurchase S&S’s interest in Able NY and Able PA.  See, Note 21 Subsequent Events for disclosure relating to the July 22, 2008 “S&S Settlement Agreement” and the October 31, 2008 “Amendment to the S&S Settlement Agreement”.

 

F-25

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Note 10 - Notes Payable and Notes Payable-Related Party - continued

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

 

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

 

In addition, the Company has entered into 17 miscellaneous loan agreements and notes that, as of June 30, 2008, the total amount due on all 17 items was $292,540 with interest rates ranging from 0.97% to 15.2% and maturity dates ranging from October 2009 to July 2011.

 

Maturities on notes payable as of June 30, 2008 are as follows:

For the Year Ending
June 30, 2008			Amount
2009			$	4,123,602
2010				257,879
2011				209,696
2012				125,714
2013				86,210
Thereafter				2,689,841
	Total		$	7,492,942

Note 11 - Capital Leases Payable

The Company has entered into various capital leases for equipment expiring through December 2012. The capital leases bear interest at rates ranging between 8% and 12% per annum. During the year ended June 30, 2007, the Company purchased equipment under five capital leases amounting to $402,775.  There were no such purchases in the year ended June 30, 2008.

 

The following is a schedule of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of June 30, 2008 

For the Year
Ending June 30,		Amount
2009		$	351,393
2010			212,320
2011			144,328
2012			63,367
2013			-
Total minimum lease payments		$	771,409
Less: amounts representing interest			83,715
Present value of net minimum lease payments		$	687,694
Less: current portion			366,804
Long-term portion		$	320,890

 

F-26

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Note 12 - Convertible Debentures

On July 12, 2005, the Company consummated a financing in the amount of $2,500,000 through the sale of Variable Rate Convertibles Debentures (the "Convertible Debentures"). The Convertible Debentures had a term of two years from the date of issuance, which term was amended on November 16, 2005, to 25 months, subject to the occurrence of an event of default, with interest payable at the rate per annum equal to LIBOR for the applicable interest period, plus 4%, payable on a quarterly basis. The Convertible Debentures may be converted at the option of the holders into shares of the Company’s common stock at a conversion price of $6.50 per share. In addition, the purchasers received five-year warrants to purchase 192,308 shares of common stock at an exercise price of $7.15 per share.   These warrants are not exchangeable for cash.  The Company has an optional redemption right (which right shall be mandatory upon the occurrence of an event of default) to repurchase all of the Convertible Debentures for 125% of the face amount of the Convertible Debentures plus all accrued and outstanding interest, as well as a right to repurchase all of the Convertible Debentures in the event of the consummation of a new financing in which the Company sells securities at a purchase price that is below the $6.50 conversion price.  Deferred financing costs related to this transaction totaled approximately $217,000, including an $82,000 broker fee and $135,000 in various legal expenses.

 

The Company allocated the proceeds from the issuance of the Convertible Debentures and warrants based on their respective fair values. As such, the Company discounted the balance of the Convertible Debentures as of the date of issuance and recorded $900,000 as an adjustment to additional paid-in capital related to the warrants. In addition, the conversion feature of the Convertible Debentures is characterized as a beneficial conversion feature. Pursuant to EITF No. 00-27, the Company has determined that the value of the beneficial conversion feature is $1,600,000. Accordingly, the Company has further discounted the balance of the Convertible Debentures as of the date of issuance and recorded an adjustment of $1,600,000 to additional paid-in capital.

 

During the year ended June 30, 2006, Convertible Debentures totaling $2,367,500 in principal amount, plus accrued interest totaling $49,563, were converted into 371,856 shares of the Company’s common stock. Amortization of the debt discounts on this Convertible Debenture for the years ended June 30, 2008 and 2007 were $7,737 and $63,016, respectively.

 

As of June 30, 2008, the outstanding principal on the Convertible Debentures was $132,500, and the debt discount was fully amortized.

 

The Company also originally granted to the purchasers who acquired the Convertible Debentures an additional investment right, exercisable for a period of eighteen months from the original investment date of July 18, 2005, to purchase units consisting of convertible debentures in the aggregate amount of up to $15,000,000 (the "Additional Debentures") and common stock purchase warrants equal to 50% of the face amount of such Additional Debentures (the "Additional Warrants"). Upon exercise of the additional investment right, the Additional Debentures are convertible into and the Additional Warrants could be exercised for unregistered, restricted shares of the Company’s common stock.

 

As part of a negotiated amendment of the purchase agreement, however, the rights of the Company and the purchasers relating to the Additional Debentures and Additional Warrants were eliminated as of November 16, 2005, and the purchase agreement was amended to issue the purchasers a series of warrants (the "New Warrants") with an exercise price of $7.50 per share. In the aggregate, the New Warrants permit the holders to acquire up to 5.25 million shares of the Company's common stock upon proper exercise. Notwithstanding the foregoing, until the required stockholder approvals are obtained, the purchasers have agreed not to convert any Convertible Debentures and the Company has the right not to honor any request to convert, or exercise any Additional Warrants or New Warrants, which in the aggregate would involve the issuance of a number of shares that would not exceed 19.999% of the total number of shares of the Company's common stock outstanding on the trading day prior to the date of the purchase agreement.

 

In connection with the issuance of the Convertible Debenture and the additional investment right, the Company entered into a Registration Rights Agreement with the Holders relating to the underlying securities. Based on the interpretive guidance in EITF No. 05-4, view C, since the registration rights agreement includes provisions for uncapped liquidated damages, the Company determined that the registration rights is a derivative liability. However due to various factors including substantial conversion of these Convertible Debentures and the registration statement becoming effective in December 2005, the value of the registration rights was deemed to be de minimis and therefore no liability was recorded in the consolidated financial statements.

 

F-27

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Note 12 - Convertible Debentures-continued

On July 5, 2006, the Company closed a Securities Purchase Agreement entered into on June 30, 2006 whereby it sold a non-redeemable $1,000,000 convertible term note, due June 30, 2009, to Laurus Master Fund, Ltd. ("Laurus") and issued a 5 year warrant for 160,000 shares of the Company’s common stock. The Company paid fees of $49,000 to Laurus and received net proceeds of $951,000. The Company incurred escrow fees of $1,500.   In conjunction with this issuance, the Company agreed that within sixty (60) days from the date of issuance of the convertible term note payable and warrant that it would file a registration statement with the SEC covering the resale of the shares of the Company's convertible term common stock issuable upon conversion of the note and the exercise of the warrant. This registration statement would also cover any additional shares of common stock issuable to Laurus as a result of any adjustment to the fixed conversion price of the note or the exercise price of the warrant.   The agreement does not provide any formula for liquidated damages.  The Company did not file a registration statement by August 29, 2006 covering the common stock issuable upon conversion of the convertible term note and the exercise of warrants issued to Laurus.  As of June 30, 2008, the Company had yet to file that registration statement.  Consequently, the Company is in breach of its registration obligations to Laurus although the Company has not received any notice from Laurus regarding this registration rights default and or the assessment of any penalties that might have resulted therefrom.  The Company’s breach of its registration obligations constitutes a default under the agreement, which enables the holders to declare the convertible debentures immediately due and payable.  Therefore, as of June 30, 2008, this debt is classified as short-term on the Company’s consolidated balance sheet.

 

In accordance with EITF 00-27 “Application of Issue #98-5 to Certain Convertible Instruments” and EITF 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjusted Conversion Ratios", on a relative fair value basis, the warrants were recorded at a value of $472,000. The conversion feature, utilizing an effective conversion price and market price of the common stock on the date of issuance of $3.00 and $7.70, per share, respectively, was valued at $723,000, which was then limited to $528,000, the remaining undiscounted value of the proceeds of the convertible term note. Accordingly, the Company has recorded a debt discount related to the warrants of $472,000 and a beneficial conversion feature of the convertible term note of $528,000, which amounts are amortizable utilizing the interest method over the three year term of the convertible term note. Amortization of debt discounts on this convertible note payable amounted to approximately $271,000 and $330,000 for the years ended June 30, 2008 and 2007, respectively.

 

The note is convertible at the option of Laurus into shares of the Company's common stock, at an initial fixed conversion price of $6.50 per share.  The conversion rate of the note is subject to certain adjustments and limitations as set forth in the note.  As of June 30, 2008 and 2007, the convertible debt principal outstanding on the Laurus note was $805,556 and $1,000,000, respectively, which was then offset by an unamortized debt discount of approximately $399,000 and $670,000 at June 30, 2008 and 2007, respectively.

 

On August 8, 2006, the Company issued $2,000,000 of convertible debentures to certain investors, due August 8, 2008 and issued 5 year non-redeemable warrants to purchase 672,667 shares of the Company’s common stock. While no formal notice of default has been received, the Company is currently negotiating to extend the terms of this agreement.  In conjunction with this issuance, the Company had agreed to file a registration statement within forty-five (45) days, or by September 22, 2006, covering the resale of the shares of common stock underlying the debentures and warrants issued to the investors, and by October 15, 2006, to have such registration statement declared effective.  The registration rights agreement with the investors provides for partial liquidated damages in the case that these registration requirements are not met.    From the date of violation, the Company is obligated to pay liquidated damages of 2% per month of the outstanding amount of the convertible debentures, up to a total of 24% of the initial investment, or $0.5 million.  As of June 30, 2008, the Company had not yet filed a registration statement regarding these securities.   Accordingly, through June 30, 2008, the Company incurred and recorded 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 approximately $0.1 million, none of which has been paid.  The holders have not waived their rights under this agreement.  Additionally, the Company’s breach of its registration obligations constitutes a default under the agreement, which enables the holders to declare the convertible debentures immediately due and payable.  Therefore, as of June 30, 2008, this debt is classified as short-term on the Company’s consolidated balance sheet.  The Company has not received any notice from the purchasers of the convertible debentures regarding this registration rights default or any other default notice.

F-28

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Note 12 - Convertible Debentures-continued

The convertible debentures are convertible into shares of the Company's common stock at a conversion price of $6.00 per share, which was the market value of the Company's common stock on the date of issuance. The Company received net proceeds of $1,820,000 and incurred expenses of legal fees of $40,000 and broker fees of $140,000 in connection with this financing that were recorded as deferred financing costs and amortized on a straight-line basis over the two year term of the convertible debentures. The convertible debentures bear interest at the greater of either LIBOR (2.46% as of June 30, 2008) plus 6.0%, or 12.5%, per annum, and such interest is payable quarterly to the holder either in cash or in additional convertible debentures at the Company’s option.

 

At any time, the holder may convert the convertible debenture into shares of common stock at $6.00 per share, or into 333,333 shares of common stock, which represents a conversion at the face value of the convertible debenture.

 

On May 30, 2007, upon consummation by the Company of the business combination transaction with Properties, the Company may redeem the convertible debentures at a price of 120% of the face amount, plus any accrued but unpaid interest and any unpaid liquidated damages or under certain conditions, the Company may redeem the amount at 120% of the face amount in cash, or redeem through the issuance of shares of common stock at the lower of the existing conversion price or 90% of the volume weighted average price, as stipulated in the agreement.

 

The investors may elect to participate in up to 50% of any subsequent financing of the Company by providing written notice of intention to the Company.

 

The investors also were issued 333,333, 166,667 and 172,667 five-year warrants to purchase additional shares of the Company's common stock at $4.00, $6.00 and $7.00 per share, respectively. These warrants were valued at $3,143,000 using the Black-Scholes model, applying an interest rate of 4.85%, volatility of 98.4%, dividends of 0% and a term of five years. In accordance with EITF 00-27 and EITF 98-5, on a relative fair value basis, the warrants were recorded at a value of $1,222,000. The beneficial conversion feature, utilizing an effective conversion price and market price of the common stock on the date of issuance of $2.00 and $6.00, per share, respectively, was valued at $1,333,000 which, was then limited to $778,000, the remaining undiscounted value of the convertible term note. Accordingly, the Company has recorded a debt discount related to the warrants of $1,222,000, the beneficial conversion feature of the convertible term note of $778,000, which amounts are amortizable over the two-year term of the convertible debenture.  Amortization of debt discount on these convertible debentures was approximately $883,000 and $893,000 for the years ended June 30, 2008 and 2007, respectively. As of June 30, 2008 and 2007, the convertible debt principal outstanding on this debt was $1,850,000 and $2,000,000, respectively, which was then offset by an unamortized debt discount of approximately $225,000 and $1,107,000 at June 30, 2008 and 2007, respectively.

 

As of June 30, 2008, the Company’s future debt discount to be amortized in 2009 was $623,962.

Note 13 - Stockholders Equity

Stock-Based Compensation

 

On December 15, 2005, the Company entered into a consulting agreement, which included the issuance of options to purchase 25,000 shares of the Company’s common stock at an exercise price of $8.09, the market price on the date of the agreement. The options were valued at $174,430 using the Black-Scholes option-pricing model and were amortized over the initial 3-year life of the consulting agreement.  Stock-based compensation was zero and $115,607 for the years ended June 30, 2008 and 2007, respectively, relating to this agreement. The Company terminated this consulting agreement in December, 2006.

 

On March 10, 2006, the Company entered into a consulting arrangement for prior services rendered, which included the issuance of options to purchase 75,000 shares of the Company’s common stock at an exercise price of $7.13, the market price on the effective date of the arrangement.  The options were valued at $195,036 using the Black-Scholes option-pricing model and was recorded as stock-based compensation immediately as the options were fully vested upon grant. During the year ended June 30, 2007, the Company revalued these options.  Stock based compensation related to the revaluation was $8,236 for the year ended June 30, 2007.

 

F-29

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Note 13 - Stockholders Equity-continued

Stock-Based Compensation-continued

 

On July 31, 2006, an option was granted to Frank Nocito, a Vice President and stockholder of the Company, to purchase 50,000 shares of common stock of the Company at a price of $4.55 per share. Thereafter, in error, the Company issued the shares to Mr. Nocito. Mr. Nocito had not formally exercised the option, nor had he paid the Company the cash consideration for the shares. Mr. Nocito returned the stock certificates to the Company and the shares were cancelled by the transfer agent.  On October 7, 2006, Mr. Nocito and the Company agreed to cancel the option and further, Mr. Nocito agreed in writing to waive any and all rights that he had to the option. The option was then cancelled and deemed null and void and the statements reflect no expense related to the cancelled grant.

 

On August 25, 2006, Steven Vella, the Company's former Chief Financial Officer, elected to exercise 12,500 options with an exercise price of $4.36 that were granted to him on June 23, 2006, as part of a negotiated severance package. As a result of the option exercise, the Company received proceeds of $54,500.  Black Scholes variables used were 3 year term, risk free interest rate of 5.23% and volatility of 86.9%.

 

On August 29, 2006, the stockholders approved an increase in the authorized shares of common stock from 10.0 million shares to 75.0 million shares.

 

On June 29, 2007, the Company issued options to four outside members of its Board of Directors to purchase an aggregate of 321,040 shares of the Company’s common stock at an exercise price of $1.90, the market price on the day of grant.  The options were valued at $439,825 using the Black-Scholes option-pricing model and were fully vested and exercisable when issued.   Black Scholes variables used were 5 year term, risk free interest rate of 4.30% and volatility of 91%.

 

A summary of the Company's stock option activity and related information for the years ended June 30, 2007 and 2008 is as follows:

 

		Number of Options				Weighted Average Exercise Price
Outstanding June 30, 2006			91,500			$	5.92
Granted			371,040				2.26
Exercised			(12,500	)			4.36
Forfeited			(50,000	)			4.55
Outstanding June 30, 2007			400,040				2.74
Granted			-				-
Exercised			-				-
Forfeited			-				-
Outstanding June 30, 2008			400,040				2.74

During the years ended June 30, 2008 and 2007, zero options and 12,500 options were exercised for proceeds of zero and $54,500 respectively.

 

F-30

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Note 13 - Stockholders Equity-continued

 

Stock-Based Compensation-continued

 

Options exercisable are as follows:

 

		Number of Options				Weighted Average Exercise Price
June 30, 2007			400,040			$	2.74
June 30, 2008		400,040				$	2.74

 

The weighted-average fair value of options granted during the year ended June 30, 2007 was $1.67.  There were no options granted in the year ended June 30, 2008.

 

The following is a summary of stock options outstanding and exercisable at June 30, 2008 by exercise price range:

Exercise Price Range			Number of Options				Weighted-Average Remaining Contractual Life (Years)				Weighted-Average Exercise Price				Intrinsic Value
$2.55 - $ 4.36				30,000				0.5			$	2.86			$	101,675
$8.09 - $ 8.32				49,000				2.6				8.20				-
$1.90				321,040				9.0				1.90				536,137
Totals				400,040				7.6			$	2.74			$	637,812

Stock Options

The estimated weighted average fair values of the options at the date of grant using the Black-Scholes option-pricing model as promulgated by SFAS 123 and the related assumptions used to develop the estimates are as follows:

 

	Years Ended
	2008		2007				2006
Risk-free interest rate	(a)			4.3%				4.3%
Expected volatility	(a)			91.0%				90.9%
Dividend yield	(a)			-				-
Expected life	(a)		5 years				3.5 years

 

Note:

(a)  There were no options granted in the year ended June 30, 2008.

The weighted average fair value of options granted during the years ended June 30, 2007 was $2.74.

 

Equity Plans

 

The Able Energy, Inc.’s 1999 Employee Stock Option Plan, as amended, permits stock option awards up to 700,000 shares of the Company's common stock to be granted to directors, employees and consultants of the Company.  This plan states that unless otherwise determined by the Board of Directors, an option shall be exercisable for ten years after the date on which it was granted.  Vesting terms are set by the Board of Directors.  There are 84,250 options remaining available for issuance under this plan at June 30, 2008.

 

F-31

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Note 13 - Stockholders Equity-continued

 

Stock-Based Compensation-continued

 

The Able Energy, Inc. 2000 Employee Stock Purchase Plan, which was approved by the stockholders on June 23, 2000, permits stock option awards up to 350,000 shares of the Company's common stock to be granted to employees of the Company. There are 350,000 shares remaining available for issuance under this plan at June 30, 2008.

 

The Able Energy, Inc. 2000 Stock Bonus Plan, which was approved by the stockholders on June 23, 2000, permits restricted stock awards up to 350,000 shares of the Company's common stock to be granted to directors, employees and consultants of the Company. There are 338,000 shares remaining available for issuance under this plan at June 30, 2008.

 

The Able Energy, Inc. 2005 Incentive Stock Plan, which was approved by the stockholders on May 25, 2005, permits stock option, common stock, and restricted common stock purchase offer awards of up to 1,000,000 shares of the Company's common stock to be granted to directors, employees and consultants of the Company.  There are 678,960 shares remaining available for issuance under this plan at June 30, 2008.

 

Warrants

 

A summary of the Company’s stock warrant activity, and related information for the years ended June 30, 2007 and 2008 is as follows:

 

		Number of Warrants				Weighted Average Exercise Price
Outstanding June 30, 2006			5,332,309			$	7.49
Granted			832,667				5.32
Exercised			-				-
Outstanding June 30, 2007			6,164,976				7.20
Granted			25,000				0.56
Exercised			-				-
Outstanding June 30, 2008			6,189,976			$	7.17

 

During the years ended June 30, 2008 and 2007, no warrants were exercised.

 

Preferred Stock

 

The Certificate of Incorporation authorizes the issuance of 10,000,000 shares of preferred stock, $.001 par value per share, with designations, rights and preferences determined from time to time by the Board of Directors.  Accordingly, the Company’s Board of Directors is empowered, without stockholder approval, to issue classes of Preferred Stock with voting, liquidation, conversion or other rights.  To date, no preferred stock has been issued.

 

F-32

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Note 13 - Stockholders Equity-continued

 

Voluntary NASDAQ Delisting

 

On October 4, 2006, the Company announced its intention to voluntarily delist the Company's common stock from the NASDAQ Capital Market, effective as of the start of trading on October 13, 2006. The Company's common stock is currently quoted on the Pink Sheets. The management of the Company has indicated that the Company will seek to have its common stock quoted on the OTC Bulletin Board as soon as it qualifies for listing following the filing of this June 30, 2008 Annual Report on Form 10-K and the September 30, 2008 Quarterly Report on Form 10-Q.

Note 14 - Segment reporting

Since the Company’s business combination with All American Plazas, Inc. on May 30, 2007, the Company is engaged in two primary business activities, organized in two reporting segments; the Oil Segment and the Travel Plaza Segment.  The Company’s senior management manages the businesses and the expected long-term financial performance of each segment.  The accounting policies of the segments are the same as those described in Note 3 - Summary of Significant Accounting Policies.  There are no intersegment sales for any of the periods presented below.

 

The Company’s Oil Segment, consisting of Able Oil, Able NY, Able 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.

 

F-33

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Note 14 - Segment reporting – continued

The Company’s Travel Plaza Segment, operated by of 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.

 

		Year Ended June 30,
		2008				2007
Revenues
Oil Segment:
#2 heating oil		$	54,677,747			$	51,848,720
Gasoline, diesel fuel, kerosene, propane & other lubricants			17,637,567				19,508,552
Equipment, sales & installation			2,255,439				2,712,048
Total Oil Segment		$	74,570,753			$	74,069,320
Travel Plaza Segment:
Fuels		$	174,578,455			$	16,721,454
Non-Fuels			27,291,380				2,850,774
Total Travel Plaza Segment		$	201,869,835			$	19,572,228
Total revenues		$	276,440,587			$	93,641,548
Depreciation & amortization
Oil Segment		$	754,263			$	692,754
Travel Plaza Segment			1,134,643				47,449
Total depreciation and amortization		$	1,888,906			$	740,203
Interest Expense
Oil Segment		$	1,501,931			$	862,034
Travel Plaza Segment			712,024				86,982
Total interest expense		$	2,213,955			$	949,016
Segment Loss
Oil Segment		$	(4,381,058	)		$	(6,019,591	)
Travel Plaza Segment			(8,532,175	)			(612,712	)
Total segment loss		$	(12,913,233	)		$	(6,632,303	)
Inventories
Total Oil Segment		$	427,339			$	626,483
Total Travel Plaza Segment			2,296,976				3,565,307
Inventory		$	2,724,315			$	4,191,790
Goodwill
Oil Segment		$	-			$	-
Travel Plaza Segment			11,046,179				11,139,542
Total goodwill		$	11,046,179			$	11,139,542
All Other Assets
Oil Segment			10,259,230			$	11,176,463
Travel Plaza Segment			10,713,274				21,654,301
Total all other assets		$	20,972,504			$	32,830,764
Total Assets
Oil Segment		$	10,686,569			$	11,802,946
Travel Plaza Segment			24,056,429				36,359,150
Total assets		$	34,742,998			$	48,162,096

 

F-34

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Note 14 - Segment reporting – continued

The Company did not have any operations outside the United States of America.  Accordingly, all revenues were generated from domestic transactions, and the Company has no long-lived assets outside the United States of America.

Note 15 - Franchising

The Company has franchise agreements with two franchised businesses specializing in residential and commercial sales of fuel oil, diesel fuel, gasoline, propane and related services.  The Company provides training, operational support and use of Company credit for the purchase of product, among other things, as specified in the agreements.

 

The Company signed its first franchise agreement in December 1998. As of June 30, 2008, there was one Able Energy franchise in operation, located in East Stroudsburg, Pennsylvania.

 

On June 29, 2001, PriceEnergy.com Franchising, LLC signed its first franchise agreement.  As of June 30, 2008, PriceEnergy.com Franchising, LLC has one franchise in operation in Norwalk, Connecticut.

 

The Company stopped actively selling franchises in March 2002 and has not sold any franchises since that time.  Franchise fee revenues were zero and $14,783 for the years ended June 30 2008 and 2007, respectively.

Note 16 - Income Taxes

Components of the provision for income taxes associated with continuing operations are as follows:

		For the Years Ended June 30,
		2008				2007
Current:
Federal		$	-			$	-
State			28,680				28,824
			28,680				28,824
Deferred:
Federal			215,000				-
State			32,000				-
			247,000				-
		$	275,680			$	28,824

The provision for (benefit from) income taxes associated with continuing operations using the statutory federal tax rate as compared to the Company’s effective tax rate is summarized as follows:

		For the Years Ended June 30,
		2008				2007
Federal income taxes at statutory rate			(34.0)%				(34.0)%
State income taxes, net of federal benefit			(0.3)%				(5.0 )%
Permanent differences			10.0%				9.6%
Change in valuation allowance			24.3 %				29.4 %
Other			- %				- %
Effective income tax rate			- %				- %

F-35

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Note 16 - Income Taxes-continued

Temporary differences between the tax bases of assets and liabilities and their financial reporting amounts that give rise to deferred tax assets and liabilities and their approximate tax effects are as follows:

		June 30,
		2008				2007
Net operating loss carry forwards		$	9,663,224			$	5,642,722
Allowance for doubtful accounts			504,632				293,365
Stock-based compensation			300,177				294,000
Deferred tax assets - gross			10,468,033				6,230,087
Property and equipment			(169,499	)			(194,718	)
Goodwill			(247,000	)			(19,000	)
Deferred tax asset - net			10,051,534				6,016,369
Less: Valuation allowance			(10,051,534	)			(6,016,369	)
Total		$	-			$	-
Increase (decrease) in valuation allowance		$	4,035,165			$	1,471,429

The Company has federal net operating loss (“NOL”) carry forwards of approximately $24,800,763 and $14,455,000 as of June 30, 2008 and 2007, respectively. The federal NOL carry forwards expire between June 30, 2021 and 2028.  Able Energy, Inc, Able Oil Company and PriceEnergy.Com, Inc. have aggregate New Jersey NOL carry forwards of approximately $24,619,313 and $13,732,000 as of June 30, 2008 and 2007, respectively.  The New Jersey net operating loss carry forwards expire between June 30, 2009 and 2015.  The federal and state NOL carry forwards at June 30, 2008 and 2007 include approximately $3,933,000 related to windfall tax deductions for which a benefit will be recorded to additional paid-in capital when realized.  The Company’s ability to use its federal NOL carry forwards may be subject to an annual limitation in future years pursuant to Section 382 of the Internal Revenue Code (“IRC”).

 

These carry forward losses are available to offset future taxable income, if any.  The Company’s utilization of this carry forward against future taxable income is subject to the Company having profitable operations or a profitable sale of Company assets, which creates taxable income. Due to the uncertainty surrounding the realization of the benefits associated with the carry forward losses and the other temporary differences, the Company has provided a valuation allowance for the entire amount of the net deferred tax assets as of June 30, 2008 and 2007.

Note 17 - 401(k) Plan

Able Oil Company, included in the Oil Segment, established a Qualified Profit Sharing Plan under IRC Section 401(k).  The Able Oil Company is obligated to match 25% of qualified employee contributions up to 6% of salary.  The 401(k) matching contribution expense was approximately $26,600 and $29,300 for the years ended June 30, 2008 and 2007, respectively.

 

While the Travel Plaza Segment’s 401(k) Savings Plan provides for matching contributions, at managements discretion, no such matching contributions have been made since the inception of the plan in 2005.

Note 18 - Related Party Transactions

PriceEnergy.com

 

At June 30, 2008, a total of four current officers, a former officer and a related party of the Company own 32.7% of the common stock of the subsidiary, PriceEnergy.com, which was incorporated in November 1999. The remaining shares of PriceEnergy.com are held by the Company.

 

F-36

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Note 18 - Related Party Transactions-continued

 

Acquisition of Assets of Properties

 

At June 30, 2008, Properties owns approximately 84.7% of the Company’s outstanding common stock.  Approximately 85.0% of the common stock of Properties is owned by the Chelednik Family Trust, a trust established by Mr. Nocito, an officer of the Company and his wife for the benefit of their family.   The balance of the outstanding common stock of Properties is owned by a limited liability company owned by Gregory D. Frost, the Chief Executive Officer and Chairman of the Board of the Company, and his wife.

 

The Company entered into a Stock Purchase Agreement on June 16, 2005 with  All American Plazas, Inc. now known as All American Properties, Inc. (“Properties”) (which was subsequently amended and restated into the Asset Purchase Agreement as of the same date) ("Purchase Agreement") with Properties in connection with the Company’s acquisition of the assets of Properties. This transaction was approved on August 29, 2006 at a special meeting of the Company’s stockholders.  The closing occurred on May 30, 2007.  Under the terms of the Purchase Agreement, the Company delivered to the Sellers 11,666,667 shares of the Company’s restricted common stock, par value $.001 per share, at $1.65 per share for an aggregate purchase price of approximately $19.3 million.

 

The Company also acquired a ten-year option to acquire any of the travel plaza real estate owned by Properties, providing that the Company assume all existing debt obligations related to the applicable properties.  The option has been valued at $5.0 million and is exercisable as long as the leases of the Company's subsidiary, All American Plazas, Inc. (“Plazas”), relating to the applicable real estate remain in effect.  Plazas’ leases automatically renew, upon the mutual consent of Plazas and Properties, for consecutive one-year terms so that the total term of each lease shall be for a period of ten years.

 

Properties Financing

 

On July 5, 2006, the Company received $1,000,000 from Laurus in connection with the issuance of a convertible term note.  Of the proceeds received from Laurus in connection with the issuance of the convertible term note, the Company loaned $905,000 to Properties in exchange for a note receivable.  Properties used such proceeds to pay (i) certain obligations of CCIG Group, Inc. (“CCIG”) and its wholly-owner subsidiary, Beach Properties Barbuda Limited (“BPBL”), which owned and operated an exclusive Caribbean resort hotel known as the Beach House located on the island of Barbuda, and (ii) a loan obligation owed by BPBL to Laurus which loan was used by CCIG to acquire the Beach house.  Properties had previously acquired a 70% interest in CCIG pursuant to a Share Exchange Agreement.  The Company received from Laurus a notice of a claim of default dated January 10, 2007.  Laurus claimed default under section 4.1(a) of the Term Note as a result of non-payment of interest and fees in the amount of $8,826 that was due on January 5, 2007, and a default under sections 6.17 and 6.18 of the securities purchase agreement for “failure to use best efforts (i) to cause CCIG to provide Holder on an ongoing basis with evidence that any and all obligations in respect of accounts payable of the project operated by CCIG’s subsidiary, BPBL, have been met; and (ii) cause CCIG to provide within 15 days after the end of each calendar month, unaudited/internal financial statements (balance sheet, statements of income and cash flow) of the Beach House and evidence that BPBL and the Beach House are current in all of their ongoing operational needs”.

 

The aforementioned interest and fees were paid by the Company on January 11, 2007. Further, the Company has used its best efforts to cause CCIG to provide reports and information to Laurus as provided for in the securities purchase agreement.

 

In connection with the claim of default, Laurus claimed an acceleration of maturity of the principal amount of the Note of $1,000,000 and approximately $154,000 in default payment (“Default Payment”) as well as accrued interest and fees of approximately $12,000. On March 7, 2007, Laurus notified the Company that it waived the event of default and that Laurus had waived the requirement for the Company to make the Default Payment.

 

F-37

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Note 18 - Related Party Transactions-continued

 

Properties Financing-continued

 

In consideration for the loan, Properties granted the Company an option, (the “Option") exercisable in the Company's sole discretion, to acquire 80% of the CCIG stock Properties acquired from CCIG pursuant to a Share Exchange Agreement. In addition, in the event that the Company exercises the Option, 80% of the outstanding principal amount of the Properties note will be cancelled and shall be deemed fully paid and satisfied. The remaining principal balance of the Properties note and all outstanding and accrued interest on the loan shall be due and payable one year from the exercise of the Option. The Option must be exercised in whole and not in part and the Option expires on July 5, 2008. The Company did not exercise the Option prior to its expiration.  In the event the Company does not exercise the Option, the Properties note shall be due in two years, on July 6, 2008, unless the Company has issued a declaration of intent not to exercise the Option, in which case the Properties note shall be due one year from such declaration. The Company has determined, that given the lack of liquidity in the shares of CCIG and the lack of information in regard to the financial condition of CCIG that this option has no value and has not been recorded by the Company.

 

The Company loaned Properties $1,730,000 as evidenced by a promissory note dated July 27, 2005 with a maturity date of June 15, 2007. Subsequent to an extension of the maturity date of the note, this note and related interest receivable was paid in -full as of June 30, 2008.    The interest income related to this note for the years ended June 30, 2008 and 2007 was $152,721 and $164,350, respectively.  The note and accrued interest receivable in the amount of $1,964,925 were classified as contra-equity on the Company’s consolidated balance sheet as of June 30, 2007.

 

During December 2006, the Company entered into a Fuel Purchase agreement with Properties. Under the agreement, the Company pre-paid $350,000 to Properties in exchange for fuel purchased pursuant to this agreement to be provided by Properties at a $.05 per gallon discount from the Newark, New Jersey daily spot market price. Properties satisfied $338,942 of its obligations under this agreement as of June 30, 2007 and the balance of $11,058 was satisfied as of June 30, 2008.  The prepaid balance under the agreement at June 30, 2007 was $11,058 and was included as a receivable from a related party in the consolidated balance sheet at June 30, 2007.

 

The Company receives rent from Properties for office space occupied by Properties in the Company’s New York City offices.  The Company has reduced gross rent expense included in sales, general and administrative expenses in the consolidated statements of operations in the amount of $114,041 and $110,615 for the years ended June 30, 2008 and 2007, respectively.

 

On June 1, 2005, Properties completed a financing that may impact the Company. Pursuant to the terms of the Securities Purchase Agreement (the "Agreement") among Properties and certain purchasers (“Purchasers”), the Purchasers loaned Properties an aggregate of $5,000,000, evidenced by Secured Debentures dated June 1, 2005 (the "Debentures").  The Debentures were due and payable on June 1, 2007, subject to the occurrence of an event of default, with interest payable at the rate per annum equal to LIBOR for the applicable interest period, plus 4% payable on a quarterly basis on April 1st, July 1st, October 1st and January 1st, beginning on the first such date after the date of issuance of the Debentures.  Upon the May 30, 2007 completion of the business combination  with Properties and the Company’s board approving the transfer of the debt that would also require the transfer of additional assets from Properties as consideration for the Company to assume this debt, then the Debentures are convertible into shares of our common stock at a conversion rate of the lesser of (i) the purchase price paid by us for issuance of our restricted common stock for the assets of All American upon completion of the business combination, or (ii) $3.00, subject to further adjustment as set forth in the agreement.

 

The loan is secured by real estate property owned by Properties in Pennsylvania and New Hampshire.  Pursuant to the Additional Investment Right (the “AIR Agreement”) among Properties and the Purchasers, the Purchasers may loan Properties up to an additional $5,000,000 of secured convertible debentures on the same terms and conditions as the initial $5,000,000 loan, except that the conversion price will be $4.00.  Pursuant to the Agreement, these Debentures are in default, as Properties did not complete the business combination with the Company prior to the expiration of the 12-month anniversary of the Agreement.

F-38

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Note 18 - Related Party Transactions-continued

Properties Financing-continued

Subsequent to the consummation of the business combination, we may assume the obligations of Properties under the Agreement.  However, the Company’s board of directors must approve the assumption of this debt, which requires that Properties transfer additional assets or consideration for such assumption of debt.  Based upon these criteria, it is highly unlikely the Company will assume the obligations of Properties, including the Debentures and the AIR Agreement, through the execution of a Securities Assumption, Amendment and Issuance Agreement, Registration Rights Agreement, Common Stock Purchase Warrant Agreement and Variable Rate Secured Convertible Debenture Agreement, each between the Purchasers and us (the “Able Energy Transaction Documents”).  Such documents provide that Properties shall cause the real estate collateral to continue to secure the loan, until the earlier of full repayment of the loan upon expiration of the Debentures or conversion by the purchasers of the Debentures into shares of our common stock at a conversion rate of the lesser of (i) the purchase price paid by us for each share of AAP common stock in the acquisition, or (ii) $3.00, (the “Conversion Price”), subject to further adjustment as set forth in the Able Energy Transaction Documents.  However, the Conversion Price with respect to the AIR Agreement shall be $4.00.  In addition, the Purchasers shall have the right to receive five-year warrants to purchase 2,500,000 of our common stock at an exercise price of $3.75 per share.  Pursuant to the Able Energy Transaction Documents, we also have an optional redemption right (which right shall be mandatory upon the occurrence of an event of default) to repurchase all of the Debentures for 125% of the face amount of the Debentures plus all accrued and outstanding interest, as well as a right to repurchase all of the Debentures in the event of the consummation of a new financing in which we sell securities at a purchase price that is below the Conversion Price.  The stockholders of Properties have agreed to escrow a sufficient number of shares to satisfy the conversion of the $5,000,000 in outstanding Debentures in full.

 

During June 2007, the Company paid $8.4 million of fuel invoices on behalf of Properties to TransMontaigne Product Services, Inc., (“TransMontaigne”).  This advance was reflected in current assets at June 30, 2007.  As a result of an October, 2007 series of transactions involving Properties, Plazas and TransMontaigne, these amounts were offset and Plazas executed a $1.6 million note payable to TransMontaigne for advance amounts under the fuel supply agreement for Plazas.

 

Manns Haggerskjold of North America, Ltd. (“Manns”) Agreement

 

On May 19, 2006, the Company entered into a letter of interest agreement with Manns, for a bridge loan to the Company in the amount of $35,000,000 and a possible loan in the amount of $100 million based upon the business combination with Properties ("Manns Agreement"). The terms of the letter of interest provided for the payment of a commitment fee of $750,000, which was non-refundable to cover the due-diligence cost incurred by Manns. On June 23, 2006, the Company advanced to Manns $125,000 toward the Manns Agreement due diligence fee. During the period from July 7, 2006 through November 17, 2006, the Company advanced an additional $590,000 toward the Manns Agreement due diligence fee. The amount outstanding relating to these advances as of June 30, 2007 was $715,000.  As a result of not obtaining the financing (see below), the entire $715,000 was expensed to amortization of deferred financing costs in the year ended June 30, 2007.

 

As a result of the Company receiving a Formal Order from the SEC on September 22, 2006, the Company and Manns agreed that the commitment to fund being sought under the Manns Agreement would be issued to Properties, since the Company’s stockholders had approved a business combination with Properties and since the collateral for the financing by Manns would be collateralized by real estate owned by Properties. Accordingly, on September 22, 2006, Properties agreed that in the event Manns funds a credit facility to Properties rather than the Company, upon such funds being received by Properties, it will immediately reimburse the Company for all expenses incurred and all fees paid to Manns in connection with the proposed credit facility from Manns to the Company.  On or about February 2, 2007, Properties received a term sheet from UBS Real Estate Investments, Inc. (“UBS”) requested by Manns as co-lender to Properties. Properties rejected the UBS offer as not consistent with the Manns’ commitment of September 14, 2006. Properties subsequently demanded that Manns refund all fees paid to Manns by Able and Properties. In order to enforce its rights in this regard, Properties has retained legal counsel and commenced an arbitration proceeding against Manns and its principals. The Company and Properties intend to pursue their remedies against Manns. All recoveries and fees and costs of the litigation will be allocated between the Company and Properties in proportion to the amount of the Manns due diligence fees paid. See Item 3, Legal Proceedings.

 

F-39

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Note 18 - Related Party Transactions-continued

 

Note Receivable-Related Parties

 

In connection with two loans entered into by the Company in May 2005, fees in the amount of $167,500 were paid to Unison Capital Corporation (“Unison”), a company controlled by Mr. Nocito, an officer of the Company. This individual also has a related-party interest in Properties.  Subsequent to the payments being made and based on discussions with Unison, it was determined the $167,500 was an inappropriate payment and Unison agreed to reimburse this amount to the Company over a twelve month period beginning in October 2005. As of June 30, 2008 the note and interest due was paid in full.  The Company received interest in the amount of $5,865 for the year ended June 30, 2008.

 

Subsequent to June 30, 2007, related party receivables from Properties were reduced by approximately $2.2 million, net.  This reduction occurred from offsets of rent owed to Properties by the Company’s wholly-owned subsidiary, Plazas, in connection with its leasing of the real property underlying the truck stops operated from July 2007 through June 2008 in the amount of approximately $1.1 million, and from cash payments made by Properties in the amount of $1.5 million resulting from refinancing and settlements by Properties in December, 2007, January, 2008 and March, 2008.

 

Notes and Loans Receivable Related Parties

Years Ending June 30, 2007 and 2008

 

		Beginning Balance				Additions				Payments				Adjustments				Ending Balance
		2007
Notes Receivable-Properties		$	1,730,000			$	-			$	-			$	-			$	1,730,000
Interest Receivable-Properties			70,575				164,350				-				-				234,925
Notes Receivable-Unison Capital			167,500																167,500
Interest Receivable Unison Note			11,730				10,050				-				-				21,780
Laurus Notes Receivable-Properties			-				905,000												905,000
Interest Receivable- Laurus Note			-				102,784				(94,242	)			-				8,542
Fuel Supply Contract-Properties			-				361,058				(350,000	)			-				11,058
Manns Agreement-Properties			125,000				590,000				-				(715,000	)			-
New York Office Rent-Properties			-				110,615				(36,221	)			-				74,394
Total		$	2,104,805			$	2,243,857			$	(480,463	)		$	(715,000	)		$	3,153,198
		2008
Notes Receivable-Properties		$	1,730,000			$	-			$	(1,730,000	)		$	-			$	-
Interest Receivable-Properties			234,925				152,721				(387,646	)			-				-
Notes Receivable-Unison Capital			167,500				-				(167,500	)			-				-
Interest Receivable Unison Note			21,780				5,865				(27,645	)			-				-
Laurus Notes Receivable-Properties			905,000				-				-				-				905,000
Interest Receivable- Laurus Note			8,542				77,353				(85,895	)			-				-
Fuel Supply Contract-Properties			11,058				-				(11,058	)			-				-
New York Office Rent-Properties			74,394				114,041				(188,435	)			-				-
Total		$	3,153,198			$	349,980			$	(2,598,178	)		$	-			$	905,000

 

F-40

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Note 18 - Related Party Transactions-continued

 

Consulting Agreements

 

The Company entered into a consulting agreement with its former CEO, Timothy Harrington, on February 16, 2005. The agreement was for two years and provided for annual fees of $60,000 to be paid in monthly installments.

 

In addition, the former CEO received options, which were fully vested upon grant, to purchase 100,000 shares of the Company's common stock at $4.00 per share. The options were exercised on July 7, 2005. The former CEO was paid $40,000 related to this agreement during the year ended June 30, 2007.

 

On August 27, 2007 the Company entered into a service agreement with Axis Consulting Services, LLC. The agreement calls for Axis Consulting to develop marketing plan (phase 1) and manage (phase 2) “The Energy Store” (an e-commerce retail sales portal for energy products and services). During phase 1, the terms are $2,750 per month and once phase 2 commences an amount of $5,600 per month. This agreement ends on December 31, 2008.  Axis Consulting’s President (Joe Nocito) has a direct relationship as the son of the Company’s Executive Vice-President Frank Nocito.

 

Change in Officers Status

 

On September 28, 2006, Gregory Frost, gave notice to the Board of Directors that he was taking an indefinite leave of absence as Chief Executive Officer of the Company and resigned as Chairman of the Board.  Mr. Christopher P. Westad, the acting Chief Financial Officer of the Company, was designated by the Board to serve as acting Chief Executive Officer. In connection with Mr. Westad's service as acting Chief Executive Officer, Mr. Westad stepped down, temporarily, as acting Chief Financial Officer. The Board designated Jeffrey S. Feld, the Company's Controller, as the acting Chief Financial Officer. Mr. Feld has been with the Company since September 1999.  Mr. Frost resumed his duties as Chief Executive Officer effective May 24, 2007.  Mr. Westad remained the President of the Company and Mr. Feld continued in his role as acting Chief Financial Officer.

 

On September 24, 2007, the Company’s Board of Directors appointed (i) Richard A. Mitstifer, the former President of  Properties as President of the Company; (ii) William Roger Roberts, the former Chief Operating Officer of Properties, as the Company’s Chief Operating Officer; (iii) Daniel L. Johnston, the former Controller of Properties, as Chief Financial Officer of the Company; and (iv) Louis Aponte, the President of All American Industries, Inc. and all American Realty and Construction Corp., which are affiliates of  Properties specializing in real estate development and construction, as the Company’s Vice-President of Special Projects. The Board also promoted Frank Nocito, the Company’s Vice-President of Business Development, to Executive Vice-President and expanded his duties to include heading the Company’s expansion into alternative and clean energy fuels and products. Mr. Nocito is the controlling person of the Cheldnick Family Trust, the largest shareholder of Properties which, in turn, is the largest shareholder of the Company. Messrs. Mitstifer, Roberts and Aponte were officers of Properties in June 2005 when the Company entered into an asset purchase agreement with Properties, pursuant to which the Company agreed to acquire substantially all of Properties’ assets and assume all liabilities of Properties other than mortgage debt liabilities. They were also officers of Properties at the time the transaction closed in May 2007. Effective September 24, 2007, Christopher P. Westad stepped down as President of the Company and Jeffrey Feld stepped down as Acting Chief Financial Officer of the Company. The Board subsequently appointed Mr. Westad as the President of the Company’s home heating Oil Segment subsidiaries, Able Oil, Inc., Able Energy New York, Inc. and Able Oil Melbourne, Inc.

 

F-41

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Note 19 - Commitments and Contingencies

 

Employment Agreements

 

On July 1, 2004, the Company entered into a three-year employment agreement with Christopher Westad, the President of the Company’s home heating Oil Segment subsidiaries, Able Oil, Inc., Able Energy New York, Inc. and Able Oil Melbourne, Inc.  Pursuant to the agreement, he will be compensated at an annual salary of $141,600 and will be eligible for an annual bonus and stock option grants, which will be separately determined by the Compensation Committee of the Board of Directors.  The term of the agreement may be extended by mutual consent of the Company and Mr. Westad, and the annual salary is subject to periodic increases at the discretion of the Board of Directors.  On November 26, 2006, the Compensation Committee of the Board of Directors renewed Mr. Westad’s employment agreement for a period of three years until November 25, 2009.  As of June 30, 2008, the total commitment under this employment agreement was $283,200.

 

On July 1, 2004, the Company entered into a three-year employment agreement with John Vrabel, the President of PriceEnergy.com, Inc. Pursuant to the agreement, he will be compensated at an annual salary of $141,600 and will be eligible for an annual bonus and stock option grants, which will be separately determined by the Compensation Committee of the Board of Directors.  The term of the agreement may be extended by mutual consent of the Company and Mr. Vrabel, and the annual salary is subject to periodic increases at the discretion of the Board of Directors.  While the term of the employment agreement was allowed to expire on July 1, 2007, Mr. Vrabel remains an employee of the Company.

 

On October 12, 2005, the Company entered into a one-year employment agreement with Gregory Frost, the Company’s CEO (who was on a paid leave of absence from September 28, 2006 through May 23, 2007). Pursuant to the agreement, he was compensated at an annual salary of $250,000 and will be eligible for an annual bonus and stock option grants, which will be separately determined by the Compensation Committee of the Board of Directors.  Pursuant to the agreement, the employment with Mr. Frost was automatically renewed through October 11, 2009.  As of June 30, 2008, the total commitment under this employment agreement was approximately $323,000.

 

Engagement of Consultant

 

On January 11, 2008, the Company executed a consulting agreement with Hammond Associates, LLC to provide consulting services in connection with satisfying the Company’s SEC reporting requirements.  On April 30, 2008, the Company issued 14,442 restricted shares of its common stock, $0.001 par value, at $0.56 per share as partial consideration for services provided by the consultant.  The Company recorded consulting expense of $8,088 related to this share issuance in the year ended June 30, 2008.  On April 16, 2008, the Company also issued Hammond Associates, LLC a five-year warrant to purchase 25,000 shares at $0.56 per share as partial consideration for services provided by the consultant.  Using the Black Scholes valuation model, the Company valued the Company’s common stock underlying the warrant at $0.31 per share and recorded additional consulting expense of $7,750 relating to the issuance of the warrant.

 

Operating Leases

 

The Company is obligated under certain property and equipment non-cancelable operating lease agreements.  The rental properties include a lease of the Company’s headquarters in Rockaway, New Jersey, office space in New York City, office space in Easton, Pennsylvania and eleven full service travel plaza facilities located in Pennsylvania, New York, New Jersey and Virginia. These leases currently expire at various dates through May, 2010 but automatically renew for consecutive one-year terms so that the total term of each lease shall be for a period of ten years.  Rent expense was $7,357,798 and $881,829 for the years ended June 30, 2008 and 2007, respectively. Future minimum payments due under these leases are as follows:

For the Year Ending June 30,		Amount
2009		$	7,177,109
2010			2,010,000
Total minimum lease payments		$	9,187,109

 

F-42

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Note 19 - Commitments and Contingencies

Purchase Commitments

 

The Company’s Oil Segment is obligated to purchase #2 heating oil under various contracts with its suppliers. As of June 30, 2008 total open commitments under these contracts are approximately $0.3 million and expire on various dates through the end of July 2008.  The Company’s Travel Plaza Segment has no open commitments for purchases.

 

Major Vendors

 

The Company’s Oil Segment purchases fuel supplies on the spot market. During the year ended June 30, 2008, the Oil Segment satisfied its inventory requirements through eleven different suppliers, the majority of which have significant domestic fuel sources, and many of which have been suppliers to us for over seven years.

 

The Company’s Travel Plaza Segment is also subject to spot market pricing and its fluctuations.  It utilizes three major suppliers for its fuel source needs.

 

Litigation

 

Following an explosion and fire that occurred at the Company's facility in Newton, New Jersey on March 14, 2003, and through the subsequent clean up efforts, the Company has cooperated fully with all local, state and federal agencies in their investigations into the cause of this accident (See Note 16).  A lawsuit (known as Hicks vs. Able Energy, Inc.) was filed against the Company by residents who allegedly suffered property damages as a result of the March 14, 2003 explosion and fire. The Company's insurance carrier is defending the Company as it related to compensatory damages. The Company has retained separate legal counsel to defend the Company against the punitive damage claims. On June 13, 2005, the Court granted a motion certifying a plaintiff class action which is defined as "All Persons and Entities that on and after March 14, 2003, residing within a 1,000 yard radius of Able Oil Company's fuel depot facility and were damaged as a result of the March 14, 2003 explosion".  The Company sought and received Court permission to serve interrogatories to all class members and in November 2007 answers to interrogatories were received by less than 125 families and less than 15 businesses. The Company successfully moved to exclude any and all persons and entities form the class that did not previously provide answers to interrogatories. The class certification is limited to economic loss and specifically excludes claims for personal injury from the Class Certification. The Company believes that the Class claims for compensatory damages are within the available limits of its insurance. On September 13, 2006, the plaintiff’s counsel made a settlement demand of $10,000,000, which the Company believes to be excessive and the methodology upon which is fundamentally flawed. On May 7, 2008, this matter entered mediation. Mediation has not been successful, but the Company remains open to reasonable settlement discussions with the plaintiffs. The Company intends to vigorously defend the claim.

 

In addition to the class action, seven property owners, who were unable to reach satisfactory settlements with the Company’s insurance carrier, filed lawsuits for alleged property damages suffered as a result of the March 14, 2003 explosion and fire. Subsequently, the Company’s insurance carrier has entered into settlement agreements with four of the property owners.  The Company's insurance carrier is defending the Company as it related to the remaining three property damage claims. The Company’s counsel is defending punitive damage claims. The Company believes that compensatory damage claims are within the available limits of insurance and reserves for losses have been established, as deemed appropriate, by the insurance carrier. There were a total of 227 claims filed against the Company for property damages and 224 claims have been settled by the Company’s insurance carrier resulting in the remaining three lawsuits as described in this paragraph. The Company believes the remaining three unsettled lawsuits will not have a material adverse effect on the Company’s consolidated financial condition or operations.

 

On June 26, 2007, the Company and its affiliate, Properties (together with the Company the “Claimants”), filed a Demand for Arbitration and Statement of Claim in the Denver, Colorado office of the American Arbitration Association against Manns Haggerskjold of North America, Ltd. (“Manns”), Scott Smith and Shannon Coe (collectively the “Respondents”), Arbitration Case No. 77 148 Y 00236 07 MAV. The Statement of Claim filed seeks to recover fees of $1.2 million paid to Manns to obtain financing for the Company and Properties. The Claimants commenced the Arbitration proceeding based upon the Respondents breach of the September 14, 2006 Commitment letter from Manns to Plazas that required Manns to loan Plazas $150 million. The Statement of Claim sets forth claims for breach of contract, fraud and misrepresentation and lender liability. On July 23, 2007,

 

F-43

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Note 19 - Commitments and Contingencies-continued

 

Litigation – continued

Respondents filed their answer to the Statement of Claim substantially denying the allegations asserted therein and interposing counterclaims setting forth claims against the Company for breach of the Non-Circumvention Clause, breach of the Exclusivity Clause and unpaid expenses. Respondents also assert counterclaims for fraudulent misrepresentation and unjust enrichment. On Respondents’ counterclaim for breach of the Non-Circumvention Clause, Respondents claim damages of $6,402,500. On their counterclaim for breach of the Exclusivity Clause, Respondents claim damages of $3,693,750, plus an unspecified amount related to fees on loans exceeding $2,000,000 closed by Properties or the Company over the next five years. Respondents do not specify damages relative to their other counterclaims.

On August 7, 2007, the Claimants filed their reply to counterclaims denying all of Respondents material allegations therein. Respondents’ counterclaims were based on the false statement that the Claimants had, in fact, received the financing agreed to be provided by Manns from a third party.  The Respondents subsequently withdrew all of their counterclaims.

 

The parties have selected an Arbitrator and are presently engaged in discovery.  The parties have exchanged documents and the depositions of the parties have commenced and are scheduled to be concluded by the end of November, 2008.  The hearing of the parties’ claims is scheduled to commence before the Arbitrator on December 8, 2008.

 

Subsequent to their dismissal on August 13, 2007, on October 10, 2007, on October 1, 2007, the Company and its Chief Executive Officer (“CEO”) filed an action in New York state court against Marcum & Kliegman, LLP (the Company’s former auditors) and several of its partners for numerous claims, including breach of contract, gross negligence and defamation.  The Company and its CEO are seeking compensatory damages in the amount of at least $1 million and punitive damages of at least $20 million. The claims asserted by the Company and its CEO arise out of Marcum & Kliegman’s conduct with respect to the preparation and filing of the Company’s SEC Reports.  On November 26, 2007, Marcum & Kliegman and its partners filed a motion to dismiss the complaint on the ground that it fails to state a claim for relief as a matter of law.  On May 5, 2008, the Court issued a written decision and order sustaining the Company’s claims against Marcum & Kliegman for breach of contract and defamation, but dismissed the Company’s claims for negligence, gross negligence, breach of fiduciary duty and breach of covenant of good faith and fair dealing against Marcum & Kliegman and the defamation claim against the individual defendants.  Both the Company and Marcum & Kliegman have filed appeals from the decision and order.  Discovery proceedings have commenced and the Company intends to vigorously prosecute this action.

 

On January 7, 2008, the Company, its Chief Executive Officer, Gregory D. Frost, and its Vice-President of Business Development, Frank Nocito, were served with a summons and complaint in a purported class action complaint filed in the United States District Court, District of New Jersey. This action, which seeks class certification, was brought by shareholders of CCI Group, Inc. (“CCIG”). The complaint relates to a Share Exchange Agreement (the “Share Exchange Agreement”), dated July 7, 2006, between Properties and CCIG, pursuant to which seventy percent (70%) of the outstanding and issued shares of CCIG were exchanged for 618,557 shares of the Company’s common stock which were owned by Properties of which 250,378 shares were to be distributed to the shareholders of CCIG and the balance of the shares were to be used to pay debts of CCIG.  Neither the Company nor Messrs. Frost or Nocito were parties to the Share Exchange Agreement. Properties remain the largest shareholder of the Company. The Share Exchange Agreement was previously disclosed by the Company in its Current Report on Form 8-K filed with the SEC on July 7, 2006 as part of a disclosure of a loan by the Company to Properties.

 

Each of the Company and Messrs. Frost and Nocito believes it/he has defenses against the alleged claims and intends to vigorously defend itself/himself against this action and have filed a motion to dismiss the compliant.  The motion has been fully briefed and submitted to the Court.  As of the date of this Report, no decision has been issued with respect to the motion.

 

Management believes it has adequate insurance coverage to cover material legal settlements, if any, and material litigation expenses.  Management does not believe that legal accruals are required at June 30, 2008, and none have been recorded.  The Company has been involved in non-material lawsuits in the normal course of business. These matters are handled by the Company’s insurance carrier.  The Company believes that the outcome of the above mentioned legal matters will not have a material effect on the Company’s consolidated financial statements.

 

F-44

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Note 19 - Commitments and Contingencies-continued

 

Changes in Registrant's Certifying Accountant

 

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

 

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

 

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

 

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

 

Environmental Contingencies

 

Environmental matters relating to the Oil Segment include the following:

 

Related to its 1999 purchase of the property on Route 46 in Rockaway, New Jersey, the Company settled a lawsuit with a former tenant of the property and received a lump sum settlement of $397,500. This sum was placed in an attorney’s escrow account for payment of all environmental remediation costs. Through June 30, 2008, Able Energy Terminal, LLC has been reimbursed for approximately $310,500 of costs and another $87,000 are not reimbursed and are included in prepaid expenses and other current assets in the accompanying consolidated balance sheet included elsewhere in this filing and must be presented to the attorney for reimbursement. The environmental remediation is currently in progress on this property.  The majority of the “free standing product” has been extracted from the underground water table.  The remainder of the remediation will be completed over the course of the next eight to ten years using natural attenuation and possible bacterial injection.

 

F-45

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Note 19 - Commitments and Contingencies-continued

Environmental Contingencies-continued

 

On September 15, 2003, Able Oil received approval from the New Jersey Department of Environmental Protection of a revised Discharge Prevention Containment and Countermeasure plan ("DPCC") and Discharge, Cleanup and Removal plan ("DCR") for the facility at 344 Route 46 East in Rockaway, New Jersey. This plan has received approval and will be in effect for three years. The State of New Jersey requires companies which operate major fuel storage facilities to prepare such plans, as proof that such companies are capable of, and have planned for, an event that might be deemed by the State of New Jersey to be hazardous to the environment. In addition to these plans, Able Oil has this facility monitored on an ongoing basis to ensure that the facility meets or exceeds all standards required by the State.

 

On September 26, 2006, the New Jersey Department of Environmental Protection (“NJDEP”) conducted a site update inspection, which included a review of the Route 46 site and an update of the progress of the approved remediation.  The NJDEP Northern Office director who conducted the inspection, concluded that the remediation progress was proceeding appropriately and that the department approved of the Company’s continued plan to eliminate the remaining underground product.  The Company experienced no spill events that would warrant investigation by state or other environmental regulatory agencies. All locations are prepared to deal with such an event should one occur.

 

Environmental matters relating to the Travel Plaza Segment include the following:

Clarks Ferry All American

This site has been subject to an ongoing groundwater cleanup program since 1996 when a claim was filed with the Pennsylvania Underground Storage Tank Indemnification Fund (“USTIF”).  The remedial action plan has been handled by a third party contractor since 1998.  Active remediation efforts ceased in 2004 and a three-year period of well monitoring was started in 2005 calling for six semi-annual well sampling events.

 

USTIF coverage for the site was approved at 65% of total remediation costs.  In 2004, cost estimates to complete the remediation project were prepared by the third party contractor and Properties accepted a lump sum payout from USTIF of approximately $32,000 (65% of $48,000 estimate of completion costs). In September 2007, the final sampling event was completed and results were favorable.  A “Post Remedial Care Plan Completion Report” was submitted to the PA DEP in January 2008 and was accepted the following month. Monitoring wells were closed in March 2008, and a final billing generated for the remedial activities.  At June 30, 2008, Plazas owed $8,000 for completion of these activities.

Frystown All American

This site is subject to an ongoing groundwater cleanup program that started in 1998 when the old tanks and fuel islands were replaced.  Tanks were not leaking, but lines in the fuel island area had leaked and created the need for soil removal and groundwater cleanup.  It is also believed that a heating oil tank removed in the early 90’s was an additional source of contamination.  The site was accepted by USTIF for 100% coverage.  The groundwater pump and treat system was activated in December, 2001 and was shut down in October, 2005, as the monitoring wells came into compliance.  The quarterly well monitoring period was started in December, 2005 and the final well sampling event in September 2007 was uneventful.   The contractor is currently preparing the final site closure report, which will be submitted to the PA DEP for final closure and concurrence that no further remedial activities are necessary.

Belmont All American

This site has been subject to an ongoing groundwater remediation since 2004, when a leak was found in a flex hose at a dispenser.  A groundwater filtration system went online in November, 2005.  Monthly well samples are taken and good progress is being shown towards the attainment of compliance.  Full closure of the site is expected within the next twelve (12) months, with an anticipated cost of approximately $35,000 to Plazas.

Doswell All American

 

F-46

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Note 19 - Commitments and Contingencies-continued

 

Environmental Contingencies-continued

 

This site presently has no underground storage tanks (“UST's”) in use for storage of petroleum products.  Diesel fuel storage is in two above ground storage tanks (“AST’s”); one 500,000 gallons and the other is 100,000 gallons.

 

In November, 2005, the Virginia Department of Environmental Quality (“VA DEQ”) issued a violation for an unknown release of petroleum product into a storm water runoff pond at the site.  Several source areas were identified and ultimately ruled out, with the exception of an oil/water separator that was found to have a faulty valve allowing oil runoff to bypass separator and drain directly to the pond.  A new oil/water separator was put in place in December, 2005.  On July 9, 2007, the VA DEQ issued a letter canceling any further action relative to this violation.

 

In April, 2007, the VA DEQ notified Plazas that, due to a change in regulations with respect to AST containment requirements, Plazas would be required to make changes to the existing AST’s and/or containment berm by December 31, 2007.  After consideration of various options to bring the site into compliance, it was decided that the best alternative was to dismantle the 500,000 gallon AST.

 

In November 2007, the 500,000 gallon AST was dismantled and removed from the site at a cost of approximately $15,000.  Soil borings in the area of the tank and pad have been clean.  No further cost is anticipated relative to this project.

 

Other Contingencies

 

On December 8, 2006, the Company commenced an action in the Superior Court of California, for the County of Los Angeles against Summit Ventures, Inc. (“Summit”), Mark Roy Anderson (“Anderson”), the principal of Summit and four other companies controlled by Anderson, Camden Holdings, Inc., Summit Oil and Gas, Inc. d/b/a Nevada Summit Oil and Gas, Harvest Worldwide, LLC and Harvest Worldwide, Inc. seeking to compel the return of 142,857 shares (the “Shares”) of the Company’s common stock issued to Summit.  The Shares were issued to Summit in connection with a consulting agreement the Company had entered into with Summit in January 2005. The complaint also sought damages as a result of Summit’s and Anderson’s breach of contract, fraud and misrepresentation with respect to the consulting agreement.  On June 28, 2007, Summit and Anderson interposed a cross-complaint against the Company, Greg Frost, the Company’s Chief Executive Officer and Chairman, Chris Westad, the President of the Company’s home heating Oil Segment subsidiaries, Able Oil, Inc., Able Energy New York, Inc. and Able Oil Melbourne, Inc., Frank Nocito, Vice President of Business Development for the Company, Stephen Chalk, a Director of the Company and Timothy Harrington, the former Chief Executive Officer of the Company. On October 10, 2007, the Company settled the Anderson Litigation, which included the issuance of 142,857 shares of the Company’s common stock to Summit.  The shares were treated as issued on June 30, 2007.

 

SEC Formal Order of Private Investigation

 

On September 7, 2006, the Company received a Formal Order of Private Investigation from the SEC pursuant to which the Company, certain of its officers and a director were served with subpoenas requesting certain documents and information. The Formal Order authorizes an investigation of possible violations of the anti-fraud provisions of the federal securities laws with respect to the offer, purchase and sale of the Company's securities and the Company's disclosures or failures to disclose material information. The Company believes that it did not violate any securities laws and intends to cooperate fully with and assist the SEC in its inquiry. The Company produced all responsive documents to the subpoenas.

 

On August 31, 2007, the Company was served with a second subpoena duces tecum (the “Second Subpoena”) from the SEC pursuant to the Formal Order of Investigation issued by the SEC on September 7, 2006. The Company continues to gather, review and produce documents to the SEC and is cooperating fully with the SEC in complying with the Second Subpoena. As of the date of this Report, the Company has produced and will, if required, continue to produce responsive documents and intends to continue cooperating with the SEC in connection with the investigation.  On May 13, 2008, the Company received correspondence from the SEC requesting the Company respond, in writing, to eleven questions proffered by the SEC staff.  The Company provided its responses to the eleven questions to the SEC on May 21, 2008.  The responsive correspondence was signed by the Company’s outside SEC counsel, Buchanan Ingersoll & Rooney, PC, after it was reviewed by the Company’s senior management, as well as the Company’s outside financial consultants.  The Company has produced and continues to produce responsive documents and intends to continue cooperating with the SEC in connection with the investigation (See Note 21 - Subsequent Events, below).

 

F-47

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Note 20 - Selected Quarterly Financial Data (Unaudited and Restated)

The following tables set forth our unaudited consolidated financial results for the last eight fiscal quarters ended June 30, 2008:

 

		For the Year Ended June 30, 2008
(Unaudited)		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Net sales		$	66,993,371			$	78,020,375			$	78,364,259			$	53,062,583
Gross profit		$	3,432,256			$	5,340,277			$	5,712,066			$	3,098,055
Net loss		$	(4,309,905	)		$	(2,468,493	)		$	(2,203,330	)		$	(3,931,505	)
Basic and diluted loss per share
Continuing operations:		$	(0.29	)		$	(0.17	)		$	(0.15	)		$	(0.26	)
Basic and diluted average number of
common shares outstanding:			14,950,947				14,950,947				14,950,947				14,960,945

 

In the table above, earnings (loss) per share from continuing operations for each quarter was computed using the weighted-average number of shares outstanding during the quarter.  However, earnings (loss) per share from continuing operations for the year were computed using the weighted-average number of shares outstanding during the year.  As a result, the sum of the loss per share for the four quarters may not equal the full year earnings (loss) per share.

 

F-48

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Note 20 - Selected Quarterly Financial Data (Unaudited and Restated) - continued

The selected quarterly financial data for the periods within the fiscal year ended June 30, 2007, as presented below, have been restated and correct errors relating to the amortization of deferred financing costs associated with the Manns financing (See Note 18).

 

		For the Year Ended June 30, 2007
(Unaudited)		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
		(Restated)				(Restated)
Net sales as previously reported		$	12,835,553			$	19,266,016			$	29,366,596			$	32,173,383
Adjustments		N.A.				N.A.				N.A.				N.A.
Restated net sales		$	12,835,553			$	19,266,016			$	29,366,596			$	32,173,383
Gross profit as previously reported		$	1,193,930			$	1,723,192			$	3,665,916			$	1,954,976
Adjustments		N.A.				N.A.				N.A.				N.A.
Restated gross profit		$	1,193,930			$	1,723,192			$	3,665,916			$	1,954,976
Net income (loss) as previously reported		$	(1,639,875	)		$	(1,462,397	)		$	553,030			$	(3,368,061	)
Adjustments			(540,000	)			(175,000	)		N.A.				N.A.
Restated net income (loss)		$	(2,179,875	)		$	(1,637,397	)		$	553,030			$	(3,368,061	)
Basic and diluted earnings per share
Continuing operations:
Net income (loss) as previously reported		$	(0.52	)		$	(0.47	)		$	0.18			$	(0.47	)
Adjustments			(0.18	)		$	(0.05	)		N.A.				N.A.
Net income (loss) as restated		$	(0.70	)		$	(0.52	)		$	0.18			$	(0.47	)
Basic and diluted average number of common shares outstanding:
As previously reported			3,133,731				3,141,423				3,141,423				7,117,352
Adjustments		N.A.				N.A.				N.A.				N.A.
As restated			3,133,731				3,141,423				3,141,423				7,117,352

 

In the table above, earnings (loss) per share for each quarter were computed independently using the weighted-average number of shares outstanding during the quarter.  However, earnings (loss) per share for the year were computed using the weighted-average number of shares outstanding during the year.  As a result, the sum of the earnings per share for the four quarters may not equal the full-year earnings (loss) per share.

Note 21 - Subsequent Events (Unaudited)

Lease of Newton Facility

 

On July 14, 2008, the Company executed a triple net lease agreement with North Jersey Oil, Inc. (North Jersey) for the use of the Company’s idled Newton, NJ fuel terminal facility. The term of the lease is for thirty years.  Upon execution, the lease agreement provides for a $250,000 cash payment to the Company and the receipt of a $250,000 Tenant’s Promissory Note (together, the “Basic Rent”). The note provides for interest at 8% and twelve monthly payments.  Payments are to commence on the date that North Jersey receives all of the necessary permits to conduct its operations at the Newton site.  If within six months of the execution date of the lease agreement North Jersey is unable to secure the necessary operating permits or during the same time North Jersey is advised that its applications for the necessary operating permits have been denied, the Company will be obligated to return the Basic Rent to North Jersey and terminate the lease agreement.  The status of the operating permits as of the filing date of this Annual Report on Form 10-K is not known.  The lease agreement also provides both the Company and North Jersey with storage and throughput rights at their respective terminals at a cost to the user of $0.05 per gallon.

 

F-49

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Note 21 - Subsequent Events (Unaudited)-continued

 

Lease of Newton Facility-continued

 

In addition, North Jersey is obligated to provide the Company with an initial six-month, $0.5 million fuel purchase credit facility at a cost to the Company of $0.02 per gallon financed.  The lease agreement also provides North Jersey with a $1.00 purchase option, which North Jersey can exercise upon payment in full, in cash, of all the Basic Rent.

 

Credit Card Receivable Financing

 

On August 14, 2008 and November 5, 2008, the Oil Segment of the Company and its subsidiary, PriceEnergy.com, refinanced their loans with Credit Cash, in the amounts of $500,000 and $250,000 respectively.  Also on August 14, 2008, Plazas refinanced its loan with Credit Cash in the amount of $900,000.  (See Note 10). The outstanding Credit Cash loan for the Company as of June 30, 2008 was $621,093.

 

SEC Formal Order of Private Investigation

 

On July 29 and 30, 2008, the Company’s CEO, Mr. Frost and the Company’s Executive Vice-President, Business Development, Mr. Nocito, were deposed by the SEC.  The Company has been advised by its SEC counsel, who also attended the depositions, that it believes the primary focus of the investigation is for the Company to complete its outstanding, delinquent SEC filings in order to obtain filing compliance.