What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2022-02-11 · 246 added, 187 removed, 357 unchanged (55% of the section changed)

45 unchanged sentences

The Company’s total outstanding common shares after redemption was 16,247,898 as of October 6, 2021.

The Company’s stock is quoted under the symbol “ESOA” on the OTCQB marketplace operated by the OTC Markets Group.

On February 16, 2022, the stockholders of Energy Services approved the Company's 2022 Equity Incentive Plan (the "Plan"), which provides for the grant of stock-based awards to officers and employees of the Company and its subsidiaries.

The maximum number of shares of stock, in the aggregate, that may be granted under the Plan as stock options, restricted stock or restricted stock units is 1,500,000 shares.

A description of the material terms of the Plan is contained in the Company's definitive proxy statement for the Annual Meeting of Stockholders filed with the Securities and Exchange Commission on January 11, 2022.

On March 23, 2022, the Company's common stock began trading on the Nasdaq Capital Market operated by The Nasdaq Stock Market, LLC under the symbol "ESOA".

On April 29, 2022, Tri-State Paving Acquisition Company ("TSP"), a West Virginia corporation and a newly formed wholly owned subsidiary of the Company, completed the acquisition of Tri-State Paving & Sealcoat, LLC ("Tri-State Paving"), a West Virginia corporation located in Hurricane, WV.

TSP acquired substantially all the assets of Tri-State Paving for $7.5 million in cash, a $1.0 million seller note, and $1.0 million in the Company's common stock, which resulted in the issuance of 419,287 new common shares.

TSP will provide utility paving services to water distribution customers in the Charleston, WV, Lexington, KY, and Chattanooga, TN markets.

The employees of TSP will be non-union and managed independently from the Company's union subsidiaries.

Energy Services provides contracting services for utilities and energy related companies including gas, petroleum power, chemical, water & sewer and automotive industries.

21 unchanged sentences

The Company’s website address is www.energyservicesofamerica.com.

A substantial portion of the Company's workforce are union members of various construction related trade unions and are subject to separately negotiated collective bargaining agreements that expire at varying time intervals.

The Company believes its relationship with its unionized workforce is good.

COVID-19 Response

10 unchanged sentences

The Company also followed the paid sick and expanded family and medical leave guidelines set forth in the Families First Coronavirus Response Act, which expired on December 31, 2020.

During the three months ended December 31, 2021, the Company had employees test positive for or were exposed to COVID-19;

During the three and six months ended March 31, 2022, the Company had employees test positive for or were exposed to COVID-19;

however, it did not have a material effect on the Company’s financial statements.

Most of the Company’s existing customers had resumed projects that were affected by the March 2020 shutdowns.

Given the uncertainty regarding the spread of this coronavirus and variants, the related financial impact on the Company’s results of operations, financial position, and liquidity or capital resources cannot be reasonably estimated at this time.

8 unchanged sentences

As a result, our volume of business may be adversely affected by where our customers are in the cycle and thereby their financial condition as to their capital needs and access to capital to finance those needs.

Three Months Ended December 31, 2021, and 2020 Overview

The following is an overview of results from operations for the three months ended December 31, 2021, and 2020:

Three and Six Months Ended March 31, 2022, and 2021 Overview

The following is an overview of results from operations for the three and six months ended March 31, 2022, and 2021:

Three Months Ended

Six Months Ended

Cost of revenues

Selling and administrative expenses

Income (loss) from operations

(Loss) income from operations

Other income (expense)

3 unchanged sentences

Gain on sale of equipment

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

(Loss) income before income taxes

Income tax (benefit) expense

Net (loss) income

Dividends on preferred stock

Net income (loss) available to common shareholders

Net (loss) income available to common shareholders

Weighted average shares outstanding-basic

Weighted average shares-diluted

Earnings (loss) per share available to common shareholders

Earnings (loss) per share-diluted available to common shareholders

Results of Operations for the Three Months Ended December 31, 2021, Compared to the Three Months Ended December 31, 2020

A table comparing the Company’s revenues for the three months ended December 31, 2021, compared to the three months ended December 31, 2020, is below:

(Loss) earnings per share available to common shareholders

(Loss) earnings per share-diluted available to common shareholders

Results of Operations for the Three and Six Months Ended March 31, 2022, Compared to the Three and Six Months Ended March 31, 2021

A table comparing the Company’s revenues for the three and six months ended March 31, 2022, compared to the three and six months ended March 31, 2021, is below:

Three Months Ended

December 31, 2021

December 31, 2020

March 31, 2022

March 31, 2021

Gas & Water Distribution

1 unchanged sentence

Electrical, Mechanical, and General

Total revenues increased by $10.7 million to $42.7 million for the three months ended December 31, 2021 as compared to $32.0 million for the three months ended December 31, 2020 as a result of increases in all categories of revenue.

Gas & Water Distribution revenues totaled $12.0 million for the three months ended December 31, 2021, a $4.8 million increase from $7.1 million for the three months ended December 31, 2020.

The revenue increase was primarily related to the Company’s overall commitment to growing this line of business through adding new distribution crews and the acquisition of West Virginia Pipeline.

West Virginia Pipeline, acquired on December 31, 2020, contributed revenues of $2.3 million for the three months ended December 31, 2021.

Favorable weather conditions during the first quarter of fiscal year 2022 also allowed the Company to work more efficiently and productively.

Gas & Petroleum Transmission revenues totaled $11.2 million for the three months ended December 31, 2021, a $2.5 million increase from $8.7 million for the three months ended December 31, 2020.

The revenue increase was primarily related to transmission work that was awarded in fiscal year 2021 but was delayed from starting by the customer until late in fiscal year 2021.

Electrical, Mechanical, & General services and construction revenues totaled $19.5 million for the three months ended December 31, 2021, a $3.3 million increase from $16.2 million for the three months ended December 31, 2020.

The revenue increase was primarily related to a $4.0 million increase in general building and civil construction during the three months ended December 31, 2021 as compared to the same period in the prior year.

Six Months Ended

March 31, 2022

March 31, 2021

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, and General

Total revenues increased by $9.8 million to $35.4 million for the three months ended March 31, 2022, as compared to $25.6 million for the three months ended March 31, 2021.

Total revenues increased by $20.5 million to $78.1 million for the six months ended March 31, 2022, as compared to $57.6 million for the six months ended March 31, 2021.

The increases were a result of increased work in all categories of business.

Gas & Water Distribution revenues totaled $10.7 million for the three months ended March 31, 2022, a $2.1 million increase from $8.6 million for the three months ended March 31, 2021.

Gas & Water Distribution revenues totaled $22.6 million for the six months ended March 31, 2022, a $6.9 million increase from $15.7 million for the six months ended March 31, 2021.

The revenue increases were primarily related to the Company’s overall commitment to growing this line of business through adding new distribution crews.

Revenues for West Virginia Pipeline were $1.5 million and $3.8 million, respectively, for the three and six months ended March 31, 2022, as compared to $1.2 million for the three and six months ended March 31, 2021.

Inclement weather in January and February 2022 had a negative impact on distribution work available during the three months ended March 31, 2022;

however, favorable weather conditions during the first quarter of fiscal year 2022 allowed the Company to increase the amount of distribution work performed during the six months ended March 31, 2022, as compared to the same period in the prior year.

Gas & Petroleum Transmission revenues totaled $8.5 million for the three months ended March 31, 2022, a $4.8 million increase from $3.7 million for the three months ended March 31, 2021.

Gas & Petroleum Transmission revenues totaled $19.8 million for the six months ended March 31, 2022, a $7.4 million increase from $12.4 million for the six months ended March 31, 2021.

The revenue increases were primarily related to transmission work that was awarded due to increased construction opportunities from the Company’s existing transmission clients.

Electrical, Mechanical, & General services and construction revenues totaled $16.2 million for the three months ended March 31, 2022, a $2.9 million increase from $13.3 million for the three months ended March 31, 2021.

Electrical, Mechanical, & General services and construction revenues totaled $35.7 million for the six months ended March 31, 2022, a $6.2 million increase from $29.5 million for the six months ended March 31, 2021.

The revenue increases were primarily related to general building and civil construction revenues which increased $3.8 million and $7.8 million, respectively, during the three and six months ended March 31, 2022, as compared to the same periods in the prior year.

Cost of Revenues.

A table comparing the Company’s costs of revenues for the three months ended December 31, 2021, compared to the three months ended December 31, 2020, is below:

A table comparing the Company’s costs of revenues for the three and six months ended March 31, 2022, compared to the three and six months ended March 31, 2021, is below:

Three Months Ended

December 31, 2021

December 31, 2020

March 31, 2022

March 31, 2021

Gas & Water Distribution

2 unchanged sentences

Unallocated Shop Expenses

Total cost of revenues increased by $8.2 million to $37.4 million for the three months ended December 31, 2021 as compared to $29.2 million for the three months ended December 31, 2020 as result of increases in all categories to cost of revenues except for unallocated shop expenses.

Gas & Water Distribution cost of revenues totaled $9.3 million for the three months ended December 31, 2021, a $3.3 million increase from $6.0 million for the three months ended December 31, 2020.

The cost of revenues increase was primarily related to the Company’s overall commitment to growing this line of business through adding new distribution crews and the acquisition of West Virginia Pipeline.

West Virginia Pipeline, acquired on December 31, 2020, incurred cost of revenues of $1.2 million for the three months ended December 31, 2021.

Gas & Petroleum Transmission cost of revenues totaled $9.7 million for the three months ended December 31, 2021, a $3.0 million increase from $6.7 million for the three months ended December 31, 2020.

The cost of revenues increase was primarily related to transmission work that was awarded in fiscal year 2021 but was delayed from starting by the customer until late in fiscal year 2021.

Also, legal expenses related to a lawsuit on a transmission project, referenced on page 30, increased by $360,000 during the three months ended December 31, 2021, as compared to the same period in 2020.

Electrical, Mechanical, & General services and construction cost of revenues totaled $18.1 million for the three months ended December 31, 2021, a $2.9 million increase from $15.2 million for the three months ended December 31, 2020.

The cost of revenues increase was primarily related to a $3.4 million increase in general building and civil construction during the three months ended December 31, 2021 as compared to the same period in the prior year.

Unallocated shop expenses totaled $170,000 for the three months ended December 31, 2021, a $1.1 million decrease from $1.3 million for the three months ended December 31, 2020.

The decrease in unallocated shop expenses was due to increased internal equipment charges to projects for the three months ended December 31, 2021, as compared to to the same period in 2020 and a focused effort to manage project and shop costs.

Six Months Ended

March 31, 2022

March 31, 2021

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, and General

Unallocated Shop Expenses

Total cost of revenues increased by $8.8 million to $32.5 million for the three months ended March 31, 2022, as compared to $23.7 million for the three months ended March 31, 2021.

Total cost of revenues increased by $17.0 million to $69.9 million for the six months ended March 31, 2022, as compared to $52.9 million for the six months ended March 31, 2021.

The increases were a result of increased work in all categories of business exclusive of unallocated shop expenses.

Gas & Water Distribution cost of revenues totaled $9.2 million for the three months ended March 31, 2022, a $2.0 million increase from $7.2 million for the three months ended March 31, 2021.

Gas & Water Distribution cost of revenues totaled $18.5 million for the six months ended March 31, 2022, a $5.2 million increase from $13.3 million for the six months ended March 31, 2021.

The increases were primarily related to the Company’s overall commitment to growing this line of business through adding new distribution crews.

Inclement weather in January and February 2022 had a negative impact on distribution work available during the three months ended March 31, 2022;

Gas & Petroleum Transmission cost of revenues totaled $7.6 million for the three months ended March 31, 2022, a $4.8 million increase from $2.8 million for the three months ended March 31, 2021.

Gas & Petroleum Transmission cost of revenues totaled $17.3 million for the six months ended March 31, 2022, a $7.9 million increase from $9.5 million for the six months ended March 31, 2021.

The increases were primarily related to transmission work that was awarded due to increased construction opportunities from the Company’s existing transmission clients.

Legal expenses related to a lawsuit on a transmission project, referenced on page 33, increased by $240,000 and $600,000, respectively, for the three months and six months ended March 31, 2022, as compared to the same periods in the prior year.

Electrical, Mechanical, & General services and construction cost of revenues totaled $15.3 million for the three months ended March 31, 2022, a $3.0 million increase from $12.3 million for the three months ended March 31, 2021.

Electrical, Mechanical, & General services and construction cost of revenues totaled $33.4 million for the six months ended March 31, 2022, a $5.9 million increase from $27.5 million for the six months ended March 31, 2021.

The costs of revenue increases were primarily related to general building and civil construction cost of revenues which increased $3.4 million and $6.8 million, respectively, during the three and six months ended March 31, 2022, as compared to the same periods in the prior year.

Unallocated shop expenses totaled $427,000 for the three months ended March 31, 2022, a $1.0 million decrease from $1.4 million for the three months ended March 31, 2022.

Unallocated shop expenses totaled $597,000 for the six months ended March 31, 2022, a $2.1 million decrease from $2.7 million for the six months ended March 31, 2022.

The decrease in unallocated shop expenses was due to increased internal equipment charges to projects for the three and six months ended March 31, 2022, as compared to the same periods in the prior year and a focused effort to manage project and shop costs.

Gross Profit.

A table comparing the Company’s gross profit for the three months ended December 31, 2021, compared to the three months ended December 31, 2020, is below:

A table comparing the Company’s gross profit for the three and six months ended March 31, 2022, compared to the three and six months ended March 31, 2021, is below:

Three Months Ended

December 31, 2021

December 31, 2020

March 31, 2022

March 31, 2021

Gas & Water Distribution

2 unchanged sentences

Unallocated Shop Expenses

Total gross profit increased by $2.5 million to $5.3 million for the three months ended December 31, 2021 as compared to $2.8 million for the three months ended December 31, 2020 as a result of increases in all categories except for a decrease in gas and petroleum transmission gross profit.

Gas & Water Distribution gross profit totaled $2.6 million for the three months ended December 31, 2021, a $1.5 million increase from $1.1 million for the three months ended December 31, 2020.

The gross profit increase was primarily related to the Company’s overall commitment to growing this line of business through adding new distribution crews and the acquisition of West Virginia Pipeline.

West Virginia Pipeline, acquired on December 31, 2020, contributed gross profit of $1.1 million for the three months ended December 31, 2021.

Favorable weather conditions during the first quarter of fiscal year 2022 also allowed the Company to work more efficiently and productively.

Gas & Petroleum Transmission gross profit totaled $1.5 million for the three months ended December 31, 2021, a $495,000 decrease from $2.0 million for the three months ended December 31, 2020.

The gross profit decrease was primarily due to legal expenses related to a lawsuit on a transmission project, referenced on page 26, that increased by $360,000 during the three months ended December 31, 2021, as compared to the same period in 2020.

Electrical, Mechanical, & General services and construction gross profit totaled $1.4 million for the three months ended December 31, 2021, a $346,000 increase from $1.0 million for the three months ended December 31, 2020.

More efficient production accounted for the increased gross profit for the three months ended December 31, 2021, as compared to the same period in 2020.

The gross profit increase was primarily related to a $523,000 increase in general building and civil construction during the three months ended December 31, 2021 as compared to the same prior year period.

Unallocated shop expenses gross profit totaled ($170,000) for the three months ended December 31, 2021, a $1.1 million increase from ($1.3 million) for the three months ended December 31, 2020.

The increase in unallocated shop gross profit was due to increased internal equipment charges to projects for the three months ended December 31, 2021, as compared to the same period in 2020 and a focused effort to manage project and shop costs.

Six Months Ended

March 31, 2022

March 31, 2021

Gas & Water Distribution

Gas & Petroleum Transmission

Electrical, Mechanical, and General

Unallocated Shop Expenses

Total gross profit increased by $1.0 million to $2.9 million for the three months ended March 31, 2022, as compared to $1.9 million for the three months ended March 31, 2021.

Total gross profit increased by $3.5 million to $8.2 million for the six months ended March 31, 2022, as compared to $4.7 million for the six months ended March 31, 2021.

Gas & Water Distribution gross profit totaled $1.5 million for the three months ended March 31, 2022, a $100,000 increase from $1.4 million for the three months ended March 31, 2021.

Gas & Water Distribution gross profit totaled $4.1 million for the six months ended March 31, 2022, a $1.6 million increase from $2.5 million for the six months ended March 31, 2021.

The gross profit increase was primarily related to the Company’s overall commitment to growing this line of business through adding new distribution.

Inclement weather in January and February 2022 had a negative impact on distribution work available during the three months ended March 31, 2022;

however, favorable weather conditions during the first quarter of fiscal year 2022 allowed the Company to increase distribution work performed and work more efficiently and productively during the six months ended March 31, 2022, as compared to the same period in the prior year.

Gas & Petroleum Transmission gross profit totaled $955,000 for the three months ended March 31, 2022, a $40,000 increase from $915,000 for the three months ended March 31, 2021.

Gas & Petroleum Transmission gross profit totaled $2.5 million for the six months ended March 31, 2022, a $454,000 decrease from $2.9 million for the six months ended March 31, 2021.

The Company’s gross profit on transmission work performed during the three and six months ended March 31, 2022 was impacted by legal expenses related to a lawsuit on a transmission project, referenced on page 33, which increased by $240,000 and $600,000, respectively, for the three months and six months ended March 31, 2022, as compared to the same periods in the prior year.

Electrical, Mechanical, & General services and construction gross profit totaled $883,000 for the three months ended March 31, 2022, a $140,000 decrease from $1.0 million for the three months ended March 31, 2021.

Electrical, Mechanical, & General services and construction gross profit totaled $2.2 million for the six months ended March 31, 2022, a $206,000 increase from $2.0 million for the six months ended March 31, 2021.

The decrease for the three months ended March 31, 2022, as compared to the same period in the prior year, was primarily due to a gross loss from a start-up electrical division that will expand the Company’s geographical reach into Michigan.

The increase for the six months ended March 31, 2022, as compared to the same period in the prior year, was primarily related to an increase in gross profit generated by general and civil construction services, partially offset by gross losses generated by start-up mechanical and electrical divisions.

Unallocated shop expenses gross profit totaled ($427,000) for the three months ended March 31, 2022, a $1.0 million increase from ($1.4 million) for the three months ended March 31, 2021.

Unallocated shop expenses gross profit totaled ($597,000) for the six months ended March 31, 2022, a $2.1 million increase from ($2.7 million) for the six months ended March 31, 2021.

The increase in unallocated shop gross profit was due to increased internal equipment charges to projects for the three and six months ended March 31, 2022, as compared to the same periods in the prior year and a focused effort to manage project and shop costs.

Selling and administrative expenses .

Total selling and administrative expenses increased by $37,000 to $3.6 million for the three months ended December 31, 2021, as compared to the same period in 2020.

Approximately, $760,000 of the selling and administrative expenses for the three months ended December 31, 2021, were related to new business lines not in operation during the three months ended December 31, 2020.

Employee compensation decreased by approximately $800,000 for the three months ended December 31, 2021 as compared to the same period in 2020 due to a reduction in incentive compensation and increased labor charges to projects.

Total selling and administrative expenses decreased by $400,000 to $3.4 million for the three months ended March 31, 2022, as compared to $3.8 million for the same period in the prior year.

Total selling and administrative expenses decreased by $370,000 to $7.0 million for the six months ended March 31, 2022, as compared to $7.4 million for the same period in the prior year.

A one-time $651,000 Qualified Non-Elective Contribution (“QNEC”) adjustment to the Company’s 401(k) plan (“Plan”) attributable to the 2021 Plan year increased selling and administrative costs for the three and six months ended March 31, 2021.

Exclusive of the QNEC adjustment, employee compensation decreased by approximately $850,000 for the six months ended March 31, 2022, as compared to the same period in the prior year primarily due to a reduction in incentive compensation and increased labor charges to projects.

Selling and administrative expenses increased by $380,000 and $1.1 million, respectively, for the three and six months ended March 31, 2022, as compared to the same period in the prior year for new business operations acquired or established during fiscal year 2021.

These operations did not incur selling and administrative expenses during the full six months ended March 31, 2021.

Interest income.

Interest income totaled $600 for the three months ended December 31, 2021, a decrease of $151,400 from $152,000 for the same period in 2020.

Interest income totaled $4 and $600, respectively, for the three and six months ended March 31, 2022, as compared to $0 and $152,000 for the same periods in the prior year.

The decrease in interest income was primarily due to the timing of recognizing interest earned from the Company’s captive insurance surety deposit.

Interest expense.

Interest expense totaled $198,000 for the three months ended December 31, 2021, an increase of $121,000 from $77,000 for the same period in 2020.

The increase in interest expense was primarily due to the financing of the West Virginia Pipeline acquisition and equipment financing.

Other nonoperating expense.

Other income totaled $153,000 for the three months ended December 31, 2021, an increase of $100,000 from $53,000 for the same period in 2020.

The increase was primarily related to an increase in intangible asset amortization expense.

Interest expense totaled $145,000 for the three months ended March 31, 2022, an increase of $2,000 from $143,000 for the same period in the prior year.

Interest expense totaled $343,000 for the six months ended March 31, 2022, an increase of $123,000 from $220,000 for the same period in the prior year.

The increase in interest expense was primarily due to the financing of the West Virginia Pipeline acquisition.

Other nonoperating (expense) income.

Other nonoperating expense totaled $110,000 for the three months ended March 31, 2022, an increase of $77,000 from $33,000 for the same period in the prior year.

Other nonoperating expense totaled $263,000 for the six months ended March 31, 2022, an increase of $177,000 from $86,000 for the same period in the prior year.

The increases were primarily related to an increase in intangible asset amortization expense.

Gain on sale of equipment.

Gain on sale of equipment totaled $340,000 for the three months ended December 31, 2021, an increase of $326,000 from $13,000 for the same period in 2020.

The increase was related to an increase in equipment sold.

Net income (loss).

Income before income taxes was $1.7 million for the three months ended December 31, 2021, compared to loss before income taxes of ($717,000) for the same period in 2020.

The increase in income before income taxes for the three months ended December 31, 2021, was due to the items mentioned above.

Income tax expense for the three months ended December 31, 2021, was $494,000 compared to income tax benefit of ($69,000) for the same period in 2020.

The effective income tax rate for the three months ended December 31, 2021, was 29.7%, as compared to (9.7%) for the same period in 2020.

Income tax expense (benefit) and effective income tax rates are estimates and may vary from period to period due to changes in the amount of taxable income and non-deductible expenses.

Gain on sale of equipment totaled $20,000 for the three months ended March 31, 2022, a decrease of $459,000 from $479,000 for the same period in the prior year.

Gain on sale of equipment totaled $360,000 for the six months ended March 31, 2022, a decrease of $132,000 from $492,000 for the same period in the prior year.

The decrease was related to a decrease in equipment sold.

Net (loss) income .

Loss before income taxes was ($786,000) for the three months ended March 31, 2022, compared to loss before income taxes of ($1.6 million) for the same period in the prior year.

Income before income taxes was $879,000 for the six months ended March 31, 2022, compared to loss before income taxes of ($2.4 million) for the same period in the prior year.

The increase in income before income taxes for the three and six months ended March 31, 2022, as compared to the same periods in the prior year, was due to the items mentioned above.

Income tax benefit for the three months ended March 31, 2022, was ($200,000) compared to income tax benefit of ($336,000) for the same period in the prior year.

Income tax expense for the six months ended March 31, 2022, was $294,000 compared to income tax benefit of ($405,000) for the same period in the prior year.

The effective income tax rate for the three months ended March 31, 2022, was (25.5) %, as compared to (20.4) % for the same period in the prior year.

The effective income tax rate for the six months ended March 31, 2022, was 33.4 %, as compared to (17.1) % for the same period in the prior year.

Effective income tax rates are estimates and may vary from period to period due to changes in the amount of taxable income and non-deductible expenses.

Per diem paid to employees on construction projects and entertainment expenses are only partially deductible from taxable income and can have a significant impact on the effective tax rate.

For the three months ended December 31, 2021, the non-deductible portion of per diem and entertainment expenses resulted in an approximate $129,000 increase in taxable income as compared to $76,000 for the same period in 2020.

In addition, income before income taxes increased for the three months ended December 31, 2021 as compared to the same prior year period.

There were no dividends on preferred stock for the three months ended December 31, 2021, due to the redemption date on the preferred stock being September 1, 2021.

Dividends on preferred stock for the three months ended December 31, 2020, were $77,250.

Net income available to common shareholders for the three months ended December 31, 2021, was $1.2 million compared to net loss available to common shareholders of ($725,000) for the same period in 2020.

Comparison of Financial Condition at December 31, 2021, and September 30, 2021

The Company had total assets of $73.5 million at December 31, 2021, an increase of $3.3 million from the prior fiscal year end balance of $70.2 million.

Accounts receivable, which totaled $25.4 million at December 31, 2021, increased by $4.3 million from the prior fiscal year end balance of $21.1 million.

The increase was primarily due to the timing of cash collections and project invoicing since September 30, 2021.

The Company received payment for several million dollars of past due invoices in early January 2022.

Cash and cash equivalents totaled $11.1 million at December 31, 2021, an increase of $2.9 million from the prior fiscal year end balance of $8.2 million.

The increase was primarily due to $6.4 million provided from operating activities, partially offset by $1.2 million in cash payments for redeemed preferred stock, $1.8 million in debt repayments, and a net $500,000 investment in property and equipment.

Retainages receivable totaled $1.5 million at December 31, 2021, a $552,000 increase from the prior fiscal year end balance of $918,000.

The increase was primarily due to more current year projects that require retainages to be withheld.

Contract assets totaled $5.9 million at December 31, 2021, a decrease of $2.8 million from the prior fiscal year end balance of $8.7 million.

The decrease was due to a difference in the timing of project billings at December 31, 2021, compared to September 30, 2021.

Prepaid expenses and other totaled $2.8 million at December 31, 2021, a decrease of $751,000 from the prior fiscal year end balance of $3.5 million.

The decrease was primarily due to expensing prepaid insurance premiums during the three months ended December 31, 2021.

Other receivables totaled $49,000 at December 31, 2021, a $495,000 decrease from the prior fiscal year end balance of $543,000.

For the three months ended March 31, 2022, the non-deductible portion of per diem and entertainment expenses resulted in an approximate $106,000 increase in taxable income as compared to $221,000 for the same period in 2021.

For the six months ended March 31, 2022, the non-deductible portion of per diem and entertainment expenses resulted in an approximate $235,000 increase in taxable income as compared to $297,000 for the same period in 2021.

There were no dividends on preferred stock for the three and six months ended March 31, 2022, due to the redemption date on the preferred stock being September 1, 2021.

Dividends on preferred stock for the three and six months ended March 31, 2021, were $77,250 and $154,500, respectively.

Net loss available to common shareholders for the three months ended March 31, 2022, was ($586,000), as compared to ($1.4 million) for the same period in the prior year.

Net income available to common shareholders for the six months ended March 31, 2022, was $585,000, as compared to a net loss available to common shareholders of ($2.1 million) for the same period in the prior year.

Comparison of Financial Condition at March 31, 2022, and September 30, 2021

The Company had total assets of $66.4 million at March 31, 2022, a decrease of $3.8 million from the prior fiscal year end balance of $70.2 million.

Accounts receivable, which totaled $16.6 million at March 31, 2022, decreased by $4.5 million from the prior fiscal year end balance of $21.1 million.

The decrease was primarily due to the timing of cash collections and project invoicing since September 30, 2021.

Contract assets totaled $7.7 million at March 31, 2022, a decrease of $1.0 million from the prior fiscal year end balance of $8.7 million.

The decrease was due to a difference in the timing of project billings at March 31, 2022, compared to September 30, 2021.

Other receivables totaled $49,000 at March 31, 2022, a $494,000 decrease from the prior fiscal year end balance of $543,000.

The decrease was primarily due to the receipt of insurance premium refunds receivable.

The Company had property, plant and equipment of $22.7 million at December 31, 2021, a decrease of $246,000 from the prior fiscal year end balance of $23.0 million.

The Company had property, plant and equipment of $22.6 million at March 31, 2022, a decrease of $372,000 from the prior fiscal year end balance of $23.0 million.

The decrease was due to $2.6 million in depreciation expense and net equipment disposals of $200,000, partially offset by $2.4 million in property, plant and equipment acquisitions.

Intangible assets, net totaled $2.3 million at December 31 2021, a decrease of $119,000 from the prior fiscal year end balance of $2.4 million.

The decrease was due to the amortization of intangible assets during the three months ended December 31, 2021.

Goodwill resulting from the West Virginia Pipeline and Revolt Energy acquisitions totaled $1.8 million at December 31, 2021, unchanged from the prior fiscal year end balance.

The Company had total liabilities of $38.9 million at December 31, 2021, an increase of $3.4 million from the prior fiscal year end balance of $35.5 million.

Contract liabilities totaled $7.5 million at December 31, 2021, an increase of $4.3 million from the prior fiscal year end total of $3.2 million.

The increase was due to a difference in the timing of project billings at December 31, 2021 compared to at September 30, 2021.

Deferred tax liabilities totaled $2.5 million at December 31, 2021, an increase of $442,000 from the prior fiscal year end balance of $2.0 million.

The increase was primarily related to the reduction of the net operating loss carry forward during the three months ended December 31, 2021.

Accounts payable totaled $7.3 million at December 31, 2021, an increase of $58,000 from the prior fiscal year end balance.

The increase was due to the timing of accounts payable payments as compared to September 30, 2021.

Long-term debt totaled $11.5 million at December 31, 2021, a decrease of $968,000 from the prior fiscal year end balance of $12.4 million.

Intangible assets, net totaled $2.2 million at March 31, 2022, a decrease of $196,000 from the prior fiscal year end balance of $2.4 million.

The decrease was due to the amortization of intangible assets during the six months ended March 31, 2022.

Prepaid expenses and other totaled $5.3 million at March 31, 2022, an increase of $1.8 million from the prior fiscal year end balance of $3.5 million.

The increase was primarily due to prepaid insurance premiums financed for calendar year 2022, partially offset by insurance premiums expensed during the three months ended March 31, 2022.

Retainage receivable totaled $1.9 million at March 31, 2022, a $1.0 million increase from the prior fiscal year end balance of $918,000.

The increase was primarily due to more current year projects that require retainages to be withheld.

Cash and cash equivalents totaled $8.4 million at March 31, 2022, an increase of $136,000 from the prior fiscal year end balance of $8.2 million.

The increase was primarily due to $7.7 million provided from operating activities, partially offset by $1.2 million in cash payments for redeemed preferred stock, $4.8 million in debt repayments, and a net $1.5 million investment in property and equipment.

Goodwill resulting from the West Virginia Pipeline and Revolt Energy acquisitions totaled $1.8 million at March 31, 2022, unchanged from the prior fiscal year end balance.

The Company had total liabilities of $32.4 million at March 31, 2022, a decrease of $3.1 million from the prior fiscal year end balance of $35.5 million.

Lines of credit and short-term borrowings totaled $2.2 million at March 31, 2022, a decrease of $2.8 million from the prior fiscal year end balance of $5.0 million.

The decrease was due to a $4.5 million line of credit repayment, partially offset by $1.7 million of insurance premiums financed, net of repayments.

Long-term debt totaled $10.7 million at March 31, 2022, a decrease of $1.7 million from the prior fiscal year end balance of $12.4 million.

The decrease in long-term debt was primarily due to $2.0 million in debt repayments, partially offset by $350,000 in new equipment debt.

Lines of credit and short-term borrowings totaled $4.5 million at December 31, 2021, a decrease of $540,000 from the prior fiscal year end balance of $5.0 million.

The decrease was due to the repayment of insurance premiums financed.

Accrued expenses and other current liabilities totaled $5.6 million at December 31, 2021, a decrease of $31,000 from the prior fiscal year end balance.

The decrease was due to the timing of accrued expense payments as compared to September 30, 2021.

Shareholders’ equity was $34.6 million at December 31, 2021, a decrease of $39,000 from the prior fiscal year end balance.

This decrease was due to $1.2 million in preferred stock redemption payments and nearly offset by the net income available to common shareholders of $1.2 million for the three months ended December 31, 2021.

Accounts payable totaled $6.8 million at March 31, 2022, a decrease of $439,000 from the prior fiscal year end balance of $7.3 million.

The decrease was due to the timing of accounts payable payments as compared to September 30, 2021.

Contract liabilities totaled $4.2 million at March 31, 2022, an increase of $1.0 million from the prior fiscal year end balance of $3.2 million.

The increase was due to a difference in the timing of project billings at March 31, 2022, as compared to September 30, 2021.

Accrued expenses and other current liabilities totaled $6.1 million at March 31, 2022, an increase of $522,000 from the prior fiscal year end balance of $5.6 million.

The increase was due to the timing of accrued expense payments, as compared to September 30, 2021.

Deferred tax liabilities totaled $2.3 million at March 31, 2022, an increase of $232,000 from the prior fiscal year end balance of $2.0 million.

The increase was primarily related to the reduction of the net operating loss carry forward during the six months ended March 31, 2022.

Shareholders’ equity was $34.0 million at March 31, 2022, a decrease of $625,000 from the prior fiscal year end balance of $34.6 million.

The decrease was due to $1.2 million in preferred stock redemption payments, partially offset by the net income available to common shareholders of $585,000 for the six months ended March 31, 2022.

Liquidity and Capital Resources

4 unchanged sentences

Treasury yield, adjusted to a constant maturity of three years as published by the Federal Reserve weekly.

As of December 31, 2021, the Company had made principal payments of $294,000.

As of March 31, 2022, the Company had made principal payments of $306,000.

The loan is collateralized by the building purchased under this agreement.

2 unchanged sentences

The interest rate on the loan agreement is 4.25% with monthly payments of $11,602.

As of December 31, 2021, the Company had made principal payments of $598,000.

As of March 31, 2022, the Company had made principal payments of $628,000.

The loan is collateralized by the building and property purchased under this agreement.

1 unchanged sentence

This five-year agreement gave the Company access to a $5.0 million line of credit (“Equipment Line of Credit 2017”), specifically for the purchase of equipment, for a period of three months with an interest rate of 4.99%.

After three months, all borrowings against the Equipment Line of Credit 2017 were converted to a five-year term note agreement with an interest rate of 4.99%.

As of December 31, 2021, the Company had borrowed $5.0 million against this note and made principal payments of $4.4 million.

After three months, all borrowings against the Equipment Line of Credit 2017 were converted to a five-year term note agreement with an interest rate of 4.99% with monthly payments of $98,865.

As of March 31, 2022, the Company had borrowed $5.0 million against this note and made principal payments of $4.7 million.

The loan is collateralized by the equipment purchased under this agreement.

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The unsecured five-year term note requires annual payments of at least $500,000 with a fixed interest rate of 3.25% on the $3.0 million sellers’ note, which equates to 5.35% on the carrying value of the note.

As of December 31, 2021, the Company had made annual installment payments of $500,000, interest payments of $97,500 and expensed $30,000 in accreted interest.

As of March 31, 2022, the Company had made annual installment payments of $500,000, interest payments of $129,000 and expensed $37,500 in accreted interest.

On January 4, 2021, the Company entered into a $3.0 million Non-Revolving Note agreement with United Bank, Inc.

This five-year agreement gave the Company access to a $3.0 million line of credit (“Equipment Line of Credit 2021”), specifically for the purchase of equipment, for a period of twelve months with a variable interest rate initially established at 4.25% as based on the Prime Rate as published by The Wall Street Journal .

After twelve months, all borrowings against the Equipment Line of Credit 2021 will be converted to a four-year term note agreement with a variable interest rate initially established at 4.25%.

After twelve months, all borrowings against the Equipment Line of Credit 2021 were converted to a four-year term note agreement with a variable interest rate initially established at 4.25%.

The loan is collateralized by the equipment purchased under this agreement.

As of December 31, 2021, the Company borrowed $3.0 million against this line of credit with payments set to begin in February 2022.

The Company has made interest payments of $66,000 on this note as of December 31, 2021.

As of March 31, 2022, the Company borrowed $3.0 million against this line of credit with monthly payments of $68,073 that started in February 2022.

The Company has made principal payments of $114,000 on this note as of March 31, 2022.

On April 2, 2021, the Company entered into a $3.5 million Non-Revolving Note agreement with United Bank, Inc.

This five-year agreement repaid the outstanding $3.5 million line of credit that was used for the down payment on the West Virginia Pipeline acquisition.

This loan has a variable interest rate initially established at 4.25% as based on the Prime Rate as published by The Wall Street Journal .

This loan has monthly installment payments of $64,853 and has a variable interest rate initially established at 4.25% as based on the Prime Rate as published by The Wall Street Journal .

The loan is collateralized by the Company’s equipment and receivables.

As of December 31, 2021, the Company had made principal payments of $477,000.

As of March 31, 2022, the Company had made principal payments of $640,000.

Operating Line of Credit

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The interest rate on the line of credit is the “Wall Street Journal” Prime Rate (the index) with a floor of 4.99%.

Based on the borrowing base calculation, the Company was able to borrow up to $12.5 million as of December 31, 2021.

The Company had $4.5 million in borrowings on the line of credit, leaving $8.0 million available on the line of credit as of December 31, 2021.

The interest rate at December 31, 2021, was 4.99%.

Based on the borrowing base calculation, the Company was able to borrow up to $9.4 million and had no borrowings on the line of credit as of March 31, 2022.

The interest rate at March 31, 2022, was 4.99%.

Based on the borrowing base calculation, the Company was able to borrow up to $12.2 million as of September 30, 2021.

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Minimum tangible net worth of $21.0 million to be measured quarterly.

The Company believes it was in compliance with all covenants for the $12.5 million component of Operating Line of Credit (2021) at December 31, 2021.

The Company believes it was in compliance with all covenants for the $12.5 million and $2.5 million components of Operating Line of Credit (2021) at March 31, 2022.

Off-Balance Sheet Arrangements

13 unchanged sentences

The lease is expensed monthly and not treated as a right-to-use asset as it does not have a material impact on the Company’s consolidated financial statements.

During the three months ended December 31, 2021, the Company entered into two lease agreements of construction equipment for a combined $160,000.

The leases have a term of twenty-two months with an interest rate of 0%, combined monthly installment payments of $6,645 and are cancellable at any time without penalty.

During the six months ended March 31, 2022, the Company entered into two lease agreements of construction equipment for a combined $160,000.

The leases have a term of twenty-two months with a stated interest rate of 0%, combined monthly installment payments of $6,645 and are cancellable at any time without penalty.

The Company has the right to purchase the equipment at the expiration of the leases by applying the two-month deposit paid.

The Company treated the transactions as capital leases.

The right-of-use assets and finance lease obligations associated with these lease agreements are included in the consolidated balance sheets within property, plant and equipment and long-term debt, respectively, and do not have a material impact on the Company’s financial statements.

The Company rents equipment for use on construction projects with rental agreements being week to week or month to month.

Rental expense can vary by fiscal year due to equipment requirements on construction projects and the availability of Company owned equipment.

Rental expense, which is included in cost of goods sold on the Consolidated Income Statement, was $1.9 million and $1.0 million for the three months ended December 31, 2021, and 2020, respectively.

Rental expense, which is included in cost of goods sold on the consolidated statements of income, was $3.5 million and $1.9 million for the six months ended March 31, 2022, and 2021, respectively.

Letters of Credit

Certain of our customers or vendors may require letters of credit to secure payments that the vendors are making on our behalf or to secure payments to subcontractors and vendors on various customer projects.

At December 31, 2021, the Company did not have any letters of credit outstanding.

Certain customers or vendors may require letters of credit to secure payments that the vendors are making on our behalf or to secure payments to subcontractors and vendors on various customer projects.

At March 31, 2022, the Company did not have any letters of credit outstanding.

Performance Bonds

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The Company does not anticipate any claims against outstanding performance bonds in the foreseeable future.

At December 31, 2021, the Company had $37.5 million in performance bonds outstanding.

At March 31, 2022, the Company had $39.9 million in performance bonds outstanding.

Concentration of Credit Risk

3 unchanged sentences

Under certain circumstances such as foreclosure, the Company may take title to the underlying assets in lieu of cash in settlement of receivables.

Please see the tables below for customers that represent 10.0% or more of the Company’s revenue or accounts receivable net of retention for the three months ended December 31, 2021, and 2020:

Three Months Ended

December 31, 2021

December 31, 2020

Please see the tables below for customers that represent 10.0% or more of the Company’s revenue or accounts receivable net of retention for the six months ended March 31, 2022, and 2021:

Six Months Ended

March 31, 2022

March 31, 2021

TransCanada Corporation

* Less than 10.0% and included in “All other” if applicable

Accounts receivable net of retention

December 31, 2021

December 31, 2020

WV American Water

Kentucky American Water

March 31, 2022

March 31, 2021

Mountaineer Gas Company

* Less than 10.0% and included in “All other” if applicable

In February 2018, the Company filed a lawsuit against a former customer (“Defendant”) in the United States District Court for the Western District of Pennsylvania.

The lawsuit is related to a dispute over work performed on a pipeline construction project.

On November 9, 2021, the Company was awarded $5.8 million, none of which has been recognized in the Company’s financial statements.

The Defendant has filed preliminary motions to request a new trial or a renewed judgement as a matter of law.

The Company anticipates that all motions, counter motions, and replies will be submitted to the court by April 5, 2022.

The Company believes the judgement order will be issued before the end of fiscal year 2022.

On November 9, 2021, the Company was awarded $5.8 million, none of which has been recognized in the Company’s consolidated financial statements.

The Defendant filed motions to request a new trial or a renewed judgement as a matter of law.

All counter motions, and replies related to the previously mentioned motions have been filed with the court as of May 12, 2022.

The Company anticipates that a final judgement order will be issued in the third calendar quarter of 2022.

A party to a civil lawsuit usually has 30 days from the entry of judgment to file a notice of appeal.

5 unchanged sentences

however, the Company firmly believes no withdrawal liability exists and plans to seek arbitration to resolve the matter.

If successfully arbitrated, the Company expects to receive repayment of all installment payments made.

Other than described above, at December 31, 2021, the Company was not involved in any legal proceedings other than in the ordinary course of business.

If successfully arbitrated, the Company expects to receive repayment of all installment payments made, currently included within prepaid assets in the accompanying consolidated balance sheets.

Other than described above, at March 31, 2022, the Company was not involved in any legal proceedings other than in the ordinary course of business.

The Company is a party from time to time to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business.

1 unchanged sentence

With respect to all such lawsuits, claims, and proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

At December 31, 2021, the Company does not believe that any of these proceedings, separately or in aggregate, would be expected to have a material adverse effect on our financial position, results of operations or cash flows.

At March 31, 2022, the Company does not believe that any of these proceedings, separately or in aggregate, would be expected to have a material adverse effect on our financial position, results of operations or cash flows.

Related Party Transactions

3 unchanged sentences

The interest rate on the loan agreement is 4.82% with monthly payments of $7,800.

As of December 31, 2021, the Company had paid approximately $294,000 in principal and approximately $362,000 in interest since the beginning of the loan.

As of March 31, 2022, the Company had paid approximately $306,000 in principal and approximately $373,000 in interest since the beginning of the loan.

Douglas Reynolds, President of Energy Services, was a director and secretary of First Bank of Charleston.

9 unchanged sentences

For the purchase price allocation, the $3.0 million note had a fair value of $2.85 million.

As part of the $6.35 million acquisition, the Company paid $3.5 million in cash in addition to the note.

As part of the $6.35 million acquisition price, the Company paid $3.5 million in cash in addition to the note.

As of December 31, 2021, the Company had made annual installment payments of $500,000, interest payments of $97,500 and expensed $30,000 in accreted interest.

Other than mentioned above, there were no new material related party transactions entered into during the three months ended December 31, 2021.

As of March 31, 2022, the Company had made annual installment payments of $500,000, interest payments of $129,000 and expensed $37,500 in accreted interest.

Other than mentioned above, there were no new material related party transactions entered into during the six months ended March 31, 2022.

Certain Energy Services subsidiaries routinely engage in transactions in the normal course of business with each other, including sharing employee benefit plan coverage, payment for insurance and other expenses on behalf of other affiliates, and other services incidental to business of each of the affiliates.

1 unchanged sentence

Most significant project materials, such as pipe or electrical wire, are provided by the Company’s customers.

The Company did experience costs increases on materials for fire protection projects, which had been bid several months prior, during the three months ended December 31, 2021.

The Company did experience costs increases on materials for fire protection projects, which had been bid several months prior, during the three months and six months ended March 31, 2022.

While significant to those smaller projects, the costs increases were immaterial to the overall operations of the Company.

1 unchanged sentence

Significant inflation or supply chain issues could cause customers to delay or cancel planned projects;

however, inflation did not have a significant effect on our results for the three months ended December 31, 2021, and 2020.

however, inflation did not have a significant effect on our results for the three and six months ended March 31, 2022, and 2021.

Critical Accounting Estimates

35 unchanged sentences

Generally, unearned project-related costs will be earned over the next twelve months.

The following table presents our costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings at December 31, 2021, and September 30, 2021:

December 31, 2021

The following table presents our costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings at March 31, 2022, and September 30, 2021:

March 31, 2022

September 30, 2021

2 unchanged sentences

Less billings to date

Costs and estimated earnings in excess of billed on

uncompleted contracts

Less billings in excess of costs and estimated earnings on

uncompleted contracts

Costs and estimated earnings in excess of billed on uncompleted contracts

Less billings in excess of costs and estimated earnings on uncompleted contracts

Allowance for doubtful accounts

4 unchanged sentences

Additionally, frequently changing reserves could be an indication of risky or unreliable customers.

At December 31, 2021, the management review deemed that the allowance for doubtful accounts was adequate.

At March 31, 2022 and September 30, 2021, the management review deemed that the allowance for doubtful accounts was adequate.

Please see the allowance for doubtful accounts table below:

December 31, 2021

March 31, 2022

September 30, 2021

Balance at beginning of year

Balance at beginning of period

Charged to expense

Deductions for uncollectible receivables written off, net of recoveries

Balance at end of year

Balance at end of year period

Impairment of goodwill and intangible assets

2 unchanged sentences

If a company fails this test or decides to bypass this step, it must proceed with a two-step quantitative assessment of goodwill impairment.

The Company did not have a goodwill impairment at December 31, 2021.

The Company did not have a goodwill impairment at March 31, 2022.

Materially incorrect estimates could cause an impairment to goodwill or intangible assets and result in a loss in profitability for the Company.

1 unchanged sentence

Amortization and

Impairment Three

Impairment Six

Remaining Life at

7 unchanged sentences

Original Cost

December 31, 2021

March 31, 2022

September 30, 2021

14 unchanged sentences

and office equipment, furniture and fixtures 5-7 years.

The Company’s depreciation expense for the three months ended December 31, 2021, and 2020 was $1.3 million and $1.1 million, respectively.

The Company’s depreciation expense for the six months ended March 31, 2022, and 2021 was $2.6 million and $2.2 million, respectively.

In general, depreciation is included in “cost of revenues” on the Company’s consolidated statements of income.

Materially incorrect estimates of depreciation and/or the useful lives of assets could significantly impact the value of property, plant, and equipment on the Company’s financial statements.

Materially incorrect estimates of depreciation and/or the useful lives of assets could significantly impact the value of property, plant, and equipment on the Company’s consolidated financial statements.

A material over valuation could result in impairment charges and reduced profitability for the Company.

2 unchanged sentences

The Company’s provision for income taxes is computed by applying a federal rate of 21.0% and a state rate of 6.0%.

Permanent income tax differences result in an increase or decrease to taxable income and impact the Company’s effective tax rates, which were 29.7% and 9.7% for the three months ended December 31, 2021, and 2020, respectively.

Our tax rate is affected by recurring items, such as non-deductible portions of per diem paid to construction personnel, which we expect to be fairly consistent in the near term.

For the three months ended December 31, 2021, and 2020, the non-deductible portion of per diem and entertainment

expenses resulted in approximate increases in taxable income of $129,000 and $76,000, respectively.

Permanent income tax differences result in an increase or decrease to taxable income and impact the Company’s effective tax rates, which were (25.5%) and (20.4%) for the three months ended March 31, 2022, and 2021, respectively.

The effective income tax rate for the six months ended March 31, 2022, was 33.4 %, as compared to (17.1) % for the same period in the prior year.

Our tax rate is affected by recurring items, such as non-deductible portions of per diem paid to construction personnel, which we expect to be fairly

consistent in the near term.

Our tax estimates are also affected by discrete items that may occur in any given year but are not consistent from year to year.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.

At December 31, 2021, the Company had a net deferred income tax liability of $2.5 million as compared to $2.0 million at September 30, 2021.

The Company’s deferred income tax liabilities at December 31, 2021 was $4.0 million and primarily related to depreciation on property and equipment.

The Company’s deferred income tax assets at December 31, 2021 was $1.5 million and primarily related to a net operating loss (“NOL”) carryforward.

At March 31, 2022, the Company had a net deferred income tax liability of $2.3 million as compared to $2.0 million at September 30, 2021.

The Company’s deferred income tax liabilities at March 31, 2022, was $4.4 million and primarily related to depreciation on property and equipment.

The Company’s deferred income tax assets at March 31, 2022, was $2.1 million and primarily related to a net operating loss (“NOL”) carryforward.

The Company believes that it is more likely than not that all NOL carryforwards will be realized.

The Company’s tax provision is evaluated annually;

however, a material difference between the provision and actual income tax filings could result in adjustments to income tax benefits or expenses and deferred tax assets and liabilities.

Changes in tax laws and rates may also affect recorded deferred tax assets and liabilities and our effective tax rate in the future.

New Accounting Pronouncements

7 unchanged sentences

Early adoption is permitted, including in any interim period, for public business entities for periods for which financial statements have not yet been issued, and for all other entities for periods for which financial statements have not yet been made available for issuance.

The Company is currently assessing the effect that ASU 2021-08 will have on their results of operations, financial position and cash flows;

however, the Company does not expect a significant impact.

The FASB recently issued ASU 2021-10, “Government Assistance (Topic 832):

3 unchanged sentences

The guidance in ASU 2021-10 is effective for financial statements of all entities, including private companies, for annual periods beginning after December 15, 2021, with early application permitted.

ASU 2021-10 has not become effective for the Company;

however, a significant impact is not expected.

Subsequent Events

On January 27, 2022, the Company announced that it submitted an application to list its common stock on the Nasdaq Capital Market.

The Company believes that it meets or will meet the financial, liquidity, and corporate governance requirements for listing on the Nasdaq Capital Market;

however, any move to Nasdaq is contingent upon fulfilling those requirements and Nasdaq approval.

Management has evaluated subsequent events through February 11, 2022, the date which the financial statements were available for issue.

TSP will provide utility paving services to water distribution customers in the Charleston, WV, Lexington, KY, and Chattanooga, TN markets.

The employees of TSP will be non-union and managed independently from the Company's union subsidiaries.

Management has evaluated all subsequent events for accounting and disclosure.

There have been no other material events during the period, other than noted above, that would either impact the results reflected in the report or the Company’s results going forward.

2 unchanged sentences

As a contractor providing electrical, mechanical, HVAC/R and underground piping installation and maintenance services to customers in the petroleum, natural gas, public utilities and power industries, the Company and its subsidiaries are considered an “Essential Business” in the various states in which it operates.

Given the uncertainty regarding the spread of COVID-19, the related

financial impact on the Company’s results of operations, financial position, and liquidity or capital resources cannot be reasonably estimated at this time.

The Company was not significantly impacted by COVID-19 during the three months ended December 31, 2021.

Major transmission pipeline construction opportunities have decreased in the past several years;

however, the Company has been successful in securing several transmission projects for fiscal year 2022.

The Company is experiencing a greater demand for its gas and water distribution, and electrical and mechanical services.

The Company’s backlog at December 31, 2021, was $101.6 million, as compared to $60.7 million and $72.2 million at December 31, 2020 and September 30, 2021, respectively.

Given the uncertainty regarding the spread of COVID-19, the related financial impact on the Company’s results of operations, financial position, and liquidity or capital resources cannot be reasonably estimated at this time.

The Company was not significantly impacted by COVID-19 during the three and six months ended March 31, 2022.

Transmission pipeline construction opportunities have increased compared to fiscal year 2021 and the Company has been successful in securing several transmission projects for fiscal year 2022.

The Company is also experiencing a greater demand for its gas and water distribution services.

Several potentially significant electrical and mechanical projects have been delayed until the Company’s third and fourth fiscal quarter;

however, electrical, mechanical, and general construction opportunities have increased in fiscal year 2022.

The Company’s backlog at March 31, 2022, was $120.3 million, as compared to $61.2 million and $72.2 million at March 31, 2021, and September 30, 2021, respectively.

While adding additional projects appears likely, no assurances can be given that the Company will be successful in bidding on projects that become available.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis