What changed in this filing

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Item 9A. Controls and Procedures

2022-12-22 compared with 2021-12-29 · 342 added, 853 removed, 676 unchanged (64% of the section changed)

1 unchanged sentence

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in

Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that Energy Services files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

9 unchanged sentences

Management has not identified any material weakness in the Company’s internal control over financial reporting.

Management has concluded that the Company’s internal control over financial reporting was effective as of the end of the most recent fiscal year.

Management has concluded that the Company’s internal control over financial reporting was effective as of the end of the most recent the fiscal year.

This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.

1 unchanged sentence

There has been no change in Energy Services of America Corporation’s internal control over financial reporting during Energy Services of America Corporation’s fourth quarter of fiscal year 2021, that has materially affected, or is reasonably likely to materially affect, Energy Services of America Corporation’s internal control over financial reporting.

There has been no change in Energy Services of America Corporation’s internal control over financial reporting during Energy Services of America Corporation’s fourth quarter of the fiscal year 2022, that has materially affected, or is reasonably likely to materially affect, Energy Services of America Corporation’s internal control over financial reporting.

Other Information

2 unchanged sentences

Directors, Executive Officers and Corporate Governance

The principal occupation during the past five years of each director and executive officer is set forth below.

All directors and executive officers have held their present positions since our inception in 2006 unless otherwise stated.

Reynolds has served as Chairman of the Board of Directors since our inception.

Reynolds has served as Chief Executive Officer and Chairman of the Board Directors of Champion Industries, Inc., a commercial printer, business form manufacturer and supplier of office products and furniture, from 1992 to 2016, and sole stockholder from 1972 to 1993;

President and General Manager of The Harrah and Reynolds Corporation, from 1964 (and sole stockholder since 1972) to present;

and Chairman of the Board of Directors of McCorkle Machine and Engineering Company in Huntington, West Virginia.

Reynolds is also Chairman of the Board of Directors of First Guaranty Bancshares, Inc., in Hammond, Louisiana, a director of Summit State Bank in Santa Rosa, CA since December 1998, and was Chairman of Premier Financial Bancorp, Inc.

in Huntington, WV from 2011 to 2021.

Reynolds is the father of Jack M.

Reynolds and Douglas V.

Reynolds varied career as a business leader and experience in a number of industries qualifies him to be on the Board of Directors.

Reynolds was appointed President and Chief Executive Officer of the Company on December 6, 2012, and has served as a Director since 2008.

Reynolds is an attorney for Reynolds & Brown, PLLC.

Reynolds is the President of the Transylvania Corporation and a director of The Harrah and Reynolds Corporation and Peoples Bancorp, Inc.

and its banking subsidiary Peoples Bank beginning in 2021.

Reynolds was a director of Premier Financial Bancorp, Inc.

from 2020 to 2021.

Reynolds is a graduate of Duke University and holds a law degree from West Virginia University.

Reynolds is the son of Director Marshall T.

Reynolds and brother of Jack M.

Reynolds’ varied experience and senior management roles with other companies make Mr.

Reynolds a valuable member of the Board.

Reynolds served as President and Chief Financial Officer from our inception until September 2008 and has been a member of our Board of Directors since our inception.

Reynolds has been a Vice President of Pritchard Electric Company since 1998.

Pritchard is an electrical contractor providing electrical services to both utility companies as well as private industries.

Reynolds also serves as a Director of Citizens Deposit Bank of Vanceburg, Kentucky.

Reynolds is the son of Marshall T.

Reynolds and the brother of Douglas V.

Reynolds lengthy service at Pritchard Electric and knowledge of the contracting industry provides hands on expertise to the Board of Directors.

Williams has been a Director since our inception.

Williams is the Chairman and Chief Executive Officer of Basic Supply Company, Inc., which he founded in 1977.

Williams was Chairman, President and Chief Executive Officer of Consolidated Bank & Trust Co., in Richmond, Virginia from 2007 until it merged with Premier Financial Bancorp, Inc.

Williams is a former member of the West Virginia Governor’s Workforce Investment Council.

He is a former Director of Unlimited Future, Inc.

(a small business incubator) and a former Member of the National Advisory Council of the U.S.

Small Business Administration.

Williams is a former Mayor and City Councilman of the City of Huntington, West Virginia.

He is a graduate of Marshall University with a degree in finance and is a former member of its Institutional Board of Governors.

Williams' investment and management experience provides the board of directors an important perspective in business development.

Kapourales was appointed to the Board of Directors on December 20, 2010.

He is a Board Member of the West Virginia Health Care Authority and Kapourales Properties, LLC.

Kapourales serves as a Director of First National Bank of Williamson.

Kapourales’ varied business experience makes him a valuable member of the Board.

Charles Abraham, MD was appointed to the Board of Directors on January 1, 2016.

Abraham is a retired Otolaryngology (Ear Nose & Throat) Specialist in Huntington, WV and was affiliated with multiple hospitals in the area, including Cabell Huntington Hospital and St.

Mary’s Medical Center.

Abraham continues to practice part-time at the Veterans Affairs Medical Center.

He received his medical degree from West Virginia University School of Medicine and has been in practice since 1968.

He also received an MBA degree from Marshall University in August 1996.

Abraham is certified by the American Board of Otolaryngology.

Abraham’s healthcare experience and understanding of health insurance related matters makes him a valuable member of the Board.

Frank Lucente was appointed to the Board of Directors on June 19, 2019.

Lucente, a retired Naval officer, holds a Master’s in Business Administration (MBA) with a specialty in marketing from Marshall University in Huntington, WV.

Lucente is the founder, owner and president of Sam’s Hot Dogs, Inc., a franchise with over 45 locations in Virginia, West Virginia, Kentucky, North

Carolina, and Georgia.

In addition, Mr.

Lucente is the co-founder of Rocco’s Restaurants, Inc.

in Ceredo, WV.

From 2005 to 2016, Mr.

Lucente served as a city council member in Waynesboro, VA and served stints as vice mayor and mayor during that time.

Lucente has served as the chairman of the board of Rocco’s Italian Specialty Foods, Inc.

Lucente’s business experience makes him a valuable member of the Board.

Daniel Mannes was appointed to the Board of Directors on October 21, 2020.

Mannes has held the position of Vice President of Investor Relations at Covanta Holding Corporation, Morristown, NJ, since 2016.

Previously, Mr.

Mannes had held various corporate finance positions since 1996.

Mannes, a Chartered Financial Analyst (CFA), earned a Master of Business Administration (MBA) degree with a concentration in finance from the University of Maryland, Baltimore, Maryland, in 2004.

Previously, Mr.

Mannes earned a Bachelor of Science in Business Administration (BSBA) degree majoring in accounting/finance from Washington University, St.

Louis, Missouri, in 1996.

Mannes’ finance and investor relations experience provides insight to issues important to stockholders and investors .

Brian Pratt was appointed to the Board of Directors on August 18, 2021.

Pratt has over 35 years of hands-on operations and management experience in the construction industry.

From 1983 through 2015, he served as the President, Chief Executive Officer and Chairman of the Board of Primoris Services Corp.

and its predecessor entity, ARB, Inc.

Pratt served as Chairman of Primoris Services Corp.

from 2008 until 2019 and as a Director until February 2020.

Pratt’s experience in the construction industry as well as mergers and acquisitions make him a valuable member of the board.

Crimmel was appointed as Chief Financial Officer of the Company on November 1, 2013, after serving as Controller from 2008 to 2013.

Crimmel graduated from West Virginia University in 1995 with a Bachelor of Science degree in Business Administration and Accounting.

Crimmel was employed by Union Boiler Company as a Field Clerk and Staff Accountant from 1995 to 1996.

From 1996-2005, Mr.

Crimmel served as Staff Accountant and Controller for Williams Union Boiler/Williams Service Group.

From 2005-2008, Mr.

Crimmel was Controller for Nitro Electric Company.

Board Leadership Structure and Risk Oversight

Our board of directors is chaired by Mr.

Reynolds, who is a non-executive director.

We separate the roles of Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles.

The Chief Executive Officer is responsible for overseeing the day-to-day operations of the Company.

The Chairman provides guidance to the Chief Executive Officer and, together with the entire board of directors helps develop the strategic plan for the Company.

The role of the board of directors in the Company’s risk oversight process includes receiving reports from senior management on areas of material risk to the Company, including operational, financial, legal, regulatory, strategic and reputational risk.

The full board reviews such reports and follows up with senior management to best determine how to address such risks.

Delinquent Section 16(a) Reports

The Company did not have any delinquent filings in fiscal year 2021.

Meetings of the Board of Directors

During fiscal 2021, the Board of Directors held twelve regular meetings and three special meetings.

Two directors, Dr.

Charles Abraham and Mr.

Neal Scaggs, attended fewer than 75% in the aggregate of the total number of board and committee meetings.

Although not required, attendance of Board members at the Annual Meeting of Shareholders is encouraged.

All members of our Board of Directors as of the Annual Meeting date attended the 2021 Annual Meeting of Shareholders.

Board Committees

Audit Committee.

The Audit Committee consists of Messrs.

Mannes, Lucente, and Kapourales, with Mr.

Mannes acting as chairman of the committee since December 16, 2020.

Scaggs was an audit committee member until his death on November 7, 2021.

Kapourales was subsequently appointed to the committee.

Each member of the audit committee is financially literate, and the Board of Directors has determined that Mr.

Mannes qualified as audit committee financial expert, as such term is defined by Securities and Exchange Commission rules.

All the directors appointed to the audit committee are independent members of the board of directors, as defined by Securities and Exchange Commission rules (Rule 10A-3 of the Securities Exchange Act of 1934) and the NYSE American

corporate governance listing standards.

The audit committee met three times during the fiscal year ended September 30, 2021.

The committee’s charter can be found at:

www.energyservicesofamerica.com/posting/Audit_Committee_Charter_v1.pdf.

The Audit Committee reviews the professional services and independence of our independent registered public accounting firm and our accounts, procedures and internal controls.

The audit committee also recommends the firm selected to be our independent registered public accounting firm, reviews and approves the scope of the annual audit, reviews and evaluates with the independent registered public accounting firm our annual audit and annual consolidated financial statements, reviews with management the status of internal accounting controls, evaluates problem areas having a potential financial impact on us that are brought to the committee’s attention by management, the independent registered public accounting firm or the board of directors, and evaluates all of our public financial reporting documents.

On November 1, 2021, Baker Tilly, US, LLP (“Baker Tilly”) completed the acquisition of the Company’s independent registered public accounting firm, Arnett Carbis Toothman, LLP.

The Audit Committee approved the appointment of Baker Tilly, US, LLP (“Baker Tilly”) to be our independent registered public accounting firm effective November 1, 2021, and for the 2022 fiscal year.

A representative of Baker Tilly is expected to attend the 2022 Annual Meeting of Stockholders.

Nominating Committee.

The Board has determined that the independent members of the Board of Directors will perform the duties of the nominating committee of the Board of Directors.

The nominating committee does not have a written charter.

The nominating committee will (i) identify individuals qualified to become members of the Board of Directors and recommend to the Board of Directors the nominees for election to the Board of Directors;

(ii) recommend director nominees for each committee to the Board of Directors;

and (iii) identify individuals to fill any vacancies on the Board of Directors.

The nominating committee met one time during the fiscal year ended September 30, 2021.

The nominating committee of the Board identifies nominees by first evaluating the current members of the Board of Directors willing to continue in service.

Current members of the Board of Directors with skills and experience that are relevant to our business and who are willing to continue in service are first considered for re-nomination, balancing the value of continuity of service by existing members of the Board of Directors with that of obtaining a new perspective.

If any member of the Board of Directors does not wish to continue in service, or if the Board decides not to re-nominate a member for re-election, or if the size of the Board of Directors is increased, the independent directors would solicit suggestions for director candidates from all board members.

The independent directors would seek to identify a candidate who at a minimum satisfies the following criteria:

● has the highest personal and professional ethics and integrity and whose values are compatible with ours;

● has experiences and achievements that have given him or her the ability to exercise and develop good business judgment;

● is willing to devote the necessary time to the work of the Board of Directors and its committees, which includes being available for board and committee meetings;

● is familiar with the communities in which we operate and/or is actively engaged in community activities;

● is involved in other activities or interests that do not create a conflict with his or her responsibilities to us and our stockholders;

● has the capacity and desire to represent the balanced, best interests of our stockholders as a group, and not primarily a special interest group or constituency.

The nominating committee will also consider whether a candidate satisfies the criteria for “independence” under Securities and Exchange Commission or NYSE American rules and, if a nominee is sought for service on the audit committee, the financial and accounting expertise of a candidate, including whether an individual qualifies as an “audit committee financial expert.” The nominating committee will consider diversity in identifying nominees for director but has no specific policy or established criteria in this regard.

The nominating committee seeks candidates who have a broad range of business experience when considering nominees to the Board of Directors.

Procedures for the Nomination of Directors by Stockholders

The Board of Directors has adopted procedures for the submission of director nominees by stockholders.

If a determination is made that an additional candidate is needed for the Board of Directors, the independent members of the Board of Directors will consider candidates submitted by our stockholders.

Stockholders can submit the names of qualified candidates for director by writing to our Corporate Secretary at 75 West 3 rd Ave., Huntington, West Virginia 25701.

The Corporate Secretary must receive a submission not less

than forty-five (45) days prior to the date of our proxy materials for the preceding year’s annual meeting.

The submission must include the following information:

● a statement that the writer is a stockholder and is proposing a candidate for consideration by our independent directors;

● the name and address of the stockholder as they appear on our books and number of shares of our common stock that are owned beneficially by such stockholder (if the stockholder is not a holder of record, appropriate evidence of the stockholder’s ownership will be required);

● the name, address and contact information for the candidate, and the number of shares of our common stock that are owned by the candidate (if the candidate is not a holder of record, appropriate evidence of the stockholder’s ownership should be provided);

● a statement of the candidate’s business and educational experience;

● such other information regarding the candidate as would be required to be included in the proxy statement pursuant to Securities and Exchange Commission Regulation 14A;

● a statement detailing any relationship between the candidate and Energy Services of America Corporation;

● a statement detailing any relationship between the candidate and any customer, supplier or competitor of Energy Services of America Corporation;

● detailed information about any relationship or understanding between the proposing stockholder and the candidate;

● a statement that the candidate is willing to be considered and willing to serve as a director if nominated and elected.

Stockholder Communications with the Board

A stockholder who wants to communicate with the Board of Directors or with any individual director can write to the Corporate Secretary at 75 West 3rd Ave., Huntington, West Virginia 25701, Attention:

Corporate Secretary.

The letter should indicate that the author is a stockholder and if shares are not held of record, should include appropriate evidence of stock ownership.

Depending on the subject matter, the Secretary will:

● forward the communication to the director or directors to whom it is addressed;

● attempt to handle the inquiry directly, i.e.

where it is a request for information about us or it is a stock-related matter;

● not forward the communication if it is primarily commercial in nature, relates to an improper or irrelevant topic, or is unduly hostile, threatening, illegal or otherwise inappropriate.

At each board meeting, management shall present a summary of all communications received since the last meeting that were not forwarded and make those communications available to the directors.

The Compensation Committee

The compensation committee consisted of directors Joseph L.

Williams, Frank Lucente and Dan Mannes.

Lucente and Mr.

Mannes were appointed to the committee on December 16, 2020.

Each member of the compensation committee is considered “independent” as defined in the NYSE American corporate governance listing standards.

The Board of Directors has not adopted a written charter for the Committee.

The compensation committee met one time during fiscal year 2021.

The compensation committee is appointed by the Board of Directors to assist the Board in developing compensation philosophy, criteria, goals and policies for our executive officers that reflect our values and strategic objectives.

The committee reviews the performance of our executive officers and annually recommends to the full Board the compensation and benefits for our executive officers (including the Chief Executive Officer).

The committee administers our equity and long-term incentive plans.

The committee establishes the terms of employment and severance agreements/arrangements for executive officers, if applicable.

The committee recommends to the full Board the compensation to be paid to our directors and any affiliates for their service on the Board.

Finally, the committee establishes annual compensation percentage increases for all employees.

Our President and Chief Executive Officer provides recommendations to the compensation committee related to our compensation program.

However, our President and Chief Executive Officer does not vote on and is not present for any discussion of his own compensation.

For 2021, in making compensation decisions, the compensation committee did not use strict numerical formulas to determine the compensation paid to our executive officers.

However, the committee considered a variety of factors in its deliberations over executive compensation, emphasizing the profitability and scope of our operations, the experience, expertise and management skills of the named executive officers and their role in our future success, as well as compensation surveys prepared by professional firms to determine compensation paid to executives performing similar duties for comparable companies.

While the quantitative and non-quantitative factors described above were considered by the committee in determining the compensation paid to our named executive officers, such factors were not assigned a specific weight in evaluating the performance of the named executive officers.

In determining the Chief Executive Officer’s bonus, the Chairman of the Board also considers the above factors and makes a recommendation to the committee which authorizes such bonus.

For the other named executive officer, the Chief Executive Officer considers the above factors and makes a recommendation to the committee which authorized his bonus.

The Company paid $70,000 in bonuses to the named executive officers during fiscal year 2021.

The Compensation Committee has authority to approve the engagement of any compensation consultant it uses and the fees for those services.

However, the Compensation Committee did not engage a compensation consultant to assist in determining the amount or form of executive and director compensation with respect to fiscal year 2021.

Code of Ethics

We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.

The Company has adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.

The Code of Ethics was previously filed as an exhibit to our Registration Statement on Form S-1.

A copy of the Code will be furnished without charge upon written request to the Corporate Secretary, Energy Services of America Corporation, 75 West 3 rd Ave., Huntington, West Virginia 25701.

The information contained under the sections captioned “Proposal I – Election of Directors” in the Company’s definitive Proxy Statement for the 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days of September 30, 2022 (the “Proxy Statement”) is incorporated herein by reference.

Executive Compensation

Executive and Director Compensation

We have adopted a compensation committee policy that reflects the compensation philosophy and objectives of the compensation committee.

Compensation Philosophy and Objectives

The compensation committee believes that an effective executive compensation program rewards the achievement of pre-established short term, long-term and strategic goals, and aligns executives’ interests with those of our stockholders.

The committee regularly evaluates both performance and compensation relative to other comparable companies.

We also manage our named executive officers’ compensation to align with the time horizon of our growth and development.

As we grow, we strive to ensure that our compensation programs and practices remain consistent with our philosophy to provide competitive, performance-based, and risk appropriate compensation that enables us to attract, motivate and retain top performers who are essential to our successful growth and performance.

The primary objectives of our executive compensation program are to:

● provide pay for performance utilizing short and long-term incentives;

● be competitive with the marketplace within which we compete for talent;

● ensure compensation programs reward performance while appropriately managing risk;

● enable us to attract, motivate, and retain top talent.

We accomplish all these objectives through a total compensation program that balances fixed and variable (i.e.

incentive) compensation with a focus on providing rewards to named executive officers for their contributions towards achieving core business objectives and furthering our short and long-term performance.

We balance our desire for superior performance with safeguards so that our programs do not result in excessive risk taking that can threaten our long-term value and stability.

We also recognize that our ability to attract and retain top talent has become even more critical as we grow.

Our executive compensation philosophy provides competitive ranges for each component of our compensation program and our compensation paid in the aggregate.

The starting point targets market median, but by using performance-based instruments, actual

compensation paid to our named executive officers varies depending on our performance against our stated objectives.

We meet our compensation objectives for our named executive officers through the following components of their total compensation:

● Base salaries are targeted at market median, but allow for recognition of everyone’s role, contribution, performance, and experience.

● Bonuses, which are determined by the compensation committee, reflect market median levels although actual payouts will vary based on our performance relative to company-wide, team and individual contributions toward our strategic plan.

● Retirement, health, life insurance, disability, severance and other perquisites and benefits are provided, but their focus and value are intentionally set to be conservatively competitive in order to attract and retain talented individuals.

Executive total compensation is expected to vary each year and evolve over the long-term to reflect our performance relative to our peers and the industry, and to correspond with shareholder returns.

We review our executive compensation philosophy and programs annually to ensure that they are achieving desired objectives and supporting our needs as we grow to be a more complex organization.

Summary Compensation Table for Named Executive Officers .

The following table shows the compensation of the Company’s named executive officers for the years ended September 30, 2021, and 2020.

Reynolds and Crimmel were the only executive officers who received total compensation in excess of $100,000 for services to Energy Services during the years ended September 30, 2021, or 2020.

Summary Compensation Table

Name and principal position

compensation (1)

President and Chief

Executive Officer

Secretary/Treasurer and

Chief Financial Officer

(1) Other compensation in 2021 includes 401(k) plan matching contributions of $3,462 for Mr.

Reynolds and $6,612 for Mr.

Other compensation in 2020 includes 401(k) plan matching contributions of $3,600 for Mr.

Reynolds and $5,851 for Mr.

Benefit Plans

Stock Benefit Plans

Long Term Incentive Plan .

At the annual meeting of shareholders on August 11, 2010, the shareholders approved the Energy Services of America Corporation Long Term Incentive Plan, to provide employees and directors of the Company with additional incentives to promote the growth and performance of the Company.

The ten-year plan expired as of August 2020 with no awards in the fiscal year ended September 30, 2020.

All stock grants have vested or been forfeited as of September 30, 2021.

Energy Services 401(k) Plan

401(k) Retirement Plans

We maintain the Energy Services of America Staff 401(k) Retirement Plan (the “Plan”).

Our five wholly owned subsidiaries, C.

Hughes Construction Company, Inc., Nitro Construction Services, Inc., Contractors Rental Corporation, West Virginia Pipeline, Inc.

and SQP Construction Group, Inc.

adopted the Plan on behalf of their non-union employees.

Employees are eligible to participate in the Plan upon completion of six months of service but must wait until a quarterly entry date to join the Plan.

Employees may contribute eligible wages up to the maximum indexed dollar amount set by the Internal Revenue Service, which was $19,500 for 2021.

In addition, participants who are age 50 or older by the end of the Plan year may elect to defer up to an additional $6,500 into the 401(k) Plan for 2021.

The Company provided a matching contribution to each participant’s account equal to 100% of each dollar contributed for the first 3% of eligible wages and 50% of each dollar contributed for the next 3% of eligible wages.

The Company’s matching contribution is used by the Plan’s third-party administrator to purchase Energy Services of America stock from the open market.

Additionally, each Plan year, the Company may make discretionary profit-sharing contributions for participants who are actively employed on the last day of the Plan year.

The discretionary contributions will be allocated to a qualifying participant’s individual account based on the ratio of his or her compensation to the total compensation of all qualifying participants for the Plan year.

No discretionary profit-sharing contributions were made in 2021.

Participants direct the investment of their account in the Plan, selecting from investment funds provided under the Plan.

Participants receive quarterly benefit statements that provide information on their account balances and have immediate access to their account through an Interactive Voice Response System and the Internet.

Plan benefits are paid as soon as administratively possible following the participant’s termination of employment.

Lump sums, partial payments and installment payments are available if the participant’s account balance exceeds $1,000.

Energy Services of America and its wholly owned subsidiaries contributed $365,000 and $271,000, respectively, for the fiscal years ended September 30, 2021, and 2020 to the Plan.

In fiscal year 2021, a one-time $651,000 Qualified Non-Elective Contribution (“QNEC”) was made to the Plan attributable to the 2021 Plan year to adjust Plan participant’s balances due to a third-party administrator’s actions.

Energy Services of America Corporation 2009 Employee Stock Purchase Plan

The plan enables eligible employees to purchase common stock through payroll deductions.

The plan is intended to qualify under Section 423 of the Internal Revenue Code and its regulations.

Up to 1,200,000 shares of common stock, subject to adjustments, may be issued under this plan.

An eligible employee’s stock purchases during a calendar year may not exceed the lesser of:

(a) a percentage of the participant’s compensation or a total dollar amount as specified by the committee or (b) $25,000.

During 2021, we did not utilize the plan.

Directors’ Compensation

Director Compensation .

The table set forth below shows the compensation of our non-executive directors for the fiscal year ended September 30, 2021.

We did not make any non-equity incentive plan awards to directors and there were no preferential earnings on nonqualified deferred compensation.

Each Director received retainer fees of $1,000 per month.

No fee payments were made for committee participation.

Fees earned or paid in

Stock Awards ($)

compensations ($)

Frank Lucente

Charles Abraham

(1) Died November 7, 2021

(2) Appointed August 17, 2021

(3) Resigned July 21, 2021

The information contained under the section captioned “Proposal I – Election of Directors – Executive and Director Compensation” in the definitive Proxy Statement is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Persons and groups who beneficially own in excess of five percent of our common stock are required to file certain reports with the Securities and Exchange Commission regarding such ownership.

The following table sets forth, as of December 21, 2021, the shares of common stock beneficially owned by each person who was the beneficial owner of more than five percent of our outstanding shares of common stock, as well as the shares owned by our directors and executive officers as a group.

Amount of Shares Owned

Percent of Shares

and Nature of Beneficial

of Common Stock

Name and Address of Beneficial Owners

Ownership (1)

All Directors and Executive Officers

as a Group (10 persons)

Principal Stockholders:

75 West 3rd Ave.

Huntington, WV 25701

75 West 3rd Ave.

Huntington, WV 25701

Brian & Barbara Pratt

59950 Berkshire Lane, Ste.

Dallas, Texas 75225

(1) In accordance with Rule 13d-3 under the Security Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table of any shares of common stock if he has sole or shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the date as of which beneficial ownership is being determined.

As used herein, “voting power” is the power to vote or direct the voting of shares and "investment power"

is the power to dispose or direct the disposition of shares.

Includes all shares held directly as well as by spouses and minor children, in trust and other indirect ownership, over which shares the named individuals effectively exercise sole or shared voting and investment power.

(2) Includes 22,514 common shares related to 401(k) match held by third party plan administrator.

The table below sets forth certain information regarding our Board of Directors and executive officers, including the terms of office of board members and the ownership of our securities as of December 21, 2021.

Shares of Common

Stock Beneficially

Owned on Record

Names and Address (1)

Position Held

Directors and Executive Officers:

Chairman and Director

Chief Executive Officer,

Charles Abraham

Chief Financial Officer

All Directors and Executive

Officers as a Group (10 persons)

The mailing address for each person is 75 West 3rd Ave., Huntington, WV 25701

As of September 30, 2021.

In accordance with Rule 13d-3 under the Security Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table of any shares of common stock if he has sole or shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the date as of which beneficial ownership is being determined.

As used herein, "voting power"

is the power to vote or direct the voting of shares and "investment power"

is the power to dispose or direct the disposition of shares.

Includes 22,514 common shares related to 401(k) match held by third party plan administrator.

Includes 20,186 common shares related to 401(k) match held by third party plan administrator.

(a) Securities Authorized for issuance under Stock-Based Compensation Plans

The following table presents certain information regarding our Equity Compensation Plan in effect as of September 30, 2022:

Number of securities to be

Number of securities

issued upon exercise of

Weighted average

remaining available for

outstanding options and rights

exercise price

issuance under plan

Equity compensation plans approved by stockholders

Equity compensations plans not approved by stockholders

(b) Security Ownership of Certain Beneficial Owners

The information required by this item is incorporated herein by reference to the section captioned “Security Ownership of Certain Beneficial Owners” in the Proxy Statement.

The information required by this item is incorporated herein by reference to the section captioned “Proposal I – Election of Directors” in the Proxy Statement.

(d) Changes in Control

Management of the Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.

Certain Relationships and Related Transactions, and Director Independence

We intend that all transactions between us and our executive officers, directors, holders of 10% or more of the shares of any class of our common stock and affiliates thereof, will be on terms no less favorable than those terms given to unaffiliated third parties and will be approved by a majority of our independent outside directors not having any interest in the transaction.

On December 16, 2014, the Company’s Nitro subsidiary entered into a 20-year $1.2 million loan agreement with First Bank of Charleston, Inc.

(West Virginia) to purchase the office building and property it had previously been leasing for $6,300 each month.

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

As of September 30, 2021, the Company had paid approximately $281,000 in principal and approximately $351,000 in interest since the beginning of the loan.

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

Samuel Kapourales, a director of Energy Services, was also a director of First Bank of Charleston.

On October 15, 2018, First Bank of Charleston was merged into Premier Bank, Inc., a wholly owned subsidiary of Premier Financial Bancorp, Inc.

Marshall Reynolds, Chairman of the Board of Energy Services, held the same position with Premier Financial Bancorp Inc.

Douglas Reynolds is the president and a director of Energy Services and was a director of Premier Financial Bancorp, Inc.

On September 17, 2021, Peoples Bancorp, Inc., parent company of Peoples Bank, completed an acquisition of Premier Financial Bancorp, Inc.

and its wholly owned subsidiaries, Premier Bank and Citizens Deposit Bank & Trust.

On October 26, 2021, Mr.

Douglas Reynolds was elected a director of Peoples Bancorp, Inc., and its subsidiary Peoples Bank.

On December 31, 2020, West Virginia Pipeline Acquisition Company, later renamed West Virginia Pipeline, Inc., entered into a $3.0 million sellers’ note agreement with David and Daniel Bolton for the remaining purchase price of West Virginia Pipeline, Inc.

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 fair acquisition, the acquirer paid $3.5 million in cash in addition to the note.

The unsecured five-year term note requires equal annual payments 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 September 30, 2021, the Company has made interest payments of $73,000 and expensed $22,500 in accreted interest.

The Company made the first installment payment in December 2021.

Other than mentioned above, there were no new material related party transactions entered into during the fiscal year ended September 30, 2021.

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.

All revenue and related expense transactions, as well as the related accounts payable and accounts receivable have been eliminated in consolidation.

Board Independence

The Board of Directors consists of a majority of “independent directors” within the meaning of the NYSE American corporate governance listing standards.

The Board of Directors has determined that Messrs.

Mannes, Williams, Kapourales, Abraham, Lucente and Pratt are “independent directors” within the meaning of such standards.

There were no transactions not required to be reported under “Certain Relationships and Related Transactions” that were considered in determining the independence of our directors.

The information required by this item is incorporated herein by reference to the sections captioned “Proposal I – Election of Directors – Certain Relationships and Related Transactions” and “– Board Independence” of the Proxy Statement.

Principal Accountant Fees and Services

On November 1, 2021, the Company was notified that the audit practice of Arnett Carbis Toothman, LLP (“Arnett Carbis Toothman”), our independent registered public accounting firm, was combined with Baker Tilly US, LLP (“Baker Tilly”) in a transaction pursuant to which Arnett Carbis Toothman combined its operations with Baker Tilly and certain of the professional staff and partners of Arnett Carbis Toothman joined Baker Tilly either as employees or partners of Baker Tilly.

On November 1, 2021, Arnett Carbis Toothman resigned as the auditors of the Company and with the approval of the Audit Committee of the Company’s Board of Directors, Baker Tilly was engaged as its independent registered public accounting firm.

Prior to engaging Baker Tilly, the Company did not consult with Baker Tilly regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by Baker Tilly on the Company’s financial statements, and Baker Tilly did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.

The report of independent registered public accounting firm of Arnett Carbis Toothman regarding the Company’s financial statements for the fiscal years ended September 30, 2020, and 2019 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the years ended September 30, 2020 and 2019, and during the interim period from the end of the most recently completed fiscal year through November 1, 2021, the date of resignation, there were no disagreements with Arnett Carbis Toothman on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Arnett Carbis Toothman would have caused it to make reference to such disagreement in its reports.

We were billed by Arnett Carbis Toothman, our independent registered public accountant, $169,069 and $172,427 for the services they have performed in connection with the audit of our financial statements included in our Annual Report for fiscal 2021 and 2020, respectively and for the review of interim financial statements included in our quarterly reports on Form 10-Q during these periods.

We were billed by Arnett Carbis Toothman, $57,988 for the services they have performed in connection with the audit of West Virginia Pipeline’s December 31, 2020 and 2019 financial statements included in our Current Report on Form 8-K/A dated March 12, 2021.

Audit-Related Fees

During fiscal years 2021 and 2020, we had no audit-related fees.

During the fiscal years ended September 30, 2021, and 2020, we were billed by Arnett Carbis Toothman $37,924 and $34,461, respectively, for tax compliance services.

Employee Benefit Plan

During the fiscal years ended September 30, 2021, and 2020, we were billed by Arnett Carbis Toothman $53,352 and $38,483, respectively, for the services they performed in connection with the audit of our 401(k) Plan and Form 11-K filing.

All Other Fees

During fiscal years 2021 and 2020, we were billed by Arnett Carbis Toothman, $3,636 and $3,803, respectively, for fees billed for products and services provided by our independent registered public accounting firm other than those set forth above.

These fees consisted primarily of travel and postage expenses.

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm

The audit committee’s policy is to pre-approve all audit and non-audit services provided by the independent registered public accounting firm.

These services may include audit services, audit-related services, tax services and other services.

Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the service or category of services and is generally subject to a specific budget.

The audit committee has delegated pre-approval authority to its Chairman when expedition of services is necessary.

The independent registered public accounting firm and management are required to periodically report to the full audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date.

All the fees paid in the audit-related, tax and all other categories during 2021 and 2020 were approved per the pre-approval policies.

The information required by this item is incorporated herein by reference to the section captioned “Proposal II – Ratification of Independent Registered Public Accounting Firm” of the Proxy Statement.

Exhibits and Financial Statement Schedules

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Energy Services of America Corporation

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 23 )

Consolidated Balance Sheets, September 30, 2022 and September 30, 2021 .

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Energy Services of America Corporation Employee Stock Purchase Plan (2)

Energy Services of America Corporation Long Term Incentive Plan (3)

Severance Agreement, Waiver and Release of all Claims with Robert N.

Energy Services of America Corporation 2022 Equity Incentive Plan (8)

Code of Ethics (1)

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Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 20, 2019.

Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commisson on November 5, 2021.

Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2021.

Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 19, 2022.

Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 18, 2022.

(b) The exhibits listed under (a)(3) above are filed herewith.

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(Principal Financial and Accounting Officer)

December 22, 2022

/s/ Joseph L.

December 22, 2022

/s/ Daniel J.

December 22, 2022

/s/ Brian Pratt

/s/ Patrick J.

December 22, 2022

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(Principal Executive Officer)

Baker Tilly US, LLP

101 Washington Street, East

Charleston, WV 25329

United States of America

+1 (304) 346 0441

+1 (304) 346 8333

bakertilly.com

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Energy Services of America Corporation and subsidiaries (the Company) as of September 30, 2021 and 2020, the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as, the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Energy Services of America Corporation and subsidiaries (the Company) as of September 30, 2022 and 2021, the related consolidated statements of income, changes in shareholders’ equity and cash flows, for each of the two years in the period ended September 30, 2022, and the related notes (collectively referred to as, the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

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We believe that our audits provide a reasonable basis for our opinion.

Baker Tilly US, LLP, trading as Baker Tilly, is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities.

Energy Services of America Corporation

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

Over-Time Revenue Recognition

Critical Audit Matter Description

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The primary procedures we performed to address this critical audit matter included:

● We obtained an understanding of the controls over the estimation process that affect revenue recognized on construction contracts, including controls over management’s monitoring and review of project costs and variable consideration estimates.

● We evaluated the Company’s estimated revenue and costs to complete by obtaining and analyzing supporting documentation of management’s estimates of variable consideration and contract costs.

● We compared contract profitability estimates in the current year to historical estimates and actual performance.

● We tested samples of completed and in-process contracts and contract transactions by inspecting the underlying customer contracts, contract billing data, and contract cost source documentation, and evaluated the Company’s recognition of contract assets, liabilities, revenue, and costs of revenue in accordance with revenue recognition policy.

Energy Services of America Corporation

Valuation of Intangible Assets

● Evaluated the Company’s estimated revenue and costs to complete by obtaining and analyzing supporting documentation of management’s estimates of variable consideration and contract costs.

● Compared contract profitability estimates in the current year to historical estimates and actual performance.

● Tested samples of completed and in-process contracts and contract transactions by inspecting the underlying customer contracts, contract billing data, and contract cost source documentation, and evaluated the Company’s recognition of contract assets, liabilities, revenue, and costs of revenue in accordance with the Company’s revenue recognition policy.

Valuation of Goodwill and Intangible Assets Associated with Business Combinations

Critical Audit Matter Description

As described in Note 23 to the consolidated financial statements, the Company completed an asset purchase of West Virginia Pipeline, Inc., for total consideration of $6.5 million during the year ended September 30, 2021.

As described in Note 24 to the consolidated financial statements, the Company completed an asset purchase of Tri-State Paving & Sealcoating, LLC, for total consideration of $9.9 million during the year ended September 30, 2022.

The acquisition was accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed to be recognized at their fair values as of the acquisition date.

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The primary procedures we performed to address this critical audit matter included:

● We obtained an understanding of the controls over the Company’s accounting for the acquisition.

● We obtained the valuation report prepared by valuation specialist engaged by management to assist in the purchase price allocations, including determination of fair values assigned to acquired intangible assets, and reviewed the report, and qualifications and objectivity of management’s specialist.

● We engaged an internal valuation specialist to assist the engagement team in its review of management valuation specialist’s report including the valuation methods and key assumptions used by the Company.

● We examined the completeness and accuracy of the underlying data supporting the significant assumptions and estimates used in the valuation reports, including historical and projected financial information.

● Reviewed the valuation report prepared by the valuation specialist engaged by management to assist in the purchase price allocation, including the determination of fair values assigned to acquired intangible assets, and assessed the qualifications and objectivity of management’s specialist.

● Engaged an internal valuation specialist to assist the engagement team in evaluating the appropriateness of the Company’s selection of the valuation model, including the evaluation of significant assumptions, including growth rates, discount rate and economic lives.

● Evaluated the reasonableness of assumptions used by management in the cash flow model, which included comparing the significant assumptions to current industry, market and economic trends, historical results of the Company’s business, other companies within the same industry, and evidence obtained in other areas of the audit.

● Tested the completeness and accuracy of the underlying data supporting the significant assumptions and estimates used in the valuation reports, including historical and projected financial information.

/s/ Baker Tilly US, LLP

We have served as the Company’s auditor since 2008.

Charleston, West Virginia

Pittsburgh, Pennsylvania

December 22, 2022

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Total fixed assets

Right-of-use assets-operating lease

Intangible assets, net

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Lines of credit and short term borrowings

Current maturities of operating lease liabilities

Accounts payable

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Long-term debt, less current maturities

Long-term operating lease liabilities

Deferred tax liability

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Shareholders' equity

Preferred stock, $ .0001 par value Authorized 1,000,000 shares, 206 issued at September 30, 2021 and 2020

Common stock, $ .0001 par value Authorized 50,000,000 shares 14,839,836 issued and 13,621,406 outstanding at September 30, 2021 and 2020

Preferred stock, $ .0001 par value Authorized 1,000,000 shares, 0 issued and outstanding at September 30, 2022 and 206 issued and outstanding at September 30, 2021

Common stock, $ .0001 par value Authorized 50,000,000 shares, 17,885,615 issued and 16,667,185 outstanding at September 30, 2022 and 14,839,836 issued and 13,621,406 outstanding at September 30, 2021

Treasury stock, 1,218,430 shares at September 30, 2022 and 2021

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Total liabilities and shareholders' equity

The Accompanying Notes are an Integral Part of These Financial Statements

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

ENERGY SERVICES OF AMERICA CORPORATION

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Selling and administrative expenses

(Loss) income from operations

Income (loss) from operations

( 1,123,210 )

Other income (expense)

Interest income

Paycheck Protection Program ("PPP") loan forgiveness

Paycheck Protection Program loan forgiveness

Other nonoperating expense

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Income before income taxes

Income tax (benefit) expense

Income tax expense (benefit)

Dividends on preferred stock

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available to common shareholders

The Accompanying Notes are an Integral Part of These Financial Statements

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

ENERGY SERVICES OF AMERICA CORPORATION

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Depreciation expense

PPP loan forgiveness

Paycheck Protection Program loan forgiveness

( 9,839,100 )

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Provision for deferred taxes

Provision for loss on contract

Amortization of intangible assets

(Increase) decrease in contracts receivable

Amortization of operating lease right-of-use assets

Accreted interest on operating lease right-of-use assets

Accreted interest on notes payable

Operating lease payments

Increase in contracts receivable

( 17,432,706 )

Decrease in retainage receivable

(Increase) decrease in other receivables

(Increase) decrease in contract assets

( 2,845,528 )

Increase in prepaid expenses

(Increase) decrease in retainage receivable

( 3,526,153 )

Decrease (increase) in other receivables

Increase in contract assets

( 7,379,191 )

( 2,184,539 )

Decrease (increase) in prepaid expenses and other

Increase in accounts payable

Increase in accrued expenses

(Decrease) increase in contract liabilities

Increase in accrued expenses and other current liabilities

Increase (decrease) increase in contract liabilities

( 1,698,610 )

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( 6,047,693 )

Acquisition of Ryan Environmental and Ryan Transport

( 4,042,057 )

Proceeds from sales of property and equipment

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Cash flows from financing activities:

Dividends on common stock

Preferred stock redemption

( 1,210,525 )

Preferred dividends paid

Treasury stock purchased by company

Borrowings on lines of credit and short-term debt, net of repayments

( 3,515,867 )

Proceeds from long term debt

Principal payments on long-term debt

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( 2,821,125 )

Net cash provided by (used in) financing activities

( 5,580,860 )

(Decrease) increase in cash and cash equivalents

Net cash (used in) provided by financing activities

Decrease in cash and cash equivalents

( 2,990,081 )

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Purchases of property & equipment under financing agreements

Insurance premiums financed

Note payable to finance West Virginia Pipeline acquisition, discounted by $ 150,000

Prepaid insurance premiums financed

Note payable to finance West Virginia Pipeline acquisition

Note payable to refinance short-term borrowing

Accrued dividends on preferred stock

Debt assumed in acquisitions

Debt assumed in acquisitions for equipment

Sellers' note Tri-State Paving acquisition

Note payable to finance Tri-State Paving acquisition

Common stock issued to finance Tri-State Paving acquisition

Par value of common stock issued from preferred stock coversion

Operating lease right-of-use assets

Supplemental disclosures of cash flows information:

Cash paid during the year for:

The Accompanying Notes are an Integral Part of These Financial Statements

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

ENERGY SERVICES OF AMERICA CORPORATION

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( 26,035,015 )

Dividends on common stock ($ 0.05 per share on 13,922,336 shares;

317,500 common shares are part of preferred units and were not eligible for the common dividend)

Accrued preferred dividends

Treasury stock purchased by company

Preferred share redemption, net of accrued dividends

( 1,210,525 )

Preferred share conversion

Shares issued for Tri-State Paving acquisition

Balance at September 30, 2022

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( 26,035,015 )

The Accompanying Notes are an Integral Part of These Financial Statements

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements

ENERGY SERVICES OF AMERICA CORPORATION

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BUSINESS AND ORGANIZATION:

Energy Services of America Corporation (“Energy Services” or the “Company”) is a contractor and service company that operates primarily in the mid-Atlantic region of the United States and provides services to customers in the natural gas, petroleum, water distribution, automotive, chemical, and power industries.

Hughes Construction Company, Inc.

Hughes”), a wholly owned subsidiary of the Company, is a general contractor primarily engaged in pipeline construction for utility companies.

Contractors Rental Corporation (“Contractors Rental”), a wholly owned subsidiary of C.J.

Hughes, provides union building trade employees for projects managed by C.J.

Nitro Construction Services, Inc.

(“Nitro”), a wholly owned subsidiary of C.

Hughes, provides electrical, mechanical, HVAC/R, solar installation, and fire protection services to customers primarily in the automotive, chemical, and power industries.

Pinnacle Technical Solutions, Inc.

(“Pinnacle”), a wholly owned subsidiary of Nitro, operates as a data storage facility within Nitro’s office building.

Pinnacle is supported by Nitro and has no employees of its own.

Hughes, Nitro, and Contractors Rental construction personnel are union members of various related construction trade unions and are subject to collective bargaining agreements that expire at varying time intervals.

On December 31, 2020, Energy Services completed the purchase of West Virginia Pipeline, Inc.

(“West Virginia Pipeline”), a West Virginia corporation located in Princeton, West Virginia.

West Virginia Pipeline, a wholly owned subsidiary of Energy Services, operates as a gas and water distribution contractor primarily in southern West Virginia.

West Virginia Pipeline’s employees are non-union, and the company is managed independently from C.J.

Hughes and Nitro.

On March 22, 2021, the Company established a new wholly owned subsidiary, SQP Construction Group, Inc.

(“SQP”), that operates as a general contractor primarily in West Virginia.

SQP engages in the construction and renovation of buildings and other civil construction projects for state and local government agencies and commercial customers.

As a general contractor, SQP manages the overall construction project and subcontracts most of the work.

On April 30, 2021, the Company’s Nitro subsidiary completed an asset purchase of Revolt Energy, Inc.

(“Revolt Energy”), a West Virginia corporation located in Nitro, WV.

Revolt Energy previously operated primarily as a residential solar installation company in southern West Virginia.

As a division of Nitro, Revolt Energy continues to perform residential solar installations and has expanded its services to include commercial and industrial customers.

Revolt Energy’s construction employees are members of the International Brotherhood of Electrical Workers.

On June 30, 2021, the Company provided notice to all holders of the Company’s 6.0 % Convertible Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”) that, subject to applicable law and in accordance with the Company’s certificate of incorporation, the Company intended to redeem all 206 shares of the Series A Preferred Stock, at a price equal to $ 25,000 per preferred share plus all accrued and unpaid dividends whether or not declared up to and excluding the Redemption Date of September 1, 2021 (the “Redemption Price”).

A portion of the 206 outstanding shares of Series A Preferred Stock were converted into common stock of the Company (“Common Stock”) at the election of each shareholder.

The conversion formula for each share of the Series A Preferred Stock was $ 25,000 plus all accrued but unpaid dividends up to, but excluding, September 1, 2021 divided by the Conversion Price of $ 1.50 .

Cash was issued in lieu of fractional shares at a rate of $ 1.50 multiplied by the fractional share rounded to the nearest cent.

On October 6, 2021, the Company’s transfer agent completed the redemption, which resulted in the issuance of 2,626,492 new shares of the Company’s common stock, the issuance of 317,500 common shares that were included in Series A Preferred Stock units, and cash redemption payments of $ 1.3 million.

Energy Services of America Corporation (“Energy Services” or the “Company”), formed in 2006, is a contractor and service company that operates primarily in the mid-Atlantic and central regions of the United States and provides services to customers in the natural gas, petroleum, water distribution, automotive, chemical, and power industries.

For the gas industry, the Company is primarily engaged in the construction, replacement and repair of natural gas pipelines and storage facilities for utility companies and private natural gas companies.

Energy Services is involved in the construction of both interstate and intrastate pipelines, with an emphasis on the latter.

For the oil industry, the Company provides a variety of services relating to pipeline, storage facilities and plant work.

For the power, chemical, and automotive industries, the Company provides a full range of electrical and mechanical installations and repairs including substation and switchyard services, site preparation, equipment setting, pipe fabrication and installation, packaged buildings, transformers, and other ancillary work with regards thereto.

Energy Services’ other services include liquid pipeline construction, pump station construction, production facility construction, water and sewer pipeline installations, various maintenance and repair services and other services related to pipeline construction.

The Company has also added the ability to install residential, commercial, and industrial solar systems and perform civil and general contracting services.

On October 6, 2021, the Company’s transfer agent completed the full redemption of all the Company’s 6.0 % Convertible Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”), which resulted in the issuance of 2,626,492 new shares of the Company’s common stock, the issuance of 317,500 common shares that were included in Series A Preferred Stock units, and cash redemption payments of $ 1.3 million.

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 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”.

Pursuant to the Asset Purchase Agreement signed on April 6, 2022, and amended on April 29, 2022, the Company acquired substantially all the assets (including but not limited to customer contracts, employees, and equipment) of Tri-State Paving, LLC for $ 7.5 million in cash, a $ 1.0 million promissory note, and $ 1.0 million in Energy Services common stock.

The $ 7.5 million in cash was funded through a loan with United Bank, Inc., Huntington, West Virginia (“United Bank”).

The transaction resulted in the issuance of 419,287 common shares.

On August 11, 2022, Ryan Construction, a newly formed wholly owned subsidiary of Energy Services, completed the acquisition of Ryan Environmental, LLC (“Ryan Environmental”), located in Bridgeport, WV, pursuant to an order issued by the United States Bankruptcy Court for the Northern District of West Virginia (the “Court”) on August 9, 2022 and Ryan Environmental Transport, LLC (“Ryan Transport”), located in Bridgeport, West Virginia, under the terms of an Asset Purchase Agreement.

As part of the business combination, the Company acquired certain assets, including equipment, vehicles, and small tools, of Ryan Environmental for $ 3.0 million in cash and certain assets, including equipment and small tools, of Ryan Transport for $ 1.0 million in cash.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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Revenue on these uninstalled materials is recognized when the cost is incurred (when control is transferred), but the associated profit is not recognized until the materials are installed.

The costs of uninstalled materials will be tracked separately within the Company’s accounting software.

The costs of uninstalled materials are tracked separately within the Company’s accounting software.

Pre-contract and bond costs, if required, and mobilization costs on projects are generally immaterial to the total value of the Company’s contracts and are expensed when incurred.

As a practical expedient, the Company recognizes these incremental costs as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

For projects expected to last greater than one year, mobilization costs will be capitalized as incurred and amortized over the expected duration of the project.

For projects expected to last greater than one year, mobilization costs are capitalized as incurred and amortized over the expected duration of the project.

For these projects, mobilization costs will be tracked separately in the Company’s accounting software.

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however, the warranty is not priced separately, and the Company does not offer customers an option to purchase a warranty.

As of September 30, 2021, the Company does not have a material amount of costs expensed that would otherwise be capitalized and amortized.

Principles of Consolidation

The consolidated financial statements of Energy Services include the accounts of Energy Services, its wholly owned subsidiaries West Virginia Pipeline, SQP and C.J.

The consolidated financial statements of Energy Services include the accounts of Energy Services, its wholly owned subsidiaries West Virginia Pipeline, SQP, Ryan Construction, Tri-State Paving and C.J.

Hughes and its subsidiaries, Contractors Rental, Nitro, and Pinnacle.

All significant intercompany accounts and transactions have been eliminated in the consolidation.

Unless the context requires otherwise, references to Energy Services include Energy Services, West Virginia Pipeline, SQP, and C.J.

Unless the context requires otherwise, references to Energy Services include Energy Services, West Virginia Pipeline, SQP, Ryan Construction, Tri-State Paving and C.J.

Hughes and its subsidiaries.

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Fair Value Measurements

The Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and specifies disclosures about fair value measurements.

The “Fair Value Measurement” Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) defines fair value, establishes a framework for measuring fair value in accordance with U.S.

GAAP and specifies disclosures about fair value measurements.

Under the FASB’s authoritative guidance on fair value measurements, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Fair Value Measurements Topic of the FASB Accounting Standards Codification establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

As noted above, there is a three-level valuation hierarchy for disclosure of fair value measurements.

The “Fair Value Measurement” Topic establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

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The carrying amount for borrowings under the Company’s revolving credit facility approximates fair value because of the variable market interest rate charged to the Company for these borrowings.

The fair value of the Company’s long term fixed-rate debt to unrelated parties was estimated using a discounted cash flow analysis and a yield rate that was estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities.

The fair value of the Company’s long term fixed-rate debt was estimated using a discounted cash flow analysis and a yield rate that was estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities.

The fair value of the aggregate principal amount of the Company’s fixed-rate debt of $ 15.0 million at September 30, 2022 was $ 14.5 million.

The fair value of the aggregate principal amount of the Company’s fixed-rate debt of $ 10.0 million at September 30, 2021 was $ 9.9 million.

All receivables and payables are carried at net realizable value which approximates fair value because of their short duration to maturity.

All other current assets and liabilities are carried at net realizable value which approximates fair value because of their short duration to maturity.

Accounts Receivable and Allowance for Doubtful Accounts

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

Intangible Assets

Acquired intangible assets subject to amortization are amortized on a straight-line basis, which approximates the pattern in which the economic benefit of the respective intangible assets are realized, over their respective estimated useful lives.

The definite-lived identifiable intangible assets recognized as part of the Company's business combinations are recorded at their estimated fair value.

Impairment of Long-Lived Assets

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Stock Compensation Plans

The Company has issued restricted stock under its Long-Term Incentive Plan;

however, there were no issuances in fiscal years 2021 or 2020.

The Company accounts for its equity-based compensation as prescribed by U.S.

6 unchanged sentences

The Company follows the liability method of accounting for income taxes in accordance with U.S.

Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect

when the underlying assets or liabilities are recovered or settled.

A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

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Any interest and penalty related to the unrecognized tax benefits, as the result of recognition of tax obligations resulting from uncertain tax positions, are included in the provision for income taxes.

The Company had not recognized any uncertain tax positions at September 30, 2021.

The Company had not recognized any uncertain tax positions at September 30, 2022 or 2021.

Earnings Per Common Share

11 unchanged sentences

New Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, “ Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment ”.

ASU 2017-04 is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The update was issued to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.

Under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

The Company has adopted ASU 2017-04 and it did not have a material impact on its financial statements or disclosure.

On October 28, 2021, the FASB released ASU 2021-08, “Business Combinations (Topic 805):

On October 28, 2021, the FASB released Accounting Standards Update (“ASU”) 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”.

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The amendments are effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022.

For all other

entities they are effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

For all other entities they are effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

Entities should apply the amendments prospectively to business combinations that occur after the effective date.

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):

Disclosures by Business Entities about Government Assistance”, which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the financial statements.

Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date.

Retrospective application of the guidance is permitted.

The guidance in ASU 2021-10 is effective for financial statements of all entities 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 October 6, 2021, the Company’s transfer agent completed the previously mentioned Series A Preferred Stock redemption, which resulted in the issuance of 2,626,492 new shares of the Company’s common stock, the issuance of 317,500 common shares that were included in Series A Preferred Stock units, and cash redemption payments of $ 1.3 million.

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

On November 9, 2021, the Company was awarded $ 5.8 million in a lawsuit related to construction services performed for a former customer (“Defendant”), none of which has been recognized in the Company’s financial statements.

The Defendant has filed motions to request a new trial or a renewed judgement as a matter of law, which has not been ruled upon.

The Company anticipates that a final judgement order will be issued in the first 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.

On November 12, 2021, the Company received a withdrawal liability claim from a pension plan to which the Company made pension contributions for union construction employees performing covered work in a particular jurisdiction.

The Company has not performed covered work in their jurisdiction since 2011;

however, the Company disagrees with the withdrawal claim and believes it is covered by an exemption under federal law.

The demand called for thirty-four quarterly installment payments of $ 41,000 starting December 15, 2021.

The Company must comply with the demand under federal pension law;

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.

Management has evaluated subsequent events through December 29, 2021, the date which the financial statements were available for issue.

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

On October 10, 2022, the Company entered into a $ 3.1 million promissory note agreement with United Bank to finance the Ryan Environmental acquisition.

This is a five-year agreement with a fixed interest rate of 6.0 % and monthly payments of $ 59,932 beginning on November 10, 2022.

In February 2018, the Company filed a lawsuit against a former customer 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 16, 2022, a Judgement Order was issued, and the Company was awarded $ 13.1 million, of which $ 5.8 million was the jury award, $ 1.6 million was for attorney’s fees, and $ 5.7 million was for penalties and interest.

None of the award had been recognized in the Company’s consolidated financial statements as of September 30, 2022.

The Company’s attorney’s fees have been expensed as incurred.

On December 16, 2022, the Defendant filed a notice of appeal with the court.

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.

REVENUE RECOGNITION

Our revenue is primarily derived from construction contracts that can span several quarters.

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606” or “Topic 606”) which provides for a five-step model for recognizing revenue from contracts with customers as follows:

We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606” or “Topic 606”) which provides for a five-step model for recognizing revenue from contracts with customers as follows:

Identify the contract

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Our contract liabilities consist of provisions for losses and billings in excess of costs and estimated earnings.

Provisions for losses are recognized in the consolidated statements of income at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue.

Provisions for losses, if incurred, are recognized in the consolidated statements of income at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue.

Billings in excess of costs and estimated earnings are billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition.

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DISAGGREGATION OF REVENUE

We disaggregate our revenue based on our operating groups and contract types as it is the format that is regularly reviewed by management.

Our reportable operating groups are Gas & Water Distribution, Gas & Petroleum Transmission, Electrical, Mechanical, & General services and construction.

The operating groups for the twelve months ended September 30, 2020, have been revised to

reflect the current presentation.

The Company disaggregates revenue based on the following lines of service:

(1) Gas & Water Distribution, (2) Gas & Petroleum Transmission, and (3) Electrical, Mechanical, & General services and construction.

Certain reclassifications have been made to the year ended September 30, 2021, to reflect the current presentation.

Our contract types are:

Lump Sum, Unit Price, Cost Plus and Time and Materials (“T&M”).

The following tables present our disaggregated revenue for the twelve months ended September 30, 2021, and 2020:

Twelve Months Ended September 30, 2021

Lump Sum, Unit Price, Cost Plus and T&M.

The following tables present our disaggregated revenue for the fiscal years ended September 30, 2022 and 2021:

Year Ended September 30, 2022

Gas & Petroleum

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Total revenue from contracts

Twelve Months Ended September 30, 2020

Year Ended September 30, 2021

Gas & Petroleum

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During the twelve months ended September 30, 2022, we recognized revenue of $ 3.0 million that was included in the contract liability balance at September 30, 2021.

Accounts receivable-trade, net of allowance for doubtful accounts, retentions receivable, contract assets and contract liabilities consisted of the following:

Accounts receivable-trade, net of allowance for doubtful accounts, contract assets and contract liabilities consisted of the following:

September 30, 2021

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Billings in excess of cost and estimated earnings

( 1,698,610 )

PERFORMANCE OBLIGATIONS

For the year ended September 30, 2021, we recognized revenue of $ 430,000 as a result of changes in contract transaction price related to performance obligations that were satisfied prior to September 30, 2020.

For the year ended September 30, 2022, there was no revenue recognized as a result of changes in contract transaction price related to performance obligations that were satisfied prior to September 30, 2021.

The changes in contract transaction price were from items such as executed or estimated change orders, and unresolved contract modifications and claims.

The changes in contract transaction price may be for items such as executed or estimated change orders, and unresolved contract modifications and claims.

At September 30, 2022, the Company had $ 69.5 million in remaining unsatisfied performance obligations, in which revenue is expected to be recognized in less than twelve months.

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Costs, estimated earnings, and billings on uncompleted contracts are summarized as follows:

Year Ended September 30,

September 30,

Costs incurred on contracts in progress

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Claims receivable is a component of contract assets.

PROVISION FOR LOSS

The Company has one project with a $248,000 provision for loss at September 30, 2022.

The provision is recorded as cost of revenues on the Company’s 2022 consolidated statements of income and accrued expenses and other current liabilities on the Company’s consolidated balance sheet at September 30, 2022.

PROPERTY, PLANT AND EQUIPMENT

9 unchanged sentences

Short-term debt consists of the following:

On August 3, 2021, the Company received a one-year extension on its line of credit (“Operating Line of credit (2021)”) effective June 28, 2021.

The $ 15.0 million revolving line of credit has a $ 12.5 million component and a $ 2.5 million component, each with separate borrowing requirements.

On July 13, 2022, the Company received a one-year extension on its operating line of credit effective June 28, 2022.

The $ 15.0 million revolving line of credit has a $ 12.5 million component and a $ 2.5 million component.

The Company can borrow from the $ 12.5 million component first and then from the additional $ 2.5 million component if additional requirements are met.

The covenant requirement for both components are below.

Based on the borrowing base calculation, the Company borrowed all $ 12.5 million available on the line of credit as of September 30, 2022.

The Company did not meet the requirements to borrow any from the $ 2.5 million component.

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 $ 12.2 million as of September 30, 2021.

The Company had $ 4.5 million in borrowings on the line of credit, leaving $ 7.7 million available on the line of credit as of September 30, 2021.

The interest rate at September 30, 2022, was 5.5 %.

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

The Company had no borrowings on the line of credit, as of September 30, 2020.

The Company had $ 4.5 million in borrowings on the line of credit, leaving $ 7.7 million available on the line of credit as of September 30, 2021.

The interest rate at September 30, 2021, was 4.99 %.

Major items excluded from the borrowing base calculation are receivables from bonded jobs and retainage as well as all items greater than ninety (90) days old.

Line of credit borrowings are collateralized by the Company’s accounts receivable.

Cash available under the line is calculated based on 70.0 % of the Company’s eligible accounts receivable.

Under the terms of the agreement, the Company must meet the following loan covenants to access the first $ 12.5 million:

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Minimum tangible net worth of $ 24.0 million to be measured quarterly.

The Company was in compliance with all covenants for the $ 12.5 million component of Operating Line of Credit (2021) at September 30, 2021 except for the debt service coverage ratio, for which the Company obtained a waiver from its lender.

The Company was not in compliance with all covenants but received a waiver on the $ 12.5 million component of the line of credit at September 30, 2022.

The Company projects to be in compliance with all covenants associated with the $ 12.5 million component for the next twelve months.

The Company also finances insurance policy premiums on a short-term basis through a financing company.

1 unchanged sentence

The Company makes a down payment in January and finances the remaining premium amount over ten monthly payments.

In January 2021, the Company financed $ 3.2 million in insurance premiums.

At September 30, 2021, the remaining balance of the insurance premiums was $ 540,000 .

In January 2022 and 2021, respectively, the Company financed $ 3.4 million and $ 3.2 million in insurance premiums.

At September 30, 2022 and 2021, respectively, the remaining balance of the insurance premiums was $ 580,000 and $ 540,000 .

SHORT-TERM AND LONG-TERM DEBT

A summary of short-term and long-term debt as of September 30, 2022 and 2021 is as follows:

Line of credit payable to bank, monthly interest at 4.99 %, final payment due by June 28, 2022, guaranteed by certain directors of the Company.

Term note payable to United Bank, WV Pipeline acquisition, due in monthly installments of $ 64,853 interest at 4.25 %, final payment due by March 25, 2026, secured by receivables and equipment, guaranteed by certain directors of the Company.

Line of credit payable to bank, variable interest rate of 5.50 % at September 30, 2022, final payment due by June 28, 2023, guaranteed by certain directors of the Company.

What changed 10-K

Item 9A. Controls and Procedures