Energy Services of America CORP 10-Q

Item 1. Financial Statements (Unaudited): Energy Services of America Corporation Consolidated Balance Sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ September 30, ​ 2022 2022 Assets ​ ​ ​ ​ ​ ​ Current assets ​ ​ Cash and cash equivalents ​ $ 7,530,907 ​ $ 7,427,474 Accounts receivable-trade ​ 35,357,058 ​ 38,525,223 Allowance for doubtful accounts ​ ( 55,538 ) ​ ( 70,310 ) Retainages receivable ​ 4,989,451 ​ 4,443,679 Other receivables ​ 13,699 ​ 10,866 Contract assets ​ 14,397,681 ​ 16,109,593 Prepaid expenses and other ​ 3,170,481 ​ 3,945,968 Total current assets ​ 65,403,739 ​ 70,392,493 ​ ​ ​ ​ ​ Property, plant and equipment, at cost ​ 75,859,708 ​ 73,736,433 less accumulated depreciation ​ ( 42,647,308 ) ​ ( 41,074,646 ) Total property and equipment, net ​ 33,212,400 ​ 32,661,787 ​ ​ ​ ​ ​ ​ ​ Right-of-use assets-operating lease ​ ​ 1,478,781 ​ ​ 1,611,321 Intangible assets, net ​ ​ 3,740,910 ​ ​ 3,873,690 Goodwill ​ ​ 4,087,554 ​ ​ 4,087,554 Total assets ​ $ 107,923,384 ​ $ 112,626,845 ​ ​ ​ ​ ​ Liabilities and shareholders’ equity ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ Current maturities of long-term debt ​ $ 4,575,060 ​ $ 4,060,016 Lines of credit and short-term borrowings ​ 12,500,000 ​ 13,080,320 Current maturities of operating lease liabilities ​ ​ 506,606 ​ ​ 588,653 Accounts payable ​ 14,984,022 ​ 20,314,408 Accrued expenses and other current liabilities ​ 8,814,256 ​ 11,266,008 Contract liabilities ​ 8,611,883 ​ 6,027,578 Total current liabilities ​ 49,991,827 ​ 55,336,983 ​ ​ ​ ​ ​ Long-term debt, less current maturities ​ 14,444,751 ​ 13,494,084 Long-term operating lease liabilities, less current maturities ​ ​ 965,012 ​ ​ 1,015,624 Deferred tax liability ​ 4,033,201 ​ 4,455,079 Total liabilities ​ 69,434,791 ​ 74,301,770 ​ ​ ​ Shareholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock, $ .0001 par value Authorized 50,000,000 shares, 17,885,615 issued and 16,667,185 outstanding at December 31, 2022 and September 30, 2022 ​ 1,789 ​ 1,789 ​ ​ ​ ​ ​ ​ ​ Treasury stock, 1,218,430 shares at December 31, 2022 and September 30, 2022 ​ ( 122 ) ​ ( 122 ) ​ ​ ​ Additional paid in capital ​ 60,508,350 ​ 60,508,350 Retained deficit ​ ( 22,021,424 ) ​ ( 22,184,942 ) ​ ​ ​ ​ ​ ​ ​ Total shareholders’ equity ​ 38,488,593 ​ 38,325,075 ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 107,923,384 ​ $ 112,626,845 ​ The Accompanying Notes are an Integral Part of These Financial Statements ​ 1 Table of Contents Energy Services of America Corporation Consolidated Statements of Income Unaudited ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Three Months Ended ​ ​ ​ December 31, ​ December 31, ​ ​ 2022 2021 Revenue ​ $ 60,042,585 ​ $ 42,659,125 ​ ​ ​ ​ ​ ​ ​ Cost of revenues ​ 54,056,323 ​ 37,350,752 ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 5,986,262 ​ 5,308,373 ​ ​ ​ ​ ​ ​ ​ Selling and administrative expenses ​ 5,316,138 ​ 3,632,595 ​ Income from operations ​ 670,124 ​ 1,675,778 ​ ​ ​ ​ ​ ​ ​ Other income (expense) ​ ​ ​ ​ ​ Interest income ​ 72 ​ 576 ​ Other nonoperating expense ​ ( 80,663 ) ​ ( 153,428 ) ​ Interest expense ​ ​ ( 474,284 ) ​ ​ ( 197,559 ) ​ (Loss) gain on sale of equipment ​ ( 31,343 ) ​ 339,896 ​ ​ ​ ( 586,218 ) ​ ( 10,515 ) ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 83,906 ​ 1,665,263 ​ ​ ​ ​ ​ ​ ​ Income tax (benefit) expense ​ ( 79,612 ) ​ 494,283 ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 163,518 ​ $ 1,170,980 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding-basic ​ 16,667,185 ​ 16,247,898 ​ ​ ​ ​ ​ ​ ​ Weighted average shares-diluted ​ 16,667,185 ​ 16,247,898 ​ ​ ​ ​ ​ ​ ​ Earnings per share-basic ​ $ 0.01 ​ $ 0.07 ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share-diluted ​ $ 0.01 ​ $ 0.07 ​ ​ The Accompanying Notes are an Integral Part of These Financial Statements ​ 2 Table of Contents Energy Services of America Corporation Consolidated Statements of Cash Flows Unaudited ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Three Months Ended ​ ​ December 31, ​ December 31, ​ 2022 2021 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 163,518 ​ $ 1,170,980 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ Depreciation expense ​ 1,762,322 ​ 1,304,496 Loss (gain) on sale of equipment ​ 31,343 ​ ( 339,896 ) Deferred income tax benefit ​ ​ ( 421,878 ) ​ ​ ( 367,010 ) Amortization of intangible assets ​ ​ 132,780 ​ ​ 119,456 Accreted interest on notes payable ​ ​ 10,599 ​ ​ — Decrease (increase) in accounts receivable ​ 3,153,393 ​ ( 4,265,751 ) Increase in retainage receivable ​ ​ ( 545,772 ) ​ ​ ( 551,585 ) (Increase) decrease in other receivables ​ ​ ( 2,833 ) ​ ​ 494,771 Decrease in contract assets ​ ​ 1,711,912 ​ ​ 2,815,751 Decrease in prepaid expenses and other ​ 775,487 ​ 750,846 (Decrease) increase in accounts payable ​ ( 5,330,386 ) ​ 58,226 (Decrease) increase in accrued expenses and other current liabilities ​ ( 2,451,871 ) ​ 837,579 Increase in contract liabilities ​ 2,584,305 ​ 4,375,775 Net cash provided by operating activities ​ 1,572,919 ​ 6,403,638 ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ Investment in property and equipment ​ ( 2,348,901 ) ​ ( 942,703 ) Proceeds from sales of property and equipment ​ 92,815 ​ 463,862 Net cash used in investing activities ​ ( 2,256,086 ) ​ ( 478,841 ) ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ Preferred stock redemption ​ ​ — ​ ​ ( 1,262,750 ) Borrowings on lines of credit and short-term debt, net of (repayments) ​ ​ ( 580,320 ) ​ ​ ( 540,250 ) Proceeds from long-term debt ​ ​ 3,100,000 ​ ​ — Principal payments on long-term debt ​ ​ ( 1,733,080 ) ​ ​ ( 1,215,390 ) Net cash provided by (used in) financing activities ​ 786,600 ​ ( 3,018,390 ) Increase in cash and cash equivalents ​ 103,433 ​ 2,906,407 Cash and cash equivalents beginning of period ​ 7,427,474 ​ 8,226,739 Cash and cash equivalents end of period ​ $ 7,530,907 ​ $ 11,133,146 ​ ​ ​ ​ ​ Supplemental schedule of noncash investing and financing activities: ​ ​ ​ ​ Purchases of property & equipment under financing agreements ​ $ 88,192 ​ $ 240,145 Par value of common stock issued from preferred stock conversion ​ $ — ​ $ 263 ​ ​ ​ ​ ​ Supplemental disclosures of cash flows information: ​ ​ ​ ​ Cash paid during the year for: ​ ​ ​ ​ Interest ​ $ 472,960 ​ $ 186,580 ​ The Accompanying Notes are an Integral Part of These Financial Statements ​ 3 Table of Contents Energy Services of America Corporation Consolidated Statements of Changes in Shareholders’ Equity For the three months ended December 31, 2022 and 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Additional Paid ​ Retained ​ Treasury ​ Shareholders’ ​ Shares Amount in Capital Deficit Stock Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, 2022 16,667,185 ​ $ 1,789 ​ $ 60,508,350 ​ $ ( 22,184,942 ) ​ $ ( 122 ) ​ $ 38,325,075 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ — ​ — ​ 163,518 ​ — ​ 163,518 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2022 16,667,185 ​ $ 1,789 ​ $ 60,508,350 ​ $ ( 22,021,424 ) ​ $ ( 122 ) ​ $ 38,488,593 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Additional Paid ​ Retained ​ Treasury ​ Shareholders’ ​ Shares Amount in Capital Deficit Stock Equity Balance at September 30, 2021 ​ 13,621,406 ​ $ 1,484 ​ $ 60,670,699 ​ $ ( 26,035,015 ) ​ $ ( 122 ) ​ $ 34,637,046 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ — ​ ​ — ​ ​ — ​ ​ 1,170,980 ​ ​ — ​ ​ 1,170,980 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred share redemption, net of accrued dividends at September 30, 2021 ​ — ​ ​ — ​ ​ ( 1,210,525 ) ​ ​ — ​ ​ — ​ ​ ( 1,210,525 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred share conversion ​ 2,626,492 ​ ​ 263 ​ ​ — ​ ​ — ​ ​ — ​ ​ 263 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2021 16,247,898 ​ $ 1,747 ​ $ 59,460,174 ​ $ ( 24,864,035 ) ​ $ ( 122 ) ​ $ 34,597,764 ​ The Accompanying Notes are an Integral Part of These Financial Statements ​ 4 Table of Contents ENERGY SERVICES OF AMERICA CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION 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. C.J. Hughes Construction Company, Inc. (“C.J. 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. Hughes. Nitro Construction Services, Inc. (“Nitro”), a wholly owned subsidiary of C.J. Hughes, provides electrical, mechanical, HVAC/R, solar installation, and fire protection services to customers primarily in the automotive, chemical, and power industries. Revolt Energy, LLC and Nitro Electric Company, LLC are newly formed, wholly owned subsidiaries of Nitro. 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. All C.J. 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. West Virginia Pipeline, Inc. (“West Virginia Pipeline” or “WVP”), a wholly owned subsidiary of Energy Services, operates as a gas and water distribution contractor primarily in southern West Virginia. The employees of West Virginia Pipeline are non-union and are managed independently from the Company’s union subsidiaries. SQP Construction Group, Inc. (“SQP”), a wholly owned subsidiary of Energy Services, 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. The employees of SQP are non-union and are managed independently from the Company’s union subsidiaries. Tri-State Paving & Sealcoating, Inc. (“TSP” or “Tri-State Paving”), a wholly owned subsidiary of Energy Services, completed the acquisition of substantially all of the assets of Tri-State Paving & Sealcoating, LLC (“Tri-State Paving, LLC”) on April 29, 2022. Tri-State Paving provides utility paving services to water distribution customers in the Charleston, West Virginia, Lexington, Kentucky, and Chattanooga, Tennessee markets. The employees of TSP are non-union and are managed independently from the Company’s union subsidiaries. Ryan Construction Services Inc. (“Ryan Construction” or “RCS”), a wholly owned subsidiary of Energy Services, formed in August 2022 in connection with the acquisition of substantially all of the assets of Ryan Environmental, LLC and Ryan Environmental Transport, LLC, provides directional drilling services for broadband service providers along with offering natural gas distribution services, cathodic protection and corrosion prevention services, and civil construction services. Ryan Construction operates primarily in West Virginia and Pennsylvania. The employees of RCS are non-union and are managed independently from the Company’s union subsidiaries. 5 Table of Contents Interim Financial Statements The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto for the years ended September 30, 2022, and 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on December 22, 2022. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to the interim financial reporting rules and regulations of the SEC. The financial statements reflect all adjustments (consisting primarily of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and results of operations. The operating results for the three months ended December 31, 2022, and 2021 are not necessarily indicative of the results to be expected for the full year or any other interim period. Principles of Consolidation 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. 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, Ryan Construction, Tri-State Paving and C.J. Hughes and its subsidiaries. Use of Estimates and Assumptions The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and loss during the reporting period. Actual results could differ materially from those estimates. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Please refer to Note 2 “ Summary of Significant Accounting Policies ” of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended September 30, 2022, for a more detailed discussion of our significant accounting policies. There were no material changes to these significant accounting policies during the three months ended December 31, 2022. ​ 3. 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: ● Identify the contract ● Identify performance obligations ● Determine the transaction price ● Allocate the transaction price ● Recognize revenue The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the cost to complete each project. We believe our experience allows us to create materially reliable estimates. There are a number of factors that can contribute to changes in estimates of contract cost and profitability. The most significant of these include: ● the completeness and accuracy of the original bid; ● costs associated with scope changes; ● changes in costs of labor and/or materials; ● extended overhead and other costs due to owner, weather and other delays; ● subcontractor performance issues; 6 Table of Contents ● changes in productivity expectations; ● site conditions that differ from those assumed in the original bid; ● changes from original design on design-build projects; ● the availability and skill level of workers in the geographic location of the project; ● a change in the availability and proximity of equipment and materials; ● our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs; and ● the customer’s ability to properly administer the contract. The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit from period to period. Significant changes in cost estimates, particularly in our larger, more complex projects, could have a significant effect on our profitability. Our contract assets include cost and estimated earnings in excess of billings that represent amounts earned and reimbursable under contracts, including claim recovery estimates, but have a conditional right for billing and payment such as achievement of milestones or completion of the project. With the exception of customer affirmative claims, generally, such unbilled amounts will become billable according to the contract terms and generally will be billed and collected over the next three months. Settlement with the customer of outstanding affirmative claims is dependent on the claims resolution process and could extend beyond one year. Based on our historical experience, we generally consider the collection risk related to billable amounts to be low. When events or conditions indicate that it is probable that the amounts outstanding become unbillable, the transaction price and associated contract asset is reduced. Our contract liabilities consist of provisions for losses and billings in excess of costs and estimated earnings. 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. Generally, unearned project-related costs will be earned over the next twelve months. ​ ​ 4. DISAGGREGATION OF REVENUE 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. 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 three months ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended December 31, 2022 ​ ​ ​ ​ ​ ​ Electrical, ​ ​ ​ ​ Gas & Water ​ Gas & Petroleum ​ Mechanical, ​ Total revenue ​ Distribution Transmission and General from contracts Lump sum contracts ​ $ — ​ $ — ​ $ 17,186,157 ​ $ 17,186,157 Unit price contracts ​ 12,389,558 ​ 16,840,150 ​ 1,537,438 ​ 30,767,146 Cost plus and T&M contracts ​ — ​ — ​ 12,089,282 ​ 12,089,282 Total revenue from contracts ​ $ 12,389,558 ​ $ 16,840,150 ​ $ 30,812,877 ​ $ 60,042,585 ​ ​ ​ ​ ​ ​ ​ ​ ​ Earned over time ​ $ 4,878,647 ​ $ 16,840,150 ​ $ 29,890,148 ​ $ 51,608,945 Earned at point in time ​ 7,510,911 ​ — ​ 922,729 ​ 8,433,640 Total revenue from contracts ​ $ 12,389,558 ​ $ 16,840,150 ​ $ 30,812,877 ​ $ 60,042,585 ​ 7 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended December 31, 2021 ​ ​ ​ ​ ​ ​ Electrical, ​ ​ ​ ​ ​ Gas &Water ​ Gas & Petroleum ​ Mechanical, ​ Total revenue ​ Distribution Transmission and General from contracts Lump sum contracts ​ $ — ​ $ — ​ $ 10,939,201 ​ $ 10,939,201 Unit price contracts ​ 11,962,034 ​ 11,238,517 ​ — ​ 23,200,551 Cost plus and T&M contracts ​ — ​ — ​ 8,519,373 ​ 8,519,373 Total revenue from contracts ​ $ 11,962,034 ​ $ 11,238,517 ​ $ 19,458,574 ​ $ 42,659,125 ​ ​ ​ ​ ​ Earned over time ​ $ 7,919,922 ​ $ 11,238,517 ​ $ 18,819,986 ​ $ 37,978,425 Earned at point in time ​ 4,042,112 ​ — ​ 638,588 ​ 4,680,700 Total revenue from contracts ​ $ 11,962,034 ​ $ 11,238,517 ​ $ 19,458,574 ​ $ 42,659,125 ​ ​ 5. CONTRACT BALANCES The Company’s accounts receivable consists of amounts that have been billed to customers and collateral is generally not required. Most of the Company’s contracts have monthly billing terms; however, billing terms for some are based on project completion. Payment terms are generally within 30 to 45 days after invoices have been issued. The Company attempts to negotiate two-week billing terms and 15-day payment terms on larger projects. The timing of billings to customers may generate contract assets or contract liabilities. During the three months ended December 31, 2022, we recognized revenue of $ 4.5 million that was included in the contract liability balance at September 30, 2022. Accounts receivable-trade, net of allowance for doubtful accounts, contract assets and contract liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 September 30, 2022 Change ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable-trade, net of allowance for doubtful accounts ​ $ 35,301,520 ​ $ 38,454,913 ​ $ ( 3,153,393 ) ​ ​ ​ ​ Contract assets ​ ​ ​ Cost and estimated earnings in excess of billings ​ $ 14,397,681 ​ $ 16,109,593 ​ $ ( 1,711,912 ) ​ ​ ​ ​ ​ ​ Contract liabilities ​ ​ ​ ​ ​ Billings in excess of cost and estimated earnings ​ $ 8,611,883 ​ $ 6,027,578 ​ $ 2,584,305 ​ ​ 6. PERFORMANCE OBLIGATIONS For the three months ended December 31, 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, 2022. Changes in contract transaction price can result from items such as executed or estimated change orders, and unresolved contract modifications and claims. At December 31, 2022, the Company had $ 155.9 million in remaining unsatisfied performance obligations, in which revenue is expected to be recognized over the next twelve months. ​ 8 Table of Contents 7. UNCOMPLETED CONTRACTS Costs, estimated earnings, and billings on uncompleted contracts as of December 31, 2022, and September 30, 2022, are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 September 30, 2022 Costs incurred on contracts in progress ​ $ 110,656,030 ​ $ 192,957,145 Estimated earnings, net of estimated losses ​ 16,806,651 ​ 28,150,060 ​ ​ 127,462,681 ​ 221,107,205 Less billings to date ​ 121,676,883 ​ 211,025,190 ​ ​ $ 5,785,798 ​ $ 10,082,015 ​ ​ ​ ​ ​ ​ ​ Costs and estimated earnings in excess of billed on uncompleted contracts ​ $ 14,397,681 ​ $ 16,109,593 ​ ​ ​ ​ ​ ​ ​ Less billings in excess of costs and estimated earnings on uncompleted contracts ​ 8,611,883 ​ 6,027,578 ​ ​ $ 5,785,798 ​ $ 10,082,015 ​ Backlog at December 31, 2022, and September 30, 2022, was $ 206.9 million and $ 142.3 million, respectively. ​ 8. FAIR VALUE MEASUREMENTS The fair value measurement guidance of the Financial Accounting Standards Board (“FASB”) ASC defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America (“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 measurement guidance of the FASB ASC 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 three levels are defined as follows: Level 1 — Quoted prices for identical assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 2 — Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data. Level 2 also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data. Level 3 — Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for nonbinding single dealer quotes not corroborated by observable market data. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. 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 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 $ 16.0 million at December 31, 2022 was $ 15.0 million. 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. All other current assets and liabilities are carried at net realizable value which approximates fair value because of their short duration to maturity. ​ 9 Table of Contents 9. EARNINGS PER SHARE The amounts used to compute the earnings per share for the three months ended December 31, 2022 and 2021 are summarized below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Three Months Ended ​ ​ December 31, ​ December 31, ​ 2022 2021 Net income ​ $ 163,518 ​ $ 1,170,980 ​ ​ ​ ​ ​ Weighted average shares outstanding-basic ​ 16,667,185 ​ 16,247,898 ​ ​ ​ ​ ​ Weighted average shares-diluted ​ 16,667,185 ​ 16,247,898 ​ ​ ​ ​ ​ Earnings per share-basic ​ $ 0.01 ​ $ 0.07 ​ ​ ​ ​ ​ Earnings per share-diluted ​ $ 0.01 ​ $ 0.07 ​ ​ 10. INCOME TAXES The components of income taxes are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ December 31, 2022 December 31, 2021 Federal ​ ​ Current ​ $ 266,966 ​ $ 671,808 Deferred ​ ( 329,064 ) ​ ( 286,268 ) Total ​ ​ ( 62,098 ) ​ ​ 385,540 ​ ​ ​ ​ ​ State ​ ​ ​ ​ Current ​ ​ 75,299 ​ ​ 189,485 Deferred ​ ( 92,813 ) ​ ( 80,742 ) Total ​ ​ ( 17,514 ) ​ ​ 108,743 ​ ​ ​ ​ ​ Total income tax (benefit) expense ​ $ ( 79,612 ) ​ $ 494,283 ​ The effective income tax rate for the three months ended December 31, 2022, was ( 94.9 )%, as compared to 29.7 % for the same period in 2021. Effective income tax rates are estimates and may vary from period to period due to changes in the amount of taxable income and non-deductible expenses. Major items that can affect the effective tax rate include amortization of goodwill and non-deductible amounts for per diem expenses. 10 Table of Contents The income tax effects of temporary differences giving rise to the deferred tax assets and liabilities are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ September 30, ​ 2022 2022 Deferred tax liabilities ​ ​ Property and equipment ​ $ 7,155,494 ​ $ 7,686,064 Other ​ 530,806 ​ 7,632 Total deferred tax liabilities ​ $ 7,686,300 ​ $ 7,693,696 ​ ​ ​ ​ ​ Deferred income tax assets ​ ​ ​ ​ Other ​ $ 913,479 ​ $ 404,093 Net operating loss carryforward ​ ​ 2,739,620 ​ ​ 2,834,524 Total deferred tax assets ​ $ 3,653,099 ​ $ 3,238,617 ​ ​ ​ ​ ​ Total net deferred tax liabilities ​ $ 4,033,201 ​ $ 4,455,079 ​ Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. At December 31, 2022, the Company expects all net operating loss carryforwards to be realized in the near future. The Company does not believe that it has any unrecognized tax benefits included in its consolidated financial statements that require recognition. The Company has not had any settlements in the current period with taxing authorities, nor has it recognized tax benefits as a result of a lapse of the applicable statute of limitations. The Company recognizes interest and penalties accrued related to unrecognized tax benefits, if applicable, in general and administrative expenses. ​ The Company and all subsidiaries file a consolidated federal and various state income tax returns on a fiscal year basis. With few exceptions, the Company is no longer subject to U.S. federal, state, or local income tax examinations for years ended prior to September 30, 2018. ​ 11. SHORT-TERM AND LONG-TERM DEBT Short-term debt consists of the following: On July 13, 2022, the Company received a one-year extension on its $ 15.0 million operating line of credit effective June 28, 2022. The interest rate on the line of credit is the “ Wall Street Journal ” Prime Rate (the index) with a floor of 4.99 %. The interest rate at December 31, 2022, was 7.75 %. The interest rate at September 30, 2022, was 5.5 %. The line of credit has a $ 12.5 million component and a $ 2.5 million component with additional borrowing requirements. Based on the borrowing base calculation, the Company borrowed all $ 12.5 million available on the line of credit as of December 31, 2022 and September 30, 2022. The Company did not meet the requirements to borrow any from the $ 2.5 million component. On January 19, 2023, the Company received an amendment to the agreement which increased the line of credit to $ 30.0 million. The maturity date remains June 28, 2023, with a variable interest rate equal to the “Wall Street Journal” Prime Rate with a floor of 4.5 %. The modified financial covenants for the quarter ended December 31, 2022, and all subsequent quarters, are below: ● Minimum tangible net worth of $ 28.0 million, ● Minimum traditional debt service coverage of 1.50x on a rolling twelve- month basis, ● Minimum current ratio of 1.20x , ● Maximum debt to tangible net worth ratio (“TNW”) of 2.75x , ● Each ratio and covenant shall be determined, tested, and measured as of each calendar quarter beginning December 31, 2022, ● Borrower shall maintain a ratio of Maximum Senior Funded Debt ("SFD") to Earnings before Interest, Taxes, Depreciation and Amortization ("EBDITA") equal to or less than 3.5 :1. SFD shall mean any funded debt or lease of Borrower, other 11 Table of Contents than subordinated debt. The covenant shall be tested quarterly, as of the end of each fiscal quarter, with EBITDA based on the preceding four quarters. The Company was in compliance with all covenants at December 31, 2022, and the Company projects to meet all covenant requirements for the next twelve months. The Company also finances insurance policy premiums on a short-term basis through a financing company. These insurance policies include workers’ compensation, general liability, automobile, umbrella, and equipment policies. The Company makes a down payment in January and finances the remaining premium amount over eleven monthly payments. At December 31, 2022 and September 30, 2022, respectively, the remaining balance of the insurance premiums was $ 0 and $ 580,000 . 12 Table of Contents A summary of short-term and long-term debt as of December 31, 2022, and September 30, 2022, is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ September 30, ​ 2022 2022 Line of credit payable to bank, monthly interest at 7.75 % , final payment due by June 28, 2023, guaranteed by certain directors of the Company. ​ $ 12,500,000 ​ $ 12,500,000 ​ ​ ​ ​ ​ Term note payable to United Bank, WV Pipeline acquisition, due in monthly installments of $ 64,853 fixed interest at 4.25 % , final payment due by March 25, 2026, secured by receivables and equipment, guaranteed by certain directors of the Company. ​ 2,361,701 ​ 2,529,421 ​ ​ ​ ​ ​ Notes payable to finance companies, due in monthly installments totaling $ 32,000 at December 31, 2022 and $ 60,000 at September 30, 2022, including interest ranging from 0.00 % to 6.03 % , final payments due January 2023 through August 2026, secured by equipment. ​ 776,551 ​ 889,165 ​ ​ ​ ​ ​ Note payable to finance company for insurance premiums financed, due in monthly installments totaling $ 282,000 in FY 2022 and $ 272,000 in FY 2021, including interest rate at 3.50 % , final payment due November 2022. ​ — ​ 580,320 ​ ​ ​ ​ ​ Notes payable to bank, due in monthly installments totaling $ 7,848 , including interest at 4.82 % , final payment due November 2034 secured by building and property. ​ 854,087 ​ 867,383 ​ ​ ​ ​ ​ Notes payable to bank, due in monthly installments totaling $ 12,464 , including interest at 8.75 % , final payment due November 2025 secured by building and property, guaranteed by certain directors of the Company. ​ 374,201 ​ 412,917 ​ ​ ​ ​ ​ Notes payable to bank, due in monthly installments totaling $ 59,932 , including fixed interest at 6.0 % , final payment due October 2027 secured by receivables and equipment, guaranteed by certain directors of the Company. ​ 3,011,436 ​ — ​ ​ ​ ​ ​ Notes payable to David Bolton and Daniel Bolton, due in annual installments totaling $ 500,000 , including fixed interest at 3.25 % , final payment due December 31, 2026, unsecured. ​ 1,637,500 ​ 2,380,000 ​ ​ ​ ​ Notes payable to bank, due in monthly installments totaling $ 68,073 , including interest at 8.75 % , beginning February 2022 with final payment due September 2026, secured by equipment, guaranteed by certain directors of the Company. ​ ​ 2,391,154 ​ ​ 2,549,281 ​ ​ ​ ​ ​ ​ ​ Term note payable to United Bank, Tri-State Paving acquisition, due in monthly installments of $ 140,000 , fixed interest at 4.50 % , final payment due by June 1, 2027, secured by receivables and equipment, guaranteed by certain directors of the Company. ​ ​ 6,666,246 ​ ​ 6,982,097 ​ ​ ​ ​ ​ ​ ​ Notes payable to Corns Enterprises, due in annual installments totaling $ 250,000 , including fixed interest at 3.50 % , final payment due April 29, 2026, unsecured. ​ ​ 946,935 ​ ​ 943,836 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total debt ​ $ 31,519,811 ​ $ 30,634,420 ​ ​ ​ ​ ​ Less current maturities ​ 17,075,060 ​ 17,140,336 ​ ​ ​ ​ ​ Total long-term debt ​ $ 14,444,751 ​ $ 13,494,084 ​ ​ ​ 13 Table of Contents 12. GOODWILL AND INTANGIBLE ASSETS The Company follows the guidance of ASC Topic 350, Intangibles-Goodwill and Other , which requires a company to record an impairment charge based on the excess of a reporting unit’s carrying amount of goodwill over its fair value. Under the current guidance, companies can first choose to assess any impairment based on qualitative factors (Step 0). If a company fails this test or decides to bypass this step, it must proceed with a quantitative assessment of goodwill impairment. The Company did not have a goodwill impairment at December 31, 2022 or September 30, 2022. A table of the Company’s goodwill is below: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, September 30, ​ ​ 2022 ​ 2022 Beginning balance ​ $ 4,087,554 ​ $ 1,814,317 Acquired ​ — ​ 2,273,237 Ending balance ​ $ 4,087,554 ​ $ 4,087,554 ​ A table of the Company’s intangible assets subject to amortization at December 31, 2022, and September 30, 2022 is below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ Accumulated ​ Amortization and ​ ​ ​ ​ ​ Remaining Life at ​ ​ ​ ​ Amortization and ​ Amortization and ​ Impairment Three ​ Net Book ​ ​ December 31, ​ ​ ​ ​ Impairment at ​ Impairment at ​ Months Ended ​ Value at Intangible assets: 2022 Original Cost December 31, 2022 September 30, 2022 December 31, 2022 December 31, 2022 West Virginia Pipeline: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer Relationships ​ 96 months ​ $ 2,209,724 ​ $ 441,935 ​ $ 386,693 ​ $ 55,242 ​ $ 1,767,789 Tradename ​ 96 months ​ ​ 263,584 ​ ​ 52,731 ​ ​ 46,136 ​ ​ 6,595 ​ ​ 210,853 Non-competes 0 months ​ 83,203 ​ 83,203 ​ 72,806 ​ 10,397 ​ — Revolt Energy: ​ ​ ​ ​ ​ Employment agreement/non-compete 16 months ​ 100,000 ​ 81,946 ​ 77,779 ​ 4,167 ​ 18,054 Tri-State Paving: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer Relationships ​ 112 months ​ ​ 1,649,159 ​ $ 108,061 ​ ​ 66,781 ​ $ 41,280 ​ ​ 1,541,098 Tradename ​ 112 months ​ ​ 203,213 ​ ​ 13,450 ​ ​ 8,368 ​ ​ 5,082 ​ ​ 189,763 Non-competes ​ 4 months ​ ​ 39,960 ​ ​ 26,607 ​ ​ 16,590 ​ ​ 10,017 ​ ​ 13,353 Total intangible assets ​ ​ ​ $ 4,548,843 ​ $ 807,933 ​ $ 675,153 ​ $ 132,780 ​ $ 3,740,910 ​ The amortization on identifiable intangible assets for the three months ended December 31, 2022 and 2021 was $133,000 and $119,000 , respectively. Amortization expense associated with the identifiable intangible assets is expected to be as follows: ​ ​ ​ ​ ​ ​ Amortization Expense January 2023 to December 2023 $ 462,590 January 2024 to December 2024 ​ 433,955 January 2025 to December 2025 ​ 432,569 January 2026 to December 2026 ​ 432,569 January 2027 to December 2027 ​ 432,569 After ​ 1,546,657 Total ​ $ 3,740,910 ​ ​ 13. LEASE OBLIGATIONS The Company leases office space for SQP for $ 1,500 per month. The lease, signed on March 25, 2021, is for a period of two years with five one-year renewals available immediately following the end of the base term. Rental terms for the option periods shall be negotiated and agreed mutually between the parties and shall not exceed five percent increases to rent, if any. 14 Table of Contents The Company has two lease agreements for construction equipment with a combined amount of $ 160,000 . The leases have a term of twenty-two months with a stated interest rate of 0 %, combined monthly installment payments of $ 6,645 and are cancellable at any time without penalty. The Company has the right to purchase the equipment at the expiration of the leases by applying the two-month deposit paid. The related assets and finance lease obligations associated with these lease agreements are included in the consolidated balance sheets within property, plant and equipment and long-term debt. The Company has two right-of-use operating leases acquired on April 29, 2022, as part of the Tri-State Paving, LLC transaction. The first operating lease, for the Hurricane, WV facility, had a net present value of $ 236,000 at April 29, 2022, and a carrying value of $ 186,000 at December 31, 2022. The second operating lease, for the Chattanooga, Tennessee facility, had a net present value of $ 144,000 at April 29, 2022, and a carrying value of $ 103,000 at December 31, 2022. The 4.5 % interest rate on the operating leases is based on the Company’s incremental borrowing rate at inception. The Company has a right-of-use operating lease with Enterprise Fleet Management, Inc. acquired on August 11, 2022, as part of the Ryan Environmental acquisition. This lease agreement was initially for 31 vehicles to be used for Ryan Construction; however, the Company plans to add vehicles as it finds necessary. This lease had a net present value of $ 1.2 million at inception, and carrying value of $ 1.1 million at December 31, 2022. The 4.5 % interest rate on the operating lease is based on the Company’s incremental borrowing rate at inception. The Company has a right-of-use operating lease with RICA Developers, LLC acquired on August 12, 2022, as part of the Ryan Environmental acquisition. This lease, for the Bridgeport, WV facility, had a net present value of $ 140,000 at inception and a carrying value of $ 83,000 at December 31, 2022. The 4.5 % interest rate on the operating lease is based on the Company’s incremental borrowing rate at inception. Schedules related to the Company’s operating leases at December 31, 2022 can be found below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining liability ​ ​ ​ ​ ​ Years left ​ December 31, 2022 ​ September 30, 2022 Lease end Fiscal year end Operating lease 1 ​ 2.3 ​ $ 186,427 ​ $ 205,267 ​ 4/30/2025 ​ 2025 Operating lease 2 ​ 1.4 ​ 103,472 ​ 119,032 ​ 5/31/2024 2024 Operating lease 3 ​ ​ 3.7 ​ ​ 1,098,727 ​ ​ 1,166,498 ​ 8/10/2026 ​ 2027 Operating lease 4 ​ ​ 0.7 ​ ​ 82,992 ​ ​ 113,480 ​ 8/11/2023 ​ 2023 ​ ​ ​ ​ ​ $ 1,471,618 ​ $ 1,604,277 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average remaining term ​ ​ ​ ​ 3.2 years ​ ​ ​ ​ ​ ​ ​ ​ Operating Lease Maturity Schedule ​ ​ ​ January 2023-December 2023 $ 559,911 January 2024-December 2024 ​ 448,309 January 2025-December 2025 ​ 352,397 January 2026-December 2026 ​ ​ 216,265 ​ ​ ​ 1,576,882 Less amounts representing interest ​ ( 105,264 ) Present value of operating lease liabilities ​ $ 1,471,618 ​ 15 Table of Contents ​ ​ ​ ​ ​ ​ ​ Three months ended ​ December 31, 2022 Operating Lease Expense ​ ​ ​ Amortization ​ Operating lease 1 ​ $ 18,841 Operating lease 2 ​ 15,559 Operating lease 3 ​ ​ 68,528 Operating lease 4 ​ ​ 29,612 Total amortization ​ ​ 132,540 Interest ​ Operating lease 1 ​ ​ 2,160 Operating lease 2 ​ 1,219 Operating lease 3 ​ ​ 12,570 Operating lease 4 ​ ​ 1,162 Total interest ​ ​ 17,111 Total amortization and interest ​ $ 149,651 ​ The Company rents equipment for use on construction projects with rental agreements being week to week or month to month. Rental expense can vary by reporting period due to equipment requirements on construction projects and the availability of Company owned equipment. Rental expense, which is included in cost of goods sold on the consolidated statements of income, was $ 2.7 million and $ 1.9 million, respectively, for the three months ended December 31, 2022 and 2021. 15. SUBSEQUENT EVENTS On January 18, 2023, the Company’s Board of Directors approved a special cash dividend of $ 0.05 per common share payable on February 15, 2023 to shareholders of record as of January 31, 2023. On January 19, 2023, the Company received an amendment to increase its line of credit from $ 15.0 million to $ 30.0 million. The maturity date remains June 28, 2023, with a variable interest rate equal to the “Wall Street Journal” Prime Rate with a floor of 4.5 %. 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. ​ 16 Table of Contents