What changed in this filing

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Item 1. Financial Statements

2024-02-12 compared with 2023-08-14 · 153 added, 230 removed, 406 unchanged (49% of the section changed)

16 unchanged sentences

( 47,799,840 )

Total property and equipment, net

Total fixed assets

Right-of-use assets-operating lease

14 unchanged sentences

Shareholders’ equity

Common stock, $ .0001 par value Authorized 50,000,000 shares, 17,885,615 issued and 16,567,185 outstanding at June 30, 2023 and 17,885,615 issued and 16,667,185 outstanding at September 30, 2022

Treasury stock, 1,318,430 shares at June 30, 2023 and 1,218,430 shares at September 30, 2022

Common stock, $ .0001 par value Authorized 50,000,000 shares, 17,885,615 issued and 16,567,185 outstanding at December 31, 2023 and September 30, 2023

Treasury stock, 1,318,430 shares at December 31, 2023 and September 30, 2023

Additional paid in capital

9 unchanged sentences

Three Months Ended

Nine Months Ended

Cost of revenues

3 unchanged sentences

Interest income

Other nonoperating expense

Other nonoperating income (expense)

Interest expense

( 1,713,862 )

Gain on sale of equipment

( 1,830,118 )

Loss on sale of equipment

Income before income taxes

Income tax expense

Income tax expense (benefit)

Weighted average shares outstanding-basic

5 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended

Three Months Ended

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Accreted interest on PPP Loans

Depreciation expense

Gain on sale of equipment

Accreted interest on PPP loans

Loss on sale of equipment

Provision for deferred taxes

Amortization of intangible assets

Accreted interest on notes payable

Increase in accounts receivable

( 9,369,616 )

( 3,086,194 )

Accreted interest on note payable

Decrease in accounts receivable

Increase in retainage receivable

( 2,101,964 )

( 2,221,588 )

(Increase) decrease in other receivables

Decrease (increase) in contract assets

Increase in other receivables

(Increase) decrease in contract assets

( 5,840,372 )

Decrease in prepaid expenses and other

(Decrease) increase in accounts payable

Increase (decrease) in accounts payable

( 5,330,386 )

(Decrease) increase in accrued expenses and other current liabilities

Increase in contract liabilities

Decrease in accrued expenses and other current liabilities

( 2,522,882 )

( 2,451,871 )

(Decrease) increase in contract liabilities

Net cash provided by operating activities

8 unchanged sentences

Cash flows from financing activities:

Preferred stock redemption

( 1,210,525 )

Dividends on common stock

Treasury stock purchased

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

4 unchanged sentences

( 1,733,080 )

Net cash used in financing activities

Net cash (used in) provided by financing activities

( 7,020,076 )

Increase (decrease) in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

( 5,176,552 )

3 unchanged sentences

Purchases of property & equipment under financing agreements

Prepaid insurance premiums financed

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 conversion

Operating lease right-of-use assets acquired in exchange for operating lease liabilities

Net operating lease right-of-use assets received in exchange for operating lease liabilities

Common dividends declared but not paid

Supplemental disclosures of cash flows information:

3 unchanged sentences

Consolidated Statements of Changes in Shareholders’ Equity

For the three and nine months ended June 30, 2023 and 2022

For the three months ended December 31, 2023 and 2022

Additional Paid

Shareholders’

Balance at September 30, 2022, as restated

( 32,269,473 )

Net income, as restated

Balance at December 31, 2022, as restated

( 32,131,099 )

( 1,873,600 )

Balance at September 30, 2023

( 25,701,413 )

Dividends on common stock ($ 0.06 per share on 16,567,185 shares)

Treasury stock purchased by company

Balance at March 31, 2023

( 34,838,059 )

Treasury stock purchased by company

Balance at June 30, 2023

Balance at December 31, 2023

( 24,653,249 )

1 unchanged sentence

Shareholders’

Balance at September 30, 2021, as restated

( 36,019,788 )

Net income, as restated

Preferred share redemption, net of accrued dividends at September 30, 2021

( 1,210,525 )

Preferred share conversion

Balance at December 31, 2021, as restated

( 34,873,952 )

Net loss, as restated

Balance at March 31, 2022, as restated

Balance at September 30, 2022

( 32,269,473 )

Net income, as restated

Shares issued for Tri-State Paving acquisition

Balance at June 30, 2022, as restated

Balance at December 31, 2022

( 32,131,099 )

8 unchanged sentences

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.

Energy Services’ other pipeline services include corrosion protection services, horizontal drilling services, 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 broadband and solar electric systems and perform civil and general contracting services.

Hughes Construction Company, Inc.

6 unchanged sentences

Revolt Energy, LLC (“Revolt”), a wholly owned subsidiary of NCS, performs residential solar installation projects.

Nitro Electric Company, LLC (“Nitro Electric”), a wholly owned subsidiary of NCS, performs industrial electrical work and is a satellite office registered in Michigan.

Nitro Electric Company, LLC (“Nitro Electric”), a wholly owned subsidiary of NCS, performs industrial electrical work and has a satellite office registered in Michigan.

Pinnacle Technical Solutions, Inc.

12 unchanged sentences

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.

(“TSP” or “Tri-State Paving”), a wholly owned subsidiary of Energy Services, completed the acquisition of substantially all 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.

5 unchanged sentences

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 Amendment No.

1 to the Company’s Annual Report on Form 10-K/A filed with the SEC on May 31, 2023.

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, 2023, and 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on January 16,2024.

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.

1 unchanged sentence

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 and nine months ended June 30, 2023 and 2022 are not necessarily indicative of the results to be expected for the full year or any other interim period.

The operating results for the three months ended December 31, 2023 and 2022 are not necessarily indicative of the results to be expected for the full year or any other interim period.

Principles of Consolidation

9 unchanged sentences

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Please refer to Note 2 “ Summary of Significant Accounting Policies ” of the Consolidated Financial Statements in the Company’s Amendment No.

1 to the Company’s Annual Report on Form 10-K/A 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 and nine months ended June 30, 2023.

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

On May 12, 2023, the audit committee of the Board of Directors of Energy Services, after considering the recommendation of management, concluded:

that (a) the Company’s previously issued audited consolidated financial statements for the fiscal years ended September 30, 2022 and 2021 included in the Company’s annual reports on Form 10-K for the fiscal years ended September 30, 2022 and 2021, and (b) the Company’s unaudited consolidated financial statements for the periods ended June 30, 2021, December 31, 2021, March 31, 2022, June 30, 2022 and December 31, 2022 as reported in the Company’s quarterly reports on Form 10-Q for those periods (together, the “Reports”) should no longer be relied upon and have been restated.

Due to the economic uncertainties created by COVID-19 and limited operating funds available, the Company applied for loans under the Paycheck Protection Program (“PPP”).

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, 2023, 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, 2023.

ACCOUNTING FOR PPP LOANS

Due to the economic uncertainties created by COVID-19 and limited operating funds available, the Company applied for loans under the PPP.

On April 15, 2020, the Company and its subsidiaries, C.J.

Hughes, Contractors Rental, and Nitro, entered into separate PPP notes effective April 7, 2020, with United Bank as the lender (“Lender”) in an aggregate principal amount of $ 13.1 million pursuant to the PPP (collectively, the “PPP Loans”).

Hughes, Contractors Rental and Nitro, entered into separate PPP notes effective April 7, 2020, with its Lender in an aggregate principal amount of $ 13.1 million pursuant to the PPP Loans.

In a special meeting held on April 27, 2020, the Board of Directors of the Company unanimously voted to return $ 3.3 million of the PPP Loans after discussing the financing needs of the Company and subsidiaries.

That left the Company and subsidiaries with $ 9.8 million in PPP Loans to fund operations.

During fiscal year 2021, the Company received notice that the Small Business Administration (the “SBA”) had granted forgiveness of the $ 9.8 million of PPP Loans and the SBA repaid the Lender in full.

During fiscal year 2021, the Company received notice that the SBA had granted forgiveness of the $ 9.8 million of PPP Loans and the SBA repaid the Lender in full.

The forgiveness was recorded as other income for the fiscal year ended September 30, 2021.

7 unchanged sentences

During July 2023, management received notification from the SBA that two additional forgiveness applications related to the PPP Loans were under review.

As part of the review, the SBA requested information regarding the ability of the Company’s affiliates to meet SBA size standards and/or PPP corporate maximum limits.

As part of the review, the SBA requested information regarding the ability of the Company’s affiliates

to meet SBA size standards and/or PPP corporate maximum limits.

The requested information was subsequently provided to the SBA through the Lender.

Tables for the income statement impact “As previously reported” and “restated” for Paycheck Protection Program loan forgiveness and interest expense for the three and nine months ended June 30, 2022 are below:

Three Months Ended June 30, 2022

As Previously

Interest expense

Nine Months Ended June 30, 2022

As Previously

Interest expense

A table for the balance sheet impact “As previously reported” and “restated” for Paycheck Protection Program loan forgiveness and interest expense at September 30, 2022 is below:

September 30, 2022

As Previously

Lines of credit and short-term borrowings

Shareholders' equity

( 10,084,531 )

Borrowers must retain PPP documentation for at least six years after the date the loan is forgiven or paid in full, and the SBA and SBA Inspector General must be granted these files upon request.

The SBA could revisit its forgiveness decision and determine that the Company does not qualify in whole or in part for loan forgiveness and demand repayment of the loans.

In addition, it is unknown what type of penalties could be assessed against the Company if the SBA disagrees with the Company’s certification.

Any penalties in addition to the potential repayment of the PPP Loans could negatively impact the Company’s business, financial condition and results of operations and prospects.

REVENUE RECOGNITION

30 unchanged sentences

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 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.

5 unchanged sentences

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

The following tables present our disaggregated revenue for the three and nine months ended June 30, 2023 and 2022:

Three Months Ended June 30, 2023

Gas & Petroleum

Mechanical, and

Total revenue

from contracts

Lump sum contracts

Unit price contracts

Cost plus and T&M contracts

Total revenue from contracts

Earned over time

Earned at point in time

Total revenue from contracts

Three Months Ended June 30, 2022

Gas & Petroleum

Mechanical, and

Total revenue

from contracts

Lump sum contracts

Unit price contracts

Cost plus and T&M contracts

Total revenue from contracts

Earned over time

Earned at point in time

Total revenue from contracts

Nine Months Ended June 30, 2023

The following tables present our disaggregated revenue for the three months ended December 31, 2023 and 2022:

Three Months Ended December 31, 2023

Gas & Petroleum

Mechanical, and

Mechanical, &

Total revenue

7 unchanged sentences

Total revenue from contracts

Nine Months Ended June 30, 2022

Three Months Ended December 31, 2022

Gas & Petroleum

Mechanical, and

Mechanical, &

Total revenue

14 unchanged sentences

The timing of billings to customers may generate contract assets or contract liabilities.

During the three and nine months ended June 30, 2023, we recognized revenue of $ 100,000 and $ 5.7 million, respectively, that was included in the contract liability balance at September 30, 2022.

During the three months ended December 31, 2023, we recognized revenue of $ 13.5 million that was included in the contract liability balance at September 30, 2023.

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

June 30, 2023

December 31, 2023

September 30, 2023

Accounts receivable-trade, net of allowance for doubtful accounts

( 8,002,890 )

Contract assets

Cost and estimated earnings in excess of billings

( 3,910,675 )

Contract liabilities

1 unchanged sentence

PERFORMANCE OBLIGATIONS

For the three and nine months ended June 30, 2023, 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.

For the three months ended December 31, 2023, there was no significant revenue recognized as a result of changes in contract transaction price related to performance obligations that were satisfied prior to September 30, 2023.

Changes in contract transaction price can result from items such as executed or estimated change orders, and unresolved contract modifications and claims.

At June 30, 2023, the Company had $ 157.0 million in remaining unsatisfied performance obligations, in which revenue is expected to be recognized over the next twelve months.

At December 31, 2023, the Company had $ 132.2 million in remaining unsatisfied performance obligations, in which revenue is expected to be recognized over the next twelve months.

UNCOMPLETED CONTRACTS

Costs, estimated earnings, and billings on uncompleted contracts as of June 30, 2023 and September 30, 2022, are summarized as follows:

June 30, 2023

Costs, estimated earnings, and billings on uncompleted contracts as of December 31, 2023 and September 30, 2023, are summarized as follows:

December 31, 2023

September 30, 2023

6 unchanged sentences

( 1,787,781 )

Backlog at June 30, 2023 and September 30, 2022, was $ 185.9 million and $ 142.3 million, respectively.

The Company’s unaudited backlog at December 31, 2023 and September 30, 2023 was $ 185.9 million and $ 229.8 million, respectively.

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 U.S.

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 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:

7 unchanged sentences

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 $ 27.2 million at June 30, 2023 was $ 25.3 million.

The fair value of the aggregate principal amount of the Company’s fixed-rate debt of $ 25.1 million, as restated, at September 30, 2022 was $ 24.3 million, as restated.

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

The fair value of the aggregate principal amount of the Company’s fixed-rate debt of $ 31.9 million at December 31, 2023 was $ 30.3 million.

The fair value of the aggregate principal amount of the Company’s fixed-rate debt of $ 33.8 million at September 30, 2023 was $ 32.1 million.

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

EARNINGS PER SHARE

The amounts used to compute the earnings per share for the three and nine months ended June 30, 2023 and 2022 are summarized below.

The amounts used to compute the earnings per share for the three months ended December 31, 2023 and 2022 are summarized below.

Three Months Ended

Nine Months Ended

Net income, as restated

Weighted average shares outstanding-basic

Weighted average shares-diluted

Earnings per share-basic

Earnings per share-diluted

Weighted average shares outstanding-diluted

Earnings per share available to common shareholders

Earnings per share available to common shareholders-diluted

The components of income taxes are as follows:

The effective income tax rate for the three and nine months ended June 30, 2023 was 30.5 % and 31.4 %, respectively, as compared to 29.0 % as restated, and 30.7 %, as restated, for the same periods in fiscal year 2022.

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 state taxes, amortization of goodwill, and non-deductible amounts for per diem expenses.

Three Months Ended

June 30, 2023

June 30, 2022

Total income tax expense

Nine Months Ended

June 30, 2023

June 30, 2022

Total income tax expense

December 31, 2023

December 31, 2022

Total income tax expense (benefit)

The Company’s income tax expense and deferred tax assets and liabilities reflect management’s best estimate of current and future taxes to be paid.

Significant judgments and estimates are required in the determination of the consolidated income tax expense.

The Company’s provision for income taxes is computed by applying a federal rate of 21.0 % and a state rate of 6.0 % to taxable income or loss after consideration of non-taxable and non-deductible items.

The effective income tax rate for the three months ended December 31, 2023, was 34.1 %, as compared to ( 135.5 )% for the same period in 2022.

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 intangible assets and non-deductible amounts for per diem expenses.

The income tax effects of temporary differences giving rise to the deferred tax assets and liabilities are as follows:

4 unchanged sentences

Deferred income tax assets

Accruals & other

Net operating loss carryforward

3 unchanged sentences

A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

At June 30, 2023, the Company expects all net operating loss carryforwards to be realized in the near future.

The Company had $ 0 and $ 3.0 million of federal net operating loss carryforwards at December 31, 2023 and September 30, 2023, respectively.

The Company had state net operating loss carryforwards at December 31, 2023 and September 30, 2023, respectively that begin to expire in 2025, that were not significant.

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 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.

SHORT-TERM AND LONG-TERM DEBT

2 unchanged sentences

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

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

On January 19, 2023, the Company received an amendment to the agreement which increased the line of credit to $ 30.0 million with a maturity date of June 28, 2023.

On June 1, 2023, the agreement was renewed through June 28, 2024.

The line of credit is limited to a borrowing base calculation, which was approximately $ 24.4 million at June 30, 2023.

The outstanding balance on the line of credit was $ 16.2 million at June 30, 2023.

The line of credit has a variable interest rate equal to the “Wall Street Journal” Prime Rate with a floor of 4.5 %, which was 9.25 % at June 30, 2023.

The line of credit is limited to a borrowing base calculation as summarized below:

December 31, 2023

September 30, 2023

Eligible borrowing base

Borrowed on line of credit

Line of credit balance available

Interest rate

The modified financial covenants for the quarter ended June 30, 2023, and all subsequent quarters, are below:

7 unchanged sentences

The covenant shall be tested quarterly, at the end of each fiscal quarter, with EBITDA based on the preceding four quarters.

The Company was not in compliance with all covenants at June 30, 2023;

however, a waiver was received from the Company’s lender.

The Company’s lender has agreed to omit the effect of the PPP loan restatement from the Company’s covenant compliance calculations while a final decision on PPP loan forgiveness remains in question.

Thus, the Company was in compliance with all covenants at December 31, 2023.

The Company projects to meet all covenant requirements for the next twelve months.

Insurance Premiums Financed

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

The Company financed its captive insurance policy premiums on a short-term basis through a financing company for the calendar years ended December 31, 2023 and 2022.

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 June 30, 2023 and September 30, 2022, the remaining balance of the insurance premiums was $ 1.9 million and $ 580,000 , respectively.

The Company made down payments in January 2023 and 2022 and financed the remaining premium amount over eleven monthly payments.

At December 31, 2023 and September 30, 2023, the remaining balance of the insurance premiums was $ 0 and $ 950,000 , respectively.

Paycheck Protection Program Loans

11 unchanged sentences

The Company recognizes that there is a possibility that the SBA could reverse its previous determination on the forgiveness of the PPP Loans.

As a result of this uncertainty, the Company restated the previously issued financial statements of the Company that were included in the Reports.

The Company has recorded a short-term borrowing due to the SBA inquiry for the full $ 9.8 million, plus accrued interest for all periods presented.

As a result of this uncertainty, the Company restated the previously audited financial statements of the Company for the fiscal years 2022 and 2021.

The Company has recorded a short-term borrowing due to the SBA inquiry for the full $ 9.8 million, plus accrued interest.

During July 2023, management received notification from the SBA that two additional forgiveness applications related to the PPP Loans were under review.

1 unchanged sentence

The requested information was subsequently provided to the SBA through the Lender.

A summary of short-term and long-term debt as of June 30, 2023 and September 30, 2022 is as follows:

Borrowers must retain PPP documentation for at least six years after the date the loan is forgiven or paid in full, and the SBA and SBA Inspector General must be granted these files upon request.

The SBA could revisit its forgiveness decision and determine that the Company does not qualify in whole or in part for loan forgiveness and demand repayment of the loans.

In addition, it is unknown what type of penalties could be assessed against the Company if the SBA disagrees with the Company’s certification.

Any penalties in addition to the potential repayment of the PPP Loans could negatively impact the Company’s business, financial condition and results of operations and prospects.

A summary of short-term and long-term debt as of December 31, 2023 and September 30, 2023 is as follows:

September 30,

Line of credit payable to bank, monthly interest at 9.25 %, final payment due by June 28, 2024, guaranteed by certain directors of the Company.

Equipment line of credit payable to United Bank, $ 9.3 million available with no borrowings at June 30, 2023.

All borrowings between June 1, 2023 and December 1, 2023 have a fixed interest rate of 7.25 % .

After December 1, 2023, the line of credit turns into a fifty-four-month term note with a fixed interest rate of 7.25 % , final payment due June 1, 2028.

Line of credit payable to bank, monthly interest with variable rate of 8.5 % at December 31, 2023, final payment due by June 28, 2024, guaranteed by certain directors of the Company.

Note payable to bank, due in monthly installments totaling $ 202,000 , including fixed interest at 7.25 %, final payment due June 2028, secured by equipment, guaranteed by certain directors of the Company.

Paycheck Protection Program loans from Small Business Administration, 1.0 % simple interest, initially forgiven in the fiscal year ended September 30, 2021.

Final forgiveness decision has not been determined.

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

Notes payable to finance companies, due in monthly installments totaling $ 48,000 at June 30, 2023 and $ 60,000 at September 30, 2022, including interest ranging from 0.00 % to 5.50 %, final payments due July 2023 through August 2026, secured by equipment.

Note payable to finance company for insurance premiums financed, due in monthly installments totaling $ 327,000 in FY 2023 and $ 282,000 in FY 2022, including interest at 3.27 %, final payment due November 2023.

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

Notes payable to finance companies, due in monthly installments totaling $ 51,000 at December 31, 2023 and $ 50,000 at September 30, 2023, including interest ranging from 0.00 % to 6.92 %, final payments due January 2024 through August 2026, secured by equipment.

Note payable to finance company for insurance premiums financed, due in monthly installments totaling $ 327,000 in calendar year 2023 and $ 282,000 in calendar year 2022, including interest rate at 6.70 %, final payment due December 2023.

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.

Notes payable to bank, due in monthly installments totaling $ 11,602 , including interest at 4.25 %, final payment due November 2025, secured by building and property, guaranteed by certain directors of the Company.

Notes payable to bank, due in monthly installments totaling $ 12,580 , including variable interest of 9.5 % at December 31, 2023, final payment due November 2025 secured by building and property, guaranteed by certain directors of the Company.

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.

Notes payable to David Bolton and Daniel Bolton, due in annual installments totaling $ 500,000 , including interest at 3.25 %, final payment due December 31, 2026, unsecured

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.

Notes payable to bank, interest at 4.25 % of outstanding balance due in monthly installments between January 2021 and January 2022.

Note payments due in monthly installments totaling $ 68,150 , including interest at 9.25 %, with final payment due September 2026, secured by equipment, guaranteed by certain directors of the Company.

Term note payable to United Bank, Tri-State Paving acquisition, due in monthly installments of $ 129,910 , including interest at 4.25 %, final payment due by June 1, 2027, secured by receivables and equipment, guaranteed by certain directors of the Company.

Notes payable to Corns Enterprises, $ 1,000,000 with fair value of $ 936,000 , due in annual installments totaling $ 250,000 , including interest at 3.50 %, final payment due April 29, 2026, unsecured

Beginning February 2022, note payments due in monthly installments totaling $ 68,150 , including variable interest of 9.5 % at December 31, 2023, with final payment due September 2026, secured by equipment, guaranteed by certain directors of the Company.

Term note payable to United Bank, Tri-State Paving acquisition, due in monthly installments of $ 129,910 , fixed interest at 4.50 %, final payment due by June 1, 2027, secured by receivables and equipment, guaranteed by certain directors of the Company.

Notes payable to Corns Enterprises, $ 1,000,000 with fair value of $ 936,000 , due in annual installments totaling $ 250,000 , including fixed interest at 3.50 %, final payment due April 29, 2026, unsecured.

Less current maturities

Total long term debt

Total long term debt, less current maturities

GOODWILL AND INTANGIBLE ASSETS

2 unchanged sentences

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 no t have a goodwill impairment at June 30, 2023 or September 30, 2022.

The Company did no t have a goodwill impairment at December 31, 2023 or September 30, 2023.

A table of the Company’s goodwill is below:

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Ending balance

A table of the Company’s intangible assets subject to amortization at June 30, 2023 and September 30, 2022 is below:

A table of the Company’s intangible assets subject to amortization is below:

and Impairment

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Impairment at

Ended June 30,

Ended December 31,

Net Book Value

Intangible assets:

June 30, 2023

December 31, 2023

Original Cost

June 30, 2023

December 31, 2023

September 30, 2023

at June 30, 2023

at December 31, 2023

at September 30, 2023

West Virginia Pipeline:

5 unchanged sentences

Total intangible assets

The amortization on identifiable intangible assets for the three and nine months ended June 30, 2023 was $ 136,000 and $401,000, respectively.

The amortization on identifiable intangible assets for the three and nine months ended June 30, 2022 was $ 112,000 and $308,000, respectively.

The amortization on identifiable intangible assets for the three months ended December 31, 2023 and 2022 was $ 108,142 and $ 132,780 , respectively.

Amortization expense associated with the identifiable intangible assets is expected to be as follows:

Amortization Expense

July 2023 to June 2024

July 2024 to June 2025

July 2025 to June 2026

July 2026 to June 2027

July 2027 to June 2028

January 2024 to December 2024

January 2025 to December 2025

January 2026 to December 2026

January 2027 to December 2027

January 2028 to December 2028

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.

The lease, which was originally 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.

The Company has only committed to a one-year renewal and is evaluating the intent to renew for additional periods.

The Company has two lease agreements for construction equipment with a combined amount of $ 160,000 .

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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, West Virginia facility, had a net present value of $ 236,000 at inception, and a carrying value of $ 148,000 at June 30, 2023.

The second operating lease, for the Chattanooga, Tennessee facility, had a net present value of $ 144,000 at inception, and a carrying value of $ 72,000 at June 30, 2023.

The first operating lease, for the Hurricane, West Virginia facility, had a net present value of $ 236,000 at inception, and a carrying value of $ 106,000 at December 31, 2023.

The second operating lease, for the Chattanooga, Tennessee facility, had a net present value of $ 144,000 at inception, and a carrying value of $ 40,000 at December 31, 2023.

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.

(Enterprise) acquired on August 11, 2022, as part of the Ryan Environmental acquisition.

This lease agreement was initially for thirty-one vehicles with a net present value of $ 1.2 million.

The Company has subsequently added twenty-six leased vehicles with a net present value of $ 2.4 million.

The right-of-use operating lease has a carrying value of $ 3.2 million at June 30, 2023.

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, West Virginia facility, had a net present value of $ 140,000 at inception and a carrying value of $ 21,000 at June 30, 2023.

The 4.5 % interest rate on the operating lease is based on the Company’s incremental borrowing rate at inception.

The Company had sixty-nine vehicles on lease at December 31, 2023.

The right-of-use operating lease has a carrying value of $ 2.5 million at December 31, 2023.

Each vehicle leased under the master lease program has its own implicit rate ranging from 12.8 % to 15.6 %.

The Company has a right-of-use operating lease with RICA Developers, LLC acquired on August 12, 2022 and renewed for one year effective October 1, 2023.

This lease, for the Bridgeport, West Virginia facility, had a net present value of $ 125,000 at inception and a carrying value of $ 83,000 at December 31, 2023.

The 8.5 % interest rate on the operating lease was based on the Company’s incremental borrowing rate at renewal.

The Company has a right-of-use operating lease acquired on March 28, 2023.

This lease, for the Winchester, Kentucky facility, had a net present value of $ 290,000 at inception and a carrying value of $ 247,000 at June 30, 2023.

This lease, for the Winchester, Kentucky facility, had a net present value of $ 290,000 at inception and a carrying value of $ 231,000 at December 31, 2023.

The 7.75 % 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 June 30, 2023 can be found below:

Schedules related to the Company’s operating leases at December 31, 2023 can be found below:

Operating Lease-Weighted Average Remaining Term

Present value of

remaining liability

June 30, 2023

September 30, 2022

Fiscal year end

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Operating Lease Maturity Schedule

July 2023 to June 2024

July 2024 to June 2025

July 2025 to June 2026

July 2026 to June 2027

Less amounts representing interest

1 unchanged sentence

Three Months Ended

Nine Months Ended

Three Months Ended

Nine Months Ended

Operating Lease Expense

June 30, 2023

June 30, 2022

December 31, 2023

December 31, 2022

Operating lease 1

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Three Months Ended

Nine Months Ended

Three Months Ended

Nine Months Ended

Cash Paid for Operating Leases

June 30, 2023

June 30, 2022

December 31, 2023

December 31, 2022

Operating lease 1

5 unchanged sentences

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 $ 2.5 million and $ 1.7 million, respectively, for the three months ended June 30, 2023 and 2022 and $ 6.8 million and $ 5.3 million, respectively, for the nine months ended June 30, 2023 and 2022.

Rental expense, which is included in cost of goods sold on the consolidated statements of income, was $ 5.4 million and $ 2.7 million, respectively, for the three months ended December 31, 2023 and 2022.

SUBSEQUENT EVENTS

On November 15, 2023, the Company’s Board of Directors approved an annual dividend of $ 0.06 per common share.

The 2024 dividend was paid on January 2, 2024 to holders of record as of December 15, 2023.

While this is expected to be an annual dividend, factors such as income from operations, cash flows, and overall financial outlook may affect future dividend payments.

Management has evaluated all subsequent events for accounting and disclosure.

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements