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Risk Related to our Operations

Our operating results may vary significantly from quarter to quarter.

We typically experience lower volumes and lower margins during the winter months due to lower demand for our pipeline services and more difficult operating conditions. Also, other items that can materially affect our quarterly results include:

Future acquisitions could disrupt the Company’s business and adversely affect our results of operations, financial condition and cash flows.

Credit facilitiesIn fiscal 2022, the Company completed the acquisitions of Tri-State Paving and Ryan Construction. The Company may choose to expand by making additional acquisitions that could be material to its business, results of operations, financial condition and cash flows. Acquisitions involve many risks, including the following:

The occurrence of any of these risks could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

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Risk Related to our operationsBusiness

The type of contracts we obtain could adversely affect our profitability.

We enter into various types of contracts, including fixed price and growth mightvariable pricing contracts. On fixed price contracts our profits could be curtailed or eliminated by unanticipated pricing increases associated with the contract.

A portion of our business depends on our ability to provide surety bonds. We may be unable to compete on certain projects if we are not able to obtain the necessary surety bonds.

Current or future market conditions, including losses in the construction industry or as a result of large corporate bankruptcies, as well as changes in our surety providers’ assessment of our operating and financial risk, could cause our surety providers to decline to issue or renew, or substantially reduce the amount of bonds for our work or could increase our bonding costs. These actions could be taken on short notice. Since a growing number of our customers require such bonding, should our surety providers limit or eliminate our access to bonding, our performance could be negatively impacted if we are unable to replace the bonded business with work that does not require bonding or if we are unable to provide other means of securing the jobs performance such as with letters of credit or cash.

Many of our contracts can be cancelled or delayed or may not be available.renewed upon completion.

If our customers cancel or delay many projects, our revenues could be reduced if we are unable to replace these contracts with others. Also, we have contracts that expire and are renewed periodically. If we are unsuccessful in renewing those contracts, that could reduce our revenue as well.

Our business requires a skilled labor force and if we are unable to attract and retain qualified employees, our ability to maintain our productivity could be impaired.

Our business relies heavily on having linesproductivity depends upon our ability to employ and maintain skilled personnel to meet our requirements. Should some of credit in place to fundour key managers leave the various projectsCompany, it could limit our productivity. Also, many of our labor personnel are trade union members. Should we encounter labor problems associated with our union employees or if we are working on. Should fundingunable to employ enough available operators, welders, or other skilled labor, our production could be significantly curtailed.

Our backlog may not be available, realized.

Our backlog could be reduced due to the cancellation of projects by customers and/or on favorable terms, itreductions in scope of the projects. Should this occur, our anticipated revenues would be reduced unless we are able to replace those contracts.

We extend credit to customers for purchases of our services and therefore have risk that they may not be able to repay us.

While we have not had any significant problems with collections of accounts receivables historically, should there be an economic downturn our customers’ ability to repay us could severelybe compromised, and this may curtail our operations and the ability to generate profits. Energy Services maintainsoperate profitably.

Our dependence on suppliers, subcontractors and equipment manufacturers could expose us to risk of loss in our operations.

On certain projects, we rely on suppliers to obtain the necessary materials and subcontractors to perform portions of our services. We also rely on equipment manufacturers to provide us with the equipment needed to conduct our operations. Any limitation on the availability of materials or equipment or failure to complete work on a banking relationship with two regional bankstimely basis by subcontractors in a quality fashion could lead to added costs and has linestherefore lower profitability for the Company.

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We face cybersecurity risk including breach of confidential personal information, Company or customer intellectual properties, and borrowing facilities with these institutions.delays related to data loss.

Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, and other systems. Our computer systems, data management and internal processes, as well as those of third parties, are integral to our performance. Our operational risks include the risk of malfeasance by employees or persons outside our company, errors relating to transaction processing and technology, systems failures or interruptions, breaches of our internal control systems, and business continuation and disaster recovery. There have been increasing efforts by third parties to breach data security. Such attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary, and other information, damages to systems, or other material disruptions to network access or business operations. The Company currently hasuses industry-leading firewall hardware and runs anti-malware, antivirus, and anti-exploit solutions on all computers as a $15.0 million Operating Linefirst line of Credit (2017), of which $9.1 million was outstanding at September 30, 2017.defense to prevent security breaches. The Company’s email software utilizes spam blocking, phishing filtering, and external sender warnings. The Company believes this line of credit will provide sufficient operating capital for future projects, but the Company cannot guarantee it will always haveuses compartmentalized network drive access to this linemitigate ransomware damage and performs daily encrypted backups to secure offsite locations including a disaster recovery site.

Although we take protective measures and believe that we have not experienced any of creditthe data breaches described above, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber-attacks that could have an impact on information security. Because the techniques used to cause security breaches change frequently, we may be unable to proactively address these techniques or to implement adequate preventative measures.

Inflation can have an adverse impact on our business and on our customers.

Inflation risk is the risk that the value of assets or income will be worth less in the future as inflation decreases the value of money. Recently, there have been market indicators of a pronounced rise in inflation and the Federal Reserve has raised certain benchmark interest rates to combat inflation. Inflation generally increases the cost of goods and services we will use in our business operations, such as electricity and other utilities, which increases our expenses. In addition, we may have to increase both wages to retain our employees and the cost of our services by a greater amount than we have budgeted. Furthermore, our customers will also be affected by inflation and the rising costs of goods and services used in their businesses, which could have a negative impact on their ability to use our services and afford to pay our fees.

Societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers.

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns. We and our customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions and operating process changes. The impact on our customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities. Among the impacts on us could be a drop in demand for our products and services, particularly in certain sectors. Our efforts to take these risks into account may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.

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The SBA may review the Company’s financial performance.

We have sold Units, each consisting of one share of 6.0% Convertible Perpetual Preferred Stock, Series APPP Loan forgiveness application and 2,500 shares of Common Stock. Ifif the Preferred Stock is converted to Common Stock, shareholders may experience dilution of their ownership interest.

As of September 30, 2013,SBA disagrees with the Company’s certification the Company sold 140 unitscould be subject to penalties and the repayment of the PPP Loans, which could negatively impact the Company’s business, financial condition and results of operations and prospects.

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 the Lender in an aggregate principal amount of $13.1 million pursuant to the PPP Loans. In a private placementspecial meeting held on April 27, 2020, the Board of Directors of the Company unanimously voted to accredited investors,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 an additional 10 units sold during$9.8 million in PPP Loans to fund operations. 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, 2014 for2021.

During April 2023, management received notification from the SBA that one of the Company’s forgiveness applications related to the PPP Loans was under review. As part of the review, the SBA requested additional payroll information. Additionally, 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. The Company recognizes that there is a totalpossibility that the SBA could reverse its previous determination on the forgiveness of 150 units.the PPP Loans. As a result of this uncertainty, the private placement, an additional 375,000 sharesCompany restated the previously issued financial statements of common stockthe Company that were outstandingincluded in the Reports.

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.

We Have Identified a Material Weakness in Our Internal Control Over Financial Reporting. If This Material Weakness Persists or If We Fail to Establish and Maintain Effective Internal Control over Financial Reporting, We May Not Be Able to Accurately or Timely Report Our Financial Condition or Results of Operations, Which May Adversely Affect Our Business and the Market Price of Our Common Stock.

The Sarbanes-Oxley Act of 2002 requires that we maintain effective internal control over financial reporting and disclosure controls and procedures. We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting, such as the material weakness as described below.

Our compliance with Section 404 necessitates that we incur substantial accounting expenses and expend significant management efforts. We will continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, including the remediation of the material weakness described below, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting and to compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to remediate the material weakness described below, or any future material weaknesses that may be identified, or to complete our evaluation, testing and remediation in a timely fashion. Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial statements.

We have concluded that a material weakness in our internal control over financial reporting existed as of September 30, 2017. The Company also issued 56 shares of Preferred Stock to Marshall Reynolds, Chairman of the2022, and consequently our Board of Directors determined that management’s report on internal control over financial reporting as of September 30, 2022, included in exchangeour Annual Report on Form 10-K for the fiscal year then ended, should no longer be relied upon. In connection with the material weakness identified in Item 9A, Controls and Procedures, we have restated our consolidated financial statements for the fiscal years ended September 30, 2022 and 2021 as described in the Explanatory Paragraph and in Note 3 to our annual consolidated financial statements. This material weakness is discussed further within Item 9A, Controls and Procedures, of this Amendment No. 1 to the Annual Report on Form 10-K/A. The existence of one or more material weaknesses precludes a debt forgivenessconclusion by management that a corporation’s internal control over financial reporting is effective.

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Table of $1.4 million. Mr. Reynolds did not receive any shares of Common Stock in this transaction. Contents

In addition, ifresponse to the Company elects to allowidentified material weakness, our management, with the holdersoversight of the Preferred StockAudit Committee of our Board of Directors, has dedicated significant resources, including the involvement of outside advisors, and efforts to chooseimprove our internal control over financial reporting and has taken immediate action to convert their Preferred Stock into sharesremediate the material weakness identified. Certain remedial actions have been completed including ongoing involvement of outside advisors to review compliance with the SBA’s rules and regulations for loan forgiveness. The Company will further enhance these controls over the remainder of fiscal year 2023. If we fail to remediate this material weakness or fail to otherwise maintain effective control over financial reporting in the future, it could result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis.

We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses which could have an adverse effect on our business, financial condition and results of operations. If we are unable to successfully remediate the material weakness in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, investors could lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, we would issue an additional 3,433,333 sharescould be subject to sanctions or investigations by the Nasdaq Stock Market, the SEC, or other regulatory authorities, we may be subject to potential civil litigation which litigation, proceedings or actions, if decided against us, could require us to pay substantial judgments, settlements or other penalties, including shareholder class action lawsuits and derivative claims made on behalf of Common Stock, which will result in shareholders experiencing a dilution in their ownership interest.us and our ability to access the capital markets could be limited.

Risk Related to our Industry

An economic downturn in the industries we serve could lead to less demand for our services.

In addition to the effects of an economic recession, there could be reductions in the particular industries that the Company serves. If the demand for natural gas should drop dramatically, or the demand for electrical and mechanical services drops dramatically, these would in turn result in less demand for the Company’s services.

Project delays or cancellations may result in additional costs to us, reductions in revenues or the payment of liquidated damages.

In certain circumstances, we guarantee project completion by a scheduled acceptance date or are paid only upon achievement of certain acceptance and performance testing levels. Failure to meet any of these requirements could result in additional costs or penalties which could exceed the expected project profits.

Revenue and cost estimates on projects may differ from actual results.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. While the Company believes losses on significant projects have been recorded at September 30, 2017, there can be no assurance that actual results will not differ from those estimates.

Changes in tax regulations could adversely affect income tax benefits.

With potential changes to tax regulations in 2017, the Company’s estimated income tax benefit and net operating loss carryforward could differ from actual results.

We may be unsuccessful at generating internal growth.

Our ability to generate internal growth will be affected by our ability to:

Our industry is highly competitive.

Our industry has been and remains competitive with competitors ranging from small owner operated companies to large public companies. Within that group there may be companies with lower overhead costs that may be able to price their services at lower levels than we can. Accordingly, if that occurs, our business opportunities could be severely limited. In addition, our industry competes for energy demand with suppliers of alternative energy sources such as solar and wind.

We may be unsuccessful at generating internal growth.

The typeOur ability to generate internal growth will be affected by our ability to:

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Risk Related to Financing

Credit facilities to fund our operations and growth might not be available.

Our business relies heavily on having lines of credit in place to fund the various projects we obtain could adversely affect our profitability.

We enter into various types of contracts, including fixed price and variable pricing contracts. On fixed price contracts our profits couldare working on. Should funding not be curtailedavailable, or eliminated by unanticipated pricing increases associated with the contract.

Changes by the government in laws regulating the industries we serve could reduce our sales volumes.

If the government enacts legislation that has a serious impact on the industries we serve,favorable terms, it could lead to the curtailment of capital projects in those industries and therefore lead to lower sales volumes for our Company.

Many of our contracts can be cancelled or delayed or may not be renewed upon completion.

If our customers should cancel or delay many projects, our revenues could be reduced if we are unable to replace these contracts with others. Also, we have contracts that expire and are rebid periodically. If we are unsuccessful in rebidding those contracts, that could reduce our revenue as well.

Our business requires a skilled labor force and if we are unable to attract and retain qualified employees, our ability to maintain our productivity could be impaired.

Our productivity depends upon our ability to employ and maintain skilled personnel to meet our requirements. Should some of our key managers leave the Company, it could limit our productivity. Also, many of our labor personnel are trade union members. Should we encounter labor problems associated with our union employees or if we are unable to employ sufficient available operators, welders, or other skilled labor, our production could be significantly curtailed.

Our backlog may not be realized.

Our backlog could be reduced due to cancellation of projects by customers and/or reductions in scope of the projects. Should this occur, our anticipated revenues would be reduced unless we are able to replace those contracts.

We extend credit to customers for purchases of our services and therefore have risk that they may not be able to repay us.

While we have not had any significant problems with collections of accounts receivables historically, should there be an economic downturn our customers’ inability to repay us would be compromised, and this mayseverely curtail our operations and the ability to operate profitably.

We may incur liabilities or suffer negative financial or reputational harm relatinggenerate profits. Energy Services maintains a banking relationship with two regional banks and has lines of credit and borrowing facilities with these institutions. On July 13, 2022, the Company renewed its $15.0 million operating line of credit with United Bank. Based on the borrowing base calculation, the Company could borrow up to occupational health$12.5 million as of September 30, 2022. The Company had borrowed $12.5 million on the line of credit as of September 30, 2022, leaving no borrowings available on the line of credit as of that date. The Company believes this line of credit will provide enough operating capital for future projects, but the Company and safety matters.

Our operationsits lenders are subjectworking on a financing package that could expand the current operating line. The Company cannot guarantee it will always have access to extensive laws and regulations relating to the maintenancethis line of safe conditionscredit in the workplace.future depending on the Company’s financial performance.

Risk Related to our Financial Performance

Revenue and cost estimates on projects may differ from actual results.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. While wethe Company believes estimates on project performance are constantly monitoring our health and safety programs, our industry involves a high degree of operating risk andmaterially correct at September 30, 2022, there can be no assurance given that weactual results will avoid significant liability exposure and/or be precludednot differ from working for various customers duethose estimates.

Risk Related to high incident rates.Law and Regulatory Compliance

Our dependence on suppliers, subcontractors and equipment manufacturers could expose us to risk of loss in our operations.

On certain projects, we rely on suppliers to obtain the necessary materials and subcontractors to perform portions of our services. We also rely on equipment manufacturers to provide us with the equipment needed to conduct our operations. Any limitation on the availability of materials or equipment or failure to complete work on a timely basis by subcontractors in a quality fashion could lead to added costs and therefore lower profitability for the Company.

During the ordinary course of business, we may become subject to lawsuits or indemnity claims, which could materially and adversely affect our business and results of operations.

From time to time, we may in the ordinary course of business be named as a defendant in lawsuits, claims and other legal proceedings. These actions may seek, among other things, compensation for alleged personal injury, worker’s compensation, employment discrimination, breach of contract, property damages, civil penalties, and other losses of injunctive or declaratory relief. Also, we often indemnify our customers for claims related to the services we provide and actions we take under our contracts with them. Because our services in certain instances may be integral to the operation and performance of our customers’ infrastructure, we may become subject to lawsuits or claims for any failure of the systems we work on. While we carry insurance to protect the Company against such claims, the outcomes of any of the lawsuits, claims or legal proceedings could result in significant costs and diversion of management’s attention from the business. Payments of significant amounts, even if reserved, could adversely affect our reputation, liquidity and results of operations.

A portion of our business depends on our ability to provide surety bonds. We may be unableincur liabilities or suffer negative financial or reputational harm relating to compete on certain projects ifoccupational health and safety matters.

Our operations are subject to extensive laws and regulations relating to the maintenance of safe conditions in the workplace. While we are not ableconstantly monitoring our health and safety programs, our industry involves a high degree of operating risk and there can be no assurance given that we will avoid significant liability exposure and/or be precluded from working for various customers due to obtainhigh incident rates.

Changes by the necessary surety bonds.government in laws regulating the industries we serve could reduce our sales volumes.

Current or future market conditions, including lossesIf the government enacts legislation that has a serious impact on the industries we serve, it could lead to the curtailment of capital projects in the construction industry or as a result of large corporate bankruptcies, as well as changes in our surety providers’ assessment of our operatingthose industries and financial risk, could cause our surety providerstherefore lead to decline to issue or renew, or substantially reduce the amount of bondslower sales volumes for our work or could increase our bonding costs. These actions could be taken on short notice. Since a growing numberCompany.

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Our failure to comply with environmental laws could result in significant liabilities.

Our operations are subject to various environmental laws and regulations, including those dealing with the handling and disposal of waste products, polychlorinated biphenyls (PCBs) and other hazardous materials, as well as fuel storage. We also work around and under bodies of water. We invest significantly in compliance with the appropriate laws and regulations. However, if we should inadvertently cause contamination of waters or soils, liabilities for our Company relating to cleanup and remediation could be substantial and could exceed any insurance coverage we might have and result in a negative impact to the Company’s ability to operate.

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Risk Related to the COVID-19 Pandemic

We have operations in multiple states and face risks related to the Coronavirus/COVID 19 global pandemic that could impact our results of operations.

Our business could be adversely affected by the effects of the widespread outbreak of Coronavirus and related variants (“COVID-19”). The outbreak of COVID-19 and other adverse public health developments may have a material and adverse effect on our business operations. These could include disruptions or restrictions on our ability to travel or to complete our projects, as well as temporary closures of our facilities or the facilities of our suppliers or customers. Any disruption of our suppliers or customers would likely impact our operating results. In addition, the continued outbreak of COVID-19 could continue to adversely affect the economies of the states that we operate in resulting in a long-term economic downturn that could impact our operating results.

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Risks Relating to Ownership of Our Common Stock

Our common stock is not heavily traded, and the stock price may fluctuate significantly.

Our common stock is traded on the NASDAQ Capital Market under the symbol “ESOA.” Certain brokers currently make a market in the common stock, but such transactions are infrequent, and the volume of shares traded is relatively small. Management cannot predict whether these or other brokers will continue to make a market in our common stock. Prices on stock that is not heavily traded, such as our common stock, can be more volatile than heavily traded stock. Factors such as our financial results, the introduction of new products and services by us or our competitors, publicity regarding our industry, and various other factors may have a significant impact on the market price of the shares of the common stock. Management also cannot predict the extent to which an active public market for our common stock will develop or be sustained in the future. Accordingly, stockholders may not be able to sell their shares of our common stock at the volumes, prices, or times that they desire.

Our directors beneficially own a significant portion of our common stock and have substantial influence over us.

Our directors, as a group, beneficially owned approximately 36.1% of our outstanding shares of common stock as of September 30, 2022. As a result of this level of ownership, our directors have the ability, by taking coordinated action, to exercise significant influence over our affairs and policies. The interests of our directors may not be consistent with your interests as a stockholder. This influence may also have the effect of delaying or preventing changes of control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our Company.

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ITEM 1B.Unresolved Staff Comments

None.

ITEM 2.Properties

The Company and its subsidiaries own the property where its subsidiaries, C.J. Hughes, Nitro, West Virginia Pipeline, SQP, Tri-State Paving and Nitro Electric,Ryan Construction and the Company’s headquarters are located. We maintain our executive offices at 75 West 3^rd Ave., Huntington, West Virginia 25701, which is also the officeoffices of C.J. Hughes. Nitro Electric’sHughes and Contractors Rental. Nitro’s office is located at 4300 1^st Ave., Nitro, WV 25143. West Virginia Pipeline’s office is located at 300 Pipeline Road, Princeton, WV 24739. SQP leases its office space and is located at 281 Smiley Drive, St Albans, WV 25177. TSP leases its office space and is located at 3384 Teays Valley Rd, Hurricane, WV 25526. Ryan Construction leases its office space and is located at 5793 W. Veterans Memorial Highway, Bridgeport, WV 26330. The Company’s management believes that its properties are adequate for the business it conducts. Please see “Liquidity and Capital Resources” for a description of the mortgages and leases on these properties.

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ITEM 3.Legal Proceedings

AtIn February 2018, the Company filed a lawsuit against a former customer (“Defendant”) in the United States District Court for the Western District of Pennsylvania. The lawsuit is related to a dispute over work performed on a pipeline construction project. On November 21, 2022, a Judgment 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. The amounts awarded by the Judgment Order have not been recognized in the Company’s consolidated financial statements as of September 30, 2017,2022. 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.

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. The Company is in negotiations with the pension fund to resolve the matter and all future payments have been suspended as part of the negotiation. The Company has expensed all $164,000 in payments made through September 30, 2022 and does not expect any future liabilities related to this claim.

Other than described above, at September 30, 2022, the Company was not involved in any legal proceedings other than in the ordinary course of business. The outcomeCompany is a party from time to time to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract and/or property damages, punitive damages, civil penalties, or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims, and proceedings, we record reserves when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. At September 30, 2022, the Company does not believe that any of these proceedings, separately or in aggregate, would not be expected to have a material toadverse effect on our financial condition orposition, results of operations.operations or cash flows.

ITEM 4.Mine Safety Disclosures

None.

PART II

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

On March 23, 2022, the Company’s common stock began trading on the Nasdaq Capital Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

operated by The Company’s stock is quotedNasdaq Stock Market, LLC under the symbol “ESOA” and transactions in. The Company’s common stock had previously been traded under the stock are reportedsymbol “ESOA” on the OTC QB marketplace.

OTCQB Marketplace.

The following table sets forth the range of high and low sales prices for common stock during each of the last two fiscal years and is based on information provided by OTC QB.years. The high and low “bid price”, as required to be disclosed by Regulation S-K, was not available for certain periods because either these were not two-sided quotes by market makers or there was only one market maker with a two-sided quote. Over the counter market quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.

Common Stock

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As of September 30, 2017,December 21, 2022, there were 2631 holders of record of our common stock. Certain shares of the Company’s common stock are held in “nominee” or “street” name and accordingly the number of beneficial owners of common stock is not included in the number of record holders.

There was a $0.05 special dividend paid on 13,922,336 common shares during fiscal year 2017 for a total of $696,117. The dividend payment did not include 317,500 common shares that are part of preferred units. There was a $0.05 special dividend paid on 13,907,340 common shares during fiscal year 2016 for a total of $695,367. The dividend payment did not include 332,496 common shares that are part of preferred units. The payment of cash dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition and will be within the discretion of our board of directors.

The Company did not repurchase any stock during the twelve months ended September 30, 2022 and 2021.

On February 16, 2022, the stockholders of Energy Services approved the Company’s 2022 Equity Incentive Plan (the “Plan”), which provides for the grant of stock-based awards to officers and employees of the Company and its subsidiaries. The maximum number of shares of stock, in the aggregate, that may be granted under the Plan as stock options, restricted stock or restricted stock units is 1,500,000 shares. A description of the material terms of the Plan is contained in the Company’s definitive proxy statement for the Annual Meeting of Stockholders filed with the Securities and Exchange Commission on January 11, 2022. No grants of stock-based awards were made during the fiscal year ended September 30, 2022.

On July 6, 2022, the Company’s Board of Directors authorized a new share repurchase program (the “Program”), pursuant to which the Company may, from time to time, purchase shares of its common stock for an aggregate repurchase amount not to exceed 1,000,000 shares, which was approximately 6.0% of its outstanding common stock as of the date of the announcement. The Program does not obligate the Company to purchase any number of shares, and there is no guarantee as to the exact number of shares to be repurchased by the Company. No repurchases were made in connection with the Program during the fourth fiscal quarter of 2017.year ended September 30, 2022.

ITEM 6. Selected Financial DataReserved

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ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of the financial condition and results of operations of Energy Services in conjunction with the historical financial statements and related notes contained elsewhere herein. Among other things, those historical consolidated financial statements include more detailed information regarding the basis of presentation for the following information.

Restatement

The accompanying information gives effect to certain adjustments made to the previously reported financial statements for the years ended September 30, 2022 and 2021. Due to the restatement of these years, the data set forth in the accompanying management discussion and analysis may not be comparable to discussions and data in our Original Report.

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Refer to “Explanatory Note” immediately preceding Item 1 of this Amendment No. 1 to the Annual Report on Form 10-K/A and Note 3, “Restatement of Previously Issued Financial Statements” in the accompanying consolidated financial statements for further details related to the restatement and impact on our financial statements.

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Understanding Gross Margins

Our gross margin is gross profit expressed as a percentage of revenues. Cost of revenues consists primarily of salaries, wages and some benefits to employees, depreciation, fuel and other equipment costs, equipment rentals, subcontracted services, portions of insurance, facilities expense, materials and parts and supplies. Factors affecting gross margin include:

Seasonal.As discussed above, seasonal patterns can have a significant impact on gross margins. Usually, business is slower in the winter months versus the warmer months.

Weather.Adverse or favorable weather conditions can impact gross margin in a giveneach period. Periods of wet weather, snow or rainfall, as well as severe temperature extremes can severely impact production and therefore negatively impact revenues and margins. Conversely, periods of dry weather with moderate temperatures can positively impact revenues and margins due to the opportunity for increased production and efficiencies.

Revenue Mix.The mix of revenues between customer types and types of work for various customers will impact gross margins. Some projects will have greater margins while others that are extremely competitive in bidding may have narrower margins.

Service and Maintenance versus Installation.In general, installation work has a higher gross margin than maintenance work. This is due to the fact thatbecause installation work usually is of a fixed price nature and therefore has higher risks involved. Accordingly, a higher portion of the revenue mix from installation work typically will result in higher margins.

Subcontract Work. Work that is subcontracted to other service providers generally has lower gross margins. Increases in subcontract work as a percentage of total revenues in a giveneach period may contribute to a decrease in gross margin.

Materials versus Labor. Typically, materials supplied on projects have lower margins than labor. Accordingly, projects with a higher material cost in relation to the entire job will have a lower overall margin.

Depreciation.Depreciation is included in our cost of revenue. This is a common practice in our industry but can make comparability to other companies difficult.

Margin Risk. Failure to properly execute a job including failure to properly manage and supervise a job could decrease the profit margin.

Selling General and Administrative Expenses

Selling general and administrative expenses consist primarily of compensation and related benefits to management, administrative salaries and benefits, marketing, communications, office and utility costs, professional fees, bad debt expense, letter of credit fees, general liability insurance and miscellaneous other expenses.

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Results of Operations for the Fiscal Year Ended September 30, 20172022, Compared to the Fiscal Year Ended September 30, 20162021.

Revenue. A table comparing the components of the Company’s revenues for the fiscal years ended September 30, 2022, and 2021 is below:

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Revenues. Revenues on continuing operations decreasedRevenue increased by $15.0$75.1 million, or 9.6%61.3%, to $140.5$197.6 million for the fiscal year ended September 30, 20172022, from $155.5$122.5 million for the fiscal year ended September 30, 2016.The decrease was primarily attributable to a $6.2 million revenue decrease in electrical and mechanical services, a $5.7 million revenue decrease in water and sewer projects and other ancillary services, and a $3.1 million revenue decrease in petroleum and gas work. Schedule delays on two major projects, please see “Major Projects with Losses” below, prevented the Company from securing additional work during the fourth quarter of fiscal year 2017.There were no2021.

Gas & Water Distribution revenues from discontinued operations for fiscal years 2017 and 2016.

Cost of Revenues. Cost of revenues on continuing operations decreased by $8.6 million or 6.1% to $132.7totaled $53.3 million for the fiscal year ended September 30, 20172022, a $12.9 million increase from $141.3$40.4 million for the fiscal year ended September 30, 2016.2021. The decreaserevenue increase was primarily attributablerelated to a $6.4 million cost decrease in electricalthe Company’s overall commitment to growing this line of business through adding new distribution crews and mechanicalthe acquisition of Tri-State Paving, which primarily provides services a $4.4 million cost decrease infor water and sewer and other ancillary services, and a $500,000 cost decrease in equipment and tool shop operations not allocated to projects, partially offset by a $2.7 million cost increase in petroleum and gas work.There was no costutility companies. Tri-State Paving, acquired on April 29, 2022, contributed revenues of revenues from discontinued operations for fiscal years 2017 and 2016.

Gross Profit. Gross profits on continuing operations decreased by $6.4 million or 45.2% to $7.8$4.9 million for the fiscal year ended September 30, 2017 from $14.22022. A full year of West Virginia Pipeline revenue, acquired on December 31, 2020, resulted in $3.1 million in additional revenue during fiscal year 2022 as compared to 2021.

Gas & Petroleum Transmission revenues totaled $58.3 million for the fiscal year ended September 30, 2016.The decrease was primarily attributable to2022, a $5.8$36.1 million gross profit decrease in petroleum and gas work, and a $1.3increase from $22.1 million gross profit decrease in water and sewer and other ancillary services, partially offset by a $500,000 gross profit increase in equipment and tool shop operations not allocated to projects and a $200,000 gross profit increase in electrical and mechanical services.The gross profit percentage was 5.5% for the fiscal year ended September 30, 20172021. The revenue increase was primarily related to an increase in the number of bidding opportunities with both existing, long-term customers and 9.1%newer customers.

Electrical, Mechanical, & General services and construction revenues totaled $86.0 million for the fiscal year ended September 30, 2016. Please see “Major Projects with Losses” below for further details. There was no gross profit on discontinued operations for fiscal years 2017 and 2016.

Selling and administrative expenses. Selling and administrative expenses on continuing operations increased by $100,000 or 1.5% to $7.42022, a $26.1 million increase from $59.9 million for the fiscal year ended September 30, 2017 from $7.3 million for the year ended September 30, 2016.2021. The revenue increase was primarily due to growth in general and civil construction opportunities for SQP, which began operations in March 2021 and increased revenues by $19.3 million in fiscal year 2022 as compared to 2021.

Cost of Revenues. A table comparing the components of the Company’s costs of revenues for fiscal years ended September 30, 2022 and 2021, is below:

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Gas & Petroleum Transmission cost of revenues totaled $54.9 million for the fiscal year ended September 30, 2022, a $37.7 million increase from $17.2 million for the fiscal year ended September 30, 2021. The cost of revenues increase was primarily related to an increase in the number of bidding opportunities with both existing, long-term customers and burden expense needednewer customers. The Company has one gas transmission project that is projected to bidlose $2.1 million.

Electrical, Mechanical, & General services and manage projects. Thereconstruction cost of revenues totaled $79.1 million for the fiscal year ended September 30, 2022, a $23.5 million increase from $55.6 million for the fiscal year ended September 30, 2021. The cost of revenues increase was noprimarily due to growth in general and civil construction opportunities for SQP, which began operations in March 2021 and increased costs of revenues by $16.4 million in fiscal year 2022 as compared to 2021.

Gross Profit. A table comparing the components of the Company’s gross profit for fiscal years ended September 30, 2022, and 2021, is below:

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Selling and administrative expenses. Total selling and administrative expenses increased by $1.9 million to $15.9 million for the fiscal year ended September 30, 2022, from $14.0 million for the fiscal year ended September 30, 2021. Approximately $700,000 of the selling and administrative expense on discontinuedincrease for the fiscal year ended September 30, 2022 as compared to the prior fiscal year, was from the operations of the new subsidiaries, Tri-State Paving and Ryan Construction. In addition, the Company incurred approximately $1.6 in million additional selling and administrative expenses related to a full twelve months of activity for West Virginia Pipeline and SQP in the fiscal years 2017 and 2016.year 2022 as compared to 2021.

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Income from operations. Income from operations decreased bywas $6.5 million or 94.5% to $400,000 for the fiscal year ended September 30, 20172022, a $7.6 million increase from $6.9a $1.1 million loss from operations for the fiscal year ended September 30, 2016.2021. The increase was due to the items described above.

Interest Expense. Interest expense increased by $285,000 or 41.0% to $988,000 for the fiscal year ended September 30, 2022, from $703,000 for the fiscal year ended September 30, 2021. This increase was primarily due to increased line of credit borrowings and financing acquisitions.

Other Income. Gain on sale of equipment and interest income, partially offset by other expenses, totaled $508,000 for the fiscal year ended September 30, 2022, as compared to $910,000 for the fiscal year ended September 30, 2021. The decrease was primarily due to a decrease in interest earned on the items mentioned above. Please see “Major Projects with Losses” below for further details. ThereCompany’s captive insurance surety deposit.

Net Income (loss). Income (loss) before income taxes was no income from discontinued operations for fiscal years 2017 and 2016.

Interest Expense. Interest expense decreased by $42,000 or 4.8% to $833,000$6.0 million for the fiscal year ended September 30, 2017 from $875,0002022, compared to ($917,000) for the fiscal year ended September 30, 2016.This decrease2021. The increase was primarilydue to the items mentioned above.

The income tax expense for the fiscal year ended September 30, 2022 was $2.3 million and was due to an increased amount of debt payments applied to principal rather than interest.

Net Income (loss). Loss from continuing operations before income tax benefit was $468,000 for fiscal year 2017, compared to income from continuing operations before income tax expense of $6.1 million for fiscal year 2016. Please see “Major Projects with Losses” below for further details on the reason for the net loss for 2017. There was no income from discontinued operations for fiscal years 2017 and 2016.

Income tax benefit for fiscal year 2017 was $80,000 compared to income tax expense of $2.9 million for fiscal year 2016. The effective tax benefit rate for fiscal year 2017 was 17.2% as compared to an effective tax expense rate of 47.2% for fiscal year 2016.increase in taxable income. The income tax benefit infor the fiscal year 2017ended September 30, 2021, was due to($29,000).

The effective income tax rate for the loss from continuing operations beforefiscal year ended September 30, 2022 was 37.6%. The effective income taxes.tax rate for the fiscal year ended September 30, 2021, was (3.2%). Effective income tax rates are estimates and may vary from period to period due to changes in the amount of taxable income or loss, non-taxable and non-deductible expenses.

Accrued dividendsDividends on preferred stock for the fiscal years ended September 30, 20172022, and 20162021 were $309,000.$0 and $284,000, respectively. There will be no further dividends paid on preferred stock after the October 6, 2021 redemption of all the Company’s preferred stock.

The net lossNet income (loss) available to common shareholders was $700,000stockholders for the fiscal year ended September 30, 20172022 was $3.8 million compared to net income available to common shareholders of $2.9($1.2) million for the fiscal year ended September 30, 2016.

Major Projects with Losses

2021. The Company has two pipeline projects (“Project A” and “Project B”), both started in April 2017, that have recognized an estimated combined loss of $5.0 million at September 30, 2017. The Company believes the total amount of expected loss has been recorded at September 30, 2017.

Project A had an estimated contract value of $9.5 million to install 19,000 feet of 24” pipe, 3,400 feet of 16” pipe, and 600 feet of 8” pipe. At September 30, 2017, the Company had recognized a $3.1 million loss on this project. Project B had an estimated contract value of $4.5 million to install 14,600 feet of 16” steel pipe. At September 30, 2017, the Company had recognized a $1.9 million loss on this project. Losses on both projects are primarily due to daily production significantly below historical results. The inefficient productionincrease was due to a shortage of qualified labor during an extremely busy time in the pipeline industry and more inclement weather than was estimated for the projects. This led to greater labor expense and longer project schedules than was estimated on the projects. A summary of the projects is below:items mentioned above.