Energy Services of America Corporation | ||||
(Exact Name of Registrant as Specified in its Charter) |
Delaware | 20-4606266 | |||||
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
75 West 3rd Ave., Huntington, West Virginia | 25701 | |||||
(Address of Principal Executive Office) | (Zip Code) |
(304) 522-3868 | ||||
(Registrant’s Telephone Number including area code) |
Title of Class | Name of Each Exchange On Which Registered | ||||
Common Stock, par value $0.0001 per share | NYSE Amex Equities |
None | ||||
(Title of Class) |
Large Accelerated Filer o | Accelerated Filer o | Non-Accelerated Filer o | Smaller Reporting Company x |
(Do not check if a Smaller reporting Company) |
Energy Services of America Corporation | ||||
Annual Report On Form 10-K | ||||
For The Fiscal Year Ended | ||||
September 30, 2013 | ||||
Table of Contents | ||||
PART I | ||||
ITEM 1. | Business | 3 | ||
ITEM 1A. | Risk Factors | 9 | ||
ITEM 1B. | Unresolved Staff Comments | 12 | ||
ITEM 2. | Properties | 12 | ||
ITEM 3. | Legal Proceedings | 13 | ||
ITEM 4. | Mine Safety Disclosures | 13 | ||
PART II | ||||
ITEM 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 13 | ||
ITEM 6. | Selected Financial Data | 14 | ||
ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | ||
ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk | 29 | ||
ITEM 8. | Financial Statements and Supplementary Data | 29 | ||
ITEM 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure | 29 | ||
ITEM 9A. | Controls and Procedures | 29 | ||
ITEM 9B. | Other Information | 30 | ||
PART III | ||||
ITEM 10. | Directors, Executive Officers and Corporate Governance | 30 | ||
ITEM 11. | Executive Compensation | 36 | ||
ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 41 | ||
ITEM 13. | Certain Relationships and Related Transactions, and Director Independence | 42 | ||
ITEM 14. | Principal Accountant Fees and Services | 43 | ||
PART IV | ||||
ITEM 15. | Exhibits and Financial Statement Schedules | 44 | ||
Signatures | 46 |
ITEM 1. | Business | |
● | The installation, replacement and repairs of pipelines for the oil and natural gas industries. |
● | General electrical services for both power companies and various other industrial applications. |
● | The installation of water and sewer lines for various governmental agencies. |
● | Various other ancillary services related to the other services. |
3 |
4 |
Gross proceeds | $ | 8,105,230 | ||
Commission | (709,208 | ) | ||
Other auction expenses | (162,109 | ) | ||
Net proceeds | $ | 7,233,913 | ||
Book value of equipment | 5,325,916 | |||
Gain on sale | $ | 1,907,997 |
5 |
6 |
7 |
8 |
Risk Factors |
9 |
10 |
11 |
Unresolved Staff Comments |
Properties |
12 |
Legal Proceedings |
Mine Safety Disclosures |
None. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Fiscal 2012 | High | Low | Dividends | |||||||||
Quarter ended December 31, 2011 | $ | 3.25 | $ | 1.78 | $ | — | ||||||
Quarter ended March 31, 2012 | 3.83 | 2.65 | — | |||||||||
Quarter ended June 30, 2012 | 3.63 | 2.15 | — | |||||||||
Quarter ended September 30, 2012 | 2.33 | 1.08 | — |
Fiscal 2013 | High | Low | Dividends | |||||||||
Quarter ended December 31, 2012 | $ | 1.31 | $ | 0.51 | $ | — | ||||||
Quarter ended March 31, 2013 | 0.80 | 0.16 | — | |||||||||
Quarter ended June 30, 2013 | 1.10 | 0.21 | — | |||||||||
Quarter ended September 30, 2013 | 1.10 | 0.60 | — |
13 |
Shares purchased | Price per share | Aggregate purchase | ||||||||||
July 2013 | 300,000 | $ | 0.0001 | $ | 30.00 |
Selected Financial Data |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 |
15 |
Gross proceeds | $ | 8,105,230 | ||
Commission | (709,208 | ) | ||
Other auction expenses | (162,109 | ) | ||
Net proceeds | $ | 7,233,913 | ||
Book value of equipment | 5,325,916 | |||
Gain on sale | $ | 1,907,997 |
16 |
17 |
18 |
Year Ended September 30, | ||||||||
2013 | 2012 | |||||||
Amount | Amount | |||||||
(In Thousands) | (In Thousands) | |||||||
Revenues | $ | 108,820 | $ | 109,020 | ||||
Cost of revenues | 98,804 | 104,375 | ||||||
Gross profit | 10,016 | 4,645 | ||||||
Selling, general and administrative expenses | 8,048 | 9,856 | ||||||
Asset impairment | - | 32,737 | ||||||
Income (loss) from operations before taxes | 1,968 | (37,948 | ) | |||||
Interest income | 1 | 3 | ||||||
Interest expense | (1,740 | ) | (1,927 | ) | ||||
Gain on sale of assets | 531 | 25 | ||||||
Other income (expense) | (12 | ) | 3 | |||||
Income (loss) from continuing operations before income taxes | 748 | (39,844 | ) | |||||
Income tax expense (benefit) | (1,319 | ) | 1,551 | |||||
Net income (loss) from continuing operations | 2,067 | (41,395 | ) | |||||
Income (loss) from discontinued operations, net of tax benefit | 1,503 | (7,127 | ) | |||||
Net income (loss) | $ | 3,570 | $ | (48,522 | ) | |||
Weighted average shares outstanding-basic | 14,461,383 | 14,448,336 | ||||||
Weighted average shares outstanding-diluted | 14,923,255 | 14,448,336 | ||||||
Earnings (loss) per share from continuing operations-basic | $ | 0.143 | $ | (2.865 | ) | |||
Earnings (loss) per share from continuing operations-diluted | $ | 0.139 | $ | (2.865 | ) | |||
Earnings (loss) per share | $ | 0.247 | $ | (3.358 | ) | |||
Earnings (loss) per share | $ | 0.239 | $ | (3.358 | ) |
Year Ended September 30, | ||||||||
2013 | 2012 | |||||||
Amount | Amount | |||||||
(In Thousands) | (In Thousands) | |||||||
Revenues | $ | 2,103 | $ | 48,719 | ||||
Cost of revenues | 3,252 | 51,681 | ||||||
Gross loss | (1,149 | ) | (2,962 | ) | ||||
Selling, general and administrative expenses | 942 | 2,228 | ||||||
Asset impairment | - | 4,177 | ||||||
Loss from operations before taxes | (2,091 | ) | (9,367 | ) | ||||
Interest income | - | 1 | ||||||
Interest expense | (1 | ) | (5 | ) | ||||
Gain on sale of assets | 2,149 | 20 | ||||||
Other income (expense) | - | 136 | ||||||
Income (loss) from discontinued operations before income taxes | 57 | (9,215 | ) | |||||
Income tax benefit | (1,446 | ) - | (2,088 | ) | ||||
Net income (loss) from discontinued operations | $ | 1,503 | $ | (7,127 | ) |
19 |
20 |
12,000 ft 6” replacement and 14,000 ft 12” replacement | ||||||||||||||||||||||||
At Quarter Ended | ||||||||||||||||||||||||
9/30/2011 | 12/31/2011 | 3/31/2012 | 6/30/2012 | 9/30/2012 | 12/31/2012 | |||||||||||||||||||
Completed | ||||||||||||||||||||||||
Contract amount | $ | 8,612,000 | $ | 8,612,000 | $ | 9,100,000 | $ | 9,377,720 | $ | 9,647,650 | $ | 9,653,550 | ||||||||||||
Cost to date | 3,212,060 | 7,566,120 | 11,699,590 | 14,047,950 | 14,606,290 | 14,650,160 | ||||||||||||||||||
Est. costs to complete | 4,060,500 | 1,200,000 | 2,250,000 | 250,000 | 63,000 | - | ||||||||||||||||||
Est. costs at completion | 7,272,560 | 8,766,120 | 13,949,590 | 14,297,950 | 14,669,290 | 14,650,160 | ||||||||||||||||||
Est. profit (loss) | $ | 1,339,440 | $ | (154,120 | ) | $ | (4,849,590 | ) | $ | (4,920,230 | ) | $ | (5,021,640 | ) | $ | (4,996,610 | ) | |||||||
Percent complete | 44.2 | % | 86.3 | % | 83.9 | % | 98.3 | % | 99.6 | % | 100 | % |
For Quarter Ended | ||||||||||||||||||||||||
9/30/2011 | 12/31/2011 | 3/31/2012 | 6/30/2012 | 9/30/2012 | 12/31/2012 | |||||||||||||||||||
Completed | ||||||||||||||||||||||||
Earned revenue | $ | 3,803,648 | $ | 3,608,351 | $ | (562,000 | ) | $ | 2,277,720 | $ | 456,930 | $ | 68,900 | |||||||||||
Costs of revenue | 3,212,060 | 4,354,060 | 4,133,470 | 2,348,360 | 558,340 | 43,870 | ||||||||||||||||||
Gross profit (loss) | $ | 591,588 | $ | (745,709 | ) | $ | (4,695,470 | ) | $ | (70,640 | ) | $ | (101,410 | ) | $ | 25,030 |
21 |
49,400 ft of 24” pipe | ||||||||||||||||||||
At Quarter Ended | ||||||||||||||||||||
12/31/2011 | 3/31/2012 | 6/30/2012 | 9/30/2012 | 12/31/2012 | ||||||||||||||||
Completed | ||||||||||||||||||||
Contract amount | $ | 13,388,670 | $ | 18,946,437 | $ | 20,162,561 | $ | 21,174,380 | $ | 21,197,818 | ||||||||||
Cost to date | 876,092 | 11,066,099 | 21,715,318 | 24,730,308 | 24,805,555 | |||||||||||||||
Est. costs to complete | 11,977,031 | 7,673,385 | 926,944 | 25,000 | - | |||||||||||||||
Est. costs at completion | 12,853,123 | 18,739,484 | 22,642,262 | 24,755,308 | 24,805,555 | |||||||||||||||
Est. profit (loss) | $ | 535,547 | $ | 206,953 | $ | (2,479,701 | ) | $ | (3,580,928 | ) | $ | (3,607,737 | ) | |||||||
Percent complete | 6.8 | % | 59.1 | % | 95.9 | % | 99.9 | % | 100 | % | ||||||||||
For Quarter Ended | ||||||||||||||||||||
12/31/2011 | 3/31/2012 | 6/30/2012 | 9/30/2012 | 12/31/2012 | ||||||||||||||||
Completed | ||||||||||||||||||||
Earned revenue | $ | 912,596 | $ | 10,275,714 | $ | 8,047,307 | $ | 1,913,764 | $ | 48,438 | ||||||||||
Costs of revenue | 876,092 | 10,190,007 | 10,649,219 | 3,014,990 | 75,247 | |||||||||||||||
Gross profit (loss) | $ | 36,504 | $ | 85,707 | $ | (2,601,912 | ) | $ | (1,101,226 | ) | $ | (26,809 | ) |
22 |
23 |
2014 | $ | 15,413,225 | ||
2015 | 512,556 | |||
2016 | 250,085 | |||
2017 | 226,043 | |||
2018 | 56,165 | |||
Thereafter | 13,871 | |||
Total | $ | 16,471,945 |
24 |
25 |
26 |
27 |
28 |
Quantitative and Qualitative Disclosures About Market Risk |
Financial Statements and Supplementary Data |
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure |
Controls and Procedures |
29 |
/s/ Douglas V. Reynolds | ||
Douglas V. Reynolds | ||
Chief Executive Officer | ||
/s/ Charles P. Crimmel | ||
Charles P. Crimmel | ||
Chief Financial Officer |
Other Information |
Directors, Executive Officers and Corporate Governance |
30 |
31 |
32 |
● | has the highest personal and professional ethics and integrity and whose values are compatible with ours; |
33 |
● | has experiences and achievements that have given him or her the ability to exercise and develop good business judgment; |
● | is willing to devote the necessary time to the work of the Board of Directors and its committees, which includes being available for board and committee meetings; |
● | is familiar with the communities in which we operate and/or is actively engaged in community activities; |
● | is involved in other activities or interests that do not create a conflict with his or her responsibilities to us and our stockholders; and |
● | has the capacity and desire to represent the balanced, best interests of our stockholders as a group, and not primarily a special interest group or constituency. |
● | a statement that the writer is a stockholder and is proposing a candidate for consideration by our independent directors; |
● | the name and address of the stockholder as they appear on the our books and number of shares of our common stock that are owned beneficially by such stockholder (if the stockholder is not a holder of record, appropriate evidence of the stockholder’s ownership will be required); |
● | the name, address and contact information for the candidate, and the number of shares of our common stock that are owned by the candidate (if the candidate is not a holder of record, appropriate evidence of the stockholder’s ownership should be provided); |
● | a statement of the candidate’s business and educational experience; |
● | such other information regarding the candidate as would be required to be included in the proxy statement pursuant to Securities and Exchange Commission Regulation 14A; |
● | a statement detailing any relationship between the candidate and Energy Services of America Corporation; |
● | a statement detailing any relationship between the candidate and any customer, supplier or competitor of Energy Services of America Corporation; |
34 |
● | detailed information about any relationship or understanding between the proposing stockholder and the candidate; and |
● | a statement that the candidate is willing to be considered and willing to serve as a director if nominated and elected. |
● | forward the communication to the director or directors to whom it is addressed; |
● | attempt to handle the inquiry directly, i.e. where it is a request for information about us or it is a stock-related matter; or |
● | not forward the communication if it is primarily commercial in nature, relates to an improper or irrelevant topic, or is unduly hostile, threatening, illegal or otherwise inappropriate. |
35 |
Executive Compensation |
● | provide pay for performance utilizing short and long-term incentives; |
● | align executive interests with those of stockholders through appropriate focus on stock based compensation; |
● | be competitive with the marketplace within which we compete for talent; |
● | ensure compensation programs reward performance while appropriately managing risk; and |
● | enable us to attract, motivate, and retain top talent. |
● | Base salaries are targeted at market median, but allow for recognition of each individual’s role, contribution, performance, and experience. |
36 |
● | Short-term incentive targets reflect market median although actual payouts will vary based on our performance relative to company-wide, team and individual contributions toward our strategic plan. |
● | Long-term incentive awards are intended to provide significant focus on long-term performance through stock-based compensation. Long-term compensation is designed to balance multiple objectives: (1) reward for long-term, sustained performance and stock price growth; (2) align executive interests with stockholders through stock ownership; and (3) provide powerful retention of our highest performers through vesting periods. During 2010, the committee made grants in the form of stock options, restricted stock and performance shares to support these objectives. |
● | Retirement, health, life insurance, disability, severance and other perquisites and benefits are provided, but their focus and value are intentionally set to be conservatively competitive in order to attract and retain talented individuals. |
Summary Compensation Table | ||||||||||||||||||||||
All other | ||||||||||||||||||||||
Stock Awards | compensation | |||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | (1) | (2) | Total | ||||||||||||||||
Edsel R. Burns | 2013 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
President and Chief Executive | 2012 | $ | 151,000 | $ | — | $ | __ | $ | 20,260 | $ | 171,260 | |||||||||||
Officer | ||||||||||||||||||||||
Harley F. Mooney | 2013 | $ | 23,077 | $ | — | $ | — | $ | — | $ | 23,077 | |||||||||||
President and Chief Executive | 2012 | $ | 5,769 | $ | — | $ | — | $ | — | $ | 5,769 | |||||||||||
Officer | ||||||||||||||||||||||
Douglas V. Reynolds | 2013 | $ | 61,846 | $ | — | $ | — | $ | — | $ | 61,846 | |||||||||||
President and Chief Executive | ||||||||||||||||||||||
Officer | ||||||||||||||||||||||
Larry Blount | 2013 | $ | 125,000 | $ | — | $ | — | $ | 8,185 | $ | 133,185 | |||||||||||
Secretary/Treasurer and Chief | 2012 | $ | 125,000 | $ | — | $ | — | $ | 9,504 | $ | 134,504 | |||||||||||
Financial Officer |
(1) | This is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. |
(2) | Other compensation for 2013 includes 401(k) match of $ 649 and vehicle rental of $7,536 for Mr. Blount. Other compensation for 2012 includes Director fees of $11,000 for Mr. Burns, 401(k) match of $2,352 for Mr. Burns and $1,968 for Mr. Blount and vehicle rental of $6,908 for Mr. Burns and $7,536 for Mr. Blount. |
37 |
38 |
39 |
Director Compensation | ||||
Name | Fees earned or paid in cash ($) | Stock Awards ($) | All other compensation ($) | Total ($) |
Jack M. Reynolds | — | — | — | — |
Neal W. Scaggs | — | — | — | — |
Joseph L. Williams | — | — | — | — |
Keith Molihan | — | — | — | — |
Nester S. Logan | — | — | — | — |
Samuel G. Kapourales | — | — | — | — |
Marshall T. Reynolds | — | — | — | — |
40 |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Name and Address of Beneficial Owners | Amount of Shares Owned and Nature of Beneficial Ownership(1) | Percent of Shares of Common Stock Outstanding | ||||
All Directors, Nominees and Executive Officers as a Group (9 persons) | 4,646,396 | 32.01 | % | |||
Principal Stockholders: | ||||||
Marshall T. Reynolds 75 West 3rd Ave., Huntington, West Virginia 25701 | 1,712,773 | 11.80 | % | |||
Douglas V. Reynolds 75 West 3rd Ave., Huntington, West Virginia 25701 | 1,259,440 | 8.68 | % |
(1) | In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table of any shares of common stock if he has sole or shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the date as of which beneficial ownership is being determined. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares. Includes all shares held directly as well as by spouses and minor children, in trust and other indirect ownership, over which shares the named individuals effectively exercise sole or shared voting and investment power. |
41 |
Names and Address (1) | Age(2) | Positions Held | Director Since | Current Term to Expire | Shares of Common Stock Beneficially Owned on Record Date (3) | Percent of Class | ||||||||||
Directors/Nominees: | ||||||||||||||||
Marshall T. Reynolds | 77 | Chairman and Director | 2006 | 2014 | 1,712,773 | 11.80% | ||||||||||
Larry A.Blount, retired November 1, 2013 | 64 | Secretary/Treasurer, Chief Financial Officer | n/a | n/a | 9,000 | 0.06 | ||||||||||
Jack M. Reynolds | 48 | Director | 2006 | 2014 | 441,549 | 3.04 | ||||||||||
Neal W. Scaggs | 77 | Director | 2006 | 2014 | 403,540 | 2.78 | ||||||||||
Joseph L. Williams | 68 | Director | 2006 | 2014 | 119,049 | 0.82 | ||||||||||
Keith Molihan | 71 | Director | 2008 | 2014 | 2,500 | 0.02 | ||||||||||
Douglas V. Reynolds | 37 | Chief Executive Officer | 2008 | 2014 | 1,259,440 | 8.68 | ||||||||||
Nester S. Logan | 74 | Director | 2010 | 2014 | 333,111 | 2.29 | ||||||||||
Samuel G. Kapourales | 78 | Director | 2010 | 2014 | 365,434 | 2.52 | ||||||||||
Charles P. Crimmel | 40 | Chief Financial Officer | n/a | n/a | - | - | ||||||||||
All Directors and Executive Officers as a Group (9 persons) | 4,646,396 | 32.01% |
* | Less than 1%. |
(1) | The mailing address for each person listed is 75 West 3rd Ave., Huntington, WV 25701. |
(2) | As of September 30, 2013. |
(3) | In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table of any shares of common stock if he has sole or shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the date as of which beneficial ownership is being determined. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares. Includes all shares held directly as well as by spouses and minor children, in trust and other indirect ownership, over which shares the named individuals effectively exercise sole or shared voting and investment power. |
Certain Relationships and Related Transactions, and Director Independence |
42 |
Principal Accountant Fees and Services |
43 |
Exhibits and Financial Statement Schedules |
The exhibits and financial statement schedules filed as a part of this Form 10-K are as follows: | |||
(a)(1) | Consolidated Financial Statements | ||
Energy Services of America Corporation | |||
Report of Independent Registered Public Accounting Firm | F-1 | ||
Balance Sheets, September 30, 2012 and September 30, 2013 | F-2 | ||
Statements of Income, Years Ended September 30, 2012 and September 30, 2013 | F-3 | ||
Statements of Changes in Shareholders’ Equity, Years Ended September 30, 2012 and September 30, 2013 | F-4 | ||
Statements of Cash Flows, Years Ended September 30, 2012 and September 30, 2013 | F-5 | ||
Notes to Financial Statements. | F-6 | ||
(a)(2) | Financial Statement Schedules | ||
No financial statement schedules are filed because the required information is not applicable or is included in the consolidated financial statements or related notes. | |||
(a)(3) | Exhibits |
44 |
Exhibit No. | Description |
3.1 | Amended and Restated Certificate of Incorporation.(1) |
3.2 | Bylaws.(1) |
3.3 | Certificate of Amendment to the Registrant’s Certificate of Incorporation.(1) |
10.2 | Form of Investment Management Trust Agreement between Continental Stock Transfer & Trust Company and the Registrant.(1) |
10.3 | Form of Stock Escrow Agreement between the Registrant, Continental Stock Transfer & Trust Company and the Initial Stockholders.(1) |
10.4 | Form of Letter Agreement between Chapman Printing Co. and the Registrant regarding administrative support.(1) |
10.5 | Advance Agreement between the Registrant and Marshall T. Reynolds, dated March 31, 2006.(1) |
10.6 | Form of Amended Registration Rights Agreement among the Registrant and the Initial Stockholders.(1) |
10.8 | Employment Agreement between James E. Shafer and the Registrant (2) |
10.9.1 | Energy Services of America Corporation Employee Stock Purchase Plan (3) |
10.9.2 | Energy Services of America Corporation Long Term Incentive Plan (4) |
10.10 | Change in Control Agreement between Registrant and Larry Blount (5) |
10.11 | Management Incentive Plan (5) |
Forebearance Agreement (6) |
14 | Code of Ethics (1) |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE | XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document |
(1) | Incorporated by reference to the Registration Statement on Form S-1 of Energy Services of America Corp. (file no. 333-133111), originally filed with the Securities and Exchange Commission on April 7, 2006, as amended. |
(2) | Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 24, 2008. |
(3) | Filed as Appendix A to the Schedule 14-A filed with the Securities and Exchange Commission on October 16, 2008. |
(4) | Filed as Appendix A to the Schedule 14-A filed with the Securities and Exchange Commission on July 2, 2010. |
(5) | Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 21, 2010. |
(6) | Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities Exchange Commission on November 29, 2012. |
(b) | The exhibits listed under (a)(3) above are filed herewith. |
(c) | Not applicable. |
45 |
ENERGY SERVICES OF AMERICA CORPORATION | |||
Date: December 20, 2013 | By: | /s/ Douglas V. Reynolds | |
Douglas V. Reynolds | |||
Chief Executive Officer | |||
(Duly Authorized Representative) |
Name | Position | Date | |||
By | /s/ Marshall T. Reynolds | Chairman of the Board | December 20, 2013 | ||
Marshall T. Reynolds | |||||
By | /s/ Jack Reynolds | Director | December 20, 2013 | ||
Jack R. Reynolds | |||||
By | /s/ Charles P. Crimmel | Chief Financial Officer | December 20, 2013 | ||
Charles P. Crimmel | |||||
By | /s/ Neal W. Scaggs | Director | December 20, 2013 | ||
Neal W. Scaggs | |||||
By | /s/ Joseph L. Williams | Director | December 20, 2013 | ||
Joseph L. Williams | |||||
By | /s/ Keith Molihan | Director | December 20, 2013 | ||
Keith Molihan | |||||
By | /s/ Nester S. Logan | Director | December 20, 2013 | ||
Nester S.Logan | |||||
By | /s/ Samuel G. Kapourales | Director | December 20, 2013 | ||
Samuel G. Kapourales | |||||
By | /s/ Douglas V. Reynolds | President and Chief Executive Officer, and Director | December 20, 2013 | ||
Douglas V. Reynolds |
46 |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors
Energy Services of America Corporation
Huntington, West Virginia
We have audited the accompanying consolidated balance sheets of Energy Services of America Corporation and subsidiaries as of September 30, 2013 and 2012, and the related consolidated statements of income, stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Energy Services of America Corporation and subsidiaries as of September 30, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 3 and 11 to the financial statements, the Company has suffered recurring losses from operations. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters also are described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 4 to the financial statements, the Company liquidated the assets of one of their subsidiaries, S.T. Pipeline, on May 14, 2013.
ARNETT FOSTER TOOTHMAN PLLC | |
Charleston, West Virginia
December 20, 2013
gfr/03096/audit/corr/opinion
101 Washington Street East │P.O. Box 2629
Charleston, WV 25329
304.346.0441 │ 800.642.3601
F-1 |
ENERGY SERVICES OF AMERICA CORPORATION | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
As of September 30, 2013 and 2012 | ||||||||
Assets | 2013 | 2012 | ||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 6,152,382 | $ | 1,398,301 | ||||
Accounts receivable-trade | 16,774,884 | 15,632,300 | ||||||
Allowance for doubtful accounts | (236,657 | ) | (240,071 | ) | ||||
Retainages receivable | 2,666,066 | 1,713,702 | ||||||
Other receivables | 271,572 | 277,933 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 9,034,956 | 10,856,769 | ||||||
Deferred tax asset | 1,809,684 | 1,250,154 | ||||||
Prepaid expenses and other | 2,191,551 | 2,005,233 | ||||||
Assets of discontinued operations | 2,274,079 | 7,808,451 | ||||||
Total Current Assets | 40,938,517 | 40,702,772 | ||||||
Property, plant and equipment, at cost | 28,801,218 | 29,060,709 | ||||||
less accumulated depreciation | (19,198,168 | ) | (16,485,112 | ) | ||||
Assets of discontinued operations, net | 155,833 | 6,477,380 | ||||||
9,758,883 | 19,052,977 | |||||||
Total Assets | $ | 50,697,400 | $ | 59,755,749 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Current maturities of long-term debt | $ | 5,280,558 | $ | 10,118,907 | ||||
Lines of credit and short term borrowings | 10,132,667 | 18,516,276 | ||||||
Accounts payable | 6,367,120 | 8,171,650 | ||||||
Accrued expenses and other current liabilities | 3,422,385 | 3,177,481 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 3,697,887 | 1,305,559 | ||||||
Income taxes payable | 384,303 | - | ||||||
Liabilities of discontinued operations | 1,370,465 | 2,149,435 | ||||||
Total Current Liabilities | 30,655,385 | 43,439,308 | ||||||
Long-term debt, less current maturities | 1,058,720 | 1,623,771 | ||||||
Long-term debt, payable to shareholder | - | 1,223,325 | ||||||
Deferred income taxes payable | 3,283,124 | 4,426,751 | ||||||
Liabilities of discontinued operations | 756,983 | 2,601,229 | ||||||
Total Liabilities | 35,754,212 | 53,314,384 | ||||||
Stockholders’ equity | ||||||||
Preferred stock, $.0001 par value | ||||||||
Authorized 1,000,000 shares, 196 issued | - | - | ||||||
Common stock, $.0001 par value | ||||||||
Authorized 50,000,000 shares | ||||||||
Issued and outstanding 14,514,836 shares for 2013 and | ||||||||
14,458,836 shares for 2012 | 1,451 | 1,446 | ||||||
Additional paid in capital | 61,039,262 | 56,107,650 | ||||||
Retained earnings (deficit) | (46,097,525 | ) | (49,667,731 | ) | ||||
Total Stockholders’ equity | 14,943,188 | 6,441,365 | ||||||
Total liabilities and stockholders’ equity | $ | 50,697,400 | $ | 59,755,749 |
F-2 |
ENERGY SERVICES OF AMERICA CORPORATION | ||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||
For the years ended September 30, 2013 and 2012 | ||||||||
2013 | 2012 | |||||||
Revenue | $ | 108,820,315 | $ | 109,019,856 | ||||
Cost of revenues | 98,804,399 | 104,375,422 | ||||||
Gross profit | 10,015,916 | 4,644,434 | ||||||
Selling and administrative expenses | 8,047,951 | 9,856,117 | ||||||
Asset Impairment | - | 32,736,658 | ||||||
Income (loss) from operations | 1,967,965 | (37,948,341 | ) | |||||
Other income (expense) | ||||||||
Interest income | 1,368 | 2,534 | ||||||
Other nonoperating income (expense) | (12,751 | ) | 3,735 | |||||
Interest expense | (1,739,689 | ) | (1,927,325 | ) | ||||
Gain on sale of equipment | 531,270 | 25,472 | ||||||
(1,219,802 | ) | (1,895,584 | ) | |||||
Income (loss) from continuing operations before income taxes | 748,163 | (39,843,925 | ) | |||||
Income tax expense (benefit) | (1,318,854 | ) | 1,551,495 | |||||
Income (loss) from continuing operations | 2,067,017 | (41,395,420 | ) | |||||
Income (loss) from discontinued operations | ||||||||
net of tax benefit of $1.45 million and $2.09 million in 2013 and 2012 respectively | 1,503,189 | (7,126,757 | ) | |||||
Net income (loss) | $ | 3,570,206 | $ | (48,522,177 | ) | |||
Weighted average shares outstanding-basic | 14,461,383 | 14,448,336 | ||||||
Weighted average shares-diluted | 14,923,255 | 14,448,336 | ||||||
Earnings (loss) per share from continuing operations | $ | 0.143 | $ | (2.865 | ) | |||
Earnings (loss) per share from continuing operations-diluted | $ | 0.139 | $ | (2.865 | ) | |||
Earnings (loss) per share | $ | 0.247 | $ | (3.358 | ) | |||
Earnings (loss) per share-diluted | $ | 0.239 | $ | (3.358 | ) |
F-3 |
ENERGY SERVICES OF AMERICA CORPORATION | ||||||||||||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
For the years ended September 30, 2013 and 2012 | ||||||||||||||||||||
Total | ||||||||||||||||||||
Common Stock | Additional Paid | Retained | Stockholders’ | |||||||||||||||||
Shares | Amount | in Capital | Earnings (Deficit) | Equity | ||||||||||||||||
Balance at September 30, 2011 | 14,446,836 | $ | 1,445 | $ | 56,059,825 | $ | (1,145,554 | ) | $ | 54,915,716 | ||||||||||
Vested stock grants | 12,000 | 1 | (1 | ) | - | - | ||||||||||||||
Share-based compensation expense | - | - | 47,826 | - | 47,826 | |||||||||||||||
Net loss | - | - | - | (48,522,177 | ) | (48,522,177 | ) | |||||||||||||
Balance at September 30, 2012 | 14,458,836 | $ | 1,446 | $ | 56,107,650 | $ | (49,667,731 | ) | $ | 6,441,365 | ||||||||||
Share-based compensation expense | - | - | 31,648 | - | 31,648 | |||||||||||||||
Private placement of preferred stock | 4,899,965 | - | 4,899,965 | |||||||||||||||||
Common stock purchased | (300,000 | ) | (30 | ) | - | - | (30 | ) | ||||||||||||
Common stock issued from private placement | 350,000 | 34 | - | - | 34 | |||||||||||||||
Vested stock grants | 6,000 | 1 | (1 | ) | - | - | ||||||||||||||
Net Income | - | - | - | 3,570,206 | 3,570,206 | |||||||||||||||
Balance at September 30, 2013 | 14,514,836 | $ | 1,451 | $ | 61,039,262 | $ | (46,097,525 | ) | $ | 14,943,188 |
F-4 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
For the years ended September 30, 2013 and 2012 | ||||||||
2013 | 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 3,570,206 | $ | (48,522,177 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation expense | 4,239,374 | 5,848,045 | ||||||
Gain on sale/disposal of equipment | (2,680,668 | ) | (45,930 | ) | ||||
Provision for bad debts | 300,000 | - | ||||||
Provision for deferred taxes | (3,148,663 | ) | (536,248 | ) | ||||
Share-based compensation expense | 31,648 | 47,826 | ||||||
Goodwill Impairment | - | 36,914,021 | ||||||
Decrease in contracts receivable | 1,675,299 | 621,387 | ||||||
(Increase) decrease in retainage receivable | (478,851 | ) | 8,005,760 | |||||
(Increase) decrease in other receivables | 46,497 | (25,541 | ) | |||||
Decrease in cost and estimated earnings in excess of billings on uncompleted contracts | 2,225,298 | 1,364,334 | ||||||
Increase in prepaid expenses | (165,037 | ) | (115,069 | ) | ||||
Increase (decrease) in accounts payable | (2,192,616 | ) | 1,316,874 | |||||
Decrease in accrued expenses | (82,980 | ) | (1,684,213 | ) | ||||
Increase (decrease) in billings in excess of cost and estimated earnings on uncompleted contracts | 2,329,328 | (1,554,983 | ) | |||||
Increase in income taxes payable | 384,303 | - | ||||||
Net cash provided by operating activities | 6,053,138 | 1,634,086 | ||||||
Cash flows from investing activities: | ||||||||
Investment in property & equipment | (902,172 | ) | (1,341,811 | ) | ||||
Proceeds from sales of property and equipment | 8,868,573 | 241,856 | ||||||
Net cash used in investing activities | 7,966,401 | (1,099,955 | ) | |||||
Cash flows from financing activities: | ||||||||
Repayment of loans from shareholders | (1,223,325 | ) | (1,176,675 | ) | ||||
Proceeds from private placement of preferred stock | 4,899,965 | - | ||||||
Par value of common stock issued to preferred shareholders | 34 | - | ||||||
Treasury stock purchased by company | (30 | ) | - | |||||
Borrowings on lines of credit and short term debt, net of (repayments) | (8,383,609 | ) | 4,640,553 | |||||
Principal payments on long term debt | (5,634,413 | ) | (4,301,584 | ) | ||||
Net cash used in financing activities | (10,341,378 | ) | (837,706 | ) | ||||
Increase (decrease) in cash and cash equivalents | 3,678,161 | (303,575 | ) | |||||
Cash beginning of period | 2,661,721 | 2,965,296 | ||||||
Cash end of period | $ | 6,339,882 | $ | 2,661,721 | ||||
Supplemental schedule of noncash investing and financing activities: | ||||||||
Insurance premiums financed | $ | 2,784,193 | $ | 2,867,738 | ||||
Purchases of property & equipment under financing agreements | $ | 231,013 | $ | 499,870 | ||||
Supplemental disclosures of cash flows information: | ||||||||
Cash paid during the year for: | ||||||||
Interest | $ | 1,830,357 | $ | 1,834,277 | ||||
Insurance premiums financed | $ | 3,079,319 | $ | 2,351,462 |
F-5 |
F-6 |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and loss during the reporting period. Actual results could differ materially from those estimates. |
F-7 |
F-8 |
F-9 |
F-10 |
F-11 |
F-12 |
F-13 |
Years Ended September 30, | ||||||||
2013 | 2012 | |||||||
(In Millions) | (In Millions) | |||||||
Sales | $ | 2.10 | $ | 48.72 | ||||
Cost of Revenues | 3.25 | 51.68 | ||||||
Gross loss | (1.15 | ) | (2.96 | ) | ||||
Selling & administrative expenses | 0.94 | 2.23 | ||||||
Asset impairment | -0- | 4.18 | ||||||
Loss from operations | (2.09 | ) | (9.37 | ) | ||||
Other income | -0- | 0.13 | ||||||
Gain on sale of equipment | 2.15 | 0.02 | ||||||
Income (loss) before tax | 0.06 | (9.22 | ) | |||||
Income tax benefit | (1.44 | ) | (2.09 | ) | ||||
Net income (loss) | $ | 1.50 | $ | (7.13 | ) |
At September 30, | ||||||||
2013 | 2012 | |||||||
Accounts receivable, net | $ | (268 | ) | $ | 2,853 | |||
Costs in excess of billings | - | 403 | ||||||
Retainages receivable | 291 | 764 | ||||||
Deferred tax asset | 2,042 | 2,440 | ||||||
Prepaid and other current assets | 210 | 1,348 | ||||||
Assets of discontinued operations-current | 2,275 | 7,808 | ||||||
Property, plant, and equipment, net | 156 | 6,477 | ||||||
Total assets of discontinued operations | 2,431 | 14,285 | ||||||
Accounts payable | 1,357 | 1,745 | ||||||
Billings in excess of cost | - | 63 | ||||||
Accrued expenses and other current liabilities | 13 | 341 | ||||||
Liabilities of discontinued operations-current | 1,370 | 2,149 | ||||||
Liabilities of discontinued operations-long term | 757 | 2,601 | ||||||
Total liabilities of discontinued operations | 2,127 | 4,750 | ||||||
Net assets | $ | 304 | $ | 9,535 |
F-14 |
Twelve Months Ended | Twelve Months Ended | |||||||
Cash Flows from operating activities: | September 30, 2013 | September 30, 2012 | ||||||
Net income (loss) | $ | 1,503,189 | $ | (7,126,757 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation expense | 438,220 | 1,806,353 | ||||||
Provision for bad debts | 300,000 | - | ||||||
Gain loss on sale/disposal of equipment | (2,149,398 | ) | (20,458 | ) | ||||
Provision for deferred taxes | (1,445,506 | ) | (2,155,714 | ) | ||||
Goodwill impairment | - | 4,177,363 | ||||||
Decrease in contracts receivable | 2,821,297 | 3,431,517 | ||||||
Decrease in retainage receivable | 473,513 | 2,643,563 | ||||||
(Increase) decrease in other receivables | 40,136 | (29,523 | ) | |||||
Decrease in cost and estimated earnings in excess of billings on uncompleted contracts | 403,485 | 3,138,225 | ||||||
Decrease in prepaid expenses | 21,281 | 35,207 | ||||||
Decrease in accounts payable | (388,086 | ) | (1,448,168 | ) | ||||
Decrease in accrued expenses | (327,884 | ) | (1,888,125 | ) | ||||
Decrease in billings in excess of costs and estimated earnings on uncompleted contracts | (63,000 | ) | (425,977 | ) | ||||
Advance to parent | (10,735,892 | ) | (1,130,822 | ) | ||||
Net cash provided by (used in) operating activities | (9,108,645 | ) | 1,006,684 | |||||
Cash flows from investing activities: | ||||||||
Proceeds from sales of property and equipment | 8,032,725 | 83,722 | ||||||
Investment in property and equipment | - | (379,575 | ) | |||||
Net cash provided by (used in) investing activities | 8,032,725 | (295,853 | ) | |||||
Cash flows from financing activities: | ||||||||
Principle payments on long term debt | - | (299,232 | ) | |||||
Net cash used in financing activities | - | (299,232 | ) | |||||
Increase (decrease) in cash and cash equivalents | (1,075,920 | ) | 411,599 | |||||
Cash beginning of period | 1,263,420 | 851,821 | ||||||
Cash end of period | $ | 187,500 | $ | 1,263,420 | ||||
Supplemental schedule of noncash investing and financing activities: | ||||||||
$ | - | $ | - | |||||
Supplemental disclosures of cash flows information: | ||||||||
Cash paid during the year for: | ||||||||
Interest | $ | 526 | $ | 4,572 |
F-15 |
Year Ended September 30, | ||||||||
2013 | 2012 | |||||||
Balance at beginning of year | $ | -0- | $ | 36,914,021 | ||||
Impairment | -0- | 36,914,021 | ||||||
Balance at end of year | $ | -0- | $ | -0- |
Year Ended September 30, | ||||||||
2013 | 2012 | |||||||
Continuing Operations | ||||||||
Balance at beginning of year | $ | 240,071 | $ | 278,339 | ||||
Charged to expense | -0- | -0- | ||||||
Deductions for uncollectible receivables written off, net of recoveries | (3,414 | ) | (38,268 | ) | ||||
Balance at end of year | $ | 236,657 | $ | 240,071 | ||||
Year Ended September 30, | ||||||||
2013 | 2012 | |||||||
Discontinued Operations | ||||||||
Balance at beginning of year | $ | -0- | $ | -0- | ||||
Charged to expense | 300,000 | -0- | ||||||
Deductions for uncollectible receivables written off, net of recoveries | -0- | -0- | ||||||
Balance at end of year | $ | 300,000 | $ | -0- |
F-16 |
Year Ended September 30, | ||||||||
2013 | 2012 | |||||||
Costs incurred on contracts in progress | $ | 159,962,769 | $ | 177,189,987 | ||||
Estimated earnings, net of estimated losses | 3,929,091 | 10,229,134 | ||||||
163,891,860 | 187,419,121 | |||||||
Less Billings to date | 158,554,791 | 177,867,911 | ||||||
$ | 5,337,069 | $ | 9,551,210 | |||||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 9,034,956 | $ | 10,856,769 | ||||
Less Billings in excess of costs and estimated earnings on uncompleted contracts | 3,697,887 | 1,305,559 | ||||||
$ | 5,337,069 | $ | 9,551,210 |
9. PROPERTY AND EQUIPMENT
Year Ended September 30, | ||||||||
2013 | 2012 | |||||||
Land | $ | 777,231 | $ | 777,231 | ||||
Buildings and leasehold improvements | 308,178 | 512,528 | ||||||
Operating equipment and vehicles | 27,579,586 | 40,710,349 | ||||||
Office equipment, furniture and fixtures | 411,223 | 440,027 | ||||||
29,076,218 | 42,440,135 | |||||||
Less Accumulated Depreciation and Amortization | 19,317,335 | 23,387,158 | ||||||
Property and equipment net | $ | 9,758,883 | $ | 19,052,977 |
F-17 |
2013 | 2012 | |||||||
Note payable to bank, due in monthly installments of $5,000, including interest at 6.75%, final payment due June 2017, secured by real estate, vehicles, and equipment. | $ | 216,823 | $ | 249,497 | ||||
Notes payable to finance companies, due in monthly installments totaling $301,892, including interest ranging from 1.0% to 23.58%, final payments due October 2013 through June 2019, secured by equipment. | 1,944,718 | 2,610,841 | ||||||
Notes payable to shareholder, interest rate at prime, note matures in August of 2014. | - | 1,223,325 | ||||||
Line of credit payable to bank, monthly interest at 6.5%, final payment due by May 31, 2014, secured by accounts receivable and equipment. | 9,911,337 | 18,000,000 | ||||||
Note payable to bank, due in monthly installments of $221,000, Including interest at 6.5%, final payment due July 2016, secured by equipment. | 4,399,067 | 8,882,340 | ||||||
16,471,945 | 30,966,003 | |||||||
Less Current Maturities | 15,413,225 | 28,118,907 | ||||||
Total Long term debt | $ | 1,058,720 | $ | 2,847,096 |
F-18 |
2014 | $ | 15,413,225 | |||
2015 | 512,556 | ||||
2016 | 250,085 | ||||
2017 | 226,043 | ||||
2018 | 56,165 | ||||
Thereafter | 13,871 | ||||
$ | 16,471,945 |
F-19 |
Gross proceeds | $ | 8,105,230 | ||
Commission | (709,208 | ) | ||
Other auction expenses | (162,109 | ) | ||
Net proceeds | $ | 7,233,913 | ||
Book value of equipment | 5,325,916 | |||
Gain on sale | $ | 1,907,997 |
F-20 |
F-21 |
Year Ended September 30, | ||||||||||
2013 | 2012 | |||||||||
Federal | Current | $ | (252,411 | ) | $ | -0- | ||||
Deferred | (2,628,386 | ) | (455,811 | ) | ||||||
Total | (2,880,797 | ) | (455,811 | ) | ||||||
State | Current | 580,270 | -0- | |||||||
Deferred | (463,833 | ) | (80,437 | ) | ||||||
Total | 116,437 | (80,437 | ) | |||||||
Total income tax benefit | $ | (2,764,360 | ) | (536,248 | ) |
Year Ended September 30, | ||||||||
2013 | 2012 | |||||||
Statutory rate | 34.00 | % | (34.00 | )% | ||||
Goodwill | -0- | 19.57 | ||||||
Meals | 10.00 | 0.73 | ||||||
Valuation allowance | (401.44 | ) | 12.72 | |||||
State Income Taxes | 14.40 | (0.11 | ) | |||||
Effective tax rate | (343.04 | )% | (1.09 | )% |
F-22 |
Year Ended September 30, | ||||||||
Current Deferred Tax Assets | 2013 | 2012 | ||||||
Net operating loss carryover | $ | 4,993,535 | $ | 7,831,368 | ||||
Other deferred assets | 3,231,199 | 3,246,856 | ||||||
Less valuation allowance | (3,493,535 | ) | (6,387,815 | ) | ||||
4,731,199 | 4,690,409 | |||||||
Continuing operations | 2,689,684 | 2,250,156 | ||||||
Discontinued operations | 2,041,515 | 2,440,253 | ||||||
Total current deferred income tax assets | $ | 4,731,199 | $ | 4,690,409 | ||||
Current Deferred Tax Liabilities | ||||||||
Contract Claims | $ | 880,000 | $ | 1,000,000 | ||||
Continuing operations | 880,000 | 1,000,000 | ||||||
Discontinued operations | -0- | -0- | ||||||
Total current deferred income tax liabilities | $ | 880,000 | $ | 1,000,000 | ||||
Long Term Deferred Tax Liabilities | ||||||||
Property, Plant and Equipment | $ | 2,983,354 | $ | 6,095,336 | ||||
Others | 1,056,753 | 932,644 | ||||||
4,040,107 | 7,027,980 | |||||||
Continuing operations | 3,283,124 | 4,426,750 | ||||||
Discontinued operations | 756,983 | 2,601,230 | ||||||
Total long term deferred income tax liabilities | $ | 4,040,107 | $ | 7,027,980 |
F-23 |
Year Ended September 30, | ||||||||
2013 | 2012 | |||||||
Net Income (loss) from continuing operations | $ | 2,067,017 | $ | (41,395,420 | ) | |||
Net Income (loss) from discontinued operations | 1,503,189 | (7,126,757 | ) | |||||
Weighted average shares outstanding basic | 14,461,383 | 14,448,336 | ||||||
Effect of dilutive securities: | ||||||||
Convertible preferred shares | 461,872 | -0- | ||||||
Restricted stock grants | -0- | -0- | ||||||
Weighted average shares outstanding diluted | 14,923,255 | 14,448,336 | ||||||
Earnings (loss) per share for continuing operations-basic | $ | 0.143 | $ | (2.865 | ) | |||
Earnings (loss) per share for continuing operations-diluted | $ | 0.139 | $ | (2.865 | ) | |||
Total earnings (loss) per share-basic | $ | 0.247 | $ | (3.358 | ) | |||
Total earnings (loss) per share-diluted | $ | 0.239 | $ | (3.358 | ) |
F-24 |
Number of | Weighted Average | |||||||
Stock Grants | Exercise Price | |||||||
Outstanding at 10/01/11 | 34,000 | $ | 4.22 | |||||
Granted | -0- | -0- | ||||||
Forfeited | (13,000 | ) | 4.22 | |||||
Earned and & issued | (12,000 | ) | 4.22 | |||||
Outstanding at 9/30/12 | 9,000 | 4.22 | ||||||
Granted | -0- | -0- | ||||||
Forfeited | (3,000 | ) | 4.22 | |||||
Earned and & issued | (6,000 | ) | 4.22 | |||||
Outstanding at 9/30/13 | -0- | -0- |
F-25 |
2014 | $ | 101,508 | ||
2015 | -0- | |||
2016 | -0- | |||
2017 | -0- |
F-26 |
F-27 |
F-28 |
In Millions except per share amounts | ||||||||||||||||||||
2013 | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | |||||||||||||||
Continuing Operations | ||||||||||||||||||||
Revenue | $ | 27.2 | $ | 24.7 | $ | 26.6 | $ | 30.3 | $ | 108.8 | ||||||||||
Operatining Income | 0.4 | (0.2 | ) | 0.5 | 1.3 | 2.0 | ||||||||||||||
Net Income | (0.1 | ) | (0.3 | ) | 0.1 | 2.4 | 2.1 | |||||||||||||
Earnings (loss) per share for continuing operations-basic | $ | (0.008 | ) | $ | (0.021 | ) | $ | 0.009 | $ | 0.163 | $ | 0.143 | ||||||||
Earnings (loss) per share for continuing operations-diluted | $ | (0.008 | ) | $ | (0.021 | ) | $ | 0.009 | $ | 0.145 | $ | 0.139 | ||||||||
2013 | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | |||||||||||||||
Discontinued Operations | ||||||||||||||||||||
Revenue | $ | 1.5 | $ | 0.3 | $ | 0.3 | $ | - | $ | 2.1 | ||||||||||
Operatining Income | (0.8 | ) | (0.1 | ) | (0.2 | ) | (0.1 | ) | (1.2 | ) | ||||||||||
Net Income | (0.6 | ) | (0.9 | ) | 2.8 | 0.2 | 1.5 | |||||||||||||
Earnings (loss) per share for discontinued operations-basic | $ | (0.045 | ) | $ | (0.062 | ) | $ | 0.194 | $ | 0.016 | $ | 0.104 | ||||||||
Earnings (loss) per share for discontinued operations-diluted | $ | (0.045 | ) | $ | (0.062 | ) | $ | 0.194 | $ | 0.015 | $ | 0.101 | ||||||||
2012 | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | |||||||||||||||
Continuing Operations | ||||||||||||||||||||
Revenue | $ | 25.2 | $ | 26.6 | $ | 30.4 | $ | 26.7 | $ | 108.9 | ||||||||||
Operatining Income | (0.1 | ) | (1.0 | ) | (2.3 | ) | (34.6 | ) | (38.0 | ) | ||||||||||
Net Income | (0.4 | ) | (0.8 | ) | (1.7 | ) | (38.5 | ) | (41.4 | ) | ||||||||||
Earnings (loss) per share for continuing operations-basic | $ | (0.022 | ) | $ | (0.061 | ) | $ | (0.121 | ) | $ | (2.660 | ) | $ | (2.865 | ) | |||||
Earnings (loss) per share for continuing operations-diluted | $ | (0.022 | ) | $ | (0.061 | ) | $ | (0.121 | ) | $ | (2.660 | ) | $ | (2.865 | ) | |||||
2012 | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total | |||||||||||||||
Discontinued Operations | ||||||||||||||||||||
Revenue | $ | 24.4 | $ | 10.5 | $ | 10.4 | $ | 3.5 | $ | 48.8 | ||||||||||
Operatining Income | 2.5 | (4.8 | ) | (0.5 | ) | (6.6 | ) | (9.4 | ) | |||||||||||
Net Income | 1.5 | (3.1 | ) | (0.3 | ) | (5.2 | ) | (7.1 | ) | |||||||||||
Earnings (loss) per share for discontinued operations-basic | $ | 0.101 | $ | (0.210 | ) | $ | (0.018 | ) | $ | (0.365 | ) | $ | (0.493 | ) | ||||||
Earnings (loss) per share for discontinued operations-diluted | $ | 0.101 | $ | (0.210 | ) | $ | (0.018 | ) | $ | (0.365 | ) | $ | (0.493 | ) |
F-29 |
BALANCE SHEETS
Assets | 2013 | 2012 | ||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 3,457,077 | $ | 563,893 | ||||
Other receivables | 1,417 | 1,834 | ||||||
Deferred tax asset | 2,534,538 | 246,395 | ||||||
Prepaid expenses and other | 1,793,418 | 1,824,198 | ||||||
Total Current Assets | 7,786,450 | 2,636,320 | ||||||
Property, plant and equipment, at cost | 220,644 | 363,049 | ||||||
less accumulated depreciation | (203,398 | ) | (250,177 | ) | ||||
17,246 | 112,872 | |||||||
Due from affiliates | 10,797,608 | 26,044,325 | ||||||
Investment in subsidiaries | 11,513,549 | 5,634,980 | ||||||
Total Assets | $ | 30,114,853 | $ | 34,428,497 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Current maturities of long-term debt | $ | 4,399,067 | $ | 8,882,340 | ||||
Lines of credit and short term borrowings | 10,132,667 | 18,516,276 | ||||||
Accounts payable | 229,812 | 267,924 | ||||||
Accrued expenses and other current liabilities | 384,566 | 242,742 | ||||||
Total Current Liabilities | 15,146,112 | 27,909,282 | ||||||
Long-term debt, less current maturities | - | - | ||||||
Deferred income taxes payable | 25,553 | 77,850 | ||||||
Total Liabilities | 15,171,665 | 27,987,132 | ||||||
Stockholders’ equity | ||||||||
Preferred stock, $.0001 par value | ||||||||
Authorized 1,000,000 shares, 196 issued | - | - | ||||||
Common stock, $.0001 par value | ||||||||
Authorized 50,000,000 shares | ||||||||
Issued and outstanding 14,514,836 shares for 2013 and | ||||||||
14,458,836 shares for 2012 | 1,451 | 1,446 | ||||||
Additional paid in capital | 61,039,262 | 56,107,650 | ||||||
Retained earnings (deficit) | (46,097,525 | ) | (49,667,731 | ) | ||||
Total Stockholders’ equity | 14,943,188 | 6,441,365 | ||||||
Total liabilities and stockholders’ equity | $ | 30,114,853 | $ | 34,428,497 |
F-30 |
STATEMENTS OF INCOME
2013 | 2012 | |||||||
General and administrative expenses | $ | 3,068,475 | $ | - | ||||
Net loss from operations before taxes | (3,068,475 | ) | - | |||||
Other nonoperating expense | (26,259 | ) | (119,064 | ) | ||||
Interest expense | (1,554,069 | ) | (1,628,309 | ) | ||||
Net loss before tax | (4,648,803 | ) | (1,747,373 | ) | ||||
Income tax expense (benefit) | (2,340,440 | ) | 154,502 | |||||
Equity in undistributed income | ||||||||
(loss) of subsidiaries | 5,878,569 | (46,620,302 | ) | |||||
Net income (loss) | $ | 3,570,206 | $ | (48,522,177 | ) | |||
Weighted average shares outstanding- basic | 14,461,383 | 14,448,336 | ||||||
Weighted average shares- diluted | 14,923,255 | 14,448,336 | ||||||
Net income (loss) per share- basic | $ | 0.247 | $ | (3.358 | ) | |||
Net income (loss) per share- diluted | $ | 0.239 | $ | (3.358 | ) |
F-31 |
2013 | 2012 | |||||||
Cash flows form operating activities: | ||||||||
Net income (loss) | $ | 3,570,206 | $ | (48,522,177 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Provision for current tax (benefit) | (2,412,606 | ) | 428,782 | |||||
Provision for deferred income tax (benefit) | 72,166 | (274,280 | ) | |||||
Depreciation expense | 68,190 | 70,563 | ||||||
Equity in undistributed loss (income) of subsidiaries | (5,878,569 | ) | 46,620,302 | |||||
Share-based compensation expense | 31,648 | 47,826 | ||||||
Loss from disposal of assets | 27,436 | |||||||
Advances from subsidiaries | 15,246,717 | 213,010 | ||||||
Changes in: | ||||||||
Decrease (increase) in prepaid expenses | 30,780 | (88,024 | ) | |||||
Decrease (increase) in other receivable | 417 | (534 | ) | |||||
Increase (decrease) in accounts payable | (38,112 | ) | 210,432 | |||||
Increase (decrease) in accrued expenses and other current liabilities | 141,824 | (6,524 | ) | |||||
Net cash used in operating activities | 10,860,097 | (1,300,624 | ) | |||||
Cash flows from investing activities: | ||||||||
Investment in property & equipment | - | (10,231 | ) | |||||
Net cash provided by investing activities | - | (10,231 | ) | |||||
Cash flows from financing activities: | ||||||||
Borrowings on lines of credit, net of (repayments) | (8,383,609 | ) | 4,640,553 | |||||
Principal payments on long term debt | (4,483,273 | ) | (2,816,794 | ) | ||||
Proceeds from private placement of preferred stock | 4,899,965 | - | ||||||
Par value of common stock issued to preferred shareholders | 34 | - | ||||||
Treasury stock purchased by company | (30 | ) | - | |||||
Net cash provided by (used in) financing activities | (7,966,913 | ) | 1,823,759 | |||||
Increase in cash and cash equivalents | 2,893,184 | 512,904 | ||||||
Cash beginning of period | 563,893 | 50,989 | ||||||
Cash end of period | $ | 3,457,077 | $ | 563,893 | ||||
Supplemental disclosures of cash flows information: | ||||||||
Cash paid during the year for: | ||||||||
Interest | $ | 1,516,134 | $ | 1,615,568 | ||||
Insurance premiums financed | $ | 2,784,193 | $ | 2,351,462 |
F-32 |