ACQUISITIONS

9 Months Ended

Jun. 30, 2022

ACQUISITIONS

ACQUISITIONS

12.  ACQUISITIONS

On April 29, 2022, the Company completed the acquisition of Tri-State Paving & Sealcoating, LLC (“Tri-State Paving, LLC”), located in Hurricane, West Virginia. Tri-State Paving, LLC was later renamed to Corns Enterprises (“Seller”). Pursuant to the Asset Purchase Agreement (“Agreement”) signed on April 6, 2022, and amended on April 29, 2022, the Company acquired substantially all the assets (including but not limited to customer contracts, employees, and equipment) of Tri-State Paving, LLC for $7.5 million in cash, a $1.0 million Promissory Note (“Note”), and $1.0 million in Energy Services Common Stock (“Stock”). The $7.5 million in cash was funded through a loan with United Bank, Inc., Huntington, West Virginia. David E. Corns continued his role as President of the Company’s new subsidiary, Tri-State Paving & Sealcoating, Inc., which earned revenues of $2.0 million for the three and nine months ended June 30, 2022.

As part of the Agreement, the Company entered into a four-year, $1.0 million Note with a fair value of $936,000 that requires $250,000 principal installment payments on or before the end of each twelve (12) full calendar month period beginning on the date of the Note, April 29, 2022. Interest payments due shall be calculated on the principal balance remaining and shall be at the annual rate of 3.5% which equates to 6.85% on the carrying value of the Note.

Additionally, the Seller received $1.0 million in Stock pursuant to an exemption under The Securities Act of 1933. Based on the market value calculation in the Agreement, the Seller received 419,287 shares of Stock. As an additional consideration, if the share price of the Stock is below a closing asking price of $1.50 per share on the date 180 days after issuance, the Company shall pay the Seller, in cash, the difference between $1.50 and the market value for each share of Stock. Payment would be made within thirty (30) days after Seller makes written demand.

Energy Services accounts for business combinations under the acquisition method in accordance with ASC Topic 805, Business Combinations. Accordingly, for the transaction, the purchase price is allocated to the fair value of the assets acquired and liabilities assumed as of the date of the acquisition. In conjunction with ASC 805, upon receipt of final fair value estimates during the measurement period, which must be within one year of the acquisition date, Energy Services records any adjustments to the preliminary fair value estimates in the reporting period in which the adjustments are determined. The Company is continuing to finalize the purchase price allocations related to the Tri-State Paving acquisition.

The purchase price for the non-cash Tri-State Paving acquisition is allocated in the table below:

Property and equipment	$	5,709,094
Goodwill		2,273,237
Customer relationships		1,649,159
Non-compete		39,960
Tradename		203,213
Total	$	9,874,663

ASC 805-10-50-2 requires public companies that present comparative financial statements to present pro forma financial statements as though the business combination that occurred during the current fiscal year had occurred as of the beginning of the comparable prior annual reporting period. As allowed under ASC 805-10-50-2, the Company finds this information impracticable to provide for the interim periods presented due to the lack of availability of meaningful financial statements of the acquired company that comply with U.S. GAAP.