Business Context and Reporting Period
Company: Energy Services of America Corporation (ESOA)
Filing Type: Form 8-K (Current Report)
Date of Report: April 29, 2022
Event: Completion of the acquisition of assets of Tri-State Paving & Sealcoating, LLC ("Tri-State Paving"), a West Virginia-based corporation.
Key Financial Metrics and Transaction Details
This filing details a specific asset acquisition rather than periodic financial performance. Key transaction metrics include:
- Total Consideration: Approximately $9.5 million in value (cash, debt, and equity).
- Cash Component: $7.5 million, funded via a loan from United Bank, Inc.
- Debt Component: $1.0 million Promissory Note issued to the seller.
- Equity Component: $1.0 million in Common Stock (419,287 shares).
- Assets Acquired: Substantially all assets, including customer contracts, employees, and equipment.
Material Changes and Transaction Structure
The Company completed the acquisition through a newly formed subsidiary, Tri-State Paving Acquisition Company, Inc. Material terms of the deal include:
- Debt Terms: The $1.0 million Note requires four annual principal installments of $250,000 starting April 29, 2023, with interest at 3.5% on the remaining balance.
- Equity Collar: A cash settlement provision exists if the stock price is below $1.50 per share 180 days after issuance. The Company must pay the difference in cash upon written demand.
- Management: David E. Corns will continue as President of the new subsidiary.
Guidance, Outlook, and Risks
Financial Statements: The filing does not contain current revenue, profit, or cash flow data for the Company or the acquired entity. Financial statements of the acquired business and pro forma financial information are scheduled to be filed by amendment within 71 days of this report.
Risks and Contingencies:
- Liquidity Risk: The $7.5 million cash portion was funded through external debt (United Bank, Inc.), increasing the Company's leverage.
- Market Risk: The equity collar creates a potential future cash outflow obligation if the stock price underperforms the $1.50 threshold within 180 days.
Investor Verification Checklist
- Verify the terms of the loan with United Bank, Inc. used to fund the $7.5 million cash portion.
- Monitor the stock price 180 days post-issuance to assess potential cash settlement obligations under the equity collar.
- Review the upcoming amendment (due within 71 days) for the acquired business's financial statements and pro forma impact.
- Confirm the integration status of Tri-State Paving's contracts and equipment.