Business Context and Reporting Period
Company: Energy Services of America Corporation (ESOA)
Filing Type: Form 8-K (Current Report)
Date of Report: May 12, 2023
Principal Event: Non-reliance on previously issued financial statements and announcement of a restatement due to uncertainty regarding the forgiveness of Paycheck Protection Program (PPP) loans.
Key Financial Metrics and Restatement Impact
The filing does not provide current period revenue, profit, or cash flow figures. Instead, it details the expected adjustments to historical financial statements resulting from the potential reversal of $9.8 million in PPP loan forgiveness.
| Reporting Period | Expected Increase in Current Liabilities | Expected Decrease in Net Income |
|---|---|---|
| Quarter ended Dec 31, 2022 | $10.1 million | $25,000 |
| Quarter ended Dec 31, 2021 | $10.0 million | $25,000 |
| Fiscal Year ended Sept 30, 2022 | $10.1 million | $100,000 |
| Fiscal Year ended Sept 30, 2021 | $10.0 million | $10.0 million |
Note: The liability increase includes the principal of $9.8 million plus accrued interest.
Material Changes Versus Prior Periods
The material change is the reclassification of the $9.8 million PPP loan forgiveness from "other income" back to a liability. Previously, the Small Business Administration (SBA) granted forgiveness in fiscal year 2021, which was recorded as income. The Company now anticipates the SBA may reverse this determination following a review of payroll information and affiliate size standards.
Outlook, Risks, and Management Commentary
- Restatement Plan: The Company intends to file amended Form 10-K reports for fiscal years 2022 and 2021, and an amended Form 10-Q for the quarter ended December 31, 2022, as soon as practicable.
- Internal Controls: Management's report on internal controls over financial reporting for the fiscal year ended September 30, 2022, should no longer be relied upon.
- Risks: The filing highlights the risk that additional information may arise requiring further adjustments or restatements of financial data. It also notes general economic uncertainties and the impact of the COVID-19 pandemic.
- Forward-Looking Statements: The Company cautions investors not to place undue reliance on forward-looking statements due to known and unknown risks.
Investor Verification Checklist
- Verify the status of the SBA review regarding the $9.8 million PPP loan forgiveness.
- Monitor upcoming amended 10-K and 10-Q filings for the final restated financial figures.
- Assess the impact of the $10.0 million to $10.1 million increase in current liabilities on the Company's liquidity and debt covenants.
- Review the Company's internal control remediation plans following the non-reliance announcement.