Energy Services of America CORP

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Energy Services of America Corporation

Huntington, West Virginia

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Energy Services of America Corporation and subsidiaries (the Company) as of September 30, 2023 and 2022, the related consolidated statements of income, changes in shareholders’ equity and cash flows, for each of the two years in the period ended September 30, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Over-Time Revenue Recognition

Critical Audit Matter Description

As described in Notes 2 and 4 to the consolidated financial statements, the Company recognizes revenue from contracts with customers over time as performance obligations are satisfied and control of the promised good and service is transferred to the customer. The Company recognizes revenue on lump sum and unit price contracts by measuring the progress toward complete satisfaction of contractual performance obligations using an input method. For cost plus and time and material contracts, the Company recognizes revenue from contracts with customers over time as control is transferred to the customer by measuring progress toward complete satisfaction of the performance obligations using an output method.

We identified the evaluation of the Company’s estimates on significant construction contracts with customers and their effect on revenue recognition as a critical audit matter. The Company’s significant estimates include the determination of the performance obligations and allocation of transaction price and estimated costs to complete. Recognition of revenue and profit over time as performance obligations are satisfied for long-term lump sum and unit price contracts is highly judgmental as it requires the Company to prepare estimates of total contract revenue and total contract costs, including costs to complete in-process contracts. Auditing the Company’s estimates of total contract revenue and costs used to recognize revenue on construction contracts involved significant auditor judgement, as it required the evaluation of subjective factors such as assumptions related to project schedule and completion, forecasted labor, material and subcontract costs and variable consideration estimates related to incentive fees, unpriced change orders and contractual disputes and claims. These estimates are dependent upon significant management judgement, which affects the measurement of revenue recognized by the Company.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical audit matter included:

Accounting for PPP Loan Forgiveness

Critical Audit Matter Description

As described in Note 3 to the consolidated financial statements, the Company received notification from The Small Business Administration (“SBA”) that one of the Company’s PPP loans was under review. As a result of the notification, the Company’s management undertook a process to re-evaluate the proper accounting for all PPP loan forgiveness and determined an error existed in previous periods. As such, the Company restated its consolidated financial statements for the fiscal years ended September 30, 2022 and 2021 to reinstate the PPP loans to their original loan balance of $9.8 million plus accrued interest.

The Company was required to apply judgment regarding the determination of PPP loan forgiveness based on the rules established, and subsequently clarified by the SBA, including rules related to the Company’s affiliates in determining the aggregate number of employees. In addition, the Company must apply a probability analysis in determining the amount and period of forgiveness.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical audit matter included:

/s/Baker Tilly US, LLP

We have served as the Company’s auditor since 2008.

Pittsburgh, Pennsylvania

January 16, 2024