UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,  D.C.   20549


FORM
10-Q





(Mark
One)






x
            Quarterly
      report under Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended December 31, 2009o
            Transition
      report under Section 13 or 15(d) of the Securities Exchange act of
      1934For the transition
      period from _______________ to
_________________




Commission
File Number:  001-32998








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)





100 Industrial Lane, Huntington, West
      Virginia
            
            25702(Address
      of Principal Executive Office)
            
            (Zip
      Code)





(304)
399-6315


(Registrant’s
Telephone Number including area code)





Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding twelve months (or
for such shorter period that the Registrant was required to file such reports)
and (2) has been subject to such requirements for the past 90
days.  YES x   NO o.





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes  No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.  (Check one):





Large
      Accelerated Filer o
            Accelerated
      Filer o
            Non-Accelerated
      Filer  oSmaller
      Reporting Company   x




As of
February 10, 2010 there were issued and outstanding 12,092,307 shares of the
Registrant’s Common Stock.





Indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).       YES o  NO x





Transitional
Small Business Disclosure Format (check
one)    Yes o   No 
x











Part
      1:
            Financial
      InformationItem
      1.
            Financial
      Statements (Unaudited):Consolidated
      Balance Sheets
            1Consolidated
      Statements of Income
            2Consolidated   Statements
      of Cash Flows
            3Consolidated
      Statements of Changes in Stockholders’ Equity
            4Notes
      to Unaudited Consolidated Financial Statements
            5Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            7Item
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            17Item
      4.
            Controls
      and Procedures
            17Part
      II:
            Other
      InformationItem
      1A.
            Risk
      Factors
            18Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            18Item
      4T.
            Submission
      of Matters to a vote of Security Holders
            18Item
      6.
            Exhibits
            19Signatures
            19









ENERGY
      SERVICES OF AMERICA CORPORATIONCONSOLIDATED
      BALANCE SHEETSDecember
      31,
              
              
              September
      30,Assets
              
              2009
              
              
              2009(Unaudited)
              
              
              (Audited)Current
      AssetsCash
      and cash equivalents
              
              $
              6,459,532
              
              
              $
              2,829,988Accounts
      receivable-trade
              
              
              12,834,403
              
              
              
              16,636,095Allowance
      for doubtful accounts
              
              
              (283,207
              )
              
              
              (283,207
              )Retainages
      receivable
              
              
              2,988,022
              
              
              
              3,135,461Other
      receivables
              
              
              140,568
              
              
              
              141,530Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
              
              
              5,339,026
              
              
              
              7,870,120Deferred
      tax asset
              
              
              2,653,320
              
              
              
              2,991,173Prepaid
      expenses and other
              
              
              2,121,921
              
              
              
              2,320,679Total
      Current Assets
              
              
              32,253,585
              
              
              
              35,641,839Property,
      plant and equipment, at cost
              
              
              35,779,262
              
              
              
              35,350,004less
      accumulated depreciation
              
              
              (7,897,371
              )
              
              
              (6,424,355
              )27,881,891
              
              
              
              28,925,649Goodwill
              
              
              38,469,163
              
              
              
              38,469,163Total
      Assets
              
              $
              98,604,639
              
              
              $
              103,036,651Liabilities
      and Stockholders' EquityCurrent
      LiabilitiesCurrent
      maturities of long-term debt
              
              $
              6,978,555
              
              
              $
              7,254,624Lines
      of credit
              
              
              7,118,860
              
              
              
              7,885,579Accounts
      payable
              
              
              4,499,016
              
              
              
              5,375,962Accrued
      expenses and other current liabilities
              
              
              3,442,965
              
              
              
              5,717,730Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
              
              
              307,506
              
              
              
              4,501Total
      Current Liabilities
              
              
              22,346,902
              
              
              
              26,238,396Long-term
      debt, less current maturities
              
              
              9,419,763
              
              
              
              10,497,844Long-term
      debt, payable to shareholder
              
              
              5,500,000
              
              
              
              5,600,000Deferred
      income taxes payable
              
              
              6,364,968
              
              
              
              6,364,968Total
      Liabilities
              
              
              43,631,633
              
              
              
              48,701,208Stockholders'
      equityPreferred
      stock, $.0001 par valueAuthorized
      1,000,000 shares, none issued
              
              
              -
              
              
              
              -Common
      stock, $.0001 par valueAuthorized
      50,000,000 sharesIssued
      and outstanding 12,092,307shares
              
              
              1,209
              
              
              
              1,209Additional
      paid in capital
              
              
              55,976,368
              
              
              
              55,976,368Retained
      earnings
              
              
              (1,004,571
              )
              
              
              (1,642,134
              )Total
      Stockholders' equity
              
              
              54,973,006
              
              
              
              54,335,443Total
      liabilities and stockholders' equity
              
              $
              98,604,639
              
              
              $
              103,036,651
    1
 
 ENERGY
      SERVICES OF AMERICA CORPORATIONCONSOLIDATED
      STATEMENTS OF INCOMEUnauditedThree
      Months Ended
              
              
              Three
      Months EndedDecember
      31,
              
              
              December
      31,2009
              
              
              2008(Unaudited)
              
              
              (Unaudited)Revenue
              
              $
              29,951,737
              
              
              $
              33,679,046Cost
      of revenues
              
              
              25,186,011
              
              
              
              35,275,121Gross
      profit (loss)
              
              
              4,765,726
              
              
              
              (1,596,075
              )Selling
      and administrative expenses
              
              
              3,417,391
              
              
              
              1,714,750Income
      (loss) from operations
              
              
              1,348,335
              
              
              
              (3,310,825
              )Other
      income (expense)Interest
      income
              
              
              16,078
              
              
              
              36,273Other
      nonoperating income (expense)
              
              
              120,447
              
              
              
              161,815Interest
      expense
              
              
              (421,534
              )
              
              
              (416,772
              )Gain
      (loss) on sale of equipment
              
              
              (619
              )
              
              
              (7,564
              )(285,628
              )
              
              
              (226,248
              )Income
      (loss) before income taxes
              
              
              1,062,707
              
              
              
              (3,537,073
              )Income
      tax expense (benefit)
              
              
              425,144
              
              
              
              (1,342,564
              )Net
      income (loss)
              
              $
              637,563
              
              
              $
              (2,194,509
              )Weighted
      average shares outstanding-basic
              
              
              12,092,307
              
              
              
              12,092,307Weighted
      average shares-diluted
              
              
              12,092,307
              
              
              
              12,092,307Net
      income (loss) per share basic
              
              $
              0.05
              
              
              $
              (0.18
              )Net
      income (loss) per share diluted
              
              $
              0.05
              
              
              $
              (0.18
              )
    2
 
 ENERGY
      SERVICES OF AMERICA CORPORATIONCONSOLIDATED
      STATEMENTS OF CASH FLOWSUnauditedThree
      Months Ended
              
              
              Three
      Months EndedDecember
      31,
              
              
              December
      31,Operating
      activities
              
              2009
              
              
              2008Net
      income (loss)
              
              $
              637,563
              
              
              $
              (2,194,509
              )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Depreciation
      expense
              
              
              1,512,671
              
              
              
              1,441,888(Gain)
      loss on sale/disposal of equipment
              
              
              619
              
              
              
              7,564Provision
      for deferred taxes
              
              
              337,853
              
              
              
              -(Increase)
      decrease in contracts receivable
              
              
              3,801,692
              
              
              
              22,350,859(Increase)
      decrease in retainage receivable
              
              
              147,439
              
              
              
              (475,670
              )(Increase)
      decrease in other receivables
              
              
              962
              
              
              
              (645,721
              )(Increase)
      decrease in cost and estimated earnings in excess of billings on
      uncompleted contracts
              
              
              2,531,094
              
              
              
              1,369,529(Increase)
      decrease in prepaid expenses
              
              
              198,758
              
              
              
              319,785Increase
      (decrease) in accounts payable
              
              
              (876,946
              )
              
              
              (7,099,594
              )Increase
      (decrease) in accrued expenses
              
              
              (2,218,053
              )
              
              
              (3,295,841
              )Increase
      (decrease) in billings in excess of cost and estimated earnings on
      uncompleted contracts
              
              
              303,005
              
              
              
              864,707Increase
      (decrease) in income taxes payable
              
              
              -
              
              
              
              (1,357,173
              )Net
      cash (used in) provided by operating activities
              
              
              6,376,657
              
              
              
              11,285,824Cash
      flows from investing activities:Investment
      in property & equipment
              
              
              (477,823
              )
              
              
              (431,181
              )Proceeds
      from sales of property and equipment
              
              
              32,050
              
              
              
              5,032Net
      cash (used in) provided by investing activities
              
              
              (445,773
              )
              
              
              (426,149
              )Cash
      flows from financing activities:Repayment
      of loans from shareholders
              
              
              (100,000
              )
              
              
              -Borrowings
      on lines of credit, net of (repayments)
              
              
              (766,719
              )
              
              
              (3,246,208
              )Proceeds
      from long term debt
              
              
              -
              
              
              
              58,575Principal
      payments on long term debt
              
              
              (1,245,183
              )
              
              
              (8,047,406
              )Principal
      payments on short term debt
              
              
              (189,438
              )
              
              
              -Net
      cash (used in) provided by financing activities
              
              
              (2,301,340
              )
              
              
              (11,235,039
              )Increase
      (decrease) in cash and cash equivalents
              
              
              3,629,544
              
              
              
              (375,364
              )Cash
      beginning of period
              
              
              2,829,988
              
              
              
              13,811,661Cash
      end of period
              
              $
              6,459,532
              
              
              $
              13,436,297Supplemental
      schedule of noncash investing and financing activities:Purchases
      of property & equipment under financing agreements
              
              $
              23,759
              
              
              $
              -Supplemental
      disclosures of cash flows information:Cash
      paid during the year for:Interest
              
              $
              398,611
              
              
              $
              416,772Income
      taxes
              
              $
              78,700
              
              
              $
              -
    3
 
 ENERGY SERVICES OF AMERICA
      CORPORATIONCONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITYFor
      Three Months Ended December 31, 2009 and 2008UnauditedTotalCommon
      Stock
              
              
              Additional
      Paid
              
              
              Retained
              
              
              Stockholders'Shares
              
              
              Amount
              
              
              in
      Capital
              
              
              Earnings
              
              
              EquityBalance
      at September 30, 2008
              
              
              12,092,307
              
              
              $
              1,209
              
              
              $
              55,976,368
              
              
              $
              4,279,640
              
              
              $
              60,257,217Net
      Income (Loss)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,194,509
              )
              
              
              (2,194,509
              )Balance
      at December 31, 2008
              
              
              12,092,307
              
              
              
              1,209
              
              
              $
              55,976,368
              
              
              $
              2,085,131
              
              
              $
              58,062,708Balance
      at September 30, 2009
              
              
              12,092,307
              
              
              $
              1,209
              
              
              $
              55,976,368
              
              
              $
              (1,642,134
              )
              
              $
              54,335,443Net
      Income (Loss)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              637,563
              
              
              
              637,563Balance
      at December 31, 2009
              
              
              12,092,307
              
              
              
              1,209
              
              
              $
              55,976,368
              
              
              $
              (1,004,571
              )
              
              $
              54,973,006




4




ENERGY
SERVICES OF AMERICA CORPORATION


NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS






1.   BUSINESS
AND ORGANIZATION:





Energy
Services of America Corporation, formerly known as Energy Services Acquisition
Corp., (the Company) was incorporated in Delaware on March 31, 2006 as a blank
check company whose objective was to acquire an operating business or
businesses.  On September 6, 2006 the Company sold 8,600,000 units in
the public offering at a price of $6.00 per unit.  Each unit consisted
of one share of the Company’s common stock and two common stock purchase
warrants for the purchase of a share of common stock at $5.00.  The
warrants could not be exercised until the later of the completion of the
business acquisition or one year from issue date.   The Company
operated as a blank check company until August 15, 2008.  On that date
the Company acquired S.T. Pipeline, Inc. and C.J. Hughes Construction Company,
Inc. with proceeds from the Company’s Initial Public Offering.  S. T.
Pipeline and C. J Hughes are operated as wholly owned subsidiaries of the
Company.





Interim
Financial Statements





The
accompanying unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (“SEC”) and
should be read in conjunction with the Company’s audited financial statements
and footnotes thereto for the years ended September 30, 2009 and 2008 included
in the Company’s Form 10-K filed December 23, 2009.  Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to interim financial
reporting rules and regulations of the “SEC”.  However, the Company
believes that the disclosures are adequate to make the information presented not
misleading.  The financial statements reflect all adjustments
(consisting primarily of normal recurring adjustments) that are, in the opinion
of management necessary for a fair presentation of the Company’s financial
position and results of operations.  The operating results for the
periods ended December 31, 2009 and 2008 are not necessarily indicative of the
results to be expected for the full year.





Principles
of Consolidation





The
consolidated financial statements of Energy Services include the accounts of
Energy Services and its wholly owned subsidiaries.  All significant
intercompany accounts and transactions have been eliminated in
consolidation.  Unless the context requires otherwise, references to
Energy Services include Energy Services and its consolidated
subsidiaries.





Reclassifications





Certain
reclassifications have been made in prior years’ financial statements to conform
to classifications used in the current year.





5





2.  UNCOMPLETED
CONTRACTS





Costs,
estimated earnings, and billings on uncompleted contracts as of December 31,
2009 and September 30, 2009 are summarized as follows:





December 31, 2009
            
            
            September 30, 2009Costs
      incurred on contracts in progress
            
            $
            39,769,908
            
            
            $
            37,568,730Estimated
      earnings, net of estimated losses
            
            
            3,051,652
            
            
            
            7,102,33442,821,560
            
            
            
            44,671,066Less
      Billings to date
            
            
            37,790,040
            
            
            
            36,805,447$
            5,031,520
            
            
            $
            7,865,619Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
            
            $
            5,339,026
            
            
            $
            7,870,120Less
      Billings in excess of costs and estimated earnings on uncompleted
      Contracts
            
            
            307,506
            
            
            
            4,501$
            5,031,520
            
            
            $
            7,865,619








3.  FAIR
VALUE MEASUREMENTS





The
carrying amount for borrowings under the Company’s revolving credit facility
approximates fair value because of the variable market interest rate charged to
the Company for these borrowings. The fair value of the Company’s long term
fixed rate debt to unrelated parties was estimated using a discounted cash flow
analysis and a yield rate that was estimated based on the borrowing rates
currently available to the Company for bank loans with similar terms and
maturities, which is a level 3 input. It was not practicable to estimate the
fair value of notes payable to related parties, The fair value of the aggregate
principal amount of the Company’s fixed-rate debt of $13.1million at
December31,
2009  was $13.3million.





4.  EARNINGS
PER SHARE





The
amounts used to compute the basic and diluted earnings per share for the three
months ended December 31, 2009 and 2008.





Three
      Months Ended December 31,2009
            
            
            2008Net
      Income (Loss) from continuing operations available
            
            $
            637,563
            
            
            $
            (2,194,509
            )to
      common shareholdersWeighted
      average shares outstanding basic
            
            
            12,092,307
            
            
            
            12,092,307Effect
      of dilutive warrants
            
            
            -0-
            
            
            
            -0-Weighted
      average shares outstanding diluted
            
            
            12,092,307
            
            
            
            12,092,307Net
      Income (Loss) per share-basic
            
            $
            0.05
            
            
            $
            (0.18
            )Net
      Income (Loss) per share-diluted
            
            $
            0.05
            
            
            $
            (0.18
            )




6


5.
COMMITMENTS AND CONTINGENCIES





On
February 6, 2009, the company filed with the SEC a registration statement
relating to the registration of 2,150,000 shares of common stock held by initial
shareholders of the Company and 2,964,763 shares issued in connection with the
acquisition of C.J. Hughes Construction Company, Inc. as well as 3,076,923
warrants to purchase shares of common stock held by initial shareholders of the
Company and the 3,076,923 shares underlying those warrants.  On
November 30, 2009 the Company filed form RW with the SEC withdrawing the request
for registration.





6.  SUBSEQUENT
EVENTS





Subsequent
events have been evaluated through February 12, 2010, the date of the issuance
of these financial statements.





7.  RECENT
ACCOUNTING PRONOUNCEMENTS





In January 2010, the FASB issued an
Account Standards Update (ASU) entitledImproving
Disclosures about Fair Value Measurements.  The ASU amends the FASB
accounting standards regarding disclosures of fair value measurements and
requires new disclosures about transfers in and out of Levels 1 and 2 of the
fair value hierarchy, and also disclosures about activity in Level 3 fair value
measurements.  Portions of this ASC update on disclosures is effective
for reporting periods beginning after December 15, 2009, and the adoption by the
Company will not have an impact on financial results.




ITEM
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations





You
should read the following discussion of the financial condition and results of
operations of Energy Services in conjunction with the “ Consolidated Financial
information “ appearing in this section of this  report as well as the
historical financial statements and related notes contained elsewhere
herein.  Among other things, those historical consolidated financial
statements include more detailed information regarding the basis of presentation
for the following information.




7




Forward
Looking Statements





Within
Energy Services’ financial statements and this discussion and analysis of the
financial condition and results of operations, there are included statements
reflecting assumptions, expectations, projections, intentions or beliefs about
future events that are intended as “forward-looking statements” under the
Private Securities Litigation Reform Act of 1995.  You can identify
these statements by the fact that they do not relate strictly to historical or
current facts.  They use words such as “anticipate,” “estimate,”
“project,” “forecast,” “may,” “will,” “should,” “could,” “expect,” “believe,”
“intend” and other words of similar meaning.





These forward-looking statements are
not guarantees of future performance and involve or rely on a number of risks,
uncertainties, and assumptions that are difficult to predict or beyond Energy
Services' control.  Energy Services has based its forward-looking
statements on management’s beliefs and assumptions based on information
available to management at the time the statements are made.  Actual
outcomes and results may differ materially from what is expressed, implied and
forecasted by forward-looking statements and any or all of Energy Services’
forward-looking statements may turn out to be wrong.  They can be
affected by inaccurate assumptions and by known or unknown risks and
uncertainties.





All of the forward-looking statements,
whether written or oral, are expressly qualified by these cautionary statements
and any other cautionary statements that may accompany such forward-looking
statements or that are otherwise included in this report.  In
addition, Energy Services does not undertake and expressly disclaims any
obligation to update or revise any forward-looking statements to reflect events
or circumstances after the date of this report or otherwise.





Company
Overview





Energy
Services was formed on March 31, 2006, to serve as a vehicle to effect a merger,
capital stock exchange, asset acquisition or other similar business combination
with an operating business.  It operated as a “Blank Check Company”
until August 15, 2008 at which time it completed the acquisitions of S.T.
Pipeline, Inc. and C.J. Hughes Construction Company, Inc.  The Company
acquired S.T. Pipeline for $16.2 million in cash and $3.0 million in a
promissory note.  As of February 12, 2010 no payments have been made
on the promissory note.  The C.J. Hughes purchase price totalled $34.0
million, one half of which was in cash and one half in Energy Services common
stock.    The acquisitions are accounted for under the
purchase method and the financial results of both acquisitions are included in
the results of Energy Services from the date of acquisition.




Since the
acquisitions, Energy Services has been engaged in one segment of operations
which is providing contracting services for energy related
companies.   Currently Energy Services primarily services the
gas, oil and electrical industries though it does some other incidental
work.  For the gas industry, the Company is primarily engaged in the
construction, replacement and repair of natural gas pipelines and storage
facilities for utility companies and private natural gas
companies.   Energy Services is involved in the construction of
both interstate and intrastate pipelines, with an emphasis on the
latter.   For the oil industry the Company provides a variety of
services relating to pipeline, storage facilities and plant work.  For
the electrical industry, the Company provides a full range of electrical
installations and repairs including substation and switchyard services, site
preparation, packaged buildings, transformers and other ancillary work with
regards thereto.   Energy Services’ other services include liquid
pipeline construction, pump station construction, production facility
construction, water and sewer pipeline installations, various maintenance and
repair services and other services related to pipeline
construction.  The majority of the Company’s customers are located in
West Virginia, Virginia, Ohio, Kentucky and North Carolina.  The
Company builds, but does not own, natural gas pipelines for its customers that
are part of both interstate and intrastate pipeline systems that move natural
gas from producing regions to consumption regions as well as building and
replacing gas line services to individual customers of the various utility
companies.




8




The Company enters into various types
of contracts, including competitive unit price, cost-plus (or time and materials
basis) and fixed price (lump sum) contracts.  The terms of the
contracts will vary from job to job and customer to customer though most
contracts are on the basis of either unit pricing in which the Company agrees to
do the work for a price per unit of work performed or for a fixed amount for the
entire project.  Most of the Company’s projects are completed within
one year of the start of the work.  On occasion, the Company’s
customers will require the posting of performance and/or payment bonds upon
execution of the contract, depending upon the nature of the work
performed.





The Company generally recognizes
revenue on unit price and cost-plus contracts when units are completed or
services are performed.  Fixed price contracts usually result in
recording revenues as work on the contract progresses on a percentage of
completion basis.  Under this accounting method, revenue is recognized
based on the percentage of total costs incurred to date in proportion to total
estimated costs to complete the contract.  Many contracts also include
retainage provisions under which a percentage of the contract price is withheld
until the project is complete and has been accepted by the
customer.





First
Quarter Overview





The
following is an overview for the three months ended December 31,
2009:





In MillionsSales
            
            $
            30.0Cost
      of Revenues
            
            
            25.2Gross
      Profit
            
            
            4.8Selling
      & Adm.
            
            
            3.4Net
      Income
            
            $
            0.6





The first
quarter for the Company is typically a very active period for our business
line.  The Company during the first quarter began to see a number
opportunities. Revenue increased from $29.3 million for the quarter ending
September 30, 2009 to $30.0 million for the quarter ending December 31,
2009.  Selling and Administrative expenses were up $1.2 million from
the previous quarter.  Net income was $0.6 million for the quarter
ending December 31, 2009.  Second quarter sales are expected to be
weaker than the first quarter due to inclement weather and the seasonality of
our work.




The
Company’s cash and cash equivalents increased by $3.6 million, with working
capital increasing by $0.5 million during the quarter ending December 31,
2009.  Accounts receivable and retainage receivable decreased by $3.8
million during the quarter ending December 31, 2009 and long-term debt was
reduced by $1.5 million.





9





Results
of Operations


Consolidated
Statement of Income for the three months ended December 31, 2009 and
2008





Three
      months ended
            
            
            Three
      months endedDecember 31, 2009
            
            
            December 31, 2008Contract
      Revenue
            
            $
            29,951,737
            
            
            $
            33,679,046Cost
      of Revenue
            
            
            25,186,011
            
            
            
            35,275,121Gross
      Profit (Loss)
            
            
            4,765,726
            
            
            
            (1,596,075
            )Selling
      and administrative expenses
            
            
            3,417,391
            
            
            
            1,714,750Income
      (Loss) from operations before taxes
            
            
            1,348,335
            
            
            
            (3,310,825
            )Interest
      Income
            
            
            16,078
            
            
            
            36,273Interest
      Expense
            
            
            (421,534
            )
            
            
            (416,772
            )Other
      Income (Expense)
            
            
            119,828
            
            
            
            154,251(285,628
            )
            
            
            (226,248
            )Income
      (Loss) before tax
            
            
            1,062,707
            
            
            
            (3,527,073
            )Income
      taxes (benefit)
            
            
            425,144
            
            
            
            (1,342,564
            )Net
      Income (Loss)
            
            $
            637,563
            
            
            $
            (2,184,509
            )Weighted
      average shares outstanding-basic
            
            
            12,092,307
            
            
            
            12,092,307Weighted
      average shares-diluted
            
            
            12,092,307
            
            
            
            12,092,307Net
      income (Loss) per share-basic
            
            $
            0.05
            
            
            $
            (0.18
            )Net
      income (Loss) per share-diluted
            
            $
            0.05
            
            
            $
            (0.18
            )





Quarter
Ending December 31, 2009 and 2008 Comparison





Revenues.Revenues
decreased by $3.7 million (11%) to $30 million for the three months ended
December 31, 2009 compared to the same period ending in 2008.  This
was due to fewer projects being done during this period.





Cost of
Revenues.Costs of Revenues
decreased by $10.1 million (29%) to $25.2 million for the three months
ended  December 31, 2009 compared to the same period ending in
2008.  The decrease in cost was greater than expected based on the
decrease in revenue due to the completion of two major jobs that incurred losses
during the quarter ending December 31, 2008 which did not occur in the quarter
ending December 31, 2009.





Gross Profit
(Loss).Gross profit increased by $6.4 million to $4.8
million for the three months ended December 31,2009 compared to the same period
ending in 2008.  This increase was due to the fact that the Company
had two particular projects at one of the operating subsidiaries which lost $3.2
million for the quarter ended December 31, 2008. There was a combination of
events that resulted in the losses on these jobs.  First, the customer
had several other projects that were supposed to start in the quarter that they
decided to delay.  The pricing had been established on these projects
under the assumption of getting the added work.  When that did not
occur many costs that would have been spread over all the jobs then had to be
absorbed into these two existing jobs.  In addition, there were
unplanned work stoppages initiated by the customer for the Thanksgiving and
Christmas holidays which resulted in added payroll costs of approximately
$450,000.  These jobs have been completed and we believe that the
results of these jobs are not indicative of future
performance.   Gross profit for the period ending December 31,
2009 returned to a more normal range.




10




Selling and
administrative expenses.Selling and
administrative expenses increased by $1.7 million (99%) for the three months
ended December 31, 2009 compared to the same period ending in
2008.  These increases were primarily due to additional administrative
expenses, such as accounting, professional fees, taxes and insurance costs to
support our informational and regulatory complianceneeds.





Income (Loss) from
Operations.Income from operations increased $4.7 million to a
profit of $1.3 million for the three months ended December 31, 2009 compared to
the same period ending for 2008.  This is a function of the previous
categories.




Interest
Income.Interest
income decreased by $20,000 (56%) for the three months ended December 31, 2009
compared to the same period ending for 2008.   This was driven by
lower interest rates and less invested cash.





Interest Expense.Interest
expense increased by $4,800 (1%) for the three months ended December 31, 2009
compared to the same period ending for 2008.   Borrowings
remained relatively stable for this quarter compared to the same period ending
in 2008.





Other Income
(Expenses).Other expenses
decreased by $34,000 (22%) for the three months ended December 31, 2009 compared
to the same period ending for 2008.  This reduction


was due
to the reduction of outside equipment rental income.





Net Income (Loss).Net Income increased by $2.8 million to a net profit of $638,000 for the
three months ended December 31, 2009 compared to the same period ending in
2008.  The increase occurred due to the various changes as previously
discussed, principally the increase in gross profit  which was
partially offset by the increase in selling and administrative
expenses.





Comparison
of Financial Condition




The
Company had total assets at December 31, 2009 of $98.6 million, a decrease from
$103.0 million at September 30, 2009.  Some of the primary components
of the balance sheet were accounts receivable which totaled $12.8 million a
decrease from $16.6 million at September 30, 2009.  This reduction
resulted from the reduced revenue earned during the quarter ending December 31,
2009 compared to the same period in the previous year.   Other
major categories of assets at December 31, 2009 included cash of $6.5 million
and fixed assets less accumulated depreciation of $27.9
million.  Liabilities totaled $43.6 million, a decrease from $48.7
million at September 30, 2009.   This decrease was primarily due
to reductions in accounts payable and debt which were paid down with the
collections on accounts receivable.





Stockholders’
Equity.Stockholders’ equity
increased from $54.3 million at September 30, 2009 to $55 million at December
31, 2009.  This increase was due to the net income of $0.6 million for
the three months ended December 31, 2009.   We have not paid any
dividends on our common stock, nor have we repurchased shares of our common
stock.




11


Liquidity
and Capital Resources




Cash
Requirements





We
anticipate that our cash and cash equivalents on hand at December 31, 2009 which
totaled  $6.5 million along with  our credit facilities
available to us and our anticipated future cash flows from operations will
provide sufficient cash to meet our operating needs.  However, with
the anticipated future energy shortage nationwide and the increased demand for
our services, we could be faced with needing significant additional working
capital.  Also, current general credit tightening resulting from the
general banking and other economic contraction that occurred in the second half
of 2008, has impaired the availability of credit facilities for future
operational needs.  A prolonged restriction in borrowing capacity may
limit the growth of the Company.




Sources
and uses of Cash





The
net income for the three months ended December 31, 2009 was $0.6
million.  The depreciation expense was $1.5
million.   Contracts, other receivables and prepaids provided
$6.7 million while accounts payable and accrued expenses consumed $3.1
million.  Net cash provided by operating activities was $6.4
million.  Financing activities consumed $2.3 million. The lines of
credit were reduced by $.8 million and long term debt was reduced by $1.2
million during this period.





As of December 31, 2009, we had $6.5
million in cash, working capital of $9.9 million and long term debt, net of
current maturities of $14.9 million.





Loan
Covenants





The Company entered into a
fifteen million dollar ($15,000,000) Line of Credit agreement with a regional
bank on August 20, 2009.  Interest will accrue on the line of credit
at an annual rate based on “Wall Street Journal” Prime Rate (the Index) with a
floor of six percent (6.0%).  Cash available under the line is
calculated based on a percentage of the Company’s accounts receivable with
certain exclusions.  Major items excluded from calculation are
receivables from bonded jobs, retainage, and items greater than one hundred
twenty (120) days old. The Company is currently working with the bank to revise
the amounts allowed for bonded jobs and retainage in order to provide quicker
greater access to the Line.   The proposed changes would give the
Company quick access to the entire Line of Credit and would provide enough cash
to meet our projected needs.   The Company is looking at
alternative methods of financing in case the discussions with the bank do not
result in a satisfactory resolution of the Company’s concerns.  If
additional working capital isn’t available the company’s growth and ability to
undertake larger projects will be reduced significantly which could have a
significant negative impact on the Company’s operating margins and overall
financial strength.




12




At
December 31, 2009 the Company was overdrawn by $370,000 on the
line.  A payment on the line of $500,000 was made on January 13, 2010
to bring the account back into compliance.





The
following are the major covenants of the line:





Current
Ratio must be not less than 1.1 in the first year.  As of December 31,
2009 our current ratio was 1.44 to 1.





Debt to
tangible net worth must not exceed 3.5 during the first year.  Our
debt to tangible net worth at December 31, 2009 was 2.64 to 1.





Capital
Expenditures (CAPEX) must not exceed $7.5 million.  CAPEX from the
loan date was approximately $600,000.





Dividends
shall not exceed 50% of taxable income without prior bank
approval.  No dividends have been declared.





With the
exception mentioned above, the Company was in compliance with all loan covenants
as of the period ending December 31, 2009.


Off-Balance
Sheet transactions





Due to the nature of our industry, we
often enter into certain off-balance sheet arrangements in the ordinary course
of business that result in risks not directly reflected in our balance
sheets.  Though for the most part not material in nature, some of
these are:




Leases




Our work
often requires us to lease various facilities, equipment and
vehicles.  These leases usually are short term in nature, one year or
less, though when warranted we may enter into longer term leases.  By
leasing equipment, vehicles and facilities, we are able to reduce our capital
outlay requirements for equipment vehicles and facilities that we may only need
for short periods of time.   The Company currently rents two
parcels of real estate from stockholders-directors of the company under
long-term lease agreements.  The first agreement calls for monthly
rental payments of $5,000 and extends through January 1, 2012.  The
second agreement is for the Company’s headquarter offices and is rented from a
corporation in which two of the Company’s directors are
shareholders.   The second agreement began November 1, 2008 and
runs through 2011 with options to renew.   This second agreement
provides for a monthly rental of $7,500.




Letters
of Credit




Certain customers or vendors may
require letters of credit to secure payments that the vendors are making on our
behalf or to secure payments to subcontractors, vendors, etc. on various
customer projects.  At December 31, 2009, the Company was contingently
liable on an irrevocable Letter of Credit for $950,000 to guarantee payments of
insurance premiums to the group captive insurance company through which the
Company obtains its general liability insurance.




13


Performance
Bonds




Some customers, particularly new ones,
or governmental agencies require us to post bid bonds, performance bonds and
payment bonds.   These bonds are obtained through insurance
carriers and guarantee to the customer that we will perform under the terms of a
contract and that we will pay subcontractors and vendors.  If we fail
to perform under a contract or to pay subcontractors and vendors, the customer
may demand that the insurer make payments or provide services under the
bond.  We must reimburse the insurer for any expenses or outlays it
isrequired to
make.  Depending upon the sizeandconditions of a particular
contract, we may be required to post letters of credit or other collateral in
favor of the insurer.   Posting of these letters or other
collateral reduce our borrowing capabilities.   Historically, the
Company has never had a payment made by an insurer under these circumstances and
does not anticipate any claims in the foreseeable
future.    At December 31, 2009, we had $81.1 million in
performance bonds outstanding.





Concentration
of Credit Risk




In the ordinary course of business the
company grants credit under normal payment terms, generally without collateral,
to our customers, which include natural gas and oil companies, general
contractors, and various commercial and industrial customers located within the
United States.    Consequently, we are subject to potential
credit risk related to business and economic factors that would affect these
companies.  However, we generally have certain statutory lien rights
with respect to services provided.  Under certain circumstances such
as foreclosure, we may take title to the underlying assets in lieu of cash in
settlement of receivables.  The Company had one customer that exceeded
ten percent of revenues for the three months ended December 31,
2009.  At December 31, 2009 that company was Markwest, which accounted
for 20 % of revenues.





Litigation




The Company is a party from time to
time to various lawsuits, claims and other legal proceedings that arise in the
ordinary course of business.  These actions typically seek, among
other things, compensation for alleged personally injury, breach of contract
and/or property damages, punitive damages, civil penalties or other losses, or
injunctive or declaratory relief.  With respect to all such lawsuits,
claims, and proceedings, we record reserves when it is probable that a liability
has been incurred and the amount of loss can be reasonably
estimated.  We do not believe that any of these proceedings,
separately or in aggregate, would be expected to have a material adverse effect
on our financial position, results of operations or cash flows.





Related
Party Transactions




Total
long-term debt at December 31, 2009 was $21.9 million, of which, $8.5million was payable to
certain directors, officers and former owners of an acquired
company.    The related party debt consist of a $5.5 million
note due in August 2010, a $3.0 million note payable on August 15 each year at
$1 million per year over the next three years.





Inflation




Due to relatively low levels of
inflation during the three months ended December 31, 2008 and 2009, inflation
did not have a significant effect on our results.




14


Critical
Accounting Policies




The discussion and analysis of the
Company’s financial condition and results of operations are based on our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States.  The
preparation of these consolidated financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities known to exist at
the date of the consolidated financial statements and reported amounts of
revenues and expenses during the reporting period.  We evaluate our
estimates on an ongoing basis, based on historical experience and on various
other assumptions that are believed to be reasonable under the
circumstances.  There can be no assurance that actual results will not
differ from those estimates.  Management believes the following
accounting policies affect our more significant judgments and estimates used in
the preparation of our consolidated financial statements.





Revenue
Recognition.Revenues
from fixed price contracts are recognized using the percentage-of-completion
method, measured by the percentage of costs incurred to date to total estimated
costs for each contract.  These contracts provide for a fixed amount
of revenues for the entire project.  Such contracts provide that the
customer accept completion of progress to date and compensate us the services
rendered, measured in terms of units installed, hours expended or some other
measure of progress.   Contract costs include all direct
material, labor and subcontract costs and those indirect costs related to
contract performance, such as indirect labor, tools and
expendables.   The cost estimates are based on the professional
knowledge and experience of the Company’s engineers, project managers and
financial professionals.  Changes in job performance, job conditions,
and others all affect the total estimated costs at
completion.    The effects of these changes are recognized
in the period in which they occur.   Provisions for the total
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. The current asset “Costs and estimated earnings in excess
of billings on uncompleted contracts” represents revenues recognized in excess
of amounts billed for fixed price contracts.  The current liability
“Billings in excess of costs and estimated earnings on uncompleted contracts”
represents billings in excess of revenues recognized for fixed price
contracts.





Revenue
on all costs plus and time and material contracts are recognized when services
are performed or when units are completed.





Goodwill.The Company has selected
July 1 as the date of the annual goodwill impairment evaluation, which is the
first day of our fourth fiscal quarter.  Goodwill was assigned to the
operating units at the time of acquisition.  The  reporting
units to which goodwill was assigned  are CJ Hughes (“CJ”)
and  its subsidiary Contractors Rental Corp (“CRC”) as one unit, Nitro
Electric (a subsidiary of CJ Hughes-”Nitro”)  and to ST
Pipeline.  The assignment to CJ consolidated and ST Pipeline was based
on the purchase price of each company.  Both purchases were supported
by fairness opinions.  The allocation of the goodwill arising from the
purchase of CJ was allocated between CJ/CRC and Nitro based on an internally
prepared analysis of the relative fair values of each unit.





CJ Hughes
and its subsidiary CRC are considered one reporting unit because CRC almost
exclusively provides labor for CJ as a subcontractor. There have
been no material operational changes to any reporting units since the date
of acquisition. Although the Company uses a centralized management
approach, the reporting units have continued to perform similar services to
those performed prior to the acquisition.  There have been no sales of
equipment, other than in the ordinary course of business, or dispositions of
lines of business by any of the operating units.




15




The
Company’s annual impairment analysis at July 1, 2009 indicated a control value
for the Company and for each of the reporting units in excess of their
respective book values.  Accordingly, no loss from impairment was
charged against earnings.   Management considered the fact that
fair value estimates contain assumptions, and note that a ten percent (10%)
decline in fair value of each reporting unit would not change the results of our
assessment.




The
Company’s valuation was based on management’s projected operating results for
the next fiscal year. The fair value of the reporting units was determined using
a weighted combination of a market approach to value utilizing pricing multiples
of guideline publicly traded companies, a market approach to value utilizing
pricing multiples of guideline merger and acquisition transactions, and an
income approach to value utilizing a discounted cash flow model.




The
Company’s market capitalization, including the market cap of both the common
stock and the outstanding warrants, continues to be at a level below book value,
and has been since shortly after the acquisition of the operating companies and
the associated redemption of common shares.  At December 31, 2009 the
market cap of the Company was at 87.8% of book value.  The Company
believes that the low stock price is attributable to larger than usual discounts
for minority shares and lack of marketability due to the low trading volume and
the complex capital structure that includes warrants and a unit purchase
option.




Management
will continue to assess at each reporting date the need for a goodwill
impairment test under the Accounting Standards Codification if an event occurs
or circumstances change that would more likely than not reduce the fair value of
a reporting unit below its carrying amount.





Income Taxes.  The
Company has recorded a deferred tax asset of $2.7 million for the tax benefits
attributable to deductible temporary differences and carry
forwards.  The majority of the Company’s deferred tax asset relates to
a net operating loss of $5.7 million incurred in the prior year.  The
recorded deferred tax asset must be reduced by a valuation allowance if it is
more likely than not that some portion or all of the deferred tax asset will not
be realized.  Management has determined that the prior year operating
loss was attributable in large part to losses on two large contracts, and does
not expect such losses to repeat.  Current operating profits and
projected profits based on current backlog with historical gross margins,
will  be more than sufficient to produce taxable income in an amount
equal to or greater than the operating loss carryover.  Additional
work continues to be negotiated and bid at levels that should maintain backlog
at or near the current level.  It is also noted that prior to
acquisition the operating companies had a history of strong operating
profits.  Management also considered the deferred tax liability of
$6.4 million associated with the book to tax differences in the basis of fixed
assets resulting from the purchase accounting adjustments at the time of the
acquisitions.  This timing difference will reverse over the next seven
years. Management has concluded that no valuation allowance against the deferred
tax asset should be recorded at this time.





Management’s
conclusion that the realization of the net operating loss carryover is more
likely than not was based on all available evidence at the balance sheet date,
and will be reassessed at each reporting date.  Failure to maintain
historical revenues and gross margins may call into question the Company’s
ability to realize the deferred tax asset and a valuation allowance may be
established at that time.





16




Outlook




The following statements are based on
current expectations.  These statements are forward looking, and
actual results may differ materially.





Recently our customers have been
experiencing reduced demand for their products.  We expect to see
spending from our customers on their transmission and distribution systems
increasing over the next few years as demand returns to normalized
levels.   The Company’s backlog at December 31, 2009 was $146
million and while adding additional business projects appears likely, no
assurances can be given that the Company will be successful in bidding on
projects that become available.





If the increased demand moves to
expected levels in fiscal 2010 and beyond, we believe that the Company will
continue to have opportunities to continue to improve both revenue volumes and
the margins thereon.  However, if the current economic conditions
deteriorate further, growth could be limited.





If growth continues, we will be
required to make additional capital expenditures for equipment to keep up with
that need.  Currently, it is anticipated that in fiscal 2010, the
Company’s capital expenditures will be between $2.0 million and $4.0
million.  However, if the customer demands grow, this number could be
significantly higher.  Significantly higher capital expenditure
requirements could impair our cash flows and require additional
borrowings.





ITEM
3.  Quantitative and Qualitative Disclosures About Market
Risk




We are
exposed to market risks, primarily related to increases in fuel prices and
adverse changes in interest rates, as discussed below.
 
 Fuel
Prices.Our exposure to market risk for changes in fuel
prices relates to our consumption of fuel and the price we have to pay for
it.  As prices rise, our total fuel cost rises.  We do not
feel that this risk is significant due to the fact that we would be able to pass
a portion of those increases on to our customers.
  Interest Rate.Our
exposure to market rate risk for changes in interest rates relates to our
borrowings from  banks.   Some of our loans have
variable interest rates.  Accordingly, as rates rise, our interest
cost would rise.  We do not feel that this risk is
significant.





ITEM
4T. Controls and Procedures





Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness of
the design and operation of our disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of
the period covered by this report. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of the end of
the period covered by this report, our disclosure controls and procedures were
effective to ensure that information required to be disclosed in the reports
that Energy Services of America Corporation files or submits under the
Securities Exchange Act of 1934, is (1) recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms, and
(2) accumulated and communicated to our management including our Chief Executive
Officer, as appropriate to allow timely decisions regarding required
disclosure.




17




There has
been no change in Energy Services of America Corporation’s internal control over
financial reporting during Energy Services of America Corporation’s first
quarter of fiscal year 2010 that has materially affected, or is reasonably
likely to materially affect, Energy Services of America Corporation’s internal
control over financial reporting.




PART
II




OTHER
INFORMATION






ITEM
1A. Risk Factors




Please
see the information disclosed in the “Risk Factors” section of our Form 10-K as
filed with the Securities and Exchange Commission on December 23, 2009, and
which is incorporated herein by reference.




ITEM 2.Unregistered Sales
of Equity Securities and Use of Proceeds.




(a) There have
been no unregistered sales of securities during the past two years.




(b) On September
6, 2006, we closed our initial public offering of 8,600,000 units. Each unit
consisted of one share of our common stock and two warrants, each to purchase
one share of our common stock at an exercise price of $5.00 per share. The units
were sold at an offering price of $6.00 per unit, generating gross proceeds of
$51,600,000. The managing underwriter in the offering was Ferris, Baker Watts
Incorporated.  The securities sold in the offering were registered
under the Securities Act of 1933 on a registration statement on Form S-1 (No.
333-133111). The Securities and Exchange Commission declared the registration
statement effective on August 30, 2006.




Energy
Services of America Corporation did not repurchase any shares of its common
stock during the relevant period.




ITEM
4. Submission of Matters to a vote of Security Holders




On
December 11, 2009, the Company held its annual meeting of
stockholders.  At the annual meeting stockholders the following matter
were considered by stockholders.  The number of votes cast for,
against, or withheld as well as the number of abstention and broker non-votes is
set forth below.




1.  Election
      of Directors
            For
            WithheldMarshall
      T. Reynolds
            11,113,552
            208,829Edsel
      R. Burns
            11,118,552
            203,829Jack
      M. Reynolds
            11,115,652
            206,729Neal
      W. Scaggs
            11,281,975
            40,406Joseph
      L. Williams
            11,284,975
            37,406Richard
      M. Adams, Jr.
            11,284,975
            37,406Keith
      Molihan
            11,281,975
            40,406Douglas
      Reynolds
            11,115,652
            206,729Eric
      Dosch
            11,285,975
            36,406James
      Shafer
            11,115,652
            206,729





18





ITEM
6. Exhibits




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 200231.2
            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 200232
            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








SIGNATURES





Pursuant
to the requirements of Section 13 of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.








ENERGY
      SERVICES OF AMERICA CORPORATIONDate:
      February 12,
      2010
            By:
            /s/ Edsel R. BurnsEdsel R. BurnsChief Executive OfficerDate:February
      12, 2010
            By:
            / s/ Larry A. BlountLarry A. BlountChief Financial Officer









19