OEG Orbital Energy Group Inc

Orbital Energy Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

March 31,

December 31,

(in thousands, except share and per share amounts)

2022

2021

Assets:

Current Assets:

Cash and cash equivalents

$

20,949

$

26,865

Restricted cash – current portion

146

150

Trade accounts receivable, net of allowance

52,670

48,752

Inventories

1,299

1,335

Contract assets

14,198

7,478

Note receivable, current portion

1,051

3,536

Prepaid expenses and other current assets

7,291

6,919

Assets held for sale, current portion

6,611

6,679

Total current assets

104,215

101,714

Property and equipment, less accumulated depreciation

28,727

29,638

Investment

1,063

1,063

Right of use assets - Operating leases

20,040

18,247

Right of use assets - Financing leases

14,231

14,702

Goodwill

102,349

100,899

Other intangible assets, net

138,207

142,656

Restricted cash, noncurrent portion

1,026

1,026

Note receivable, noncurrent portion

—

836

Deposits and other assets

1,557

1,558

Total assets

$

411,415

$

412,339

Liabilities and Stockholders' Equity:

Current Liabilities:

Accounts payable

$

17,853

$

10,111

Notes payable, current portion

68,563

72,774

Line of credit

4,000

2,500

Operating lease obligations - current portion

5,179

4,674

Financing lease obligations - current portion

5,048

4,939

Accrued expenses

30,524

28,301

Contract liabilities

6,470

6,503

Financial instrument liability, current portion

25,912

825

Liabilities held for sale, current portion

5,735

4,367

Total current liabilities

169,284

134,994

Financial instrument liability, noncurrent portion

1,753

—

Deferred tax liabilities

260

260

Notes payable, less current portion

153,414

156,605

Operating lease obligations, less current portion

14,878

13,555

Financing lease obligations, less current portion

9,455

9,939

Other long-term liabilities

720

720

Total liabilities

349,764

316,073

Commitments and contingencies

Stockholders' Equity:

Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at March 31, 2022 or December 31, 2021

—

—

Common stock, par value $0.001; 325,000,000 shares authorized; 85,887,514 shares issued and 85,409,451 shares outstanding at March 31, 2022 and 82,259,739 shares issued and 81,906,676 shares outstanding at December 31, 2021

86

82

Additional paid-in capital

314,485

311,487

Treasury stock at cost; 353,063 shares held at March 31, 2022 and December 31, 2021

(413)

(413)

Accumulated deficit

(248,535)

(210,934)

Accumulated other comprehensive loss

(3,989)

(3,995)

Total Orbital Energy Group, Inc.'s stockholders' equity

61,634

96,227

Noncontrolling interest

17

39

Total stockholders' equity

61,651

96,266

Total liabilities and stockholders' equity

$

411,415

$

412,339

Orbital Energy Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

For the Three Months

(in thousands, except share and per share amounts)

Ended March 31,

2022

2021

Revenues

$

70,254

$

5,561

Cost of revenues

58,671

8,082

Gross profit

11,583

(2,521)

Operating expenses:

Selling, general and administrative expense

8,126

12,019

Depreciation and amortization

5,323

1,082

Recovery of bad debt

(60)

—

Other operating expense

(18)

—

Total operating expenses

13,371

13,101

Loss from operations

(1,788)

(15,622)

Loss on extinguishment of debt

(26,019)

(250)

Other income (expense)

(583)

313

Interest expense

(8,039)

(734)

Loss from continuing operations before taxes

(36,429)

(16,293)

Income tax expense

241

16

Loss from continuing operations, net of income taxes

(36,670)

(16,309)

Discontinued operations

Loss from discontinued operations, net of income taxes

(953)

(1,643)

Net loss

(37,623)

(17,952)

Less: net loss attributable to noncontrolling interest

(22)

—

Net loss attributable to Orbital Energy Group, Inc.

$

(37,601)

$

(17,952)

Basic and diluted weighted average common shares outstanding

83,126,709

44,564,868

Loss from continuing operations per common share - basic and diluted

$

(0.44)

$

(0.36)

Income from discontinued operations - basic and diluted

(0.01)

(0.04)

Loss per common share - basic and diluted

$

(0.45)

$

(0.40)

Orbital Energy Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the Three Months

(in thousands)

Ended March 31,

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(37,623)

$

(17,952)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

3,687

316

Amortization of intangibles

5,003

1,431

Amortization of debt discount

1,635

140

Amortization of note receivable discount

(63)

(74)

Stock-based compensation and expense, net of forfeitures

(3,050)

2,559

Fair value adjustment to liability for stock appreciation rights

(269)

1,908

Fair value adjustment to financial instrument liability

928

—

Loss on extinguishment of debt and debt modifications

26,019

250

Recovery of bad debt

31

(19)

Inventory reserve

(22)

(72)

Gain on sale of assets

(103)

—

Non-cash unrealized foreign currency (gain) loss

48

(100)

Change in operating assets and liabilities, net of acquisition:

Trade accounts receivable

(3,935)

1,689

Inventories

20

225

Contract assets

(6,378)

156

Prepaid expenses and other current assets

(751)

783

Right of use assets/lease liabilities, net

35

(222)

Deposits and other assets

(26)

—

Accounts payable

7,929

(4,343)

Accrued expenses

4,175

1,286

Contract liabilities

1,145

(1,443)

NET CASH USED IN OPERATING ACTIVITIES

(1,565)

(13,482)

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash paid for acquisition, net of cash received

(773)

—

Purchases of property and equipment

(1,351)

(2,946)

Deposits on financing lease property and equipment

26

—

Proceeds from sale of property and equipment

78

—

Purchase of other intangible assets

(51)

(692)

Proceeds from notes receivable

3,500

100

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

1,429

(3,538)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit

3,500

—

Payments on line of credit

(2,000)

(441)

Payments on financing lease obligations

(1,212)

(1)

Proceeds from notes payable

—

9,701

Payments on notes payable

(5,804)

(3,238)

Proceeds from sales of common stock

—

42,376

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

(5,516)

48,397

Effect of exchange rate changes on cash

(268)

11

Net increase (decrease) in cash, cash equivalents and restricted cash

(5,920)

31,388

Cash, cash equivalents and restricted cash at beginning of period

28,041

4,524

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

$

22,121

$

35,912

Reconciliation of Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA from Continuing Operations for the Three Months Ended March 31, 2022 and 2021

The following table presents reconciliations of the non-GAAP financial measures of EBITDA and Adjusted EBITDA from continuing operations to loss from continuing operations, net of taxes for the three months ended March 31, 2022 and 2021. These reconciliations are intended to provide useful information to investors and analysts as they evaluate the Company's performance. EBITDA from continuing operations is defined as loss from continuing operations before interest, taxes, depreciation and amortization, and Adjusted EBITDA from continuing operations is defined as EBITDA from continuing operations adjusted for certain other items as described below. We believe that the exclusion of these items from loss from continuing operations enables management and investors to more effectively evaluate the Company's operations period over period and to identify operating trends that might not be apparent when including the excluded items. However, these measures should not be considered as an alternative to loss from continuing operations or other measures of performance that are derived in accordance with GAAP. As to certain of the items below, (i) stock-based compensation and expense may vary from period to period due to fair value adjustments from changes in market conditions, forfeiture rates, accelerated vesting and amounts granted; (ii) acquisition costs vary from period to period depending on the Company's level of acquisition activity; (iii) gains and losses loss on disposal of assets varies from period to period depending on operational wear and tear and condition of the Company's fixed assets; (iv) gains and losses on extinguishment and modification of debt varies from period to period depending on changes in the Company's financing activities and the exercise of certain debt-to-equity conversion features; and (v) fair value adjustments to equity-linked financial instrument liabilities varies from period to period depending on changes in the market price of Orbital Energy's common stock and certain assumptions used in fair valuation calculations. Because EBITDA and adjusted EBITDA from continuing operations, as defined, exclude some, but not all, items that affect loss from continuing operations, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, loss from continuing operations, net of income taxes and information reconciling the GAAP and non-GAAP financial measures, are included below. See notes to follow:

For the Three Months Ended

(In thousands)

(Unaudited)

2022

2021

Loss from continuing operations, net of income taxes (GAAP)

$

(36,670)

$

(16,309)

Interest expense, net

7,961

653

Income tax expense (benefit)

241

16

Depreciation and amortization

8,690

1,315

EBITDA from continuing operations (a)

(19,778)

(14,325)

Stock-based compensation and expense, net of forfeitures (b)

(3,319)

4,467

Acquisition costs (c)

32

—

(Gain) loss on disposal of assets (d)

(103)

—

(Gain) loss on extinguishment and modification of debt (e)

26,019

250

Fair value adjustment to equity-linked financial instruments (f)

928

—

Adjusted EBITDA from continuing operations (a)

$

3,779

$

(9,608)

(a)

The calculations of EBITDA and Adjusted EBITDA from continuing operations for the three months ended March 31, 2021 have been amended to conform to the current period calculations of EBITDA and Adjusted EBITDA from continuing operations.

(b)

The amounts include non-cash expenses recognized from the vesting of stock-based compensation awards issued to employees, executives, directors and consultants for services provided, net of forfeitures. The amount for the three-month period ended March 31, 2021 includes non-cash expenses recognized from modifications to executive stock appreciation rights (SARS) compensation awards that were exchanged for restricted stock units (RSUs).

(c)

The amounts for the three months ended March 31, 2022 includes certain acquisition-related costs incurred for the acquisition of Coax Fiber Solutions, Inc.

(d)

The amounts relate to net gains or losses recognized on the disposal of the Company's assets.

(e)

The amounts for the three months ended March 31, 2022 include the net gains and losses recognized for the modification of seller financed notes payable issued for the acquisition of Front Line Power Construction, LLC and the issuance of shares of common stock in exchange for payment on certain notes payable.

(f)

The amounts for the three months ended March 31, 2022 include fair value adjustments related to certain down-round and anti-dilutive protections on equity-linked financial instruments issued to the lenders of the Company's syndicated debt. 

Estimated EBITDA and Adjusted EBITDA from Continuing Operations for the Full Year 2022

The following table presents reconciliations of the non-GAAP financial measures of EBITDA and Adjusted EBITDA from continuing operations to loss from continuing operations, net of income taxes for the full year ending December 31, 2022. These reconciliations are intended to provide useful information to investors and analysts as they evaluate the Company's expected performance. EBITDA from continuing operations is defined as loss from continuing operations before interest, taxes, depreciation and amortization, and Adjusted EBITDA from continuing operations is defined as EBITDA from continuing operations adjusted for certain other items as described below. We believe that the exclusion of these items from loss from continuing operations enables management and investors to more effectively evaluate the Company's operations period over period and to identify operating trends that might not be apparent when including the excluded items. However, these measures should not be considered as an alternative to loss from continuing operations or other measures of performance that are derived in accordance with GAAP. As to certain of the items below, stock-based compensation expense may vary from period to period due to fair value adjustments from changes in market conditions, forfeiture rates, accelerated vesting and amounts granted. Because EBITDA and adjusted EBITDA from continuing operations, as defined, exclude some, but not all, items that affect loss from continuing operations, such measures may not be comparable to similarly titled measures of other companies. The most comparable GAAP financial measure, loss from continuing operations, net of income taxes and information reconciling the GAAP and non-GAAP financial measures, are included below. See notes to follow:

Estimated Range

(In thousands)

(Unaudited)

Full Year Ending
December 31, 2022

Loss from continuing operations, net of income taxes (as defined by GAAP) (a)

$

(21,616)

$

(16,816)

Interest expense, net

25,671

25,671

Income tax expense (benefit) (b)

300

500

Depreciation and amortization

28,445

28,445

EBITDA from continuing operations

32,800

37,800

Stock-based compensation and expense

5,200

5,200

Adjusted EBITDA from continuing operations

$

38,000

$

43,000

(a)

The Company incurred a loss on extinguishment of $26.0 million as a result of non-cash losses incurred during the period ended March 31, 2022 from fair value adjustments made to certain equity-linked financial instruments. The estimated financial results are reflective of an expected net impact of $0 on the Company's financial results during the full year ending December 31, 2022 as the Company expects these factors will be offset by changes in market factors and estimated financial results from continuing operations during the full year ending December 31, 2022. Actual results of this non-cash item would not have an impact on Adjusted EBITDA from continuing operations.

(b)

These amounts include estimated state minimum tax expenses determined using the statutory tax rates of the jurisdictions where taxable income is expected to be earned. These amounts do not include federal and foreign income tax expense (benefits) as the Company does not expect to generate taxable income related to its US and foreign jurisdictions and expects valuation allowance reserves to be recognized on any deferred tax assets realized during the full year 2022.