ORBITAL INFRASTRUCTURE GROUP, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

Important Note About Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the
Company's unaudited condensed consolidated financial statements as of September
30, 2022 and notes thereto included in this document and the audited
consolidated financial statements in the Company's 10-K filing for the period
ended December 31, 2021 and the notes thereto. In addition to historical
information, the following discussion and other parts of this Form 10-Q contain
forward-looking information that involves risks and uncertainties. The Company's
actual results could differ materially from those anticipated by such
forward-looking information due to factors discussed elsewhere in this Form
10-Q.



The statements that are not historical constitute "forward-looking statements."
Said forward-looking statements involve risks and uncertainties that may cause
the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements, express or
implied by such forward-looking statements. These forward-looking statements are
identified by their use of such terms and phrases as "expects," "intends,"
"goals," "estimates," "projects," "plans," "anticipates," "should," "future,"
"believes," and "scheduled."



The variables which may cause differences include, but are not limited to, the
following: general economic and business conditions; changes in regulatory
environment; extraordinary external events such as the pandemic health event
resulting from COVID-19; competition; success of operating initiatives;
operating costs; advertising and promotional efforts; the existence or absence
of adverse publicity; changes in business strategy or development plans; the
ability to retain management; availability, terms and deployment of capital;
business abilities and judgment of personnel; availability of qualified
personnel; labor and employment benefit costs; availability and costs of raw
materials and supplies; and changes in, or failure to comply with various
government regulations. Although the Company believes that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate; therefore, there can be no assurance
that the forward-looking statements included in this Form 10-Q will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any person that the
objectives and expectations of the Company will be achieved.



                                       35

————————————————– ——————————

  Table of Contents



Overview

Orbital Infrastructure Group is a diversified infrastructure services company
serving customers in the electric power, telecommunications, and renewable
markets. The Company is dedicated to maximizing shareholder value through
greenfield development and the acquisition of, and investment in successful,
entrepreneurial led companies to profitably grow revenues by providing
end-to-end solutions to customers, primarily in the renewable, electric power
transmission and distribution, and telecommunications infrastructure markets.
The Company is organized in three segments. The Electric Power segment consists
of Front Line Power Construction, LLC based in Houston, Texas, Orbital Power,
Inc. based in Dallas, Texas, and Eclipse Foundation Group based in Gonzales,
Louisiana. The segment provides comprehensive infrastructure solutions to
customers in the electric power industry. Services performed by Front Line Power
and Orbital Power, Inc. generally include but are not limited to the
engineering, design, installation, upgrade, repair and maintenance of electric
power transmission and distribution infrastructure and substation facilities as
well as emergency restoration services. Eclipse Foundation Group, which began
operations in January 2021, is a drilled shaft foundation construction company
that specializes in providing services to the electric transmission and
substation, industrial, telecommunication and disaster restoration market
sectors, with expertise performing services in water, marsh and rock terrains.
In the third quarter of 2022, in order to streamline operations, the Eclipse
business was integrated into Front Line Power Construction, LLC, and ceased to
be a separate business unit.



The Telecommunications segment consists of Gibson Technical Services (GTS) along
with its subsidiaries IMMCO, Inc. based in Atlanta, Georgia and Full Moon
Telecom, LLC based in Florida. GTS provides engineering, design, construction,
and maintenance services to the broadband and wireless telecommunication
industries and was acquired by the Company effective April 13, 2021. IMMCO, Inc.
provides enterprise solutions to the cable and telecommunication industries and
was acquired by the Company effective July 28, 2021. Full Moon Telecom, LLC
provides telecommunication services including an extensive array of wireless
service capabilities and was acquired by the Company effective October 22, 2021.
Coax Fiber Solutions was acquired as of March 7, 2022, and is a Georgia based
GDOT Certified contractor specializing in Aerial Installation, directional
drilling, trenching, plowing, and missile crews for telecommunications, power,
gas, water, CCTV, ATMS, and traffic signal cable installation.



Orbital Solar Services, LLC (OSS), based in Raleigh, North Carolina, makes up
the Renewables segment. OSS provides engineering, procurement and construction
("EPC") services that support the development of renewable energy generation
focused on utility-scale solar construction.



The Company has experienced rapid growth through organic growth and acquisitions
as the Company benefits from its 2021 investments and acquisitions and as the
economy continues to emerge from the COVID-19 induced slowdown. Third quarter
2022 revenue was over four times greater than the Company's total revenue from
the third quarter of 2021. Improved revenues and income were a result of the
inclusion of operations from the November acquisition of Front Line Power
Construction in the Electric Power segment and continued growth in the
Telecommunications segment acquired in the three months ended June 30, 2021. The
Company continues to pursue both organic growth and growth through
acquisitions. The Company's Telecommunications segment made an additional
"tuck-in" acquisition in the first quarter of 2022 for cash and stock
consideration of approximately $0.9 million.



During the nine-month period ended September 30, 2022, the Company began to see
tangible benefits for all segments from the investments the Company made in 2021
through improved revenue. These benefits were offset by sub-contractor labor and
material cost over-runs at OSS's Black Bear project that is projected to be
completed by the end of the year. The Company is in the midst of a reset of its
solar business. The solar reset should not materially change the revenue mix in
the near term. Given some of the recent legislation and executive order, solar
projects that had been delayed are now likely to be opportunities in 2023 and
beyond. As the Company moves away from providing engineering, procurement, and
construction ("EPC") services to being a specialized contractor providing
skilled resources to EPC companies, the Company will benefit from a reduced risk
profile that comes with being an EPC, and margins will be enhanced as we will
not share profits or losses with our joint venture partners as we are now
required to do.



The Company's results were affected negatively in the first nine months of 2022
by the $29.4 million loss on extinguishment of debt primarily related to the
Company's seller financed debt on the November 2021 Front Line Construction
acquisition and stock-based payments made against its investor held debt for
which the stock was issued at a discount to the stock's fair value.



In the third quarter of 2021, the Company incurred ramp-up costs in the Electric
Power segment that put downward pressure on margins in the third quarter of
2021.The Company also incurred professional fees related to mergers and
acquisitions as the Company finalized the acquisition of GTS. The three-month
period ended September 30, 2021, for both segments were also negatively affected
by generally lower economic activity due to the COVID-19 pandemic that caused
economic slowdowns throughout the world.



For the three and nine months ended September 30, 2022, Orbital Infrastructure
Group, Inc. had a consolidated loss from continuing operations of
$141.6 million and $208.3 million, respectively, compared to a consolidated loss
from continuing operations in the three and nine months ended September 30,
2021, of $9.5 million and $34.1 million, respectively.



During the nine months ended September 30, 2022, Orbital Infrastructure Group,
Inc. had a consolidated net loss of $210.8 million compared to a consolidated
net loss in the nine months ended September 30, 2021, of $36.3 million. The
greater net loss for the nine months ended September 30, 2022, was primarily the
result of impairments on goodwill, intangibles, and financing leased assets, the
loss on extinguishment of debt related to the loan modification of the seller
financed debt, and increased interest expense related to acquisitions financed
by debt in the second half of 2021.



Revenues from continuing operations increased for the nine months ended
September 30, 2022, due to the continued ramp-up of the Electric Power and
Renewables segments along with the addition of the Telecommunications segment
which was assembled via acquisitions starting in the second quarter of 2021 and
continuing into 2022.



                                       36

————————————————– ——————————

Contents

Ongoing operating results

The following tables present, for the period indicated, certain financial information concerning revenues and results of operations by segment.

For the three months ended September 30, 2022:


                                Percent of                                 Percent of                          Percent of                       Percent of                      Percent of
(dollars in      Electric        Segment                                     Segment                             Segment                         Segment                          Total
thousands)        Power          Revenues         Telecommunications        Revenues          Renewables        Revenues           Other         Revenues         Total          Revenues
                    $               %                     $                     %                 $                 %                $              %               $               %
Revenues        $   36,732            100.0 %    $             24,064             100.0 %    $     39,026             100.0 %    $       -                - %   $   99,822            100.0 %
Income (loss)
from
operations      $  (76,606 )         (208.6 )%   $            (23,213 )           (96.5 )%   $    (26,535 )           (68.0 )%   $  (2,356 )              - %   $ (128,710 )         (128.9 )%



For the three months ended September 30, 2021:

                                     Percent of                                 Percent of                          Percent of                       Percent of                     Percent of
(dollars in                            Segment                                    Segment                             Segment                         Segment                          Total
thousands)      Electric Power        Revenues         Telecommunications        Revenues          Renewables        Revenues           Other         Revenues         Total         Revenues
                       $                  %                     $                    %                 $                 %                $              %               $               %
Revenues        $        12,200             100.0 %    $             8,742             100.0 %    $      3,880             100.0 %    $       -                - %   $  24,822             100.0 %
Loss from
operations      $        (2,445 )           (20.0 )%   $              (436 )            (5.0 )%   $     (3,605 )           (92.9 )%   $  (4,364 )              - %   $ (10,850 )           (43.7 )%



For the nine months ended September 30, 2022:

                                Percent of                                  Percent of                          Percent of                       Percent of                      Percent of
(dollars in      Electric         Segment                                     Segment                             Segment                         Segment                           Total
thousands)        Power          Revenues          Telecommunications        Revenues          Renewables        Revenues           Other         Revenues         Total          Revenues
                    $                %                     $                     %                 $                 %                $              %               $                %
Revenues        $  117,695             100.0 %    $             60,524             100.0 %    $     85,770             100.0 %    $       -                - %   $  263,989             100.0 %
Income (loss)
from
operations      $  (77,621 )           (66.0 )%   $            (21,662 )           (35.8 )%   $    (32,280 )           (37.6 )%   $  (6,642 )              - %   $ (138,205 )           (52.4 )%



For the nine months ended September 30, 2021:

                                Percent of                                  Percent of                          Percent of                      Percent of                     Percent of
(dollars in      Electric         Segment                                     Segment                            Segment                         Segment                         Total
thousands)        Power          Revenues          Telecommunications        Revenues          Renewables        Revenues          Other         Revenues         Total         Revenues
                    $                %                     $                     %                 $                %                $              %               $              %
Revenues        $   20,297             100.0 %    $             14,816             100.0 %    $      6,789            100.0 %    $       -                - %   $  41,902            100.0 %
Loss from
operations      $  (11,461 )           (56.5 )%   $             (1,185 )            (8.0 )%   $    (17,178 )         (253.0 )%   $ (14,243 )              - %   $ (44,067 )         (105.2 )%




                                       37

————————————————– ——————————

  Table of Contents



Revenue

The revenues for the three and nine months ended September 30, 2022, increased
compared to the 2021 comparable periods primarily due to the additions of the
Telecommunications segment following the acquisitions of GTS in Q2 2021, IMMCO
in Q3 2021, Full Moon in Q4 2021 and Coax Fiber Solutions, LLC in Q1 2022 along
with the acquisition of Front Line Power Construction, LLC, included in the
Company's Electric Power segment, added in Q4 2021. In addition, Orbital Power
Inc. in the Electric Power segment has continued to ramp up operations in 2022.
Renewables had significantly higher revenues in the three months ended September
30, 2022, on the strength of several large projects compared to the three months
ended September 30, 2021, which was affected by supply chain issues and a
general slow-down caused by the COVID-19 epidemic.



The Electric Power Segment held backlogs of customer orders of approximately
$226.8 million as of September 30, 2022, and $207.7 million at December 31,
2021. The increase in backlog is generally due to timing of master service
agreement renewals. The Telecommunications segment held backlogs of customer
orders of approximately $209.2 million as of September 30, 2022, compared to a
backlog of $194.5 million at December 31, 2021. Increases to the backlog are due
to the continuous growth of Gibson Technical Services. The Renewables segment
had a backlog of $36.3 million as of September 30, 2022 compared to
$121.4 million as of December 31, 2021 which is due to further work being
completed and revenue being recognized in the quarter on projects that make up
this backlog. Of the September 30, 2022, backlog totals, the amounts expected to
be recognized in the twelve months following Q3 2022 are approximately $265.9
million. The amounts expected to be recognized in the twelve months following Q3
2022 consist of $150.1 million from the Electric Power segment,
$79.5 million from the Telecommunications segment and $36.3 million from the
Renewables segment.



Cost of revenues

For the three months ended September 30, 2022, the cost of revenues as a
percentage of revenue increased to 105.9% from 90.7% from the prior-year period
primarily due to the significant cost overruns at the Black Bear solar project
in the Renewables segment in the quarter. For the nine months ended September
30, 2022, the cost of revenues as a percentage of revenue decreased
to 94.1% from 107.4% from the prior-year period. This decrease was primarily in
the Electric Power segment and was attributable to ramp-up of revenues in the
segment both organically and the addition of Front Line Power Construction and
was partially offset by lower margins in the Renewables segment due to cost
overruns in the Black Bear solar project. The Black Bear project had negative
gross margins of $18.8 million and $22.2 million for the three and nine months
ended September 30, 2022. At September 30, 2022, the Company had a loss
provision of $3.8 million for estimated future losses on the Black Bear
contract. Margin percentages will vary based upon the mix of projects including
emergency response services, new crew onboarding costs, and the competitive
markets in which the Company competes.



The three and nine months ended September 30, 2021 were affected by start-up
costs at the Company's Orbital Power Services group, lower margin projects
during the period for Orbital Solar Services and was also affected negatively by
the COVID-19 pandemic and the resulting world-wide economic slowdown. Ramp-up
costs included onboarding personnel, equipment and supplies in advance of
projected work in order to obtain the necessary resources in a competitive
market as the Company prepared for forward demand expectations. Additionally,
adverse weather negatively impacted several Electric Power fixed price jobs in
the first nine months of 2021.



The Company expects continued improvement in margins during the remainder of
2022 as the Electric Power segment continues to gain efficiencies and increase
revenues, and the Telecommunications segment sees continued
synergistic benefits from the acquisitions of GTS, IMMCO, Full Moon, and Coax
Fiber Solutions.


Selling, general and administrative expenses

Selling, General and Administrative (SG&A) expenses include such items as wages,
commissions, consulting, general office expenses, business promotion expenses
and costs of being a public company, including legal and accounting fees,
insurance and investor relations. SG&A expenses are generally associated with
the ongoing activities to reach new customers, promote new product and service
lines including for the Electric Power segment, Renewables segment, and
Telecommunications segments.



During the three months ended September 30, 2022, SG&A increased $1.0 million
compared to the three months ended September 30, 2021, primarily due to organic
growth and the Company's 2021 and 2022 acquisitions. In the nine months ended
September 30, 2022 SG&A decreased $3.7 million compared to the prior-year
comparative periods. The decrease in SG&A for the nine month period was
primarily due to decreased SG&A costs in the Renewables segment due to the
$5.2 million restricted stock forfeiture related to a Renewables' Executive
termination in Q1 2022 and higher stock-based compensation in the nine months
ended September 30, 2021 as compared to the nine months ended September 30,
2022 due to the restricted stock vesting expense recorded in 2021 on the
restricted stock that was subsequently forfeited in the first quarter of
2022. Also contributing to the decreased SG&A was lower executive bonuses in Q1
2022 and a $0.3 million positive cash settled SARS mark-to-market fair value
adjustment in 2022 compared to a $2.5 million mark-to-market expense in the
nine months ended September 30, 2021. These decreases were partially offset by
increases in SG&A in the Electric Power and Telecommunications segments
primarily due to organic growth and the Company's 2021 and 2022 acquisitions.



Impairment of goodwill and intangible assets

The Company recorded $100.3 million of impairments of goodwill and intangible
assets in the three and nine months ended September 30, 2022 due to an
additional 25-percent drop in the Company's stock price between June 30, 2022
and September 30, 2022, that caused an overall further decrease in the Company's
market capitalization. Additional triggering events included the significant
loss in the Renewables segment in the third quarter of 2022, interest rate
increases and limitations on accessing capital, which raised substantial doubt
regarding the Company's ability to continue as a going concern. See Note 1 for
more information on goodwill and goodwill impairments.



Restructuring costs

In September 2022, the Company fully impaired its finance lease equipment
related to the Eclipse Foundation Group in the Electric Power segment, which was
integrated by Front Line Power. These pieces of equipment are drilling specific
and at this time, the Company does not plan to use the equipment for the
remaining term of the leases. As these leases are non-cancelable and do not
include a sub-leasing option, the full finance lease assets related to Eclipse
have been removed from the balance sheet and an equal impairment has been
recognized in the amount of $4.5 million. Future payments related to these
leases will be approximately $5.2 million paid through June 2026.



                                       38

————————————————– ——————————

Contents

Depreciation and amortization

(dollars in thousands)



                                              For the Three Months Ended
Depreciation and amortization expense by
Segment                                              September 30,
                                               2022                2021           $ Change       % Change
Electric Power                             $       6,975       $       1,095     $    5,880          537.0 %
Telecommunications                                 1,315                 774            541           69.9 %
Renewables                                           608                 614             (6 )         (1.0 )%
Other                                                 16                 416           (400 )        (96.2 )%
Total depreciation and amortization        $       8,914       $       2,899     $    6,015          207.5 %




                                              For the Nine Months Ended
Depreciation and amortization by Segment            September 30,
                                               2022                2021          $ Change       % Change
Electric Power                             $      21,445       $      1,944     $   19,501         1003.1 %
Telecommunications                                 3,582              1,389          2,193          157.9 %
Renewables                                         1,825              2,319           (494 )        (21.3 )%
Other                                                 47              1,281         (1,234 )        (96.3 )%
Total depreciation and amortization        $      26,899       $      6,933     $   19,966          288.0 %



Depreciation expense is associated with the amortization of leasehold improvements, furniture, equipment, vehicles and the amortization of intangible assets over the estimated useful life of the related assets.



Depreciation and amortization expense in the three and nine months ended
September 30, 2022, were up compared to the three and nine months ended
September 30, 2021, primarily due to additional amortization in the Electric
Power and Telecommunication segments from acquisition intangibles that were
acquired in the second, third and fourth quarter of 2021 and depreciation of
equipment used by Orbital Power Services which had been ramping up their capital
expenditures as more crews were added.



                                       39

————————————————– ——————————

Contents

Gain (loss) on extinguishment of debt

Loss on extinguishment of debt in the three and nine months ended September 30,
2022, was $1.1 million and $29.4 million, respectively.  The loss included $26.2
million related to loan modifications on the Company's seller financed debt with
the sellers of Front Line Power Construction recorded in the first two quarters
of the year and approximately $1.1 million and 2.7 million loss on
extinguishment in the three and nine months ended September 30, 2022, related to
the payment of certain loans with stock-based payments for which the stock was
issued at a discount to the stock's fair value. The loss on extinguishment on
the seller financed debt was primarily related to financial instruments included
in the first quarter 2022 loan modification. The loss on extinguishment also
included $0.5 million from the paydown of two non-recourse agreements with C6 in
the second quarter of 2022.



Gain on extinguishment of debt in the three and nine months ended September 30,
2021 of $0.7 million and $1.6 million was due to the forgiveness by the U.S.
government of certain payroll protection loans in the three months ended
September 30, 2021, partially offset by the loss on the extinguishment of debt
due to the amendment to remove the convertible equity feature of its convertible
debt and the earlier paydown of two non-recourse agreements with C6 during the
nine months ended September 30, 2021.



Loss on financial instruments

Loss on financial instruments Include mark to market adjustment on financial
instrument related to Syndicated debt in the amount of $4.4 million, $13.3
million related to the financial instrument embedded in the Front Line seller
notes and $0.2 million related to the Company's prepaid advance agreement. See
Note 12 for more information on these financial instruments.





Other income (expenses), net

(dollars in thousands)



                                  For the Three Months Ended
Other Income (Expense), net              September 30,
                                    2022                2021         $ Change      % Change
Foreign exchange gain (loss)   $            34       $      (380 )   $     414        (108.9 )%
Interest income                             20                82           (62 )       (75.6 )%
Rental income                              129               129             -           0.0 %
Liquidated damages on debt              (1,194 )               -        (1,194 )       100.0 %
Other, net                                (117 )             (34 )        

(83) 244.1% Total Other income (expenses) ($1,128) $ (203 ) $(925) 455.7%




                                  For the Nine Months Ended
Other Income (Expense), net             September 30,
                                    2022               2021         $ Change      % Change
Foreign exchange loss          $           (7 )     $      (241 )   $     234         (97.1 )%
Interest income                           118               245          (127 )       (51.8 )%
Rental income                             488               372           116          31.2 %
Liquidated damages on debt             (2,271 )               -        (2,271 )       100.0 %
Other, net                               (162 )              (6 )        

(156) 2600.0% Total Other income (expenses) ($1,834) $370 ($2,204) (595.7)%




Other income (expense) changes contributing to increased expenses
were liquidated damages incurred on the Company's investor held debt and less
favorable foreign currency affects in 2022 compared to 2021. Losses were offset
by greater rental income in the year-to-date period.



Interest charges

For the three and nine months ended September 30, 2022, the Company incurred
interest expense of $9.7 million and $27.6 million, respectively, compared to
interest for the three and nine months ended September 30, 2021, of $1.3 million
and $3.1 million, respectively. The increase in interest expense in 2022 is
related to the increase in notes payable outstanding in the three and nine
months ended September 30, 2022, compared to the three and nine months ended
September 30, 2021, primarily related to the Front Line Power Construction
acquisition. Also contributing to the increase is the increase in the variable
rate on the Company's $104.5 million Syndicated debt that increased from 13.50%
at inception to 15.45% at September 30, 2022.



income tax expense

The Company is subject to taxation in the U.S., various state and foreign
jurisdictions. The Company continues to record a full valuation allowance
against the Company's U.S. net deferred tax assets and partial valuation
allowance against the Company's Canada net deferred tax assets, as it is not
more likely than not that the Company will realize a benefit from these assets
in a future period.



                                       40

————————————————– ——————————

Contents

For additional analysis, see Note 14, “Income taxes”, to the condensed consolidated financial statements in Part I – Item I, “Financial statements”.

Cash and capital resources

Business conditions and sources of liquidity

The Company has experienced net losses, cash outflows from cash used in
operating activities and a decline in share value over the past years. As of and
for the nine months ended September 30, 2022, the Company had an accumulated
deficit of $421.4 million, loss from continuing operations of $208.3 million,
and net cash used in operating activities of $13.4 million. Further, as of
September 30, 2022, the Company had a working capital deficit of $118.7 million,
including current maturities of debt, and cash and cash equivalents of $28.0
million available for working capital needs and planned capital asset
expenditures.  As a result of the foregoing, the Company does not have
sufficient liquidity and capital resources to meet its obligations and fund its
operations for the twelve months following the issuance of these financial
statements. These conditions raise substantial doubt regarding the Company's
ability to continue as a going concern.



The Company has plans to access additional capital to meet its obligations for
the twelve months from the date these financial statements are available to be
issued. Historically, the Company has raised additional equity and debt
financing to fund its expansion; refer to Note 16 - Notes Payable and Line of
Credit. The Company has also funded some of its capital expenditures through
long-term financing with lenders and other investors as also described in
further detail in Note 16 - Notes Payable and Line of Credit. Our ability to
raise the additional capital is dependent on a number of factors, including, but
not limited to, the market demand for our common stock, which itself is subject
to a number of business risks and uncertainties, our creditworthiness and the
uncertainty that we would be able to raise such additional capital at a price
that is favorable to us. As of September 30, 2022, the Company has an effective
S-3 shelf registration statement for the issuance of various types of
securities, including common stock, preferred stock, debt securities and/or
warrants in the aggregate of up to $68.8 million. In addition, although no
formal agreements exist, the company has solicited interest from various lenders
to potentially raise additional term debt to restructure or refinance its
existing notes.



The Company plans to meet its obligations as they become due over the next
twelve months by raising additional capital through equity and debt financing
sources and forecasted positive cash flows generated from operations. There can
be no assurance that the Company will succeed in executing these plans. If
unsuccessful, the Company will not have sufficient liquidity and capital
resources to repay its indebtedness when it matures, or otherwise meet its cash
requirements over the next twelve months, as noted above.



General

As of September 30, 2022, the Company held cash and cash equivalents of
$28.0 million and restricted cash of $0.6 million. Operations, investments, and
equipment have been funded through cash on hand, the issuance of common stock
authorized by its July 2020 and February 2021 S-3 filings, seller financing, and
the issuance of debt and financing through the sale of future revenues. The
Company filed an S-3 in February of 2021 which became effective in April 2021
for the issuance of additional stock or public debt. In April 2022, the Company
issued 9,000,000 shares of common stock and pre-funded warrants to purchase up
to 7,153,847 shares of Common Stock for a total raise of $21.0 million before
expenses. In August of 2021, the Company opened a $4.0 million dollar line of
credit to support additional funding. Major uses of cash in the first nine
months of 2022 included the purchases of property and equipment, debt payments
and changes in working capital. The Company continues to work to improve its
short-term liquidity through management of its working capital. Long-term
liquidity is expected to benefit from revenue growth and earnings through its
existing operations. Overall volume growth in the Company's businesses both
organically and through acquisitions are expected to benefit cash flows as well.



Cash Used in Operations

Cash used in trading $13.4 million was a $23.5 million decrease in cash used compared to the nine-month period in 2021.



The decrease in uses of cash in the first nine months of 2022 are primarily
related to higher merger and acquisition costs in the first quarter of 2021 as
compared to 2022 along with company growth in 2022. Due to the large increase in
revenue and associated costs both through acquisitions and organic growth, the
Company was better able to cover it's fixed costs, but increased interest costs
partially offset the benefits of much greater sales. Also, with the growth of
the company's revenue comes increased accounts receivables and accounts payable,
which outside of timing, generally have offsetting cash flow effects. In the
short-term, rapid growth can have a detrimental effect on cash flows as sales on
account with positive gross margins waiting to be collected exceed accounts
payable not yet paid. As the Company's growth begins to moderate, overall cash
used in operations will continue to improve through revenue growth associated
with new customers and larger projects. The change in cash used in operating
activities since December 31, 2021, exclusive of net loss, is primarily the
result of the following line items: Timing of cash payments on accounts payable
and accrued liabilities was a combined $36.9 million increase in cash provided
by  operating activities related to larger projects at Orbital Solar Services.
Changes in cost in excess of billing and accounts receivable from December 31,
2021, was a combined $14.5 million use of cash for the period and reflects the
greater revenue volumes in the first nine months of 2022 compared to the first
nine months of 2021.



                                       41

————————————————– ——————————

  Table of Contents



S-3 registration

The Company filed an S-3 registration statement on July 17, 2020, containing a
prospectus that was effective in September 2020. The Company utilized this
filing in January 2021 to issue common stock for $45 million before costs. The
Company filed a new S-3 shelf registration in January 2021, which, as amended,
became effective in April 2021. With this filing, Orbital Infrastructure Group
may from time-to-time issue various types of securities, including common stock,
preferred stock, debt securities and/or warrants, up to an aggregate amount of
$150 million. The Company utilized this S-3 registration to issue additional
common stock in July 2021 for $38 million before expenses. In May 2022, the
Company utilized the S-3 to issue shares and prefunded warrants for $21.0
million and additional warrants with a cumulative exercise value of $21.2
million. The Company has approximately $68.8 million remaining available to
issue additional securities from its shelf registration.



As the Company focuses on growing its infrastructure services market presence
both organically and through strategic acquisitions, technology development,
product and service line additions, and increasing Orbital's market presence, it
will fund these activities together with related operating, sales and marketing
efforts for its various product and service offerings with cash on hand, and
possible proceeds from future issuances of equity through the S-3 registration
statement, and available debt.



Orbital Infrastructure Group may raise additional capital necessary to finance the development and marketing of its products and services as well as the payment of its debts.

See the section titled Recent sales of Unregistered titles for a complete listing of all unrecorded securities transactions.

Capital expenditure and investments

During the first nine months of 2022 and 2021, Orbital Infrastructure Group
invested $3.7 million and $6.6 million, respectively, in property and equipment.
These investments typically include additions to equipment including vehicles
and equipment for powerline service and maintenance, engineering, furniture,
computer equipment for office personnel, facilities improvements and other fixed
assets as needed for operations. In addition, during the nine months ended
September 30, 2022, the Company had collections from a notes receivable of
$3.5 million related to the sale of the Company's electromechanical business in
2019.



Financing Activities

In the nine months ended September 30, 2022, the Company made cash payments on
notes payable of $35.5 million and had proceeds from notes payable of $41.2
million, respectively. This compared to $19.4 million of proceeds from notes
payable and $7.5 million of payments on notes payable in the nine months ended
September 30, 2021. The Company also received $3.5 million in proceeds from
their line of credit and made $2.0 million in payments on this line of credit in
2022 compared to $0.4 million paid in the first nine months of 2021 to close its
line of credit that was acquired with the Orbital Solar Services business. In
the nine months ended September 30, 2022, and 2021 the Company recorded payments
on finance lease obligations of $3.8 million and $0.9 million dollars,
respectively.



Summary of Liquid Assets and Capital Resources

At September 30, 2022, the Company had unrestricted cash and cash equivalents
balances of $28.0 million of which $2.5 million is covered by insured deposit
programs. At September 30, 2022, the Company had $0.6 million of restricted cash
and cash equivalents balances at domestic financial institutions including
$0.4 million that is covered under the FDIC insured deposits programs.



The Company recorded a net loss of $210.8 million and cash used in operating activities of $13.4 million in the nine months ended September 30, 2022. From September 30, 2022the Company’s accumulated deficit was $421.4 million.




                                       42

————————————————– ——————————

Contents



The Company expects the revenues from its continuing operations, and cash on
hand, to cover operating and other expenses for the next twelve months of
operations. However, in the short-term, the Company expects to continue to need
cash support as the Company's businesses increase their market positions and
revenue. The Company may issue additional debt or equity to support continuing
operations and acquisition efforts in the remaining months of 2022.



Critical Accounting Policies



The Company has adopted various accounting policies to prepare the consolidated
financial statements in accordance with Generally Accepted Accounting
Principles, ("GAAP"). Certain of the Company's accounting policies require the
application of significant judgment by management in selecting the appropriate
assumptions for calculating financial estimates. In the Company's 2021 Annual
Report on Form 10-K filed on March 31, 2022, the Company identified the critical
accounting policies that affect the Company's more significant estimates and
assumptions used in preparing the Company's consolidated financial statements.



Recent accounting pronouncements



See Note 11 Recent Accounting Pronouncements of the condensed consolidated
financial statements in Part I-Item I, "Financial Statements" for a description
of recent accounting pronouncements, including the expected dates of adoption
and estimated effects on financial position, results of operations and cash
flows.



Off-balance sheet arrangements

See Note 19 Commitments and contingencies to the condensed consolidated financial statements in Part I, Item I, “Financial statements”, for a description of the Company’s off-balance sheet arrangements.

© Edgar Online, source Previews

About Gertrude H. Kerr

Check Also

Service design: designing the interaction The Design Group Italia experience

What is clear right away is that service design is a choral project. This becomes …