Orbital Energy Group, Inc. (Form: 8-K/A, Received: 01/13/2022 16:45:13)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

Amendment No. 2

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

January 13, 2022 (November 17, 2021)

Commission File Number: 0-29923

Orbital Energy Group, Inc.

(Exact Name of registrant as specified in Its Charter)

Colorado		84-1463284
(State or jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1924 Aldine Western, Houston, Texas		77038
(Address of Principal Executive Offices)		(zip code)

(832) 467-1420

(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a- 12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.1 4d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value	OEG	Nasdaq Capital Market

Item 2.01 Completion of Acquisition or Disposition of Assets.

This Current Report on Form 8-K/A is being filed as an amendment to the Current Report on Form 8-K filed by Orbital Energy Group, Inc. ("Orbital Energy Group" or the "Company") with the Securities and Exchange Commission (the "SEC") on November 23, 2021 (the "Original Form 8-K"). The Original Form 8-K reported, among other things, the completion by the Company on November 17, 2021 of its acquisition of Front Line Power Construction, LLC ("FLP or "Front Line"). The acquisition was effectuated pursuant to the Membership Unit Purchase agreement (the “MUPA”), dated as of November 17, 2021, by and among the Company and the owners of all the issued and outstanding membership interests of Front Line. Orbital Energy Group paid $100 million in cash at closing, issued 11,622,018 shares of restricted common stock (as amended) of the Company to the sellers of FLP, with an aggregate grant date value $31,670,000 (as amended) based upon a per share value of $2.725 and issued three unsecured promissory notes to the sellers of FLP, in the aggregate principal amount outstanding of $86,730,000 ("Seller Notes") (as amended).

The MUPA contains various customary representations, warranties and covenants. In connection with the MUPA, (i) the Company caused FLP to enter into the Employment Agreement with Kurt A. Johnson, Jr., a key employee of FLP, with base compensation ranging up to $250,000, (ii) the Company entered into the Registration Rights Agreement with the sellers of FLP, which provides for piggyback registration rights, (iii) the Company entered into Lockup Agreements with the sellers of FLP, which provide for two (2) year lockups, and (iv) the Company caused FLP to enter into three primary real estate leases with related party affiliates of the sellers of FLP, with each lease providing for initial three (3) year terms.

This Current Report on Form 8-K/A amends and restates Item 9.01 of the Original Form 8-K to present certain financial statements of Front Line and to present certain unaudited pro forma financial statements of the Company in connection with the Company's acquisition of Front Line, which audited financial statements and unaudited pro forma financial statements are filed as exhibits hereto and are incorporated herein by reference. Exhibit 99.17 and 99.18 are incorporated by reference from Form 8-K/A - Amendment No. 1. All of the other items in the Original Form 8-K remain the same and are hereby incorporated by reference into this Current Report on Form 8-K/A.

The press release is available at the Company’s website, www.orbitalenergygroup.com.

Section 9 - Financial Statement and Exhibits

Item 9.01 Financial Statement and Exhibits.

(a) Financial Statements of Business Acquired

The following financial statements of Front Line are filed as Exhibit 99.1 to this Current Report on Form 8-K/A:

(i) Audited financial statements as of and for the years ended December 31, 2020 and 2019.

(ii) Unaudited financial statements as of and for the nine months ended September 30, 2021 and 2020.

(b) Pro Forma Financial Information

The following unaudited pro forma financial statements are filed as Exhibit 99.2 to this Current Report on Form 8-K/A:

(i) Unaudited pro forma balance sheet as of September 30, 2021.

(ii) Unaudited pro forma income statement for the year ended December 31, 2020 and the nine months ended September 30, 2021.

(d) Exhibits

Exhibit No.		Description of Exhibit
Exhibit 23.1		Consent of KM&L, LLC
Exhibit 99.1		Financial Statements of Front Line Power Construction, LLC
Exhibit 99.2		Pro Forma Financial Statements
Exhibit 99.3		Press Release announcing closing of Front Line Power Construction, LLC acquisition is incorporated by reference to Exhibit 99.1 to the Original Form 8-K.
Exhibit 99.4		Membership Unit Purchase Agreement, dated November 17, 2021, by and among Orbital Energy Group, Inc., Kurt A. Johnson, Jr., and Tidal Power Group, LLC is incorporated by reference to Exhibit 99.2 to the original Form 8-K.
Exhibit 99.5		Unsecured Promissory Note, dated November 17, 2021, given by Orbital Energy Group, Inc. in favor of Kurt A. Johnson, Jr., and Tidal Power Group, LLC. is incorporated by reference to Exhibit 99.3 to the original Form 8-K.
Exhibit 99.6		Unsecured Promissory Note dated November 17, 2021 given by Orbital Energy Group, Inc. in favor of Tidal Power Group, LLC is incorporated by reference to Exhibit 99.4 to the original Form 8-K.
Exhibit 99.7		Lock Up Letter Agreement, dated November 17, 2021, by and between Orbital Energy Group, Inc., and Kurt A. Johnson, Jr. is incorporated by reference to Exhibit 99.5 to the original Form 8-K.
Exhibit 99.8		Lock Up Letter Agreement dated November 17, 2021 by and between Orbital Energy Group, Inc. and Tidal Power Group, LLC is incorporated by reference to Exhibit 99.6 to the original Form 8-K.
Exhibit 99.9		Registration Rights Agreement, dated November 17, 2021, by and among Orbital Energy Group, Inc., Kurt A. Johnson, Jr., and Tidal Power Group, LLC. is incorporated by reference to Exhibit 99.7 to the original Form 8-K.
Exhibit 99.10		Industrial Triple Net Lease, dated November 17, 2021, by and between Danbury Property Company LLC and Front Line Power Construction, LLC is incorporated by reference to Exhibit 99.8 to the original Form 8-K.
Exhibit 99.11		Industrial Triple Net Lease, dated November 17, 2021, by and between Manvel Property Management and Front Line Power Construction, LLC is incorporated by reference to Exhibit 99.9 to the original Form 8-K.

Exhibit 99.12		Industrial Triple Net Lease, dated November 17, 2021, by and between Oak Property Group and Front Line Power Construction, LLC is incorporated by reference to Exhibit 99.10 to the original Form 8-K,
Exhibit 99.13		Credit Agreement, dated November 17, 2021, by and among the lenders identified therein, Alter Domus, as administrative and collateral agent for each of the lenders, Orbital Energy Group, Inc., Front Line Power Construction, LLC, and certain subsidiaries thereof. [without schedules] is incorporated by reference to Exhibit 99.11 to the original Form 8-K.
Exhibit 99.14		Pledge Agreement, dated November 17, 2021, by and between Orbital Energy Group, Inc. and Alter Domus (US) LLC, in its capacity as collateral agent for each Secured Party. is incorporated by reference to Exhibit 99.12 to the original Form 8-K.
Exhibit 99.15		Security Agreement, dated November 17, 2021, by and between Front Line Power Construction, LLC, and Alter Domus (US) LLC, as collateral agent for each Security Party is incorporated by reference to Exhibit 99.13 to the original Form 8-K
Exhibit 99.16		Form of Subscription Agreement with Lenders dated November 17, 2021 relating to the issuance of 1,690,677 shares of our restricted common stock. is incorporated by reference to Exhibit 99.14
Exhibit 99.17		Letter Agreement, dated December 10, 2021, by and between Orbital Energy Group, Inc., and Kurt A. Johnson, Jr. is incorporated by reference to Exhibit 99.1 to Amendment No. 1
Exhibit 99.18		Unsecured Promissory Note, given by Orbital Energy Group, Inc. in favor of Kurt A. Johnson, Jr. is incorporated by reference to Exhibit 99.2 to Amendment No. 1.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

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

Signed and submitted this 13th day of January 2022.

Orbital Energy Group, Inc.

(Registrant)

By:	/s/ Nicholas M. Grindstaff
	Nicholas M. Grindstaff
	Chief Financial Officer

Exhibit 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the incorporation in this Form 8-K, of Orbital Energy Group, Inc., of our Independent Auditor’s Report, dated July 9, 2021 on the financial statements of Front Line Power Construction, LLC, for the years ended December 31, 2020 and 2019. We have not compiled, reviewed or audited the Pro Forma Financial Statements (Exhibit 99.2) which include the nine months condensed financial statements for September 30, 2021 and 2020, and the unaudited pro forma condensed combined financial statements which are included in this Form 8-K.

/s/ KM&L, LLC

Lake Jackson, Texas

January 13, 2022

Exhibit 99.1

FRONT LINE POWER CONSTRUCTION, LLC

ROSHARON, TEXAS

FINANCIAL STATEMENTS

FOR THE YEARS ENDED

DECEMBER 31, 2020 and 2019

8 WEST WAY COURT

LAKE JACKSON, TEXAS 77566

(979) 297-4075

THIS PAGE LEFT BLANK INTENTIONALLY.

FRONT LINE POWER CONSTRUCTION, LLC

FINANCIAL STATEMENTS

For the Years Ended December 31, 2020 and 2019

TABLE OF CONTENTS

		Page
Independent Auditor's Report		5-6

FINANCIAL STATEMENTS:

Balance Sheets		8-9

Statements of Operations and Partners' Capital		10-11

Statements of Cash Flow		12

Notes to Financial Statements		13-21

THIS PAGE LEFT BLANK INTENTIONALLY.

Independent Auditor’s Report

Front Line Power Construction, LLC

Rosharon, Texas 77583

We have audited the accompanying financial statements of Front Line Power Construction, LLC ( the “Company”) which comprise the balance sheets as of December 31, 2020 and 2019, , and the related statements of operations and partners’ capital, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Lake Jackson	El Campo	Angleton	Bay City
8 W Way Ct.	201 W. Webb St.	2801 N. Velasco, Suite C	2245 Avenue G
Lake Jackson, TX 77566	El Campo, TX 77437	Angleton, TX 77515	Bay City, TX 77414
979-297-4075	979-543-6836	979-849-8297	979-245-9236

www.kmandl.com

Front Line Power Construction, LLC

Page 2

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

KM&L, LLC

Lake Jackson, Texas

July 9, 2021

-6-

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FRONT LINE POWER CONSTRUCTION, LLC

BALANCE SHEETS

December 31, 2020 and 2019

Assets

	2020		2019
Current Assets:
Cash and cash equivalents	$	8,584,450	$	4,068,870
Accounts receivable (net of allowance
for doubtful accounts of $73,128 and $73,128)		8,608,632		14,344,579
Costs and estimated earnings in excess of billings
on uncompleted contracts		653,323		1,241,341
Prepaid expenses		377,595		119,900
Other assets		45		17,044

Total current assets		18,224,045		19,791,734

Property and Equipment:
Computers and office equipment		82,632		82,632
Field equipment and tools		6,162,692		5,564,270
Vehicles and vehicle equipment		13,353,009		10,948,544
Leasehold improvements		46,976		34,427

Total property and equipment		19,645,309		16,629,873

Less accumulated depreciation		9,500,737		6,619,025

Net property and equipment		10,144,572		10,010,848

Other Assets:
Investment		302,722		132,995

Total other assets		302,722		132,995

Total assets	$	28,671,339	$	29,935,577

The accompanying notes are an integral part of the financial statements.

-8-

Liabilities and Partners’ Capital

		2020		2019
Current Liabilities:
Accounts payable	$	325,954	$	1,196,191
Other current liabilities		222,134		147,260
Billings in excess of costs and estimated
earnings on uncompleted contracts		32,635		73,404
Current portion of notes payable		1,408,476		324,520

Total current liabilities		1,989,199		1,741,375

Long-Term Liabilities:
Notes payable		931,229		1,180,357
PPP loan payable		2,144,607		—

Total long-term liabilities		3,075,836		1,180,357

Total liabilities		5,065,035		2,921,732

Partners' capital		23,606,304		27,013,845

Total liabilities and partners' capital	$	28,671,339	$	29,935,577

-9-

FRONT LINE POWER CONSTRUCTION, LLC

STATEMENTS OF OPERATIONS AND PARTNERS’ CAPITAL

For the Years Ended December 31, 2020 and 2019

	2020		2019

Revenue	$	56,120,605	$	54,980,814
Cost of sales		39,609,829		39,028,271

Gross margin		16,510,776		15,952,543

Operating Expenses:
Salaries and wages		1,238,589		1,013,992
Employee benefits		143,189		180,136
Business promotion		—		23,517
Bank charges		5,487		6,434
Charitable contributions		2,332		18,691
Dues and subscriptions		20,263		14,984
Equipment rental		18,708		30,723
Freight and postage		6,319		8,106
Interest expense		50,185		8,710
Licenses and permits		6,919		30,748
Printing and reproduction		—		4,821
Professional fees		269,681		179,665
Building rent		150,000		150,000
Telephone		51,339		45,814
Utilities		20,450		19,465
Uniforms		—		3,851
Supplies		46,666		41,554
Payroll taxes		88,312		78,273
Employee testing		74,339		111,025
Other taxes		1,200		4,170
Property taxes		172,519		122,127
Franchise taxes		178,559		110,544
Travel		1,507		4,641
Meals and entertainment		75,399		66,678
Miscellaneous		33,357		31,861

Total operating expenses		2,655,319		2,310,530

Income from operations		13,855,457		13,642,013

(continued)

-10-

FRONT LINE POWER CONSTRUCTION, LLC

STATEMENTS OF OPERATIONS AND PARTNERS’ CAPITAL - Continued

For the Years Ended December 31, 2020 and 2019

	2020			2019

Other Income (Expense):
Other income	$	14,555		$	6,279
Loss on disposal of assets		(27,553	)		(7,993	)

Total other income (expense)		(12,998	)		(1,714	)

Net income		13,842,459			13,640,299

Beginning partners' capital		27,013,845			18,748,546

Distributions to partners		(17,250,000	)		(5,375,000	)

Ending partners' capital	$	23,606,304		$	27,013,845

The accompanying notes are an integral part of the financial statements

-11-

FRONT LINE POWER CONSTRUCTION, LLC

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2020 and 2019

	2020			2019
Cash Flows from Operating Activities
Net income	$	13,842,459		$	13,640,299
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation		3,022,760			2,401,919
Loss on disposal of assets		27,553			7,993
Changes in Working Capital
Accounts receivable		5,735,947			(6,391,523	)
Prepaid expenses		(257,695	)		—
Costs and estimated earnings in excess
Of billings on uncompleted contracts		588,018			(805,249	)
Other assets		16,999			(77,297	)
Accounts payable		(870,237	)		857,646
Billings in excess of costs and estimated
Earnings on uncompleted contracts		(40,769	)		(239,935	)
Other liabilities		74,874			35,803

Net cash provided by operating activities		22,139,909			9,429,656

Cash Flows from Investing Activities:
Purchase of investment		(169,727	)		(132,995	)
Purchase of property and equipment		(3,184,037	)		(5,396,747	)

Net cash used by investing activities		(3,353,764	)		(5,529,742	)

Cash Flows from Financing Activities
Proceeds from notes payable		3,316,829			1,432,980
Payments on notes payable		(337,394	)		(111,372	)
Distribution of partners' capital		(17,250,000	)		(5,375,000	)

Net cash used by financing activities		(14,270,565	)		(4,053,392	)

Net increase (decrease) in cash and cash equivalents		4,515,580			(153,478	)

Cash and cash equivalents, January 1		4,068,870			4,222,348

Cash and cash equivalents, December 31	$	8,584,450		$	4,068,870

Cash Paid for Interest:
Interest	$	50,185		$	8,710

Federal income taxes	$	—		$	—

The accompanying notes are an integral part of the financial statements

-12-

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2020 and 2019

INDEX

Note

Page

Summary of Significant Accounting Policies

Deposits

Investment

Costs and Estimated Earnings on Uncompleted Contracts

Long-Term Notes Payable

Operating Leases

Related Party Transactions

Contingent Liabilities and Litigation

Union Employee Benefit Plans

Evaluation of Subsequent Events

-13-

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2020 and 2019

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Front Line Power Construction, LLC (“Company”) is a partnership which is engaged in full service electrical construction. The Company’s products are marketed through management and in-house sales representatives.

Cash and Cash Equivalents

The Company considers all short-term investments with a maturity of three months or less to be cash equivalents.

Accounts Receivable and Concentrations of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company grants credit to customers in the electrical distribution and petro-chemical industry. Five customers make up 89% and eight customers make up 90% of the current accounts receivable balance as of December 31, 2020 and 2019, respectively. The Company’s ability to collect the amounts due from customers is affected by current economic conditions in these industries. The Company maintains an allowance for doubtful accounts based on its historical bad debt experience. Uncollectible accounts are charged against the reserve account. A provision for bad debts is expensed to restore the reserve. The balance recorded in the allowance for doubtful accounts was $73,128 and $73,128 at December 31, 2020 or 2019, respectively. Financial risk also exists in regards to the distribution of customer revenue. Seven customers make up 93% and five customers make up 95% of the revenue for the years ended December 31, 2020 and 2019, respectively. One customer makes up 68% and 78% of the total revenue across a number of the customer’s divisions for the years ended December 31, 2020 and 2019, respectively.

Property and Equipment

Property and equipment are recorded at cost less depreciation and amortization. Depreciation and amortization are primarily accounted for on a straight-line method based on estimated useful lives of the assets.

Depreciation and amortization is based on the following useful lives:

	Years
Computers and office equipment	5
Field equipment and tools	5-7
Vehicles and vehicle equipment	5-7
Leasehold improvements	15

The Company’s depreciation expense was $3,022,760 and $2,401,919 for the years ended December 31, 2020 and 2019, respectively.

-14-

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Years Ended December 31, 2020 and 2019

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Income taxes

The Company is a partnership and therefore any income is not taxable to the Company but flows through to the Company’s partners.

Adoption of New Accounting Standard and Revenue Recognition

The Company recognizes revenue according to FASB ASC 606 revenue from contracts with customers. FASB ASC 606 has been adopted by the Company using the Full Retrospective Method which has been applied and is effective as of January 1, 2019.

As part of the adoption of FASB ASC 606, the Company did consider but was not required to elect specific transition expedients as the adoption of the new standard required no changes to previously reported revenues as a result of the adoption.

The majority of the Company’s revenue is recognized at a point in time based on the transfer of control or percentage of completion on a contract. Revenue recognized over time primarily consists of performance obligations that are satisfied within one year or less. In addition, the majority of the Company’s contracts do not contain variable consideration. Based on the Company’s evaluation process and review of its contracts with customers, the timing and amount of revenue recognized previously is consistent with how revenue is recognized under the new standard. Contract change orders do occur on percentage of completion contracts and revenue is recognized using the percentage of completion method while considering these ongoing contract change orders and the relative completion of the change orders. There are warranties typically provided on completed contract work up to 12 months from contract completion however warranty work is rare and therefore the probability of future warranty work occurring is insignificant. For these reasons, there is not a significant impact as a result of adopting FASB ASC 606.

There are three major revenue streams which are for construction, service and maintenance, and storm restoration. As previously discussed, revenue is recognized when performance obligations are met throughout the contract primarily based on percentage of completion. At December 31, 2020 and 2019 the Company had contract assets and liabilities. The contract assets are listed on the balance sheet as cost and estimated earnings in excess of billings on uncompleted contracts in the amount of $653,323 and $1,241,341 as of December 31, 2020 and 2019, respectively. Contract liabilities are listed on the balance sheet as billings in excess of costs and estimated earnings on uncompleted contracts in the amount of $32,635 and $73,404 as of December 31, 2020 and 2019, respectively.

Cost of Revenue

Cost of sales are direct costs which are incurred in the delivery of construction services.

-15-

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Years Ended December 31, 2020 and 2019

NOTE A – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES - Continued

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE B - DEPOSITS

The Company does not require financial institutions to provide collateral for amounts in excess of insured balances. At December 31, 2020 the carrying amount of the Company’s deposits was $8,584,450 while the financial institution balances totaled $9,853,898. At December 31, 2019 the carrying amount of the Company’s deposits was $4,068,870 while the financial institution balances totaled $4,747,056.

NOTE C - INVESTMENT

The Company is not restricted as to the type of investments, which can be made with unrestricted funds.

During both 2020 and 2019 the Company invested in a captive insurance provider. The carrying amount of the investment was $302,722 at December 31, 2020 and $132,995 at December 13, 2019. The market value of this investment is not readily determinable. The Company elects to measure the investment at cost less any impairment and plus or minus changes visible from observable price changes. The Company determined that the investment was not impaired and therefore no impairment adjustments have been recorded to the original cost. There were no unrealized gains or losses in 2020 or 2019.

Fair Value Measures

Financial Accounting Standards Board Accounting Standards Codification 820-10, Fair Value Measurements (FASB Codification 820-10), establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level

3 measurements). The three levels of the fair value hierarchy under FASB Codification 820-10 are described below:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

Level 2 Inputs to the valuation methodology include:

●

Quoted prices for similar assets or liabilities in active markets;

●

Quoted prices for identical or similar assets or liabilities in inactive markets;

●

Inputs other than quoted prices that are observable for the asset or liability;

(continued)

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FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Years Ended December 31, 2020 and 2019

NOTE C - INVESTMENT - continued

●

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table sets forth by level, within the fair value hierarchy, the Company’s assets at fair value as of December 31, 2020 and 2019:

	Assets at Fair Value
	Level 1		Level 2		Level 3		Total
December 31, 2020:
Captive insurance provider	$	—	$	302,722	$	—	$	302,722

Total assets at fair value	$	—	$	302,722	$	—	$	302,722

	Assets at Fair Value
	Level 1		Level 2		Level 3		Total
December 31, 2019:
Captive insurance provider	$	—	$	132,995	$	—	$	132,995

Total assets at fair value	$	—	$	132,995	$	—	$	132,995

NOTE D - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings on uncompleted contracts for the period ended December 31, 2020 and 2019 were comprised of the following:

	2020		2019

Costs incurred on uncompleted contracts	$	3,264,043	$	7,316,216
Estimated earnings		1,988,697		4,826,169

		5,252,740		12,142,385
Less billings to date		4,632,052		10,974,448

	$	620,688	$	1,167,937

(continued)

-17-

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Years Ended December 31, 2020 and 2019

NOTE D - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS - continued

Included in accompanying balance sheet under the following captions:

		2020			2019
Costs and estimated earnings in excess of billings on
uncompleted contracts	$	653,323		$	1,241,341

Billings in excess of costs and estimated earnings
on uncompleted contracts		(32,635	)		(73,404	)

	$	620,688		$	1,167,937

NOTE E - LONG-TERM NOTES PAYABLE

Long-term debt at December 31, is comprised of the following:

	2020		2019
Note payable to a financial institution, due in monthly
installments of $976 at 0% interest, final payment due
August 2020, secured by equipment.	$	—	$	7,808

Note payable to a financial institution, due in monthly
installments of $831 at 5% interest, final payment due
November 2021, secured by equipment		4,987		14,963

Note payable to a financial institution, due in monthly
installments of $829 at 0% interest, final payment due
July 2022, secured by equipment		14,924		24,872

Note payable to a financial institution, due in monthly
installments of $2,289 at 0% interest, final payment due
September 2022, secured by equipment		48,073		75,544

Note payable to a financial institution, due in monthly
installments of $1,531 at 0% interest, final payment due
January 2023, secured by equipment		39,809		58,182

Note payable to a bank, due in monthly installments of
$3,555 including interest at 4.23%, final payment due
August 2024, secured by equipment		147,704		183,300

Note payable to a bank, due in monthly installments of
$3,545 including interest at 4.23%, final payment due
September 2024, secured by equipment		150,695		185,977

Note payable to a bank, due in monthly installments of
$3,545 including interest at 4.23%, final payment due
September 2024, secured by equipment		150,695		185,977

-18-

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Years Ended December 31, 2020 and 2019

NOTE E - LONG-TERM NOTES PAYABLE - Continued

		2020		2019
Note payable to a bank, due in monthly installments of
$3,549 including interest at 4.23%, final payment due
September 2024, secured by equipment	$	150,550	$	186,157

Note payable to a bank, due in monthly installments of
$3,549 including interest at 4.23%, final payment due
September 2024, secured by equipment		150,550		186,157

Note payable to a bank, due in monthly installments of
$3,545 including interest at 4.23%, final payment due
September 2024, secured by equipment		150,550		185,977

Note payable to a bank, due in monthly installments of
$3,900 including interest at 4.35%, final payment due
November 2024, secured by equipment		171,537		209,963

Note payable to a financial institution, due in monthly
installments of $829 at 0% interest, final payment due
July 2022, secured by equipment		95,338		—

Paycheck Protection Program (PPP) loan received in April
of 2020. The loan has an effective interest rate of 1% and
any balance due would be payable beginning in 2021.
The balance which is expected to be payable is $0.		3,208,900		—

Total notes payable		4,484,312		1,504,877

Less current maturities		1,408,476		324,520

Total long-term notes payable	$	3,075,836	$	1,180,357

Long-term debt maturing in the next five years is as follows:

Year Ended
December 31,	Principal		Interest		Total

2021	$	1,408,476	$	40,454	$	1,448,930
2022		2,483,306		29,112		2,512,418
2023		309,647		17,278		326,925
2024		248,397		4,142		252,539
2025		34,486		—		34,486

Total	$	4,484,312	$	90,986	$	4,575,298

-19-

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Years Ended December 31, 2020 and 2019

NOTE F - OPERATING LEASES

The Company leases three buildings from an entity and a property from another entity, each under month to month operating leases and each of which can be canceled by either party at any time. Each of the lessor companies share a common owner with the Company. The three leases had monthly payments of $4,000, $6,500 and $2,000 in both 2020 and 2019. The Company also leases temporary building units under operating leases at varying lease payment amounts. Total building operating lease expense was $150,000 for the years ended December 31, 2020 and December 31, 2019.

The Company leases vehicles under an operating lease agreement from an entity which shares a common owner with the Company. Vehicles are leased at varying monthly lease payment amounts and all are month to month leases. Total vehicle operating lease expense was $42,025 for the year ended December 31, 2020 and $97,145 for the year ended December 31, 2019.

NOTE G - RELATED PARTY TRANSACTIONS

The Company has operating lease agreements with four different entities, each having a common owner with the Company. All operating lease agreements are in place for property which is used directly as business use property of the Company and all lease agreements are market based agreements. The total amount paid by the Company in 2020 and 2019 for all of these lease agreements combined was $192,025 and $247,145, respectively.

NOTE H - CONTINGENT LIABILITIES AND LITIGATION

The Company had no contingent liabilities or litigation in process at December 31, 2020 or 2019

NOTE I – UNION EMPLOYEE BENEFIT PLANS

The Company employs unionized employees and as a result contributes monthly to union operated employee benefit plans. The name of the plan is National Electrical Benefit Fund (the “Plan”), EIN 53-0181657, Plan Number 001. The Plan has a plan zone status of Green. The union collective bargaining agreement which established this plan has an expiration date of August 31, 2023. The Company contributed $6.50 in 2020 and $6.00 in 2019 per hour worked for eligible employees to a health insurance plan, 3% of gross wages for eligible employees to an employee benefit retirement plan, 25% of gross wages paid to another employee benefit retirement plan and 1% of gross wages for eligible employees to an apprentice program. The Company made combined contributions for all of the these benefit plans totaling $6,716,480 and $5,730,108 which are recorded in cost of revenue for the year ended December 31, 2020 and 2019, respectively. A new fund was created near the end of 2019 which is also employer funded for health insurance and any amount contributed in excess of $6.00 per hour above is offset by the amount funded to this new health insurance fund. The new fund started at $0.60 per hour and was down to $0.10 per hour contribution rate at the end of 2020.

-20-

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Years Ended December 31, 2020 and 2019

NOTE J - EVALUATION OF SUBSEQUENT EVENTS

The Company has evaluated subsequent events through July 9, 2021, the date which the financial statements were available to be issued.

As of July 9, 2021, the Company has received communication from it’s banking institution that the PPP loan in the amount of $3,208,900 has been forgiven completely.

-21-

THIS PAGE LEFT BLANK INTENTIONALLY.

-22

FRONT LINE POWER CONSTRUCTION, LLC

CONDENSED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

(Unaudited)

FRONT LINE POWER CONSTRUCTION, LLC

Index

Page

Condensed Balance Sheets	1

Condensed Statements of Operations and Partners' Capital	3

Condensed Statements of Cash Flows	3

Notes to Financial Statements	4-9

FRONT LINE POWER CONSTRUCTION, LLC

Balance Sheets

(Unaudited)

September 30, 2021 and December 31, 2020

Assets

	2021		2020
Current Assets:
Cash and cash equivalents	$	5,435,503	$	8,584,450
Accounts receivable (net of allowance
for doubtful accounts of $73,128 and $73,128)		14,256,830		8,608,632
Costs and estimated earnings in excess of billings
on uncompleted contracts		695,265		653,323
Prepaid and other current assets		365,627		377,640

Total current assets		20,753,225		18,224,045

Property and Equipment:
Computers and office equipment		122,728		82,632
Field equipment and tools		6,080,297		6,162,692
Vehicles and vehicle equipment		16,534,074		13,353,009
Leasehold improvements		55,089		46,976

Total property and equipment		22,792,188		19,645,309

Less accumulated depreciation		11,785,288		9,500,737

Net property and equipment		11,006,900		10,144,572

Investment		530,781		302,722

Total assets	$	32,290,906	$	28,671,339

Liabilities and Partners’ Capital

(Unaudited)

	2021		2020
Current Liabilities:
Accounts payable	$	515,229	$	325,954
Other current liabilities		1,342,753		222,134
Billings in excess of costs and estimated
earnings on uncompleted contracts		380,219		32,635
Current portion of notes payable		345,475		1,408,476

Total current liabilities		2,583,676		1,989,199

Notes payable		671,377		931,229
Paycheck Protection Program ("PPP") loan payable		—		2,144,607

Total liabilities		3,255,053		5,065,035

Partners' capital		29,035,853		23,606,304

Total liabilities and partners' capital	$	32,290,906	$	28,671,339

FRONT LINE POWER CONSTRUCTION, LLC

STATEMENTS OF OPERATIONS AND PARTNERS’ CAPITAL (Unaudited)

For the Nine Months Ended September 30, 2021 and 2020

	For the Nine Months Ended September 30,
	2021			2020

Revenues	$	49,683,263		$	40,688,742

Cost of revenues		32,796,639			28,620,521

Gross profit		16,886,624			12,068,221

Operating expenses:
Selling, general and administrative expense		1,767,545			1,432,007
(Gain) loss on disposal of fixed assets		(69,944	)		8,614

Total operating expenses		1,697,601			1,440,621

Income from operations		15,189,023			10,627,600

Other income (expense)		3,248,169			(5,722	)
Interest expense		(32,623	)		(38,341	)
Net income		18,404,569			10,583,537

Beginning partners' capital		23,606,304			27,013,845

Distributions to partners		(12,975,020	)		(17,230,815	)

Ending partners' capital	$	29,035,853		$	20,366,567

FRONT LINE POWER CONSTRUCTION, LLC

STATEMENTS OF CASH FLOWS (Unaudited)

For the Nine Months Ended September 30, 2021 and 2020


Cash flows from operating activities:	2021			2020
Net income	$	18,404,569		$	10,583,537
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation		2,519,067			2,254,817
Gain on extinguishment of debt		(3,208,900	)		—
(Gain) loss on disposal of fixed assets		(69,944	)		8,614
Changes in operating assets and liabilities:
Accounts receivable		(5,648,198	)		5,053,994
Costs and estimated earnings in excess
of billings on uncompleted contracts		(41,942	)		1,208,371
Prepaid expense and other current assets		12,013			7,585
Accounts payable		189,275			(428,745	)
Billings in excess of costs and estimated
earnings on uncompleted contracts		347,584			(59,619	)
Accrued expenses		1,120,619			(256,416	)
Net cash provided by operating activities		13,624,143			18,372,138

Cash flows from investing activities:
Purchase of investment		(228,059	)		(169,727	)
Purchases of property and equipment		(3,434,521	)		(2,122,071	)
Proceeds from sale of property and equipment		123,070			52,861
Net cash used in investing activities		(3,539,510	)		(2,238,937	)

Cash flows from financing activities:
Proceeds from PPP loans		—			3,208,900
Repayment of long-term debt		(258,560	)		(143,818	)
Distribution of partners' capital		(12,975,020	)		(17,230,815	)
Net cash used in financing activities		(13,233,580	)		(14,165,733	)

Net change in cash		(3,148,947	)		1,967,468
Cash and cash equivalents at beginning of year		8,584,450			4,068,870
Cash and cash equivalents at end of year		5,435,503			6,036,338

Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	32,623		$	38,341

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Nine Months Ended September 30, 2021 and 2020

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Cash and Cash Equivalents

The Company considers all short-term investments with a maturity of three months or less to be cash equivalents.

Accounts Receivable and Concentrations of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company grants credit to customers in the electrical distribution and petro-chemical industry. Three customers make up 79% and five customers make up 89% of the current accounts receivable balance as of September 30, 2021 and December 31, 2020, respectively. The Company’s ability to collect the amounts due from customers is affected by current economic conditions in these industries. The Company maintains an allowance for doubtful accounts based on its historical bad debt experience. Uncollectible accounts are charged against the reserve account. A provision for bad debts is expensed to restore the reserve. The balance recorded in the allowance for doubtful accounts was $73,128 and $73,128 at September 30, 2021 and December 31, 2020, respectively. Financial risk also exists in regards to the distribution of customer revenue. One customer makes up 77% and two customers make up 83% of the revenue for the nine months ended September 30, 2021 and 2020, respectively. One customer makes up 77% and 69% of the total revenue across a number of the customer’s divisions for the nine months ended September 30, 2021 and 2020, respectively.

Income taxes

The Company is a partnership and therefore any income is not taxable to the Company but flows through to the Company’s partners.

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Nine Months Ended September 30, 2021 and 2020

NOTE B - INVESTMENT

The Company is not restricted as to the type of investments, which can be made with unrestricted funds.

During both the nine months ended September 30, 2021 and 2020 the Company invested in a captive insurance provider. The carrying amount of the investment was $530,781 at September 30, 2021 and $302,722 at December 31, 2020. The market value of this investment is not readily determinable. The Company elects to measure the investment at cost less any impairment and plus or minus changes visible from observable price changes. The Company determined that the investment was not impaired and therefore no impairment adjustments have been recorded to the original cost. There were no unrealized gains or losses in the nine months ended September 30, 2021 or 2020.

Fair Value Measures

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

Level 2 Inputs to the valuation methodology include:

●

Quoted prices for similar assets or liabilities in active markets;

●

Quoted prices for identical or similar assets or liabilities in inactive markets;

●

Inputs other than quoted prices that are observable for the asset or liability;

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Nine Months Ended September 30, 2021 and 2020

NOTE B - INVESTMENT - continued

●

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table sets forth by level, within the fair value hierarchy, the Company’s assets at fair value as of September 30, 2021 and December 31, 2020:

	Assets at Fair Value
	Level 1		Level 2		Level 3		Total
September 30, 2020:
Captive insurance provider	$	—	$	530,781	$	—	$	530,781

Total assets at fair value	$	—	$	530,781	$	—	$	530,781

	Assets at Fair Value
	Level 1		Level 2		Level 3		Total
December 31, 2020:
Captive insurance provider	$	—	$	302,722	$	—	$	302,722

Total assets at fair value	$	—	$	302,722	$	—	$	302,722

NOTE C - REVENUE FROM CONTRACTS WITH CUSTOMERS

Front Line Power Construction, LLC is a full-service electrical construction company that performs work from foundation and installation of equipment to service and maintenance. The business is located in Texas and performs work throughout the United States. Revenue at Front Line Power is recognized over time as the performance creates or enhances an asset that the customer controls as the asset is created. In this manner, the customer simultaneously receives and consumes the benefits of FLP's performance as FLP performs the service.

Balances and activity in the current contract liabilities as of and for the nine months ended September 30, 2021 and 2020 was as follows:

Contract liabilities:	2021			2020
Billings in excess of costs and estimated earnings on uncompleted contracts , January 1	$	32,635		$	73,404

Revenue recognized		(32,635	)		(73,404	)
Other contract additions, net		380,219			13,785
Billings in excess of costs and estimated earnings on uncompleted contracts , September 30	$	380,219		$	13,785

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Nine Months Ended September 30, 2021 and 2020

NOTE D - LONG-TERM NOTES PAYABLE

Long-term debt at September 30, 2021 and December 31, 2020, is comprised of the following:

	As of September 30		As of December 31
	2021		2020

Note payable to a financial institution, due in monthly
installments of $831 at 5% interest, final payment due
November 2021, secured by equipment	$	—	$	4,987

Note payable to a financial institution, due in monthly
installments of $829 at 0% interest, final payment due
July 2022, secured by equipment		7,462		14,924

Note payable to a financial institution, due in monthly
installments of $2,289 at 0% interest, final payment due
September 2022, secured by equipment		27,471		48,073

Note payable to a financial institution, due in monthly
installments of $1,531 at 0% interest, final payment due
January 2023, secured by equipment		26,029		39,809

Note payable to a bank, due in monthly installments of
$3,555 including interest at 4.23%, final payment due
August 2024, secured by equipment		120,004		147,704

Note payable to a bank, due in monthly installments of
$3,545 including interest at 4.23%, final payment due
September 2024, secured by equipment		123,098		150,695

Note payable to a bank, due in monthly installments of
$3,545 including interest at 4.23%, final payment due
September 2024, secured by equipment		123,098		150,695

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Nine Months Ended September 30, 2021 and 2020

Note payable to a bank, due in monthly installments of
$3,549 including interest at 4.23%, final payment due
September 2024, secured by equipment		122,980		150,550

Note payable to a bank, due in monthly installments of
$3,549 including interest at 4.23%, final payment due
September 2024, secured by equipment		122,980		150,550

Note payable to a bank, due in monthly installments of
$3,545 including interest at 4.23%, final payment due
September 2024, secured by equipment		122,980		150,550

Note payable to a bank, due in monthly installments of
$3,900 including interest at 4.35%, final payment due
November 2024, secured by equipment		141,602		171,537

Note payable to a financial institution, due in monthly
installments of $1,799 at 0% interest, final payment due
June 2025, secured by equipment		79,148		95,338

Paycheck Protection Program (PPP) loan received in April
of 2020. The loan has an effective interest rate of 1% and
any balance due would have been payable beginning in 2021.
The balance of the loan and accrued interest was forgiven in 2021		—		3,208,900

Total notes payable		1,016,852		4,484,312

Less current maturities		345,475		1,408,476

Total long-term notes payable	$	671,377	$	3,075,836

Long-term debt maturing in the next five years is as follows:

Period Ended
December 31,	Principal		Interest		Total

2021	$	85,918	$	9,080	$	94,998
2022		339,004		29,147		368,151
2023		309,964		17,298		327,262
2024		272,972		5,037		278,009
2025		8,994		—		8,994

Total	$	1,016,852	$	60,562	$	1,077,414

FRONT LINE POWER CONSTRUCTION, LLC

NOTES TO FINANCIAL STATEMENTS - Continued

For the Nine Months Ended September 30, 2021 and 2020

NOTE E - RELATED PARTY TRANSACTIONS

The Company has operating lease agreements with four different entities, each having a common owner with the Company. All operating lease agreements are in place for property which is used directly as business use property of the Company and all lease agreements are market based agreements. The total amount paid by the Company in the nine months ended September 30, 2021 and 2020 for all of these lease agreements combined was $120,500 and $112,500, respectively.

NOTE F - CONTINGENT LIABILITIES AND LITIGATION

The Company had no contingent liabilities or litigation in process at September 30, 2021 or December31, 2020.

NOTE G – UNION EMPLOYEE BENEFIT PLANS

The Company employs unionized employees and as a result contributes monthly to union operated employee benefit plans. The name of the plan is National Electrical Benefit Fund (the “Plan”), EIN 53- 0181657, Plan Number 001. The Plan has a plan zone status of Green. The union collective bargaining agreement which established this plan has an expiration date of August 31, 2023. The Company contributed $6.75 in the nine months ended September 30, 2021 and $6.50 in 2020 per hour worked for eligible employees to a health insurance plan, 3% of gross wages for eligible employees to an employee benefit retirement plan, 25% of gross wages paid to another employee benefit retirement plan and 1.5% of gross wages for eligible employees to an apprentice program. The Company made combined contributions for all of its benefit plans totaling $6,092,900 and $4,990,382 which are recorded in cost of revenue for the nine months ended September 30, 2021 and 2020, respectively.

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On November 17, 2021, Orbital Energy Group, Inc., a Colorado corporation (“Orbital Energy”, the “Company”, “we”, or “our”) entered into a Membership Unit Purchase agreement (the "MUPA") by and among the Company and the owners of all the issued and outstanding membership interests of Front Line Power Construction, LLC, a Texas limited liability company ("FLP" or "Front Line"). FLP is a Houston-based full service electrical infrastructure service company that has provided construction, maintenance, and emergency response services for customers since 2010 and will become a wholly owned subsidiary of the Company. All capitalized terms not defined herein are defined in the MUPA.

Subject to the terms and conditions set forth in the MUPA, the purchase price for FLP was $219,936,000, with the consideration structured as follows:

●

$100,545,000 in cash paid at closing;

●

Issuance of 11,622,018 (as amended) of restricted common stock issued to the sellers of FLP, with an aggregate value of $31,670,000 based upon a per share value of $2.725.

●

Issuance of two, unsecured promissory notes to the sellers of FLP, in the aggregate principal amount outstanding of $86,730,000 (“Seller Notes”) (as amended).

●

Payoff of Front Line notes payable in the amount of $991,000.

The MUPA contains various customary representations, warranties and covenants. In connection with the MUPA, (i) the Company caused FLP to enter into the Employment Agreement with Kurt A. Johnson, Jr., a key employee of FLP, with base compensation ranging up to $250,000, (ii) the Company entered into the Registration Rights Agreement with the sellers of FLP, which provides for piggyback registration rights, (iii) the Company entered into a Lockup Agreements with the sellers of FLP, which provide for two (2) year lockups, and (iv) the Company caused FLP to enter into three primary real estate leases with related party affiliates of the sellers of FLP, with each lease providing for initial three (3) year terms.

The following pro forma financial information is based on our historical consolidated financial statements and the historical financial statements of the acquired Front Line business and is intended to provide you with information about how the FLP transaction might have affected our historical consolidated statement of operations if it had closed as of January 1, 2020. The Company's Gibson Technical Services, Inc. ("GTS") acquisition on April 13, 2021 is also reflected in the pro forma statement of operations as if it was acquired as of January 1, 2020. GTS results are consolidated within Orbital Energy Group, Inc. since the April 13, 2021 acquisition date. The pro forma balance sheet as of September 30, 2021 is as if the FLP acquisition had closed on that date. The GTS balance sheet as of September 30, 2021 is consolidated within Orbital Energy Group, Inc. and so is not shown separately on the pro forma balance sheet.

The pro forma financial information below is based on available information and preliminary assumptions that we believe are reasonable. The pro forma financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what our results of operations would have been had the transaction described above occurred on the date indicated. The pro forma financial information also should not be considered representative of our future financial condition or results of operations.

The following unaudited pro forma condensed combined balance sheet as of September 30, 2021 and statements of operations for the year ended December 31, 2020 and for the nine-month period ended September 30, 2021, give effect to our acquisitions of Front Line and GTS and the common stock issued to fund the acquisitions. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined statements of operations to give effect to or remove the effect of events that are (1) directly attributable to the Front Line and GTS acquisitions, (2) factually supportable, and (3) expected to have a continuing impact on our results.

Unaudited Pro Forma Condensed Combined Balance Sheet

	Historical					Pro Forma Adjustments
		Orbital Energy Group, Inc.			Front Line Power Construction, LLC		Front Line Power Construction, LLC				Pro Forma Combined
(in thousands)	As of September 30, 2021			As of September 30, 2021		Transaction Accounting Adjustments			Note	As of September 30, 2021
	(Unaudited)			(Unaudited)
Assets:
Current Assets:
Cash and cash equivalents	$	11,179		$	5,435	$	(720	)	2a	$	15,894
Restricted cash - current		150			—		—				150
Trade accounts receivable, net of allowance		22,953			14,257		—				37,210
Inventories		1,790			—		—				1,790
Contract assets		9,048			695		—				9,743
Note receivable, current portion		44			—		—				44
Prepaid expenses and other current assets		5,926			366		—				6,292
Total current assets		51,090			20,753		(720	)			71,123


Property and equipment, less accumulated depreciation		14,800			11,007		—				25,807
Investment		1,063			531		—				1,594
Right of use assets - Operating leases		12,880			—		238		2b		13,118
Right of use assets - Financing leases		11,238			—		—				11,238
Goodwill		30,337			—		189,910		2c		220,247
Other intangible assets, less accumulated amortization		41,304			—		—				41,304
Restricted cash		1,026			—		—				1,026
Note receivable		3,210			—		—				3,210
Deposits and other assets		1,083			—		—				1,083
Total assets	$	168,031		$	32,291	$	189,428			$	389,750

Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable	$	7,710		$	515	$	—			$	8,225
Notes payable, current		25,175			346		85,348		2d		110,869
Operating lease obligations - current portion		3,895			—		189		2b		4,084
Financing lease obligations - current portion		3,805			—		—				3,805
Accrued expenses		10,290			1,343		—				11,633
Contract liabilities		4,188			380		—				4,568
Total current liabilities		55,063			2,584		85,537				143,184
Notes payable, less current portion		4,854			671		97,450		2e, 2f		102,975
Operating lease obligations, less current portion		8,897			—		49		2b		8,946
Financing lease obligations, less current portion		7,561			—		—				7,561
Contingent consideration		720			—		—				720
Other long-term liabilities		69			—		—				69
Total liabilities		77,164			3,255		183,036				263,455

Commitments and contingencies

Stockholders' Equity:
Preferred stock		—			—		—				—
Common stock		66			—		13		2g		79
Additional paid-in capital		281,498			—		35,434		2g		316,932
Treasury stock		(413	)		—		—				(413	)
Accumulated deficit		(185,993	)		—		(19	)	2g		(186,012	)
Partners' capital		—			29,036		(29,036	)	2g		—
Accumulated other comprehensive loss		(4,291	)		—		—				(4,291	)
Total stockholders' equity		90,867			29,036		6,392				126,295
Total liabilities and stockholders' equity	$	168,031		$	32,291	$	189,428			$	389,750

See accompanying notes to unaudited pro forma financial statements

Unaudited Pro Forma Condensed Combined Statement of Operations

	Historical									Pro Forma Adjustments
(in thousands, except share and per share amounts)		Orbital Energy Group, Inc.			Gibson Technical Services, Inc.			Front Line Power Construction, LLC			Gibson Technical Services, Inc.			Front Line Power Construction, LLC				Combined Pro Forma
	For the Year Ended December 31, 2020			For the Year Ended December 31, 2020			For the Year Ended December 31, 2020			Transaction Accounting Adjustments			Transaction Accounting Adjustments			Note	For the Year Ended December 31, 2020

Revenues	$	38,414		$	40,037		$	56,121		$	—		$	—			$	134,572

Cost of revenues		31,315			33,266			39,610			126			—		2i		104,317

Gross profit (loss)		7,099			6,771			16,511			(126	)		—				30,255

Operating expenses:
Selling, general and administrative expense		29,395			6,669			2,605			—			716		2l		39,385
Depreciation and amortization		4,749			274			—			1,744			—		2h, 2i		6,767
Research and development		45			—			—			—			—				45
Provision for bad debt		1,639			—			—			—			—				1,639
Other operating (income) expense		24			(8	)		28			—			—				44

Total operating expenses		35,852			6,935			2,633			1,744			716				47,880

Income (loss) from operations		(28,753	)		(164	)		13,878			(1,870	)		(716	)			(17,625	)

Other income		959			—			14			—			—				973
Interest expense		(1,303	)		(103	)		(50	)		—			(20,967	)	2j		(22,423	)

Income (loss) from continuing operations before income taxes and equity in net loss of affiliate		(29,097	)		(267	)		13,842			(1,870	)		(21,683	)			(39,075	)
Net loss of affiliate		(4,806	)		—			—			—			—				(4,806	)
Income (loss) from continuing operations before taxes		(33,903	)		(267	)		13,842			(1,870	)		(21,683	)			(43,881	)
Income tax benefit		(3,546	)		—			—			—			—				(3,546	)

Income (loss) from continuing operations, net of income taxes	$	(30,357	)	$	(267	)	$	13,842		$	(1,870	)	$	(21,683	)		$	(40,335	)

Basic and diluted weighted average common shares outstanding		29,937,863			—			—			5,929,267			13,222,440		2k		49,089,570

Loss from continuing operations per common share - basic and diluted	$	(1.02	)														$	(0.82	)

See accompanying notes to unaudited pro forma financial statements

Unaudited Pro Forma Condensed Combined Statement of Operations

	Historical									Pro Forma Adjustments
(in thousands, except share and per share amounts)		Orbital Energy Group, Inc.			Gibson Technical Services, Inc.			Front Line Power Construction, LLC			Gibson Technical Services, Inc.			Front Line Power Construction, LLC				Pro Forma Combined
	For the Nine Months Ended September 30, 2021			For the 2021 period through April 13, 2021			For the Nine Months Ended September 30, 2021			Transaction Accounting Adjustments			Transaction Accounting Adjustments			Note	For the Nine Months Ended September 30, 2021

Revenues	$	56,718		$	9,072		$	49,683		$	—		$	—			$	115,473

Cost of revenues		55,400			6,328			32,797			36			—		2h		94,561

Gross profit (loss)		1,318			2,744			16,886			(36	)		—				20,912

Operating expenses:
Selling, general and administrative expense		43,856			5,067			1,767			—			—				50,690
Depreciation and amortization		4,668			74			—			494			—		2g, 2h		5,236
Research and development		2			—			—			—			—				2
Provision for bad debt		65			—			—			—			—				65
Other operating income		(15	)		(6	)		(70	)		—			—				(91	)

Total operating expenses		48,576			5,135			1,697			494			—				55,902

Income (loss) from operations		(47,258	)		(2,391	)		15,189			(530	)		—				(34,990	)

Other income		3,009			1,494			3,248			—			—				7,751
Interest expense		(3,098	)		(23	)		(33	)		—			(15,726	)	2i		(18,880	)

Income (loss) from continuing operations before income taxes		(47,347	)		(920	)		18,404			(530	)		(15,726	)			(46,119	)

Income tax benefit		(11,035	)		—						—			—				(11,035	)

Income (loss) from continuing operations, net of income taxes	$	(36,312	)	$	(920	)	$	18,404		$	(530	)	$	(15,726	)		$	(35,084	)

Basic and diluted weighted average common shares outstanding		53,142,557									2,477,506			13,222,440		2j		68,842,503

Loss from continuing operations per common share - basic and diluted	$	(0.68	)														$	(0.51	)

See accompanying notes to unaudited pro forma financial statements

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

1. Basis of Pro Forma Presentation

The unaudited pro forma condensed combined statements of operations have been prepared using the historical consolidated financial statements of Orbital Energy Group, Inc., and the historical financial statements of Front Line Power Construction, LLC, and Gibson Technical Services, Inc. Because we now control Front Line Power Construction, LLC and Gibson Technical Services, Inc., we have applied acquisition accounting as if the acquisitions had closed as of January 1, 2020 for the pro forma statement of operations and as if the acquisition of Front Line Power Construction, LLC, had closed as of September 30, 2021 for the pro forma balance sheet. Purchase accounting adjustments are further described in Note 2 below.

In addition to presenting Orbital Energy Group Inc. operations as reported in our historical financial statements, our unaudited condensed combined pro forma statement of operations for the year ended December 31, 2020 includes the results of Front Line Power Construction, LLC and Gibson Technical Services, Inc. for the year ended December 31, 2020. We believe presenting these combined results is useful in illustrating the presentation of our pro forma condensed combined statement of operations for the year ended December 31, 2020. These pro forma adjustments are based on management's preliminary estimates, which may materially change prior to the completion of the final valuation and purchase price allocations. Line items subject to change based on final valuations still in process include fixed assets, goodwill, other acquisition intangible assets and stock consideration.

2. Transaction-Related Adjustments

Represents cash paid by Orbital Energy Group, Inc. to pay off certain FLP debt and to pay debt issuance costs classified as part of the syndicated loan's original issued discount.

Represents FLP's adoption of ASU 2016-02, Leases (Topic 842) effective January 1, 2019. The adoption of ASU 2016-02 was not applicable in the Front Line Power Construction, LLC financials, as private company implementation under ASC 842 was not required for the reporting period.

Represents the preliminary implied goodwill of Front Line Power Construction, LLC purchased by Orbital Energy Group, Inc. The Company is currently reviewing FLP's potential other intangible assets, for which the Company will allocate from goodwill and which may be amortized in the future.

Represents the issuance of three unsecured promissory notes to the sellers of FLP, in the aggregate principal amount outstanding of $86,730,000 plus the current portion of the Syndicated debt, net of original issue discount.

Represents a $105 million Term Loan with a $4,165,139 million original issue discount for the purposes of financing the FLP Acquisition and the associated expenses and 1,600,422 shares issued to various banks for consideration and payment for the extension of credit related to the $105 million Term Loan issued at $2.36 or preliminary estimated fair value of $3,776,996 classified as an additional original issue discount. The Term Loan initially bears interest at the three-month Adjusted LIBOR Rate, plus the Applicable Margin, of which 2.5% may be paid in-kind. The Term Loan shall be repaid in consecutive quarterly installments of $262,500, commencing on June 30, 2022. The Credit Agreement provides for mandatory prepayments on the occurrence of events such as sales of assets, consolidated excess cash flow and excess receipts during the term. The Credit Agreement provides for prepayment premiums (initially 5% on prepayments made in the first 30 months of the term, declining to 1% in the final year of the term). The Term Loan matures on November 17, 2026, subject to acceleration on events of default.

Represents the payoff of equipment loans held by FLP by Orbital Energy Group, Inc. in the amount of $991,318.

Represents the reversal of FLP's Partners' capital and to record the estimated fair value of 11,622,018 restricted shares issued by Orbital Energy Group, Inc. per the MUPA at $2.725 per share and the issuance of 1,600,422 shares at $2.36 to various banks for consideration and payment for the extension of credit related to the $105 million Term Loan. Accumulated deficit adjustment represents non-original issue discount eligible bank fees paid by the Company which were cost reimbursements associated with the Company's debt offerings.

Represents the addition of Orbital Energy's fair value estimate of the acquired GTS intangibles and the related pro forma amortization. Other intangible assets, acquired values, useful lives and pro forma amortization expense are as follows:

(in thousands)

	Value		Amortization Period (Years)		2020 Pro Forma Amortization		2021 Pro Forma Amortization January 1 to April 12, 2021
Customer Relationships	$	16,075		10	$	1,607	$	455
Trade name		6,388	indefinite			—		—
Non-Compete covenants		385		5		77		22
Total	$	22,848			$	1,684	$	477

Represents the pro forma depreciation related to the markup to fair value of GTS's fixed assets. The markup and related pro forma depreciation expense is as follows:

(in thousands)

	Value		Life (Years)	2020 Pro Forma Depreciation		2021 Pro Forma Amortization January 1 to April 12, 2021
Fixed asset fair value markup - COGS	$	882	7	$	126	$	36
Fixed asset fair value markup - SG&A		417	7		60		17
	$	1,299		$	186	$	53

Represents the interest expense associated with the unsecured promissory notes and the credit agreement including the amortization of the original issue discount on the credit agreement. Interest expense was calculated as follows:

(in thousands)
								2020		2021
	Value			Interest rate			Pro Forma Interest		Nine Month Pro Forma Interest
Seller financed promissory notes	$	86,730			6.00	%	$	5,204	$	3,903
Credit Agreement		105,000			13.50	%		14,175		10,631
Original issue discount on Credit Agreement		(4,165	)		straight line over 5 years			833		625
1,600,422 restricted common shares issued to banks as additional Original issue discount		(3,777	)		straight line over 5 years			756		567
Total	$	183,788					$	20,968	$	15,726

Represents the increase in weighted average shares in connection with the issuance of 5,929,267 common shares toward the GTS acquisition, 11,622,018 shares issued in connection with the FLP acquisition, and 1,600,422 shares issued to various banks for consideration and payement for the extension of credit related to the $105 million Term Loan.

Represents cost reimbursements from syndicates related to the issuance of the syndicated Credit Agreement totaling $19,124.

3. Purchase Consideration and Preliminary Purchase Price Allocation

The purchase consideration for Front Line as of November 17, 2021 is as follows:

(in thousands)

Cash consideration	$	100,545
Unsecured promissory notes		86,730
Orbital Energy restricted stock issued - 11,622,018 shares		31,670
Pay-off of certain Front Line debt		991
	$	219,936

Preliminary Purchase Price Allocation – The total purchase price as summarized below was allocated to the acquired tangible and intangible assets and liabilities for purposes of this unaudited pro forma condensed combined financial information, based on their estimated relative fair values assuming the acquisition was completed on the pro forma balance sheet date presented. The final allocation, expected to be complete prior to issuance of the Company's 10-K, will be based upon valuations and other studies for which there is currently insufficient information to make a definitive allocation. Accordingly, the purchase price allocation adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. The final purchase price allocation will be determined after completion of a thorough analysis to determine the fair value of the acquired tangible assets and liabilities, including fixed assets, and identifiable intangible assets and liabilities as well as the fair value of equity and debt consideration. Accordingly, the final purchase accounting adjustments, including those resulting from conforming accounting policies to those of the Company, could differ materially from the pro forma adjustments presented herein. Any increase or decrease in the fair value of the acquired tangible and identifiable intangible assets and liabilities, as compared to the information shown herein, will also change the portion of purchase price allocable to goodwill and could impact the operating results of the combined company following the acquisition due to differences in amortization related to the assets and liabilities. The total preliminary purchase price was allocated as follows:

(in thousands)
Purchase price	$	219,936

Cash and cash equivalents		5,435
Trade accounts receivable		14,257
Contract assets		695
Prepaid expenses and other current assets		366
Property and equipment		11,007
Investment		531
Right of use assets		238
Goodwill		189,910
Liabilities assumed		(2,503	)

Purchase price allocation	$	219,936

5. Important Cautions Regarding Forward Looking Statements

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this document that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this document specifically include the expectations surrounding the acquisitions of GTS and FLP as well as the benefits of it and related transactions, as well as plans, strategies, objectives and anticipated financial and operating results of the Company, and other guidance included in this document. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of if the Company, which could cause actual results to vary materially from those projected in the forward-looking statements. The Company may experience significant fluctuations in future operating results due to a number of economic, competitive, and other factors, including, among other things, our reliance on third-party manufacturers and suppliers, government agency budgetary and political constraints, new or increased competition, changes in market demand, and the performance or reliability of our products. These factors and others could cause operating results to vary significantly from those in prior periods, and those projected in forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information regarding these and other factors, which could materially affect the Company and its operations, are included in certain forms the Company has filed with the Securities and Exchange Commission.