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Section 1: 8-K (FORM 8-K)

oeg20200816_8k.htm

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):

August 18, 2020

 

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 2.02. Results of Operations and Financial Condition.

 

On August 18, 2020, Orbital Energy Group, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the three and six months ended June 30, 2020. The press release is being furnished with this report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference. This report (including the exhibit) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference in any filing made by the Registrant pursuant to the Securities Act of 1933, as amended, other than to the extent that such filing incorporates by reference any or all of such information by express reference thereto.

 

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.

 

(d)     Exhibits

 

Exhibit No.

 

Description of Exhibit

99.1

 

Press Release dated August 18, 2020

 

 

 

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 18th day of August 2020.

 

 

Orbital Energy Group, Inc.

(Registrant)

 

 By:

   /s/ Daniel N. Ford

 

        Daniel N. Ford

 

        Chief Financial Officer

 

 
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Section 2: EX-99.1 (EXHIBIT 99.1)

ex_199986.htm

Exhibit 99.1

 

 

 

Orbital Energy Group Reports Second Quarter 2020
Financial Results


Continues Building Diversified Energy Infrastructure Services Platform as Operating Conditions Improve and Customer Activity Increases Since Onset of COVID-19

 

HOUSTON, August 18, 2020 -- Orbital Energy Group, Inc. (Nasdaq: OEG) (“Orbital Energy” or the “Company”) today reported unaudited financial results for the three and six months ended June 30, 2020.

 

Financial and Operating Highlights:

 

 

Reported total revenues of $7.8 million for the second quarter of 2020, compared to $6.3 million for the second quarter of 2019, an increase of 24%;

 

 

Gross profit was $1.0 million for the second quarter of 2020, compared to $1.7 million for the second quarter of 2019, the decline mainly due to late-stage start-up costs at the Company's Orbital Power Services group and COVID-19 related business impacts; it is expected to improve throughout the remainder of 2020;

 

 

Gross margin was 13.4% for the second quarter of 2020, compared to 27.5% for the second quarter of 2019, respectively;

 

 

Operating loss was $7.2 million for the second quarter of 2020, compared to $3.2 million in the prior year period, mainly due to higher SG&A associated with Orbital Power Services start-up costs and the addition of Reach Construction Group (“Reach”) during the quarter;

 

 

Recorded an impairment charge of $3.5 million related to its equity method investment in Virtual Power Systems ("VPS") during the quarter;

 

 

Held Cash and cash equivalents of $4.4 million and Restricted cash of $3.6 million as of June 30, 2020;

 

 

Total backlog was $46.4 million at June 30, 2020, up from $9.5 million at March 31, 2020, reflecting inclusion of Reach contractual backlog and growth of Orbital Power Services;

 

 

Completed the acquisition of Reach, an engineering, procurement and construction (“EPC”) company with expertise in the utility scale solar renewable energy industry; and

 

 

Consummated the Company’s name change to Orbital Energy Group, Inc., listed for trading under ticker symbol ‘OEG’ as of May 11, 2020.

 

Commentary

 

“We continued our transformation into a diversified energy infrastructure services company during the second quarter despite a challenging global environment,” said Jim O'Neil, vice chairman and CEO of Orbital Energy. “Specifically, we finalized our platform acquisition of Reach Construction Group, marking our entry into the rapidly growing solar and renewable energy market. While entering this new industry segment, we also continued to expand our Orbital Gas Systems operations into the field of biomethane and renewable energy production. Simultaneously, we remained focused on developing our new Orbital Power Services division, which provides electric transmission and distribution services. Following the acquisition of Reach and concurrent with these other actions, we implemented our corporate name change to Orbital Energy Group, which we believe reflects our strategic repositioning and progress in becoming an energy services infrastructure provider.”

 

Mr. O’Neil continued, “Towards the end of the quarter, we began to see a resurgence of customer activity, reflecting the reopening of the U.S. and U.K. economies and decreasing impact of COVID-19, as many businesses have quickly adapted to this new environment. As a result, many previously delayed customer projects have started to resume. We are very encouraged by this recent uptick in customer activity, both in our North America and U.K. operations. Despite the near-term difficulties we’ve faced during this pandemic, we continue to see the long-term benefits from the acquisition of Reach Construction and expect it to add substantial revenues and positive net earnings to Orbital Energy Group. As operating conditions continue to steadily improve, we have the assets in place to capitalize on this momentum and deliver long-term value to our shareholders as we continue to build a diversified energy infrastructure services platform for growth.”

 

Conference Call

 

Management will host a conference call today, August 18, 2020 at 5:00 PM ET to discuss these results as well as recent corporate developments. After management's opening remarks, there will be a question and answer period. To access the call, please dial (888) 734-0328 and provide conference ID 5143757. For international callers, please dial (678) 894-3054. The live webcast of the conference call and accompanying slide presentation can be accessed through the 'Events & Presentations' page of the Orbital Energy Investor Relations website (www.orbitalenergygroup.com).

 

For those unable to attend the live call, a telephonic replay will be available until September 3, 2020. To access the replay of the call dial (855) 859-2056 or (404) 537-3406 and provide conference ID 5143757. An archived copy of the webcast and slide presentation will also be available on the 'Events & Presentations' page of the Orbital Energy Investor Relations website.

 

 

 

About Orbital Energy Group

 

Orbital Energy Group, Inc. (Nasdaq: OEG), formerly known as CUI Global, Inc., is creating a diversified energy services platform through the acquisition and development of innovative companies. Orbital Energy’s group of businesses includes: Orbital Gas Systems, Inc., Orbital Power Services and Orbital Solar Services. Orbital Gas Systems is a 30-year leader in innovative gas solutions, serving the energy, power and processing markets through the design, installation and commissioning of industrial gas sampling, measurement and delivery systems. Orbital Power Services provides engineering, construction, maintenance and emergency response solutions to the power, utilities and midstream markets. Orbital Solar Services provides engineering, procurement and construction (“EPC”) expertise in the renewable energy industry and established relationships with solar developers and panel manufacturers in the utility scale solar market. As a publicly traded company, Orbital Energy is dedicated to maximizing shareholder value. But most important, our commitment to conduct business with a high level of integrity, respect, and philanthropic dedication allows the organization to make a difference in the lives of their customers, employees, investors and global community.

 

For more information please visit: www.orbitalenergygroup.com

 

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. Such statements are subject to risks and uncertainties that 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. 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.

 

Investor Relations:
KCSA Strategic Communications
David Hanover
T: 212-896-1220
orbital@kcsa.com  

 

 

 

 

 

Orbital Energy Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

   

June 30,

   

December 31,

 

(in thousands, except share and per share amounts)

 

2020

   

2019

 
                 

Assets:

               

Current Assets:

               

Cash and cash equivalents

  $ 4,370     $ 23,351  

Restricted cash - current

    2,551        

Trade accounts receivable, net of allowance of $47 and $47 at June 30, 2020 and December 31, 2019, respectively

    10,783       5,290  

Retainage receivable

    1,278       5  

Inventories

    1,071       1,631  

Contract assets

    1,765       2,309  

Note receivable, current portion

    44        

Convertible note receivable

    260        

Prepaid expenses and other current assets

    3,180       2,215  

Assets held for sale - current

    8,245       6,893  

Total current assets

    33,547       41,694  
                 
                 

Property and equipment, less accumulated depreciation of $1,718 and $1,441 at June 30, 2020 and December 31, 2019, respectively

    5,643       4,454  

Investment in VPS - equity method

    58       4,865  

Right of use assets - Operating leases

    6,898       5,524  

Goodwill

    7,006        

Other intangible assets, less accumulated amortization of $12,166 and $11,191 at June 30, 2020 and December 31, 2019, respectively

    16,102       4,298  

Restricted cash

    1,027        

Note receivable

    3,351       3,253  

Deposits and other assets

    1,111       70  

Total assets

  $ 74,743     $ 64,158  
                 

Liabilities and Stockholders' Equity:

               

Current Liabilities:

               

Accounts payable

  $ 15,258     $ 2,904  

Notes payable, current

    1,528       473  

Line of credit

    550        

Operating lease obligations - current portion

    1,582       821  

Accrued expenses

    2,946       5,159  

Contract liabilities

    6,616       1,668  

Liabilities held for sale, current

    4,192       4,970  

Total current liabilities

    32,672       15,995  

Notes payable, less current portion

    7,822        

Operating lease obligations, less current portion

    5,348       4,852  

Contingent consideration

    720        

Other long-term liabilities

    162       194  

Total liabilities

    46,724       21,041  
                 

Commitments and contingencies

               
                 

Stockholders' Equity:

               

Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at June 30, 2020 or December 31, 2019

           

Common stock, par value $0.001; 325,000,000 shares authorized; 30,773,748 shares issued and 30,420,685 shares outstanding at June 30, 2020 and 28,736,436 shares issued and 28,383,373 shares outstanding at December 31, 2019

    31       29  

Additional paid-in capital

    171,341       170,106  

Treasury stock at cost; 353,063 shares held at June 30, 2020 and December 31, 2019

    (413 )     (413 )

Accumulated deficit

    (138,940 )     (122,234 )

Accumulated other comprehensive loss

    (4,000 )     (4,371 )

Total stockholders' equity

    28,019       43,117  

Total liabilities and stockholders' equity

  $ 74,743     $ 64,158  

 

 

 

Orbital Energy Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

   

For the Three Months

   

For the Six Months

 

(in thousands, except share and per share amounts)

 

Ended June 30,

   

Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 
                                 

Revenues

  $ 7,775     $ 6,261     $ 13,463     $ 11,720  
                                 

Cost of revenues

    6,731       4,540       11,860       8,812  
                                 

Gross profit

    1,044       1,721       1,603       2,908  
                                 

Operating expenses:

                               

Selling, general and administrative expense

    6,787       4,463       13,979       9,298  

Depreciation and amortization

    1,424       384       1,831       790  

Research and development

    28       51       45       103  

Provision for (credit to) for bad debt

    2       61       8       128  

Other operating (income) expense

                      (2 )
                                 

Total operating expenses

    8,241       4,959       15,863       10,317  
                                 

Continuing loss from operations

    (7,197 )     (3,238 )     (14,260 )     (7,409 )
                                 

Other (expense) income

    234       (353 )     (798 )     (105 )

Interest expense

    (125 )     (22 )     (136 )     (31 )
                                 

Loss from continuing operations before income taxes and equity in net loss of affiliate

    (7,088 )     (3,613 )     (15,194 )     (7,545 )

Net loss of affiliate

    (4,360 )     (356 )     (4,806 )     (356 )

Loss from continuing operations before taxes

    (11,448 )     (3,969 )     (20,000 )     (7,901 )
                                 

Income tax benefit

    (1,550 )     (280 )     (3,150 )     (454 )
                                 

Loss from continuing operations, net of income taxes

    (9,898 )     (3,689 )     (16,850 )     (7,447 )
                                 

Discontinued operations

                               

Income from operations of discontinued power and electromechanical components businesses

    595       1,313       109       2,289  

Income tax (benefit) expense

    22       (111 )     (35 )     110  

(Loss) income from discontinued operations, net of income taxes

    573       1,424       144       2,179  
                                 

Net loss

  $ (9,325 )   $ (2,265 )   $ (16,706 )   $ (5,268 )
                                 

Basic and diluted weighted average common shares outstanding

    30,424,896       28,634,766       29,422,813       28,609,324  
                                 

Loss from continuing operations per common share - basic and diluted

  $ (0.33 )   $ (0.13 )   $ (0.57 )   $ (0.26 )
                                 

(Loss) income from discontinued operations - basic and diluted

  $ 0.02     $ 0.05     $ 0.00     $ 0.08  
                                 

Loss per common share - basic and diluted

  $ (0.31 )   $ (0.08 )   $ (0.57 )   $ (0.18 )

 

 

 

 

 

Orbital Energy Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

   

For the Six Months

 

(in thousands)

 

Ended June 30,

 
   

2020

   

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (16,706 )   $ (5,268 )

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

               

Depreciation

    365       462  

Amortization of intangibles

    1,670       907  

Amortization of note receivable discount

    (142 )      

Stock issued and stock to be issued for compensation, royalties and services

    7       111  

Non-cash loss on equity method investment in VPS

    4,806       356  

Non-cash fair value gain on equity method investment purchase

          (629 )

Provision for bad debt expense

    8       138  

Deferred income taxes

    (1,594 )     (289 )

Inventory reserve

    (17 )     189  

Non-cash unrealized foreign currency losses

    1,141       159  

Gain on disposal of assets

          (2 )

Change in operating assets and liabilities, net of effects of acquisition:

               

Trade accounts receivable

    749       (68 )

Retainage receivable

    557        

Inventories

    (792 )     (972 )

Contract assets

    1,786       (1,159 )

Prepaid expenses and other current assets

    304       381  

Right of use assets - Operating leases

    (283 )     467  

Deposits and other assets

    (991 )     21  

Accounts payable

    (617 )     2,001  

Operating lease liabilities

    182       (429 )

Accrued expenses

    (1,212 )     (325 )

Refund liabilities

          (253 )

Contract liabilities

    1,804       (121 )

NET CASH USED IN OPERATING ACTIVITIES

    (8,975 )     (4,323 )
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Cash paid for acquisition, net of cash received

    (2,980 )      

Purchases of property and equipment

    (1,391 )     (233 )

Payment from working capital adjustment on Power group disposition

    (2,804 )      

Proceeds from sale of property and equipment

          2  

Cash paid for other intangible assets

    (5 )     (196 )

Cash paid for convertible notes receivable

    (260 )      

Cash paid for equity-method investment

    (129 )     (1,021 )

Proceeds from Notes receivable

          313  

NET CASH USED IN INVESTING ACTIVITIES

    (7,569 )     (1,135 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from overdraft facility

          6,842  

Payments on overdraft facility

          (8,208 )

Proceeds from line of credit

    100       17,189  

Payments on line of credit

          (11,718 )

Payments on financing lease obligations

    (2 )     (2 )

Proceeds from notes payable

    1,924        

Payments on notes payable

    (846 )      

NET CASH PROVIDED BY FINANCING ACTIVITIES

    1,176       4,103  
                 

Effect of exchange rate changes on cash

    (35 )     11  

Net decrease in cash, cash equivalents and restricted cash

    (15,403 )     (1,344 )

Cash, cash equivalents and restricted cash at beginning of period

    23,351       4,502  
                 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

  $ 7,948     $ 3,158  

 

 

 

 

Reconciliation of Non-GAAP Financial Measures

 

EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) are non-GAAP financial measures and are reconciled in the table below. These non-GAAP financial measures do not represent funds available for management's discretionary use and is not intended to represent cash flow from operations. EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) should not be construed as a substitute for net loss or as a better measure of liquidity than cash flow from operating activities, which is determined in accordance with United States generally accepted accounting principles ("GAAP"). EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) exclude components that are significant in understanding and assessing the company's results of operations and cash flows. In addition, EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) are not terms defined by GAAP and as a result our measure of EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) might not be comparable to similarly titled measures used by other companies. However, EBITDA, Adjusted EBITDA and Adjusted Net Income (loss) are used by management to evaluate, assess and benchmark the company's operational results and the company believes EBITDA, Adjusted EBITDA, and Adjusted Net Income (loss) are relevant and useful information which are often reported and widely used by analysts, investors and other interested parties in the Company's industry. Accordingly, the Company is disclosing this information to permit a more comprehensive analysis of its operating performance, to provide an additional measure of performance and liquidity and to provide additional information with respect to the Company's ability to meet future debt service, capital expenditure and working capital requirements. Adjusted Net Income (loss) eliminates the amortization expenses associated with intangible assets acquired with Orbital Gas Systems Limited, CUI-Canada and Reach Construction as well as non-cash expenses associated with impairments, Gains on sale of businesses, non-cash gains and losses related to the Company's equity method investment in VPS and stock and stock options for compensation, royalties and services during the period.

 

(in thousands)

 

For the Three Months En

   

For the Six months Ended

 

(Unaudited)

 

June 30

   

June 30

 
   

2020

   

2019

   

2020

   

2019

 

EBITDA:

                               

Net loss

  $ (9,325 )   $ (2,265 )     (16,706 )     (5,268 )

Plus Interest expense

    125       118       136       203  

Plus: (Benefit) provision for taxes

    (1,528 )     (391 )     (3,185 )     (344 )

Plus: Depreciation and amortization

    1,549       624       2,035       1,369  

EBITDA

  $ (9,179 )   $ (1,914 )     (17,720 )     (4,040 )
                                 

Adjusted EBITDA:

                               

Plus: Bad debt

    2       31       8       118  

Plus: Stock and stock to be issued for compensation, royalties and services

    4       60       7       111  

Minus: Pretax gain on assets contributed as part of the purchase of VPS

          (629 )           (629 )

Plus: Non-cash loss on equity method investment in VPS

    4,360       356       4,806       356  

Adjusted EBITDA

  $ (4,813 )   $ (2,096 )     (12,899 )     (4,084 )
                                 

Adjusted net income (loss):

                               
                                 

Net loss

  $ (9,325 )   $ (2,265 )     (16,706 )     (5,268 )

Amortization expense of Orbital, CUI-Canada and Reach Construction acquisition intangibles

    1,305       297       1,556       597  

Plus: Stock and stock to be issued for compensation, royalties and services

    4       60       7       111  

Minus: Pretax gain on assets contributed as part of the purchase of VPS

          (629 )           (629 )

Plus: Non-cash loss on equity method investment in VPS

    4,360       356       4,806       356  

Adjusted net loss

  $ (3,656 )   $ (2,181 )     (10,337 )     (4,833 )

 

 
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