UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to ______
Commission File Number
Orbital Infrastructure Group, Inc. (f/k/a Orbital Energy Group, Inc.)
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| Suite 1650 | ||
| (Address of principal executive offices and zip code) |
| Former address: |
| 1924 Aldine Western |
| Houston, Texas 77038 |
(
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| | Smaller reporting company |
| 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
There were
Securities registered pursuant to Section 12(b) of the Act.:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | |
Item 1. Financial Statements.
Orbital Infrastructure Group, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| September 30, | December 31, | |||||||
| (in thousands, except share and per share amounts) | 2022 | 2021 | ||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash - current portion | ||||||||
| Trade accounts receivable, net of allowance of $ and $, respectively | ||||||||
| Inventories | ||||||||
| Contract assets | ||||||||
| Note receivable, current portion | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Assets held for sale, current portion | ||||||||
| Total current assets | ||||||||
| Property and equipment, less accumulated depreciation | ||||||||
| Investment | ||||||||
| Right of use assets - Operating leases | ||||||||
| Right of use assets - Financing leases | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Restricted cash, noncurrent portion | ||||||||
| Note receivable, noncurrent portion | ||||||||
| Deposits and other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity (Deficit): | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Notes payable, current portion | ||||||||
| Line of credit | ||||||||
| Operating lease obligations - current portion | ||||||||
| Financing lease obligations - current portion | ||||||||
| Accrued expenses | ||||||||
| Contract liabilities | ||||||||
| Financial instrument liability, current portion | ||||||||
| Liabilities held for sale, current portion | ||||||||
| Total current liabilities | ||||||||
| Financial instrument liability, noncurrent portion | ||||||||
| Warrant liabilities | ||||||||
| Deferred tax liabilities | ||||||||
| Notes payable, less current portion | ||||||||
| Operating lease obligations, less current portion | ||||||||
| Financing lease obligations, less current portion | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' Equity (Deficit): | ||||||||
| Preferred stock, par value $; shares authorized; shares issued at September 30, 2022 or December 31, 2021 | ||||||||
| Common stock, par value $; shares authorized; shares issued and shares outstanding at September 30, 2022 and shares issued and shares outstanding at December 31, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock at cost; shares held at September 30, 2022 and December 31, 2021 | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Orbital Infrastructure Group, Inc.'s stockholders' equity (deficit) | ( | ) | ||||||
| Noncontrolling interest | ( | ) | ||||||
| Total stockholders' equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders' equity (deficit) | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements
Orbital Infrastructure Group, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months |
For the Nine Months |
|||||||||||||||
| (in thousands, except share and per share amounts) |
Ended September 30, |
Ended September 30, |
||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues |
$ | $ | $ | $ | ||||||||||||
| Cost of revenues |
||||||||||||||||
| Gross profit |
( |
) | ( |
) | ||||||||||||
| Operating expenses (income): |
||||||||||||||||
| Selling, general and administrative expense |
||||||||||||||||
| Depreciation and amortization |
||||||||||||||||
| Impairment of goodwill and intangible assets |
||||||||||||||||
| Impairment of financing leased assets |
||||||||||||||||
| (Recovery of) provision for bad debt |
( |
) | ||||||||||||||
| Other operating income, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total operating expenses |
||||||||||||||||
| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Gain (loss) on extinguishment of debt |
( |
) | ( |
) | ||||||||||||
| Loss on financial instruments |
( |
) | ( |
) | ||||||||||||
| Gain on warrant liabilities |
||||||||||||||||
| Other income (expense) |
( |
) | ( |
) | ( |
) | ||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss from continuing operations before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense (benefit) |
( |
) | ( |
) | ||||||||||||
| Loss from continuing operations, net of income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Discontinued operations (Note 3) |
||||||||||||||||
| Income (loss) from operations of discontinued businesses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Less: net loss attributable to noncontrolling interest |
( |
) | ( |
) | ||||||||||||
| Net loss attributable to Orbital Infrastructure Group, Inc. |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Basic and diluted weighted average common shares outstanding |
||||||||||||||||
| Loss from continuing operations per common share - basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Loss from discontinued operations - basic and diluted |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss per common share - basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
See accompanying notes to condensed consolidated financial statements
Orbital Infrastructure Group, Inc.
Condensed Consolidated Statements of Comprehensive Income and Loss
(Unaudited)
| For the Three Months |
For the Nine Months |
|||||||||||||||
| (in thousands) |
Ended September 30, |
Ended September 30, |
||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive income (loss) |
||||||||||||||||
| Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||||||
| Reclassification of Foreign currency translation adjustment from accumulated other comprehensive loss to gain on sale of Orbital U.K. upon disposition |
||||||||||||||||
| Net other comprehensive income (loss) |
( |
) | ||||||||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Less: Comprehensive income (loss) attributable to noncontrolling interests |
( |
) | ( |
) | ||||||||||||
| Comprehensive loss attributable to Orbital Infrastructure Group, Inc. |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
See accompanying notes to condensed consolidated financial statements
Orbital Infrastructure Group, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
(Unaudited)
| (in thousands, except share amounts) | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-in Capital | Shares | Amount | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total OIG Stockholder's Equity (Deficit) | Non-controlling Interest | Total Stockholders' Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Common stock issued for acquisition | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued and issuable for compensation, services and royalty payments | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Common stock issued for debt repayment | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued to lenders for OID for $105 million debt - (reissued) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | ||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for acquisition - purchase price adjustment | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of pre-funded warrants, net | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued and issuable for compensation, services and royalty payments | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for debt repayment | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued to lenders based on a new reference price on subscription agreement | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | ||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued and issuable for compensation, services and royalty payments | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for debt repayment | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued to lenders based on a new reference price on subscription agreement | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| (in thousands, except share amounts) | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-in Capital | Shares | Amount | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | |||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Issuance of common stock via equity raises | — | — | — | — | ||||||||||||||||||||||||||||
| Common stock issued for cashless exercises of stock options | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Common stock issued and vesting of restricted stock for compensation, services, and royalty payments | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common stock issued for acquisition of Gibson Technical Services, Inc. | — | — | — | — | ||||||||||||||||||||||||||||
| Common stock issued for compensation, services, and royalty payments | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Issuance of common stock via equity raise | — | — | — | — | ||||||||||||||||||||||||||||
| Common stock issued for acquisition of IMMCO, Inc. | — | — | — | — | ||||||||||||||||||||||||||||
| Common stock issued for and issuable for compensation, services and royalty payments | — | — | — | — | — | |||||||||||||||||||||||||||
| Common stock issued for debt repayment | — | — | — | — | ||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
| Other comprehensive income | — | — | ||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements
Orbital Infrastructure Group, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months |
||||||||
| (in thousands) |
Ended September 30, |
|||||||
| 2022 |
2021 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation |
||||||||
| Amortization of intangibles |
||||||||
| Amortization of debt discount |
||||||||
| Amortization of note receivable discount |
( |
) | ( |
) | ||||
| Stock-based compensation and expense, net of forfeitures |
( |
) | ||||||
| Fair value adjustment to liability for stock appreciation rights |
( |
) | ||||||
| Fair value adjustment to financial instrument liabilities |
||||||||
| Fair value adjustment to warrant liabilities |
( |
) | ||||||
| Loss (gain) on extinguishment of debt and debt modifications |
( |
) | ||||||
| Gain on sale of business |
( |
) | ||||||
| (Recovery of) provision for bad debt |
( |
) | ||||||
| Deferred income taxes |
( |
) | ||||||
| Impairment of goodwill and intangible assets |
||||||||
| Impairment of financing leased assets |
||||||||
| Inventory reserve |
( |
) | ( |
) | ||||
| Gain on sale of assets |
( |
) | ( |
) | ||||
| Non-cash unrealized foreign currency loss |
( |
) | ||||||
| Liquidated damages from debt |
||||||||
| Change in operating assets and liabilities, net of acquisition: |
||||||||
| Trade accounts receivable |
( |
) | ||||||
| Inventories |
( |
) | ||||||
| Contract assets |
( |
) | ( |
) | ||||
| Prepaid expenses and other current assets |
||||||||
| Right of use assets/lease liabilities, net |
( |
) | ||||||
| Deposits and other assets |
( |
) | ( |
) | ||||
| Accounts payable |
( |
) | ||||||
| Accrued expenses |
||||||||
| Contract liabilities |
( |
) | ( |
) | ||||
| NET CASH USED IN OPERATING ACTIVITIES |
( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Cash paid for acquisitions, net of cash received |
( |
) | ( |
) | ||||
| Cash paid for working capital adjustment on Front Line Power acquisition |
( |
) | ||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Deposits on financing lease property and equipment |
( |
) | ||||||
| Proceeds from sale of businesses, net of cash included in the business |
||||||||
| Proceeds from sale of property and equipment and businesses |
||||||||
| Purchases of investments |
( |
) | ||||||
| Purchase of other intangible assets |
( |
) | ( |
) | ||||
| Proceeds from notes receivable |
||||||||
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from line of credit |
||||||||
| Payments on line of credit |
( |
) | ( |
) | ||||
| Payments on financing lease obligations |
( |
) | ( |
) | ||||
| Proceeds from notes payable |
||||||||
| Payments on notes payable |
( |
) | ( |
) | ||||
| Proceeds from sales of common stock and warrants |
||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
||||||||
| Effect of exchange rate changes on cash |
( |
) | ( |
) | ||||
| Net increase in cash, cash equivalents and restricted cash |
||||||||
| Cash, cash equivalents and restricted cash at beginning of period |
||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD |
$ | $ | ||||||
See accompanying notes to condensed consolidated financial statements
Orbital Infrastructure Group, Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(Unaudited)
| For the Nine Months |
||||||||
| (in thousands) |
Ended September 30, |
|||||||
| 2022 |
2021 |
|||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
| Income taxes paid (net refunded) |
$ | $ | ( |
) | ||||
| Interest paid |
$ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
||||||||
| Non-cash investment in acquisitions including seller notes, equity issued and contingent consideration |
$ | $ | ||||||
| Equipment purchased with debt |
$ | $ | ||||||
| Accrued property and equipment purchases |
$ | $ | ||||||
See accompanying notes to condensed consolidated financial statements
Orbital Infrastructure Group, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
| 1. | NATURE OF OPERATIONS, BASIS OF PRESENTATION AND COMPANY CONDITIONS |
Nature of Operations
Orbital Infrastructure Group, Inc. f/k/a Orbital Energy Group, Inc. (Orbital Infrastructure Group, "OIG," "The Company") is a diversified infrastructure services company serving customers in the electric power, telecommunications, and renewable markets. The Company’s reportable segments are the Electric Power segment, the Telecommunications segment, and the Renewables segment. In December 2021, the Company announced the planned divestiture of its previously reported Integrated Energy Infrastructure Solutions and Services segment.
The Electric Power segment consists of Front Line Power Construction, LLC based in Houston, Texas (acquired November 17, 2021), Orbital Power, Inc. based in Dallas, Texas, (began operations in Q1 2020) and Eclipse Foundation Group based in Gonzales, Louisiana (began operations in Q1 2021). The segment provides comprehensive infrastructure solutions to customers in the electric power industry. Services performed by Front Line Power and Orbital Power, Inc. generally include but are not limited to the engineering, design, installation, upgrade, repair and maintenance of electric power transmission and distribution infrastructure and substation facilities as well as emergency restoration services. Eclipse Foundation Group, which began operations in January 2021, is a drilled shaft foundation construction company that specializes in providing services to the electric transmission and substation, industrial, telecommunication and disaster restoration market sectors, with expertise performing services in water, marsh and rock terrains. In the third quarter of 2022, in order to streamline operations, the Eclipse business was integrated into Front Line Power Construction, LLC, and ceased to be a separate business unit.
The Telecommunications segment is made up of Gibson Technical Services, Inc. (“GTS”) (acquired April 13, 2021) and subsidiaries. GTS is an Atlanta-based telecommunications company providing diversified telecommunications services nationally since 1990 and is the parent of IMMCO, Inc., Full Moon Telecom, LLC, and Coax Fiber Solutions, LLC. IMMCO, Inc. (acquired July 28, 2021), which includes two Indian subsidiaries, is an Atlanta-based, full-service telecom engineering and network design company providing diversified engineering services and customized software solutions to a global customer base since 1992. Full Moon Telecom, LLC (acquired October 22, 2021) is a Florida-based telecommunications service provider that offers an extensive array of wireless service capabilities and experience including Layer 2/Layer 3 Transport, Radio Access Network (“RAN”) Integration, test and turn-up of Small Cell systems and Integration/Commissioning of Distributed Antenna (“DAS”) systems. Coax Fiber Solutions, LLC (acquired March 7, 2022), is based in Loganville, Georgia. Founded in 2016, Coax Fiber Solutions is a GDOT Certified contractor specializing in Aerial Installation, directional drilling, trenching, plowing, and missile crews for telecommunications, power, gas, water, CCTV, ATMS, and traffic signal cable installation.
The Renewables segment consists of Orbital Solar Services based in Raleigh, North Carolina. Orbital Solar Services provides engineering, procurement and construction (“EPC”) services that support the development of renewable energy generation focused on utility-scale solar construction. The Company serves a wide variety of project types, including commercial, substation, solar farms and public utility projects.
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information, which includes condensed consolidated financial statements. Accordingly, they do not include all the information and notes necessary for a comprehensive presentation of financial position and results of operations and should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The Condensed Consolidated Balance Sheet as of December 31, 2021 has been derived from the audited financial statements as of that date included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
It is management's opinion that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statement presentation. All intercompany accounts and transactions have been eliminated in consolidation. The results for the interim period are not necessarily indicative of the results to be expected for the remaining quarters or year ending December 31, 2022.
Reconciliation of Cash, Cash Equivalents, and Restricted Cash on Condensed Consolidated Statements of Cash Flows
| For the Nine Months | ||||||||
| (in thousands) | Ended September 30, | |||||||
| 2022 | 2021 | |||||||
| Cash and cash equivalents at beginning of period | $ | $ | ||||||
| Restricted cash at beginning of period (1) | ||||||||
| Cash, cash equivalents and restricted cash at beginning of period | $ | $ | ||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Restricted cash at end of period (1) | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
(1) Restrictions on cash at September 30, 2022 and September 30, 2021 relate to collateral for several bank-issued letters of credit for contract guaranties.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. Significant estimates include estimates used to record purchase price allocation for the Company's acquisitions, fair value measurements used in goodwill impairment tests, impairment estimations of long-lived assets, revenue recognition on cost-to-cost type contracts, allowances for uncollectible accounts, valuations of non-cash capital stock issuances, estimates of the incremental borrowing rate for long-term leases, fair value estimates and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Reclassifications
Certain reclassifications have been made to the 2021 classifications in order to conform to the 2022 presentation.
Company Conditions and Sources of Liquidity
The Company has experienced net losses, cash outflows from cash used in operating activities and a decline in share value over the past years. As of and for the nine months ended September 30, 2022, the Company had an accumulated deficit of $
The Company has plans to access additional capital to meet its obligations for the twelve months from the date these financial statements are available to be issued. Historically, the Company has raised additional equity and debt financing to fund its expansion; refer to Note 16 — Notes Payable and Line of Credit. The Company has also funded some of its capital expenditures through long-term financing with lenders and other investors as also described in further detail in Note 16 — Notes Payable and Line of Credit. Our ability to raise the additional capital is dependent on a number of factors, including, but not limited to, the market demand for our common stock, which itself is subject to a number of business risks and uncertainties, our creditworthiness and the uncertainty that we would be able to raise such additional capital at a price that is favorable to us. As of September 30, 2022, the Company has an effective S-3 shelf registration statement for the issuance of various types of securities, including common stock, preferred stock, debt securities and/or warrants in the aggregate of up to $
The Company plans to meet its obligations as they become due over the next twelve months by raising additional capital through equity and debt financing sources and forecasted positive cash flows generated from operations. There can be no assurance that the Company will succeed in executing these plans. If unsuccessful, the Company will not have sufficient liquidity and capital resources to repay its indebtedness when it matures, or otherwise meet its cash requirements over the next twelve months, as noted above.
Restructuring Costs
In September 2022, the Company fully impaired its finance lease equipment related to the Eclipse Foundation Group in the Electric Power segment. These pieces of equipment are drilling specific and at this time, the Company does not plan to use the equipment for the remaining term of the leases. As these leases are non-cancelable and do not include a sub-leasing option, the full finance lease assets related to Eclipse have been removed from the balance sheet and an equal impairment has been recognized in the amount of $
Sale of Orbital U.K.
On May 11, 2022, the Company completed the sale of its Orbital U.K. operations for the agreed upon amount of
Goodwill and Indefinite-lived intangible assets
The Company had Goodwill from acquisitions made in 2020, 2021 and 2022.
Roll-forward of the Company's goodwill:
| Electric Power | Telecommunications | Renewables | Total | |||||||||||||
| Goodwill - December 31, 2021 | $ | $ | $ | $ | ||||||||||||
| Acquisition of CFS | ||||||||||||||||
| IMMCO purchase price allocation adjustment | ||||||||||||||||
| September 30, 2022 - impairment | ( | ) | ( | ) | ( | ) | ||||||||||
| Goodwill - September 30, 2022 | $ | $ | $ | $ | ||||||||||||
The Company tests for impairment of Indefinite-lived intangibles and Goodwill in the second quarter of each year and when events or circumstances indicate that the carrying amount of Goodwill exceeds its fair value and may not be recoverable.
Under current accounting guidance, Orbital Infrastructure Group is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The guidance includes a number of factors to consider in conducting the qualitative assessment.
During the three months ended June 30, 2022, the Company completed a quantitative analysis to determine whether it was more likely than not that the fair value of its reporting units were less than their carrying amount, including goodwill. To complete the review, management evaluated the fair value of the Goodwill and considered all known events and circumstances that might trigger an impairment of goodwill. The review of goodwill, prepared as of May 31, 2022, determined that there were not indicators present to suggest that it was more likely than not that the fair value of any of the Company's reporting units was less than its carrying amount and thus no impairment was necessary during the quarter ended June 30, 2022.
The Company did a second goodwill impairment analysis as of June 30, 2022 due to a
During the third quarter of 2022, triggering events were identified which led to performing interim goodwill impairment testing of our reporting units as of September 30, 2022. These events included a further decrease in the Company's market capitalization, the significant loss in the Renewables segment in the third quarter of 2022, interest rate increases and limitations on accessing capital, which raised substantial doubt regarding the Company’s ability to continue as a going concern. The fair value for our reporting units for the interim testing was valued using a market approach. The impairment assessment resulted in a conclusion that goodwill in the Electric Power and Telecommunications reporting units was impaired by $
Accrued expenses
Accrued expenses are liabilities that reflect expenses on the statement of operations that have not been paid or recorded in accounts payable at the end of the period. At September 30, 2022 and December 31, 2021, accrued expenses of $
| (in thousands) | September 30, | December 31 | ||||||
| 2022 | 2021 | |||||||
| Accrued bonding | $ | $ | ||||||
| Accrued compensation | ||||||||
| Working capital adjustment on Front Line Power Construction acquisition | ||||||||
| Accrued interest | ||||||||
| Accrued taxes payable | ||||||||
| Accrued subcontractor expenses | ||||||||
| Accrued union dues | ||||||||
| Accrued vendor invoices and accrued other expenses | ||||||||
| Total accrued expense | $ | $ | ||||||
Impact of COVID-19 Pandemic and current economic environment
The effects of the COVID-19 pandemic continues to impact certain aspects and geographies of the global economy due to supply chain, production and other logistical disruptions. While we have continued to operate as a provider of essential services from the onset of the pandemic, during the course of the pandemic our operations and financial results have been adversely impacted by governmental responses to the COVID-19 pandemic, including shut-down orders and limitations on work site practices implemented by governments. The longer-term implications of the COVID-19 pandemic on our financial performance remain uncertain and variable in the current economic environment including rising interest and inflation rates.
We continue to monitor governmental vaccination and testing standards or requirements related to COVID-19, as well as certain standards and guidance for preventing the spread of COVID-19. While the impact of these standards has lessened in 2022, we continue to monitor changes in these standards that may impact our business.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Our significant accounting policies are detailed in "Note 2 Summary of Significant Accounting Policies" within Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022.
| 3. | DISCONTINUED OPERATIONS AND SALE OF A BUSINESS |
As part of the Company’s stated strategy to transform Orbital Infrastructure Group into a diversified energy infrastructure services platform serving North American energy customers, the Company’s board of directors made the decision to divest of its Orbital Gas subsidiaries. The Orbital Gas subsidiaries provide proprietary gas measurement and sampling technologies and the integration of process control and measuring/sampling systems. They are legacy businesses that are not part of the Company’s strategy of building an infrastructure services company serving the electric power, telecommunications and renewable markets. The disposition of the Orbital Gas subsidiaries will facilitate the Company’s restructuring and cost savings initiatives and are intended to realign and simplify its business structure and better position the Company for future growth and improved profitability. In the fourth quarter of 2021, the Company recorded a $
The sale of the U.K. operations closed in May of 2022. The Company could receive additional consideration if certain events transpire during the 12-month restricted period following the settlement date. In addition, the Company will receive a “royalty” of
Assets and liabilities held for sale that are included on the Company's balance sheet, relate to the company's discontinued businesses, and are described below.
| As of | As of | |||||||
| September 30, | December 31, | |||||||
| (in thousands) | 2022 | 2021 | ||||||
| Carrying amounts of the major classes of assets included in discontinued operations: | ||||||||
| Trade accounts receivable | $ | $ | ||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Contract assets | ||||||||
| Assets held for sale, current portion | ||||||||
| Property and equipment | ||||||||
| Other intangible assets | ||||||||
| Deposits and other assets | ||||||||
| Assets held for sale, noncurrent portion | ||||||||
| Total assets of the disposal group classified as held for sale | $ | $ | ||||||
| Carrying amounts of the major classes of liabilities included in discontinued operations: | ||||||||
| Accounts payable | $ | $ | ||||||
| Contract liabilities | ||||||||
| Operating lease obligations - current portion | ||||||||
| Accrued expenses | ||||||||
| Liabilities held for sale, current portion | ||||||||
| Operating lease obligations, less current portion | ||||||||
| Other long-term liabilities | ||||||||
| Liabilities held for sale, noncurrent portion | ||||||||
| Total liabilities held for sale | $ | $ | ||||||
Selected data for these discontinued businesses consisted of the following:
Reconciliation of the Major Classes of Line Items Constituting Pretax Income from
Discontinued Operations to the After-Tax Income from Discontinued Operations That Are
Presented in the Condensed Consolidated Statement of Operations
| (in thousands) | For the Three Months | For the Nine Months | ||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| Major classes of line items constituting pretax profit of discontinued operations: | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Selling, general and administrative expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization | ( | ) | ( | ) | ||||||||||||
| (Provision) recovery of bad debt | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Gain on extinguishment of PPP loan | ||||||||||||||||
| Other expense | ||||||||||||||||
| Pretax income of discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Pretax gain on sale of Orbital U.K. | ||||||||||||||||
| Income tax expense | ||||||||||||||||
| Total income from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
There was $
| 4. | REVENUE FROM CONTRACTS WITH CUSTOMERS |
The Electric Power segment provides full service building, maintenance and support to the electrical power distribution, transmission, substation, and emergency response sectors of North America through Front Line Power, Orbital Power Services and Eclipse Foundation. The Telecommunications segment composed of Gibson Technical Services and subsidiaries provides technical implementation, design, maintenance, emergency and repair support services in the broadband, wireless, and outside plant and building technologies. The Renewables segment, Orbital Solar Services, provides engineering, procurement and construction (“EPC”) services that support the development of renewable energy generation focused on utility scale solar and community solar construction.
For our construction contracts, revenue is generally recognized over time. Our fixed price and unit-price construction projects generally use a cost-to-cost input method or an output method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer. Revenue is also generally recognized over time as the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Under the output method, the measure of progress towards completion is based on units of work completed multiplied by the contractual pricing amounts per unit. Under the output method, revenue is determined by actual work achieved. For jobs under the output method, revenue is earned based on each unit in the contract completed. We construct comprehensive revenue calculations based on quantifiable measures of actual units completed multiplied by the agreed upon contract prices per item completed.
For our engineering and network design contracts, revenue is also generally recognized over time. In these jobs, timing of revenue recognition also depends on the payment terms of the contract, as our performance does not create an asset with an alternative use to us. For those contracts where the Company's performance creates or enhances an asset that the customer controls as the asset is created or enhanced or for which we have a right to payment for performance completed to date at all times throughout our performance, inclusive of a cancellation, we recognize revenue over time. As discussed above, these performance obligations use a cost-to-cost input method or output method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer. However, for those contracts for which we do not have a right, at all times, to payment for performance completed to date and we are not enhancing a customer-controlled asset, we recognize revenue at the point in time when control is transferred to the customer.
For our service contracts, revenue is also generally recognized over time as the customer simultaneously receives and consumes the benefits of our performance as we perform the service. For our fixed price service contracts with specified service periods, revenue is generally recognized on a straight-line basis over such service period when our inputs are expended evenly, and the customer receives and consumes the benefits of our performance throughout the contract term.
For certain of our revenue streams, such as call-out repair and service work, and outage services, that are performed under time and materials contracts, our progress towards complete satisfaction of such performance obligations is measured using an input method as the customer receives and consumes the benefits of our performance completed to date.
Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.
Accounts Receivable, Contract Assets and Contract Liabilities
Accounts receivable are recognized in the period when our right to consideration is unconditional. We also assess our customer's ability and intention to pay, which is based on a variety of factors, including our historical payment experience with and the financial condition of our customers.
The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from our construction projects when revenue recognized under the output method or input cost-to-cost method exceeds the amounts invoiced to our customers, as the amounts cannot be billed under the terms of our contracts. Such amounts are recoverable from our customers based upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of a contract. Also included in contract assets are retainage receivables and amounts we seek or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders or modifications in dispute or unapproved as to both scope and/or price or other customer-related causes of unanticipated additional contract costs (claims and unapproved change orders). Our contract assets do not include capitalized costs to obtain and fulfill a contract. Contract assets are generally classified as current within the Condensed Consolidated Balance Sheets.
Contract liabilities from our construction contracts occur when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost or output method measure of progress. Contract liabilities additionally include advanced payments from our customers on certain contracts and provision for future contract losses for those contracts estimated to close in a gross loss position. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and are recorded as either current or long-term, depending upon when we expect to recognize such revenue.
Balances and activity in the current contract liabilities as of and for the nine months ended September 30, 2022 and 2021 was as follows:
| For the Nine Months | ||||||||
| Ended September 30, | ||||||||
| (in thousands) | 2022 | 2021 | ||||||
| Total contract liabilities - beginning of period | $ | $ | ||||||
| Other contract additions, net | ||||||||
| Revenue recognized | ( | ) | ( | ) | ||||
| Contract settlements | ( | ) | ||||||
| Total contract liabilities - end of period | $ | $ | ||||||
Performance Obligations
Remaining Performance Obligations
Remaining performance obligations represents the transaction price of contracts with customers for which work has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts. As of September 30, 2022, the Company's remaining performance obligations are generally expected to be filled within the next 12 months. For the contracts that are greater than 12 months the Company has approximately $
Any adjustments to net revenues, cost of revenues, and the related impact to operating income are recognized as necessary in the period they become known. These adjustments may result from positive program performance and may result in an increase in operating income during the performance of individual performance obligations, if we determine we will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations. Likewise, these adjustments may result in a decrease in operating income if we determine we will not be successful in mitigating these risks. Changes in estimates of net revenues, cost of revenues and the related impact to operating income are recognized on a cumulative catch-up basis in the period they become known, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation's percentage of completion. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations.
Performance Obligations Satisfied Over Time
To determine the proper revenue recognition method for our contracts, we evaluate whether a single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to separate the single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period.
For most of our contracts, the customer contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability (even if that single project results in the delivery of multiple units). Hence, the entire contract is accounted for as one performance obligation. Less commonly, however, we may promise to provide distinct goods or services within a contract in which case we separate the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. We infrequently sell standard products with observable standalone sales. In cases where we do, the observable standalone sales are used to determine the standalone selling price. More frequently, we sell a customized customer specific solution, and in these cases, we typically use the output method or the expected cost plus a margin approach to estimate the standalone selling price of each performance obligation.
Variable Consideration
The nature of our contracts gives rise to several types of variable consideration. In rare instances, we include in our contract estimates, additional revenue for submitted contract modifications or claims against the customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably, and its realization is probable. In evaluating these criteria, we consider the contractual/legal basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs and the objective evidence available to support the claim. These amounts are included in our calculation of net revenue recorded for our contracts and the associated remaining performance obligations. Additionally, if the contract has a provision for liquidated damages in the case that the Company misses a timing target, or fails to meet any other contract benchmarks, the Company accounts for those estimated liquidated damages as variable consideration and will adjust revenue accordingly with periodic updates to the estimated variable consideration as the job progresses. Liquidated damages are recognized as variable consideration and are estimated based on the most likely amount that is deemed probable of realization.
Significant Judgments
Our contracts with certain customers may be subject to contract cancellation clauses. Contracts with other cancellation provisions may require judgment in determining the contract term, including the existence of material rights, transaction price and identifying the performance obligations and whether a contract should be accounted for over time or on a completed contract basis. Revenue is recognized for certain projects over time using cost-based input methods, in which significant judgement is required to evaluate assumptions including the amount of total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize.
At times, customers may request changes that either amend, replace or cancel existing contracts. Judgment is required to determine whether the specific facts and circumstances within the contracts require the changes to be accounted for as a separate contract or as a modification. Generally, contract modifications containing additional goods and services that are determined to be distinct and sold at their stand-alone selling price are accounted for as a separate contract. For contract modifications where goods and services are not determined to be distinct and sold at their stand-alone selling price, the original contract is updated and the required adjustments to revenue and contract assets, liabilities, and other accounts will be made accordingly.
Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately rather than together may require significant judgment. For, example, we consider many of our contracts that coordinate multiple products into an integrated system to be a single performance obligation, while the same products would be considered separate performance obligations if not so integrated.
In contracts where there are timing differences between when we transfer a promised good or service to the customer and when the customer pays for that good or service, we have determined that, our contracts do not include a significant financing component.
The following tables present the Company's revenues disaggregated by the type of customer:
| For the Three Months | For the Three Months | |||||||||||||||||||||||||||||||
| Ended September 30, 2022 | Ended September 30, 2021 | |||||||||||||||||||||||||||||||
| (in thousands) | Electric Power | Telecommunications | Renewables | Total | Electric Power | Telecommunications | Renewables | Total | ||||||||||||||||||||||||
| Utilities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Telecommunications | ||||||||||||||||||||||||||||||||
| Renewables | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| For the Nine Months | For the Nine Months | |||||||||||||||||||||||||||||||
| Ended September 30, 2022 | Ended September 30, 2021 | |||||||||||||||||||||||||||||||
| (in thousands) | Electric Power | Telecommunications | Renewables | Total | Electric Power | Telecommunications | Renewables | Total | ||||||||||||||||||||||||
| Utilities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Telecommunications | ||||||||||||||||||||||||||||||||
| Renewables | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
The following tables present the Company's revenues disaggregated by type of contract:
| For the Three Months | For the Three Months | |||||||||||||||||||||||||||||||
| Ended September 30, 2022 | Ended September 30, 2021 | |||||||||||||||||||||||||||||||
| (in thousands) | Electric Power | Telecommunications | Renewables | Total | Electric Power | Telecommunications | Renewables | Total | ||||||||||||||||||||||||
| Cost-plus contracts | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Fixed price contracts | ||||||||||||||||||||||||||||||||
| Unit price contracts | ||||||||||||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| For the Nine Months | For the Nine Months | |||||||||||||||||||||||||||||||
| Ended September 30, 2022 | Ended September 30, 2021 | |||||||||||||||||||||||||||||||
| (in thousands) | Electric Power | Telecommunications | Renewables | Total | Electric Power | Telecommunications | Renewables | Total | ||||||||||||||||||||||||
| Cost-plus contracts | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Fixed price contracts | ||||||||||||||||||||||||||||||||
| Unit price contracts | ||||||||||||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| 5. | INVENTORIES |
Inventories consist of work-in-process and finished goods and are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) method as a cost flow convention or through the moving average cost method. At September 30, 2022 and December 31, 2021, inventory by category is valued net of reserves and consists of:
| As of September 30, | As of December 31, | |||||||
| (in thousands) | 2022 | 2021 | ||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Total inventories | $ | $ | ||||||
| 6. | INVESTMENTS |
The Company has a minority ownership in Virtual Power Systems ("VPS"). The VPS investment basis at September 30, 2022 and December 31, 2021 was $
| 7. | LEASES |
Operating leases
Consolidated total operating lease costs were $
Future minimum operating lease obligations at September 30, 2022 are as follows for the years ended December 31:
| (in thousands) | ||||
| 2022 (remaining period) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Interest portion | ( | ) | ||
| Total operating lease obligations | $ |
Total lease cost and other lease information is as follows:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||
| Short-term lease cost | ||||||||||||||||
| Variable lease cost | ||||||||||||||||
| Sublease income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
| Other information - Operating leases (in thousands) | For the Nine Months Ended September 30, 2022 | |||||||
| 2022 | 2021 | |||||||
| Cash paid for amounts included in the measurement of lease obligations: | ||||||||
| Operating cash flows from operating leases (includes discontinued operations) | $ | ( | ) | $ | ( | ) | ||
| Right-of-use assets obtained in exchange for new operating lease obligations | $ | $ | ||||||
| Weighted-average remaining lease term - operating leases (in years) | ||||||||
| Weighted-average discount rate - operating leases | % | % | ||||||
Variable lease costs primarily include common area maintenance costs, real estate taxes and insurance costs passed through to the Company from lessors.
Financing leases
Consolidated total financing lease costs were $
Future minimum finance lease obligations at September 30, 2022 are as follows for the years ended December 31:
| (in thousands) | ||||
| 2022 (remaining period) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Interest portion | ( | ) | ||
| Total financing lease obligations | $ |
Total financing lease costs are as follows:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Depreciation of financing lease assets | $ | $ | $ | $ | ||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Total finance lease cost | $ | $ | $ | $ | ||||||||||||
In addition to the financing lease costs noted above, for the three and nine months ended September 30, 2022, the Company recognized $
| Other information - Financing leases | For the Nine Months Ended September 30, | |||||||
| (in thousands) | 2022 | 2021 | ||||||
| Cash paid for amounts included in the measurement of lease obligations: | ||||||||
| Operating cash flows from financing leases | $ | ( | ) | $ | ( | ) | ||
| Cash paid for amounts included in the measurement of lease obligations: | $ | ( | ) | $ | ( | ) | ||
| Right-of-use assets obtained in exchange for new financing lease obligations | $ | $ | ||||||
| Weighted-average remaining lease term - financing leases (in years) | ||||||||
| Weighted-average discount rate - finance leases | % | % | ||||||
| 8. | STOCK-BASED COMPENSATION AND EXPENSE |
Through December 31, 2021, the Company had been vesting a series of stock appreciation rights (SARS) to be settled in cash to certain executives. The SARS were considered liability-classified awards meaning their fair-values were remeasured at the end of each reporting period using a binomial lattice model and any changes in fair value for the vesting periods to-date were recorded through the income statement with a corresponding liability accrued on the balance sheet. Since December 31, 2021, the SARS have been exchanged for restricted stock units (RSUs) on the modification date of January 14, 2022 as approved by the Board of Directors. To account for this exchange, the company revalued the SARS as of the modification date of January 14, 2022 using the binomial lattice model and recorded changes in the vested value since December 31, 2021 as an adjustment to the income statement. The Company then reclassified the SARS accrued liability to APIC for new RSUs and recognized incremental expense. Shares deemed vested at the modification date were released and issued net of tax in March 2022. The SARS that converted to RSUs, were added to the Company's existing RSU program. The company recorded $
Restricted Stock
In March 2021, the Company granted
Restricted Stock Units
| Number of restricted shares | Weighted-average grant date fair value | |||||||
| Non-vested shares, beginning of year | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Non-vested shares, September 30, 2022 | $ | |||||||
| 9. | WARRANTS |
On April 28, 2022, the Company entered into a Securities Purchase Agreement with an institutional investor. The Purchase Agreement provides for the sale and issuance by the Company of an aggregate of: (i)
The accompanying warrants have an exercise price of $
Common stock warrants are accounted for in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging - Contracts in Entity's Own Equity (ASC Topic 815), as either derivative liabilities or equity instruments depending on the specific terms of the warrant agreement.
The Company’s warrants are considered to be derivative warrants, are classified as liabilities, and are recorded at fair value. The warrants are subject to re-measurement at each balance sheet date and any change in fair value is recognized as a component of change in fair value of warrant liability in the consolidated statements of operations. The Company uses the Black-Scholes pricing model to estimate the fair value of the related derivative warrant liability. The warrants are classified as Level 3 liabilities (see Note 12 for fair value disclosures.)
Warrants outstanding and warrant activity for the nine months ended September 30, 2022 is as follows:
| Description | Classification | Exercise Price | Expiration Date | Balance December 31, 2021 | Warrants Issued | Warrants Exercised | Warrants Expired | Balance September 30, 2022 | ||||||||||||||||||
| Warrants | Liability | $ | April 2027 | |||||||||||||||||||||||
| Pre-funded warrants | Liability | $ | April 2027 | |||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
| 10. | SEGMENT REPORTING |
Operating segments are defined in accordance with ASC 280-10 as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The measurement basis of segment profit or loss is income (loss) from operations. Management has identified
The Electric Power segment consists of Front Line Power Construction, LLC, Orbital Power, Inc. and Eclipse Foundation Group. The segment provides comprehensive solutions to customers in the electric power industries.
The Telecommunications segment is made up of Gibson Technical Services, Inc. (“GTS”) (acquired April 13, 2021). GTS is an Atlanta-based telecommunications company providing diversified telecommunications services nationally since 1990 and is the parent of the following companies: IMMCO, Inc., Full Moon Telecom, and Coax Fiber Solutions, LLC.
The Renewables segment consists of Orbital Solar Services based in Raleigh, North Carolina. Orbital Solar Services provides engineering, procurement and construction (“EPC”) services that support the development of renewable energy generation focused on utility-scale solar construction. The Company serves a wide variety of project types, including commercial, substation, solar farms and public utility projects.
The Other category is made up primarily of the Company's corporate activities. This category does not include any operating segments and does not generate revenue.
The following information represents segment activity for the three months ended September 30, 2022:
| (in thousands) | Electric Power | Telecommunications | Renewables | Other | Total | |||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization (1) | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Expenditures for long-lived assets | ||||||||||||||||||||
(1) Depreciation and amortization includes $
The following information represents segment activity for the three months ended September 30, 2021:
| (in thousands) | Electric Power | Telecommunications | Renewables | Other | Total | |||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization (1) | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Expenditures for long-lived assets (2) | ||||||||||||||||||||
(1) Depreciation and amortization includes $
(2) Includes purchases of property, plant and equipment and other intangible assets. The Other category includes expenditures for discontinued operations of $
The following information represents selected balance sheet items by segment as of September 30, 2022:
| (in thousands) | Electric Power | Telecommunications | Renewables | Other | Total | |||||||||||||||
| Segment assets | $ | $ | $ | $ | $ | |||||||||||||||
| Goodwill | ||||||||||||||||||||
| Other intangible assets, net | ||||||||||||||||||||
The following information represents segment activity for the nine months ended September 30, 2022:
| (in thousands) | Electric Power | Telecommunications | Renewables | Other | Total | |||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization (1) | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Expenditures for long-lived assets (2) | ||||||||||||||||||||
(1) Depreciation and amortization includes $
(2) Includes purchases of property, plant and equipment and other intangible assets. The Other category includes expenditures for discontinued operations of $
The following information represents segment activity for the nine months ended September 30, 2021:
| (in thousands) | Electric Power | Telecommunications | Renewables | Other | Total | |||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization (1) | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Expenditures for long-lived assets (2) | ||||||||||||||||||||
(1) Depreciation and amortization includes $
(2) Includes purchases of property, plant and equipment and other intangible assets. The Other category includes expenditures for discontinued operations of $
The following information represents selected balance sheet items by segment as of December 31, 2021:
| (in thousands) | Electric Power | Telecommunications | Renewables | Other | Total | |||||||||||||||
| Segment assets | $ | $ | $ | $ | $ | |||||||||||||||
| Goodwill | ||||||||||||||||||||
| Other intangible assets, net | ||||||||||||||||||||
| 11. | RECENT ACCOUNTING PRONOUNCEMENTS |
In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations to enhance transparency about an entity’s use of supplier finance programs. Under the ASU, the buyer in a supplier finance program is required to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a roll-forward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. An entity should also consider whether the existence of a supplier finance program changes the appropriate presentation of the payables in the program from trade payables to borrowings. The amendments in this update are effective for the Company for fiscal periods beginning after December 15, 2022, including interim periods within those fiscal years, except for the disclosure of roll-forward information, which is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the effect of this new standard, which is not expected to have a material effect on the Company's financial position or results of operations.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security should not be considered in measuring fair value. It also requires the following disclosures for equity securities subject to the contractual sale restrictions: 1) the fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet; 2) the nature and remaining duration of the restriction(s); and 3) the circumstances that could cause a lapse in the restriction(s). ASU 2022-03 is effective for the fiscal years and interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The guidance should be applied prospectively. ASU 2022-03 is not expected to have a material effect on our consolidated financial statements.
On October 28, 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This guidance will require entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. This standard was designed to provide consistent recognition and measurement guidance for revenue contracts with customers. Legacy guidance requires entities to record contract assets and contract liabilities acquired to be recorded at fair value. The amendments will be effective for the Company beginning for fiscal years beginning after December 15, 2022. Early adoption is allowed. If an entity early adopts, the entity would be required to apply the new guidance to all acquisitions made in the year of the early adoption. The Company is still reviewing the standard and as of the reporting date of this filing has not elected to early adopt.
| 12. | FAIR VALUE MEASUREMENTS |
The Company’s fair value hierarchy for our financial assets and liabilities as of September 30, 2022 and December 31, 2021 was as follows:
| (in thousands) | ||||||||||||||||
| September 30, 2022 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Contingent consideration | $ | $ | $ | $ | ||||||||||||
| Front Line Power Construction Seller Financed debt | ||||||||||||||||
| Financial instrument liability - related to Syndicated debt | ||||||||||||||||
| Financial instrument liability - related to Front Line Power Construction seller financed debt | ||||||||||||||||
| Prepaid advance agreement | ||||||||||||||||
| Warrant liabilities | ||||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| December 31, 2021 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Contingent consideration | $ | $ | $ | $ | ||||||||||||
| Front Line Power Construction Seller financed debt | ||||||||||||||||
| Financial instrument liability | ||||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| (in thousands) | Financial Instrument Liability - related to Syndicated debt | |||
| Balance at December 31, 2021 | $ | |||
| Issuance of shares upon exercise and reset of instrument (instrument includes reference price of $0.40 per share at September 30, 2022) | ( | ) | ||
| Fair value adjustments to Financial instrument liability | ||||
| Balance at September 30, 2022 | $ | |||
| (in thousands) | Financial Instrument Liability - related to FLP seller financed debt | |||
| Balance at December 31, 2021 | $ | |||
| Fair value of financial instrument liability at inception | ||||
| Fair value adjustment to Derivative liability | ||||
| Balance at September 30, 2022 | $ | |||
| (in thousands) | Warrant Liability | |||
| Balance at December 31, 2021 | $ | |||
| Fair value of warrant liability at inception | ||||
| Exercise of pre-funded warrants | ( | ) | ||
| Fair value adjustment to warrant liability | ( | ) | ||
| Balance at September 30, 2022 | $ | |||
See note 16 for more information about the Company's prepaid advance agreement. There were no transfers between Level 3 and Level 2 in the three months ended September 30, 2022 as determined at the end of the reporting period.
| 13. | LOSS PER COMMON SHARE |
In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 260 (“FASB ASC 260”), “Earnings per Share,” Basic loss from continuing operations per share, basic income from discontinued operations per share and basic net income (loss) per share that is available to shareholders is computed by dividing the income or loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the respective loss available to common stockholders by the weighted average number of diluted shares outstanding during the period calculated using the treasury stock method. Due to the Company’s loss from continuing operations in the three and nine months ended September 30, 2022 and September 30, 2021, the assumed exercise of stock options, warrants and the unvested restricted stock that would otherwise increase diluted shares using the treasury stock method would have had an antidilutive effect and therefore
| For the Three Months | For the Nine Months | |||||||||||||||
| (in thousands, except share and per share amounts) | Ended September 30, | Ended September 30, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Loss from continuing operations, net of income taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income (loss) from discontinued operations, net of income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted weighted average number of shares outstanding | ||||||||||||||||
| Loss from continuing operations per common share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss from discontinued operations - basic and diluted | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss per common share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 14. | INCOME TAXES |
The Company is subject to taxation in the U.S., as well as various state and foreign jurisdictions. The Company continues to record a full valuation allowance against the Company's U.S. net deferred tax assets and a partial valuation allowance on its Canada deferred tax assets as it is not more likely than not that the Company will realize a benefit from these assets in a future period other than a $
Total net income tax expense of $
Total net income tax benefit of $
| 15. | ACCUMULATED OTHER COMPREHENSIVE LOSS |
The components of accumulated other comprehensive loss are as follows:
| (in thousands) | As of September 30, 2022 | As of December 31, 2021 | ||||||
| Foreign currency translation adjustment | $ | ( | ) | $ | ( | ) | ||
| Accumulated other comprehensive loss | $ | ( | ) | $ | ( | ) | ||
In the nine months ended September 30, 2022, the Company reclassified $
| 16. | NOTES PAYABLE AND LINE OF CREDIT |
Notes payable is summarized as follows:
| (in thousands) | As of September 30, 2022 | As of December 31, 2021 | ||||||
| Syndicated debt (1) | $ | $ | ||||||
| Seller Financed notes payable - Front Line Power Construction, LLC acquisition (2) | ||||||||
| Note Payable - Financing notes (3) | ||||||||
| Seller Financed notes payable - Reach Construction Group, LLC acquisition (4) | ||||||||
| Vehicle and equipment loans (5) | ||||||||
| Non-recourse payable agreements (6) | ||||||||
| Notes payable - Institutional investor (7) | ||||||||
| Prepaid Advance agreement (8) | ||||||||
| Conditional settlement notes payable agreement (9) | ||||||||
| Full Moon and CFS - loans to prior owners (10) | ||||||||
| Subtotal | ||||||||
| Unamortized prepaid financing fees and debt discounts | ( | ) | ( | ) | ||||
| Total notes payable | ||||||||
| Less: notes payable, current | ( | ) | ( | ) | ||||
| Notes payable, less current portion | $ | $ | ||||||
| (1) | On November 17, 2021, the Company entered into a credit agreement and associated documents (the “Credit Agreement”) with Alter Domus (US), LLC (“Alter Domus”), as administrative agent and collateral agent and various lenders (the “Lenders”) in order to enable the Company to finance the acquisition of Front Line Power Construction, LLC. The Lenders made a Term Loan to Front Line in the initial principal amount of $ |
|
|
| (2) | On November 17, 2021, the Company entered into two unsecured promissory notes, one with Kurt A Johnson, Jr, for $ |
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| |
| (3) | The Company has a note payable to First Insurance Funding executed in 2022 for the purposes of financing a portion of the Company's insurance coverage. The note has an annual percentage rate of |
|
| |
| (4) | Includes two seller-financed notes payable, one for $ |
|
| |
| (5) | Includes vehicle and equipment loans with interest rates ranging from |
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| |
| (6) | The Company entered into a non-recourse agreement with C6 which was originated in November 2021 with a face amount of $
In April, 2022, the Company took out three non-recourse agreements with C6 Capital for the sale of future revenues in the combined amount of $ |
| (7) | On March 23, 2021, the Company completed a note payable agreement with an institutional investor with a face amount of $
On May 11, 2021, the Company completed a note payable agreement with the institutional investor with a face amount of $
On December 20, 2021, the Company completed a note payable agreement with the institutional investor with a face amount of $
On June 9, 2022, the Company completed a note payable agreement with the institutional investor with a face amount of $
On August 2, 2022, the Company completed a note payable agreement with the institutional investor with a face amount of $
On September 29, 2022, the Company completed a note payable agreement with the institutional investor with a face amount of $ |
| (8) | On August 18, 2022, the Company entered into a Prepaid Advance Agreement (the “PPA”) with YA II PN, Ltd., a Cayman Islands exempt limited partnership (“Yorkville”). In accordance with the terms of the PPA, the Company may request advances of up to $ |
| (9) | In October 2020, the Company entered into a conditional settlement agreement with a subcontractor to make payments of $ |
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| (10) | Represents Coax Fiber Solutions and Full Moon Telecom, LLC opening balance sheet loans to prior Coax Fiber Solutions and Full Moon Telecom, LLC owners. |
Line of Credit
On August 19, 2021, the Company's GTS subsidiary entered into a $
Debt Modifications
In the first quarter of 2022, the Company entered into a loan modification on the Front Line Seller Financed notes payable. In order to extend the maturity date of these loans from the original maturity date of May 16, 2022, the Company agreed to reduce the restriction period on the stock granted to one of the sellers from two years to one and guarantee a $
| 17. | CONCENTRATIONS |
The Company’s major product lines in 2021 and 2022 were electric power transmission and distribution maintenance and service, utility-scale solar construction projects and telecommunications maintenance and service.
The Company had the following revenue concentrations by customer greater than 10% of consolidated revenue:
| For the Three Months Ended September 30, | ||||||||
| Customer | 2022 | 2021 | ||||||
| Customer 1 | % | |||||||
| Customer 2 | % | |||||||
| Customer 3 | | % | ||||||
| Customer 4 | % | % | ||||||
| Customer 5 | % | |||||||
| Total concentrations | % | % | ||||||
| For the Nine Months Ended September 30, | ||||||||
| Customer | 2022 | 2021 | ||||||
| Customer 1 | % | |||||||
| Customer 2 | % | |||||||
| Customer 3 | % | |||||||
| Customer 4 | % | % | ||||||
| Total concentrations | % | % | ||||||
The Company did not have geographic revenue concentrations outside the U.S.A. greater than 10% of consolidated revenue.
The Company had the following gross trade accounts receivable concentrations by customer greater than 10% of gross trade accounts receivable:
| As of September 30, | As of December 31, | |||||||
| Customer | 2022 | 2021 | ||||||
| Customer 2 | % | % | ||||||
| Customer 4 | | % | ||||||
| Customer 5 | % | |||||||
| Customer 3 | % | |||||||
| Total concentrations | % | % | ||||||
The Company did not have geographic concentrations outside of the U.S.A. greater than 10% of gross trade accounts receivable.
For the three months ended September 30, 2022, the Company had supplier concentrations of approximately
| 18. | ACQUISITIONS |
Acquisition of Coax Fiber Solutions
Effective March 7, 2022, GTS, an OIG subsidiary included in the Telecommunications segment, entered into a share purchase agreement to acquire Coax Fiber Solutions (CFS), a Georgia based GDOT Certified contractor specializing in Aerial Installation, directional drilling, trenching, plowing, and missile crews for telecommunications, power, gas, water, CCTV, ATMS, and traffic signal cable installation. GTS paid $
Acquisition of IMMCO
Effective July 28, 2021, the Company entered into a share purchase agreement to acquire IMMCO, Inc., an Atlanta-based telecommunications company providing enterprise solutions to the cable and telecommunications industries since 1992. The acquisition was effectuated pursuant to the Share Purchase Agreement (the “Agreement”), with the shareholders of IMMCO (the "Seller"). Orbital Infrastructure Group paid $
The purchase consideration was as follows:
(in thousands)
| Purchase Consideration | ||||
| Cash payment | $ | |||
| Fair value of common stock issued to sellers | ||||
| Total | $ |
The acquisition was accounted for using the purchase method of accounting and the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated preliminary fair values at the date of acquisition.
(in thousands)
| Purchase price | $ | |||
| Cash and cash equivalents | $ | |||
| Trade accounts receivable, net | ||||
| Contract assets | ||||
| Prepaid expenses and other current assets | ||||
| Property and equipment | ||||
| Intangible, customer relationships | ||||
| Intangible, trade name | ||||
| Intangible, technology know how | ||||
| Other long-term assets | ||||
| Deferred tax liability | ( | ) | ||
| Liabilities assumed | ( | ) | ||
| Net assets acquired | ||||
| Goodwill | ||||
| Purchase price allocation | $ |
| (in thousands) | ||||
| Revenue from July 28, 2021 acquisition date to September 30, 2021 | $ | |||
| Income from continuing operations, net of income taxes from July 28, 2021 acquisition date to September 30, 2021 | * |
* The deferred tax liability recorded at acquisition was offset against the Company's valuation allowance and recorded as a tax benefit in the nine months ended September 30, 2021 within the income tax benefit line of the Condensed Consolidated Statement of Operations and is included in the total.
Acquisition of Gibson Technical Services
Effective April 13, 2021, the Company entered into a share purchase agreement to acquire Gibson Technical Services, an Atlanta-based telecommunications company providing diversified telecommunications services nationally since 1990. The acquisition was effectuated pursuant to the Share Purchase Agreement (the “Agreement”), dated as of April 13, 2021, between Orbital Infrastructure Group and the shareholders of GTS (the "Seller"). Orbital Infrastructure Group paid $
The purchase consideration was as follows:
| (in thousands) | ||||
| Purchase Consideration | ||||
| Cash payment | $ | |||
| Fair value of common stock issued to sellers | ||||
| Total | $ |
The acquisition was accounted for using the purchase method of accounting and the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated preliminary fair values at the date of acquisition.
| Purchase price | $ | |||
| Cash and cash equivalents | $ | |||
| Trade accounts receivable | ||||
| Contract assets | ||||
| Contingent receivable | ||||
| Prepaid expenses and other current assets | ||||
| Property and equipment | ||||
| Right of use assets - Operating leases | ||||
| Intangible, customer relationships | ||||
| Intangible, trade name | ||||
| Intangible, non-compete agreements | ||||
| Other long-term assets | ||||
| Deferred tax liability | ( | ) | ||
| Liabilities assumed | ( | ) | ||
| Net assets acquired | ||||
| Goodwill | ||||
| Purchase price allocation | $ |
| (in thousands) | ||||
| Revenue from April 13, 2021 acquisition date to September 30, 2021 | $ | |||
| Income from continuing operations, net of income taxes from April 13, 2021 acquisition date to September 30, 2021 | * |
* The deferred tax liability recorded at acquisition was offset against the Company's valuation allowance and recorded as a tax benefit in the nine months ended September 30, 2021 within the income tax benefit line of the Condensed Consolidated Statement of Operations and is included in the total.
The table below summarizes the unaudited condensed pro forma information of the results of operations of Orbital Infrastructure Group, Inc. for the three and nine months ended September 30, 2021 as though the acquisitions of GTS and IMMCO had been completed as of January 1, 2020.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30 | |||||||
| 2021 | 2021 | |||||||
| Gross revenue | $ | $ | ||||||
| Loss from continuing operations, net of income taxes | $ | ( | ) | $ | ( | ) | ||
| 19. | COMMITMENTS AND CONTINGENCIES |
Off-Balance Sheet Arrangements
Performance and Payment Bonds and Parent Guarantees
In the ordinary course of business, Orbital Infrastructure Group and its subsidiaries are required by certain customers to provide performance and payment bonds for contractual commitments related to their projects. These bonds provide a guarantee to the customer that the Company will perform under the terms of a contract and that the Company will pay its subcontractors and vendors. If the Company fails to perform under a contract or to pay its subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. The Company must reimburse the surety for expenses or outlays it incurs. Certain bonds are for open-ended contracts with multiple work orders so the value may increase as the work progresses and more work orders are started. The bonds will remain in place as the Company completes projects and resolves any disputed matters with the customers, vendors and subcontractors related to the bonded projects. As of September 30, 2022, the total amount of the outstanding performance and payment bonds was approximately $
Additionally, from time to time, we guarantee certain obligations and liabilities of our subsidiaries that may arise in connection with, among other things, contracts with customers, equipment lease obligations, and contractor licenses. These guarantees may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. For example, with respect to customer contracts, a guarantee may cover a variety of obligations and liabilities arising during the ordinary course of the subsidiary’s business or operations, including, among other things, warranty and breach of contract claims, third-party and environmental liabilities arising from the subsidiary’s work and for which it is responsible, liquidated damages, or indemnity claims.
Contingent Liabilities
Orbital Infrastructure Group, Inc. is occasionally party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, negligence or gross negligence and/or property damages, wage and hour and other employment-related damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief.
Regarding all lawsuits, claims and proceedings, Orbital Infrastructure Group, Inc. records a reserve when it is probable that a liability has been incurred and the loss can be reasonably estimated. In addition, Orbital Infrastructure Group, Inc. discloses matters for which management believes a material loss is at least reasonably possible. None of these proceedings are expected to have a material adverse effect on Orbital Infrastructure Group, Inc.’s consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.
Financial Instrument Liabilities
Seller Financed debt - financial instrument
To the extent that the fair value of the shares of common stock previously issued to Tidal Power are less than $
Syndicated debt - subscription agreement financial instrument
To the extent that the Company issues shares of its common stock at a price less than the current reference price, the Company is obligated to issue additional shares to the syndicated lenders based on formulas included in their subscription agreements. When additional shares are issued to the lenders the reference price is reset. The reference price was $
| 20. | SUBSEQUENT EVENTS |
Orbital Solar Services potential liquidated damages.
On October 23, 2022, Orbital Solar Services had a project completion milestone due that was not met. Contractually, liquidated damages may be incurred at $
New home office facility lease
On October 6, 2022, the Company signed a lease for its new home office in Houston, Texas. The lease is for
Cured default on syndicated debt
In November 2022, The Company resolved a dispute with the Syndicated lenders whereby the Syndicated lenders deemed the Company to be in default of its credit agreement due to the Company using proceeds from Front Line Power's operations to pay down $
Extension of prepaid advance maturity date
The maturity date for the Company's prepaid advance, which had a fair value of $
Shares issued to lenders of the Company's syndicated debt as part of the Company's subscription agreement with those lenders
On November 7, 2022, the Company issued the lenders of the Company's syndicated debt an additional
| Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Important Note about Forward-Looking Statements
The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of September 30, 2022 and notes thereto included in this document and the audited consolidated financial statements in the Company’s 10-K filing for the period ended December 31, 2021 and the notes thereto. In addition to historical information, the following discussion and other parts of this Form 10-Q contain forward-looking information that involves risks and uncertainties. The Company’s actual results could differ materially from those anticipated by such forward-looking information due to factors discussed elsewhere in this Form 10-Q.
The statements that are not historical constitute “forward-looking statements.” Said forward-looking statements involve risks and uncertainties that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements, express or implied by such forward-looking statements. These forward-looking statements are identified by their use of such terms and phrases as "expects,” “intends,” “goals,” “estimates,” “projects,” “plans,” “anticipates,” “should,” “future,” “believes,” and “scheduled.”
The variables which may cause differences include, but are not limited to, the following: general economic and business conditions; changes in regulatory environment; extraordinary external events such as the pandemic health event resulting from COVID-19; competition; success of operating initiatives; operating costs; advertising and promotional efforts; the existence or absence of adverse publicity; changes in business strategy or development plans; the ability to retain management; availability, terms and deployment of capital; business abilities and judgment of personnel; availability of qualified personnel; labor and employment benefit costs; availability and costs of raw materials and supplies; and changes in, or failure to comply with various government regulations. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate; therefore, there can be no assurance that the forward-looking statements included in this Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any person that the objectives and expectations of the Company will be achieved.
Orbital Infrastructure Group is a diversified infrastructure services company serving customers in the electric power, telecommunications, and renewable markets. The Company is dedicated to maximizing shareholder value through greenfield development and the acquisition of, and investment in successful, entrepreneurial led companies to profitably grow revenues by providing end-to-end solutions to customers, primarily in the renewable, electric power transmission and distribution, and telecommunications infrastructure markets. The Company is organized in three segments. The Electric Power segment consists of Front Line Power Construction, LLC based in Houston, Texas, Orbital Power, Inc. based in Dallas, Texas, and Eclipse Foundation Group based in Gonzales, Louisiana. The segment provides comprehensive infrastructure solutions to customers in the electric power industry. Services performed by Front Line Power and Orbital Power, Inc. generally include but are not limited to the engineering, design, installation, upgrade, repair and maintenance of electric power transmission and distribution infrastructure and substation facilities as well as emergency restoration services. Eclipse Foundation Group, which began operations in January 2021, is a drilled shaft foundation construction company that specializes in providing services to the electric transmission and substation, industrial, telecommunication and disaster restoration market sectors, with expertise performing services in water, marsh and rock terrains. In the third quarter of 2022, in order to streamline operations, the Eclipse business was integrated into Front Line Power Construction, LLC, and ceased to be a separate business unit.
The Telecommunications segment consists of Gibson Technical Services (GTS) along with its subsidiaries IMMCO, Inc. based in Atlanta, Georgia and Full Moon Telecom, LLC based in Florida. GTS provides engineering, design, construction, and maintenance services to the broadband and wireless telecommunication industries and was acquired by the Company effective April 13, 2021. IMMCO, Inc. provides enterprise solutions to the cable and telecommunication industries and was acquired by the Company effective July 28, 2021. Full Moon Telecom, LLC provides telecommunication services including an extensive array of wireless service capabilities and was acquired by the Company effective October 22, 2021. Coax Fiber Solutions was acquired as of March 7, 2022, and is a Georgia based GDOT Certified contractor specializing in Aerial Installation, directional drilling, trenching, plowing, and missile crews for telecommunications, power, gas, water, CCTV, ATMS, and traffic signal cable installation.
Orbital Solar Services, LLC (OSS), based in Raleigh, North Carolina, makes up the Renewables segment. OSS provides engineering, procurement and construction (“EPC”) services that support the development of renewable energy generation focused on utility-scale solar construction.
The Company has experienced rapid growth through organic growth and acquisitions as the Company benefits from its 2021 investments and acquisitions and as the economy continues to emerge from the COVID-19 induced slowdown. Third quarter 2022 revenue was over four times greater than the Company's total revenue from the third quarter of 2021. Improved revenues and income were a result of the inclusion of operations from the November acquisition of Front Line Power Construction in the Electric Power segment and continued growth in the Telecommunications segment acquired in the three months ended June 30, 2021. The Company continues to pursue both organic growth and growth through acquisitions. The Company's Telecommunications segment made an additional "tuck-in" acquisition in the first quarter of 2022 for cash and stock consideration of approximately $0.9 million.
During the nine-month period ended September 30, 2022, the Company began to see tangible benefits for all segments from the investments the Company made in 2021 through improved revenue. These benefits were offset by sub-contractor labor and material cost over-runs at OSS's Black Bear project that is projected to be completed by the end of the year. The Company is in the midst of a reset of its solar business. The solar reset should not materially change the revenue mix in the near term. Given some of the recent legislation and executive order, solar projects that had been delayed are now likely to be opportunities in 2023 and beyond. As the Company moves away from providing engineering, procurement, and construction ("EPC") services to being a specialized contractor providing skilled resources to EPC companies, the Company will benefit from a reduced risk profile that comes with being an EPC, and margins will be enhanced as we will not share profits or losses with our joint venture partners as we are now required to do.
The Company's results were affected negatively in the first nine months of 2022 by the $29.4 million loss on extinguishment of debt primarily related to the Company's seller financed debt on the November 2021 Front Line Construction acquisition and stock-based payments made against its investor held debt for which the stock was issued at a discount to the stock's fair value.
In the third quarter of 2021, the Company incurred ramp-up costs in the Electric Power segment that put downward pressure on margins in the third quarter of 2021.The Company also incurred professional fees related to mergers and acquisitions as the Company finalized the acquisition of GTS. The three-month period ended September 30, 2021, for both segments were also negatively affected by generally lower economic activity due to the COVID-19 pandemic that caused economic slowdowns throughout the world.
For the three and nine months ended September 30, 2022, Orbital Infrastructure Group, Inc. had a consolidated loss from continuing operations of $141.6 million and $208.3 million, respectively, compared to a consolidated loss from continuing operations in the three and nine months ended September 30, 2021, of $9.5 million and $34.1 million, respectively.
During the nine months ended September 30, 2022, Orbital Infrastructure Group, Inc. had a consolidated net loss of $210.8 million compared to a consolidated net loss in the nine months ended September 30, 2021, of $36.3 million. The greater net loss for the nine months ended September 30, 2022, was primarily the result of impairments on goodwill, intangibles, and financing leased assets, the loss on extinguishment of debt related to the loan modification of the seller financed debt, and increased interest expense related to acquisitions financed by debt in the second half of 2021.
Revenues from continuing operations increased for the nine months ended September 30, 2022, due to the continued ramp-up of the Electric Power and Renewables segments along with the addition of the Telecommunications segment which was assembled via acquisitions starting in the second quarter of 2021 and continuing into 2022.
Continuing Results of Operations
The following tables set forth, for the period indicated, certain financial information regarding revenue and operating results by segment.
For the Three Months Ended September 30, 2022:
| (dollars in thousands) |
Electric Power |
Percent of Segment Revenues |
Telecommunications |
Percent of Segment Revenues |
Renewables |
Percent of Segment Revenues |
Other |
Percent of Segment Revenues |
Total |
Percent of Total Revenues |
||||||||||||||||||||||||||||||
| $ |
% |
$ |
% |
$ |
% |
$ |
% |
$ |
% |
|||||||||||||||||||||||||||||||
| Revenues |
$ | 36,732 | 100.0 | % | $ | 24,064 | 100.0 | % | $ | 39,026 | 100.0 | % | $ | — | — | % | $ | 99,822 | 100.0 | % | ||||||||||||||||||||
| Income (loss) from operations |
$ | (76,606 | ) | (208.6 | )% | $ | (23,213 | ) | (96.5 | )% | $ | (26,535 | ) | (68.0 | )% | $ | (2,356 | ) | — | % | $ | (128,710 | ) | (128.9 | )% | |||||||||||||||
| (dollars in thousands) |
Electric Power |
Percent of Segment Revenues |
Telecommunications |
Percent of Segment Revenues |
Renewables |
Percent of Segment Revenues |
Other |
Percent of Segment Revenues |
Total |
Percent of Total Revenues |
||||||||||||||||||||||||||||||
| $ |
% |
$ |
% |
$ |
% |
$ |
% |
$ |
% |
|||||||||||||||||||||||||||||||
| Revenues |
$ | 12,200 | 100.0 | % | $ | 8,742 | 100.0 | % | $ | 3,880 | 100.0 | % | $ | — | — | % | $ | 24,822 | 100.0 | % | ||||||||||||||||||||
| Loss from operations |
$ | (2,445 | ) | (20.0 | )% | $ | (436 | ) | (5.0 | )% | $ | (3,605 | ) | (92.9 | )% | $ | (4,364 | ) | — | % | $ | (10,850 | ) | (43.7 | )% | |||||||||||||||
For the Nine Months Ended September 30, 2022:
| (dollars in thousands) |
Electric Power |
Percent of Segment Revenues |
Telecommunications |
Percent of Segment Revenues |
Renewables |
Percent of Segment Revenues |
Other |
Percent of Segment Revenues |
Total |
Percent of Total Revenues |
||||||||||||||||||||||||||||||
| $ |
% |
$ |
% |
$ |
% |
$ |
% |
$ |
% |
|||||||||||||||||||||||||||||||
| Revenues |
$ | 117,695 | 100.0 | % | $ | 60,524 | 100.0 | % | $ | 85,770 | 100.0 | % | $ | — | — | % | $ | 263,989 | 100.0 | % | ||||||||||||||||||||
| Income (loss) from operations |
$ | (77,621 | ) | (66.0 | )% | $ | (21,662 | ) | (35.8 | )% | $ | (32,280 | ) | (37.6 | )% | $ | (6,642 | ) | — | % | $ | (138,205 | ) | (52.4 | )% | |||||||||||||||
For the Nine Months Ended September 30, 2021:
| (dollars in thousands) |
Electric Power |
Percent of Segment Revenues |
Telecommunications | Percent of Segment Revenues |
Renewables |
Percent of Segment Revenues |
Other |
Percent of Segment Revenues |
Total |
Percent of Total Revenues |
||||||||||||||||||||||||||||||
| $ |
% |
$ |
% |
$ |
% |
$ |
% |
$ |
% |
|||||||||||||||||||||||||||||||
| Revenues |
$ | 20,297 | 100.0 | % | $ | 14,816 | 100.0 | % | $ | 6,789 | 100.0 | % | $ | — | — | % | $ | 41,902 | 100.0 | % | ||||||||||||||||||||
| Loss from operations |
$ | (11,461 | ) | (56.5 | )% | $ | (1,185 | ) | (8.0 | )% | $ | (17,178 | ) | (253.0 | )% | $ | (14,243 | ) | — | % | $ | (44,067 | ) | (105.2 | )% | |||||||||||||||
Revenue
The revenues for the three and nine months ended September 30, 2022, increased compared to the 2021 comparable periods primarily due to the additions of the Telecommunications segment following the acquisitions of GTS in Q2 2021, IMMCO in Q3 2021, Full Moon in Q4 2021 and Coax Fiber Solutions, LLC in Q1 2022 along with the acquisition of Front Line Power Construction, LLC, included in the Company's Electric Power segment, added in Q4 2021. In addition, Orbital Power Inc. in the Electric Power segment has continued to ramp up operations in 2022. Renewables had significantly higher revenues in the three months ended September 30, 2022, on the strength of several large projects compared to the three months ended September 30, 2021, which was affected by supply chain issues and a general slow-down caused by the COVID-19 epidemic.
The Electric Power Segment held backlogs of customer orders of approximately $226.8 million as of September 30, 2022, and $207.7 million at December 31, 2021. The increase in backlog is generally due to timing of master service agreement renewals. The Telecommunications segment held backlogs of customer orders of approximately $209.2 million as of September 30, 2022, compared to a backlog of $194.5 million at December 31, 2021. Increases to the backlog are due to the continuous growth of Gibson Technical Services. The Renewables segment had a backlog of $36.3 million as of September 30, 2022 compared to $121.4 million as of December 31, 2021 which is due to further work being completed and revenue being recognized in the quarter on projects that make up this backlog. Of the September 30, 2022, backlog totals, the amounts expected to be recognized in the twelve months following Q3 2022 are approximately $265.9 million. The amounts expected to be recognized in the twelve months following Q3 2022 consist of $150.1 million from the Electric Power segment, $79.5 million from the Telecommunications segment and $36.3 million from the Renewables segment.
Cost of revenues
For the three months ended September 30, 2022, the cost of revenues as a percentage of revenue increased to 105.9% from 90.7% from the prior-year period primarily due to the significant cost overruns at the Black Bear solar project in the Renewables segment in the quarter. For the nine months ended September 30, 2022, the cost of revenues as a percentage of revenue decreased to 94.1% from 107.4% from the prior-year period. This decrease was primarily in the Electric Power segment and was attributable to ramp-up of revenues in the segment both organically and the addition of Front Line Power Construction and was partially offset by lower margins in the Renewables segment due to cost overruns in the Black Bear solar project. The Black Bear project had negative gross margins of $18.8 million and $22.2 million for the three and nine months ended September 30, 2022. At September 30, 2022, the Company had a loss provision of $3.8 million for estimated future losses on the Black Bear contract. Margin percentages will vary based upon the mix of projects including emergency response services, new crew onboarding costs, and the competitive markets in which the Company competes.
The three and nine months ended September 30, 2021 were affected by start-up costs at the Company's Orbital Power Services group, lower margin projects during the period for Orbital Solar Services and was also affected negatively by the COVID-19 pandemic and the resulting world-wide economic slowdown. Ramp-up costs included onboarding personnel, equipment and supplies in advance of projected work in order to obtain the necessary resources in a competitive market as the Company prepared for forward demand expectations. Additionally, adverse weather negatively impacted several Electric Power fixed price jobs in the first nine months of 2021.
The Company expects continued improvement in margins during the remainder of 2022 as the Electric Power segment continues to gain efficiencies and increase revenues, and the Telecommunications segment sees continued synergistic benefits from the acquisitions of GTS, IMMCO, Full Moon, and Coax Fiber Solutions.
Selling, General and Administrative Expenses
Selling, General and Administrative (SG&A) expenses include such items as wages, commissions, consulting, general office expenses, business promotion expenses and costs of being a public company, including legal and accounting fees, insurance and investor relations. SG&A expenses are generally associated with the ongoing activities to reach new customers, promote new product and service lines including for the Electric Power segment, Renewables segment, and Telecommunications segments.
During the three months ended September 30, 2022, SG&A increased $1.0 million compared to the three months ended September 30, 2021, primarily due to organic growth and the Company's 2021 and 2022 acquisitions. In the nine months ended September 30, 2022 SG&A decreased $3.7 million compared to the prior-year comparative periods. The decrease in SG&A for the nine month period was primarily due to decreased SG&A costs in the Renewables segment due to the $5.2 million restricted stock forfeiture related to a Renewables' Executive termination in Q1 2022 and higher stock-based compensation in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2022 due to the restricted stock vesting expense recorded in 2021 on the restricted stock that was subsequently forfeited in the first quarter of 2022. Also contributing to the decreased SG&A was lower executive bonuses in Q1 2022 and a $0.3 million positive cash settled SARS mark-to-market fair value adjustment in 2022 compared to a $2.5 million mark-to-market expense in the nine months ended September 30, 2021. These decreases were partially offset by increases in SG&A in the Electric Power and Telecommunications segments primarily due to organic growth and the Company's 2021 and 2022 acquisitions.
Impairments of goodwill and intangible assets
The Company recorded $100.3 million of impairments of goodwill and intangible assets in the three and nine months ended September 30, 2022 due to an additional 25-percent drop in the Company's stock price between June 30, 2022 and September 30, 2022, that caused an overall further decrease in the Company's market capitalization. Additional triggering events included the significant loss in the Renewables segment in the third quarter of 2022, interest rate increases and limitations on accessing capital, which raised substantial doubt regarding the Company’s ability to continue as a going concern. See Note 1 for more information on goodwill and goodwill impairments.
Restructuring Costs
In September 2022, the Company fully impaired its finance lease equipment related to the Eclipse Foundation Group in the Electric Power segment, which was integrated by Front Line Power. These pieces of equipment are drilling specific and at this time, the Company does not plan to use the equipment for the remaining term of the leases. As these leases are non-cancelable and do not include a sub-leasing option, the full finance lease assets related to Eclipse have been removed from the balance sheet and an equal impairment has been recognized in the amount of $4.5 million. Future payments related to these leases will be approximately $5.2 million paid through June 2026.
Depreciation and Amortization
(dollars in thousands)
| For the Three Months Ended |
||||||||||||||||
| Depreciation and amortization expense by Segment |
September 30, |
|||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Electric Power |
$ | 6,975 | $ | 1,095 | $ | 5,880 | 537.0 | % | ||||||||
| Telecommunications |
1,315 | 774 | 541 | 69.9 | % | |||||||||||
| Renewables |
608 | 614 | (6 | ) | (1.0 | )% | ||||||||||
| Other |
16 | 416 | (400 | ) | (96.2 | )% | ||||||||||
| Total depreciation and amortization |
$ | 8,914 | $ | 2,899 | $ | 6,015 | 207.5 | % | ||||||||
| For the Nine Months Ended |
||||||||||||||||
| Depreciation and amortization by Segment |
September 30, |
|||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Electric Power |
$ | 21,445 | $ | 1,944 | $ | 19,501 | 1003.1 | % | ||||||||
| Telecommunications |
3,582 | 1,389 | 2,193 | 157.9 | % | |||||||||||
| Renewables |
1,825 | 2,319 | (494 | ) | (21.3 | )% | ||||||||||
| Other |
47 | 1,281 | (1,234 | ) | (96.3 | )% | ||||||||||
| Total depreciation and amortization |
$ | 26,899 | $ | 6,933 | $ | 19,966 | 288.0 | % | ||||||||
Depreciation and amortization expenses are associated with depreciation on leasehold improvements, furniture, equipment, vehicles, and amortization of intangible assets over the estimated useful lives of the related assets.
Depreciation and amortization expense in the three and nine months ended September 30, 2022, were up compared to the three and nine months ended September 30, 2021, primarily due to additional amortization in the Electric Power and Telecommunication segments from acquisition intangibles that were acquired in the second, third and fourth quarter of 2021 and depreciation of equipment used by Orbital Power Services which had been ramping up their capital expenditures as more crews were added.
Gain (loss) on Extinguishment of debt
Loss on extinguishment of debt in the three and nine months ended September 30, 2022, was $1.1 million and $29.4 million, respectively. The loss included $26.2 million related to loan modifications on the Company's seller financed debt with the sellers of Front Line Power Construction recorded in the first two quarters of the year and approximately $1.1 million and 2.7 million loss on extinguishment in the three and nine months ended September 30, 2022, related to the payment of certain loans with stock-based payments for which the stock was issued at a discount to the stock's fair value. The loss on extinguishment on the seller financed debt was primarily related to financial instruments included in the first quarter 2022 loan modification. The loss on extinguishment also included $0.5 million from the paydown of two non-recourse agreements with C6 in the second quarter of 2022.
Gain on extinguishment of debt in the three and nine months ended September 30, 2021 of $0.7 million and $1.6 million was due to the forgiveness by the U.S. government of certain payroll protection loans in the three months ended September 30, 2021, partially offset by the loss on the extinguishment of debt due to the amendment to remove the convertible equity feature of its convertible debt and the earlier paydown of two non-recourse agreements with C6 during the nine months ended September 30, 2021.
Loss on financial instruments
Loss on financial instruments Include mark to market adjustment on financial instrument related to Syndicated debt in the amount of $4.4 million, $13.3 million related to the financial instrument embedded in the Front Line seller notes and $0.2 million related to the Company's prepaid advance agreement. See Note 12 for more information on these financial instruments.
Other Income (Expense), net
(dollars in thousands)
| For the Three Months Ended |
||||||||||||||||
| Other Income (Expense), net |
September 30, |
|||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Foreign exchange gain (loss) |
$ | 34 | $ | (380 | ) | $ | 414 | (108.9 | )% | |||||||
| Interest income |
20 | 82 | (62 | ) | (75.6 | )% | ||||||||||
| Rental income |
129 | 129 | — | 0.0 | % | |||||||||||
| Liquidated damages on debt |
(1,194 | ) | — | (1,194 | ) | 100.0 | % | |||||||||
| Other, net |
(117 | ) | (34 | ) | (83 | ) | 244.1 | % | ||||||||
| Total Other income (expense) |
$ | (1,128 | ) | $ | (203 | ) | $ | (925 | ) | 455.7 | % | |||||
| For the Nine Months Ended |
||||||||||||||||
| Other Income (Expense), net |
September 30, |
|||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Foreign exchange loss |
$ | (7 | ) | $ | (241 | ) | $ | 234 | (97.1 | )% | ||||||
| Interest income |
118 | 245 | (127 | ) | (51.8 | )% | ||||||||||
| Rental income |
488 | 372 | 116 | 31.2 | % | |||||||||||
| Liquidated damages on debt |
(2,271 | ) | — | (2,271 | ) | 100.0 | % | |||||||||
| Other, net |
(162 | ) | (6 | ) | (156 | ) | 2600.0 | % | ||||||||
| Total Other income (expense) |
$ | (1,834 | ) | $ | 370 | $ | (2,204 | ) | (595.7 | )% | ||||||
Other income (expense) changes contributing to increased expenses were liquidated damages incurred on the Company's investor held debt and less favorable foreign currency affects in 2022 compared to 2021. Losses were offset by greater rental income in the year-to-date period.
Interest Expense
For the three and nine months ended September 30, 2022, the Company incurred interest expense of $9.7 million and $27.6 million, respectively, compared to interest for the three and nine months ended September 30, 2021, of $1.3 million and $3.1 million, respectively. The increase in interest expense in 2022 is related to the increase in notes payable outstanding in the three and nine months ended September 30, 2022, compared to the three and nine months ended September 30, 2021, primarily related to the Front Line Power Construction acquisition. Also contributing to the increase is the increase in the variable rate on the Company's $104.5 million Syndicated debt that increased from 13.50% at inception to 15.45% at September 30, 2022.
Income Tax Expense
The Company is subject to taxation in the U.S., various state and foreign jurisdictions. The Company continues to record a full valuation allowance against the Company's U.S. net deferred tax assets and partial valuation allowance against the Company’s Canada net deferred tax assets, as it is not more likely than not that the Company will realize a benefit from these assets in a future period.
For additional analysis, see Note 14, "Income Taxes," of the condensed consolidated financial statements in Part I - Item I, "Financial Statements."
Liquidity and Capital Resources
Company Conditions and Sources of Liquidity
The Company has experienced net losses, cash outflows from cash used in operating activities and a decline in share value over the past years. As of and for the nine months ended September 30, 2022, the Company had an accumulated deficit of $421.4 million, loss from continuing operations of $208.3 million, and net cash used in operating activities of $13.4 million. Further, as of September 30, 2022, the Company had a working capital deficit of $118.7 million, including current maturities of debt, and cash and cash equivalents of $28.0 million available for working capital needs and planned capital asset expenditures. As a result of the foregoing, the Company does not have sufficient liquidity and capital resources to meet its obligations and fund its operations for the twelve months following the issuance of these financial statements. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern.
The Company has plans to access additional capital to meet its obligations for the twelve months from the date these financial statements are available to be issued. Historically, the Company has raised additional equity and debt financing to fund its expansion; refer to Note 16 — Notes Payable and Line of Credit. The Company has also funded some of its capital expenditures through long-term financing with lenders and other investors as also described in further detail in Note 16 — Notes Payable and Line of Credit. Our ability to raise the additional capital is dependent on a number of factors, including, but not limited to, the market demand for our common stock, which itself is subject to a number of business risks and uncertainties, our creditworthiness and the uncertainty that we would be able to raise such additional capital at a price that is favorable to us. As of September 30, 2022, the Company has an effective S-3 shelf registration statement for the issuance of various types of securities, including common stock, preferred stock, debt securities and/or warrants in the aggregate of up to $68.8 million. In addition, although no formal agreements exist, the company has solicited interest from various lenders to potentially raise additional term debt to restructure or refinance its existing notes.
The Company plans to meet its obligations as they become due over the next twelve months by raising additional capital through equity and debt financing sources and forecasted positive cash flows generated from operations. There can be no assurance that the Company will succeed in executing these plans. If unsuccessful, the Company will not have sufficient liquidity and capital resources to repay its indebtedness when it matures, or otherwise meet its cash requirements over the next twelve months, as noted above.
General
As of September 30, 2022, the Company held cash and cash equivalents of $28.0 million and restricted cash of $0.6 million. Operations, investments, and equipment have been funded through cash on hand, the issuance of common stock authorized by its July 2020 and February 2021 S-3 filings, seller financing, and the issuance of debt and financing through the sale of future revenues. The Company filed an S-3 in February of 2021 which became effective in April 2021 for the issuance of additional stock or public debt. In April 2022, the Company issued 9,000,000 shares of common stock and pre-funded warrants to purchase up to 7,153,847 shares of Common Stock for a total raise of $21.0 million before expenses. In August of 2021, the Company opened a $4.0 million dollar line of credit to support additional funding. Major uses of cash in the first nine months of 2022 included the purchases of property and equipment, debt payments and changes in working capital. The Company continues to work to improve its short-term liquidity through management of its working capital. Long-term liquidity is expected to benefit from revenue growth and earnings through its existing operations. Overall volume growth in the Company's businesses both organically and through acquisitions are expected to benefit cash flows as well.
Cash Used in Operations
Cash used in operations of $13.4 million was a $23.5 million decrease in cash used compared to the nine-month period in 2021.
The decrease in uses of cash in the first nine months of 2022 are primarily related to higher merger and acquisition costs in the first quarter of 2021 as compared to 2022 along with company growth in 2022. Due to the large increase in revenue and associated costs both through acquisitions and organic growth, the Company was better able to cover it's fixed costs, but increased interest costs partially offset the benefits of much greater sales. Also, with the growth of the company's revenue comes increased accounts receivables and accounts payable, which outside of timing, generally have offsetting cash flow effects. In the short-term, rapid growth can have a detrimental effect on cash flows as sales on account with positive gross margins waiting to be collected exceed accounts payable not yet paid. As the Company's growth begins to moderate, overall cash used in operations will continue to improve through revenue growth associated with new customers and larger projects. The change in cash used in operating activities since December 31, 2021, exclusive of net loss, is primarily the result of the following line items: Timing of cash payments on accounts payable and accrued liabilities was a combined $36.9 million increase in cash provided by operating activities related to larger projects at Orbital Solar Services. Changes in cost in excess of billing and accounts receivable from December 31, 2021, was a combined $14.5 million use of cash for the period and reflects the greater revenue volumes in the first nine months of 2022 compared to the first nine months of 2021.
S-3 registration
The Company filed an S-3 registration statement on July 17, 2020, containing a prospectus that was effective in September 2020. The Company utilized this filing in January 2021 to issue common stock for $45 million before costs. The Company filed a new S-3 shelf registration in January 2021, which, as amended, became effective in April 2021. With this filing, Orbital Infrastructure Group may from time-to-time issue various types of securities, including common stock, preferred stock, debt securities and/or warrants, up to an aggregate amount of $150 million. The Company utilized this S-3 registration to issue additional common stock in July 2021 for $38 million before expenses. In May 2022, the Company utilized the S-3 to issue shares and prefunded warrants for $21.0 million and additional warrants with a cumulative exercise value of $21.2 million. The Company has approximately $68.8 million remaining available to issue additional securities from its shelf registration.
As the Company focuses on growing its infrastructure services market presence both organically and through strategic acquisitions, technology development, product and service line additions, and increasing Orbital’s market presence, it will fund these activities together with related operating, sales and marketing efforts for its various product and service offerings with cash on hand, and possible proceeds from future issuances of equity through the S-3 registration statement, and available debt.
Orbital Infrastructure Group may raise additional capital needed to fund the further development and marketing of its products and services as well as payment of its debt obligations.
See the section entitled Recent Sales of Unregistered Securities for a complete listing of all unregistered securities transactions.
Capital Expenditures and Investments
During the first nine months of 2022 and 2021, Orbital Infrastructure Group invested $3.7 million and $6.6 million, respectively, in property and equipment. These investments typically include additions to equipment including vehicles and equipment for powerline service and maintenance, engineering, furniture, computer equipment for office personnel, facilities improvements and other fixed assets as needed for operations. In addition, during the nine months ended September 30, 2022, the Company had collections from a notes receivable of $3.5 million related to the sale of the Company's electromechanical business in 2019.
Financing Activities
In the nine months ended September 30, 2022, the Company made cash payments on notes payable of $35.5 million and had proceeds from notes payable of $41.2 million, respectively. This compared to $19.4 million of proceeds from notes payable and $7.5 million of payments on notes payable in the nine months ended September 30, 2021. The Company also received $3.5 million in proceeds from their line of credit and made $2.0 million in payments on this line of credit in 2022 compared to $0.4 million paid in the first nine months of 2021 to close its line of credit that was acquired with the Orbital Solar Services business. In the nine months ended September 30, 2022, and 2021 the Company recorded payments on finance lease obligations of $3.8 million and $0.9 million dollars, respectively.
Recap of Liquidity and Capital Resources
At September 30, 2022, the Company had unrestricted cash and cash equivalents balances of $28.0 million of which $2.5 million is covered by insured deposit programs. At September 30, 2022, the Company had $0.6 million of restricted cash and cash equivalents balances at domestic financial institutions including $0.4 million that is covered under the FDIC insured deposits programs.
The Company expects the revenues from its continuing operations, and cash on hand, to cover operating and other expenses for the next twelve months of operations. However, in the short-term, the Company expects to continue to need cash support as the Company's businesses increase their market positions and revenue. The Company may issue additional debt or equity to support continuing operations and acquisition efforts in the remaining months of 2022.
Critical Accounting Policies
The Company has adopted various accounting policies to prepare the consolidated financial statements in accordance with Generally Accepted Accounting Principles, ("GAAP"). Certain of the Company's accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. In the Company's 2021 Annual Report on Form 10-K filed on March 31, 2022, the Company identified the critical accounting policies that affect the Company's more significant estimates and assumptions used in preparing the Company's consolidated financial statements.
Recent Accounting Pronouncements
See Note 11 Recent Accounting Pronouncements of the condensed consolidated financial statements in Part I—Item I, “Financial Statements” for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on financial position, results of operations and cash flows.
Off-Balance Sheet Arrangements
See Note 19 Commitments and Contingencies of the condensed consolidated financial statements in Part I—Item I, “Financial Statements” for a description of the Company's off-balance sheet arrangements.
| Quantitative and Qualitative Disclosure about Market Risk. |
The Company is exposed to market risk in the ordinary course of business. Market risk represents the risk of loss that may impact the Company’s financial position due to adverse changes in financial market prices and rates. This market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. The Company neither holds nor issues financial instruments for trading purposes.
Investment Risk
The Company has an Investment Policy that, inter alia, provides an internal control structure that takes into consideration safety (credit risk and interest rate risk), liquidity and yield. Our Investment officers, CEO and CFO, oversee the investment portfolio and compile a quarterly analysis of the investment portfolio when applicable for internal use. In addition, the Company has an Investment Committee to administer and operate the portfolio. At September 30, 2022, the Investment Committee is comprised of C. Stephen Cochennet, Corey A. Lambrecht, Chairman, and Nicholas M. Grindstaff, CFO.
Cash and cash equivalents are diversified and maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
The Company has trade receivable and revenue concentrations with large customers. See Note 17 of the Company's financial statements for more information on the Company's concentration risks.
| Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
The Company's management, with the participation of the Company's Chief Executive Officer (CEO) and its Chief Financial Officer (CFO), evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report. In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Company’s management is required to apply their judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon that evaluation, the Company's management, including the CEO and the CFO, concluded that, as of September 30, 2022, the Company’s disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting (as defined in Rule 13(a)-15(f) or Rule 15d-15(f) of the Exchange Act) during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Orbital Infrastructure Group, Inc. is occasionally party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, negligence or gross negligence and/or property damages, wage and hour and other employment-related damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief.
Regarding all lawsuits, claims and proceedings, Orbital Infrastructure Group, Inc. records a reserve when it is probable that a liability has been incurred and the loss can be reasonably estimated. The Company currently has no such reserves. In addition, Orbital Infrastructure Group, Inc. discloses matters for which management believes a material loss is at least reasonably possible. None of these proceedings are expected to have a material adverse effect on Orbital Infrastructure Group, Inc.’s consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.
The Company recently filed and served a federal civil complaint in the United States District Court for the Northern District of Texas – Dallas Division against the former owner of Reach Construction Group LLC (“Reach”). The complaint alleges, among other things, misrepresentations and misconduct committed by the former owner in conjunction with the purchase and sale of Reach to Orbital Infrastructure Group, Inc. Based on the information and evidence contained in the complaint, the Company reasonably believes that it owes no more compensation to the former owner and is seeking return of certain funds already paid and relief of certain debt and accruals currently on the balance sheet.
There are no material changes from Risk Factors as previously disclosed in the Company’s Form 10-K filed with the Commission on March 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Common Stock Issued.
During the nine months ended September 30, 2022, the Company issued the following shares of common stock, which were not registered under the Securities Act. The Company relied on Section 4(2) of the Securities Act of 1933 as the basis for an exemption from registration for the following issuances.
| Date of issuance |
Type of issuance |
Stock issuance recipient |
Reason for issuance |
Total no. of shares |
Grant date fair value recorded at issuance and periodic vesting (in thousands) |
|||||||||||||||
| January, April 2022 |
Common stock |
Consultant |
Services |
117,320 | $ | 212 | ||||||||||||||
| January, February, March, April, May, June, July, August, September 2022 |
Common stock |
Institutional investor |
Debt payment |
14,286,090 | 14,048 | |||||||||||||||
| February 2022 |
Common stock |
1 Syndicated debt lender |
Portion of original issue discount on $105 million credit facility * |
54,026 | — | |||||||||||||||
| June and September 2022 |
Common stock | Syndicated debt lenders | Shares issued to lenders as part of amended and restated subscription agreement | 8,284,360 | 4,361 | |||||||||||||||
| Total other equity transactions |
22,741,796 | $ | 18,621 | |||||||||||||||||
* These shares were issuable as of November 17, 2021 and were recorded as part of additional paid in capital prior to issuance.
Cured default on syndicated debt
On November 7, 2022, The Company resolved a dispute with the Syndicated lenders whereby the Syndicated lenders deemed the Company to be in default of its credit agreement due to the Company using proceeds from Front Line Power's operations to pay down $9.5 million of the Company's working capital adjustment with the sellers of Front Line Power. As part of a consent agreement with the lenders, the Company agreed to pay the lenders in a paid-in-kind amount of $10.5 million, which was added to the Syndicated debt balance and included $1.0 million of interest calculated from the first intercompany advance that the Company made. See Exhibit 10.139 for the consent agreement.
The following exhibits are included as part of this Form 10-Q.
| Exhibit No. |
Description |
| 10.136 1 | Home Office lease dated October 5, 2022 by and between Franklin Post Oak, Ltd and Orbital Infrastructure Group, Inc. |
| 10.137 1 | Executive Long Term Retention Equity Award Agreement by Orbital Infrastructure Group, Inc. and William J. Clough |
| 10.138 1 | Executive Long Term Retention Equity Award Agreement by Orbital Infrastructure Group, Inc and James F. O'Neil |
| 10.139 1 | Limited Consent to Credit Agreement between Alter Domus LLC, Front Line Power Construction LLC and Orbital Infrastructure Group, Inc. |
| 31.1 1 |
|
| 31.2 1 |
|
| 32.1 1 |
|
| 32.2 1 |
|
| 101.INS 1 |
Inline XBRL Instance Document |
| 101.SCH 1 |
Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL 1 |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF 1 |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB 1 |
Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE 1 |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Footnotes to Exhibits:
1Filed herewith.
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 14th day of November 2022.
| Orbital Infrastructure Group, Inc. |
|||
| By: |
/s/ James F. O'Neil |
||
| James F. O'Neil, |
|||
| Chief Executive Officer |
|||
| (Principal Executive Officer) |
|||
| By: |
/s/ Nicholas M. Grindstaff |
||
| Nicholas M. Grindstaff, |
|||
| Chief Financial Officer |
|||
| (Principal Financial Officer) |
|||
Exhibit 10.136
444 WESTHEIMER HOUSTON, TEXAS
LEASE AGREEMENT BETWEEN
FRANKLIN POST OAK, LTD.
(“Landlord”)
ORBITAL INFRASTRUCTURE GROUP, INC.
(“Tenant”)
10/5/2022
DATE:
TABLE OF CONTENTS
|
1. |
Leased Premises1 |
|
2. |
Net Rentable Area1 |
|
3. |
Term1 |
|
4. |
Use1 |
|
5. |
Rent2 |
|
6. |
Abatement of Rent4 |
|
7. |
Operating Expenses4 |
|
8. |
Security Deposit8 |
|
9. |
Utilities8 |
|
10. |
Building Services9 |
|
11. |
Keys and Locks; Access Cards10 |
|
12. |
Graphics10 |
|
13. |
Peaceful Enjoyment10 |
|
14. |
Repairs by Landlord11 |
|
15. |
Payments by Tenant11 |
|
16. |
Repairs by Tenant11 |
|
17. |
Care of the Leased Premises11 |
|
18. |
Assignment or Sublease11 |
|
19. |
Use, Alterations, Addition, Improvements, and Surrender of Leased Premises13 |
|
20. |
Legal Use and Violations of Insurance Coverage14 |
|
21. |
Laws, Regulations and Rules of the Building14 |
|
22. |
Entry in Leased Premises15 |
|
23. |
Nuisance15 |
|
24. |
Subordination to Mortgage16 |
|
25. |
Estoppel Certificate16 |
|
26. |
Leasehold Improvements16 |
|
27. |
Limitation of Landlord’s Personal Liability17 |
|
28. |
Parking17 |
|
29. |
Condemnation18 |
|
30. |
Damages from Certain Causes19 |
|
31. |
Lien for Rent19 |
|
32. |
Holding Over19 |
|
33. |
Casualty Clause19 |
DocuSign Envelope ID: 9845786F-7846-42A2-A5C8-DDD250A72BE3
|
34. |
Attorneys’ Fees; Conflicts; Venue20 |
|
35. |
Amendments20 |
|
36. |
Assignment by Landlord20 |
|
37. |
Default by Tenant20 |
|
38. |
Remedies21 |
|
39. |
Bankruptcy23 |
|
40. |
Non-Waiver24 |
|
41. |
Casualty Insurance24 |
|
42. |
Liability Insurance24 |
|
43. |
Release and Waiver; Indemnity26 |
|
44. |
Waiver of Subrogation Rights27 |
|
45. |
Name of Building27 |
|
46. |
Notices27 |
|
47. |
Relocation28 |
|
48. |
Survival; Entire Agreement28 |
|
49. |
Real Estate Brokers29 |
|
50. |
Telecommunications29 |
|
51. |
Fees for Tenant Requested Forms30 |
|
52. |
Force Majeure31 |
|
53. |
Hazardous Substances31 |
|
54. |
Certification Related to Executive Order 13224 and the USA PATRIOT Act32 |
|
55. |
Counterparts32 |
|
56. |
Authority32 |
|
57. |
Waiver of Jury Trial32 |
|
58. |
Renewal Option33 |
|
59. |
Letter of Credit34 |
|
60. |
Early Termination Option35 |
|
61. |
Tenant Improvement Allowance35 |
-ii-
EXHIBITS
Exhibit “A” – Floor Plan to Leased Premises Exhibit “A-1” – Property Description Exhibit “B” – Rules and Regulations
Exhibit “C” – Building Standard Defined Exhibit “D” – Form of Letter of Credit
-1-
LEASE AGREEMENT
10/5/2022
THIS LEASE AGREEMENT (“Lease”) is made and entered into effective ,
(the “Execution Date”) between FRANKLIN POST OAK, LTD., a Texas limited partnership (“Landlord”), and ORBITAL INFRASTRUCTURE GROUP, INC., a Texas corporation (“Tenant”), whose address for purposes hereof is 1974 ALDINE WESTERN RD HOUSTON, TX 77038-1204, prior to the Commencement Date (as defined below) and thereafter shall be the Leased Premises in the Building.
WITNESSETH:
|
1. |
Leased Premises |
Subject to and upon the terms and conditions hereinafter set forth, and each in consideration of the covenants and obligations of the other hereunder, Landlord does hereby lease, demise and let to Tenant and Tenant does hereby lease and take from Landlord those certain premises (the “Leased Premises”) in the building (the “Building”) located at 5444 Westheimer, Houston, Harris County, Texas, such Leased Premises being more particularly described as follows:
Approximately 4,918 net rentable square feet (NRSF) located on the sixteenth (16th) floor of the Building, Suite 1650, as reflected on the floor plan of such Leased Premises attached hereto as Exhibit “A”.
|
2. |
Net Rentable Area |
The Building and the Leased Premises have been measured, and according to such measurement, the net rentable area (“Net Rentable Area”) in the Building is 382,369 NRSF and the Net Rentable Area in the Leased Premises is 4,918 NRSF, which calculations for the purpose of this Lease, have been stipulated to by Landlord and Tenant.
|
3. |
Term |
a. Subject to and upon the terms and conditions set forth herein, or in any exhibit, this Lease shall continue in force for a term of 46 months (the “Term”) beginning on October 15, 2022 (the “Commencement Date”) and ending on the expiration of 46 months thereafter.
b. Within ten (10) business days of the Commencement Date of the Term, Landlord and Tenant shall execute a declaration mutually confirming the acceptance of the Leased Premises, the Commencement Date and ending date of the Term.
|
4. |
Use |
a. The Leased Premises shall be used and occupied by Tenant (and its permitted assignees and subtenants) solely as general, administrative and executive offices
-2-
(including such ancillary uses in connection therewith as shall be reasonably required by Tenant in the operation of its business); provided, that in no event shall any of the following be permitted in the Leased Premises: (i) offices or agencies of a foreign government or political subdivisions thereof; (ii) offices of any governmental bureau or agency of the United States or any state or political subdivision thereof; (iii) personnel agencies; (iv) customer service offices of any public utility company; (v) daycare or child care facilities; (vi) schools for students of any age, or other training or vocational centers, or other educational uses; (vii) executives suites for use by parties other than Tenant and its employees; or (viii) telemarketing call centers.
b. The following uses shall not be permitted in the Leased Premises except to the extent they are ancillary to an otherwise permitted use: (i) data processing activities; (ii) health care activities; (iii) clerical support services; (iv) reservation centers for airlines or travel agencies;
(v) retail or restaurant use; (vi) studios for radio, television of other media; or (vii) storage.
c. The Leased Premises shall not be used for any purpose which would, in Landlord’s reasonable opinion, lower the first-class character of the Project (defined below) or any part thereof, create unreasonable or excessive elevator or floor loads, interfere with any of the operations of the Project or any part thereof or the proper and economic heating, air-conditioning, cleaning or other servicing of the Project or any part thereof or unreasonably interfere with the use of the other areas of the Project by any other tenants.
d. Subject to the terms and conditions of this Lease, Landlord grants Tenant, its employees, licensees and invitees a nonexclusive license for the Term to use those areas or facilities of the “Project” (which term means and includes the Building, Garage (defined below) and any other parking facilities, and the tract or tracts of land on which they are located (“Land”), the Land being described on Exhibit “A-1” attached hereto) available to and intended for the common use by the tenants of the Building, as designated from time to time by Landlord (“Common Areas”) in common with others entitled to use the Common Areas, including without limitation, Landlord and other tenants of the Building, and their respective employees and invitees, and other persons authorized by Landlord.
|
5. |
Rent |
PERIOD
ANNUAL RATE PER NET RENTABLE SQUARE FOOT
MONTHLY BASE RENTAL
Commencement Date through the last day of the 4th full calendar month after the Commencement Date (*See Section 6 below) *$18.00 *$7,377.00
First day of the 5th full calendar month after the Commencement Date through the last day of the 16th full calendar month after the Commencement Date $18.00 $7,377.00
First day of the 17th full calendar month after the Commencement Date through the last day of the 28th full calendar month after the Commencement Date $18.50 $7,581.92
First day of the 29th full calendar month after the Commencement Date through the last day of the 40th full calendar month after the Commencement Date $19.00 $7,786.83
First day of the 41st full calendar month after the Commencement Date through the last day of the 46th full calendar month after the Commencement Date $19.50 $7,991.75
Base Rental shall be due and payable, without invoice or demand, in twelve (12) equal installments each year on the first day of each calendar month during the Term. All components of Rent (defined below) owed to Landlord shall be prorated based on the actual number of days in any partial calendar month for which any Rent is due, including for the Commencement Date Month. Tenant shall be required to pay Base Rental and Tenant’s Operating Expenses (i.e., $12,057.30, which includes $7,377.00 in Base Rental and $4,680.30 in Tenant’s Operating Expense) for Month 5 of the Term upon execution of this Lease.
|
a. |
Tenant’s Operating Expenses. In addition to the Base Rental, the Tenant shall also pay, as Rent, Tenant’s Operating Expenses (defined below). Landlord shall have the option to provide to Tenant from time to time for each upcoming calendar year (or remainder thereof, if applicable), and to the extent practicable, not later than thirty (30) days prior to the commencement of each calendar year, a statement of the Estimated Operating Expenses of the Project (defined below) and the estimated amount of Tenant’s Operating Expenses for the upcoming calendar year and Tenant shall be required to pay the monthly payment of Tenant’s Operating Expenses adjusted in accordance with any such estimate, no later than thirty (30) days’ of Landlord’s invoice for the same. Tenant shall pay Tenant’s Operating Expenses in twelve (12) equal installments each year at the same time that Tenant is obligated to pay Base Rental, or in the event Landlord makes an adjustment to Tenant’s Operating Expenses after the beginning of the calendar year affected, Tenant shall amortize and shall pay Tenant’s Operating Expenses as so |
-3-
adjusted through the remaining portion of the calendar year affected in equal monthly payments at the same time that Tenant is obligated to pay Base Rental.
|
b. |
Additional Rent. Tenant shall pay all other sums of money as shall become due from and payable by Tenant to Landlord under this Lease as “Additional Rent.” Such Additional Rent shall be due and payable within thirty (30) days after delivery by Landlord to Tenant of Landlord’s invoice therefor, unless otherwise specified herein, and, as provided in this Lease, payments of Base Rental, Tenant’s Operating Expenses and Parking Charges (as defined in Section 28 below), will be due and payable on the first of each month without notice or invoice. Landlord shall have the same remedies for default in the payment of Additional Rent as are available to Landlord in the case of a default in the payment of Base Rental and Tenant’s Operating Expenses. Base Rental, Tenant’s Operating Expenses and Additional Rent are sometimes hereafter referred to as “Rent.” |
|
c. |
Payment of Rent; Late Fee. Tenant hereby agrees to pay to Landlord when due all Rent at Landlord’s address as provided herein (or such other address as may be designated by Landlord from time to time), all without invoice or demand. If the Term commences on other than the first day of a month or terminates on other than the last day of a month, then the installments of Base Rental, Tenant’s Operating Expenses and any Additional Rent for such month or months shall be prorated and the installment or installments so prorated shall be paid in advance. If any payment of Rent is not received by Landlord when due, a late charge equal to five percent (5%) of said late payment shall be assessed by Landlord as Additional Rent, which shall be due and payable by Tenant. |
|
6. |
Abatement of Rent |
Landlord agrees that Base Rental, as set forth in Section 5.a above, and Tenant’s Operating Expenses during Months 1-4 of the Term otherwise due and payable by Tenant, will be abated. The Rent abatement provided for in Section 5.a and this Section 6 is conditioned upon Tenant’s full and timely performance of all of its obligations under the Lease. If at any time during the Term, Tenant defaults, and fails to cure such default beyond the notice and opportunity to cure period, if any, then Tenant shall promptly pay to Landlord, in addition to all other amounts due under the Lease, the full amount of all Rent herein abated (the “Abated Rent”).
|
7. |
Operating Expenses |
|
a. |
“Operating Expenses,” as said term is used herein, shall consist of all operating expenses of the Project which shall be computed on the accrual basis and shall consist of all costs incurred by Landlord to maintain all facilities in operation during any year and such additional facilities in subsequent years as may be determined by Landlord to be necessary or generally beneficial for the Project. The term “Operating Expenses” as used herein shall mean all expenses, costs and disbursements including costs to obtain and maintain LEED certification and other green programs or initiatives (but not replacement of capital investment items except as specifically provided below nor specific costs especially billed to and paid by specific tenants) of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, management and operation of the Project including but not limited to the following: |
-4-
|
1. |
Wages and salaries and related expenses and benefits of all on-site and off-site employees engaged in the supervision, operation and maintenance, or access control, of the Project and personnel who may provide traffic control relating to ingress and egress to and from the Project to the adjacent public streets and the costs (based upon fair market rental rates) of a management office in the Project. |
|
2. |
All supplies, tools, equipment and materials used in operation and maintenance of the Project. |
|
3. |
Cost of all utilities for the Project including the cost of water and power, heating, lighting, air conditioning and ventilating for the Project (excluding those costs separately paid by specific tenants). |
|
4. |
Cost of all maintenance and service agreements for the Project and the equipment therein, including, but not limited to, access control service, window cleaning, elevator maintenance, landscaping and janitorial services. |
|
5. |
Cost of all insurance relating to the Project including, but not limited to, the cost of casualty and liability insurance, worker’s compensation, group and health insurance and rental abatement insurance applicable to the Project and Landlord’s personal property used in connection therewith. |
|
6. |
All taxes and assessments which shall mean (i) all real estate taxes and assessments on the Project, and taxes and assessments levied in substitution or supplementation in whole or in part of such taxes, (ii) all personal property taxes for the Project's personal property, (iii) all franchise taxes imposed under Title 2, Subtitle F, Chapter 171 of the Texas Tax Code or any successor thereto, and (iv) all other taxes, fees or assessments now or hereafter levied by any governmental authority on the Project or its contents or on the operation and use thereof (except as relate to specific tenants); together with fees paid to property tax consultants retained by Landlord to assist Landlord with pursuing a reduction in the assessed value of the Project for real estate tax purposes; provided, that if at any time during the Term, the present method of real estate taxation or assessment shall be changed so that the whole or any part of the foregoing described taxes shall be changed and as a substitute therefor, or in lieu of an addition thereto, taxes, assessments, levies, impositions or charges shall be levied, assessed or imposed by any taxing authorities wholly or partially as a capital levy or otherwise on the Project or on the rents received from the Project or the Rent reserved herein or any part thereof, then such substitute or additional taxes, assessments, levies, impositions or charges, to the extent so levied, assessed or imposed, shall be deemed to be included in taxes; but excluding any federal income taxes, gift taxes, inheritance and succession taxes, transfer taxes, and estate taxes. In calculating the amount of taxes to be included in Operating Expenses hereunder (a) if Landlord is part of a combined group for filing purposes, such taxes shall only include the amount of such taxes allocable to the Project, and (b) if such taxes apply to more than one property owned by Landlord, such taxes shall be limited to the amount of such taxes that would be payable if the Project were the only property |
-5-
of the Landlord subject to such tax. It is agreed that Tenant shall be responsible for ad valorem taxes on its personal property and on the value of leasehold improvements (if separately assessed by the appraisal district) to the extent that same exceed Building Standard (as described in Exhibit “C” hereto) allowances.
|
7. |
Cost of repairs and general maintenance of the Project (excluding repairs and general maintenance paid by proceeds of insurance or by Tenant or other third parties, and alterations attributable solely to preparation of space for occupancy by tenants of the Building other than Tenant). |
|
8. |
Amortization (together with reasonable financing charges) of the cost of supplying and installation of capital investment items which are intended for the purpose of reducing operating costs or which may be required by governmental authority. All such costs shall be amortized over the reasonable life of the capital investment items with the reasonable life and amortization schedule being determined in accordance with generally accepted accounting principles and in no event to extend beyond the reasonable life of the Building. In the case of installations for the purpose of reducing operating costs, Landlord shall amortize such costs over a period such that the resulting annual amortization, plus reasonable financing charges, results in a charge to Operating Expenses that does not exceed the projected annual reduction in operating costs, and upon request, provide a cost justification for its practicality. |
|
9. |
Landlord’s central accounting costs and audit fees attributable to the Project. |
|
10. |
Any Operating Expense item of significant cost that is not required to be capitalized but is unexpected or does not typically recur may, in Landlord’s discretion, be amortized on a straight-line basis (together with reasonable financing charges) over a reasonable life determined in accordance with generally accepted accounting principles and in no event to extend beyond the reasonable life of the Building. |
|
11. |
Landlord’s attorneys’ fees attributable to the Project, except to the extent incurred in connection with the negotiation or enforcement of any lease of any portion of the Project. |
|
12. |
All reasonable fees paid by Landlord for property management services to the Project. |
|
b. |
Notwithstanding the foregoing, “Operating Expenses” shall not include the following: |
|
i. |
Leasing commissions, attorneys’ fees, and other expenses incurred in connection with leasing space in the Building. |
|
ii. |
Advertising and promotional expenditures for leasing and marketing the Building. |
-6-
|
iii. |
Costs incurred in renovating or otherwise improving or decorating, painting, or redecorating vacant space or space for tenants or prospective tenants of the Building, provided, however, this exclusion shall not apply to the Common Areas of the Project. |
|
iv. |
Any cost or expense to the extent that Landlord is reimbursed by any tenant, insurer, governmental authority, or other person (other than through payment of each tenant’s share of Operating Expenses) or for which any tenant or other party (including Tenant) pays third persons. |
|
v. |
Any depreciation and amortization on the Building except as permitted in subsection (8) of the list of included Operating Expenses set forth above. |
|
vi. |
Costs incurred by Landlord for repairs, alterations or replacements which are considered to be capital repairs, alterations or replacements pursuant to generally accepted accounting principles, except as permitted in subsections 7(a)(8) and 7(a)(10) above. |
|
vii. |
Debt service on any mortgages or other debt, or rent on any ground or underlying lease. |
|
viii. |
Fees, fines, or attorneys’ fees incurred due to the violation by Landlord of laws, ordinances, other governmental rules or requirements, or the terms of any lease pertaining to the Building. |
|
ix. |
Costs of Landlord’s general partnership overhead, provided, however, this exclusion shall not be applicable to the management fee described in subsection (12) of the list of included Operating Expenses set forth above. |
|
x. |
The cost of works of art exceeding $5,000.00. |
|
c. |
“Estimated Operating Expenses”, as that term is used herein, shall mean the estimated Operating Expenses from time to time as calculated by Landlord for any calendar year. |
|
d. |
“Tenant’s Share”, as that term is used herein, shall mean a fraction, the numerator of which is the Net Rentable Area in the Leased Premises and the denominator of which is the Net Rentable Area in the Building, which is agreed to be 382,369 NRSF. Landlord and Tenant stipulate that Tenant’s Share shall be 1.286%. For each calendar year of this Lease, Landlord shall provide to Tenant from time to time a statement of the estimated amount of Tenant’s Share of the total Operating Expenses (“Tenant’s Operating Expenses”) for the next succeeding calendar year. To the extent practicable, the statement shall be provided no less than thirty (30) days prior to the beginning of said calendar year, and if the estimated amount of Tenant’s Operating Expenses changes during the calendar year affected, then Landlord shall have the option to provide to Tenant from time to time one or more adjusted statements of the estimated amount of Tenant’s Operating Expenses. |
-7-
|
e. |
If the estimated amounts paid as Rent for any calendar year for Tenant’s Operating Expenses are less than Tenant’s Operating Expenses as set forth in the Annual Statement (defined below), Tenant shall pay the amount of such deficiency to Landlord within thirty (30) days after Tenant’s receipt of the Annual Statement. However, if the estimated amounts paid by Tenant for any calendar year for Tenant’s Operating Expenses are greater than Tenant’s Operating Expenses as set forth in the Annual Statement, Landlord shall, at its sole option, either refund to Tenant the amount of such overpayment within thirty (30) days after Tenant’s receipt of the Annual Statement, or apply such amounts to future installments of Rent until such amounts are exhausted. |
|
f. |
Within one hundred fifty (150) days (or as soon thereafter as reasonably practicable) after the expiration of a calendar year all or any portion of which is within the Term, Landlord shall deliver to Tenant a written statement itemized in reasonable detail and certified to by Landlord, showing the actual Operating Expenses for such calendar year and a statement of Tenant’s Operating Expenses for such year (“Annual Statement”). |
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g. |
Notwithstanding any other provision herein to the contrary, it is agreed that in the event the Building is not fully occupied or leased during any year the Operating Expenses for such year shall be calculated for such year as though the Building had been fully occupied during such year. |
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h. |
Notwithstanding any other provision herein to the contrary, (i) if there is an actual change in the allocable Common Areas of the Project, then Landlord may recalculate Operating Expenses and other amounts affected by such change, effective as of the date of any such change, and (ii) if there is an actual change in the size of the Leased Premises or in the Net Rentable Area of the Building, then Landlord may recalculate Tenant’s Share as the ratio of the Net Rentable Area of the Leased Premises to the Net Rentable Area of the Building, effective as of the date of any such change. |
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8. |
Security Deposit |
Tenant hereby agrees to pay Landlord a security deposit of $12,057.30 (“Security Deposit”) payable on the date this Lease is executed by Tenant. Upon the occurrence of any event of default by Tenant, Landlord may in its sole election, without prejudice to any other remedy, apply the Security Deposit to the extent necessary to make good any arrears of Rent, or to any other damage, injury, expense or liability owed by Tenant to Landlord hereunder. In the event Landlord uses the Security Deposit to pay any Rent or other sums due under this Lease, Tenant agrees to immediately repay such sums to Landlord so as to fully replenish the Security Deposit. Landlord, upon expiration of this Lease, may withhold from the Security Deposit sums for damage to the Leased Premises or for unpaid Rent. The Security Deposit, less any sums properly withheld by Landlord, shall be returned by Landlord to Tenant within sixty (60) days after the expiration of this Lease accompanied by a written statement of any funds withheld by Landlord. Notwithstanding anything to the contrary contained herein, the Security Deposit shall not be considered an advance payment of Rent or a limitation of Landlord’s damages in case of default by Tenant.
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9. |
Utilities |
Landlord agrees to use reasonable efforts to cause public utilities to furnish the electricity, gas and water utilized in operating any and all facilities serving the Leased Premises subject to the provisions set forth below.
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10. |
Building Services |
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a. |
Landlord agrees to furnish to Tenant the following services, the cost of which is included in Operating Expenses: |
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i. |
Hot and cold water at those points of supply provided for general use of other tenants in the Building and central heat and air conditioning, at such temperatures and in such amounts as are considered by Landlord to be standard, during normal business hours of the Building as determined by Landlord. Tenant shall pay the costs of central heat and air conditioning requested by Tenant outside of normal business hours for the Building. As of the Execution Date of this Lease, the charge for after-hours central heat and air conditioning is $50.00 per hour per floor. Normal business hours are defined as 7:00 A.M. to 6:00 P.M. Monday through Friday and, if requested in advance by Tenant, from 8:00 A.M. to 1:00 P.M. on Saturday, except Holidays. Holidays are as follows: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In the event a holiday falls on a Saturday or Sunday, the Building Holiday shall be the nationally recognized day either preceding or following such holiday. |
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ii. |
Janitor services on a five (5) day week basis; provided, however, if any of Tenant’s floor coverings or other improvements are other than Building Standard, Tenant shall pay the additional cleaning cost attributable thereto plus fifteen percent (15%) for management cost recovery as Additional Rent. Tenant shall pay said Additional Rent upon presentation of a statement therefor by Landlord, and Tenant’s failure to pay shall constitute default hereunder. |
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iii. |
Electrical facilities to furnish sufficient power for personal computers, printers, copying machines and other machines of similar low electrical consumption, but not including electricity required for special lighting in excess of Building Standard, and any other item of electrical equipment, including, without limitation, space heaters, hotplates, or other items with a heating element, (and provided that if the installation or operation of said electrical equipment requires additional air conditioning capacity above that provided by the Building Standard system, then the additional air conditioning installation and operating costs will be the obligation of Tenant). Tenant shall not install or cause to be installed any utility service meter, electrical panel box, air-conditioning equipment, electronic data processing machine, or any other similar equipment of high electrical consumption without the prior written consent of Landlord. |
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iv. |
All Building Standard fluorescent bulb (and ballast) replacement in all areas and all incandescent bulb replacement in public areas, rest room areas and stairwells. |
|
v. |
Non-exclusive elevator service to the Leased Premises during normal business hours; and at least one elevator serving the Leased Premises available for use at all times. |
|
b. |
Failure by Landlord to any extent to furnish the foregoing defined services, or any cessation thereof, shall not render Landlord liable in any respect for damages to either person or property, nor be construed as an eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. Additionally, should any of the equipment or machinery used in connection with the Project break down, or for any cause cease to function properly, Tenant shall have no claim for rebate or abatement of rent or damages on account of an interruption in service occasioned thereby or resulting therefrom. |
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11. |
Keys and Locks; Access Cards |
|
a. |
Landlord agrees to furnish, at Landlord’s cost, fifteen (15) keys for each corridor door entering the Leased Premises. Additional keys will be furnished at a charge by Landlord on an order signed by Tenant or Tenant’s authorized representative. All such keys shall remain the property of Landlord. No additional locks shall be allowed on any door of the Leased Premises without Landlord’s permission, and Tenant shall not make, or permit to be made any duplicate keys, except those furnished by Landlord. Upon termination of this Lease, Tenant shall surrender to Landlord all keys of the Leased Premises, and give Landlord the explanation of the combination of all locks for safes, safe cabinets and vault doors, if any, in the Leased Premises. |
|
b. |
Landlord agrees to furnish, at Landlord’s cost, fifteen (15) initial access cards (“Building Access Cards”) for entrance to the Building after the normal hours that the Building is open. After the initial fifteen (15) Building Access Cards are issued to Tenant, all replacement Building Access Cards are at Tenant’s cost, regardless of whether such Building Access Cards are defective, worn out, lost, stolen, etc. A replacement Building Access Card will be furnished by Landlord on an order signed by Tenant or Tenant’s authorized representative and upon the cancellation of an equal number of issued and outstanding Building Access Cards. As of the date of this Lease, Landlord’s charge per Building Access Card is $20.00. All such Building Access Cards shall remain the property of Landlord. |
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12. |
Graphics |
Landlord agrees to provide and install, at Landlord’s cost, Building Standard letters or numerals at the entrance to the Leased Premises. Landlord also agrees to provide and install, at Landlord’s expense, a listing of Tenant’s name and office number on the Building Directory. No signs, numerals, letters or other graphics shall be used or permitted on the exterior of, or which may be visible from outside the Leased Premises unless approved in writing by Landlord.
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13. |
Peaceful Enjoyment |
Landlord covenants that Tenant shall, and may peacefully have, hold and enjoy the Leased Premises, subject to the other terms hereof, provided that Tenant pays the Rent and all other sums herein recited to be paid by Tenant and performs all of Tenant’s covenants and agreements herein contained. It is understood and agreed that this covenant and any and all other covenants of Landlord contained in this Lease shall be binding upon Landlord and its successors only with respect to breaches occurring during its and their respective ownerships of the Landlord’s interest hereunder.
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14. |
Repairs by Landlord |
Landlord shall maintain the Common Areas of the Project, the Building’s structure and the Building’s utility systems in reasonably good order and condition at Landlord’s expense, except as may be included in Operating Expenses. Unless otherwise stipulated herein, Landlord shall not be required to make any improvements to or repairs of any kind or character on the Leased Premises during the Term, except such repairs as may be deemed necessary by Landlord for normal maintenance operations. The obligation of Landlord to maintain and repair the Leased Premises shall be limited to Building Standard items. Special leasehold improvements shall, at Tenant’s written request, be maintained by Landlord at Tenant’s expense, at a cost or charge equal to the costs incurred in such maintenance plus an additional charge to cover Landlord’s overhead.
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15. |
Payments by Tenant |
Tenant agrees to pay all Rent and sums provided to be paid to Landlord hereunder at the times and in the manner herein provided.
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16. |
Repairs by Tenant |
Tenant will be responsible for the cost and expense to repair or replace any damage or injury done to the Building or the Project (outside the Leased Premises), or any part thereof, caused by Tenant or Tenant’s agents, contractors, employees, invitees, or visitors. Landlord will make such repairs or replacements, and any reasonable sums expended by Landlord shall be considered Additional Rent to be paid by Tenant within thirty (30) days after written demand.
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17. |
Care of the Leased Premises |
Tenant agrees to not commit or allow any waste or damage to be committed on any portion of the Leased Premises and at the termination of this Lease, by lapse of time or otherwise, to deliver up said Leased Premises to Landlord in as good condition as at date of possession by Tenant, ordinary wear and tear excepted, and upon such termination of this Lease, Landlord shall have the right to re-enter and resume possession of the Leased Premises.
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18. |
Assignment or Sublease |
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a. |
In the event Tenant should desire to assign this Lease or sublet the Leased Premises or any part thereof, or to grant a license or permit the use or occupancy of any part of the Leased Premises to any other party, Tenant agrees to give Landlord written notice of such desire (and the proposed effective date thereof) at least sixty (60) days in advance of the date on which Tenant desires to make such assignment, sublease or other arrangement. The notice must include the name of the proposed transferee, the nature of the business to be conducted by the proposed |
transferee, current financial information on the proposed transferee, the terms and provisions of the proposed assignment, sublease or other agreement (including a copy of the proposed documentation pertaining to the proposed transfer), and, if the transaction is a sublease that pertains to only a portion of the Leased Premises (“Partial Sublease”), information regarding access and construction issues that must be addressed to facilitate the Partial Sublease. Landlord shall then have a period of thirty (30) days following receipt of such notice within which to notify Tenant in writing that Landlord elects either: (i) in the case of a Partial Sublease, to terminate this Lease as to the space so affected as of the date so specified by Tenant in which event Tenant will be relieved of all further obligation hereunder as to such space (provided, however that Tenant will be responsible for the costs to demise the terminated space), or (ii) to permit Tenant to assign this Lease, sublet such space, or enter into any other occupancy agreement, subject, however, to written approval of the proposed transferee by Landlord (in accordance with subsections (b) or (c) below), or (iii) to refuse to consent (in accordance with subsections (b) or (c) below) to Tenant’s assignment of this Lease or sublease or other transfer of such space and to continue this Lease in full force and effect as to the entire Leased Premises. If Landlord should fail to notify Tenant in writing of such election within the stated thirty (30) day period, Landlord shall be deemed to have elected option (iii) above. Furthermore, if Landlord consents to Tenant’s transfer, Tenant agrees that any profit realized by Tenant as a result of such assignment or sublease (meaning the consideration agreed upon between Tenant and said assignee or subtenant and the difference between the rental rate agreed upon between Tenant and said subtenant and the Rent then required to be paid under this Lease multiplied by the number of months in the term of the sublease, as applicable), shall, to the extent such profit is immediate, be due and payable by Tenant to Landlord upon the execution of an agreement, and, to the extent such profit is deferred, be payable to Landlord by said assignee or subtenant as it accrues.
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b. |
In making its determination if Landlord will give its consent pursuant to this Section 18, Landlord agrees that Landlord will not unreasonably withhold such consent. Landlord and Tenant acknowledge that it would be reasonable for Landlord to withhold its consent in any of the following instances: (1) the net worth and other evidence of creditworthiness of the proposed transferee is less than that of the Tenant both as of the date of this Lease and at the time of the transfer; (2) the proposed transferee is a governmental agency; (3) Landlord has received from any prior landlord to the proposed transferee a materially negative report concerning such prior landlord’s experience with the proposed transferee; (4) Landlord has experienced previous defaults by or is in litigation with the proposed transferee; (5) the proposed transferee is a current tenant of the Building or an entity with whom Landlord is negotiating to lease space in the Building; (6) the proposed assignment, sublease or other agreement would cause a violation of another lease for space in the Building or would give an occupant of the Building a right to terminate or cancel its lease; (7) Landlord is not satisfied with the form of assumption of lease, sublease or other documentation; or (8) a default exists under this Lease. |
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c. |
In the case of a proposed transfer to an Affiliate, defined for purposes of this section as any person or entity that controls, is controlled by, or is under common control with Tenant (for purposes hereof, “control” shall mean ownership of not less than 50% of all of the voting stock or legal and equitable interest in the entity in question), Landlord and Tenant acknowledge that it would be reasonable for Landlord to withhold its consent in any of the following instances: (1) the net worth and other evidence of creditworthiness of the Affiliate is less than that of the Tenant both as of the date of this Lease and at the time of the assignment or sublease; (2) Landlord is not satisfied with the form of assumption of lease or sublease documentation; or (3) a default exists under this Lease. |
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|
d. |
No consent by Landlord to any assignment, sublease or other agreement shall be deemed to be consent to a use not permitted under this Lease, to any act in violation of this Lease, or to any other or subsequent transfer, and no assignment, sublease or other agreement by Tenant shall relieve Tenant of any obligation under this Lease. Any attempted transfer by Tenant in violation of the terms and covenants of Section 18 shall be void. |
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19. |
Use, Alterations, Addition, Improvements, and Surrender of Leased Premises |
|
a. |
Tenant agrees that it shall not permit the Leased Premises to be used for any purpose other than that stated in the use clause hereof, or make or allow to be made any alterations or physical additions in or to the Leased Premises (except as provided in the Work Letter), or place signs on the Leased Premises which are visible from outside the Leased Premises, or place safes, vaults or other heavy furniture or equipment within the Leased Premises, without first obtaining the written consent of Landlord. Any and all such alterations, physical additions, or improvements, when made to the Leased Premises by Tenant, shall at once become the property of Landlord and shall be surrendered to Landlord upon termination of this Lease by lapse of time or otherwise; provided, however, this clause shall not apply to movable equipment or furniture owned by Tenant. Tenant agrees specifically that no food, soft drink or other vending machine or cooking equipment will be installed within the Leased Premises without the written consent of Landlord. |
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b. |
Upon termination of this Lease, Tenant shall surrender and vacate the Leased Premises immediately and deliver possession thereof to Landlord in a clean, good and tenantable condition, ordinary wear and tear excepted. Tenant shall be entitled to remove from the Leased Premises all movable personal property of Tenant, Tenant’s trade fixtures and such Tenant alterations which at the time of their installation Landlord and Tenant agreed may be removed by Tenant. Tenant shall also remove such other Tenant alterations as required by Landlord, including, but not limited to, any Tenant alterations containing Hazardous Substances (as defined herein) and any Tenant alterations which Landlord notified Tenant in writing of such removal requirement at the time Tenant asked Landlord specifically in writing whether removal would be required. Tenant immediately shall repair all damage resulting from removal of any of Tenant’s property, furnishings or Tenant alterations, shall close all floor, ceiling and roof openings created by or for Tenant and shall restore the Leased Premises to a tenantable condition as reasonably determined by Landlord. If any of the Tenant alterations which were installed by Tenant involved the lowering of ceilings, raising of floors or the installation of specialized wall or floor coverings or lights, then Tenant shall also be obligated to return such surfaces to their condition prior to the commencement of this Lease. In addition, if any wiring, or cable or electrical lines which are not customary for general office use at the time of their installation have been installed in, or to provide service to, Tenant within the Leased Premises, Tenant, unless instructed otherwise by Landlord in writing, shall at Tenant’s sole cost and expense, remove all such wiring, cable or electrical lines which are not customary for general office use at the time of their installation, and restore the Leased Premises to the same condition as at the commencement of the Term in a clean, good and tenantable condition, ordinary wear and tear excepted. In the event possession of the Leased |
Premises is not delivered to Landlord when required hereunder, or if Tenant shall fail to remove those items described above, Landlord may, at Tenant’s cost and expense, remove any of such property therefrom without any liability to Tenant, and undertake, at Tenant’s sole cost and expense, such restoration work as Landlord deems necessary or advisable. All property which may be removed from the Leased Premises by Landlord shall be conclusively presumed to have been abandoned by Tenant if not claimed after five (5) days. Tenant shall also reimburse Landlord for all costs and expenses incurred by Landlord in removing any of Tenant alterations and in restoring the Leased Premises to the condition required by this Lease at the date this Lease terminates.
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20. |
Legal Use and Violations of Insurance Coverage |
Tenant agrees to not occupy or use, or permit any portion of the Leased Premises to be occupied or used for any business or purpose which is unlawful, disreputable or deemed to be extra-hazardous on account of fire, or permit anything to be done which would in any way increase the rate of fire or liability or any other insurance coverage on the Project and/or its contents, including but not limited to the use, storage, disposal or transportation of Hazardous Substances other than office supplies and similar substances commonly found in commercial office buildings in quantities or concentrations that do not violate any legal requirement.
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21. |
Laws, Regulations and Rules of the Building |
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a. |
Tenant covenants to comply with all laws, ordinances, rules and regulations (state, federal, municipal and other agencies or bodies having any jurisdiction thereof) relating to the use, condition or occupancy of the Leased Premises. Tenant will comply with the rules (“Rules and Regulations” attached hereto as Exhibit “B”) adopted and altered by Landlord from time to time for the safety, care and cleanliness of the Leased Premises, the Building and the Project and for preservation of good order therein, all of which will be sent by Landlord to Tenant in writing and shall be thereafter carried out and observed by Tenant. Tenant agrees that it will not protest or appeal any appraisal or re-appraisal of the Leased Premises or all or any portion of the Project before any governmental authority and Tenant hereby waives any right to receive notices of re- appraisal pursuant to all laws. |
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b. |
Landlord and Tenant acknowledge that the Americans With Disabilities Act of 1990 (42 U.S.C. §§ 12101, et seq.) and regulations and guidelines promulgated thereunder, as all of the same may be amended and supplemented from time to time (collectively referred to herein as the “ADA”) establish requirements for business operations, accessibility and barrier removal, and that such requirements may or may not apply to the Leased Premises and the Building depending on, among other things: (1) whether Tenant’s business is deemed a “public accommodation” or “commercial facility”, (2) whether such requirements are “readily achievable”, and (3) whether a given alteration affects a “primary function area” or triggers “path of travel” requirements. The parties hereby agree that: (A) Landlord shall be responsible for implementing ADA Title III compliance in (i) the Common Areas as part of Operating Expenses (except as provided in subclause (C) of this subsection below); and (ii) the restrooms and elevator call buttons located in the elevator lobbies within the Leased Premises, (B) Tenant shall be responsible for ADA Title III compliance in the Leased Premises, including any leasehold |
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improvements or other work to be performed in the Leased Premises under or in connection with this Lease (except for restrooms and elevator call buttons located in the elevator lobbies within the Leased Premises which shall be Landlord’s obligation), (C) Landlord may perform, or require that Tenant perform, and Tenant shall be responsible for the cost of, ADA Title III “path of travel” requirements triggered by alterations in the Leased Premises, and (D) Landlord may perform, or require Tenant to perform, and Tenant shall be responsible for the cost of, ADA Title III compliance in the Common Areas necessitated by the Building being deemed to be a “public accommodation” instead of a “commercial facility” as a result of Tenant’s use of the Leased Premises. Tenant shall be solely responsible for requirements under Title I of the ADA relating to Tenant’s employees.
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c. |
Landlord and Tenant acknowledge that the Texas Architectural Barriers Act, Art. 9102, Tex. Civ. Stat. Ann. (1994), and regulations and guidelines promulgated thereunder, as all of the same may be amended and supplemented from time to time (collectively referred to herein as “TABA”) establish requirements for accessibility and barrier removal. The parties hereby agree that: (1) Tenant shall be responsible for compliance with TABA, including, without limitation, submission (through the Property manager) of required plans and documents to the State of Texas for approval of accessibility design features, in connection with the work set forth in the Work Letter, if any, and any other construction or alterations to the Leased Premises during the Term, except that Landlord agrees to be responsible for such compliance in connection with any work done by Landlord hereunder, and (2) Landlord shall be responsible for compliance with TABA, including, without limitation, submission of required plans and documents to the State of Texas for approval of accessibility design features, in connection with construction or alterations to the Common Areas and the work required of Landlord hereunder, except that Tenant agrees to be responsible for such compliance in connection with any such work with respect to the Common Areas outside the Leased Premises which may be necessitated solely as a result of Tenant’s use of the Leased Premises. |
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22. |
Entry in Leased Premises |
Tenant agrees to permit Landlord or its agents or representatives to enter into and upon any part of the Leased Premises at all reasonable hours to inspect the same, clean or make repairs, alterations or additions to the Project, and, during the last twelve (12) months of the Term (unless Tenant has previously exercised its option to renew), show the Leased Premises to prospective tenants, as Landlord may deem necessary or desirable. In connection with any repairs, maintenance, improvements or alterations, in or about the Project, Landlord may erect scaffolding and other structures reasonably required, and during such operations may enter upon the Leased Premises and take into and upon or through the Leased Premises, all materials required to make such repairs, maintenance, alterations or improvements, and may close public entry ways, other public areas, restrooms, stairways or corridors, and Tenant shall not be entitled to any abatement or reduction of Rent by reason thereof.
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23. |
Nuisance |
Tenant agrees to conduct its business and control its agents, employees, invitees, and visitors in such manner as not to create any nuisance, or interfere with, annoy or disturb any other tenant or Landlord in its operation of the Project.
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|
24. |
Subordination to Mortgage |
Tenant agrees that this Lease is subject and subordinate to each mortgage (an “Underlying Mortgage”) and each underlying financing or ground lease (an “Underlying Lease”) which may now or subsequently affect Landlord’s interest in the Project. In the event of the enforcement by the holder of any Underlying Mortgage of the remedies provided for by law or by such Underlying Mortgage, or in the event of the termination of an Underlying Lease, Tenant shall, upon request of any person succeeding to the interest of such holder or upon the request of the landlord under such Underlying Lease, automatically become the tenant of such successor in interest or such landlord, as the case may be, without change in the terms or provisions of this Lease; provided, that neither such successor in interest nor such landlord shall be: (i) bound by any payment of the Base Rental or Tenant’s Operating Expenses for more than one month in advance except prepayment in the nature of security for the performance by Tenant of its obligations under this Lease; (ii) bound by any amendment or modification of this Lease made without the consent of such successor in interest or such landlord; or (iii) liable for any act or omission of a prior landlord under this Lease.
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25. |
Estoppel Certificate |
Within ten (10) business days after request therefor by Landlord, Tenant shall:
|
a. |
execute estoppel certificates addressed to: (i) any mortgagee or prospective mortgagee of Landlord, (ii) any purchaser or prospective purchaser of all or any portion of, or interest in, the Project, or (iii) any investor in the Project, certifying to the best of Tenant’s knowledge: (A) that this Lease is unmodified and in full force and effect (or if there have been modifications, identifying such modifications and certifying that the Lease, as modified, is in full force and effect); (B) the dates to which the Base Rental and Tenant’s Operating Expenses have been paid; (C) that the Landlord is not in default under any provision of this Lease (or if Landlord is in default, specifying each such default); (D) the address to which notices to Tenant shall be sent; and (E) other matters as such mortgagee(s), purchaser(s) or investor may reasonably require, and in the form of estoppel certificate that such mortgagee(s), purchaser(s) or investor may require; and |
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b. |
deliver to Landlord such information regarding the net worth and financial condition of Tenant as Landlord may reasonably request in connection with such mortgage, sale or investments. |
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26. |
Leasehold Improvements |
|
a. |
Subject to the terms and conditions of this Lease, including, but not limited to, construction of the initial Leasehold Improvements, Tenant is leasing the Leased Premises in an “as-is” condition that existed as of the date of this Lease. Tenant and Landlord shall comply |
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with and be bound by the provisions of the Work Letter regarding construction of the initial Leasehold Improvements.
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b. |
Tenant shall not be deemed to be the agent or representative of Landlord in making any alterations, physical additions or improvements to the Leased Premises, and shall have no right, power or authority to encumber any interest in the Project in connection therewith. However, should any mechanics’ or other liens be filed against any portion of the Project or any interest therein by reason of Tenant’s acts or omissions or because of a claim against Tenant or its contractors, Tenant shall cause the same to be cancelled or discharged of record by bond or otherwise within ten (10) days after notice by Landlord. If Tenant shall fail to cancel or discharge said lien or liens within said ten (10) day period, which failure shall be deemed to be a default hereunder, Landlord may, at its sole option and in addition to any other remedy of Landlord hereunder, cancel or discharge the same and upon Landlord’s demand, Tenant shall promptly reimburse Landlord for all costs incurred in canceling or discharging such lien or liens. |
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c. |
Tenant shall pay all ad valorem taxes (if separately assessed by the appraisal district), and increased insurance premiums that are payable on account of any leasehold improvements that are above Building Standard. |
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27. |
Limitation of Landlord’s Personal Liability |
Tenant specifically agrees to look solely to Landlord’s interest in the Project for the recovery of any judgment from Landlord, it being agreed that Landlord (and its partners and shareholders) shall never be personally liable for any such judgment. Tenant waives all rights to claim a lien under §91.004(b) of the Texas Property Code or any other law against the rent, the Project or Landlord’s property.
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28. |
Parking |
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a. |
Tenant shall, at all times during the Term, have parking rights for fifteen (15) unreserved parking spaces (each a “Parking Space”) in the parking garage adjacent to the Building (the “Garage”). No specific spaces in the Garage are to be assigned to Tenant, but Landlord will issue to Tenant the aforesaid number of parking stickers, each of which will authorize parking in the Garage of a vehicle on which the sticker is displayed, or Landlord will provide a reasonable alternative means of identifying and controlling vehicles authorized to park in the Garage. Landlord may designate the area or areas of the Garage within which each such vehicle may be parked, and Landlord may change such designations from time to time. Landlord may make, modify and enforce rules and regulations relating to the parking of vehicles in the Garage, and Tenant will abide by and cause its agents, employees and invitees to comply with such rules and regulations. Landlord may provide parking for visitors to the Building in an area designated by Landlord and in a capacity determined by Landlord to be appropriate for the Building. Landlord reserves the right to charge and collect a fee for parking in the visitor parking area in an amount determined by Landlord to be appropriate. Landlord, at its sole discretion, may change the designated area for the visitor parking and the fee to be charged for its use. |
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|
b. |
As the charge for said Parking Spaces (“Parking Charges”), Tenant covenants and agrees to pay Landlord during the Term, as Additional Rent hereunder, $50.00 for each unreserved Parking Space leased hereunder, such sum to be payable monthly in advance on the first day of each and every calendar month during the Term, and a pro rata portion of such sum shall be payable for the first and last partial calendar month of the Term in the event the Term commences on a date other than the first day of a calendar month. Tenant’s obligation to pay the Parking Charges shall be considered an obligation to pay Rent for all purposes hereunder and shall be secured in like manner as is Tenant’s obligation to pay Rent. Default in payment of such Parking Charges shall be deemed a default in payment of Rent. All Parking Charges are subject to applicable sales tax. Notwithstanding anything herein to the contrary, the Parking Charges for the fifteen (15) unreserved Parking Spaces in the Garage will be waived from the Commencement Date through the end of Month 16 of the Term. |
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c. |
Landlord agrees to furnish, at Landlord’s cost, one access card (“Garage Access Card(s)”) for each Parking Space leased for entering the Garage. Tenant and Landlord stipulate that, as of the date of this Lease, the access card system utilized by Landlord for the Project permits the programming of each Building Access Card for access to the Garage, and each Building Access Card programmed for access to both the Building and Garage will be a “Garage Access Card” for purposes of this Section 28.c; it being understood that as of the date of this Lease, Landlord will not issue separate Building Access Cards and Garage Access Cards. Landlord reserves the right to change the system of access to the Garage and/or the Building, at Landlord’s expense, which may result in a different access card system for entry to the Building and/or the Garage. |
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d. |
One of the unreserved Parking Spaces allocated to Tenant in Subsection (a) above may be converted to a reserved space in the Garage, at a cost of $80.00 per reserved space per month, plus applicable sales tax. Except as set forth otherwise in the preceding sentence, the same provisions set forth above in Subsections (a) and (b) apply to the reserved space, except that there will be no abatement or waiver of the Parking Charges for any reserved space. Tenant must give at least thirty (30) days' prior written notice to Landlord of its desire to so convert one unreserved space to a reserved space. |
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29. |
Condemnation |
Landlord and Tenant agree that if the Leased Premises is taken or condemned for any public purpose to such an extent as to render the Leased Premises untenantable, this Lease shall, at the option of either party, forthwith cease and terminate. Provided however, in the event that the Leased Premises is partially taken or condemned for any public purpose and the remainder of the Leased Premises is tenantable and may be reasonably used by Tenant for the operation of Tenant’s business, then at the option of Landlord, this Lease will continue in full force and effect, the Rent hereunder shall be reduced based upon the percentage of the Leased Premises rendered untenantable, and Landlord and Tenant agree to execute any amendment to the Lease necessary to carry out the purpose of this provision. All proceeds from any taking or condemnation of the Leased Premises shall belong to and be paid to Landlord, provided however, so long as there is no diminution of Landlord’s award as a result, that Tenant may file a separate claim with any third party other than Landlord in connection with the taking or condemnation to seek a separate award
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in respect of the loss, if any, to Tenant’s alterations or improvements paid for by Tenant without any credit or allowance from Landlord, and for any personal property, equipment and trade fixtures of Tenant affected by such condemnation.
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30. |
Damages from Certain Causes |
Landlord and Tenant agree that Landlord shall not be liable or responsible to Tenant for any loss or damage to any property or person, whether or not foreseeable, occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, act of terrorism, court order, requisition or order of governmental body or authority, a failure to act or delay of any governmental body or authority, as with respect to issuing a required permit, or any cause beyond Landlord’s reasonable control, or for any damage or inconvenience which may arise through repair or alteration of any part of the Project.
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31. |
Lien for Rent |
In consideration of the mutual benefits arising under this Lease, Tenant hereby grants to Landlord a lien and security interest on all property of Tenant now or hereafter placed in or upon the Leased Premises, and such property shall be and remain subject to such lien and security interest of Landlord for payment of all Rent and other sums agreed to be paid by Tenant herein. The provisions of Section 31 relating to said lien and security interest shall constitute a security agreement under Article 9 of the Texas Business and Commerce Code (“Code”) so that Landlord shall have and may enforce a security interest on all property of Tenant now or hereafter placed in or on the Leased Premises, including but not limited to all fixtures, machinery, equipment, furnishings and other articles of personal property now or hereafter placed in or upon the Leased Premises by Tenant. Tenant agrees to execute as debtor such financing statement or statements as Landlord may now or hereafter reasonably request in order that such security interest or interests may be protected pursuant to said Code. Landlord may at its election at any time file a copy of this Lease as a financing statement. Landlord, as secured party, shall be entitled to all of the rights and remedies afforded a secured party under said Code in addition to and cumulative of the Landlord’s liens and rights provided by law or by the other terms and provisions of this Lease.
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32. |
Holding Over |
In the event Tenant fails to vacate the Leased Premises upon expiration or termination of this Lease without the written consent of Landlord, Tenant shall be considered a holdover Tenant. Thereafter this Lease shall be considered a tenancy at sufferance upon the same terms as set forth in this Lease except the Base Rental shall be equal to two times the Base Rental set forth herein, and any extension or renewal options shall be null and void. No holding over by Tenant after the termination of this Lease shall be construed to extend the Lease; in the event of any unauthorized holding over, Tenant shall indemnify Landlord against all claims for damages by any other tenant to whom Landlord may have leased all or any part of the Leased Premises effective after the termination of this Lease.
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33. |
Casualty Clause |
In the event of a fire or other casualty in the Leased Premises, Tenant shall immediately give notice thereof to Landlord. If the Leased Premises, through no fault or neglect of Tenant, its agents, employees, invitees or visitors, shall be partially destroyed by fire or other casualty so as to render the Leased Premises untenantable, the Rent provided for herein shall abate thereafter until such time as the Leased Premises are made tenantable as determined by Landlord (but in no event shall Landlord’s obligation exceed Building Standard Improvements). In the event of the complete destruction of the Leased Premises without fault or neglect of Tenant, its agents, employees, invitees or visitors, then Landlord or Tenant may terminate this Lease and all Rent owed up to the time of such damage, destruction or termination shall be paid by Tenant and thenceforth this Lease shall cease and come to an end. In the event of partial or complete destruction of the Leased Premises or the Project or a portion thereof from any cause and Landlord elects not to rebuild, then Landlord or Tenant may terminate this Lease and all Rent owed up to the time of such damage, destruction, or termination shall be paid by Tenant and thenceforth this Lease shall cease and come to an end.
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|
34. |
Attorneys’ Fees; Conflicts; Venue |
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a. |
In any action or proceeding brought by Landlord or Tenant regarding the performance of any of the terms, covenants, agreements or conditions contained in this Lease, including a forcible entry and detainer action by Landlord in connection with a default by Tenant, Landlord and Tenant agree that the prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees, investigations and other costs, and court costs. |
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b. |
This Lease is a Texas contract, and all of the terms hereof shall be construed according to the laws of the State of Texas without giving effect to its conflict of law provisions. |
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c. |
Venue for any and all disputes in anyway relating to, arising under, connected with, or incident to this Lease shall lie exclusively in Harris County, Texas. |
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35. |
Amendments |
This Lease may not be altered, changed or amended, except by an instrument in writing signed by both parties hereto.
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36. |
Assignment by Landlord |
Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Project and property referred to herein, and in such event and upon such transfer (any such transferee to have the benefit of, and be subject to, the provisions of Sections 13 and 27 hereof) no further liability or obligation shall thereafter accrue against Landlord hereunder or under any agreement relating to this Lease.
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37. |
Default by Tenant |
The occurrence of any of the following shall constitute a material default and breach of the
Lease:
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|
a. |
A failure by Tenant to pay Rent or Additional Rent or to make any other payment required to be made by Tenant under this Lease; |
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b. |
A failure by Tenant to perform any other obligation, covenant, or condition which Tenant is required to observe and to perform, and such default shall continue for twenty (20) days after Landlord sends written notice to Tenant; provided, however, that if Landlord has given Tenant a notice of the same or substantially the same default under this subsection two (2) times, and if the same or substantially the same defaults occurs again, Landlord will not be obligated to give Tenant any further notices prior to exercising any of Landlord’s remedies under this Lease; and |
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c. |
Landlord may treat the occurrence of any one or more of the following events as an immediate and material breach and default of this Lease (provided that no such described levy, execution, legal process or petition filed against Tenant shall constitute a breach of this Lease if Tenant shall vigorously contest the same by appropriate proceedings and shall remove or vacate the same within thirty (30) days from the date of its creation, service or filing): |
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i. |
If the interest of Tenant under this Lease is levied on under execution or other legal process; |
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ii. |
If any petition is filed by or against Tenant to declare Tenant a bankrupt or to delay, reduce or modify Tenant’s debt or obligations hereunder; |
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iii. |
If any petition is filed or other action taken to reorganize or modify Tenant’s capital structure if Tenant is a corporation or other entity; |
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iv. |
If Tenant is declared insolvent according to law; |
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v. |
If any assignment of Tenant’s property shall be made for the benefit of creditors; |
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vi. |
If a receiver or trustee is appointed for Tenant or its property; |
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vii. |
If Tenant abandons or vacates the Leased Premises without paying Rent during the Term; |
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viii. |
If Tenant is a corporation or legal entity and Tenant shall cease to exist as a corporation or legal entity in good standing under applicable law; or |
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ix. |
If Tenant is a partnership or other entity and shall be dissolved or otherwise liquidated. |
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38. |
Remedies |
In the event a default occurs on the part of Tenant as set forth above, Landlord may exercise one or more of the following described remedies, in addition to all other rights and remedies available at law or in equity, whether or not stated in this Lease, all of which are cumulative:
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|
a. |
Landlord may continue this Lease in full force and effect and shall have the right to collect Rent (and other amounts due under this Lease) when due, whether or not Tenant has vacated the Leased Premises, and whether or not Landlord has repossessed the Leased Premises, and may file suit from time to time to enforce this remedy. |
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b. |
Landlord may continue this Lease in full force and effect and shall have the right to collect Rent (and other amounts due under this Lease) when due, and Landlord may also (but shall be under no obligation to do so by reason of this Lease) repossess the Leased Premises with or without legal process and relet them, or any part of them, to one or more third parties for Tenant’s account, and Tenant hereby expressly waives any and all claims for damages arising by reason of such repossession and reletting. |
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c. |
Without terminating this Lease, Landlord may terminate the Tenant’s right of possession under the Lease, and repossess the Leased Premises, in which event, Landlord shall be entitled to recover as damages a sum of money equal to the total of: (i) the cost of recovering the Leased Premises, including, without limitation, attorneys’ fees and legal expenses, (ii) the unpaid Rent due and unpaid at the time of repossession of the Leased Premises, (iii) the balance of the Rent from the time of repossession of the Leased Premises through the remainder of the Term, less the fair market rental value of the Leased Premises for that period discounted to present value at a rate of eight percent (8%) per annum, (iv) any other sum of money and damages owed by Tenant to Landlord (including, without limitation, any identified in this Lease), and (v) interest thereon at the maximum non-usurious rate per annum from the due date until paid. |
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d. |
Landlord may terminate this Lease and repossess the Leased Premises, in which event, Landlord shall be entitled to recover as damages a sum of money equal to the total of: (i) the cost of recovering the Leased Premises, including, without limitation, attorneys’ fees and legal expenses, (ii) the unpaid Rent due and unpaid at the later to occur of the time of termination or repossession, (iii) any other sum of money and damages owed by Tenant to Landlord (including, without limitation, any identified in this Lease), and (iv) interest thereon at the maximum non-usurious rate per annum from the due date until paid. |
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e. |
Tenant shall be liable to Landlord for and shall immediately pay, as Additional Rent, all of the costs and expenses of repossession and reletting, if any, together with broker’s fees, decorations, repairs, changes, alterations and additions and the expense of any such reletting and of the collection of the Rent accruing therefrom to satisfy the Rent provided for in this Lease to be paid. Reletting can be for a period shorter or longer than the remaining Term and can be for part of or the entirety of the Leased Premises, and in no event shall Landlord be under any obligation to relet part of or the entirety of the Leased Premises. To the extent any duty or obligation to mitigate damages is applicable to Landlord, Tenant agrees that Landlord has fully complied with its duty or obligation to mitigate damages by making the Leased Premises available for rental at fair market value through a broker. On the dates such Rent is due, Tenant shall pay to Landlord a sum equal to the Rent and other amounts due under this Lease, and Landlord may, by notice to Tenant, provide Tenant credit against the Rent for any sums paid as Rent that Landlord receives from any reletting. No act by Landlord allowed by this section shall terminate this Lease unless Landlord notifies Tenant in writing that Landlord elects to terminate this Lease. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach. |
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f. |
Tenant agrees that after and during a default under this Lease, Landlord may enter the Leased Premises under this provision by use of a master key, a duplicate key or any other means to the extent permitted by law and without breaching the peace and change, alter or modify the door locks or other security devices on all entry doors of the Leased Premises thereby permanently excluding Tenant and its agents, employees, contractors, directors, invitees, licensees, and invitees from the Leased Premises, and Landlord shall not be liable to Tenant for damages in connection therewith. Tenant agrees that this provision of the Lease will override and control any conflicting provisions of Sections 93.002 and 93.003 of the Texas Property Code, as well as any successor statute governing the right of a Landlord to change the door locks of a commercial Tenant. |
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39. |
Bankruptcy |
The following provisions shall apply in the event of the bankruptcy or insolvency of Tenant:
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a. |
In connection with any proceeding under Chapter 7 of the Bankruptcy Code where the trustee of Tenant elects to assume this Lease for the purposes of assigning it, such election or assignment may only be made upon compliance with the provisions of subparts (b) and (c) below, which conditions Landlord and Tenant acknowledge to be commercially reasonable. In the event the trustee elects to reject this Lease, then Landlord shall immediately be entitled to possession of the Leased Premises, and the Leased Premises shall immediately be surrendered to Landlord, without further obligation to Tenant or the trustee. |
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b. |
Any election to assume this Lease under Chapter 11 or 13 of the Bankruptcy Code by Tenant as debtor-in-possession or by Tenant’s trustee (the “Electing Party”) must provide for the Electing Party to cure or provide to Landlord adequate assurance that it will cure all monetary defaults under this Lease within fifteen (15) days from the date of assumption and it will cure all nonmonetary defaults under this Lease within thirty (30) days from the date of assumption. Landlord and Tenant acknowledge such condition to be commercially reasonable. Tenant’s cure obligation includes the obligation to pay compensation to Landlord for any actual pecuniary loss, including, without limitation, attorneys’ fees. |
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c. |
If the Electing Party has assumed this Lease or elects to assign Tenant’s interest under this Lease to any other person, such interest may be assigned only if the intended assignee has provided adequate assurance of future performance (as herein defined), of all of the obligations imposed on Tenant under this Lease. For the purposes hereof, “adequate assurance of future performance” means that Landlord has ascertained that each of the following conditions has been satisfied: |
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|
i. |
The assignee has submitted a current financial statement, certified by its chief financial officer, which shows a net worth and current and anticipated working capital available in amounts sufficient to assure the future performance by the assignee of Tenant’s obligations under this Lease; and |
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ii. |
Landlord has obtained consents or waivers from any third parties which may be required under a lease, mortgage, financing arrangement, or other agreement by which Landlord is bound, to enable Landlord to permit such assignment. |
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d. |
Landlord’s acceptance of rent or any other payment from any trustee, receiver, assignee, person, or other entity will not be deemed to have waived, or waive, the requirement of Landlord’s consent, Landlord’s right to terminate this Lease for any transfer of Tenant’s interest under this Lease without such consent, or Landlord’s claim for any amount of Rent due from Tenant. |
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40. |
Non-Waiver |
Failure of Landlord to declare any default immediately upon occurrence thereof, or delay in taking any action in connection therewith, shall not waive such default, but Landlord shall have the right to declare any such default at any time and take such action as might be lawful or authorized hereunder, either in law or in equity. Landlord may collect and receive any Rent due from Tenant and the payment thereof shall not constitute a waiver of or affect any notice or demand given, suit instituted or judgment obtained by Landlord, or be held to waive, affect, change, modify or alter the rights or remedies which Landlord may have in equity or at law or by virtue of this Lease at the time of such payment.
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41. |
Casualty Insurance |
Landlord shall maintain Causes of Loss – Special Form (or equivalent) insurance on the base building portion of the Building and on Building Standard Improvements within the Leased Premises, and in amounts determined by the Landlord in its sole discretion. Said insurance shall be at the expense of Landlord (which expense shall be an Operating Expense pursuant to Section 7(a)(5) of this Lease) and payments for losses thereunder shall be made solely to Landlord and Landlord’s mortgagees, if any. Tenant shall maintain, at its expense, Causes of Loss – Special Form (or equivalent) insurance on all of its personal property, including removable trade fixtures, located in the Leased Premises and on all additions and leasehold improvements to the Leased Premises which exceed Building Standard, with a deductible, if any, no greater than $25,000.00. If the annual premiums to be paid by Landlord shall exceed the standard rates because Tenant’s operations, contents of the Leased Premises, or leasehold improvements with respect to the Leased Premises beyond Building Standard, result in extra-hazardous exposure or increased costs, Tenant shall promptly pay the excess amount of the premium to Landlord as Additional Rent hereunder.
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42. |
Liability Insurance |
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|
a. |
Landlord shall, at its expense (which expense shall be an Operating Expense pursuant to Section 7(a)(5) of this Lease), maintain a policy or policies of commercial general liability insurance in amounts determined by the Landlord in its sole discretion. |
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b. |
During the Term, Tenant shall, at its sole expense, carry insurance for the benefit of the parties hereto as follows: |
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i. |
Worker’s Compensation insurance providing coverage for statutory benefits in the state(s) where work is to be performed under this Lease and as may be required by local law in the operation area in which Tenant may become legally obligated to pay benefits. |
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ii. |
Employers Liability insurance with limits of at least $1,000,000 each Accident for Bodily Injury by Accident and $1,000,000 each employee and policy limit for Bodily Injury by Disease. |
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iii. |
Commercial Automobile Liability insurance covering owned, hired and non-owned vehicles with limits of at least $1,000,000 combined single limit each occurrence for bodily injury and property damage. |
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iv. |
Commercial General Liability insurance with limits of at least $1,000,000 each occurrence and $2,000,000 General Aggregate for Bodily Injury and Property Damage combined, including designated location(s) general aggregate limit. Such insurance shall be written on an “occurrence” form and shall be endorsed to include the Leased Premises. |
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v. |
Umbrella or Excess Liability insurance with limits of at least $2,000,000 each occurrence and aggregate where applicable in excess of the coverages and limits of the liability of the policies set forth in subsections (ii), (iii), and (iv) above. |
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c. |
All of Tenant’s and any subtenant’s policies shall be endorsed to: |
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i. |
Name Landlord, the manager for the Project, and their respective subsidiaries, affiliates, partnerships, directors, officers, partners and employees (“Landlord Parties”) as Additional Insureds, except this requirement shall not apply to subsections (b)(i) and (ii) above; |
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ii. |
Waive Underwriters’ rights of subrogation or recovery against Landlord Parties; |
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iii. |
Provide thirty (30) days’ prior written notice of cancellation of or material change in coverage to Landlord; and |
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iv. |
Stipulate that Tenant’s insurance will be primary to and will not seek contribution from any other insurance carried by Landlord Parties, with Landlord Parties’ insurance being excess, secondary and non-contributing, and Tenant’s policies shall be appropriately endorsed. |
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|
d. |
Tenant’s insurance policies required by Section 42(b) will have a deductible, if any, no greater than $25,000.00. Losses not covered by Tenant’s insurance, including but not limited to deductibles, co-insurance penalties and defense costs, shall be borne by Tenant. All of Tenant’s insurance described above shall be placed with insurance companies satisfactory to Landlord. A Certificate of Tenant’s insurance, including copies of all appropriate endorsements, and proof of Tenant’s payment of premium, shall be delivered to Landlord contemporaneously with the delivery of executed counterparts of this Lease, and thereafter, shall be mailed to Landlord within thirty (30) days of each renewal of such insurance. When requested by Landlord, Tenant shall furnish complete certified copies of all its policies to Landlord. |
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e. |
Tenant acknowledges that Landlord requires all vendors or subcontractors hired by Tenant to provide evidence of insurance coverage prior to commencing any service in the Leased Premises. |
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43. |
Release and Waiver; Indemnity |
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a. |
TO THE EXTENT PERMITTED BY LAW, TENANT (A “RELEASING PARTY”) RELEASES AND WAIVES ANY CLAIMS IT MAY HAVE AGAINST THE LANDLORD PARTIES (THE “RELEASED PERSONS”) AND LANDLORD (ALSO A “RELEASING PARTY”) RELEASES AND WAIVES ANY CLAIMS IT MAY HAVE AGAINST THE TENANT (ALSO A “RELEASED PERSON”) FOR BUSINESS INTERRUPTION OR DAMAGE TO PROPERTY SUSTAINED BY THE RELEASING PARTY AS THE RESULT OF ANY ACT OR OMISSION OF THE RELEASED PERSON(S) IN ANY WAY CONNECTED WITH ANY LOSS COVERED BY INSURANCE, WHETHER REQUIRED HEREIN OR NOT, OR WHICH SHOULD HAVE BEEN COVERED BY INSURANCE REQUIRED HEREIN, INCLUDING THE DEDUCTIBLE AND/OR UNINSURED PORTION THEREOF, MAINTAINED AND/OR REQUIRED TO BE MAINTAINED BY THE RELEASING PARTY PURSUANT TO THIS LEASE. THE WAVIER OF CLAIMS CONTAINED IN THIS SECTION 43 (I) WILL SURVIVE THE END OF THE TERM AND (II) WILL APPLY EVEN IF THE LOSS IS CAUSED IN WHOLE OR IN PART BY THE ORDINARY NEGLIGENCE OR STRICT LIABILITY OF THE RELEASED PERSON(S) BUT WILL NOT APPLY TO THE EXTENT A LOSS OR DAMAGE IS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE RELEASED PERSON(S). |
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b. |
TO THE EXTENT PERMITTED BY LAW, TENANT SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS THE LANDLORD PARTIES AGAINST ANY CLAIM BY ANY THIRD PARTY FOR INJURY TO ANY PERSON OR DAMAGE TO OR LOSS OF ANY PROPERTY OCCURRING IN OR AROUND THE PROJECT AND ARISING FROM THE USE OR OCCUPANCY OF THE LEASED PREMISES OR FROM ANY OTHER ACT OR OMISSION OR NEGLIGENCE OF TENANT, OR TENANT’S SUBTENANTS OR ANY OF TENANT’S OR SUBTENANT’S OFFICERS, DIRECTORS, EMPLOYEES, CONTRACTORS, AGENTS OR INVITEES. |
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c. |
TO THE EXTENT PERMITTED BY LAW, LANDLORD SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS TENANT AND ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS AGAINST ANY CLAIM BY ANY THIRD PARTY FOR INJURY TO ANY PERSON OR DAMAGE TO OR LOSS OF ANY PROPERTY OCCURRING IN THE PROJECT AND ARISING FROM ANY ACT OR OMISSION OR NEGLIGENCE OF ANY OF THE LANDLORD PARTIES. |
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|
d. |
THE INDEMNITIES CONTAINED IN THIS SECTION 43 ARE (i) INDEPENDENT OF TENANT’S AND LANDLORD’S INSURANCE (AS APPLICABLE), (ii) WILL NOT BE LIMITED BY COMPARATIVE NEGLIGENCE STATUTES OR DAMAGES PAID UNDER THE WORKERS’ COMPENSATION ACT OR SIMILAR EMPLOYEE BENEFIT ACTS, AND (iii) WILL SURVIVE THE END OF THE TERM. NOTWITHSTANDING ANYTHING IN THIS LEASE TO THE CONTRARY, TO THE EXTENT THE INDEMNIFIED LIABILITY, LOSS, COST, DAMAGE OR EXPENSE ARISES OUT OF THE JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE, CAUSATION, RESPONSIBILITY OR FAULT OF TENANT AND LANDLORD, WHETHER NEGLIGENCE, STRICT LIABILITY, BREACH OF WARRANTY, EXPRESS OR IMPLIED, PRODUCTS LIABILITY, BREACH OF THE TERMS OF THIS LEASE OR WILLFUL MISCONDUCT, THEN THE INDEMNIFYING PARTY’S OBLIGATION TO THE INDEMNIFIED PERSONS SHALL ONLY EXTEND TO THE PERCENTAGE OF TOTAL RESPONSIBILITY OF THE INDEMNIFYING PARTY IN CONTRIBUTING TO SUCH LIABILITY, LOSS, COST, DAMAGE OR EXPENSE OF THE INDEMNIFIED PERSONS. |
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44. |
Waiver of Subrogation Rights |
Anything in this Lease to the contrary notwithstanding, Landlord and Tenant each hereby waive (and shall cause its insurance carrier(s) and any other party claiming through or under such carrier(s), by way of subrogation or otherwise, to waive) any and all rights of recovery, claim, action or cause of action, against the other, its agents, officers, or employees, for any loss or damage that may occur to the Leased Premises, or any leasehold improvements thereto, or the Project, or any improvements thereto, or any personal property of such party therein, by reason of fire, the elements, or any other cause which could be insured against under the terms of insurance policies referred to in Section 41 hereof, regardless of cause or origin, including negligence of the other party hereto, its agents, officers or employees, and agrees that no insurer under such policies shall hold any right of subrogation against such other party. The insurance policies to be retained by Tenant pursuant to this Lease shall be endorsed to acknowledge the waiver in favor of Landlord Parties by the insurer under such policies of the aforementioned right of subrogation.
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45. |
Name of Building |
Landlord may change the name of the Building at any time without notice to Tenant and Tenant shall not use the name of the Building for any purpose other than its mailing address.
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46. |
Notices |
Any notice which may or shall be given under the terms of this Lease shall be in writing and shall be either delivered by hand, delivered by a commercially recognized express mail or messenger service, or sent by United States Mail, certified or registered, return receipt requested,
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postage prepaid, to the addresses set forth below. Such addresses may be changed from time to time by either party by giving written notice as provided herein. Notice shall be deemed given upon the date of delivery if by hand or messenger service (or attempted delivery if such delivery is unsuccessful), as evidenced by the records of the express mail or messenger service, as applicable, or in the case of certified or registered mail, the earlier of receipt as evidenced by the records of the return receipt or three (3) days following deposit in the mail.
For the Landlord:
Franklin Post Oak, Ltd.
5444 Westheimer, Suite 1500
Houston, Texas 77056 Attention: Property Manager
with a copy to:
Franklin Post Oak, Ltd.
c/o Tanglewood Property Group 5444 Westheimer, Suite 1435
Houston, Texas 77056 Attention: President
For the Tenant:
Orbital Infrastructure Group, Inc. 5444 Westheimer, Suite 1435
Houston, Texas 77056 Attention: William J. Clough
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47. |
Relocation |
Tenant agrees that Landlord may substitute for the Leased Premises other premises (herein referred to as the “New Premises”) in the Building provided: (i) the New Premises shall be comparable to the Leased Premises in area; (ii) Landlord shall give Tenant at least sixty (60) days’ written notice before making such change, and the parties shall execute an amendment to the Lease confirming the change; and (iii) if Tenant shall already have taken possession of the Leased Premises, Landlord shall pay: (a) the direct, out-of-pocket, reasonable expenses of Tenant in moving from the Leased Premises to the New Premises and improving the New Premises so that they are substantially similar to the Leased Premises; and (b) up to $500.00 of costs incurred by Tenant as a result of the relocation, including without limitation costs incurred in changing addresses on stationery, business cards, directories, advertising and other such items.
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48. |
Survival; Entire Agreement |
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a. |
All of Tenant’s covenants and obligations contained in this Lease which have not been performed at the time of termination of the Lease shall survive the expiration or earlier termination of this Lease. No provision of this Lease providing for termination of this Lease prior to expiration of the Term in certain events shall be construed as a limitation or restriction of Landlord’s rights and remedies at law or in equity available upon a breach by Tenant of this Lease. |
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|
b. |
This Lease shall be binding upon and inure to the benefit of the successors of Landlord, and shall be binding upon and inure to the benefit of Tenant, its successors and assigns, to the extent permitted or approved by Landlord hereunder. The pronouns of any gender shall include the other genders, and either the singular of the plural shall include the other. |
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c. |
All rights and remedies of Landlord under this Lease shall be cumulative and none shall exclude any other rights or remedies allowed by law. |
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d. |
Time is of the essence of this Lease. |
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e. |
This Lease (including its exhibits) constitutes the entire agreement between the parties hereto with respect to the subject matter of this Lease, and supersedes all prior agreements, understandings, discussions and negotiations, written or oral, between the parties. There are no representations, warranties, agreements, or promises pertaining to the subject matter of in this Lease that are not contained in this Lease, and Tenant is not relying on any statements or representations of Landlord, any agent of Landlord, or any other party, that are not contained in this Lease. |
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49. |
Real Estate Brokers |
Tenant represents to Landlord that Tenant has not dealt with any broker in connection with this Lease, other than Compass RE Texas, LLC (“Tenant’s Broker”). Landlord agrees to pay Tenant’s Broker a commission pursuant to one or more separate agreements between Landlord and Tenant’s Broker. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent, other than Tenant’s Broker, occurring by, through or under the indemnifying party. The parties acknowledge that Tanglewood Property Management Company, LLC, as property manager, is representing Landlord and Landlord's interests in such capacity.
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50. |
Telecommunications |
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a. |
Landlord reserves the right as promulgated by state and federal laws, rules and regulations to oversee and manage the telecommunication issues, equipment and cabling in the Building. Tenant will notify Landlord of any telecommunication needs, requirement and issues as required or deemed necessary by the Tenant. Landlord will not unreasonably delay any request by Tenant regarding any telecommunications issues or needs. Landlord will not unreasonably deny or discriminate regarding entry to the Building by any telecommunications provider, but will seek a fair and reasonable agreement based on available space in the Building; health, safety and engineering issues and other issues that directly affect the Building and the Building’s tenants. |
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b. |
Landlord reserves the right now or in the future to install a minimum point of entry cable facility and a cable/fiber riser system within the Building and require all telecommunication providers to equally utilize this location or area depending on the space available and utilize the cable or fiber riser system as each telecommunications provider chronologically seeks to enter the Building. If the telecommunications providers currently have equipment and cabling in the Building riser when Landlord institutes the Building cable facility, Landlord will give that telecommunications provider(s) ninety (90) days written notice that Landlord will be completing a new cable riser facility in the Building and that the telecommunications provider will be required to move to the minimum point of entry and connect to the Building’s cable riser system. |
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c. |
Tenant agrees to indemnify and hold the Landlord, Landlord’s partners, agents, employees and contractors harmless from all liabilities and damages regarding telecommunication services and issues as well as the telecommunications riser facility installed or present in the Building by any telecommunications company or provider. |
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d. |
Telecommunications will evolve and increase in need during the Term. Landlord will use commercially reasonable efforts to accommodate all reasonable needs and requirements of all tenants and all telecommunications providers. |
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51. |
Fees for Tenant Requested Forms |
During the Term, Tenant may request certain specific forms which may be necessary for Landlord to prepare, review, consent or approve.
The fees for such forms are as follows:
Form Fee per occurrence
Landlord’s Waiver & Consent $1,500.00
Sub-Lease Agreement $1,500.00
Miscellaneous Amendments (e.g., Tenant name change, $1,500.00
early termination, or any document that does not create at least six months of additional Base Rental income for the Landlord)
Review of remodeling plans for any modification of
the Leased Premises $25.00 per sheet
not to exceed $200.00
Any form requiring lender approval or involvement Costs of lender and any
attorney fees plus 15% Landlord administrative fee
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52. |
Force Majeure |
In the event that Landlord shall be delayed in the performance of any obligation hereunder as a result of strikes, lockouts, shortages of labor, fuel or materials, acts of God, legal requirements, fire or other casualty, or any other cause beyond the control of Landlord (collectively, “Force Majeure”), then the performance of such obligation shall be excused for the period of such delay, and the period for the performance of such obligation shall be extended by the number of days equivalent to the number of days of such delay. Landlord shall in no event be required to settle or compromise any strike, lockout or other labor disputes, the resolution thereof being within the sole discretion of Landlord.
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53. |
Hazardous Substances |
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a. |
The term “Hazardous Substance(s)” as used in the Lease, is defined as any element, compound, mixture, solution, particle or substance, which presents danger or potential danger for damage or injury to health, welfare or to the environment including, but not limited to: |
(i) those substances which are inherently or potentially radioactive, explosive, ignitable, corrosive, reactive, carcinogenic or toxic and (ii) those substances which have been recognized as dangerous or potentially dangerous to health, welfare or to the environment by any federal, municipal, state, county or other governmental or quasi-governmental authority and/or any department or agency thereof.
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b. |
At all times during the Term, Tenant shall: |
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i. |
promptly comply at Tenant’s own cost and expense, with all laws, orders, rules, regulations, certificates of occupancy, or other requirements, as the same now exist or may hereafter be enacted, amended or promulgated, of any federal, municipal, state, county or other governmental or quasi-governmental authorities and/or any department or agency thereof relating to the manufacturing, processing, distributing, using, producing, treating, storing (above or below ground level), disposing or allowing to be present Hazardous Substances in or about the Leased Premises or the Project. |
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ii. |
indemnify and hold Landlord, its agents and employees, harmless from any and all demands, claims, causes of action, penalties, liabilities, judgments, damages (including consequential damages) and expenses including, without limitation, court costs and reasonable attorneys’ fees incurred by Landlord as a result of (x) Tenant’s failure or delay in properly complying with such law, order, rule, regulation, certificate of occupancy or other requirement referred to in Section 53(b)(i) above or (y) any adverse effect which results from the presence of any Hazardous Substance in or about the Leased Premises caused by Tenant or Tenant’s agents, employees, contractors or any other person claiming under Tenant, with or without Tenant’s consent. If any action or proceeding is brought against Landlord, its agents or employees by reason of any such claim, Tenant, upon notice from Landlord, will defend such claim at Tenant’s expense with counsel reasonably satisfactory to Landlord. |
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iii. |
not permit the presence of any chlorinated solvent in or about the Leased Premises or the Project. |
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|
54. |
Certification Related to Executive Order 13224 and the USA PATRIOT Act |
Neither Tenant, nor to Tenant’s knowledge, any of Tenant’s officers, directors, shareholders, partners, members or associates, and no other direct or indirect holder of any equity interest in Tenant, is an entity or person: (i) that is listed in the Annex to, or is otherwise subject to the provisions of United States Presidential Executive Order 13224 issued on September 24, 2001 (“Executive Order”); (ii) whose name appears on the U.S. Department of the Treasury, Office of Foreign Assets Control’s (“OFAC”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, www.treas.gov/ofac/; (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in the Executive Order; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a “Prohibited Person”). Tenant covenants and agrees to use commercially reasonable efforts to ensure that neither Tenant, nor any of its officers, directors, shareholders, partners, members or associates, and no other direct or indirect holder of any equity interest in Tenant will: (a) conduct any business, or engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person; or (b) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001. On request by Landlord from time to time, Tenant further covenants and agrees promptly to deliver to Landlord any such certification or other evidence as may be requested by Landlord in its sole and absolute discretion, confirming that, to Tenant’s knowledge, no violation of this section shall have occurred.
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55. |
Counterparts |
This Lease may be executed in one or more counterparts each of which shall be deemed an original and when taken together shall constitute one agreement.
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56. |
Authority |
Tenant covenants and warrants that it has the authority to enter into this Lease and that all corporate or other authorizations required under Tenant’s governance documents have been obtained prior to the execution of this Lease.
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57. |
Waiver of Jury Trial |
Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either party against the other on any matter whatsoever arising out of, or in any way connected with, the Lease, the relationship of Landlord and Tenant created hereby, Tenant’s use or occupancy of the Leased Premises, and/or any claim for injury or damage. Landlord and Tenant acknowledge to each other that Landlord and Tenant are not in a significantly disparate bargaining position.
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58. |
Renewal Option |
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a. |
So long as (i) no default exists under this Lease, and (ii) Tenant leases the entire Leased Premises of 4,918 NRSF, Tenant is hereby granted the option to renew the term of this Lease for one (1) additional period of thirty-six (36) months (the “Renewal Term”) to commence at the expiration of the Initial Term. |
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b. |
Tenant shall exercise its option to renew as follows: Tenant shall deliver written notice (“Renewal Notice”) to Landlord of its intention to renew at least nine (9) months, but not earlier than twelve (12) months, prior to the expiration of the Initial Term, which Renewal Notice must be accompanied by current financial information regarding Tenant. If Landlord is not satisfied with Tenant’s financial condition, Landlord will send Tenant notice thereof, and Tenant shall not be entitled to exercise this renewal option. If Landlord is satisfied with Tenant’s financial condition, within thirty (30) days of Landlord’s receipt of Tenant’s Renewal Notice, Landlord shall notify Tenant in writing of the Market Base Rental Rate (hereinafter defined) for the Renewal Term that Tenant shall pay. Within forty-five (45) days after receipt of such written notice from Landlord, Tenant shall, if it elects, deliver written notice to Landlord of its election to exercise its renewal option hereunder. If Tenant does not respond within such forty-five (45) day period, Tenant’s right to renew hereunder shall terminate. All terms of this Lease shall apply to such Renewal Term, except (i) the Base Rental during the Renewal Term shall be the then-prevailing Market Base Rental Rate at the time Tenant exercises the renewal option, (ii) Tenant shall not have an option to renew this Lease beyond the expiration of the Renewal Term, (iii) Tenant shall not have the right to assign its renewal rights to any subtenant or assignee of the Leased Premises nor may a subtenant or assignee exercise such renewal right, and (iv) the leasehold improvements will be provided in their then existing condition (i.e. on an “as-is” basis) at the time the Renewal Term commences. |
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c. |
As used in this Lease, the term “Market Base Rental Rate” shall mean the gross effective rate per square foot of net rentable area at which a willing landlord and a willing tenant would agree to lease comparable space to that for which the Market Base Rental Rate is being determined in comparable office buildings in the West Loop/Galleria area of Houston, Texas, which rate shall take into account all relevant economic and non-economic factors, including but not limited to: the credit-worthiness, reputation and other qualities of such tenant, the quality and reputation of the management of the building in question, the amount of space being offered for lease, the location within the building of such offered space, whether the space being offered is a full floor or a portion of a multi-tenant floor, the quality and finish of the offered space as it then exists, the age and quality of such building, the lease term and renewal options, the scheduled or actual commencement date, add-on factors, basis for paying operating expenses, and market inducements, such as free rent, moving expenses, and architectural, construction and lease assumption allowances. |
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|
d. |
Whenever Tenant is to pay the Market Base Rental Rate for space under the terms of this Lease, Tenant shall, in addition, pay its share of the Operating Expenses and Parking Charges. |
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e. |
Any defaults must be cured by Tenant prior to exercising the renewal option, and there can be no defaults at the commencement of the Renewal Term. |
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59. |
Letter of Credit |
Tenant will deposit a Letter of Credit (herein so called) with Landlord in the amount of $90,000.00 upon full execution of this Lease. Provided no default by Tenant has occurred, the required amount of the Letter of Credit will be reduced to $45,000.00 upon the expiration of the Month 16 of the Term, and $0 upon the expiration of Month 28 of the Term. The Letter of Credit secures Tenant’s performance of all Lease obligations through the last day of Month 28 of the Term. Landlord may apply the Letter of Credit against any cost Landlord incurs or damage Landlord suffers because Tenant fails to perform any Lease obligation, including payment of Rent. The Letter of Credit shall be substantially in the form attached hereto as Exhibit “D”. The Letter of Credit shall be subject to Landlord approval and provide for a clean, irrevocable, non- documentary and unconditional letter of credit issued by and drawable upon any commercial bank, trust company, national banking association or savings and loan association with offices for banking purposes in the City of Houston, Texas (the “Issuing Bank”), which has outstanding unsecured, uninsured and unguaranteed indebtedness, or shall have issued a letter of credit or other credit facility that constitutes the primary security for any outstanding indebtedness (which is otherwise uninsured and unguaranteed), that is then rated in respect of long-term counterparty risk, without regard to qualification of such rating by symbols such as “+” or “-” or numerical notation, “A” or better by Moody’s Investors Service and “A” or better by Standard & Poor’s Rating Service, and has combined capital, surplus and undivided profits of not less than $2,000,000,000. The Letter of Credit shall (a) name Landlord as beneficiary, (b) have a term of not less than one year, (c) permit multiple drawings, (d) be fully transferable by Landlord without the payment of any fees or charges by Landlord, and (e) otherwise be in form and content satisfactory to Landlord. If upon any transfer of the Letter of Credit, any fees or charges shall be so imposed, then such fees or charges shall be payable solely by Tenant and the Letter of Credit shall specify that it is transferable without charge to Landlord. If Landlord pays any such fees or charges, Tenant shall reimburse Landlord therefor upon written demand. The Letter of Credit shall provide that it shall be deemed automatically renewed, without amendment, for consecutive periods of one year each thereafter through the last day of the Month 28 of the Term (and in no event shall the Letter of Credit expire prior to the last day of Month 28 of the Term) unless the Issuing Bank sends notice (the “Non-Renewal Notices”) to Landlord by certified mail, return receipt requested, not less than 45 days next preceding the then expiration date of the Letter of Credit stating that the Issuing Bank has elected not to renew the Letter of Credit. The Issuing Bank shall agree with all drawers, endorsers and bona fide holders that drafts drawn under and in compliance with the terms of the Letter of Credit will be duly honored upon presentation to the Issuing Bank at an office location in Houston, Texas. The Letter of Credit shall be subject in all respects to the International Standby Practices 1998, International Chamber of Commerce Publication No. 590. If an event of default by Tenant occurs in the payment or performance of any of the terms, covenants or conditions of this Lease, including the payment of Rent, Landlord shall have the right by sight draft to draw, at
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its election, all or a portion of the proceeds of the Letter of Credit and thereafter hold, use, apply, or retain the whole or any part of such proceeds or shall have the right to apply or retain any cash security, as the case may be. If Landlord applies or retains any part of the proceeds of the Letter of Credit or cash security, Tenant, upon written demand, shall amend the Letter of Credit to increase the amount thereof by the amount so applied or retained or provide Landlord with an additional Letter of Credit in the amount so applied or retained so that Landlord shall have the full amount thereof on hand at all times through the last day of Month 28 of the Term. Upon a sale or other transfer of the Real Property or the Building, Landlord shall have the right to transfer the Letter of Credit or cash security to its transferee. With respect to the Letter of Credit, within five
(5) days after notice of such transfer, Tenant, at its sole cost, shall arrange for the transfer of the Letter of Credit to the new landlord, as designated by Landlord in the foregoing notice or have the Letter of Credit reissued in the name of the new landlord. Upon such transfer, Tenant shall look solely to the new landlord for the return of the Letter of Credit or such cash security and the provisions hereof shall apply to every transfer or assignment made of the Letter of Credit or cash security to a new landlord.
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60. |
Early Termination Option |
Provided Tenant is not in default at the time of exercise of the option granted herein, Tenant shall have a one-time right to terminate this Lease effective after the end of Month 28 of the Term, by giving Landlord no less than six (6) months’ prior written notice of same. Such notice shall not be delivered prior to the end of Month 28 of the Term. The effective date of termination is herein called the “Early Cancellation Date”. As consideration for such option, Tenant agrees to pay to Landlord within ten (10) days of delivery by Landlord of an invoice for such payment, a lump sum termination payment equal to one (1) month of Base Rental, plus one (1) month of Tenant’s Operating Expense, calculated at the rates and amounts applicable for the month immediately prior to the Early Cancellation Date, plus the unamortized Tenant Improvement Allowance, the unamortized Abated Rent, and the unamortized commissions and legal fees paid by Landlord in connection with this Lease, all at eight percent (8%) annual interest. In addition, as a condition to the right to terminate this Lease, Tenant must continue to comply with all of the terms of this Lease from the date Tenant sends its notice to terminate until the Early Cancellation Date, including the payment of all other Rental and other sums otherwise provided for in this Lease, and Tenant will surrender possession of the Leased Premises to Landlord on or before the Early Cancellation Date in accordance with Section 19 of this Lease. The failure to comply with all of the provisions of this Section will render Tenant’s early termination option void, and the Lease will continue in full force and effect.
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61. |
Tenant Improvement Allowance |
Landlord is providing a Tenant Improvement Allowance (herein so called) up to, but no more than, $59,016.00 (calculated based on $12.00/NRSF) to be used against (a) the costs, if any, of construction, renovations, alterations, changes, improvements, repairs, replacements or additions in the Leased Premises, including any demolition, architectural fees, and construction management fees, in accordance with mutually approved plans and specifications as may be agreed upon by Landlord and Tenant pursuant to Landlord's standard form of Work Letter (herein so called) (collectively, the "Renovation Work Costs"), and (b) Rent. In no event shall any such work
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require Landlord to (i) pay aggregate Renovation Work Costs greater than the Tenant Improvement Allowance, or (ii) perform such work at an aggregate cost that exceeds the Tenant Improvement Allowance. If Tenant elects to apply any Tenant Improvement Allowance against Rent, then Tenant must do so by delivery of written notice thereof to Landlord any time prior to the end of Month 12 of the Term, specifying the applicable amount(s) and period(s), which period(s) must be after the date of such notice for Rent not yet due and payable. All Tenant Improvement Allowance remaining as of the end of Month 12 of the Term shall be waived by Tenant and revert to Landlord.
SIGNATURES APPEAR ON FOLLOWING PAGE
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the Execution Date.
LANDLORD:
FRANKLIN POST OAK, LTD.,
a Texas limited partnership
By: A-Group Holdings, L.L.C.,
a Delaware limited liability company its sole general partner
By: /s/ Maria S. Muñoz _ 10/5/2022 _
Name: Maria S. Muñoz
Title: Vice President
TENANT:
ORBITAL INFRASTRUCTURE GROUP, INC.,
a Texas corporation
By: /s/ William J. Clough 10/4/2022
Name: William J. Clough
Title: Executive Chairman/CLO
Exhibit 10.137
ORBITAL INFRASTRUCTURE GROUP, INC.
EXECUTIVE LONG TERM RETENTION EQUITY AWARD AGREEMENT THIS EXECUTIVE LONG TERM RETENTION EQUITY AWARD AGREEMENT
(“Agreement”) is made effective as of September 15, 2022 by ORBITAL INFRASTRUCTURE GROUP, INC., a Texas corporation (the “Company”) and WILLIAM J. CLOUGH (the “Executive”).
RECITAL
WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) held a committee meeting on August 23, 2022, and determined it to be in the best interest of the Company and its shareholders that the Executive receive a long term retention-based equity award of restricted stock units (“Award”) in order to provide the Executive with additional remuneration for services rendered to encourage the Executive to remain in the employ of the Company and to increase the Executive’s personal interest in the continued success and progress of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, the Company and the Executive agree as follows:
1. Recitals/Incorporation by Reference to Other Documents. The recitals of this Agreement are true and correct and incorporated into this Agreement by this reference. This Award is issued pursuant to the Company’s 2020 Equity Incentive Award Plan, as amended (the “Plan”). Capitalized terms used herein have the meanings subscribed to them pursuant to the Plan and the Executive’s Employment Agreement dated May 14, 2019, as amended on April 1, 2022 (“Employment Agreement).
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2. |
Grant of Award. |
2.1 Award of Restricted Stock Units. For the reasons set forth in the above recital, and in consideration of the Executive’s Continued Service (as defined below) to the Company, the Company hereby grants the Executive Eight Hundred Fifty Thousand (850,000) Restricted Stock Units (“RSU’s”) with twenty five percent (25%) vesting immediately as of August 23, 2022 and the remaining seventy five percent (75%) vesting in three (3) equal annual amounts over three (3) years on the annual anniversary date of the initial Award as set forth below and subject to the other provisions of this Agreement:
Vesting Schedule
|
Total # of Restricted Stock Units Awarded |
Initial Award Date |
Initial Award (8/23/22) |
8/23/2023 |
8/23/24 |
8/23/2025 |
|
850,000 |
8/22/2022 |
212,500 RSU’s |
212,500 RSU’s |
212,500 RSU’s |
212,500 RSU’s |
2.2 Consideration; Subject to Plan. The grant of the Award is made in consideration of the Continuous Service (as defined below) to be rendered by the Executive to the Company and is subject to the terms and conditions of this Agreement. “Continuous Service” shall mean the uninterrupted provision of services to the Company in any capacity of employee, officer, director, or other service provider. Continuous Service shall not be considered to be interrupted in the case of (i) any preapproved leave of absence, (ii) transfers among the Company in any capacity of employee, officer director, or other service provider, or (iii) any change in status as long as the Executive remains in the service of the Company in any capacity of employee, officer, director, or other service provider. An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.
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3. |
Termination of Continuous Service. |
3.1 Termination for Cause. If the Executive’s Continuous Service is terminated for Cause, as defined in the Employment Agreement, the Award (whether vested or unvested) shall immediately terminate such that the Executive shall no longer have any rights or interest in the Award, except for any RSU’s that have been sold or disposed of prior to date of termination for Cause.
3.2 Termination for Good Reason. In the event Executive terminates his employment with Company for Good Reason, as defined by the Employment Agreement, notwithstanding any provision of the Plan or this Agreement to the contrary, the Award shall become immediately vested with respect to 100% of the RSU’s subject to the Award.
3.3 Termination due to Death. If the Executive’s Continuous Service terminates as a result of the Executive’s death, the vested portion of the Award may be received by the Executive’s estate, by a person who acquired the right to receive the Award by bequest or inheritance or by the person designated to receive the Award upon the Executive’s death.
3.4 Termination due to Disability. If the Executive’s Continuous Service terminates as a result of the Executive’s Disability, as defined by the Employment Agreement, the Executive may receive the vested portion of the Award.
3.5 Termination on Account of Voluntary Resignation without Good Reason. If Executive’s employment terminates on account of a resignation by Executive for no reason or any reason other than on account of Good Reason, then notwithstanding any provision of the Plan or this Agreement to the contrary, the Executive will be entitled only to the vested portion of the Award, and any rights to the unvested portion of the Award shall terminate.
3.6 Termination Without Cause by the Company. If the Executive’s Continuous Service terminates as a result of termination without Cause by the Company, the Award shall become immediately vested with respect to 100% of the RSU’s subject to the Award.
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4. |
Manner of Receipt. |
4.1 Election. The Executive will receive the Award according to the vesting schedule pursuant to Section 2.1 hereof. If the Executive’s executor, administrator, or heir is to receive the Award on behalf of the Executive (in case of the Executive’s death or incapacity), such
person must submit documentation reasonably acceptable to the Company verifying that he or she has the legal right to receive the Award.
4.2 Withholding. If the Company, in its discretion, determines that it is obligated to withhold any tax in connection with the vesting of the Award, the Executive must make arrangements satisfactory to the Company to pay, provide for or satisfy any applicable federal, state and local withholding obligations of the Company. The Company shall have the right to withhold tax from any compensation paid to the Executive.
4.3 Issuance of Shares. The Company shall issue the RSU’s of Common Stock registered in the name of the Executive, the Executive’s authorized assignee, or the Executive’s legal representative which shall be evidenced by stock certificates representing the shares with the appropriate legends affixed thereto, appropriate entry on the books of the Company or of a duly authorized transfer agent, or other appropriate means as determined by the Company, which may include electronic book entry in an account maintained for the benefit of the Executive.
5. Transferability. The Award is not transferable by the Executive other than to a designated beneficiary upon the Executive’s death or by will or the laws of intestacy and is to be awarded only to the Executive during the Executive’s lifetime. No assignment or transfer of the Award, or the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except to a designated beneficiary, upon death, by will or the laws of intestacy) will vest in an assignee or transferee, any interest or right herein whatsoever, but immediately upon such assignment or transfer, the Award will terminate and become of no further effect.
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6. |
Change in Control. |
6.1 Acceleration of Vesting. In the event of a Change in Control (as defined by the Employment Agreement), notwithstanding any provision of the Plan or this Agreement to the contrary, the Award shall become immediately vested with respect to 100% of the shares subject to the Award. To the extent practicable, such acceleration of vesting shall occur in a manner and at a time which allows the Executive the ability to participate in the Change in Control with respect to the shares of Common Stock received.
6.2 Cash-out. In the event of a Change in Control, the Committee may, in its discretion and upon at least ten (10) days’ advance notice to the Executive, cancel the Award and pay to the Executive the value of the Award based upon the price per share of Common Stock received or to be received by other shareholders of the Company in the Change in Control event.
7. Adjustments. The shares of Common Stock subject to the Award may be adjusted or terminated in any manner as contemplated by the Plan.
8. Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Executive’s responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant or vesting, of the Award; and
(b) does not commit to structure the Award to reduce or eliminate the Executive’s liability for Tax- Related Items.
9. Section 409A. The provisions of Section 11 of the Employment Agreement, concerning compliance with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, are incorporated by reference into this Agreement and shall apply to any amounts and timing thereof payable to the Executive under this Agreement.
10. Section 280G. If any of the Awards issued pursuant to this Agreement, either alone or together with other payments and benefits which Executive has the right to receive from the Company (or any affiliate) will constitute a “Parachute Payment” under Section 280G of the Internal Revenue Code of 1986, as amended (“Code”) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such amounts shall be reduced (the “Benefit Reduction”) by the minimum amount necessary to result in no portion of such benefits being subject to the Excise Tax, provided, however, that the Benefit Reduction shall only occur if such reduction would result in the Executive’s “Net After-Tax Amount” attributable to such benefits being greater than it would be if no Benefit Reduction was affected. For this purpose, “Net After- Tax Amount” shall mean the net amount of benefits the Executive is entitled to under this Agreement after giving effect to all federal, state and local taxes, which would be applicable to such payments and benefits, including but not limited to, Excise Tax. Nothing contained herein shall result in the reduction of any payments or benefits to which the Executive may be entitled upon termination of employment and/or a Change in Control other than as specified in this Section 10 or in Section 9 above regarding Section 409A of the Code.
11. Restrictive Covenants. The provisions of Section 12 of the Employment Agreement, concerning the restrictive covenants applicable to the Executive are incorporated by reference into this Agreement and shall apply to the Executive under this Agreement and are not superseded by this Agreement and shall remain in full force and effect.
12. Compliance with Law. The Award and the issuance and transfer of shares of Common Stock shall be subject to compliance by the Company and the Executive with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be listed. No shares of Common Stock shall be issued pursuant to this Award unless and until any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel.
13. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Secretary or other comparable officer of the Company at the Company’s principal corporate offices. Any notice required to be delivered to the Executive under this Agreement shall be in writing and addressed to the Executive at the Executive’s address as shown in the records of the Company. Either party may designate another address in writing (or by such other method approved by the Company) from time to time.
14. Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Texas without regard to conflict of law principles.
15. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Executive or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Executive and the Company.
16. Awards Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s shareholders. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the Committee will determine which provisions shall apply.
17. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Executive and the Executive’s beneficiaries, executors, administrators and the person(s) to whom this Agreement may be transferred by will or the laws of descent or distribution.
18. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
19. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled or terminated by the Company at any time, in its discretion. The grant of the Award in this Agreement does not create any contractual right or other right to receive any Awards or other Awards in the future. Future awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Executive’s employment with the Company or this Agreement.
20. Amendment. The Committee has the right to amend, alter, suspend, discontinue or cancel the Award, prospectively or retroactively; provided, that, no such amendment shall adversely affect the Executive’s material rights under this Agreement without the Executive’s consent.
21. No Impact on Other Benefits. The value of the Award is not part of the Executive’s normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefits.
22. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
23. Acceptance. The Executive hereby acknowledges receipt of a copy of the Plan and this Agreement. The Executive has read and understands the terms and provisions thereof, and accepts the Award subject to all of the terms and conditions of the Plan and this Agreement. The Executive acknowledges that there may be adverse tax consequences upon vesting of the Award or disposition of the underlying shares and that the Executive should consult a tax advisor prior to such vesting or disposition.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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COMPANY: ORBITAL INFRASTRUCTURE GROUP, INC. |
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By: /s/ Corey Lambrecht Name: Corey Lambrecht Title: Chairman of the Compensation Committee |
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EXECUTIVE: |
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/s/ William J. Clough William J. Clough |
MTC/ej/8290310v1
Exhibit 10.138
ORBITAL INFRASTRUCTURE GROUP, INC.
EXECUTIVE LONG TERM RETENTION EQUITY AWARD AGREEMENT THIS EXECUTIVE LONG TERM RETENTION EQUITY AWARD AGREEMENT
(“Agreement”) is made effective as of September 15, 2022 by ORBITAL INFRASTRUCTURE GROUP, INC., a Texas corporation (the “Company”) and JAMES F. O’NEIL III (the “Executive”).
RECITAL
WHEREAS, the Compensation Committee of the Board of Directors of the Company (the “Committee”) held a committee meeting on August 23, 2022, and determined it to be in the best interest of the Company and its shareholders that the Executive receive a long term retention-based equity award of restricted stock units (“Award”) in order to provide the Executive with additional remuneration for services rendered to encourage the Executive to remain in the employ of the Company and to increase the Executive’s personal interest in the continued success and progress of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, the Company and the Executive agree as follows:
1. Recitals/Incorporation by Reference to Other Documents. The recitals of this Agreement are true and correct and incorporated into this Agreement by this reference. This Award is issued pursuant to the Company’s 2020 Equity Incentive Award Plan, as amended (the “Plan”). Capitalized terms used herein have the meanings subscribed to them pursuant to the Plan and the Executive’s Employment Agreement dated October 1, 2019, as amended on April 1, 2022 (“Employment Agreement).
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2. |
Grant of Award. |
2.1 Award of Restricted Stock Units. For the reasons set forth in the above recital, and in consideration of the Executive’s Continued Service (as defined below) to the Company, the Company hereby grants the Executive One Million Twenty Thousand (1,020,000) Restricted Stock Units (“RSU’s”) with twenty five percent (25%) vesting immediately as of August 23, 2022 and the remaining seventy five percent (75%) vesting in three (3) equal annual amounts over three (3) years on the annual anniversary date of the initial Award as set forth below and subject to the other provisions of this Agreement:
Vesting Schedule
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Total # of Restricted Stock Units Awarded |
Initial Award Date |
Initial Award (8/23/22) |
8/23/2023 |
8/23/24 |
8/23/2025 |
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1,020,000 |
8/22/2022 |
255,000 RSU’s |
255,000 RSU’s |
255,000 RSU’s |
255,000 RSU’s |
2.2 Consideration; Subject to Plan. The grant of the Award is made in consideration of the Continuous Service (as defined below) to be rendered by the Executive to the Company and is subject to the terms and conditions of this Agreement. “Continuous Service” shall mean the uninterrupted provision of services to the Company in any capacity of employee, officer, director, or other service provider. Continuous Service shall not be considered to be interrupted in the case of (i) any preapproved leave of absence, (ii) transfers among the Company in any capacity of employee, officer director, or other service provider, or (iii) any change in status as long as the Executive remains in the service of the Company in any capacity of employee, officer, director, or other service provider. An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.
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3. |
Termination of Continuous Service. |
3.1 Termination for Cause. If the Executive’s Continuous Service is terminated for Cause, as defined in the Employment Agreement, the Award (whether vested or unvested) shall immediately terminate such that the Executive shall no longer have any rights or interest in the Award, except for any RSU’s that have been sold or disposed of prior to date of termination for Cause.
3.2 Termination for Good Reason. In the event Executive terminates his employment with Company for Good Reason, as defined by the Employment Agreement, notwithstanding any provision of the Plan or this Agreement to the contrary, the Award shall become immediately vested with respect to 100% of the RSU’s subject to the Award.
3.3 Termination due to Death. If the Executive’s Continuous Service terminates as a result of the Executive’s death, the vested portion of the Award may be received by the Executive’s estate, by a person who acquired the right to receive the Award by bequest or inheritance or by the person designated to receive the Award upon the Executive’s death.
3.4 Termination due to Disability. If the Executive’s Continuous Service terminates as a result of the Executive’s Disability, as defined by the Employment Agreement, the Executive may receive the vested portion of the Award.
3.5 Termination on Account of Voluntary Resignation without Good Reason. If Executive’s employment terminates on account of a resignation by Executive for no reason or any reason other than on account of Good Reason, then notwithstanding any provision of the Plan or this Agreement to the contrary, the Executive will be entitled only to the vested portion of the Award, and any rights to the unvested portion of the Award shall terminate.
3.6 Termination Without Cause by the Company. If the Executive’s Continuous Service terminates as a result of termination without Cause by the Company, the Award shall become immediately vested with respect to 100% of the RSU’s subject to the Award.
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4. |
Manner of Receipt. |
4.1 Election. The Executive will receive the Award according to the vesting schedule pursuant to Section 2.1 hereof. If the Executive’s executor, administrator, or heir is to receive the Award on behalf of the Executive (in case of the Executive’s death or incapacity), such
person must submit documentation reasonably acceptable to the Company verifying that he or she has the legal right to receive the Award.
4.2 Withholding. If the Company, in its discretion, determines that it is obligated to withhold any tax in connection with the vesting of the Award, the Executive must make arrangements satisfactory to the Company to pay, provide for or satisfy any applicable federal, state and local withholding obligations of the Company. The Company shall have the right to withhold tax from any compensation paid to the Executive.
4.3 Issuance of Shares. The Company shall issue the RSU’s of Common Stock registered in the name of the Executive, the Executive’s authorized assignee, or the Executive’s legal representative which shall be evidenced by stock certificates representing the shares with the appropriate legends affixed thereto, appropriate entry on the books of the Company or of a duly authorized transfer agent, or other appropriate means as determined by the Company, which may include electronic book entry in an account maintained for the benefit of the Executive.
5. Transferability. The Award is not transferable by the Executive other than to a designated beneficiary upon the Executive’s death or by will or the laws of intestacy and is to be awarded only to the Executive during the Executive’s lifetime. No assignment or transfer of the Award, or the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except to a designated beneficiary, upon death, by will or the laws of intestacy) will vest in an assignee or transferee, any interest or right herein whatsoever, but immediately upon such assignment or transfer, the Award will terminate and become of no further effect.
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6. |
Change in Control. |
6.1 Acceleration of Vesting. In the event of a Change in Control (as defined by the Employment Agreement), notwithstanding any provision of the Plan or this Agreement to the contrary, the Award shall become immediately vested with respect to 100% of the shares subject to the Award. To the extent practicable, such acceleration of vesting shall occur in a manner and at a time which allows the Executive the ability to participate in the Change in Control with respect to the shares of Common Stock received.
6.2 Cash-out. In the event of a Change in Control, the Committee may, in its discretion and upon at least ten (10) days’ advance notice to the Executive, cancel the Award and pay to the Executive the value of the Award based upon the price per share of Common Stock received or to be received by other shareholders of the Company in the Change in Control event.
7. Adjustments. The shares of Common Stock subject to the Award may be adjusted or terminated in any manner as contemplated by the Plan.
8. Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Executive’s responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant or vesting, of the Award; and
(b) does not commit to structure the Award to reduce or eliminate the Executive’s liability for Tax- Related Items.
9. Section 409A. The provisions of Section 11 of the Employment Agreement, concerning compliance with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, are incorporated by reference into this Agreement and shall apply to any amounts and timing thereof payable to the Executive under this Agreement.
10. Section 280G. If any of the Awards issued pursuant to this Agreement, either alone or together with other payments and benefits which Executive has the right to receive from the Company (or any affiliate) will constitute a “Parachute Payment” under Section 280G of the Internal Revenue Code of 1986, as amended (“Code”) would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such amounts shall be reduced (the “Benefit Reduction”) by the minimum amount necessary to result in no portion of such benefits being subject to the Excise Tax, provided, however, that the Benefit Reduction shall only occur if such reduction would result in the Executive’s “Net After-Tax Amount” attributable to such benefits being greater than it would be if no Benefit Reduction was affected. For this purpose, “Net After- Tax Amount” shall mean the net amount of benefits the Executive is entitled to under this Agreement after giving effect to all federal, state and local taxes, which would be applicable to such payments and benefits, including but not limited to, Excise Tax. Nothing contained herein shall result in the reduction of any payments or benefits to which the Executive may be entitled upon termination of employment and/or a Change in Control other than as specified in this Section 10 or in Section 9 above regarding Section 409A of the Code.
11. Restrictive Covenants. The provisions of Section 12 of the Employment Agreement, concerning the restrictive covenants applicable to the Executive are incorporated by reference into this Agreement and shall apply to the Executive under this Agreement and are not superseded by this Agreement and shall remain in full force and effect.
12. Compliance with Law. The Award and the issuance and transfer of shares of Common Stock shall be subject to compliance by the Company and the Executive with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s shares of Common Stock may be listed. No shares of Common Stock shall be issued pursuant to this Award unless and until any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel.
13. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Secretary or other comparable officer of the Company at the Company’s principal corporate offices. Any notice required to be delivered to the Executive under this Agreement shall be in writing and addressed to the Executive at the Executive’s address as shown in the records of the Company. Either party may designate another address in writing (or by such other method approved by the Company) from time to time.
14. Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of Texas without regard to conflict of law principles.
15. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Executive or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Executive and the Company.
16. Awards Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s shareholders. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the Committee will determine which provisions shall apply.
17. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Executive and the Executive’s beneficiaries, executors, administrators and the person(s) to whom this Agreement may be transferred by will or the laws of descent or distribution.
18. Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.
19. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled or terminated by the Company at any time, in its discretion. The grant of the Award in this Agreement does not create any contractual right or other right to receive any Awards or other Awards in the future. Future awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Executive’s employment with the Company or this Agreement.
20. Amendment. The Committee has the right to amend, alter, suspend, discontinue or cancel the Award, prospectively or retroactively; provided, that, no such amendment shall adversely affect the Executive’s material rights under this Agreement without the Executive’s consent.
21. No Impact on Other Benefits. The value of the Award is not part of the Executive’s normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefits.
22. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
23. Acceptance. The Executive hereby acknowledges receipt of a copy of the Plan and this Agreement. The Executive has read and understands the terms and provisions thereof, and accepts the Award subject to all of the terms and conditions of the Plan and this Agreement. The Executive acknowledges that there may be adverse tax consequences upon vesting of the Award or disposition of the underlying shares and that the Executive should consult a tax advisor prior to such vesting or disposition.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
COMPANY: ORBITAL INFRASTRUCTURE GROUP, INC.
By: /s/ Corey Lambrecht
Name: Corey Lambrecht
Title: Chairman of the Compensation Committee
EXECUTIVE:
MTC/ej/8290310v1
/s/ James F. O’Neil
James F. O’Neil III
Exhibit 10.139
LIMITED CONSENT TO CREDIT AGREEMENT
Limited Consent, dated November 2, 2022 (this “Agreement”), to the Credit Agreement, dated as of November 17, 2021 (as amended by Amendment No. 1 thereto, dated as of March 25, 2022, and as further amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”), by and among the lenders from time to time party thereto (each of such lenders, together with its successors and permitted assigns, is referred to hereinafter as a “Lender”), ALTER DOMUS (US) LLC, a Delaware limited liability company (“Alter Domus”), in its capacity as administrative agent for each Lender and as collateral agent for each Lender (in such capacities, together with its successors and assigns in such capacity, “Agent”), FRONT LINE POWER CONSTRUCTION LLC, a Texas limited liability corporation (“Front Line” or “Borrower”), and ORBITAL INFRASTRUCTURE GROUP, INC., a Texas corporation (f/k/a Orbital Energy Group, Inc.) (“Orbital” or “Parent”).
RECITALS:
WHEREAS, prior to the date hereof, the Borrower has made an intercompany advance to Orbital in an amount of $9,500,000.00 (the “Intercompany Advance”) and has asked the Lenders to waive any actual or potential Default or Event of Default pursuant to Section 8.01(c) of the Credit Agreement resulting from a failure to comply with Section 5.01(f), Section 6.05, 6.07, Section 6.12 and/or Section 8.01(c) of the Credit Agreement that has or may have occurred prior to the Consent Effective Date as a direct result of the Intercompany Advance or the failure to issue shares pursuant to the Subscription Agreement;
WHEREAS, the Lenders party hereto, which collectively constitute the Required Lenders under the Credit Agreement, are willing, subject and limited to the terms and conditions set forth herein, to consent to such request;
NOW THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Unless otherwise specifically defined herein, each term used herein that is defined in the Credit Agreement has the meaning assigned to such term in the Credit Agreement. Each reference in the Credit Agreement to “this Agreement”, “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference, and each reference in any other Loan Document to “the Credit Agreement”, “thereof”, “thereunder”, “therein” or “thereby” or any other similar reference to the Credit Agreement shall, from the Consent Effective Date, refer to the Credit Agreement as amended or modified hereby.
SECTION 2. Limited Consent. In accordance with Section 10.5(a) of the Credit Agreement, effective as of the Consent Effective Date, and subject and limited to the terms and conditions set forth herein, the Lenders party hereto, which collectively constitute the Required Lenders, hereby waive any actual or potential Default or Event of Default pursuant to Section 8.01(c) of the Credit Agreement resulting from a failure to comply with Sections 5.01(f), 6.05, 6.07, 6.12 and/or 8.01(c) of the Credit Agreement that has or may have occurred prior to the Consent Effective Date as a direct result of the Intercompany Advance or the failure to issue shares pursuant to the Subscription Agreement; provided that:
(a) the waiver in this Section 2 shall be limited to any actual or potential Default or Event of Default pursuant to Section 8.01(c) of the Credit Agreement resulting solely from a failure to comply with Sections 5.01(f), 6.05, 6.07, 6.12 and/or 8.01(c) of the Credit Agreement that has or may have occurred prior to the Consent Effective Date as a direct result of the Intercompany Advance and shall not constitute a consent or waiver, implied or explicit, to any other intercompany advance, any intercompany advance
exceeding $9,500,000.00 or any other failure to comply with the terms of the Loan Documents that has or may have occurred or may or will occur on or prior to the date hereof or after the date hereof;
(b) nothing contained in this Section 2 shall be deemed a consent to or waiver of, or a commitment or obligation on the part of the Agent or the Lenders to any future consent to or waiver of, any other action or inaction on the part of the Borrowers or any other Loan Party that constitutes (or would constitute) a violation of or departure from any covenant, condition or other obligation of the Loan Parties under the Credit Agreement and the other Loan Documents and neither the Lenders nor the Agent shall be obligated to, or shall be deemed to have indicated, directly, indirectly or implicitly, any willingness to, grant any future waivers or consents with respect to any provision of the Credit Agreement or any other Loan Document, any of which must be specifically agreed to in writing in accordance with the terms of the Credit Agreement;
(c) no failure or delay on the part of Agent or any Lender to exercise any right or remedy under the Credit Agreement, any other Loan Document or applicable law shall operate as a consent to or waiver thereof, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise of any right or remedy, all of which are cumulative and are expressly reserved;
(d) the waiver in this Section 2 shall, upon notice by the Required Lenders or their counsel to the Borrower, immediately terminate and be void ab initio upon the occurrence of any of the following (it being understood that all other provisions of this Agreement shall remain in full force and effect), and upon such notice an immediate Event of Default shall occur:
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i. |
The occurrence of any Default or any Event of Default other than to the extent specifically addressed in this Section 2; |
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ii. |
any Restricted Junior Payment shall be made or any Investment or any other transaction shall occur that involves a Front Line Loan Party and any Affiliate of any Front Line Loan Party; |
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iii. |
the failure by Orbital (i) by no later than November 7, 2022, to retain legal counsel of nationally recognized standing, and (ii) by no later than November 15, 2022, retain a financial advisory firm reasonably acceptable to the Required Lenders to provide advice related to restructuring, capital market transactions, and other strategic alternatives. In addition, such advisory firm will review and provide advice on any dividends, affiliate transactions, and/or transactions described in clause ii. above; |
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iv. |
the failure by any Loan Party to (i) deliver an updated Perfection Certificate acceptable to the Required Lenders by no later than November 7, 2022, |
(ii) promptly comply with all requests by the Agent, the Required Lenders or their respective counsel to provide information with respect to their assets and property, and (iii) promptly take all steps in furtherance of the creation, confirmation and perfection of the security interests created by the Security Agreement (the “Security Agreement”), dated as of November 17, 2021, by and among the Borrower, Eclipse Foundation Group, Inc. and the Agent, as requested by the Agent or the Required Lenders;
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v. |
the failure by the Borrower to, by no later than November 7, 2022, in each case in a manner satisfactory to the Required Lenders, (i) cause the Intercompany Advance to be evidenced by an intercompany note from Orbital to the Borrower, |
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(ii) |
cause such intercompany note to be secured by substantially all property of |
Orbital, other than the Pledged Collateral (as defined in the Pledge Agreement by and between Orbital, the Borrower and the Agent, dated as of November 17, 2021), and (iii) enter into an appropriate supplement to the Security Agreement and cause such intercompany note, with appropriate note powers, to be delivered as collateral to the Agent in accordance with the terms of the Security Agreement;
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vi. |
the failure by any Loan Party (i) to provide any Lender, with access to inspect such Loan Party’s financial records and properties, (ii) promptly to provide to the Lenders such customary financial, business plan and other information regarding the Loan Parties and their respective businesses and operations that any Lender or its advisors may request to the extent (x) such information does not constitute trade secrets and (y) the provision of such information is not prohibited by law or by the legally binding confidentiality obligations of any Loan Party to a third party (other than another Loan Party); provided that the applicable Loan Party shall use commercially reasonable efforts to obtain the consent of any such third party to provide such information to the applicable Lender or its advisors on a confidential basis and use commercially reasonable efforts to communicate, to the extent permitted, the applicable information in a way that would not risk waiver of such privilege or violate the applicable obligation, and (iii) to provide to the Lenders any material notice, including any notice of termination, received from any counterparty to a material agreement or any other Indebtedness within three business day of receipt of such notice; |
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vii. |
the failure by Orbital to provide to the Lenders, beginning on November 18, 2022 and thereafter by no later than 5:00 p.m. (New York time) on each Wednesday, in each case for Orbital and its Subsidiaries on an entity by entity basis, (i) an updated 13-week statement of projected receipts and disbursements (each such statement, a “Rolling 13-Week Cash Flow Forecast”), (ii) a report showing actual receipts and disbursements through the prior week, including a variance report showing the variance to the immediately prior Rolling 13-Week Cash Flow Forecast, (iii) a report showing actual and current balances in any and all bank accounts (each such report, an “Account Balance Report”); or |
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viii. |
the failure of Orbital to issue shares by November 11, 2022 in accordance with the terms of any of the Subscription Agreements. |
(e) Any Loan Party may continue to execute arm’s length intercompany transactions for the purchase of good and services that are typically procured in the ordinary course of business for fair market value no less favorable to the applicable Front Line Loan Party than could be obtained in an arms length transaction with an unaffiliated third party; provided that in each case, shall not exceed the amount of $100,000.00 from any such single transaction or a related series of such transactions. The aggregate amount of intercompany receivables resulting from such transactions shall not exceed $100,000.00 at any time.
SECTION 3. Representations and Warranties of the Borrower.
The Borrower hereby represents and warrants that:
(a) as of the Consent Effective Date, and other than as specifically addressed in this Agreement, no event has occurred and is continuing that would constitute an Event of Default or a Default; and
(b) as of the Consent Effective Date, with respect to Parent and its Subsidiaries, the representations and warranties contained in the Credit Agreement and in each other Loan Document, certificate, or other writing delivered to Agent or any Lender pursuant thereto on or prior to the Consent Effective Date are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations or warranties that already are qualified or modified as to “materiality” or “Material Adverse Effect” in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties have been true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations or warranties that already are qualified or modified as to “materiality” or “Material Adverse Effect” in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) on and as of such earlier date.
SECTION 4. Conditions to the Consent Effective Date. This Agreement shall become effective (the “Consent Effective Date”) on the date on which the following conditions precedent have been satisfied:
(a) the Agent shall have received from the Borrower, the other Loan Parties and Lenders constituting the Required Lenders executed counterparts of this Agreement;
(b) the Borrower shall have paid all of the Agent’s and Lenders’ out-of-pocket costs and expenses incurred in connection with the administration of the Loan Documents and invoiced prior to the Consent Effective Date; and
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(c) |
the PIK Payment (as defined below) shall have been paid in full. |
SECTION 5. PIK Payment
(a) The Borrower agrees to pay to the Agent for the ratable account of each Lender party hereto a paid-in-kind amount equal to $10,512,754.17 (the “PIK Payment”), it being understood that
(i) $1,012,754.17 of the PIK Payment shall be on account of additional interest payable pursuant to Section 2.09 of the Credit Agreement during the period from the first Intercompany Advance through the Consent Effective Date, which the Lenders party hereto agree to accept in the form of the PIK Payment, and (ii) $9,500,000.00 of the PIK Payment shall be the consideration for the agreement of each Lender party hereto to enter into this Agreement.
(b) The PIK Payment shall (i) be paid in kind by adding the amount of such fee to the principal of the outstanding Loans of each Lender on the Consent Effective Date, (ii) thereafter, be treated as outstanding principal for all purposes of the Credit Agreement and (iii) bear interest in accordance with the terms of the Credit Agreement.
SECTION 6. Governing Law, Venue, Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THEREOF.
(b) The terms of Sections 10.15 and 10.16 of the Credit Agreement are incorporated herein by reference, mutatis mutandis.
SECTION 7. Credit Agreement Governs. Except as expressly set forth herein, this Agreement shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of any Lender or the Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any Loan Party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances
SECTION 8. No Liability. Neither the Agent nor any of its Affiliates shall be liable to the Borrower, any other Loan Party, any Lender or any of their respective Affiliates, equity holders or debt holders for any losses, costs, damages or liabilities incurred, directly or indirectly, as a result of the Agent, or any of their respective Affiliates, taking any action in accordance with the terms of the Credit Agreement and this Agreement, as applicable, except to the extent the Agent or its Affiliates would be liable for such losses, costs, damages or liabilities pursuant to the terms of the Credit Agreement.
SECTION 9. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic means shall be effective as delivery of an original counterpart of this Agreement.
SECTION 10. Releases
(a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each of Holdings, the Borrower and each other Loan Party, on behalf of itself and its successors and assigns, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent and Lenders, and their successors and assigns, and their present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, each Lender and all such other Persons being hereinafter referred to collectively as the "Releasees"), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which Holdings, the Borrower and each other Loan Party or any of their respective successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever in relation to, or in any way in connection with any of the Credit Agreement, any of the other Loan Documents, this Agreement or transactions thereunder or related thereto which arises at any time on or prior to the date of this Amendment.
(b) Each of Holdings, the Borrower and each other Loan Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.
(c) Each of Holdings, the Borrower and each other Loan Party agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above.
SECTION 11. Miscellaneous.
(a) This Agreement shall constitute a Loan Document for all purposes of the Credit Agreement and the other Loan Documents. The Borrower shall pay all reasonable fees, costs and expenses of the Agent incurred in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated hereby in accordance with the terms of the Credit Agreement. The provisions of this Agreement are deemed incorporated into the Credit Agreement as if fully set forth therein.
(b) This Agreement shall not constitute an modification of, amendment to or waiver of any provision of the Credit Agreement and the other Loan Documents except as expressly stated herein and shall not be construed as a consent to any action on the part of the Borrowers or any other Loan Party that would require an amendment, waiver or consent of the Agent or the Lenders except as expressly stated herein. Except as expressly amended or waived hereby, the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with their terms.
(c) The parties hereto acknowledge and agree that (i) this Agreement does not constitute a novation, or termination of the “Obligations” under the Credit Agreement as in effect prior to the Consent Effective Date; (ii) such “Obligations” are in all respects continuing in full force and effect; and (iii) the Liens and security interests as granted under the Loan Documents securing payment of such “Obligations” are in all such respects continuing in full force and effect and secure the payments of the “Obligations”.
(d) The parties hereto agree that the running of the statutes of limitation and the doctrine of laches applicable to all claims and causes of action that the Agent or any Lender may be entitled to take or bring in order to enforce its rights and remedies against Orbital, the Borrower or any other Loan Party are, to the fullest extent permitted by law, tolled and suspended during the forbearance period.
[Remainder of page intentionally left blank]
IN WITNESS WHERE OF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
FRONT LINE POWER CONSTRUCTION, LLC,
as the Borrower
By /s/ James F. O’Neil
Name: James F. O’Neil
Title: Vice-Chairman & CEO
ORBITAL INFRASTRUCTURE GROUP, INC.,
As the Parent and a Guarantor
By: /s/ William J. Clough
Name: William J. Clough
Title: Executive Chairman & CLO
ECLIPSE FOUNDATION GROUP, INC.,
As a Guarantor
By: /s/ James F. O’Neil
Name: James F. O’Neil
Title: Vice-Chairman & CEO
ORBITAL POWER, INC.,
as a Guarantor
By: /s/ William J. Clough
Name: William J. Clough
Title: Executive Chairman & CLO
ORBITAL GAS SYSTEMS, LTD.,
As a Guarantor
By: N/A – discontinued
Name:
Title:
[Signature Page – Consent Agreement to Credit Agreement]
GIBSON TECHNICAL SERVICES, INC.,
As a Guarantor
By: /s/ James F. O’Neil
Name: James F. O’Neil
Title: Vice-Chairman & CEO
IMMCO, INC.,
As a Guarantor
By: /s/ James F. O’Neil
Name: James F. O’Neil
Title: Vice-Chairman & CEO
ORBITAL SOLAR SERVICES, LLC,
As a Guarantor
By: /s/ James F. O’Neil
Name: James F. O’Neil
Title: Vice-Chairman & CEO
FULL MOON TELECOM, LLC,
as a Guarantor
By: /s/ James F. O’Neil
Name: James F. O’Neil
Title: Vice-Chairman & CEO
CUI HOLDINGS INC.,
as a Guarantor
By: /s/ William J. Clough
Name: William J. Clough
Title: Executive Director & CLO
CUI PROPERTIES, LLC,
as a Guarantor
By: /s/ William J. Clough
Name: William J. Clough
Title: Executive Chairman & CLO
[Signature Page – Consent Agreement to Credit Agreement]
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IRRADIANT SOLUTIONS FUND, L.P. as a Lender By: Irradiant Solutions Fund GP, LLC Its: General Partner By: Irradiant Partners, LP Its: Managing Member By: /s/ Jon Levinson |
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Name: Title: |
Jon Levinson Co-CEO |
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IRRADIANT SOLUTIONS OFFSHORE FUND, L.P. as a Lender By: Irradiant Solutions Fund GP, LLC Its: General Partner By: Irradiant Partners, LP Its: Managing Member By: /s/ Jon Levinson |
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Name: Title: |
Jon Levinson Co-CEO |
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AG CREDIT SOLUTIONS MASTER FUND II A, L.P., AG POTOMAC FUND, L.P., AG CATALOOCHEE, L.P., AG CENTRE STREET PARTNERSHIP, L.P., AG MM, L.P., AG CAPITAL SOLUTIONS SMA ONE, L.P., each as a Lender By: Angelo, Gordon & Co., L.P., as manager or advisor |
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By: /s/ Christopher Moor |
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Name: Christopher Moore Title: Authorized Signatory |
Barings Capital Investment Corporation, as a Lender
By: Barings LLC as Investment Adviser
By: /s/ Michael Searles
Name: Michael Searles
Title: Managing Director
BARINGS BDC, INC.,
as a Lender
By: Barings LLC as Investment Adviser
By: /s/ Michael Searles
Name: Michael Searles
Title: Managing Director
BARINGS SS4 (LUX) LLC,
as a Lender
By: Barings LLC as Investment Adviser
By: /s/ Michael Searles
Name: Michael Searles
Title: Managing Director
BARINGS GLOBAL SPECIAL SITUATIONS CREDIT FUND 4 (DELAWARE), L.P.,
as a Lender
By: Barings LLC as Investment Adviser
By: /s/ Michael Searles
Name: Michael Searles
Title: Managing Director
BARINGS PARTICIPATION INVESTORS
as a Lender
By: Barings LLC as Investment Adviser
By: /s/ Michael Searles
Name: Michael Searles
Title: Managing Director
The foregoing is executed on behalf of Barings Participation Investors, organized under a Declaration of Trust, dated April 7, 1988, as amended from time to time. The obligations of such Trust are not binding upon, nor shall resort be had to the property of, any of the Trustees, shareholders, officers, employees or agents of such Trust individually, but the Trust’s assets and property only shall be bound.
BARINGS CORPORATE INVESTORS,
as a Lender
By: Barings LLC as Investment Adviser
By: /s/ Michael Searles
Name: Michael Searles
Title: Managing Director
The foregoing is executed on behalf of Barings Corporate Investors, organized under a Declaration of Trust, dated September 13, 1985, as amended from time to time. The obligations of such Trust are not personally binding upon, nor shall resort be had to the property of, any of the Trustees, shareholders, officers, employees or agents of such Trust, but the Trust’s property only shall be bound.
BARINGS PRIVATE CREDIT CORPORATION,
as a Lender
By: Barings LLC as Investment Adviser
By: /s/ Michael Searles
Name: Michael Searles
Title: Managing Director
Acknowledged: ALTER DOMUS (US) LLC,
as Agent
By: /s/ Pinju Chiu
Name: Pinju Chiu
Title: Associate Counsel
[Signature Page – Consent Agreement to Credit Agreement]
Exhibit 31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14(a) of the Securities Exchange Act of 1934, as Amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, James F. O'Neil, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Orbital Infrastructure Group, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and; |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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By: /s/ James F. O'Neil |
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Dated: November 14th, 2022 |
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James F. O'Neil, |
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|
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Chief Executive Officer |
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Exhibit 31.2
Certification of Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14(a) of the Securities Exchange Act of 1934, as Amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Nicholas M. Grindstaff, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Orbital Infrastructure Group, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and; |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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By: /s/ Nicholas M. Grindstaff |
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Dated: November 14th, 2022 |
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| Nicholas M. Grindstaff |
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|
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Chief Financial Officer |
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Exhibit 32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Orbital Infrastructure Group, Inc. (the "Company"), on Form 10-Q of the quarter ended September 30, 2022, I hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
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(1) |
The quarterly report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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By: /s/ James F. O'Neil |
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Dated: November 14th, 2022 |
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James F. O'Neil, |
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Chief Executive Officer |
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Exhibit 32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Orbital Infrastructure Group, Inc. (the "Company"), on Form 10-Q of the quarter ended September 30, 2022, I hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
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(1) |
The quarterly report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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By: /s/ Nicholas M. Grindstaff |
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Dated: November 14th, 2022 |
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| Nicholas M. Grindstaff |
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Chief Financial Officer |
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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accounts Receivable, Allowance for Credit Loss | $ 921 | $ 1,487 |
| Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
| Preferred stock, authorized (in shares) | 10,000,000 | 10,000,000 |
| Preferred stock, issued (in shares) | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized (in shares) | 325,000,000 | 325,000,000 |
| Common stock, shares issued (in shares) | 124,935,259 | 82,259,739 |
| Common stock, shares outstanding (in shares) | 124,582,196 | 81,906,676 |
| Treasury stock, shares (in shares) | 353,063 | 353,063 |
Condensed Consolidated Statements of Comprehensive Income and Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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| Net loss | $ (142,233) | $ (10,147) | $ (210,792) | $ (36,312) |
| Foreign currency translation adjustment | (182) | 129 | (300) | 115 |
| Reclassification of Foreign currency translation adjustment from accumulated other comprehensive loss to gain on sale of Orbital U.K. upon disposition | 0 | 0 | 3,608 | 0 |
| Net other comprehensive income (loss) | (182) | 129 | 3,308 | 115 |
| Comprehensive loss | (142,415) | (10,018) | (207,484) | (36,197) |
| Less: Comprehensive income (loss) attributable to noncontrolling interests | (167) | 0 | (302) | 0 |
| Comprehensive loss attributable to Orbital Infrastructure Group, Inc. | $ (142,248) | $ (10,018) | $ (207,182) | $ (36,197) |
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited) (Parentheticals) $ in Millions |
Jun. 30, 2022
USD ($)
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|---|---|
| Debt | $ 105 |
Note 1 - Nature of Operations, Basis of Presentation and Company Conditions |
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| Business Description and Basis of Presentation [Text Block] |
Nature of Operations Orbital Infrastructure Group, Inc. f/k/a Orbital Energy Group, Inc. (Orbital Infrastructure Group, "OIG," "The Company") is a diversified infrastructure services company serving customers in the electric power, telecommunications, and renewable markets. The Company’s reportable segments are the Electric Power segment, the Telecommunications segment, and the Renewables segment. In December 2021, the Company announced the planned divestiture of its previously reported Integrated Energy Infrastructure Solutions and Services segment.
The Electric Power segment consists of Front Line Power Construction, LLC based in Houston, Texas (acquired November 17, 2021), Orbital Power, Inc. based in Dallas, Texas, (began operations in Q1 2020) and Eclipse Foundation Group based in Gonzales, Louisiana (began operations in Q1 2021). The segment provides comprehensive infrastructure solutions to customers in the electric power industry. Services performed by Front Line Power and Orbital Power, Inc. generally include but are not limited to the engineering, design, installation, upgrade, repair and maintenance of electric power transmission and distribution infrastructure and substation facilities as well as emergency restoration services. Eclipse Foundation Group, which began operations in January 2021, is a drilled shaft foundation construction company that specializes in providing services to the electric transmission and substation, industrial, telecommunication and disaster restoration market sectors, with expertise performing services in water, marsh and rock terrains. In the third quarter of 2022, in order to streamline operations, the Eclipse business was integrated into Front Line Power Construction, LLC, and ceased to be a separate business unit.
The Telecommunications segment is made up of Gibson Technical Services, Inc. (“GTS”) (acquired April 13, 2021) and subsidiaries. GTS is an Atlanta-based telecommunications company providing diversified telecommunications services nationally since 1990 and is the parent of IMMCO, Inc., Full Moon Telecom, LLC, and Coax Fiber Solutions, LLC. IMMCO, Inc. (acquired July 28, 2021), which includes two Indian subsidiaries, is an Atlanta-based, full-service telecom engineering and network design company providing diversified engineering services and customized software solutions to a global customer base since 1992. Full Moon Telecom, LLC (acquired October 22, 2021) is a Florida-based telecommunications service provider that offers an extensive array of wireless service capabilities and experience including Layer 2/Layer 3 Transport, Radio Access Network (“RAN”) Integration, test and turn-up of Small Cell systems and Integration/Commissioning of Distributed Antenna (“DAS”) systems. Coax Fiber Solutions, LLC (acquired March 7, 2022), is based in Loganville, Georgia. Founded in 2016, Coax Fiber Solutions is a GDOT Certified contractor specializing in Aerial Installation, directional drilling, trenching, plowing, and missile crews for telecommunications, power, gas, water, CCTV, ATMS, and traffic signal cable installation.
The Renewables segment consists of Orbital Solar Services based in Raleigh, North Carolina. Orbital Solar Services provides engineering, procurement and construction (“EPC”) services that support the development of renewable energy generation focused on utility-scale solar construction. The Company serves a wide variety of project types, including commercial, substation, solar farms and public utility projects.
Basis of Presentation The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information, which includes condensed consolidated financial statements. Accordingly, they do not include all the information and notes necessary for a comprehensive presentation of financial position and results of operations and should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The Condensed Consolidated Balance Sheet as of December 31, 2021 has been derived from the audited financial statements as of that date included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
It is management's opinion that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statement presentation. All intercompany accounts and transactions have been eliminated in consolidation. The results for the interim period are not necessarily indicative of the results to be expected for the remaining quarters or year ending December 31, 2022.
Reconciliation of Cash, Cash Equivalents, and Restricted Cash on Condensed Consolidated Statements of Cash Flows
(1) Restrictions on cash at September 30, 2022 and September 30, 2021 relate to collateral for several bank-issued letters of credit for contract guaranties.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. Significant estimates include estimates used to record purchase price allocation for the Company's acquisitions, fair value measurements used in goodwill impairment tests, impairment estimations of long-lived assets, revenue recognition on cost-to-cost type contracts, allowances for uncollectible accounts, valuations of non-cash capital stock issuances, estimates of the incremental borrowing rate for long-term leases, fair value estimates and the valuation allowance on deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Reclassifications Certain reclassifications have been made to the 2021 classifications in order to conform to the 2022 presentation.
Company Conditions and Sources of Liquidity The Company has experienced net losses, cash outflows from cash used in operating activities and a decline in share value over the past years. As of and for the nine months ended September 30, 2022, the Company had an accumulated deficit of $421.4 million, loss from continuing operations of $208.3 million, and net cash used in operating activities of $13.4 million. Further, as of September 30, 2022, the Company had a working capital deficit of $118.7 million, including current maturities of debt, and cash and cash equivalents of $28.0 million available for working capital needs and planned capital asset expenditures. As a result of the foregoing, the Company does not have sufficient liquidity and capital resources to meet its obligations and fund its operations for the twelve months following the issuance of these financial statements. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern.
The Company has plans to access additional capital to meet its obligations for the twelve months from the date these financial statements are available to be issued. Historically, the Company has raised additional equity and debt financing to fund its expansion; refer to Note 16 — Notes Payable and Line of Credit. The Company has also funded some of its capital expenditures through long-term financing with lenders and other investors as also described in further detail in Note 16 — Notes Payable and Line of Credit. Our ability to raise the additional capital is dependent on a number of factors, including, but not limited to, the market demand for our common stock, which itself is subject to a number of business risks and uncertainties, our creditworthiness and the uncertainty that we would be able to raise such additional capital at a price that is favorable to us. As of September 30, 2022, the Company has an effective S-3 shelf registration statement for the issuance of various types of securities, including common stock, preferred stock, debt securities and/or warrants in the aggregate of up to $68.8 million. In addition, although no formal agreements exist, the company has solicited interest from various lenders to potentially raise additional term debt to restructure or refinance its existing notes.
The Company plans to meet its obligations as they become due over the next twelve months by raising additional capital through equity and debt financing sources and forecasted positive cash flows generated from operations. There can be no assurance that the Company will succeed in executing these plans. If unsuccessful, the Company will not have sufficient liquidity and capital resources to repay its indebtedness when it matures, or otherwise meet its cash requirements over the next twelve months, as noted above.
Restructuring Costs In September 2022, the Company fully impaired its finance lease equipment related to the Eclipse Foundation Group in the Electric Power segment. These pieces of equipment are drilling specific and at this time, the Company does not plan to use the equipment for the remaining term of the leases. As these leases are non-cancelable and do not include a sub-leasing option, the full finance lease assets related to Eclipse have been removed from the balance sheet and an equal impairment has been recognized in the amount of $4.5 million. Future payments related to these leases will be approximately $5.2 million paid through June 2026.
Sale of Orbital U.K. On May 11, 2022, the Company completed the sale of its Orbital U.K. operations for the agreed upon amount of 3,000,000 GBP. The Company received 1,575,000 GBP on the settlement date and the remaining 1,425,000 GBP was received on July 11, 2022. The Company could receive additional consideration if certain events transpire during the 12-month restricted period following the settlement date. In addition, the Company will receive a “royalty” of 15% on any sales of the GasPT device related to Snam Rete Gas and/or the Future Billing Methodology (FBM) Project.
Goodwill and Indefinite-lived intangible assets The Company had Goodwill from acquisitions made in 2020, 2021 and 2022.
Roll-forward of the Company's goodwill:
The Company tests for impairment of Indefinite-lived intangibles and Goodwill in the second quarter of each year and when events or circumstances indicate that the carrying amount of Goodwill exceeds its fair value and may not be recoverable.
Under current accounting guidance, Orbital Infrastructure Group is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The guidance includes a number of factors to consider in conducting the qualitative assessment.
During the three months ended June 30, 2022, the Company completed a quantitative analysis to determine whether it was more likely than not that the fair value of its reporting units were less than their carrying amount, including goodwill. To complete the review, management evaluated the fair value of the Goodwill and considered all known events and circumstances that might trigger an impairment of goodwill. The review of goodwill, prepared as of May 31, 2022, determined that there were not indicators present to suggest that it was more likely than not that the fair value of any of the Company's reporting units was less than its carrying amount and thus no impairment was necessary during the quarter ended June 30, 2022.
The Company did a second goodwill impairment analysis as of June 30, 2022 due to a 42-percent drop in the Company's stock price between May 31, 2022 and June 30, 2022, that caused an overall decrease in the Company’s market capitalization. We performed the interim impairment tests consistent with our approach for annual impairment testing, including similar models, inputs, and assumptions. As a result of the interim impairment testing, no impairment was identified as of June 30, 2022.
During the third quarter of 2022, triggering events were identified which led to performing interim goodwill impairment testing of our reporting units as of September 30, 2022. These events included a further decrease in the Company's market capitalization, the significant loss in the Renewables segment in the third quarter of 2022, interest rate increases and limitations on accessing capital, which raised substantial doubt regarding the Company’s ability to continue as a going concern. The fair value for our reporting units for the interim testing was valued using a market approach. The impairment assessment resulted in a conclusion that goodwill in the Electric Power and Telecommunications reporting units was impaired by $70.1 million and $25.8 million, respectively, during the three months ended September 30, 2022. The impairment assessment also concluded that the fair value of the Renewables reporting unit was in excess of its carrying amount.
Accrued expenses Accrued expenses are liabilities that reflect expenses on the statement of operations that have not been paid or recorded in accounts payable at the end of the period. At September 30, 2022 and December 31, 2021, accrued expenses of $30.3 million and $28.3 million, respectively included the following components:
Impact of COVID-19 Pandemic and current economic environment The effects of the COVID-19 pandemic continues to impact certain aspects and geographies of the global economy due to supply chain, production and other logistical disruptions. While we have continued to operate as a provider of essential services from the onset of the pandemic, during the course of the pandemic our operations and financial results have been adversely impacted by governmental responses to the COVID-19 pandemic, including shut-down orders and limitations on work site practices implemented by governments. The longer-term implications of the COVID-19 pandemic on our financial performance remain uncertain and variable in the current economic environment including rising interest and inflation rates.
We continue to monitor governmental vaccination and testing standards or requirements related to COVID-19, as well as certain standards and guidance for preventing the spread of COVID-19. While the impact of these standards has lessened in 2022, we continue to monitor changes in these standards that may impact our business.
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Note 2 - Summary of Significant Accounting Policies |
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| Notes to Financial Statements | |||
| Significant Accounting Policies [Text Block] |
Our significant accounting policies are detailed in "Note 2 Summary of Significant Accounting Policies" within Item 8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022.
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Note 3 - Discontinued Operations and Sale of a Business |
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| Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] |
As part of the Company’s stated strategy to transform Orbital Infrastructure Group into a diversified energy infrastructure services platform serving North American energy customers, the Company’s board of directors made the decision to divest of its Orbital Gas subsidiaries. The Orbital Gas subsidiaries provide proprietary gas measurement and sampling technologies and the integration of process control and measuring/sampling systems. They are legacy businesses that are not part of the Company’s strategy of building an infrastructure services company serving the electric power, telecommunications and renewable markets. The disposition of the Orbital Gas subsidiaries will facilitate the Company’s restructuring and cost savings initiatives and are intended to realign and simplify its business structure and better position the Company for future growth and improved profitability. In the fourth quarter of 2021, the Company recorded a $9.2 million impairment related to its U.K. operations to write the value of its investment in the U.K. operations to its expected realizable value of 3 million GBP ($4.1 million on December 31, 2021).
The sale of the U.K. operations closed in May of 2022. The Company could receive additional consideration if certain events transpire during the 12-month restricted period following the settlement date. In addition, the Company will receive a “royalty” of 15% on any sales of the GasPT device related to Snam Rete Gas and/or the Future Billing Methodology (FBM) Project. The Company sold a portion of the North America business in the third quarter of 2022 at approximately book value of the assets sold. Certain assets and liabilities not sold with the business were reclassified from held for sale to held and used. Remaining assets held for sale at September 30, 2022 include the VE Technology asset of the Company's North America Orbital Gas subsidiary. VE Technology is a gas sampling intellectual property, which provides a superior method of penetrating the gas flow without the associated vortex vibration, thereby making it a ‘‘stand-alone’’ product for thermal sensing (thermowells) and trace-element sampling.
Assets and liabilities held for sale that are included on the Company's balance sheet, relate to the company's discontinued businesses, and are described below.
Selected data for these discontinued businesses consisted of the following:
Reconciliation of the Major Classes of Line Items Constituting Pretax Income from Discontinued Operations to the After-Tax Income from Discontinued Operations That Are Presented in the Condensed Consolidated Statement of Operations
Net cash used in operating activities of discontinued operations for the
nine months ended
September 30, 2022 was
$0.8 million.
There was $62 thousand net cash provided by investing activities of discontinued operations for the nine months ended September 30, 2022.
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Note 4 - Revenue From Contracts With Customers |
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| Revenue from Contract with Customer [Text Block] |
The Electric Power segment provides full service building, maintenance and support to the electrical power distribution, transmission, substation, and emergency response sectors of North America through Front Line Power, Orbital Power Services and Eclipse Foundation. The Telecommunications segment composed of Gibson Technical Services and subsidiaries provides technical implementation, design, maintenance, emergency and repair support services in the broadband, wireless, and outside plant and building technologies. The Renewables segment, Orbital Solar Services, provides engineering, procurement and construction (“EPC”) services that support the development of renewable energy generation focused on utility scale solar and community solar construction.
For our construction contracts, revenue is generally recognized over time. Our fixed price and unit-price construction projects generally use a cost-to-cost input method or an output method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer. Revenue is also generally recognized over time as the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Under the output method, the measure of progress towards completion is based on units of work completed multiplied by the contractual pricing amounts per unit. Under the output method, revenue is determined by actual work achieved. For jobs under the output method, revenue is earned based on each unit in the contract completed. We construct comprehensive revenue calculations based on quantifiable measures of actual units completed multiplied by the agreed upon contract prices per item completed.
For our engineering and network design contracts, revenue is also generally recognized over time. In these jobs, timing of revenue recognition also depends on the payment terms of the contract, as our performance does not create an asset with an alternative use to us. For those contracts where the Company's performance creates or enhances an asset that the customer controls as the asset is created or enhanced or for which we have a right to payment for performance completed to date at all times throughout our performance, inclusive of a cancellation, we recognize revenue over time. As discussed above, these performance obligations use a cost-to-cost input method or output method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer. However, for those contracts for which we do not have a right, at all times, to payment for performance completed to date and we are not enhancing a customer-controlled asset, we recognize revenue at the point in time when control is transferred to the customer.
For our service contracts, revenue is also generally recognized over time as the customer simultaneously receives and consumes the benefits of our performance as we perform the service. For our fixed price service contracts with specified service periods, revenue is generally recognized on a straight-line basis over such service period when our inputs are expended evenly, and the customer receives and consumes the benefits of our performance throughout the contract term.
For certain of our revenue streams, such as call-out repair and service work, and outage services, that are performed under time and materials contracts, our progress towards complete satisfaction of such performance obligations is measured using an input method as the customer receives and consumes the benefits of our performance completed to date.
Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.
Accounts Receivable, Contract Assets and Contract Liabilities Accounts receivable are recognized in the period when our right to consideration is unconditional. We also assess our customer's ability and intention to pay, which is based on a variety of factors, including our historical payment experience with and the financial condition of our customers.
Payment terms and conditions vary by contract, and are within industry standards across our business lines. Accounts receivable are recognized net of an allowance for doubtful accounts.
The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from our construction projects when revenue recognized under the output method or input cost-to-cost method exceeds the amounts invoiced to our customers, as the amounts cannot be billed under the terms of our contracts. Such amounts are recoverable from our customers based upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of a contract. Also included in contract assets are retainage receivables and amounts we seek or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders or modifications in dispute or unapproved as to both scope and/or price or other customer-related causes of unanticipated additional contract costs (claims and unapproved change orders). Our contract assets do not include capitalized costs to obtain and fulfill a contract. Contract assets are generally classified as current within the Condensed Consolidated Balance Sheets.
Contract liabilities from our construction contracts occur when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost or output method measure of progress. Contract liabilities additionally include advanced payments from our customers on certain contracts and provision for future contract losses for those contracts estimated to close in a gross loss position. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and are recorded as either current or long-term, depending upon when we expect to recognize such revenue.
Balances and activity in the current contract liabilities as of and for the nine months ended September 30, 2022 and 2021 was as follows:
Performance Obligations
Remaining Performance Obligations
Remaining performance obligations represents the transaction price of contracts with customers for which work has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts. As of September 30, 2022, the Company's remaining performance obligations are generally expected to be filled within the next 12 months. For the contracts that are greater than 12 months the Company has approximately $198.1 million in the aggregate of future revenue related to remaining performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2022.
Any adjustments to net revenues, cost of revenues, and the related impact to operating income are recognized as necessary in the period they become known. These adjustments may result from positive program performance and may result in an increase in operating income during the performance of individual performance obligations, if we determine we will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations. Likewise, these adjustments may result in a decrease in operating income if we determine we will not be successful in mitigating these risks. Changes in estimates of net revenues, cost of revenues and the related impact to operating income are recognized on a cumulative catch-up basis in the period they become known, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation's percentage of completion. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations.
Performance Obligations Satisfied Over Time
To determine the proper revenue recognition method for our contracts, we evaluate whether a single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to separate the single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period.
For most of our contracts, the customer contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability (even if that single project results in the delivery of multiple units). Hence, the entire contract is accounted for as one performance obligation. Less commonly, however, we may promise to provide distinct goods or services within a contract in which case we separate the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. We infrequently sell standard products with observable standalone sales. In cases where we do, the observable standalone sales are used to determine the standalone selling price. More frequently, we sell a customized customer specific solution, and in these cases, we typically use the output method or the expected cost plus a margin approach to estimate the standalone selling price of each performance obligation.
Variable Consideration The nature of our contracts gives rise to several types of variable consideration. In rare instances, we include in our contract estimates, additional revenue for submitted contract modifications or claims against the customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably, and its realization is probable. In evaluating these criteria, we consider the contractual/legal basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs and the objective evidence available to support the claim. These amounts are included in our calculation of net revenue recorded for our contracts and the associated remaining performance obligations. Additionally, if the contract has a provision for liquidated damages in the case that the Company misses a timing target, or fails to meet any other contract benchmarks, the Company accounts for those estimated liquidated damages as variable consideration and will adjust revenue accordingly with periodic updates to the estimated variable consideration as the job progresses. Liquidated damages are recognized as variable consideration and are estimated based on the most likely amount that is deemed probable of realization.
Significant Judgments Our contracts with certain customers may be subject to contract cancellation clauses. Contracts with other cancellation provisions may require judgment in determining the contract term, including the existence of material rights, transaction price and identifying the performance obligations and whether a contract should be accounted for over time or on a completed contract basis. Revenue is recognized for certain projects over time using cost-based input methods, in which significant judgement is required to evaluate assumptions including the amount of total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize.
At times, customers may request changes that either amend, replace or cancel existing contracts. Judgment is required to determine whether the specific facts and circumstances within the contracts require the changes to be accounted for as a separate contract or as a modification. Generally, contract modifications containing additional goods and services that are determined to be distinct and sold at their stand-alone selling price are accounted for as a separate contract. For contract modifications where goods and services are not determined to be distinct and sold at their stand-alone selling price, the original contract is updated and the required adjustments to revenue and contract assets, liabilities, and other accounts will be made accordingly.
Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately rather than together may require significant judgment. For, example, we consider many of our contracts that coordinate multiple products into an integrated system to be a single performance obligation, while the same products would be considered separate performance obligations if not so integrated.
In contracts where there are timing differences between when we transfer a promised good or service to the customer and when the customer pays for that good or service, we have determined that, our contracts do not include a significant financing component.
The following tables present the Company's revenues disaggregated by the type of customer:
The following tables present the Company's revenues disaggregated by type of contract:
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Note 5 - Inventories |
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| Inventory Disclosure [Text Block] |
Inventories consist of work-in-process and finished goods and are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) method as a cost flow convention or through the moving average cost method. At September 30, 2022 and December 31, 2021, inventory by category is valued net of reserves and consists of:
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Note 6 - Investments |
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Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Investment [Text Block] |
The Company has a minority ownership in Virtual Power Systems ("VPS"). The VPS investment basis at September 30, 2022 and December 31, 2021 was $1.1 million and $1.1 million, respectively, as reflected on the condensed consolidated balance sheets. The investment is held at September 30, 2022 under the cost method of accounting for investments.
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Note 7 - Leases |
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| Lease Disclosure [Text Block] |
Operating leases Consolidated total operating lease costs were $5.2 million for the nine months ended September 30, 2022 and $3.0 million for the nine months ended September 30, 2021 and are included in cost of sales; selling, general and administrative expense; and other income (expense), on the condensed consolidated statement of operations.
Future minimum operating lease obligations at September 30, 2022 are as follows for the years ended December 31:
Total lease cost and other lease information is as follows:
Variable lease costs primarily include common area maintenance costs, real estate taxes and insurance costs passed through to the Company from lessors.
Financing leases Consolidated total financing lease costs were $4.6 million and $1.1 million for the nine months ended September 30, 2022 and 2021 and are included in depreciation in cost of sales and interest expense.
Future minimum finance lease obligations at September 30, 2022 are as follows for the years ended December 31:
Total financing lease costs are as follows:
In addition to the financing lease costs noted above, for the three and nine months ended September 30, 2022, the Company recognized $4.5 million in impairments on outstanding financing leases at Eclipse Foundation Group. See Note 1 for additional information on the impairments.
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Note 8 - Stock-based Compensation and Expense |
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| Share-Based Payment Arrangement [Text Block] |
Through December 31, 2021, the Company had been vesting a series of stock appreciation rights (SARS) to be settled in cash to certain executives. The SARS were considered liability-classified awards meaning their fair-values were remeasured at the end of each reporting period using a binomial lattice model and any changes in fair value for the vesting periods to-date were recorded through the income statement with a corresponding liability accrued on the balance sheet. Since December 31, 2021, the SARS have been exchanged for restricted stock units (RSUs) on the modification date of January 14, 2022 as approved by the Board of Directors. To account for this exchange, the company revalued the SARS as of the modification date of January 14, 2022 using the binomial lattice model and recorded changes in the vested value since December 31, 2021 as an adjustment to the income statement. The Company then reclassified the SARS accrued liability to APIC for new RSUs and recognized incremental expense. Shares deemed vested at the modification date were released and issued net of tax in March 2022. The SARS that converted to RSUs, were added to the Company's existing RSU program. The company recorded $1.1 million and $2.4 million of expense for RSUs for the three and nine months ended September 30, 2022.
Restricted Stock In March 2021, the Company granted 3 million restricted shares with an aggregate fair value of $16.4 million with a graded vesting schedule. One- of which were vested in April 2021, one- of which were due to vest in April 2022, and one- of which were due to vest in April 2023. In the three and nine months ended September 30, 2022, the Company recorded zero and a net credit of $3.9 million, respectively, to compensation expense related to the forfeiture and partial vesting of these grants compared to $1.4 million and $8.0 million of compensation expense in the three and nine months ended September 30, 2021 for partial vesting of the grants. The credit to compensation expense in the first nine months of 2022 was due to a reversal of expense related to the forfeiture of the unvested restricted stock upon the termination of an employee as of September 30, 2022.
Restricted Stock Units
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Note 9 - Warrants |
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| Warrants [Text Block] |
On April 28, 2022, the Company entered into a Securities Purchase Agreement with an institutional investor. The Purchase Agreement provides for the sale and issuance by the Company of an aggregate of: (i) 9,000,000 shares of the Company’s common stock, $0.001 par value, (ii) pre-funded warrants to purchase up to 7,153,847 shares of Common Stock and (iii) accompanying warrants to purchase up to 16,153,847 shares of Common Stock. The offering price per share and associated prefunded warrants was $1.30 for the shares and $1.2999 for the prefunded warrants. The prefunded warrants were immediately exercisable, had an exercise price of and were exercised during the three months ended June 30, 2022.
The accompanying warrants have an exercise price of $1.31, and will be exercisable 6-months after their date of issuance and will expire on the anniversary of the original issuance date.
Common stock warrants are accounted for in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging - Contracts in Entity's Own Equity (ASC Topic 815), as either derivative liabilities or equity instruments depending on the specific terms of the warrant agreement.
The Company’s warrants are considered to be derivative warrants, are classified as liabilities, and are recorded at fair value. The warrants are subject to re-measurement at each balance sheet date and any change in fair value is recognized as a component of change in fair value of warrant liability in the consolidated statements of operations. The Company uses the Black-Scholes pricing model to estimate the fair value of the related derivative warrant liability. The warrants are classified as Level 3 liabilities (see Note 12 for fair value disclosures.)
Warrants outstanding and warrant activity for the nine months ended September 30, 2022 is as follows:
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Note 10 - Segment Reporting |
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| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting Disclosure [Text Block] |
Operating segments are defined in accordance with ASC 280-10 as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The measurement basis of segment profit or loss is income (loss) from operations. Management has identified five operating segments based on the activities of the Company in accordance with ASC 280-10. These operating segments have been aggregated into three reportable segments. The three reportable segments are Electric Power, Telecommunications, and Renewables and an Other category.
The Electric Power segment consists of Front Line Power Construction, LLC, Orbital Power, Inc. and Eclipse Foundation Group. The segment provides comprehensive solutions to customers in the electric power industries.
The Telecommunications segment is made up of Gibson Technical Services, Inc. (“GTS”) (acquired April 13, 2021). GTS is an Atlanta-based telecommunications company providing diversified telecommunications services nationally since 1990 and is the parent of the following companies: IMMCO, Inc., Full Moon Telecom, and Coax Fiber Solutions, LLC.
The Renewables segment consists of Orbital Solar Services based in Raleigh, North Carolina. Orbital Solar Services provides engineering, procurement and construction (“EPC”) services that support the development of renewable energy generation focused on utility-scale solar construction. The Company serves a wide variety of project types, including commercial, substation, solar farms and public utility projects.
The Other category is made up primarily of the Company's corporate activities. This category does not include any operating segments and does not generate revenue.
The following information represents segment activity for the three months ended September 30, 2022:
(1) Depreciation and amortization includes $3.5 million of depreciation expense which was included in cost of revenues in the Condensed Consolidated Statements of Operations.
The following information represents segment activity for the three months ended September 30, 2021:
(1) Depreciation and amortization includes $1.2 million of depreciation expense which was included in cost of revenues in the Condensed Consolidated Statements of Operations and $0.4 million of depreciation and amortization which was included in Other that was discontinued operations.
(2) Includes purchases of property, plant and equipment and other intangible assets. The Other category includes expenditures for discontinued operations of $3 thousand.
The following information represents selected balance sheet items by segment as of September 30, 2022:
The following information represents segment activity for the nine months ended September 30, 2022:
(1) Depreciation and amortization includes $10.7 million of depreciation expense which was included in cost of revenues in the Condensed Consolidated Statements of Operations.
(2) Includes purchases of property, plant and equipment and other intangible assets. The Other category includes expenditures for discontinued operations of $10 thousand.
The following information represents segment activity for the nine months ended September 30, 2021:
(1) Depreciation and amortization includes $2.3 million of depreciation expense which was included in cost of revenues in the Condensed Consolidated Statements of Operations and $1.2 million of depreciation and amortization which was included in Other that was discontinued operations. (2) Includes purchases of property, plant and equipment and other intangible assets. The Other category includes expenditures for discontinued operations of $0.7 million.
The following information represents selected balance sheet items by segment as of December 31, 2021:
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Note 11 - Recent Accounting Pronouncements |
9 Months Ended | ||
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Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Accounting Standards Update and Change in Accounting Principle [Text Block] |
In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations to enhance transparency about an entity’s use of supplier finance programs. Under the ASU, the buyer in a supplier finance program is required to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a roll-forward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. An entity should also consider whether the existence of a supplier finance program changes the appropriate presentation of the payables in the program from trade payables to borrowings. The amendments in this update are effective for the Company for fiscal periods beginning after December 15, 2022, including interim periods within those fiscal years, except for the disclosure of roll-forward information, which is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the effect of this new standard, which is not expected to have a material effect on the Company's financial position or results of operations.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security should not be considered in measuring fair value. It also requires the following disclosures for equity securities subject to the contractual sale restrictions: 1) the fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet; 2) the nature and remaining duration of the restriction(s); and 3) the circumstances that could cause a lapse in the restriction(s). ASU 2022-03 is effective for the fiscal years and interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The guidance should be applied prospectively. ASU 2022-03 is not expected to have a material effect on our consolidated financial statements.
On October 28, 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This guidance will require entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. This standard was designed to provide consistent recognition and measurement guidance for revenue contracts with customers. Legacy guidance requires entities to record contract assets and contract liabilities acquired to be recorded at fair value. The amendments will be effective for the Company beginning for fiscal years beginning after December 15, 2022. Early adoption is allowed. If an entity early adopts, the entity would be required to apply the new guidance to all acquisitions made in the year of the early adoption. The Company is still reviewing the standard and as of the reporting date of this filing has not elected to early adopt. |
Note 12 - Fair Value Measurements |
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| Fair Value Disclosures [Text Block] |
The Company’s fair value hierarchy for our financial assets and liabilities as of September 30, 2022 and December 31, 2021 was as follows:
See note 16 for more information about the Company's prepaid advance agreement. There were no transfers between Level 3 and Level 2 in the three months ended September 30, 2022 as determined at the end of the reporting period.
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Note 13 - Loss Per Common Share |
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| Earnings Per Share [Text Block] |
In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 260 (“FASB ASC 260”), “Earnings per Share,” Basic loss from continuing operations per share, basic income from discontinued operations per share and basic net income (loss) per share that is available to shareholders is computed by dividing the income or loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the respective loss available to common stockholders by the weighted average number of diluted shares outstanding during the period calculated using the treasury stock method. Due to the Company’s loss from continuing operations in the three and nine months ended September 30, 2022 and September 30, 2021, the assumed exercise of stock options, warrants and the unvested restricted stock that would otherwise increase diluted shares using the treasury stock method would have had an antidilutive effect and therefore 0.2 million shares related to stock options, 16.2 million warrants outstanding at September 30, 2022 and 4.6 million shares of restricted stock units were excluded from the computation of diluted net loss per share for the three and nine months ended September 30, 2022 and 0.2 million shares related to stock options outstanding at September 30, 2021 were excluded for the three and nine months ended September 30, 2021 and 2.3 million shares of restricted stock and restricted stock units were excluded from the computation of diluted net loss per share for the nine months ended September 30, 2021. Accordingly, diluted earnings (loss) per share for continuing operations, discontinued operations and net income is the same as basic earnings (loss) per share for continuing operations, discontinued operations and net income for the three and nine months ended September 30, 2022 and 2021.
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Note 14 - Income Taxes |
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| Notes to Financial Statements | |||
| Income Tax Disclosure [Text Block] |
The Company is subject to taxation in the U.S., as well as various state and foreign jurisdictions. The Company continues to record a full valuation allowance against the Company's U.S. net deferred tax assets and a partial valuation allowance on its Canada deferred tax assets as it is not more likely than not that the Company will realize a benefit from these assets in a future period other than a $91 thousand carryback benefit at Canada. In future periods, tax benefits and related deferred tax assets will be recognized when management concludes realization of such amounts is more likely than not.
Total net income tax expense of $0.2 million and $0.8 million were recorded to the income tax provision from continuing operations for the three and nine months ended September 30, 2022, resulting in an effective tax rate of (0.1%) and (0.4%), respectively. Income tax expense was primarily due to state minimum taxes and estimated Texas gross receipts taxes.
Total net income tax benefit of $2.1 million and $11.0 million was recorded to the income tax provision from continuing operations for the three and nine months ended September 30, 2021, respectively, resulting in an effective tax rate of 18.1% and 24.4%, respectively. The income tax benefit from continuing operations for the three and nine months ended September 30, 2021, was as a result of the release of valuation allowances currently held against the Company’s deferred tax assets as a result of the additional $11.2 million of deferred tax liabilities assumed in the April 2021 and July 2021 acquisitions of GTS and IMMCO. As a result, for the three and nine months ended September 30, 2021 the Company recorded a $2.2 million and $11.2 million tax benefit, respectively, for a reduction in prior recorded valuation allowances. All of the Company’s domestic and foreign net deferred tax assets were reduced by a full valuation allowance.
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Note 15 - Accumulated Other Comprehensive Loss |
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| Comprehensive Income (Loss) Note [Text Block] |
The components of accumulated other comprehensive loss are as follows:
In the nine months ended September 30, 2022, the Company reclassified $3.6 million related to accumulated foreign currency adjustment from Accumulated Other Comprehensive Loss to net loss as a result of the sale of the Company's U.K operations.
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Note 16 - Notes Payable and Line of Credit |
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| Debt Disclosure [Text Block] |
Notes payable is summarized as follows:
Line of Credit On August 19, 2021, the Company's GTS subsidiary entered into a $4.0 million variable rate line of credit agreement. Interest accrues at a rate of 2.05% over the Daily Simple Secured Overnight Financing Rate ("SOFR") index rate. The original maturity date of the line of credit was August 19, 2022, but the maturity date was extended three months to November 2022. At September 30, 2022 the Company had an outstanding balance on the line of credit of $4.0 million with dollars available for borrowing.
Debt Modifications In the first quarter of 2022, the Company entered into a loan modification on the Front Line Seller Financed notes payable. In order to extend the maturity date of these loans from the original maturity date of May 16, 2022, the Company agreed to reduce the restriction period on the stock granted to one of the sellers from two years to one and guarantee a $4.00 stock value upon the expiration of the restriction period. The stock price guarantee was valued as a put option and the additional expected cost of the debt from the put option was determined to be an extinguishment of debt for which the Company recorded a $26.2 million loss on extinguishment and a new financial instrument valued at $26.8 million. The put option was re-valued at $40.1 million at September 30, 2022. The change between the original put option value and the value as of September 30, 2022 was recorded as a $13.3 million loss on financial instrument for the nine months ended September 30, 2022, and the change between the June 30, 2022 put option value and the September 30, 2022 value was recorded as a $1.7 million loss on financial instrument for the three months ended September 30, 2022.
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Note 17 - Concentrations |
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| Concentration Risk Disclosure [Text Block] |
The Company’s major product lines in 2021 and 2022 were electric power transmission and distribution maintenance and service, utility-scale solar construction projects and telecommunications maintenance and service.
The Company had the following revenue concentrations by customer greater than 10% of consolidated revenue:
The Company did not have geographic revenue concentrations outside the U.S.A. greater than 10% of consolidated revenue.
The Company had the following gross trade accounts receivable concentrations by customer greater than 10% of gross trade accounts receivable:
The Company did not have geographic concentrations outside of the U.S.A. greater than 10% of gross trade accounts receivable.
For the three months ended September 30, 2022, the Company had supplier concentrations of approximately 14%, 13%, and 11% in the Renewables segment and supplier concentrations for the nine months ended September 30, 2022. In the three months ended September 30, 2021, the Company did have any supplier concentration over 10%. In the nine months ended September 30, 2021, the Company had supplier concentration at approximately 10% in the Electric Power segment.
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Note 18 - Acquisitions |
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| Business Combination Disclosure [Text Block] |
Acquisition of Coax Fiber Solutions Effective March 7, 2022, GTS, an OIG subsidiary included in the Telecommunications segment, entered into a share purchase agreement to acquire Coax Fiber Solutions (CFS), a Georgia based GDOT Certified contractor specializing in Aerial Installation, directional drilling, trenching, plowing, and missile crews for telecommunications, power, gas, water, CCTV, ATMS, and traffic signal cable installation. GTS paid $0.8 million and issued 125,000 shares of restricted common stock to the Seller to purchase CFS with the stock valued at $146,000. Goodwill reflects the excess purchase price over the fair value of net assets. The Company recorded opening balance items of $0.4 million of current assets, $0.5 million of fixed assets, $1.5 million of goodwill, and $1.5 million of liabilities as part of this transaction.
Acquisition of IMMCO Effective July 28, 2021, the Company entered into a share purchase agreement to acquire IMMCO, Inc., an Atlanta-based telecommunications company providing enterprise solutions to the cable and telecommunications industries since 1992. The acquisition was effectuated pursuant to the Share Purchase Agreement (the “Agreement”), with the shareholders of IMMCO (the "Seller"). Orbital Infrastructure Group paid $16 million and issued 874,317 shares of restricted common stock issued to the Seller ($2.0 million estimated fair value as of July 28, 2021) plus a $0.6 million working capital adjustment for a combined total of $18.6 million. Goodwill reflects the excess purchase price over the fair value of net assets. The Company recorded $11.1 million of goodwill as part of this transaction and all of this goodwill is deductible for tax purposes. Acquisition-related expenses incurred during the nine months ended September 30, 2021 for the IMMCO acquisitions were approximately $0.6 million before taxes, which were recognized within the Selling, general and administrative expense line of the Condensed Consolidated Statements of Operations.
The purchase consideration was as follows:
(in thousands)
The acquisition was accounted for using the purchase method of accounting and the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated preliminary fair values at the date of acquisition.
(in thousands)
* The deferred tax liability recorded at acquisition was offset against the Company's valuation allowance and recorded as a tax benefit in the nine months ended September 30, 2021 within the income tax benefit line of the Condensed Consolidated Statement of Operations and is included in the total.
Acquisition of Gibson Technical Services Effective April 13, 2021, the Company entered into a share purchase agreement to acquire Gibson Technical Services, an Atlanta-based telecommunications company providing diversified telecommunications services nationally since 1990. The acquisition was effectuated pursuant to the Share Purchase Agreement (the “Agreement”), dated as of April 13, 2021, between Orbital Infrastructure Group and the shareholders of GTS (the "Seller"). Orbital Infrastructure Group paid $22 million and issued 5,929,267 shares of restricted common stock issued to the Seller ($16.9 million estimated fair value as of April 13, 2021) for a combined total of $38.9 million. Goodwill reflects the excess purchase price over the fair value of net assets. The Company recorded $12.3 million of goodwill as part of this transaction and all of this goodwill is deductible for tax purposes. Acquisition-related expenses incurred during the nine months ended September 30, 2021 were approximately $0.9 million before tax which were recognized within the Selling, general and administrative expense line of the Condensed Consolidated Statements of Operations.
The purchase consideration was as follows:
The acquisition was accounted for using the purchase method of accounting and the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated preliminary fair values at the date of acquisition.
* The deferred tax liability recorded at acquisition was offset against the Company's valuation allowance and recorded as a tax benefit in the nine months ended September 30, 2021 within the income tax benefit line of the Condensed Consolidated Statement of Operations and is included in the total.
The table below summarizes the unaudited condensed pro forma information of the results of operations of Orbital Infrastructure Group, Inc. for the three and nine months ended September 30, 2021 as though the acquisitions of GTS and IMMCO had been completed as of January 1, 2020.
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Note 19 - Commitments and Contingencies |
9 Months Ended | ||
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| Notes to Financial Statements | |||
| Commitments and Contingencies Disclosure [Text Block] |
Off-Balance Sheet Arrangements
Performance and Payment Bonds and Parent Guarantees In the ordinary course of business, Orbital Infrastructure Group and its subsidiaries are required by certain customers to provide performance and payment bonds for contractual commitments related to their projects. These bonds provide a guarantee to the customer that the Company will perform under the terms of a contract and that the Company will pay its subcontractors and vendors. If the Company fails to perform under a contract or to pay its subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. The Company must reimburse the surety for expenses or outlays it incurs. Certain bonds are for open-ended contracts with multiple work orders so the value may increase as the work progresses and more work orders are started. The bonds will remain in place as the Company completes projects and resolves any disputed matters with the customers, vendors and subcontractors related to the bonded projects. As of September 30, 2022, the total amount of the outstanding performance and payment bonds was approximately $38.4 million. In addition, the Company had letters of credit outstanding of $1.4 million as of September 30, 2022.
Additionally, from time to time, we guarantee certain obligations and liabilities of our subsidiaries that may arise in connection with, among other things, contracts with customers, equipment lease obligations, and contractor licenses. These guarantees may cover all of the subsidiary’s unperformed, undischarged and unreleased obligations and liabilities under or in connection with the relevant agreement. For example, with respect to customer contracts, a guarantee may cover a variety of obligations and liabilities arising during the ordinary course of the subsidiary’s business or operations, including, among other things, warranty and breach of contract claims, third-party and environmental liabilities arising from the subsidiary’s work and for which it is responsible, liquidated damages, or indemnity claims.
Contingent Liabilities Orbital Infrastructure Group, Inc. is occasionally party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, negligence or gross negligence and/or property damages, wage and hour and other employment-related damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief.
Regarding all lawsuits, claims and proceedings, Orbital Infrastructure Group, Inc. records a reserve when it is probable that a liability has been incurred and the loss can be reasonably estimated. In addition, Orbital Infrastructure Group, Inc. discloses matters for which management believes a material loss is at least reasonably possible. None of these proceedings are expected to have a material adverse effect on Orbital Infrastructure Group, Inc.’s consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.
Financial Instrument Liabilities Seller Financed debt - financial instrument To the extent that the fair value of the shares of common stock previously issued to Tidal Power are less than $4.00 per share upon expiration of the restriction period in November 2022, the Company has agreed to pay additional consideration to Tidal Power so that the value of Tidal Power's shares of common stock are equal to no less than $28,852,844. For the Johnson lockup letter, the Company agreed to pay additional consideration to Mr. Johnson upon expiration of the restriction period in November 2023 so that the value of his stock consideration is no less than $17,635,228, which is equal to $4.00 per common share. Any shortfall would be made up by issuing Mr. Johnson additional common shares. The fair value of this liability at September 30, 2022 was $40.1 million. See Note 12 for additional information on this financial instrument.
Syndicated debt - subscription agreement financial instrument To the extent that the Company issues shares of its common stock at a price less than the current reference price, the Company is obligated to issue additional shares to the syndicated lenders based on formulas included in their subscription agreements. When additional shares are issued to the lenders the reference price is reset. The reference price was $0.40 at September 30, 2022. The financial instrument liability had a fair value of $0.8 million at September 30, 2022. See Note 12 for additional information on this financial instrument and Note 20 for additional issuances and changes to the reference price related to the subscription agreement following the September 30, 2022 reporting date. |
Note 20 - Subsequent Events |
9 Months Ended | ||
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Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Subsequent Events [Text Block] |
Orbital Solar Services potential liquidated damages. On October 23, 2022, Orbital Solar Services had a project completion milestone due that was not met. Contractually, liquidated damages may be incurred at $150,000 per day related to this milestone. In aggregate, delay-related liquidated damages cannot exceed a cap of $9.4 million specific to this contract. Liquidated damages are due and payable within 15 days of invoice per the language in the contract. As of November 14, 2022, the project milestone has not been completed and we have not been invoiced.
New home office facility lease On October 6, 2022, the Company signed a lease for its new home office in Houston, Texas. The lease is for 46 months and commences at $7 thousand per month.
Cured default on syndicated debt In November 2022, The Company resolved a dispute with the Syndicated lenders whereby the Syndicated lenders deemed the Company to be in default of its credit agreement due to the Company using proceeds from Front Line Power's operations to pay down $9.5 million of the Company's working capital adjustment with the sellers of Front Line Power. As part of a consent agreement with the lenders, the Company agreed to pay the lenders in a paid-in-kind amount of $10.5 million, which was added to the Syndicated debt balance and included $1.0 million of interest calculated from the first intercompany advance that the Company made.
Extension of prepaid advance maturity date The maturity date for the Company's prepaid advance, which had a fair value of $4.7 million at September 30, 2022, was extended to February 28, 2023 from its original maturity date of October 27, 2022 for additional consideration of $52,500.
Shares issued to lenders of the Company's syndicated debt as part of the Company's subscription agreement with those lenders On November 7, 2022, the Company issued the lenders of the Company's syndicated debt an additional 3,325,010 shares, which dropped the subscription agreement's reference price from $0.40 at September 30, 2022 to $0.30 and on November 10, the Company issued the same lenders an additional 3,685,971 shares, which set a new reference price of $0.2349 for the subscription agreement. See Note 16 for more information about the Company's syndicated debt, and note 12 and 19 for information on the financial instrument liability related to the subscription agreement.
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| Schedule of Nonvested Restricted Stock Units Activity [Table Text Block] |
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Note 9 - Warrants (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block] |
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Note 10 - Segment Reporting (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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Note 12 - Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] |
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| Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] |
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Note 13 - Loss Per Common Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Note 15 - Accumulated Other Comprehensive Loss (Tables) |
9 Months Ended | |||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||
| Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] |
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Note 16 - Notes Payable and Line of Credit (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Debt [Table Text Block] |
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Note 17 - Concentrations (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedules of Concentration of Risk, by Risk Factor [Table Text Block] |
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Note 18 - Acquisitions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Business Acquisitions, by Acquisition [Table Text Block] |
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| Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] |
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| Business Acquisition, Pro Forma Information [Table Text Block] |
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Note 1 - Nature of Operations, Basis of Presentation and Company Conditions (Details Textual) |
2 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
May 11, 2022
USD ($)
|
Jul. 10, 2022
USD ($)
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2021
USD ($)
|
Jun. 30, 2022
USD ($)
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2021
USD ($)
|
May 11, 2022
GBP (£)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
| Retained Earnings (Accumulated Deficit), Total | $ (421,424,000) | $ (421,424,000) | $ (210,934,000) | |||||||
| Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent, Total | (141,567,000) | $ (9,498,000) | (208,331,000) | $ (34,125,000) | ||||||
| Net Cash Provided by (Used in) Operating Activities, Total | (13,355,000) | (36,806,000) | ||||||||
| Working Capital | (118,700,000) | (118,700,000) | ||||||||
| Cash and Cash Equivalents, at Carrying Value, Total | 27,960,000 | 11,179,000 | 27,960,000 | 11,179,000 | 26,865,000 | $ 3,046,000 | ||||
| Sale of Equity, Registration, Maximum Value | 68,800,000 | 68,800,000 | ||||||||
| Finance Lease, Impairment Loss | 4,467,000 | $ 0 | 4,467,000 | $ 0 | ||||||
| Finance Lease, Future Payments | 5,200,000 | 5,200,000 | ||||||||
| Percentage of Drop in Stock Price | 42.00% | |||||||||
| Goodwill, Impairment Loss | $ 0 | 95,951,000 | ||||||||
| Accrued Liabilities, Current, Total | 30,296,000 | $ 30,296,000 | $ 28,301,000 | |||||||
| Electric Power Segment [Member] | ||||||||||
| Goodwill, Impairment Loss | 70,100,000 | |||||||||
| Telecommunications Segment [Member] | ||||||||||
| Goodwill, Impairment Loss | $ 25,800,000 | |||||||||
| Discontinued Operations, Disposed of by Sale [Member] | Orbital Gas Systems Limited [Member] | ||||||||||
| Disposal Group, Including Discontinued Operation, Consideration | £ | £ 3,000,000 | |||||||||
| Proceeds from Divestiture of Businesses | $ 1,575,000 | $ 1,425,000 | ||||||||
| Royalty Payment, Percent of Gross Sales | 15.00% | |||||||||
Note 1 - Nature of Operations, Basis of Presentation and Company Conditions - Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
Sep. 30, 2021 |
||
|---|---|---|---|---|---|
| Cash and cash equivalents at beginning of period | $ 26,865 | $ 11,179 | $ 3,046 | ||
| Restricted cash at beginning of period | [1] | 1,176 | 1,176 | 1,478 | |
| Cash, cash equivalents and restricted cash at beginning of period | 28,041 | 12,355 | 4,524 | ||
| Cash and cash equivalents at end of period | 27,960 | 26,865 | 11,179 | ||
| Restricted cash at end of period | [1] | 609 | 1,176 | 1,176 | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ 28,569 | $ 28,041 | $ 12,355 | ||
| |||||
Note 1 - Nature of Operations, Basis of Presentation and Company Conditions - Accrued Expenses (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accrued bonding | $ 1,631 | $ 167 |
| Accrued compensation | 4,365 | 6,369 |
| Working capital adjustment on Front Line Power Construction acquisition | 4,592 | 14,092 |
| Accrued interest | 4,340 | 2,902 |
| Accrued taxes payable | 148 | 102 |
| Accrued subcontractor expenses | 6,775 | 0 |
| Accrued union dues | 1,044 | 870 |
| Accrued vendor invoices and accrued other expenses | 7,401 | 3,799 |
| Total accrued expense | $ 30,296 | $ 28,301 |
Note 3 - Discontinued Operations and Sale of a Business (Details Textual) - Discontinued Operations, Held-for-sale or Disposed of by Sale [Member] - Orbital Gas Systems Limited [Member] $ in Thousands, £ in Millions |
3 Months Ended | 9 Months Ended | |
|---|---|---|---|
|
Dec. 31, 2021
USD ($)
|
Sep. 30, 2022
USD ($)
|
Dec. 31, 2021
GBP (£)
|
|
| Disposal Group, Including Discontinued Operation, Assets Held-for-sale Impairment | $ 9,200 | ||
| Investment, Expected Net Realizable Value | $ 4,100 | £ 3 | |
| Royalty Payment, Percent of Gross Sales | 15.00% | ||
| Cash Provided by (Used in) Operating Activities, Discontinued Operations | $ (800) | ||
| Cash Provided by (Used in) Investing Activities, Discontinued Operations | $ 62 |
Note 4 - Revenue From Contracts With Customers (Details Textual) $ in Millions |
Sep. 30, 2022
USD ($)
|
|---|---|
| Revenue, Remaining Performance Obligation, Amount | $ 198.1 |
Note 4 - Revenue From Contracts With Customers - Contract Liabilities (Details) - USD ($) $ in Thousands |
9 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|||
| Total contract liabilities - beginning of period | [1] | $ 6,503 | $ 4,873 | |
| Other contract additions, net | 1,003 | 720 | ||
| Revenue recognized | (7,155) | (754) | ||
| Contract settlements | 0 | (3,141) | ||
| Total contract liabilities - end of period | $ 351 | $ 1,698 | ||
| ||||
Note 5 - Inventories - Inventory (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Raw materials | $ 1,198 | $ 1,316 |
| Work-in-process | 210 | 19 |
| Total inventories | $ 1,408 | $ 1,335 |
Note 6 - Investments (Details Textual) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Equity Method Investments | $ 1,063 | $ 1,063 |
| Virtual Power Systems [Member] | ||
| Equity Method Investments | $ 1,100 | $ 1,100 |
Note 7 - Leases (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Finance Lease, Interest Expense | $ 207 | $ 118 | $ 672 | $ 176 |
| Finance Lease, Impairment Loss | $ 4,467 | $ 0 | 4,467 | 0 |
| Cost of Sales; Selling, General and Administrative Expense; and Other Income (Expense) [Member] | ||||
| Operating Lease, Expense | 5,200 | 3,000 | ||
| Depreciation in Cost of Sales and Interest Expense [Member] | ||||
| Finance Lease, Interest Expense | $ 4,600 | $ 1,100 | ||
Note 7 - Leases - Future Minimum Operating Lease Obligations (Details) $ in Thousands |
Sep. 30, 2022
USD ($)
|
|---|---|
| 2022 (remaining period) | $ 1,437 |
| 2023 | 5,421 |
| 2024 | 4,501 |
| 2025 | 2,953 |
| 2026 | 2,551 |
| Thereafter | 3,905 |
| Interest portion | (3,167) |
| Operating Lease Obligations [Member] | |
| Total operating lease obligations | $ 17,601 |
Note 7 - Leases - Future Minimum Finance Lease Obligations (Details) $ in Thousands |
Sep. 30, 2022
USD ($)
|
|---|---|
| 2022 (remaining period) | $ 1,478 |
| 2023 | 5,911 |
| 2024 | 5,342 |
| 2025 | 1,842 |
| 2026 | 893 |
| Thereafter | 48 |
| Interest portion | (1,324) |
| Total financing lease obligations | $ 14,190 |
Note 8 - Stock-based Compensation and Expense - Restricted Stock Units (Details) - Restricted Stock Units (RSUs) [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
$ / shares
shares
| |
| Non-vested shares, beginning of year (in shares) | shares | 3,018,788 |
| Non-vested shares, beginning of year, weighted average grant date fair value (in dollars per share) | $ / shares | $ 4.58 |
| Granted (in shares) | shares | 5,943,197 |
| Granted, weighted average grant date fair value (in dollars per share) | $ / shares | $ 1.33 |
| Vested (in shares) | shares | (2,222,770) |
| Vested, weighted average grant date fair value (in dollars per share) | $ / shares | $ 1.54 |
| Forfeited (in shares) | shares | (2,139,872) |
| Forfeited, weighted average grant date fair value (in dollars per share) | $ / shares | $ 5.31 |
| Non-vested shares, end of year (in shares) | shares | 4,599,343 |
| Non-vested shares, beginning of year, weighted average grant date fair value (in dollars per share) | $ / shares | $ 1.50 |
Note 9 - Warrants - Warrants Outstanding and Activity (Details) - $ / shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Jun. 30, 2022 |
|
| Balance (in shares) | 0 | |
| Issued (in shares) | 23,307,694 | |
| Exercised (in shares) | 7,153,847 | |
| Expired (in shares) | 0 | |
| Balance (in shares) | 16,153,847 | |
| Warrants [Member] | ||
| Exercise price (in dollars per share) | $ 1.31 | |
| Balance (in shares) | 0 | |
| Issued (in shares) | 16,153,847 | |
| Exercised (in shares) | 0 | |
| Expired (in shares) | 0 | |
| Balance (in shares) | 16,153,847 | |
| Prefunded Warrant [Member] | ||
| Exercise price (in dollars per share) | $ 0.0001 | |
| Balance (in shares) | 0 | |
| Issued (in shares) | 7,153,847 | |
| Exercised (in shares) | 7,153,847 | |
| Expired (in shares) | 0 | |
| Balance (in shares) | 0 |
Note 10 - Segment Reporting (Details Textual) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2021
USD ($)
|
|||||||||||||
| Number of Operating Segments | 5 | |||||||||||||||
| Number of Reportable Segments | 3 | |||||||||||||||
| Depreciation, Depletion and Amortization, Total | $ 8,914 | [1] | $ 2,899 | [2] | $ 26,899 | [3] | $ 6,933 | [4] | ||||||||
| Other Segments [Member] | ||||||||||||||||
| Depreciation, Depletion and Amortization, Total | 16 | [1] | 416 | [2] | 47 | [3] | 1,281 | [4] | ||||||||
| Discontinued Operations, Held-for-sale or Disposed of by Sale [Member] | Other Segments [Member] | ||||||||||||||||
| Disposal Group, Including Discontinued Operation, Depreciation and Amortization | 400 | 1,200 | ||||||||||||||
| Disposal Group, Including Discontinued Operation, Expenditures for Long-lived Assets | 3 | 10 | 700 | |||||||||||||
| Cost of Sales [Member] | ||||||||||||||||
| Depreciation, Depletion and Amortization, Total | $ 3,500 | $ 1,200 | $ 10,700 | $ 2,300 | ||||||||||||
| ||||||||||||||||
Note 10 - Segment Reporting - Segment Activity (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|||||||||||||||||||
| Revenues from external customers | $ 99,822 | $ 24,822 | $ 263,989 | $ 41,902 | |||||||||||||||||||
| Depreciation, Depletion and Amortization, Total | 8,914 | [1] | 2,899 | [2] | 26,899 | [3] | 6,933 | [4] | |||||||||||||||
| Interest expense | 9,714 | 1,266 | 27,566 | 3,096 | |||||||||||||||||||
| Income (loss) from operations | (128,710) | (10,850) | (138,205) | (44,067) | |||||||||||||||||||
| Expenditures for long-lived assets | 817 | 1,902 | [5] | 3,796 | [6] | 7,296 | [7] | ||||||||||||||||
| Segment assets | 302,109 | 302,109 | $ 412,339 | ||||||||||||||||||||
| Goodwill | 7,006 | 7,006 | 100,899 | ||||||||||||||||||||
| Other intangible assets, net | 123,853 | 123,853 | 142,656 | ||||||||||||||||||||
| Electric Power Segment [Member] | |||||||||||||||||||||||
| Revenues from external customers | 36,732 | 12,200 | 117,695 | 20,297 | |||||||||||||||||||
| Depreciation, Depletion and Amortization, Total | 6,975 | [1] | 1,095 | [2] | 21,445 | [3] | 1,944 | [4] | |||||||||||||||
| Interest expense | 4,441 | 116 | 12,743 | 175 | |||||||||||||||||||
| Income (loss) from operations | (76,606) | (2,445) | (77,621) | (11,461) | |||||||||||||||||||
| Expenditures for long-lived assets | 368 | 1,391 | [5] | 2,719 | [6] | 5,532 | [7] | ||||||||||||||||
| Segment assets | 184,801 | 184,801 | 273,726 | ||||||||||||||||||||
| Goodwill | 0 | 0 | 70,151 | ||||||||||||||||||||
| Other intangible assets, net | 95,287 | 95,287 | 106,377 | ||||||||||||||||||||
| Telecommunications Segment [Member] | |||||||||||||||||||||||
| Revenues from external customers | 24,064 | 8,742 | 60,524 | 14,816 | |||||||||||||||||||
| Depreciation, Depletion and Amortization, Total | 1,315 | [1] | 774 | [2] | 3,582 | [3] | 1,389 | [4] | |||||||||||||||
| Interest expense | 19 | 9 | 115 | 10 | |||||||||||||||||||
| Income (loss) from operations | (23,213) | (436) | (21,662) | (1,185) | |||||||||||||||||||
| Expenditures for long-lived assets | 396 | 393 | [5] | 975 | [6] | 838 | [7] | ||||||||||||||||
| Segment assets | 68,480 | 68,480 | 80,800 | ||||||||||||||||||||
| Goodwill | 0 | 0 | 23,742 | ||||||||||||||||||||
| Other intangible assets, net | 26,960 | 26,960 | 28,571 | ||||||||||||||||||||
| Renewables Segment [Member] | |||||||||||||||||||||||
| Revenues from external customers | 39,026 | 3,880 | 85,770 | 6,789 | |||||||||||||||||||
| Depreciation, Depletion and Amortization, Total | 608 | [1] | 614 | [2] | 1,825 | [3] | 2,319 | [4] | |||||||||||||||
| Interest expense | 1 | 256 | 5 | 270 | |||||||||||||||||||
| Income (loss) from operations | (26,535) | (3,605) | (32,280) | (17,178) | |||||||||||||||||||
| Expenditures for long-lived assets | 10 | 77 | [5] | 19 | [6] | 118 | [7] | ||||||||||||||||
| Segment assets | 29,765 | 29,765 | 28,324 | ||||||||||||||||||||
| Goodwill | 7,006 | 7,006 | 7,006 | ||||||||||||||||||||
| Other intangible assets, net | 1,606 | 1,606 | 7,708 | ||||||||||||||||||||
| Other Segments [Member] | |||||||||||||||||||||||
| Revenues from external customers | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Depreciation, Depletion and Amortization, Total | 16 | [1] | 416 | [2] | 47 | [3] | 1,281 | [4] | |||||||||||||||
| Interest expense | 5,253 | 885 | 14,703 | 2,641 | |||||||||||||||||||
| Income (loss) from operations | (2,356) | (4,364) | (6,642) | (14,243) | |||||||||||||||||||
| Expenditures for long-lived assets | 43 | $ 41 | [5] | 83 | [6] | $ 808 | [7] | ||||||||||||||||
| Segment assets | 19,063 | 19,063 | 29,489 | ||||||||||||||||||||
| Goodwill | 0 | 0 | 0 | ||||||||||||||||||||
| Other intangible assets, net | $ 0 | $ 0 | $ 0 | ||||||||||||||||||||
| |||||||||||||||||||||||
Note 13 - Loss Per Common Share (Details Textual) - shares shares in Millions |
3 Months Ended | 9 Months Ended | |
|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Share-Based Payment Arrangement, Option [Member] | |||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 0.2 | 0.2 | |
| Warrant [Member] | |||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 16.2 | ||
| Restricted Stock [Member] | |||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 4.6 | 4.6 | |
| Restricted Stock and Restricted Stock Units [Member] | |||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 2.3 | ||
Note 13 - Loss Per Common Share - Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Loss from continuing operations, net of income taxes | $ (141,567) | $ (9,498) | $ (208,331) | $ (34,125) | ||
| Income (loss) from discontinued operations, net of income taxes | (666) | (649) | (2,461) | (2,187) | ||
| Net loss | $ (142,233) | $ (30,936) | $ (37,623) | $ (10,147) | $ (210,792) | $ (36,312) |
| Basic and diluted weighted average number of shares outstanding (in shares) | 115,637,323 | 62,823,330 | 98,209,495 | 53,142,557 | ||
| Loss from continuing operations per common share - basic and diluted (in dollars per share) | $ (1.22) | $ (0.15) | $ (2.12) | $ (0.64) | ||
| Loss from discontinued operations - basic and diluted (in dollars per share) | (0.01) | (0.01) | (0.03) | (0.04) | ||
| Loss per common share - basic and diluted (in dollars per share) | $ (1.23) | $ (0.16) | $ (2.15) | $ (0.68) | ||
Note 14 - Income Taxes (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Income Tax Expense (Benefit), Total | $ 207 | $ (2,098) | $ 830 | $ (11,035) |
| Effective Income Tax Rate Reconciliation, Percent, Total | (0.10%) | 18.10% | (0.40%) | 24.40% |
| Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount | $ (2,200) | $ (11,200) | ||
| Gibson Technical Services and IMMCO [Member] | ||||
| Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Liabilities | $ 11,200 | $ 11,200 | ||
| Foreign Tax Authority [Member] | Canada Revenue Agency [Member] | ||||
| Deferred Tax Assets, Operating Loss Carryforwards, Total | $ 91 | $ 91 | ||
Note 15 - Accumulated Other Comprehensive Loss (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Net Income (Loss) Attributable to Parent, Total | $ (142,066) | $ (10,147) | $ (8,213) | $ (17,952) | $ (210,490) | $ (36,312) |
| Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Foreign Currency Adjustment Attributable to Parent [Member] | ||||||
| Net Income (Loss) Attributable to Parent, Total | $ 3,600 | |||||
Note 15 - Accumulated Other Comprehensive Loss - Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Foreign currency translation adjustment | $ (687) | $ (3,995) |
| Accumulated other comprehensive loss | $ (687) | $ (3,995) |
Note 16 - Notes Payable and Line of Credit (Details Textual) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2022 |
Sep. 29, 2022 |
Aug. 02, 2022 |
Jun. 09, 2022 |
May 06, 2022 |
Mar. 31, 2022 |
Dec. 20, 2021 |
Dec. 10, 2021 |
Nov. 17, 2021 |
Aug. 19, 2021 |
May 11, 2021 |
Oct. 30, 2020 |
Apr. 01, 2020 |
Nov. 30, 2023 |
Nov. 30, 2022 |
Jun. 30, 2022 |
Apr. 30, 2022 |
Feb. 28, 2022 |
Nov. 30, 2021 |
Aug. 31, 2021 |
Apr. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
Aug. 31, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Aug. 18, 2022 |
Mar. 23, 2021 |
Dec. 31, 2020 |
|||||||||
| Debt Instrument, Face Amount | $ 105,000,000 | |||||||||||||||||||||||||||||||||||||||
| Long-term Debt, Total | $ 236,772,000 | $ 229,379,000 | $ 236,772,000 | |||||||||||||||||||||||||||||||||||||
| Gain (Loss) on Extinguishment of Debt, Total | (1,122,000) | $ 723,000 | (29,354,000) | $ 1,633,000 | ||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | $ 248,392,000 | $ 241,982,000 | $ 248,392,000 | |||||||||||||||||||||||||||||||||||||
| Common Stock, Par or Stated Value Per Share (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | |||||||||||||||||||||||||||||||||||||
| Line of Credit [Member] | GTS Subsidiary [Member] | ||||||||||||||||||||||||||||||||||||||||
| Line of Credit Facility, Maximum Borrowing Capacity | $ 4,000,000.0 | |||||||||||||||||||||||||||||||||||||||
| Long-Term Line of Credit, Total | $ 4,000,000.0 | $ 4,000,000.0 | ||||||||||||||||||||||||||||||||||||||
| Line of Credit Facility, Remaining Borrowing Capacity | 0 | 0 | ||||||||||||||||||||||||||||||||||||||
| Exchange Agreement to Reduce Principal on Seller-financed Note Payable [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Conversion, Converted Instrument, Shares Issued (in shares) | 155,763 | |||||||||||||||||||||||||||||||||||||||
| Debt Conversion, Original Debt, Amount | $ 1,000,000 | |||||||||||||||||||||||||||||||||||||||
| Seller Financed Notes Payable, Two [Member] | ||||||||||||||||||||||||||||||||||||||||
| Long-term Debt, Total | $ 1,500,000 | |||||||||||||||||||||||||||||||||||||||
| Unsecured Debt [Member] | Streeterville Capital, LLC [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 10,700,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 9.00% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Effective Percentage | 19.60% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Unamortized Discount, Total | $ 1,000,000.0 | |||||||||||||||||||||||||||||||||||||||
| Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member] | Line of Credit [Member] | GTS Subsidiary [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Basis Spread on Variable Rate | 2.05% | |||||||||||||||||||||||||||||||||||||||
| Unsecured Promissory Note With Kurt A Johnson [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 34,256,000 | |||||||||||||||||||||||||||||||||||||||
| Unsecured Promissory Note With Tidal Power Group [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 51,384,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 6.00% | |||||||||||||||||||||||||||||||||||||||
| Repayments of Debt | $ 20,000,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Share Price Covenant (in dollars per share) | $ 4.00 | $ 4.00 | ||||||||||||||||||||||||||||||||||||||
| Payments for Additional Consideration | $ 28,852,844 | |||||||||||||||||||||||||||||||||||||||
| Unsecured Promissory Note With Tidal Power Group [Member] | Forecast [Member] | ||||||||||||||||||||||||||||||||||||||||
| Repayments of Debt | $ 15,000,000 | |||||||||||||||||||||||||||||||||||||||
| Unsecured Promissory Note With Kurt A Johnson 2 [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 1,090,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 6.00% | |||||||||||||||||||||||||||||||||||||||
| Reduction in Stock Shares in Exchange for Debt (in shares) | 400,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Share Price Covenant (in dollars per share) | $ 4.00 | $ 4.00 | ||||||||||||||||||||||||||||||||||||||
| Payments for Additional Consideration | $ 17,635,228 | |||||||||||||||||||||||||||||||||||||||
| Seller Financed Notes Payable, One [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 6.00% | |||||||||||||||||||||||||||||||||||||||
| Repayments of Debt | $ 1,000,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 18 months | |||||||||||||||||||||||||||||||||||||||
| Long-term Debt, Total | $ 5,000,000 | $ 5,000,000 | ||||||||||||||||||||||||||||||||||||||
| August 2021 Seller-financed Notes Payable [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 2,000,000.0 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 6.00% | |||||||||||||||||||||||||||||||||||||||
| Estimated Market Interest Rate on Which Debt Instrument is Based | 10.00% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Unamortized Discount, Total | $ 48,000 | |||||||||||||||||||||||||||||||||||||||
| Seller Financed Notes Payable, Two [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 36 months | |||||||||||||||||||||||||||||||||||||||
| Vehicle and Equipment loans [Member] | ||||||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | [1] | $ 1,752,000 | $ 222,000 | $ 1,752,000 | ||||||||||||||||||||||||||||||||||||
| Vehicle and Equipment loans [Member] | Minimum [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 0.00% | 0.00% | ||||||||||||||||||||||||||||||||||||||
| Vehicle and Equipment loans [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 9.15% | 9.15% | ||||||||||||||||||||||||||||||||||||||
| The Investor Note [Member] | ||||||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | [2] | $ 50,006,000 | 33,922,000 | $ 50,006,000 | ||||||||||||||||||||||||||||||||||||
| Unsecured Investor Note [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 8,600,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Total | $ 800,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 9.00% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Effective Percentage | 16.40% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 18 months | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Unamortized Discount, Total | $ 600,000 | |||||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | 8,200,000 | 8,200,000 | ||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Failure to Pay, Percentage Increase to Principal | 10.00% | |||||||||||||||||||||||||||||||||||||||
| Unsecured Investor Note [Member] | Forecast [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Required Monthly Payments Under Clause | $ 4,000,000 | |||||||||||||||||||||||||||||||||||||||
| Unsecured Investor Note 2 [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 5,400,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Total | $ 500,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 9.00% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Effective Percentage | 16.50% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 18 months | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Unamortized Discount, Total | $ 400,000 | |||||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | 5,000,000.0 | 5,000,000.0 | ||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Failure to Pay, Percentage Increase to Principal | 10.00% | |||||||||||||||||||||||||||||||||||||||
| Unsecured Investor Note 2 [Member] | Forecast [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Required Monthly Payments Under Clause | $ 4,000,000 | |||||||||||||||||||||||||||||||||||||||
| Prepaid Advance Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Unamortized Discount, Total | 150,000 | 150,000 | ||||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | [3] | 4,720,000 | 0 | 4,720,000 | ||||||||||||||||||||||||||||||||||||
| Common Stock, Par or Stated Value Per Share (in dollars per share) | $ 0.001 | |||||||||||||||||||||||||||||||||||||||
| Pre-paid Advance Offset by Issuance of Common Stock, Price per Share above the Market Price (in dollars per share) | $ 0.01 | |||||||||||||||||||||||||||||||||||||||
| Pre-paid Advance Offset by Issuance of Common Stock, Percentage of the Lowest Daily Volume Weighted Average Price of Our Common Stock | 96.00% | |||||||||||||||||||||||||||||||||||||||
| Prepaid Advance Agreement [Member] | Minimum [Member] | ||||||||||||||||||||||||||||||||||||||||
| Share Price (in dollars per share) | $ 0.20 | |||||||||||||||||||||||||||||||||||||||
| Conditional Settlement Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 0.00% | |||||||||||||||||||||||||||||||||||||||
| Repayments of Debt | $ 350,000 | $ 150,000 | 500,000 | |||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 3 years | |||||||||||||||||||||||||||||||||||||||
| Long-term Debt, Total | $ 3,500,000 | |||||||||||||||||||||||||||||||||||||||
| Conditional Settlement Agreement [Member] | Forecast [Member] | ||||||||||||||||||||||||||||||||||||||||
| Repayments of Debt | $ 1,500,000 | $ 1,000,000 | ||||||||||||||||||||||||||||||||||||||
| Seller Financed Notes Payable - Front Line Power Acquisition [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 26,800,000 | $ 26,800,000 | ||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Share Price Covenant (in dollars per share) | $ 4.00 | $ 4.00 | ||||||||||||||||||||||||||||||||||||||
| Gain (Loss) on Extinguishment of Debt, Total | (1,700,000) | $ (26,200,000) | (13,300,000) | |||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | [4] | 69,168,000 | $ 86,730,000 | 69,168,000 | ||||||||||||||||||||||||||||||||||||
| Seller Financed Notes Payable - Front Line Power Acquisition [Member] | Put Option [Member] | ||||||||||||||||||||||||||||||||||||||||
| Option Contract Indexed to Equity, Settlement, Share, Fair Value | $ 40,100,000 | $ 40,100,000 | ||||||||||||||||||||||||||||||||||||||
| Alter Domus and Various Lenders [Member] | Financing Acquisition Term Loan [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 105,000,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Total | $ 262,500 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Initial Prepayment Premium, Percentage | 5.00% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Final Prepayment Premium, Percentage | 1.00% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 15.45% | 15.45% | ||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Effective Percentage | 18.00% | 18.00% | ||||||||||||||||||||||||||||||||||||||
| Alter Domus and Various Lenders [Member] | Financing Acquisition Term Loan [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Basis Spread on Variable Rate | 2.50% | |||||||||||||||||||||||||||||||||||||||
| First Insurance Funding [Member] | First and Second Financing Note [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 3.28% | 3.28% | ||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 10 months | |||||||||||||||||||||||||||||||||||||||
| First Insurance Funding [Member] | First and Second Financing Note [Member] | Minimum [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 3.00% | |||||||||||||||||||||||||||||||||||||||
| First Insurance Funding [Member] | First and Second Financing Note [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 4.35% | |||||||||||||||||||||||||||||||||||||||
| C6 Capital [Member] | Future Revenue Payable Two [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 20,200,000 | $ 9,500,000 | ||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Total | 384,000 | |||||||||||||||||||||||||||||||||||||||
| Repayments of Debt | 4,200,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Unamortized Discount, Total | 2,600,000 | |||||||||||||||||||||||||||||||||||||||
| Proceeds from Issuance of Long-term Debt, Total | $ 13,300,000 | $ 6,900,000 | ||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Effective Interest Rate for Discount Amortization | 88.00% | 89.00% | ||||||||||||||||||||||||||||||||||||||
| Gain (Loss) on Extinguishment of Debt, Total | (100,000) | $ (400,000) | ||||||||||||||||||||||||||||||||||||||
| C6 Capital [Member] | Future Revenue Payable Two [Member] | Minimum [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 182 days | |||||||||||||||||||||||||||||||||||||||
| C6 Capital [Member] | Future Revenue Payable Two [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 336 days | |||||||||||||||||||||||||||||||||||||||
| C6 Capital [Member] | Future Revenue Payable One [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Total | $ 148,000 | |||||||||||||||||||||||||||||||||||||||
| Streeterville Capital, LLC [Member] | The Investor Note [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 10,700,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Total | $ 1,000,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 9.00% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Effective Percentage | 19.60% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Unamortized Discount, Total | $ 1,000,000.0 | |||||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | $ 5,300,000 | |||||||||||||||||||||||||||||||||||||||
| Streeterville Capital, LLC [Member] | The Fourth Investor Note [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 16,100,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Total | $ 1,500,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 9.00% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Effective Percentage | 16.30% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 18 months | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Unamortized Discount, Total | $ 1,100,000 | |||||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | $ 16,900,000 | $ 16,900,000 | ||||||||||||||||||||||||||||||||||||||
| Streeterville Capital, LLC [Member] | The Fifth Investor Note [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Face Amount | $ 10,700,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Total | $ 1,000,000.0 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Stated Percentage | 9.00% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Interest Rate, Effective Percentage | 16.40% | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Term (Month) | 18 months | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Unamortized Discount, Total | $ 700,000 | |||||||||||||||||||||||||||||||||||||||
| Long-Term Debt, Gross | $ 12,800,000 | $ 12,800,000 | ||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Required Monthly Payments Under Clause | $ 4,000,000 | |||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Periodic Payment, Failure to Pay, Percentage Increase to Principal | 10.00% | |||||||||||||||||||||||||||||||||||||||
| Other Expenses | $ 2,300,000 | |||||||||||||||||||||||||||||||||||||||
| Yorkville [Member] | Prepaid Advance Agreement [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Prepaid Advances Limitation, Outstanding | $ 5,000,000.0 | |||||||||||||||||||||||||||||||||||||||
| Yorkville [Member] | Prepaid Advance Agreement [Member] | Minimum [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Maximum Prepaid Advances | 5,000,000.0 | |||||||||||||||||||||||||||||||||||||||
| Yorkville [Member] | Prepaid Advance Agreement [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||||||||
| Debt Instrument, Maximum Prepaid Advances | $ 50,000,000.0 | |||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||
Note 16 - Notes Payable and Line of Credit - Summary of Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Long-term Debt, gross | $ 248,392 | $ 241,982 | ||||||||||||||||||||
| Unamortized prepaid financing fees and debt discounts | (11,620) | (12,603) | ||||||||||||||||||||
| Total notes payable | 236,772 | 229,379 | ||||||||||||||||||||
| Less: notes payable, current | (129,034) | (72,774) | ||||||||||||||||||||
| Notes payable, less current portion | 107,738 | 156,605 | ||||||||||||||||||||
| Syndicated Term Note [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [1] | 104,475 | 105,000 | |||||||||||||||||||
| Seller Financed Notes Payable - Front Line Power Acquisition [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [2] | 69,168 | 86,730 | |||||||||||||||||||
| Financing Note [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [3] | 2,650 | 1,357 | |||||||||||||||||||
| Seller Financed Notes Payable - Reach Construction Acquisition [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [4] | 3,480 | 3,480 | |||||||||||||||||||
| Vehicle and Equipment loans [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [5] | 1,752 | 222 | |||||||||||||||||||
| Non-Recourse Payable Agreement [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [6] | 9,610 | 8,269 | |||||||||||||||||||
| The Investor Note [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [7] | 50,006 | 33,922 | |||||||||||||||||||
| Prepaid Advance Agreement [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [8] | 4,720 | 0 | |||||||||||||||||||
| Conditional Settlement Note Payable [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [9] | 2,500 | 3,000 | |||||||||||||||||||
| Full Moon - Loan to Prior Owner [Member] | ||||||||||||||||||||||
| Long-term Debt, gross | [10] | $ 31 | $ 2 | |||||||||||||||||||
| ||||||||||||||||||||||
Note 17 - Concentrations (Details Textual) - Supplier Concentration Risk [Member] - Cost of Goods and Service Benchmark [Member] - Renewables Segment [Member] |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Number of Supplier | 3 | 0 | 0 | 1 |
| One Supplier [Member] | ||||
| Concentration Risk, Percentage | 14.00% | |||
| Two Suppliers [Member] | ||||
| Concentration Risk, Percentage | 13.00% | |||
| Three Suppliers [Member] | ||||
| Concentration Risk, Percentage | 11.00% | |||
Note 18 - Acquisitions - Purchase Consideration (Details) - USD ($) $ in Thousands |
2 Months Ended | ||
|---|---|---|---|
Jul. 28, 2021 |
Apr. 13, 2021 |
Sep. 30, 2021 |
|
| IMMCO, Inc. [Member] | |||
| Cash payment | $ 16,597 | ||
| Fair value of common stock issued to sellers | 2,024 | ||
| Total | $ 18,621 | $ 18,600 | |
| Gibson Technical Services, Inc. [Member] | |||
| Cash payment | $ 22,000 | ||
| Fair value of common stock issued to sellers | 16,932 | ||
| Total | $ 38,932 |
Note 18 - Acquisitions - Pro Forma Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2021 |
|||
| IMMCO, Inc. [Member] | ||||
| Revenue from July 28, 2021 acquisition date to September 30, 2021 | $ 1,301 | |||
| Income from continuing operations, net of income taxes from July 28, 2021 acquisition date to September 30, 2021 | [1] | 2,189 | ||
| Revenue from April 13, 2021 acquisition date to September 30, 2021 | 1,301 | |||
| Income from continuing operations, net of income taxes from April 13, 2021 acquisition date to September 30, 2021 | [1] | 2,189 | ||
| Gibson Technical Services, Inc. [Member] | ||||
| Revenue from July 28, 2021 acquisition date to September 30, 2021 | 13,515 | |||
| Income from continuing operations, net of income taxes from July 28, 2021 acquisition date to September 30, 2021 | [1] | 9,224 | ||
| Revenue from April 13, 2021 acquisition date to September 30, 2021 | 13,515 | |||
| Income from continuing operations, net of income taxes from April 13, 2021 acquisition date to September 30, 2021 | [1] | 9,224 | ||
| Gibson Technical Services and IMMCO [Member] | ||||
| Gross revenue | $ 31,462 | 69,867 | ||
| Loss from continuing operations, net of income taxes | $ (13,919) | $ (41,876) | ||
| ||||
Note 19 - Commitments and Contingencies (Details Textual) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2022 |
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Performance and Payment Bonds Outstanding Amount | $ 38,400,000 | ||
| Letters of Credit Outstanding, Amount | $ 1,400,000 | ||
| Stock in Connection With Syndicated Debt [Member] | |||
| Stock Issued, Reference Price Per Share (in dollars per share) | $ 0.40 | ||
| Unsecured Promissory Note With Tidal Power Group [Member] | |||
| Debt Instrument, Share Price Covenant (in dollars per share) | $ 4.00 | ||
| Payments for Additional Consideration | $ 28,852,844 | ||
| Unsecured Promissory Note With Kurt A Johnson 2 [Member] | |||
| Debt Instrument, Share Price Covenant (in dollars per share) | $ 4.00 | ||
| Payments for Additional Consideration | $ 17,635,228 | ||
| Seller Financed Notes Payable - Front Line Power Acquisition [Member] | |||
| Debt Instrument, Share Price Covenant (in dollars per share) | $ 4.00 | ||
| Debt Instrument, Fair Value Disclosure, Total | $ 40,085,000 | $ 86,183,000 | |
| Syndicated Term Note [Member] | |||
| Debt Instrument, Fair Value Disclosure, Total | $ 844,000 |
Note 20 - Subsequent Events (Details Textual) - USD ($) |
1 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Nov. 10, 2022 |
Nov. 07, 2022 |
Oct. 06, 2022 |
Nov. 30, 2022 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Oct. 23, 2022 |
|
| Payments for Working Capital Adjustment | $ 9,500,000 | $ (0) | |||||
| Stock in Connection With Syndicated Debt [Member] | |||||||
| Stock Issued, Reference Price Per Share (in dollars per share) | $ 0.40 | ||||||
| Syndicated Term Note [Member] | |||||||
| Debt Instrument, Fair Value Disclosure, Total | $ 844,000 | ||||||
| Prepaid Advance Agreement [Member] | |||||||
| Debt Instrument, Fair Value Disclosure, Total | 4,666,000 | ||||||
| Debt Instrument, Additional Consideration | $ 52,500 | ||||||
| Subsequent Event [Member] | |||||||
| Liquidated Damages, Amount Per Day | $ 150,000 | ||||||
| Delay-related Liquidated Damages Cap | $ 9,400,000 | ||||||
| Subsequent Event [Member] | Stock in Connection With Syndicated Debt [Member] | |||||||
| Stock Issued During Period, Shares, New Issues (in shares) | 3,685,971 | 3,325,010 | |||||
| Stock Issued, Reference Price Per Share (in dollars per share) | $ 0.2349 | $ 0.30 | |||||
| Subsequent Event [Member] | Syndicated Lenders [Member] | |||||||
| Payments for Working Capital Adjustment | $ 9,500,000 | ||||||
| Subsequent Event [Member] | Syndicated Lenders [Member] | Syndicated Term Note [Member] | |||||||
| Paid-in-kind Amount | 10,500,000 | ||||||
| Interest Payable | $ 1,000,000.0 | ||||||
| Subsequent Event [Member] | New Home Office in Houston, Texas [Member] | |||||||
| Lessee, Operating Lease, Term of Contract (Month) | 46 months | ||||||
| Operating Lease, Monthly Expense | $ 7,000 | ||||||
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