Important Note about Forward-Looking Statements



The following discussion and analysis should be read in conjunction with our
audited consolidated financial statements as of December 31, 2022 and notes
thereto included in this document and our unaudited 10-Q filings for the first
three quarters of 2022 and the notes thereto. In addition to historical
information, the following discussion and other parts of this Form 10-K contain
forward-looking information that involves risks and uncertainties. Our actual
results could differ materially from those anticipated by such forward-looking
information due to factors discussed elsewhere in this Form 10-K.



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,
expressed or implied by such forward-looking statements. These forward-looking
statements are identified by the 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; 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-K
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.

Overview

Orbital Infrastructure Group, Inc. is a Texas corporation organized on April 21,
1998. The Company's principal place of business is located at 5444 Westheimer
Road Suite 1650 Houston, Texas 77056. Orbital Infrastructure Group is a holding
company dedicated to maximizing stockholder value through the acquisition
and development of infrastructure services contractors. Through its
subsidiaries, Orbital Infrastructure Group has built a diversified portfolio of
industry leading infrastructure service providers that touch many markets. The
Company's reportable segments are the Electric Power segment, the
Telecommunications segment, and the Renewables segment.

Critical Accounting Estimates



Our financial statements and related public financial information are based on
the application of accounting principles generally accepted in the United States
(''GAAP''). GAAP requires the use of estimates, assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue, and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently applied. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances. Actual results may differ materially from these
estimates under different assumptions or conditions. We continue to monitor
significant estimates made during the preparation of our financial statements.



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While all of our significant accounting policies impact the Company's financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would have caused a material change in our results of
operations, financial position or liquidity for the periods presented in this
report.

Finite-Lived Asset Impairment



The Company reviews its long-lived assets including finite-lived intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset exceeds its fair value and may not be
recoverable. In performing the review for recoverability, the Company estimates
the future cash flows expected to result from the use of the asset and its
eventual disposition. If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized as the excess of the carrying amount over the fair
value. Otherwise, an impairment loss is not recognized. Management estimates the
fair value and the estimated future cash flows expected. Any changes in these
estimates could impact whether there was impairment and the amount of the
impairment.

Fair Value of Estimates in Business Combination Accounting and Goodwill and Indefinite Lived Assets



The Company accounts for business combinations under the acquisition method of
accounting in accordance with ASC 805, ''Business Combinations,'' where the
total purchase price is allocated to the tangible and identified intangible
assets acquired and liabilities assumed based on their estimated fair values.
The purchase price is allocated using the information currently available, and
may be adjusted, up to one year from acquisition date, after obtaining more
information regarding, among other things, asset valuations, liabilities assumed
and revisions to preliminary estimates if they were known or knowable at the
acquisition date. The purchase price in excess of the fair value of the tangible
and identified intangible assets acquired less liabilities assumed is recognized
as goodwill. At December 31, 2022, the Company has four operating segments
(Front Line Power, Orbital Power Inc., Gibson Technical Services, and Orbital
Solar Services) comprised of eight reporting units with Gibson Technical
Services, IMMCO, Inc, Full Moon Telecom, LLC and Coax Fiber
Solutions consolidating into one operating segment called Gibson Technical
Services, and Eclipse Foundation is combined with Front Line Power. Goodwill is
recognized at the operating segment level. At December 31, 2022, all remaining
goodwill is at the Orbital Solar Services operating segment as goodwill at
Front Line Power Construction, LLC and Gibson Technical Service was fully
impaired in Q3 2022.



Upon acquisition of Coax Fiber Solutions (CFS), the Company recorded
$1.5 million of goodwill. Factors that contributed to the Company's goodwill in
CFS include the company's specialized knowledge and experience in Aerial
Installation, directional drilling, trenching, plowing, and missile crews for
telecommunications, power, gas, water, CCTV, ATMS, and traffic signal cable
installation which will add synergies with customers in the telecommunication
market.



Upon acquisition of Front Line Power Construction, LLC, the Company recorded
$70.2 million of goodwill. Goodwill was valued as of November 17, 2021 by a
third-party valuation expert and was recorded following the recognition of Front
Line Power Construction's tangible assets and liabilities and $108.2 million of
finite- and indefinite-lived identifiable intangible assets. Factors that
contributed to the Company's goodwill at Front Line Power Construction included
the strong leadership of Kurt Johnson, Front Line Power Construction's Founder
and CEO, along with the skills and expertise brought by his team. Front Line
Power Construction's team provides synergies with Orbital Power Inc. that have
added momentum to the comprehensive range of solutions by OIG's Electric Power
Segment.



Upon acquisition of Full Moon Telecom, LLC, the Company recorded $0.8 million of
goodwill. Goodwill was valued as of October 22, 2021, by a third-party valuation
expert and was recorded following the recognition of Full Moon Telecom's
tangible assets and liabilities and $0.4 million of finite- and indefinite-lived
identifiable intangible assets. Factors that contributed to the Company's
goodwill in Full Moon Telecom, LLC, included the highly skilled and technically
competent workforce at Full Moon. This workforce when combined with Gibson
Technical Services and IMMCO provides synergies that increase the unique
portfolio of services provided to their customers and further penetrates the
telecommunications market.



Upon acquisition of IMMCO, Inc., and after recording a working capital
adjustment, the Company recorded $11.1 million of goodwill. Goodwill was valued
as of July 28, 2021 by a third-party valuation expert and was recorded following
the recognition of IMMCO Inc.'s tangible assets and liabilities and $6.4 million
of finite- and -indefinite-lived identifiable intangible assets. Factors that
contributed to the Company's goodwill at IMMCO include the significant synergies
added to the Company's telecommunications segment by expanding the depth and
breadth of the customer solutions provided.



Upon acquisition of Gibson Technical Services, the Company recorded $12.3
million of goodwill. Goodwill was valued as of April 13, 2021 by a third-party
valuation expert and was recorded following the recognition of Gibson Technical
Services' tangible assets and liabilities and $22.8 million of finite- and
indefinite-lived identifiable intangible assets. Factors that contributed to the
Company's goodwill in Gibson Technical Services (GTS) include GTS's sterling
reputation within the telecommunications industry, which when combined with the
Company's resources, provides the Company the solid platform that has helped OIG
penetrate the telecommunications market and build upon to create synergies with
current and future acquisitions.



During the three months ended June 30, 2022, the Company performed its annual
impairment testing as of May 31, 2022, which included a quantitative analysis to
determine whether the carrying value, including goodwill, exceeded the fair
value for each reporting unit. Fair values of the reporting units were
determined based on applying a combination of the discounted cash flow method
(i.e., income approach) as well as a market approach. Significant assumptions
included estimates of future cash flows, discount rates, and market information
for comparable companies. The review of goodwill determined that the fair value
of each of the reporting units exceeded the carrying value and
thus no impairment was necessary during the quarter ended June 30, 2022.



The Company performed 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 and intangibles 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 $70.2 million and
$25.8 million, respectively, during the three months ended September 30,
2022. The impairment assessment concluded that the fair value of the Renewables
reporting unit was in excess of its carrying amount, which was negative. At
December 31, 2022, all remaining goodwill is at the Orbital Solar Services
operating segment as goodwill at Front Line Power Construction, LLC and Gibson
Technical Service was fully impaired in Q3 2022.



During the three months ended June 30, 2022, the Company also performed an
annual impairment analysis for Indefinite-lived intangible assets, which
included a quantitative analysis to determine if carrying value exceeded the
fair value for each asset. Fair values of the Indefinite-lived intangible assets
were determined using the relief from royalty method, which included assumptions
related to revenue growth rates, royalty rates, and discount rates. As a result
of the annual impairment test, no impairment was identified as of June 30, 2022.



During the third quarter of 2022, an additional impairment analysis was
performed over the Indefinite-lived intangible assets due to the triggering
events mentioned above. As a result of the interim impairment
testing, no impairment was identified as of September 30, 2022. In the fourth
quarter of 2022, triggering events were identified which led to performing an
additional Indefinite-lived intangibles impairment test.  These events included
a further decrease in the Company's market capitalization, the significant loss
in the Renewables segment, interest rate increases and limitations on accessing
capital, which raised substantial doubt regarding the Company's ability to
continue as a going concern.  The Company's intangible assets were valued using
a relief from royalties method which resulted in impairment. For the year ended
December 31, 2022, management concluded that Indefinite-lived intangibles were
impaired by $9.3 million dollars primarily attributable to the Front Line and
GTS trade names.



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Revenue Recognition

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,
and Orbital Power Services. 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. 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, progress towards completion is
measured based on units of work completed based on the contractual pricing
amounts. We construct comprehensive revenue calculations based on quantifiable
measures of actual units completed multiplied by the agreed upon contract prices
per item completed. 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 certain types of over time revenue jobs, the Company utilizes the
right-to-invoice practical expedient. In these instances, we have a right to
invoice the customer for an amount that corresponds directly with the value
transferred to the customer for our performance completed to date. When this
practical expedient is used, we recognize revenue based on billing and calculate
any additional revenue earned that is unbilled at the period end. We have
contracts which have payment terms dictated by daily or hourly rates where some
contracts may have mixed pricing terms which include a fixed fee portion. For
contracts in which we charge the customer a fixed rate based on the time or
materials spent during the project, we recognize revenue in the amount to which
we have the right to invoice, which corresponds to the value transferred to the
customer.



For any job where the customer does not simultaneously receive and consume the
benefits of our performance as we perform the service, the timing of revenue
recognition also depends on the payment terms of the contract. For those
contracts 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.



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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.



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 integration systems 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.

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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 event 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 only when the Company estimates that they will be a
factor in the performance of the contract.



Two large solar projects have liquidated damages included within their customer
contract which reduce their total contract values. In the event of a delay in
the achievement of project milestones, the contracts specify the dollar amount
of delay damages owed each day past the agreed upon milestone date. These delay
liquidated damages are capped at 15% of the project contract price. During Q4
2022, the estimated completion dates on these two large solar projects were
pushed passed milestone due dates in which the Company is contractually
obligated to meet. As a result of these delays, the Company recorded liquidated
damages as variable consideration, reducing the contract price on these two
projects by a total of $17.1 million in 2022. This reduction in contract price
along with additional estimated costs to complete the project resulted in a
catch-up adjustment to reduce revenue recorded year-to-date by $21.4 million
dollars. The customer on these two solar projects has the right to invoice for
any liquidated damages on one of these projects, but as of March 31, 2023, has
not yet sent an invoice for liquidated damages. Although the Company accrued for
these liquidated damages in 2022, there is a possibility that some or all of the
$17.1 million in liquidated damages could be reversed in future years if the
customer does not invoice for these damages or if a legal settlement is reached.

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.

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 year ended December 31, 2022, the Company had an accumulated deficit of
$487.1 million, loss from continuing operations of $277.9 million, and net cash
used in operating activities of $19.6 million. Further, as of December 31, 2022,
the Company had a working capital deficit of $190.5 million, including current
maturities of debt, and cash and cash equivalents of $21.5 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 7 - Notes Payable and Note
8 - 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 7 - Notes Payable and Note 8 - 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 December 31, 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 $65.9 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.

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.


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Cash used in Operations

Cash used in operations was approximately $19.6 million during the year ended
December 31, 2022 compared to a $45.7 million use of cash in 2021. This was a
decrease in the use of cash from operations of approximately $26.1 million
from the year ended December 31, 2021. Overall, the change in cash used in
operations is primarily the result of the loss from continuing operations, net
of income taxes in 2022 and changes in assets and liabilities.



Decreased uses of cash in 2022 relate to improved cash flows in the Electric
Power segment provided in large part by a full year of operations from Front
Line Power. The Company believes that revenue generated by recent
Telecommunications and Electric Power acquisitions will continue to improve cash
flow from operating activities. The Company believes overall cash used in
operations will improve through revenue growth associated with new customers and
larger projects.



During 2022, in addition to the Company's net loss after non-cash items,
significant factors affecting cash used in operating activities included the
change in retainage receivables, trade accounts payable, accrued liabilities,
and changes in contract liabilities. and contract assets. The change in
retainage receivables accounted for a $7.0 million use of cash in operating
activities and was due to increased retainage receivables balances from the
Renewables segment. Trade accounts payable increased $30.3 million primarily
related to increased costs for subcontractor labor and materials on two large
Renewable projects in 2022. Accrued liabilities also increased by $19.9
million, largely due to increased labor and vendor costs in the Renewables
segment. Changes in contract liabilities and contract assets were due to a
$1.9 million increase in costs in excess of billings and an increase in
provision for loss on contracts of $4.2 million, primarily related to the
Renewables segment.



During 2021, in addition to the Company's net loss after non-cash items,
significant factors affecting cash used in operating activities included the
change in trade accounts receivable, accrued liabilities, and changes in
contract liabilities. The change in trade accounts receivable accounted for a
$19.2 million use of cash in operating activities and was due to increased
trade account receivable balances from the Electric Power and Renewables
segments. Accrued expenses and Accrued Compensation increased by $4.5 million
primarily related to increased accrued compensation expense in 2021 related to
the timing of payroll expense along with increased accrued expenses at the
corporate level for interest payable on outstanding debt. Changes in contract
liabilities was a source of cash due to increased billings in excess of cash at
the Renewables segment.



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During 2022 and 2021, the Company issued common stock as a form of payment to
certain vendors, consultants, directors and employees. For the years ended
December 31, 2022 and 2021, the Company recorded a total of $1.1 million greater
forfeitures than stock compensations compared to $12.2 of net stock compensation
in 2021. These amounts are comprised of compensation related to equity given, or
to be given, to employees, directors and consultants for services provided and
as payment for royalties earned net of forfeitures. The decrease in
2022 compared to 2021 was due to greater stock-based compensation in 2021 than
in 2022, and a $5.2 million dollar employee restricted stock forfeiture in
2022. In addition, there was a fair value adjustment to stock appreciation
rights of negative $0.3 million in 2022 compared to a fair value adjustment of
$2.1 million in 2021. Stock appreciation rights were exchanged for restricted
stock units in the first quarter of 2022.

Capital Expenditures and Investments

In 2022 and 2021, the Company paid $0.8 million and $132.5 million cash for acquisitions, net of cash received.





During the years ended 2022 and 2021, Orbital Infrastructure Group invested
$4.5 million and $7.8 million, respectively, in fixed assets. These investments
typically include additions to equipment including vehicles and equipment for
powerline service and maintenance, telecommunications service and maintenance,
engineering and research and development, tooling for manufacturing, furniture,
computer equipment for office personnel, facilities improvements and other fixed
assets as needed for operations. The decrease in 2022 was due to larger costs in
2021 compared to 2022 related to start-up costs associated with the Company's
Electric Power segment along with increased equipment at the Telecommunications
segment. The Company anticipates further investment in fixed assets during
2023 in support of its on-going business and continued development of product
lines, technologies and services.



Orbital Infrastructure Group invested $0.1 million and $0.7 million in other
intangible assets during 2022 and 2021, respectively. These investments
typically include capitalized website development, software for engineering and
research and development and software upgrades for office personnel. The
decrease in cash paid for investments in the current year primarily relates to
an investment in VE Technology in 2021 compared to an investment in software
developed by IMMCO and subsidiaries in 2022.



The Company paid a working capital adjustment related to the Front Line Power
Acquisition of $9.5 million in 2022. In 2022 the Company recognized proceeds
from notes receivable of $3.5 million compared to $0.6 million in 2021. Cash
used in purchase of short-term investments was $0.5 million in 2022 compared to
$1.0 million in 2021. During 2022 the Company was refunded $0.2 million on
finance lease deposits compared to lease deposits paid of $0.8 million in 2021.







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Financing Activities

During the years ended December 31, 2022 and 2021, the Company issued payments
of $5.1 million and $2.0 million, against finance leases of equipment. The
Company had proceeds from notes payable in 2022 of $90.5 million, compared to
$143.0 million in 2021. See Note 7, Notes payable for more information on the
Company's notes payable. The Company made payments on notes payable of
$83.2 million in 2022 and $9.9 million in 2021.

On August 19, 2021, the Company's Telecommunications segment entered into a $4.0 million variable rate line of credit agreement that was extended in November 2022 until November 2023. Interest accrues at a rate of 2.05% over the Daily Simple Secured Overnight Financing Rate ("SOFR") index rate. At December 31, 2022 the Company had an outstanding balance on the line of credit of $4.0 million and zero dollars were available for borrowing. At December 31, 2021 the Company had an outstanding balance on the line of credit of $2.5 million and $1.5 million was available for borrowing.

S-3 registration and share issuances



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 costs of approximately
$2.3 million for net proceeds of approximately $35.7 million. 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 $65.9 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 offerings with cash on hand, and possible
proceeds from future issuances of equity through the S-3 registration statement.

Orbital Infrastructure Group may raise additional capital needed to fund operations as well as make payment on debt obligations.

See the section entitled Recent Sales of Unregistered Securities for a complete listing of all unregistered securities transactions.


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Recap of Liquidity and Capital Resources



The Company had a net loss of $280.3 million and cash used in operating
activities of $19.6 million during 2022. As of December 31, 2022, the Company's
accumulated deficit is $487.1 million. The Company has supplemented its
liquidity by issuing $45 million of common stock in January 2021 and $38 million
of common stock in July 2021. In November 2021, the Company entered into a
Credit Agreement with Alter Domus (US), LLC, 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 ("Front
Line") (the "Acquisition"). Pursuant to the Credit Agreement, the Lenders made a
Term Loan to Front Line in the initial principal amount of $105 million for the
purposes of financing the Acquisition and the associated expenses. The Term Loan
initially bears interest at the three-month Adjusted LIBOR Rate, plus the
Applicable Margin, of which 2.5% may be paid in-kind. The Term Loan is
being repaid in consecutive quarterly installments of $262,500, and commenced
with payments on June 30, 2022. The Credit Agreement provides for mandatory
prepayments on the occurrence of events such as sales of assets, Consolidated
Excess Cash Flow and Excess Receipts during the term. The Credit Agreement
provides for prepayment premiums (initially 5% on prepayments made in the first
30 months of the term, declining to 1% in the final year of the term). The Term
Loan matures on November 17, 2026, subject to acceleration on Events of Default.
Additionally, the Company issued two, unsecured promissory notes to the sellers
of Front Line in the aggregate principle amount outstanding of $86.7 million
with an original maturity date of May 17, 2022 and an interest rate of 6% per
annum. The seller notes were amended in the first quarter of 2022 so that $35
million will be due in 2022 and the remaining portion of the seller notes will
be due May 31, 2023. As modified on April 29, 2022 and December 30, 2022, $20
million was paid on May 6, 2022, $15 million is due on or before April 1, 2023
and the remaining balance is due on May 31, 2023.



At December 31, 2022, and 2021 the Company had cash and cash equivalents
balances of $21.5 million and $26.9 million. At December 31, 2022 and 2021, the
Company had $3.0 million and $2.3 million, respectively, of cash and cash
equivalents balances at domestic financial institutions that were covered under
the FDIC insured deposit programs and $0.3 million and $0.4 million,
respectively, of cash and cash equivalents covered at foreign financial
institutions. At December 31, 2022 and 2021, the Company held $1.6 million and
$2.1 million, respectively, in foreign bank accounts.



The following tables present our contractual obligations as of December 31,
2022:

                                                                Payments due by period
                                  Less than
(In thousands)                      1 year        1 to 3 years       3 to 5 years       After 5 years        Total
Financing lease obligations:
Minimum lease payments            $    5,977     $        7,177     $          944     $             -     $  14,098

Operating lease obligations:
Operating lease - minimum
payments                               5,565              7,779              4,936               1,512        19,792

Notes payable obligations:
Notes payable maturities plus
interest                             176,383             46,153            131,818                   -       354,354
Total Obligations                 $  187,925     $       61,109     $      137,698     $         1,512     $ 388,244

As of December 31, 2022, the Company had an accumulated deficit of $487.1 million.

The Company expects the revenues from its continuing operations to cover operating expenses for the next twelve months of operations. However, in the short-term, the Company is working to restructure its debt in order to extend payment of its current debt obligations over a longer duration.

Off-Balance Sheet Arrangements - Obligations under Certain Guarantee Contracts



The Company may enter into guarantee arrangements in the normal course of
business to facilitate commercial transactions with third parties. As of
December 31, 2022, the Company is an indemnitor on nine surety bonds and had
three letters of credit off-balance sheet for a total dollar value of
approximately $16.8 million. Two bonds were with the Renewables segment for a
total of $14.9 million dollars for two construction projects. At the Electric
Power segment there were three bonds totaling $0.4 million for various
unit-based construction jobs. The Company held three off-balance sheet letters
of credit as of December 31, 2022. The Telecommunications segment had a letter
of credit for $0.4 million, the Renewables segment for $0.6 million and the
Other segment for $0.4 million. The Company does not expect any liability
associated with these off-balance sheet arrangements.



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Results of Operations

The following tables set forth, for the periods indicated, Revenue and income (loss) from operations by segment:







(Dollars in
thousands)                             For the Year Ended December 31, 2022
                  Electric
                   Power         Telecommunications       Renewables        Other         Total
Total Revenues   $  152,635     $             83,816     $     85,766     $       -     $  322,217
Loss from
operations       $  (88,045 )   $            (22,112 )   $    (68,137 )   $  (9,283 )   $ (187,577 )





(Dollars in
thousands)                              For the Year Ended December 31, 2021
                   Electric
                    Power         Telecommunications       Renewables        Other         Total
Total Revenues    $   43,599     $             27,799     $     11,550     $       -     $  82,948
Income (loss)
from operations   $  (13,215 )   $                 43     $    (19,043 )   $ (20,576 )   $ (52,791 )






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Revenue

2022 compared to 2021

Revenues in 2022 are primarily attributable to newly acquired entities and
increased revenues in the Renewables segment. Net revenues for the year ended
December 31, 2022 were greater than in 2021 due to continued growth in the
Telecommunications and Electric Power segments along with progress made in two
large solar projects. Revenues will fluctuate generally around the timing of
customer project delivery schedules.



The Electric Power segment held unaudited backlogs of customer orders of
approximately $229.4 million as of December 31, 2022 and $207.7 million at
December 31, 2021. The Renewables segment held unaudited backlogs of customer
orders of approximately $34.1 million as of December 31, 2022 compared to
$121.4 million as of December 31, 2021. Telecommunications, had unaudited
backlogs of customer orders of approximately $199.0 million compared to
$194.5 million as of December 31, 2021. The difference between the total
Non-GAAP backlog and remaining performance obligations relates to certain Master
Service Agreement Backlog that does not meet the GAAP definition of performance
obligations.



Cost of Revenues

2022 compared to 2021

For the year ended December 31, 2022, the cost of revenues as a percentage of
revenue increased to 100.2% from 94.8% during 2021. Although the Company
experienced improved margins in the electric power and telecommunications
segments, margins in the renewables segment were negatively impacted by poor
performance and higher than expected cost of sales related to two large solar
projects which included recording delay liquidated damages that reduced the
contract prices on these jobs. When combined, this resulted in an increase in
cost of revenues as a percentage of revenue year over year. Margins will vary
based upon the mix of work provided, proprietary technology included in
projects, contract labor necessary to complete projects, and the competitive
markets in which the Company competes.



The Company expects improvement in 2023 with the continued growth of the
Telecommunications group of companies and Front Line Power Construction, LLC in
the Electric Power segment. With the addition of these entities, the Company
expects synergies that will promote efficiencies and increase revenue in the
years to come. The Company also expects improved margins in the Renewables
segment with a movement away from fixed price contracts and into subcontractor
projects.
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Selling, General and Administrative Expense

Selling, General and Administrative (SG&A) expenses includes such items as wages, consulting, general office expenses, and costs of being a public company including legal and accounting fees, insurance and investor relations.

2022 compared to 2021



During the year ended December 31, 2022, SG&A decreased $2.6 million compared to
the year ended December 31, 2021.  The decrease in SG&A for the twelve 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 year
ended December 31, 2021 as compared to the year ended December 31, 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. Additionally, in
2021 there were higher SG&A expenses around strategic initiatives which included
increased professional fees and costs associated with due diligence activities
related to acquisitions.

SG&A decreased to 14.7% of total revenue in 2022 compared to 60.3% of total revenue during the year ended December 31, 2021 due to economies of scale on 288.5% higher consolidated revenues, and the factors described above.

Depreciation and Amortization



                                                For the Years Ended December 31,
Depreciation and Amortization by Segment                      Percent
(Dollars in thousands)                        2022             Change          2021
Electric Power                             $    26,911            350.8 %    $  5,969
Telecommunications                               4,863            109.1 %       2,326
Renewables                                       2,001            (31.7 )%      2,931
Other                                               64            (96.2 )%      1,684
Total depreciation and amortization (1)    $    33,839            162.1 %    $ 12,910




(1) For the year ended December 31, 2021, depreciation and amortization totals
included $1.6 million that were classified in income from discontinued
operations on the Consolidated Statements of Operations in the Other segment,
with no such amounts in 2022. For the years ended December 31, 2022 and 2021,
depreciation and amortization totals included $13.8 million and $4.5 million,
respectively that were classified as cost of revenues in the Consolidated
Statements of Operations.

The depreciation and amortization expenses are associated with depreciating buildings, furniture, vehicles, equipment, software and other intangible assets over the estimated useful lives of the related assets.


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2022 compared to 2021

Depreciation and amortization expense in the year ended December 31, 2022 was up
compared to 2021 primarily due to the amortization of Telecommunications and
Electric Power segment acquisition intangibles and depreciation of equipment
used by Telecommunications and Electric Power segments.

Provision for Bad Debt



Provision for bad debt in 2022 represented less than 1% of total revenues and
related to miscellaneous trade receivables, which the Company had either
recorded an allowance for doubtful collections of the receivable or for which
the Company had determined the balance to be uncollectible. The provision for
bad debt decreased in 2022 compared to 2021 as the 2021 provision for bad debt
primarily related to accounts receivable write-offs on the Renewables
segment's customer balances that were deemed to be uncollectible.



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Other Income (Expense)



                                    For the Years Ended December 31,
                                                   Percent
(Dollars in thousands)            2022              Change          2021
Foreign exchange loss          $         1             (100.2 )%   $ (500 )
Interest income                        138              (59.2 )%      338
Sublet rental income                   517                3.2 %       501
Liquidated damages on debt          (7,969 )            100.0 %         -
Other, net                             274              585.0 %        40
Total other income (expense)   $    (7,039 )          (1957.3 )%   $  379




Other income (expense) changes contributing to increased expenses
were liquidated damages incurred on the Company's investor held debt in 2022.
Losses were slightly offset by rental income in the year-to-date period. See
Note 7 - Notes Payable for more information on the liquidated damages on debt.



Interest Expense

The Company incurred $37.8 million and $8.3 million of interest expense during
2022 and 2021, respectively. Interest expense is for interest on the short-term
and long-term notes payable including syndicated debt agreement, seller-financed
notes, non-recourse payable agreements, convertible note payable, insurance
financing notes, secured promissory note, and lines of credit. The
increased interest expense in 2022 is related to interest on debt acquired in
the Front Line Power Construction acquisition in late November 2021. Also
contributing to the increase in interest expense is the increase in the variable
rate on the Company's $104.5 million Syndicated debt that increased from 13.50%
at inception to 17.15% in 2022.

See Note 7 for more information on the Company's notes payable.

Loan modifications and gain (losses) on extinguishments



In 2022, the Company recorded total losses on extinguishments of $31.3 million.
Of this amount, $28.5 million related to loan modifications and loans refinanced
of which $26.2 million was related to the seller financed notes payable with the
sellers of Front Line Power Construction, LLC. See Note 7  - Notes Payable for
more information on the Company's seller financed notes payable.



The remaining portion of losses on extinguishment were due to the Company's
payment of debt with its common stock. Any discounts the Company gives to the
investor on its common stock is recorded as a loss on extinguishment. In 2022,
the Company issued 20,297,993 shares to this investor for $15.9 million,
which included a $2.8 million loss on extinguishment.

Gain (loss) on financial instruments and warrant liabilities



As part of the purchase of Front Line, the Company paid the sellers, Tidal Power
and Kurt Johnson, a certain number of shares of restricted stock. To the extent
that if the value of the shares previously issued to Tidal Power were less than
$4.00 per share upon expiration of the restriction period, the Company has
agreed to pay additional consideration to Tidal Power so that the value of Tidal
Power's shares 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 so that the value of his stock
consideration is no less than $17,635,228, which is equal to $4.00 per common
share. In 2022, fair value adjustments to these financial instrument liabilities
were $16.9 million of losses.



In conjunction with the Company issuing $105 million of debt to a syndicate of
lenders, the Company committed to issuing 1,690,677 shares of stock to the
lenders in the syndicate in a subscription agreement. Included in the
subscription agreement is a provision that provides for additional shares to be
issued to the lenders of the syndicate if the Company issues shares of common
stock in an offering at a price lower than $2.36 per share amount ("the
reference price"), for the shares initially issued to the lenders in the
syndicate. This financial instrument was valued as a put option using the Black
Scholes option pricing model. Unobservable inputs include volatility, exercise
price, and time to expiration. The put expires at the maturity of the Company's
seller notes. In 2022, there were five separate issuances via the financial
instrument for a total of 25.0 million shares. The updated reference price as of
December 31, 2022 was $0.15. In 2022, fair value adjustments to this financial
instrument liability were $7.4 million of losses.



We account for warrants for shares of the Company's common stock that
are not indexed to our own stock as liabilities at fair value on the balance
sheet. The warrants are subject to re-measurement at each balance sheet date and
any change in fair value is recognized in our statement of operations. Changes
in the estimated fair value of the warrants are recognized as a non-cash gain or
loss on the statements of operations. The fair value of the Warrants issued in
connection with Company's offering has been measured based on the Black Scholes
Option Pricing Model. In 2022, fair value adjustments to warrant liabilities
were $11.1 million.





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Provision (benefit) for taxes

The Company is subject to taxation in the U.S., various state and foreign
jurisdictions. We continue to record a full valuation allowance against the
Company's U.S. 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. 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."



2022 compared to 2021

In 2022, net tax expense of $0.8 million, was recorded to the income tax
provision from continuing operations for the year ended December 31,
2022 resulting in an effective tax rate of (0.31%) compared to a $10.5 million
tax benefit from continuing operations for the year ended December 31, 2021 and
an effective tax rate of 17.4%. For the year ended December 31, 2022, the income
tax expense primarily represents state minimum and foreign taxes. For the year
ended December 31, 2021, the income tax benefit primarily represents a decrease
in the U.S. valuation allowance as a result of the GTS acquisition. As of
December 31, 2022, we have federal and state net operating loss carryforwards of
approximately $192.9 million and $0.9 million respectively, and for which the
federal and state net operating loss carry-forwards will expire between 2027 and
2038, with the exception of $34.1 million of federal net operating loss
carryforwards that are not subject to expiration.

Loss from Continuing Operations, net of income taxes

2022 compared to 2021



The Company had a loss from continuing operations, net of income taxes of $277.9
million for the year ended December 31, 2022 compared to a loss of $49.8 million
in 2021. The increased loss from continuing operations, net of income taxes was
attributable in part to an over $55.0 million loss on two utility scale solar
projects which were nearing completion as of December 31, 2022. In addition, the
Company recorded $109.6 million of impairments of goodwill and intangible assets
in 2022. There was also a $29.5 million increase in interest expense compared to
2021, primarily related to debt financing of 2021 acquisitions. Loss on
extinguishment of debt of $31.3 million was recognized, largely due to a loan
modification in the first quarter of 2022 on the Front Line Seller Financed
notes payable. Lastly, unfavorable changes in financial instruments resulted in
a $13.4 million dollar loss in 2022.



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Income from Discontinued Operations, net of income taxes

2022 compared to 2021



The Company had loss from discontinued operations, net of income taxes of
$2.3 million for the year ended December 31, 2022 compared to a loss of
$11.4 million in 2021. The decrease in loss from discontinued operations is
primarily due to an impairment recognized at Orbital UK in 2021 that wrote down
Orbital UK to its expected sales price.  Orbital UK was sold in 2022 and the VE
Technology asset of the Company's North America Orbital Gas subsidiary remains
held for sale at December 31, 2022.



Consolidated Net Loss

2022 compared to 2021

The Company had a net loss of $280.3 million for the year ended December 31,
2022 compared to a net loss of $61.2 million for the year ended December 31,
2021. The increased consolidated net loss was attributable to $109.6 million
dollars of impairment recognized in 2022 on goodwill and intangible assets
driven in part by a large stock price decrease in 2022. In addition, two utility
scale solar projects resulted in large losses in 2022 related to delays,
additional subcontractor labor related to rework, and other costs beyond
original estimates that eroded the margins on these jobs, resulting in an
over $55 million dollar loss. Loss on extinguishment of debt and losses on
financial instruments also contributed to the greater loss.

Recently Adopted and Recently Issued Accounting Standards

Information on recently adopted and recently issued accounting standards is included in Note 2 Summary of Significant Accounting Policies - Recent Accounting Pronouncements, to the Consolidated Financial Statements under Part II, Item 8, ''Financial Statements and Supplementary Data.''

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