~~our ability~~stock to ~~retain existing customers, attract new customers and satisfy our customers’ requirements;~~fluctuate include:

●

fluctuations in our quarterly or annual financial results or the quarterly or annual financial results of companies perceived to be similar to us or relevant for our business;

●

changes in estimates of our financial results or recommendations by securities analysts;

●

failure of our services, products, and technologies to achieve or maintain market acceptance;

●

changes in market valuations of similar or relevant companies;

●

success of competitive service offerings or technologies;

●

changes in our capital structure, such as the issuance of securities or the incurrence of debt;

●

announcements by us or by our competitors of significant services, contracts, acquisitions or strategic alliances;

●

regulatory developments in the United States, foreign countries, or both;

●

litigation;

●

additions or departures of key personnel;

●

investors’ general perceptions; and

●

changes in general economic, industry or market conditions.

~~general economic conditions;~~

~~changes in our pricing policies;~~

~~our ability to expand our business;~~

~~the effectiveness~~Table of ~~our personnel;~~

Contents

~~new product and service introductions;~~

~~technical difficulties or interruptions in our services;~~

~~the timing of additional investments in our products and solutions;~~

~~regulatory compliance costs;~~

~~costs associated with future acquisitions of technologies and businesses; and~~

~~extraordinary expenses such as litigation or other dispute-related settlement payments.~~

These factors may materially and adversely affect the market price of our common stock, regardless of our performance. In addition, the stock market in general and the market for energy infrastructure services companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our actual operating performance. Additionally, because the trading volume of our stock is not large, there can be a disparity between the bid and the asked price that may not be indicative of the stock’s true value.

In addition, if the market for energy stocks, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition, or results of operations. Further, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

A possible “short squeeze” due to a sudden increase in demand of our common stock that largely exceeds supply may lead to additional price volatility.

In the future investors may purchase shares of our common stock to hedge existing exposure or to speculate on the price of our common stock. Speculation on the price of our common stock may involve long and short exposures. To the extent an aggregate short exposure in our common stock becomes significant, investors with short exposure may have to pay a premium to purchase shares for delivery to share lenders at times if and when the price of our common stock increases significantly, particularly over a short period of time. Those purchases may in turn, dramatically increase the price of our common stock. This is often referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in our common stock that are not directly correlated to our business prospects, financial performance or other traditional measures of value for the Company or its common stock.

Additional stock offerings in the future may dilute then-existing shareholders’ percentage ownership of the Company.

Given our plans and expectations that we will need additional capital in the future, we anticipate that we may need to issue additional shares of common stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible notes, stock options or warrants. The issuance of additional securities in the future will dilute the percentage ownership and potentially voting power of then current stockholders and could negatively impact the price of our common stock and other securities.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock and make it more difficult for us to raise funds through future offerings of common stock.

We have never paid dividends on our common stock and do not expect to pay any in the foreseeable future.

Potential purchasers should not expect to receive a return on their investment in the form of dividends on our common stock. The Company has never paid cash dividends on its common stock and the Company does not expect to pay dividends in the foreseeable future.

~~Table of Contents~~

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Our ability to pay dividends may be further restricted by the terms of any of our future debt or preferred securities. Accordingly, investors must rely on sales of their own common stock after price appreciation, which may never occur, as the only way to realize their investment. Investors seeking cash dividends should not purchase shares of our stock.

There is a limited public trading market for our common stock so you may not be able to resell your stock and may not be able to turn your investment into cash.

Our common stock is currently traded on the NASDAQ Stock Market under the trading symbol ‘‘~~CUI.~~OEG.’’ Our shares of common stock are thinly traded. Due to the illiquidity, the market price may not accurately reflect our relative value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. Because our common stock is thinly traded, a large block of shares traded can lead to a dramatic fluctuation in the share price and investors may not be able to liquidate their investment in us at all or at a price that reflects the value of the business.

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Nasdaq may delist our common stock from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.

If for 30 consecutive trading days, the bid price of our common stock closes below the $1.00 per share minimum required for continued listing on the Nasdaq ~~Capital~~Stock Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), Nasdaq will send us a Notice. The Notice would not have an immediate effect on the listing of our common stock, and our common stock would continue to trade on the Nasdaq ~~Capital~~Stock Market under the symbol ~~“CUI.~~“OEG.” Under Nasdaq Listing Rule 5810(c)(3)(A), if during the 180 calendar day period following the date of the Notice (the “Compliance Period”), the closing bid price of our common stock would be at or above $1.00 for a minimum of 10 consecutive business days, we would regain compliance with the Minimum Bid Price Requirement and our common stock would continue to be eligible for listing on the Nasdaq ~~Capital~~Stock Market, absent noncompliance with any other requirement for continued listing. If we did not regain compliance with the Minimum Bid Price Requirement by the end of the Compliance Period (or the Compliance Period as may be extended) the Company’s common stock would be subject to delisting. If this were to happen, we would monitor the closing bid price of our common stock and may, if appropriate, consider implementing available options to regain compliance with the Minimum Bid Price Requirement under the Nasdaq Listing Rules.

If our common stock is delisted, our common stock would likely then trade only in the over-the-counter market. If our common stock were to trade on the over-the-counter market, selling our common stock could be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and we could face significant material adverse consequences, including: a limited availability of market quotations for our securities; reduced liquidity with respect to our securities; a determination that our shares are a “penny stock,” which will require brokers trading in our securities to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our securities; a reduced amount of news and analyst coverage for our Company; and a decreased ability to issue additional securities or obtain additional financing in the future. These factors could result in lower prices and larger spreads in the bid and ask prices for our common stock and would substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for us.

In addition to the foregoing, if our common stock is delisted from Nasdaq and it trades on the over-the-counter market, the application of the “penny stock” rules could adversely affect the market price of our common stock and increase the transaction costs to sell those shares. The SEC has adopted regulations which generally define a “penny stock” as an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. If our common stock is delisted from Nasdaq and it trades on the over-the-counter market at a price of less than $5.00 per share, our common stock would be considered a penny stock. The SEC’s penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that before a transaction in a penny stock occurs, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s agreement to the transaction. If applicable in the future, these rules may restrict the ability of brokers-dealers to sell our common stock and may affect the ability of investors to sell their shares, until our common stock no longer is considered a penny stock.

~~Table of Contents~~

Risks Relating to ~~Shareholder~~Stockholder Rights

Our board of directors has the authority, without ~~shareholder~~stockholder approval, to issue preferred stock with terms that may not be beneficial to existing common ~~shareholders~~stockholders and with the ability to adversely affect ~~shareholder~~stockholder voting power and perpetuate their control.

Although we do not have any preferred stock outstanding presently, our Articles of Incorporation allow us to issue shares of preferred stock without any vote or further action by our ~~shareholders.~~stockholders. Our board of directors has the authority to issue preferred stock without further ~~shareholder~~stockholder approval, as well as the authority to fix and determine the relative rights and preferences of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock or other preferred ~~shareholders~~stockholders and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.

Preferred stock could be used to dilute a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred shares may have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change of control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable to and assets available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including voting rights, of the holders of our common stock and preferred stock.

Our Articles of Incorporation limits director liability, thereby making it difficult to bring any action against them for breach of fiduciary duty.

~~CUI Global,~~Orbital Energy Group, Inc. is a Colorado corporation. As permitted by Colorado law, the Company’s Articles of Incorporation limits the liability of directors to ~~CUI Global,~~Orbital Energy Group, Inc. or its ~~shareholders~~stockholders for monetary damages for breach of a director’s fiduciary duty, with certain exceptions. These provisions may discourage ~~shareholders~~stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by ~~shareholders~~stockholders on behalf of the Company against a director.

Our charter documents may inhibit a takeover that ~~shareholders~~stockholders consider favorable.

Provisions of our Articles of Incorporation and Bylaws may delay or discourage transactions involving an actual or potential change in control of the Company, including transactions in which ~~shareholders~~stockholders might otherwise receive a premium for their shares, or transactions that our ~~shareholders~~stockholders might otherwise deem to be in their best interests. These provisions:

~~provide that the authorized number of directors may be changed by resolution of the board of directors;~~

provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; and

~~do not provide for cumulative voting rights.~~

~~Item~~ ~~1B. Unresolved Staff Comments~~

~~None.~~

~~Item~~ ~~2. Properties~~

During December 2018, our wholly owned subsidiary, CUI Properties, LLC signed closing documents on the sale and leaseback of our Tualatin, Oregon corporate office real estate located at 20050 SW 112th Avenue in the Tualatin Franklin Business Park for a ten-year lease.
•
provide that the authorized number of directors may be changed by resolution of the board of directors;
•
provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; and
•
do not provide for cumulative voting rights.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

In ~~November 2017,~~2020, the ~~Company's~~Company relocated its headquarters to its Houston ~~operations, rented~~office where it rents office and warehouse space ~~in Houston, Texas, of~~totaling approximately 40,000 square feet. Its lease expires in 2022.

In April 2021, the Company acquired Gibson Technical Services, LLC ("GTS"), which leases approximately 10,000 square feet of office and 5,000 square feet of warehouse space in Atlanta, GA. In addition, this space includes a fenced equipment yard of approximately 30,000 square feet. The lease ends in July 2028. GTS also leases warehouse space ranging from 250 square feet to 8,700 square feet in Alabama, Georgia, North Carolina, Nevada, Mississippi, Louisiana, New York, Virginia, and Oklahoma.

In July 2021, the Company acquired IMMCO, Inc, which is a subsidiary of Gibson Technical Services, LLC and which shares office space with GTS in Atlanta, GA.

In October 2021, the Company acquired Full Moon, Telecom, LLC, which runs remotely and thus has no properties associated with it.

In November 2021, the Company acquired Front Line Power Construction, LLC, which leases two industrial/office type buildings and surrounding six acres in the greater Houston area of Rosharon, Texas. The lease expires in 2024.

In April 2020, the Company sublet office space in Irving, Texas for corporate support services and Orbital Power, Inc. office personnel; the lease runs through 2023. Orbital Power, Inc. also maintains an equipment yard in Sherman, Texas that houses equipment primarily for Orbital Power, Inc. for which the lease runs until 2022.

~~In March 2015, as part~~With the acquisition of ~~the Tectrol (CUI-Canada) acquisition in the the discontinued Power and Electromechanical segment,~~Orbital Solar (formerly Reach Construction Group, LLC), the Company leased ~~a 73,700 square foot manufacturing facility in Toronto, Canada that runs until November 2020.~~

In September 2015, Orbital, completed the construction of a new 46,000 square foot state-of-the-art manufacturing/administration/research and development facility on its existing site in the UK to supplement existing office space.

~~Additionally, CUI Japan, in the discontinued Power and Electromechanical segment, has leased~~industrial space in ~~Tokyo, Japan,~~Sanford, North Carolina which ~~is used as a sales~~includes approximately 4,600 square feet of warehouse space and 4,800 square feet of office space and ~~is leased~~runs through ~~March 2021.~~2022.

The Company ~~has enough manufacturing~~leases office and ~~office capacity~~warehouse space in Tualatin, Oregon, which was its former headquarters and now sublets to ~~meet~~outside parties.

In the future, the Company may obtain additional leased properties to support its ~~business needs for~~growth strategy and expansion of operations within the ~~foreseeable future.~~energy infrastructure services industry.

Item 3. Legal Proceedings

The Company and its subsidiaries are not parties in any legal proceedings. No director, officer or affiliate of the Company, any owner of record or beneficially of more than five percent of any class of voting securities of the Company or any associate of any such director, officer, affiliate of the Company or security holder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

Item 4. Mine Safety Disclosure

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

~~Description~~Description of Securities

The Company’s ~~Common Stock~~common stock is traded on The ~~NASDAQ~~Nasdaq Stock Market under the trading symbol ‘‘~~CUI.~~OEG.’’ The Company currently has authorized 325,000,000 common shares, par value $0.001 per share, and as of December 31, ~~2019,~~2021, the Company’s issued and outstanding shares consisted of ~~28,383,373~~82,259,739 shares of common stock issued and 81,906,676 shares outstanding of which ~~28,246,147~~65,787,438 shares are freely tradable without restriction or limitation under the Securities Act. As of December 31, ~~2019,~~2021, the Company had in excess of 3,000 beneficial holders of our common stock and in excess of 2,300 ~~shareholders~~stockholders of record. The actual number of ~~shareholders~~stockholders is greater than this number of record holders and includes ~~shareholders~~stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

The holders of Common Stock are entitled to one vote per share and do not have cumulative voting rights. Holders of the Company’s Common Stock do not have any pre-emptive or other rights to subscribe for or purchase additional shares of capital stock and no conversion rights, redemption or sinking-fund provisions.

~~Table of Contents~~

~~Market~~Market Value

The Company’s ~~Common Stock~~common stock is traded on the ~~NASDAQ~~Nasdaq Stock Market under the trading symbol ‘‘~~CUI.~~OEG.’’ The following table sets forth, the high and low sales prices of our Common Stock on the ~~NASDAQ~~Nasdaq during each quarter of the two most recent years.

	High		Low		High		Low
2019
2021
First Quarter	$	1.79	$	1.18	$	9.86	$	2.08
Second Quarter		1.31		0.82		7.64		2.91
Third Quarter		0.91		0.53		4.66		2.92
Fourth Quarter		1.19		0.68		3.07		2.15
2018
2020
First Quarter	$	3.25	$	2.50	$	1.79	$	1.18
Second Quarter		3.16		2.56		1.31		0.82
Third Quarter		3.00		2.15		0.91		0.53
Fourth Quarter		2.25		1.17		1.19		0.68

~~Stock Performance Graph~~

The following graph compares the performance of our common stock to the performance of the NASDAQ Composite Index and the Russell 2000 Index. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity markets. The comparisons in the chart below are provided in response to SEC disclosure requirements and are not intended to forecast or be indicative of future performance of our common stock. We issued 7,392,856 shares in October 2017, which increased the total number of shares outstanding by about 35% and this had a dilutive effect on the share price as reflected in the following graph.

Period Ending

Index

12/31/2014 *

12/31/2015

12/31/2016

12/31/2017

12/31/2018

12/31/2019

CUI Global, Inc.
$ 100.00 $ 94.50 $ 93.02 $ 36.91 $ 16.51 $ 14.77
NASDAQ Composite
100.00 106.96 116.45 150.96 146.67 200.49
Russell 2000
100.00 95.59 115.95 132.94 118.30 148.49

* Assumed $100 invested on 12/31/2014 in stock or index, including reinvestment of dividends. Fiscal year ended December 31.

~~Source: S&P Global Market Intelligence~~

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Dividend Policy

The Company has never paid cash dividends on its ~~Common Stock~~common stock and the Company does not expect to pay dividends in the foreseeable future.

We currently expect to retain future earnings to finance the growth and development of our business. The timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flows; our general financial condition and future prospects; our capital requirements and surplus; contractual restrictions; the amount of distributions, if any, received by us from our subsidiaries; and other factors deemed relevant by our board of directors. Any future dividends on our common shares would be declared by and subject to the discretion of our board of directors.

Common Stock Reserved for Future Issuances

Set forth below is a summary of the outstanding securities, transactions and agreements, which relate to ~~849,635~~237,985 shares of common stock the Company is required to reserve for potential future issuances.

•

~~849,635~~237,985 common shares reserved for outstanding options issued under our Equity Compensation Plans.

As of December 31, ~~2019,~~2021, there were reserved for issuance an aggregate of ~~849,635~~237,985 shares of common stock for options outstanding under the Company’s 2008 Equity Incentive Plan and the Company’s 2009 Equity Incentive Plan ~~and the Company’s 2009 Equity Incentive Plan~~ (Executive).

At the 2020 Annual Meeting of Shareholders, the Company’s shareholders approved the Orbital Energy Group 2020 Incentive Award Plan and authorized a share limit of 2,000,000 shares. This limit was increased to a total of 5,000,000 shares at the 2021 Annual Meeting of Shareholders. This Plan replaced the 2008 and 2009 Equity Incentive Plan, which had expired. As of December 31, 2021 there are 4,130,665 remaining shares available to grant under the 2020 Incentive Award Plan. See Note 10 Stockholders' Equity for more information on the Company's 2020 Incentive Award Plan.

Other than as described herein, as of the date of this report, there are currently no plans, arrangements, commitments or understandings for the issuance of additional shares of Common Stock.

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RECENT SALES OF UNREGISTERED SECURITIES

Following is a list of all securities we sold within the past ~~three~~two years, 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.

~~2019~~2021 Sales of Unregistered Securities

Common Stock Issued During ~~2019~~2021

(Dollars in thousands)

Dates of issuance

Type of
issuance

Expense/
Prepaid

Stock issuance
recipient

Reason for
issuance

Total no.
of shares

Grant date
fair value
recorded at
issuance

January, April, July and October 2019

Vested restricted common stock

Expense

Four board members

Director compensation
164,713 $ 162

May 2019

Common stock

Expense

Employee

Approved bonus
18,837 17

Total 2019 issuances
183,550 $ 179 ⁽¹⁾

(1) Total excludes $36 thousand of 2019 stock compensation and $3 thousand of 2018 stock compensation related to royalties that were recorded as expense but not issued and outstanding as of December 31, 2019.

(Dollars in thousands)

Dates of issuance

Type of issuance

Stock issuance recipient

Reason for issuance

Total no. of shares

Fair value recorded at issuance

February, June, July, and August and October 2021

Common stock

Four consultants

Services

251,537

1,161

April and June 2021

Common stock

Various GTS sellers

GTS acquisition

5,929,267

16,932

July 2021

Common stock

Various IMMCO sellers

IMMCO acquisition

874,317

2,024

July, August, and September, October, November and December 2021

Common stock

Various

Debt payment

3,082,299

8,971

October 2021

Common stock

2 sellers

Full Moon Telecom acquisition

227,974

368

November 2021

Common stock

2 sellers

Front Line Power acquisition

11,622,018

17,612

November 2021

Common stock

4 lenders

Portion of original issue discount on $105 million credit facility

1,636,651

3,813

Total 2021 issuances

23,624,063

50,881

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~~2018 Sales of Unregistered Securities~~

~~Common Stock Issued During 2018~~

(Dollars in thousands)

Dates of issuance

Type of
issuance

Expense/
Prepaid

Stock issuance
recipient

Reason for
issuance

Total no.
of shares

Grant date
fair value
recorded at
issuance

January, April July, and October 2018

Vested restricted common stock

Expense

Four board members

Director compensation
72,157 $ 175

January and July 2018

Common stock

Expense

Three Employees

Approved bonuses
68,118 183 ⁽¹⁾

July and December 2018

Common stock

Expense

Related Party, James McKenzie

Pursuant to royalty agreement
5,755 14 ⁽¹⁾
Total 2018 issuances
146,030 $ 372 ^{(2) (3)}

~~(1) Includes bonus and royalties of $170 thousand that was accrued and expensed in 2017.~~

~~(2) Total excludes $3 thousand of stock compensation related to royalties that were recorded as expense but not issued and outstanding as of December 31, 2018.~~

~~(3) Excludes $24 thousand of stock compensation for stock issued in 2017 that was amortized from prepaid expense in 2018.~~

~~Table of Contents~~

~~2017 Sales of Unregistered Securities~~

~~Common Stock Issued During 2017~~

(Dollars in thousands)

Date of issuance

Type of
issuance

Expense/
Prepaid/
Cash

Stock issuance
recipient

Reason for
issuance

Total no.
of shares

Grant date
fair value
recorded at
issuance

January, April, August and October 2017

Vested restricted common stock

Expense

Four board members

Director compensation
49,980 $ 200

January, February and June 2017

Common stock

Expense

Three Employees

Approved bonuses
28,634 182 ⁽¹⁾

January and December 2017

Common stock

Expense

Related party, James McKenzie

Pursuant to royalty agreement
3,293 16 ⁽¹⁾
January and February 2017

Common stock

Expense

Two Employees

Cashless stock option exercises
245 — ⁽²⁾
May 2017

Common stock

Prepaid expense/expense

Third-party consultant

Strategic investor marketing services
15,000 57 ⁽³⁾
Total 2017 issuances
97,152 $ 455 ⁽⁴⁾⁽⁵⁾

~~(1)~~

~~Includes bonuses and royalty of $176 thousand that were accrued and expensed in 2016.~~

~~(2)~~

~~The Company received $0 for the issuance in the cashless option exercises.~~

~~(3)~~

~~Amount includes $24 thousand that was included in prepaid expense at December 31, 2017.~~

~~(4)~~

~~Does not include stock expense of $170 thousand included in accrued liabilities at December 31, 2017 for unissued stock.~~

~~(5)~~

~~Does not include registered 7,392,856 shares issued in October 2017 via the S-3 registration statement. See Note 10. Shareholders' Equity for more information on the October share issuances.~~

Shares Eligible for Future Sale

As of December 31, ~~2019,~~2021, we had outstanding ~~28,383,373~~81,906,676 shares of ~~Common Stock.~~common stock. Of these shares, ~~28,246,147~~65,787,438 shares are freely tradable without restriction or limitation under the Securities Act.

The ~~137,226~~16,119,141 shares of ~~Common Stock~~common stock held by existing ~~shareholders~~stockholders as of December 31, ~~2019~~2021 that are ‘‘restricted’’ within the meaning of Rule 144 adopted under the Securities Act (the ‘‘Restricted Shares’’), may not be sold unless they are registered under the Securities Act or sold pursuant to an exemption from registration, such as the exemption provided by Rule 144 promulgated under the Securities Act. The Restricted Shares were issued and sold by us in private transactions in reliance upon exemptions from registration under the Securities Act.

~~Issuer Purchases of Equity Securities~~

On December 3, 2019, the Board of Directors of the Company authorized and approved a two-year share repurchase program for up to $5 million of the then outstanding shares of the Company's common stock. The following table provides information regarding repurchases of the Company's common stock during the quarter ended December 31, 2019:

Period

Total Number of
Shares Purchased

Average Price
Paid Per share

Total Number of
Shares as Part of
Publicly
Announced Plans
or Programs

Maximum Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs

December 1, 2019 through December 31, 2019
353,063 $ 1.17 353,063 $ 4,586,678
Total
353,063 $ 1.17 353,063 $ 4,586,678

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Item 6. ~~Selected Financial Data~~Reserved

The following tables contain selected consolidated financial data as of the dates and for the periods presented. The selected consolidated balance sheet data as of December 31, 2019 and 2018 and the selected consolidated statement of operations data for the years ended December 31, 2019, 2018, and 2017 have been derived from our consolidated financial statements and related notes that we have included elsewhere in this Form 10-K. The selected consolidated balance sheet data as of December 31, 2017, 2016, and 2015 and the selected consolidated statement of operations data for the years ended December 31, 2016 and 2015 have been derived from consolidated financial statements that are not presented in this Form 10-K. The timing of acquisitions and divestitures completed during the years presented affects the comparability of the selected financial data.

The selected historical consolidated financial data as of any date and for any period are not necessarily indicative of the results that may be achieved as of any future date or for any future period. You should read the following selected historical financial data in conjunction with the more detailed information contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the related notes that we have presented elsewhere in this Form 10-K.

(In thousands, except share and per share amounts)

For the Years Ended December 31,

2019

2018 (d)

2017

2016

2015

Selected Statements of Operations Data (a):

Total revenues
$ 23,492 $ 20,342 $ 18,843 $ 28,058 $ 28,203
Cost of revenues
17,680 17,783 12,913 16,141 17,661
Gross profit
5,812 2,559 5,930 11,917 10,542
Selling, general and administrative expense
20,063 18,629 17,506 17,483 16,845
Depreciation and amortization
1,544 1,549 1,366 1,422 1,964
Research and development
139 155 222 143 141

Provision for (credit to) bad debt
131 13 (16
)
44 125

Impairment of goodwill (b)
— 4,347 3,152 — —
Other operating expenses
(20
)
— 5 (1
)
34
Loss from operations
(16,045
)
(22,134
)
(16,305
)
(7,174
)
(8,567
)
Other income (expense)
567 (316
)
310 (385
)
20
Interest expense
(61
)
(216
)
(201
)
(202
)
(178
)
Loss before income taxes and equity in net earnings of affiliate
(15,539
)
(22,666
)
(16,196
)
(7,761
)
(8,725
)
Net (loss) income of affiliate
(1,043
)
— — — 53
Income tax (benefit) (c)
(2,956
)
(1,342
)
(2,251
)
(49
)
(1,270
)

Loss from continuing operations, net of income taxes
(13,626
)
(21,324
)
(13,945
)
(7,712
)
(7,402
)
Income from discontinued operations, net of income taxes
12,497 3,999 1,356 446 1,415
Net loss
$ (1,129
)
$ (17,325
)
$ (12,589
)
$ (7,266
)
$ (5,987
)
Loss from continuing operations per common share - basic and diluted
$ (0.48
)
$ (0.75
)
$ (0.62
)
$ (0.37
)
$ (0.36
)
Earnings from discontinued operations per common share - basic and diluted
0.44 0.14 0.06 0.02 0.07

Loss per common share - basic and diluted
$ (0.04
)
$ (0.61
)
$ (0.56
)
$ (0.35
)
$ (0.29
)
Basic and diluted weighted average number of shares outstanding
28,654,500 28,517,339 22,397,865 20,897,812 20,792,494
(In thousands, except share data)

As of December 31,

2019

2018

2017

2016

2015

Selected Balance Sheet Data:

Cash and cash equivalents
$ 23,351 $ 3,979 $ 12,646 $ 4,617 $ 7,267
Total current assets
41,694 35,481 41,276 32,103 38,157
Total assets
64,158 70,167 87,909 79,843 90,848
Total current liabilities
15,995 18,586 18,914 17,738 17,055
Total liabilities
21,041 28,629 30,423 31,208 31,332
Total stockholders' equity
43,117 41,538 57,486 48,635 59,516
Common shares outstanding
28,383,373 28,552,886 28,406,856 20,916,848 20,806,219
~~(a)~~
Statements of operations selected data for 2018, 2017, 2016 and 2015 has been reclassified to present continuing operations separately from operations classified as discontinued operations and consistent with the 2019 presentation.
~~(b)~~
During the year ended December 31, 2018, management determined that an impairment of $4.3 million was necessary related to goodwill at Orbital-UK. During the year ended December 31, 2017, management determined that an impairment of $3.2 million was necessary related to goodwill at Orbital-UK.
~~(c)~~
~~There was an $887 thousand tax benefit generated from the effect of the USA Tax Cut and Jobs Act ("Tax Act") passed in December 2017.~~
~~(d)~~
~~ASC 606,~~ ~~Revenue from Contracts with Customers~~~~, was applied on a modified retrospective basis as of January 1, 2018 thus years prior to 2018 are not restated.~~
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~~Item~~ 7.  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 our audited consolidated financial statements as of December 31, ~~2019~~2021 and notes thereto included in this document and our unaudited 10-Q filings for the first three quarters of ~~2019~~2021 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
~~CUI Global,~~Orbital Energy Group, Inc. is a Colorado corporation organized on April 21, 1998. The Company’s principal place of business is located at ~~20050 SW 112th Avenue, Tualatin, Oregon 97062, phone (832) 467-1420. CUI Global~~1924 Aldine Western, Houston, Texas 77038. Orbital Energy Group is a ~~platform~~holding company dedicated to maximizing ~~shareholder~~stockholder value through the acquisition and development ~~and commercialization~~ of ~~new, innovative technologies.~~infrastructure services contractors. Through its subsidiaries, ~~CUI Global~~Orbital Energy Group has built a diversified portfolio of industry leading ~~technologies~~infrastructure service providers that touch many markets.

~~Critical~~Critical Accounting ~~Policies~~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.

~~In the fourth quarter~~Fair Value of ~~2019, the Company determined that certain acquisition intangibles related to CUI-Canada, which were classified as held for sale~~Estimates in 2019 did not have adequate forecasted revenue to justify the current valuation and were written off. This was primarily driven by the Company's decision to close the facility by the end of 2020. The impairment of $92 thousand is reported in discontinued operations.
In the fourth quarter of 2018, the Company determined that certain long-term prepaid assets classified on the balance sheet as deposits and other assets, which were reliant on future revenue in order to be amortized to expense, did not have adequate forecasted revenue to justify the current valuation. This was primarily driven by the lack of substantial sales over the previous two years and uncertainty regarding the level of future sales. For that reason, the Company recorded a $1.5 million impairment to deposits and other assets included in cost of revenues and reclassified $0.1 million to prepaid assets. The amount reclassified to prepaid assets related to prepaid royalties associated with expected 2019 revenue.
~~Indefinite-Lived Intangibles~~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. 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, 2021, the Company has six operating segments comprised of eight reporting units with Gibson Technical Services, IMMCO, Inc, and Full Moon Telecom, LLC consolidating into one operating segment called Gibson Technical Services. Goodwill is recognized at the operating segment level. At December 31, 2021, operating segments with goodwill include Front Line Power Construction, LLC, Orbital Solar Services and Gibson Technical Services.

~~2019 Goodwill Impairments~~
~~In the fourth quarter~~Upon acquisition of ~~2019,~~Front Line Power Construction, LLC, the Company ~~determined~~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 contribute to the Company’s goodwill at Front Line Power Construction include 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 will add momentum to the comprehensive range of solutions by OEG’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 contribute to the Company’s goodwill in Full Moon Telecom, LLC, include the highly skilled and technically competent workforce at Full Moon. This workforce when combined with Gibson Technical Services and IMMCO provide synergies that increase the unique portfolio of services provided to their customers and further penetrate the telecommunications market.
Upon acquisition of IMMCO, Inc., the Company recorded $10.6 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 contribute 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 contribute 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 will help OEG penetrate the telecommunications market and build upon to create synergies with future acquisitions.
Upon acquisition of Reach Construction Group, LLC, the Company recorded $7.0 million of goodwill. Goodwill was valued as of April 1, 2020 by a third-party valuation expert and was recorded following the recognition of Reach's tangible assets and liabilities and $13.7 million of finite-lived identifiable intangible assets. Factors that contributed to the Company's goodwill are Reach Construction's skilled workforce and reputation within its industry. The Company also expected to achieve future synergies between Reach Construction and Orbital Power, Inc. business. These synergies were expected to be achieved in the form of power line work necessary when bringing new solar power systems online.
For Orbital Solar Systems, (formally known as Reach Construction), management completed a quantitative analysis to determine potential impairment at the May 31, 2021 annual impairment test date. Goodwill in the Telecommunications segment was qualitatively reviewed to determine whether it was more likely than not that the fair value of its ~~goodwill at CUI-Canada and CUI Japan~~reporting unit was less than its carrying amount, including goodwill. To complete the ~~carrying amounts. The Company hired a third-party valuation expert to perform a valuation~~qualitative review, management evaluated the fair value of the Goodwill and ~~it was~~considered all known events and circumstances that might trigger an impairment of goodwill. Management determined that ~~the remaining goodwill held by CUI-Canada~~no additional testing was necessary, and ~~CUI Japan should be written down to zero. With those write downs, the Company does not have any remaining goodwill.~~
~~2018 Goodwill Impairments~~
no impairment was necessary. During ~~our review of Goodwill as of May 31, 2018, the Company determined that~~2021 there were ~~indicators present~~no triggering events to suggest that it was more likely than not that the fair value of ~~the Orbital-UK~~each reporting unit and each indefinite-lived intangible was less than its carrying ~~amount.~~amount and thus no impairment was necessary.
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Revenue Recognition
On January 1, 2018, we adopted the accounting standard ASC 606, “Revenue from Contracts with Customers” and all the related amendments (“new revenue standard"), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. This guidance includes the required steps to achieve the core principle that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. For the majority of contracts, revenue is still measured over time using the input cost-to-cost method or the output method. The change that most affected the transition adjustment on revenue was the requirement to limit revenue recognition on certain contracts without an enforceable right to payment for performance completed to date. Without a specific enforceable right to payment throughout the life of the contract, revenue is recorded at completion of the contact. For the Telecommunications, Electric Power, and Renewables segments, the majority of contracts are classified over time due to the guidance that allows for over time revenue recognition for construction contracts where the Company's performance creates or enhances an asset that the customer controls as the asset is being created or enhanced. This criterion is met since the Company is typically constructing the solar farms, as well as telecommunications and electric power construction services on customer owned or customer-controlled property, so the customer controls the asset as it is created.
For our construction contracts, revenue is generally recognized over time. Our fixed price construction projects use either an output method or a cost-to-cost input 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. 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 to measure revenue based on the output method.

The ~~significant~~timing of revenue recognition 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 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 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. However, for those contracts for which we do not have a right, at all times, to payment for performance completed to date, we recognize revenue at the point in time when control is transferred to the customer.
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For our services contracts, revenue is 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, outage services and training that are performed under time and materials contracts, our progress towards complete satisfaction of such performance obligations is measured using an output 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 indicate a loss, a provision for the ~~Orbital-UK reporting unit subsequent to~~entire estimated loss on the ~~most recent impairment test performed as of December 31, 2017 included a decline~~unsatisfied performance obligation is made in the ~~2018 actual~~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 ~~operating income~~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 ~~cash flows compared~~circumstances within the contracts require the changes to ~~prior forecasts~~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 ~~same period~~original contract is updated and ~~a negative change in~~ the ~~2018 forecasted~~required adjustments to revenue ~~operating income~~ and ~~cash flows for the remainder of the year due in part to the longer than expected halt in shipping of its GasPT product to a major customer in Italy~~contract assets, liabilities, and ~~market uncertainty due to the continuing effects of Brexit.~~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 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 only when the Company estimates that they will be a factor in the performance of the contract.
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 ~~performed a quantitative test~~has experienced net losses and cash outflows from cash used in operating activities over the past years. As of and for the ~~Orbital-UK reporting unit, which resulted in a goodwill impairment charge of $1.3 million during the second quarter of 2018.~~
twelve months ended December ~~2018 Interim Test.~~ ~~During the fourth quarter of 2018,~~31, 2021, the Company ~~determined that there were additional indicators present to suggest that it was more likely than not that the fair value~~had an accumulated deficit of ~~the Orbital-UK reporting unit was less than its carrying amount. The significant changes for the Orbital-UK reporting unit subsequent to the annual goodwill impairment test performed as~~$210.9 million, loss from continuing operations of ~~May 31, 2018 were driven by a slower recovery than what was originally forecasted. Actual GasPT revenue continued to lag behind forecasted revenue as acceptance~~$49.8 million, and net cash used in operating activities of the technology continued to be slower than anticipated and continued delays associated with existing customer contracts that had not yet resumed even though previously communicated issues had been resolved. This slower than expected recovery, led to lower 2018 revenue, operating income and cash flows than originally forecasted.$45.7 million.

As ~~a result~~ of ~~its analysis,~~December 31, 2021, the Company ~~performed another quantitative test~~had Cash and cash equivalents of ~~goodwill. The quantitative test~~$26.9 million available for working capital needs and planned capital asset expenditures and a working capital deficit of approximately $33.3 million, including current maturities of debt. These factors initially raise substantial doubt about our ability to continue as a going concern, but this doubt has been alleviated by the ~~Orbital-UK reporting unit resulted~~Company’s plans to raise sufficient capital to meet our current obligations over the next twelve months, in ~~a further goodwill impairment charge~~addition to the expected recovery of ~~$3.1 million during the fourth quarter of 2018, which was a write-off of the remaining Energy segment goodwill. In addition, the reporting units~~our assets to satisfy liabilities in the ~~discontinued Power and Electromechanical segment were tested for impairment due to the overall decrease in market capitalization experienced in 2018, with no impairment identified.~~
~~December 2017 Interim Test.~~ ~~During the fourth quarter~~normal course of 2017, the Company determined that there were indicators present to suggest that it was more likely than not that the fair value of the Orbital-UK reporting unit was less than its carrying amount. The significant changes for the Orbital-UK reporting unit subsequent to the annual goodwill impairment test performed as of May 31, 2017 included a decline in the 2017 actual revenue, operating income and cash flows compared to previously forecasted results and a decline in the 2018 forecasted revenue, operating income and cash flows due in part to the longer than expected halt in shipping of its GasPT product to a major customer in Italy and market uncertainty due to the continuing effects of Brexit.business.

The Company ~~performed a quantitative analysis and concluded that the carrying value of the Orbital-UK reporting unit exceeded~~has plans to access additional capital to meet its ~~estimated fair value. The quantitative test resulted in an impairment~~obligations for the ~~Orbital-UK reporting unit,~~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 the expansion; refer to Note – 10 Stockholders’ Equity and Stock-Based Compensation and Note 7 — Notes Payable. 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. 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. The Company ~~recorded~~currently has an effective S-3 shelf registration statement with $112 million of aggregate offering value available for the issuance of various types of securities, including common stock, preferred stock, debt securities and/or warrants. While management will look to continue funding future acquisitions, organic growth initiatives and continuing operations by raising additional capital from sources such as sales of its debt or equity securities or notes payable in order to meet operating cash requirements, there is no assurance that management’s plans will be successful.
As the Company continues its progression to build a ~~goodwill impairment charge~~full-service infrastructure services platform, a successful transition to attaining profitable operations is dependent upon achieving a level of ~~$3.2~~positive cash flows through generating adequate revenue growth to support the Company’s cost structure. For the twelve months ended December 31, 2021, our revenues have increased by $61.5 million resulting in a 286% increase in revenue from the prior year. The significant increase in revenues during the ~~fourth quarter~~year was primarily driven by the strategic acquisitions of ~~2017.~~
~~Long-lived assets~~Front Line Power Construction, LLC, Gibson Technical Services, IMMCO, Inc., and ~~finite lived intangible assets~~
~~Besides goodwill being tested for impairment,~~Full Moon Telecom, LLC made coupled with organic growth within Orbital Power Services. In addition, two large utility scale solar projects were awarded to Orbital Solar Systems during the twelve-month period ended December 31, 2021. We anticipate, based on currently proposed plans and assumptions relating to our operations, the Company ~~also tested its long-lived assets~~to generate sufficient revenue growth required to achieve profitability and ~~finite lived intangible assets for Orbital-UK. The result of the quantitative test of undiscounted~~generate positive cash flows ~~did not result in any impairment.~~from operations over the next twelve months. No assurance can be made that we will be able to obtain profitability and positive cash flows from our continuing operations.

~~Stock-Based Compensation~~
The Company accounts for stock-based compensation using FASB Accounting Standards Codification No. 718 (‘‘FASB ASC 718’’), ‘‘Compensation – Stock Compensation.’’ FASB Codification No. 718 requires the fair value of all stock-based employee compensation awardedplans to ~~employees to be recorded~~meet its obligations as ~~an expense~~they become due over the ~~related vesting period.~~
~~Stock bonuses issued~~next twelve months by raising additional capital through equity and debt financing sources and expected positive cash flows generated from operations. Given the considerations, we believe the mitigating effect of management’s plans has alleviated any substantial doubt about the Company’s ability to employees are recorded at fair value using the market price of the stock on the date of grant and expensed over the vesting period or immediately if fully vested on date of issuance. Employee stock options are recorded at fair value using the Black-Scholes option pricing model. The underlying assumptions used in the Black-Scholes option pricing model by the Company are taken from publicly available sources including: (1) volatility and grant date stock price, which are sourced from historic stock price information; (2) the appropriate discount rates are sourced from the United States Federal Reserve; and (3) other inputs are determined based on previous experience and related estimates. With regards to expected volatility for determining the fair value of our stock options, the Company utilizes an appropriate period for historical share prices for CUI Global, Inc. that best reflects the expected weighted average lifespan of the options.continue as a going concern.

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~~Valuation~~Cash used in Operations
There was a use of ~~Non-Cash~~ cash from operations of approximately $45.7 million during the year ended December 31, 2021 compared to a $15.0 million use of cash in 2020. This was an increase in the use of cash from operations of approximately $30.7 million from the year ended December 31, 2020. Overall, the change in cash used in operations is primarily the result of the loss from continuing operations, net of income taxes in 2021 and changes in assets and liabilities.
Increased uses of cash in 2021 are primarily for normal administrative costs, and cash usage in the Electric Power segment primarily related to start-up costs and Renewables primarily related to its loss from operations. While the Company saw an initial cost increase from the Electric Power segment, management expects this segment to become cash flow positive, as the business environment normalizes and it continues to increase service crews deployed. The Company believes that revenue generated by recent Telecommunications and Electric Power acquisitions will 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 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 trades 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. Change in contract liabilities was a source of cash due to increased billings in excess of cash at the Renewables segment.
During 2020, in addition to the Company's net loss after non-cash items, significant factors affecting cash used in operating activities included the change in accrued liabilities, accounts payable and changes in contract liabilities. A use of cash of $1.2 million in accrued liabilities related largely to the payout of severance at CUI Canada that was accrued for in 2019. Change in accounts payable, which was a $3.5 million use of cash, was largely due to the paydown of accounts payable at the Renewables segment, which was acquired on April 1, 2020. Accounts payable paid down did not get replaced at the same rate due to decreased business activity at the Renewables segment due to the COVID-19 pandemic and timing of customer projects. Change in contract liabilities was a source of cash due to increased billings in excess of cash at the Renewables segment partially offset by the decrease in provision for loss contracts at the Renewables segment as the estimated contract losses recorded on the acquisition date were realized as vendors were paid.
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During 2021 and 2020, the Company used stock and options as a form of payment to certain vendors, consultants, directors and employees. For years ended December 31, 2021 and 2020, the Company recorded a total of $12.2 million and $0.3 million, respectively for share-based compensation related to equity given, or to be given, to employees, directors and consultants for services provided and as payment for royalties earned. The increase in 2021 compared to 2020 was due to greater stock-based bonuses, and greater stock-based director compensation. In addition, there was a fair value adjustment to stock appreciation rights of $2.1 million in 2021 compared to a fair value adjustment of $0.6 million in 2020. Stock appreciate rights were exchanged for restricted stock units in the first quarter of 2022. There was no stock option vesting expense in 2021 or 2020.
Capital ~~Stock Issuances~~Expenditures and Investments
In 2021, the Company paid $132.5 million cash for acquisitions, net of cash received.
During the years ended 2021 and 2020, Orbital Energy Group invested $7.8 million and $1.7 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 increase in 2021 was due to the 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 2022 in support of its on-going business and continued development of product lines, technologies and services.
Orbital Energy Group invested $0.7 million and $11 thousand in other intangible assets during 2021 and 2020, respectively. These investments typically include product certifications, technology rights, capitalized website development, software for engineering and research and development and software upgrades for office personnel. The increase in cash paid for investments in the current year primarily relates to VE Technology purchased by Orbital Gas Systems North America, now classified as discontinued operations.
In 2021, the Company entered into finance lease agreements that required payment of deposits. Per the agreement, these deposits should be returned 36 months after the lease commences. During 2021 the Company paid $0.8 million on finance lease deposits compared to zero in 2020.
In 2021 the Company recognized proceeds from notes receivable of $0.6 million compared to zero in 2020. Cash used in purchase of short-term investments of $1.0 million in 2021 compared to zero in 2020.
The Company ~~values~~made an additional $0.3 million investment in a convertible note receivable from Virtual Power Systems ("VPS") in 2020 including payments made related to the Company's transition agreement with VPS. This note was converted to equity in VPS in the third quarter of 2020 along with an additional contribution of $0.5 million and a non-cash contribution of inventory in the amount of $0.3 million.
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Financing Activities
During the years ended December 31, 2021 and 2020, the Company issued payments of $2.0 million and $4 thousand, against finance leases of equipment. The Company had proceeds from notes payable in 2021 of $143.0 million, compared to $8.1 million in 2020. See Note 7, Note payable for more information on the Company's notes payable. The Company made payments on notes payable of $9.9 million in 2021 and $4.1 million in 2020.
On August 19, 2021, the Company's Telecommunications segment 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. 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. In 2020, the $0.4 million line of credit balance was held at the Renewables segment. The Renewable segment line of credit was paid and closed in the first quarter of 2021.
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 Energy 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.
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, and available debt.
Orbital Energy 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.
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Recap of Liquidity and Capital Resources
The Company had a net loss of $61.2 million and cash used in operating activities of $45.7 million during 2021. As of December 31, 2021, the Company's accumulated deficit is $210.9 million. The Company has supplemented its liquidity by issuing $45 million of shares of stock in January 2021 and $38 million shares of 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 shall be repaid in consecutive quarterly installments of $262,500, commencing on June 30, 2022. The Credit Agreement provides for mandatory prepayments on the occurrence of events such as sales of assets, Consolidated Excess Cash Flow and Excess Receipts during the term. The Credit Agreement provides for prepayment premiums (initially 5% on prepayments made in the first 30 months of the term, declining to 1% in the final year of the term). The Term Loan matures on November 17, 2026, subject to acceleration on Events of Default. 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 a 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.
At December 31, 2021, and 2020 the Company had cash and cash equivalents balances of $26.9 million and $3.0 million. At December 31, 2021 and 2020, the Company had $2.3 million and $0.6 million, respectively, of cash and cash equivalents balances at domestic financial institutions, which were covered under the FDIC insured deposits programs and $0.4 million and $0.2 million, respectively, of cash and cash equivalents covered at foreign financial institutions. At December 31, 2021 and 2020, the Company held $2.1 million and $2.2 million, respectively, in foreign bank accounts.
The following tables present our contractual obligations as of December 31, 2021:

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
$ 5,729 $ 9,980 $ 576 $ — $ 16,285

Operating lease obligations:

Operating lease - minimum payments
5,767 8,789 4,093 2,714 21,363

Notes payable obligations:

Notes payable maturities plus interest
97,659 92,077 130,053 — 319,789
Total Obligations
$ 109,155 $ 110,846 $ 134,722 $ 2,714 $ 357,437
The above notes payable maturities reflects the agreement made with the Front Line sellers to extend the maturity date for those agreements from May 16, 2022 to May 31, 2023, with $35 million being due in 2022 and the remaining principal due in 2023.
As of December 31, 2021, the Company had an accumulated deficit of $210.9 million.
The Company expects the revenues from its continuing operations to cover operating and other expenses for the next twelve months of operations. However, in the short-term, the Company expects its operating units to need cash support as the Company acquires fixed assets to grow their businesses. Further equity issuance or borrowing may be required to fund future acquisitions.
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, 2021, the Company is an indemnitor on four surety bonds and had three letters of credit off-balance sheet for a total dollar value of approximately $131.8 million. Two bonds were with the Renewables segment for a total of $127.0 million dollars for two construction projects. At the Electric Power segment there were two bonds totaling $3.8 million for various unit-based construction jobs. For the projects related to these bonds, bonds, there was $110.7 million in costs left to complete the projects at December 31, 2021. The Company held three off-balance sheet letters of credit as of December 31, 2021. The Telecommunications segment had a letter of credit for $0.4 million, Discontinued UK operations for $54 thousand and Renewables for $0.6 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, 2021

Telecommunications

Electric Power

Renewables

Other

Total

Total Revenues
$ 27,799 $ 43,599 $ 11,550 $ — $ 82,948
Income (Loss) from operations
$ 43 $ (13,215 ) $ (19,043 ) $ (20,576 ) $ (52,791 )

(Dollars in thousands)
For the Year Ended December 31, 2020

Telecommunications

Electric Power

Renewables

Other

Total

Total Revenues
$ — $ 8,482 $ 13,005 $ — $ 21,487
Loss from operations
$ — $ (4,942 ) $ (5,479 ) $ (11,610 ) $ (22,031 )
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Revenue

For the Years Ended December 31,

Revenues by Segment

Percent

(Dollars in thousands)

2021

Change

2020

Telecommunications
$ 27,799 100.0 % $ —
Electric Power
43,599 414.0 % 8,482
Renewables
11,550 (11.2 )% 13,005
Total revenues
$ 82,948 286.0 % $ 21,487
2021 compared to 2020
Revenues in 2021 are attributable to newly acquired entities, continued sales, and marketing efforts. Net revenues for the year ended December 31, 2021 were greater than in 2020 due to the acquisitions in the Telecommunications and Electric Power segments and the development of the Company's Electric Power business. This increase was partially offset by lower renewables revenue at Orbital Solar Services during 2021. Revenues will fluctuate generally around the timing of customer project delivery schedules.
The Electric Power segment held backlogs of customer orders of approximately $207.7 million as of December 31, 2021 and $22.2 million at December 31, 2020. The Renewables segment held backlogs of customer orders of approximately $121.4 million as of December 31, compared to $8.1 million as of December 31, 2020. Telecommunications, had backlogs of customer orders of approximately $194.5 million compared to zero as of December 31, 2020.
Cost of Revenues
2021 compared to 2020
For the year ended December 31, 2021, the cost of revenues as a percentage of revenue increased to 94.8% from 91.1% during 2020. This increase was attributable to start-up costs at the Company’s Electric Power segment and lower margin projects during the period for Orbital Solar Services. 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 year ended December 31, 2021 was also affected negatively by the COVID-19 pandemic and the resulting world-wide economic slowdown.
The Company expects continued improvement in 2022 with the addition of the newly acquired companies Gibson Technical Services, IMMCO, Inc., Full Moon Telecom, LLC, and Front Line Power Construction, LLC. These acquired entities have been profitable from acquisition. With the addition of these entities, the Company expects synergies that will promote efficiencies and increase revenue in the years to come. Additionally, two large solar projects are scheduled to ramp up in 2022 and increase revenue.
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Selling, General and Administrative Expense
Selling, General and Administrative (SG&A) expenses includes 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 lines including Telecommunications, Electric Power, and Renewables segments and other new product and service introductions.
2021 compared to 2020
During the year ended December 31, 2021, SG&A increased $31.0 million compared to the year ended December 31, 2020. The increase in SG&A for 2021 compared to 2020 was due to the addition of entities in our Telecommunications and Electric Power segments. Additionally, the Electric Power segment experienced increased start-up SG&A costs around increased payroll and insurance expense. Also contributing to SG&A were increased corporate costs largely due to strategic initiatives, which included increased professional fees and costs associated with due diligence activities related to acquisitions.
SG&A decreased to 60.3% of total revenue in 2021 compared to 88.6% of total revenue during the year ended December 31, 2020 due to economies of scale on 286.0% higher consolidated revenues.
Depreciation and Amortization

For the Years Ended December 31,

Depreciation and Amortization by Segment

Percent

(Dollars in thousands)

2021

Change

2020

Telecommunications
$ 2,326 100.0 % $ —
Electric Power
5,969 1278.5 % 433
Renewables
2,931 (10.6 )% 3,278
Other
1,684 10.1 % 1,530
Total depreciation and amortization (1)
$ 12,910 146.3 % $ 5,241
(1) For the years ended December 31, 2021 and 2020, depreciation and amortization totals included $1.6 million and $1.5 million, respectively that were classified in income from discontinued operations on the Consolidated Statements of Operations in the Other segment. For the years ended December 31, 2021 and 2020, depreciation and amortization totals included $4.5 million and $0.5 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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2021 compared to 2020
Depreciation and amortization expense in the year ended December 31, 2021 was up compared to 2020 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 2021 represented less than 1% of total revenues and related to miscellaneous 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 2021 compared to 2020 as the 2020 provision for bad debt primarily related to accounts receivable write-offs on the Renewable 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)

2021

Change

2020

Foreign exchange gain (loss)
$ (500 ) (198.6 )% $ 507
Interest income
338 15.4 % 293
Sublet rental income
501 50.9 % 332
Financial instrument income (expense)
33 (100.0 )% —
Gain (loss) on extinguishment of debt and loan modifications
365 337.0 % (154 )
Other, net
40 900.0 % 4
Total other income (expense)
$ 777 (20.9 )% $ 982
Fluctuations in Other Income (Expense) are largely due to fluctuations in foreign currency rates. Foreign currency gains and losses are primarily related to intercompany receivables/payables between Orbital Energy Group and its U.K Orbital Gas Systems subsidiary. Additionally, increased gain on extinguishment of debt primarily relates to the forgiveness by the U.S. government of certain payroll protection loans partially offset by the loss on extinguishment of debt related to exchange of common stock for debt payments. The increase in financial instrument income relates to a standalone financial instrument included in the subscription agreement related to the $105 million credit agreement utilized in the funding of the acquisition of Front Line Power Construction, LLC. This financial instrument is discussed further in Note 7. Increased sublet rental income is due to an increase in the square footage subleased in 2021 related to the Company’s previous corporate office in Oregon.
Investment Income
Prior to the third quarter of 2020, based on its equity ownership and that the Company maintained a board seat and participated in operational activities of Virtual Power Systems ("VPS"), the Company maintained significant influence to account for the investment as an equity-method investment. Under the equity method of accounting, results are not consolidated, but the Company records a proportionate percentage of the profit or loss of VPS as an addition to or a subtraction from the VPS investment asset balance. With the decrease in ownership percentage following a Q3 2020 equity raise by VPS and additional board seats placed, Orbital Energy Group, Inc. no longer has significant influence to recognize the investment under the equity method. As such, the Company held the investment under the cost method as of December 31 2020 resulting in a $4.8 million loss on its equity-method investment in the six months ended June 30, 2020. The VPS investment continues to be held under the cost method and at December 31, 2021 and December 31, 2020, the Company’s basis in the investment was $1.1 million as reflected on the consolidated balance sheets.
Interest Expense
The Company incurred $8.3 million and $1.3 million of interest expense during 2021 and 2020, 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 increase in interest expense in 2021 is related to the increase in notes payable outstanding as of December 31, 2021. See note 7 for more information on the Company's notes payable.
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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. and U.K. 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."
2021 compared to 2020
In 2021, a net tax benefit of $10.5 million, was recorded to the income tax provision from continuing operations for the year ended December 31, 2021 resulting in an effective tax rate of 17.4% compared to a $1.5 million tax benefit from continuing operations for the year ended December 31, 2020 and an effective tax rate of 5.3%. 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. For the year ended December 31, 2020, the income tax benefit primarily represents a decrease in the U.S. valuation allowance as a result of the Reach Construction Group, LLC acquisition. As of December 31, 2021, we have federal, state and foreign net operating loss carry forwards of approximately $97.3 million, $21.3 million, and $16.5 million, respectively, and for which the federal and state net operating loss carry-forwards will expire between 2026 and 2037.
Loss from Continuing Operations, net of income taxes
2021 compared to 2020
The Company had a loss from continuing operations, net of income taxes of $49.8 million for the year ended December 31, 2021 compared to a loss of $25.7 million in 2020. The increased loss from continuing operations, net of income taxes was attributable to start-up costs at the Company's Electric Power segment and projects with lower than normal margins during the period for the Renewables segment due to supply chain delays caused by COVID-19 leading to inefficiencies. In addition, the Company faced increased administrative costs from acquisition due diligence for the four companies acquired in 2021.
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Income from Discontinued Operations, net of income taxes
2021 compared to 2020
The Company had loss from discontinued operations, net of income taxes of $11.4 million for the year ended December 31, 2021 compared to a loss of $1.7 million in 2020. The increase in loss from discontinued operations is primarily due to impairment recognized at Orbital UK in 2021 of $9.2 million. As of December 31, 2021, Orbital UK was considered held for sale and their assets were written down to their expected sale price.
Consolidated Net Loss
2021 compared to 2020
The Company had a net loss of $61.2 million for the year ended December 31, 2021 compared to a net loss of $27.4 million for the year ended December 31, 2020. The increased consolidated net loss was attributable to start-up costs at the Company's Electric Power segment and projects with lower than normal margins during the period for Renewables segment due to supply chain delays caused by COVID-19 leading to inefficiencies, as well as increased administrative costs from acquisition due diligence for the four companies acquired in 2021.
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.’’
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our 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.
The following sections provide quantitative information on the Company’s exposure to foreign currency exchange rate risk and stock price risk. The Company makes use of sensitivity analyses that are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.
Foreign Currency Exchange Rates
The Company conducts continuing operations in one principal currency: the U.S. dollar. This currency operates as the functional currency for the Company’s U.S. operations. Cash is managed centrally within the region with net earnings invested in the U.S. and working capital requirements met from existing U.S. intercompany liquid funds.
Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to the Company’s reporting currency, the U.S. dollar, for consolidation purposes. As currency exchange rates fluctuate, translation of our Statements of our foreign operations into U.S. dollars affects the comparability of revenues and operating expenses between years.
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Revenues and operating expenses are primarily denominated in the currencies of the ~~equity~~countries in which our continuing operations are located, which is the U.S. Our U.K. operations were reclassified to discontinued operations in 2021 and so the Company's revenues and operating expenses from continuing operations were not materially affected by foreign currency translation. We have limited operations in India and Australia. Our consolidated results of operations and cash flows are, therefore, subject to limited fluctuations due to changes in foreign currency exchange rates and is not expected to be adversely affected in the future due to changes in foreign exchange rates.
To date, we have not entered into any hedging arrangements with respect to foreign currency risk and have limited activity with forward foreign currency contracts or other similar derivative instruments. ~~Various methods can be used to determine the fair value of an equity instrument.~~
Investment Risk
The Company ~~may use~~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 ~~fair value~~investment portfolio and compile a quarterly analysis of the consideration received, the quoted market price of the stock or a contemporaneous cash sale of the common or preferred stock. Each of these methods may produce a different result. Management uses the method it determines most appropriately reflects the stock transaction. If a different method was used it could impact the expense and equity stock accounts.investment portfolio when applicable for internal use. In ~~2019, 2018, and 2017,~~addition, the Company ~~used~~implemented an Investment Committee in 2019 to administer and operate the ~~quoted market price~~portfolio. At December 31, 2021, the Investment Committee is comprised of C. Stephen Cochennet, Corey A. Lambrecht, Chairman, and Nicholas M. Grindstaff, CFO. See Item 10 of this Form 10-K for more information on the Company’s Investment Committee.
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 15 of the Company's ~~common stock to estimate~~financial statements for more information on the ~~fair value~~Company's concentration risks.
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Item 8.  Financial Statements and Supplementary Data

This item includes the following financial information:
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
46
Consolidated Balance Sheets
48
Consolidated Statements of Operations
49
Consolidated Statements of Comprehensive Income and (Loss)
50
Consolidated Statements of Changes in Stockholders’ Equity
51
Consolidated Statements of Cash Flows
52
Notes to Consolidated Financial Statements
54 – 89
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REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Orbital Energy Group, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Orbital Energy Group, Inc. (a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income and (loss), changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
~~Revenue Recognition~~Variable Consideration
~~On January 1, 2018,~~The nature of our contracts gives rise to several types of variable consideration. In rare instances, we ~~adopted~~include in our contract estimates, additional revenue for submitted contract modifications or claims against the ~~accounting standard ASC 606, “Revenue from Contracts with Customers”~~customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably and ~~all~~its realization is probable. In evaluating these criteria, we consider the ~~related amendments (“~~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 ~~standard"), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. This guidance includes~~recorded for our contracts and the ~~required steps~~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 ~~achieve~~meet any other contract benchmarks, the core principle that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchangeCompany accounts for those ~~goods or services. The~~estimated liquidated damages as variable consideration and will adjust revenue ~~standard was applied using~~accordingly with periodic updates to the ~~modified retrospective method. We~~estimated variable consideration as the job progresses. Liquidated damages are recognized as variable consideration only when the ~~cumulative effect of initially applying~~Company estimates that they will be a factor in the ~~revenue standard as an adjustment to accumulated deficit as of January 1, 2018. As a result~~performance of the ~~adoption of this standard, certain changes have been made to the condensed consolidated balance sheets. We expect the ongoing impact of the adoption of the standard to primarily affect the~~contract.
In contracts where there are timing of revenue recognition. The most significant impact was on the discontinued operations of the Power and Electromechanical segment revenue with certain distribution customers that were previously recorded as “sell through." Under the revenue accounting guidance,differences between when we record the revenue upon sale to the distributor with an appropriate amount reserved for estimated returns and allowances as the Company recognizes revenue at the time the related performance obligation is satisfied by transferringtransfer a promised good or service to ~~its customers. For~~ the ~~majority of~~customer and when the customer pays for that good or service, we have determined that, our contracts revenue is still measured over time using the cost-to-cost method. The change that most affected the transition adjustment on revenue was the requirement to limit revenue recognition on contracts without an enforceable right to payment for performance completed to date. Revenue on contracts withoutdo not include a specific enforceable right to payment on work performed to date was "clawed back" as part of the Company's transition adjustment. The cumulative effect adjustment recorded as of January 1, 2018 was a net $1.9 million decrease to accumulated deficit due to a $2.8 million transition adjustment from the discontinued Powersignificant financing component.
Liquidity and ~~Electromechanical segment partially offset by a $(0.9) million transition adjustment from the Energy segment, net of deferred tax.~~Capital Resources
Company Conditions and Sources of Liquidity
The Company ~~generates its revenue~~has experienced net losses and cash outflows from cash used in operating activities over the past years. As of and for the twelve months ended December 31, 2021, the Company had an accumulated deficit of $210.9 million, loss from continuing operations of $49.8 million, and net cash used in operating activities of $45.7 million.

As of December 31, 2021, the Company had Cash and cash equivalents of $26.9 million available for working capital needs and planned capital asset expenditures and a ~~portfolio~~working capital deficit of ~~products, services and resources that offer~~approximately $33.3 million, including current maturities of debt. These factors initially raise substantial doubt about our ability to continue as a ~~diverse range of personalized gas engineering solutions~~going concern, but this doubt has been alleviated by the Company’s plans to raise sufficient capital to meet our current obligations over the next twelve months, in addition to the ~~gas utilities, power generation, petrochemical, emissions, manufacturing and automotive industries, among others.~~
~~Orbital accounts for a majority~~expected recovery of ~~its contract revenue proportionately over time. For~~ our ~~performance obligations satisfied over time, we recognize revenue by measuring~~assets to satisfy liabilities in the ~~progress toward complete satisfaction~~normal course of that performance obligation. The selection of the method to measure progress towards completion can be either an input method or an output method and requires judgment based on the nature of the goods or services to be provided.
For our construction contracts, revenue is generally recognized over time. Our fixed price construction projects generally use a cost-to-cost input 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.business.

The ~~timing~~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 the expansion; refer to Note – 10 Stockholders’ Equity and Stock-Based Compensation and Note 7 — Notes Payable. The Company has also funded some of ~~revenue recognition~~its capital expenditures through long-term financing with lenders and other investors as also described in further detail in Note 7— Notes Payable. Our ability to raise the additional capital is dependent on a number of factors, including, but not limited to, the market demand for ~~Energy products also depends on~~our common stock, which itself is subject to a number of business risks and uncertainties, our creditworthiness and the ~~payment terms of the contract, as our performance does not create an asset with an alternative use~~uncertainty that we would be able to raise such additional capital at a price that is favorable to us. The Company currently has an effective S-3 shelf registration statement with $112 million of aggregate offering value available for the issuance of various types of securities, including common stock, preferred stock, debt securities and/or warrants. While management will look to continue funding future acquisitions, organic growth initiatives and continuing operations by raising additional capital from sources such as sales of its debt or equity securities or notes payable in order to meet operating cash requirements, there is no assurance that management’s plans will be successful.
As the Company continues its progression to build a full-service infrastructure services platform, a successful transition to attaining profitable operations is dependent upon achieving a level of positive cash flows through generating adequate revenue growth to support the Company’s cost structure. For ~~those contracts which~~the twelve months ended December 31, 2021, our revenues have increased by $61.5 million resulting in a 286% increase in revenue from the prior year. The significant increase in revenues during the year was primarily driven by the strategic acquisitions of Front Line Power Construction, LLC, Gibson Technical Services, IMMCO, Inc., and Full Moon Telecom, LLC made coupled with organic growth within Orbital Power Services. In addition, two large utility scale solar projects were awarded to Orbital Solar Systems during the twelve-month period ended December 31, 2021. We anticipate, based on currently proposed plans and assumptions relating to our operations, the Company to generate sufficient revenue growth required to achieve profitability and generate positive cash flows from operations over the next twelve months. No assurance can be made that we ~~have a right~~will be able to ~~payment for performance completed~~obtain profitability and positive cash flows from our continuing operations.
The Company plans to ~~date at all times throughout our performance, inclusive of a cancellation, we recognize revenue~~meet its obligations as they become due over ~~time. As discussed above, these performance obligations use a cost-to-cost input method to measure our progress towards complete satisfaction of~~ the ~~performance obligation as~~next twelve months by raising additional capital through equity and debt financing sources and expected positive cash flows generated from operations. Given the considerations, we believe ~~it best depicts~~ the ~~transfer~~mitigating effect of ~~control~~management’s plans has alleviated any substantial doubt about the Company’s ability to ~~the customer. However, for those contracts for which we do not have~~continue as a ~~right, at all times, to payment for performance completed to date, we recognize revenue at the point in time when control is transferred to the customer, generally when shipped.~~going concern.

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~~For our services contracts, revenue~~Cash used in Operations
There was a use of cash from operations of approximately $45.7 million during the year ended December 31, 2021 compared to a $15.0 million use of cash in 2020. This was an increase in the use of cash from operations of approximately $30.7 million from the year ended December 31, 2020. Overall, the change in cash used in operations is ~~generally recognized over time~~primarily the result of the loss from continuing operations, net of income taxes in 2021 and changes in assets and liabilities.
Increased uses of cash in 2021 are primarily for normal administrative costs, and cash usage in the Electric Power segment primarily related to start-up costs and Renewables primarily related to its loss from operations. While the Company saw an initial cost increase from the Electric Power segment, management expects this segment to become cash flow positive, as the ~~customer simultaneously receives~~business environment normalizes and ~~consumes the benefits of our performance as we perform the service. For our fixed price~~it continues to increase service ~~contracts~~crews deployed. The Company believes that revenue generated by recent Telecommunications and Electric Power acquisitions will improve cash flow from operating activities. The Company believes overall cash used in operations will improve through revenue growth associated with ~~specified service periods, revenue is generally recognized on a straight-line basis over such service period when our inputs are expended evenly,~~new customers and ~~the customer receives and consumes the benefits of our performance throughout the contract term.~~larger projects.

~~For certain of our revenue streams, such as call-out repair~~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 service work, outage services and training that are performed under time and materials contracts, our progress towards complete satisfaction of such performance obligations is measured using an output 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~~contract liabilities. The change in ~~the period in which the revisions to the estimates are made. When the current estimate of total costs~~trade accounts receivable accounted for a ~~performance obligation indicate a loss, a provision for~~$19.2 million use of cash in operating activities and was due to increased trades account receivable balances from the ~~entire estimated loss on the unsatisfied performance obligation is made~~Electric Power and Renewables segments. Accrued expenses and Accrued Compensation increased by $4.5 million primarily related to increased accrued compensation expense in ~~the period in which the loss becomes evident.~~
~~Product-type contracts (for example, sale of GasPT units) for which revenue does not qualify~~2021 related to ~~be recognized over time are recognized at a point in time. Revenues from extended warranty and maintenance activities are recognized ratably over the term of the warranty and maintenance period.~~
~~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 customers' 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, although our standard terms include a requirement of payment within 30 days. 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~~payroll expense along with increased accrued expenses at the cost-to-cost measure of progress 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 includedcorporate level for interest payable on outstanding debt. Change in contract ~~assets are amounts we seek or will seek~~liabilities was a source of cash due to ~~collect from customers or others for errors or~~increased billings in excess of cash at the Renewables segment.
During 2020, in addition to the Company's net loss after non-cash items, significant factors affecting cash used in operating activities included the change in accrued liabilities, accounts payable and changes in contract ~~specifications or design,~~liabilities. A use of cash of $1.2 million in accrued liabilities related largely to the payout of severance at CUI Canada that was accrued for in 2019. Change in accounts payable, which was a $3.5 million use of cash, was largely due to the paydown of accounts payable at the Renewables segment, which was acquired on April 1, 2020. Accounts payable paid down did not get replaced at the same rate due to decreased business activity at the Renewables segment due to the COVID-19 pandemic and timing of customer projects. Change in contract ~~change orders or modifications~~liabilities was a source of cash due to increased billings in ~~dispute or unapproved~~excess of cash at the Renewables segment partially offset by the decrease in provision for loss contracts at the Renewables segment as ~~to both scope and/or price or other customer-related causes of unanticipated additional~~the estimated 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~~losses recorded on the acquisition date were realized as ~~current within the Consolidated Balance Sheets.~~
Contract liabilities from our construction contracts occur when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from our customers on certain contracts. 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.
~~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 December 31, 2019, the Company's remaining performance obligations are generally expected to be filled within the next 12 months.vendors were paid.

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~~Any adjustments~~During 2021 and 2020, the Company used stock and options as a form of payment to ~~net revenues, cost~~certain vendors, consultants, directors and employees. For years ended December 31, 2021 and 2020, the Company recorded a total of ~~revenues,~~$12.2 million and ~~the~~$0.3 million, respectively for share-based compensation related ~~impact~~ to ~~operating income are recognized~~equity given, or to be given, to employees, directors and consultants for services provided and as ~~necessary~~payment for royalties earned. The increase in 2021 compared to 2020 was due to greater stock-based bonuses, and greater stock-based director compensation. In addition, there was a fair value adjustment to stock appreciation rights of $2.1 million in 2021 compared to a fair value adjustment of $0.6 million in 2020. Stock appreciate rights were exchanged for restricted stock units in the ~~period they become known.~~first quarter of 2022. There was no stock option vesting expense in 2021 or 2020.
Capital Expenditures and Investments
In 2021, the Company paid $132.5 million cash for acquisitions, net of cash received.
During the years ended 2021 and 2020, Orbital Energy Group invested $7.8 million and $1.7 million, respectively, in fixed assets. These ~~adjustments may result from positive program performance,~~investments typically include additions to equipment including vehicles and ~~may result in an~~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 increase in ~~operating income~~2021 was due to the 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 ~~the performance~~2022 in support of ~~individual performance obligations, if we determine we will be successful~~its on-going business and continued development of product lines, technologies and services.
Orbital Energy Group invested $0.7 million and $11 thousand in ~~mitigating risks surrounding the technical, schedule~~other intangible assets during 2021 and ~~cost aspects of those performance obligations. Likewise, these adjustments may result~~2020, respectively. These investments typically include product certifications, technology rights, capitalized website development, software for engineering and research and development and software upgrades for office personnel. The increase 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 recognizescash paid for investments in the current ~~period~~year primarily relates to VE Technology purchased by Orbital Gas Systems North America, now classified as discontinued operations.
In 2021, the ~~cumulative effect~~Company entered into finance lease agreements that required payment of deposits. Per the ~~changes~~agreement, these deposits should be returned 36 months after the lease commences. During 2021 the Company paid $0.8 million on ~~current and prior periods based on~~finance lease deposits compared to zero in 2020.
In 2021 the Company recognized proceeds from notes receivable of $0.6 million compared to zero in 2020. Cash used in purchase of short-term investments of $1.0 million in 2021 compared to zero in 2020.
The Company made an additional $0.3 million investment in a ~~performance obligation's percentage of completion. A significant change~~convertible note receivable from Virtual Power Systems ("VPS") in ~~one or more of these estimates could affect~~2020 including payments made related to the ~~profitability of one or more of our performance obligations. For separately priced extended warranty or product maintenance performance obligations, when estimates of total costs~~Company's transition agreement with VPS. This note was converted to ~~be incurred on the performance obligation exceed total estimates of revenue to be earned, a provision for the entire loss on the performance obligation is recognized~~equity in VPS in the ~~period the loss is determined.~~
~~Performance Obligations Satisfied Over Time~~
~~To determine the proper revenue recognition method for contracts, we evaluate whether~~third quarter of 2020 along with an additional contribution of $0.5 million and 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 changenon-cash contribution of inventory in the amount of ~~revenue and profit recorded in a given period.~~$0.3 million.

~~For most~~
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Table 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 expected cost plus a margin approach to estimate the standalone selling price of each performance obligation.
Contents

~~Performance Obligations Satisfied at a Point in Time.~~Financing Activities
~~Revenue from goods and services transferred to customers at a single point in time accounted for 29% and 22% of revenues for~~During the years ended December 31, ~~2019~~2021 and ~~2018.~~2020, the Company issued payments of $2.0 million and $4 thousand, against finance leases of equipment. The Company had proceeds from notes payable in 2021 of $143.0 million, compared to $8.1 million in 2020. See Note 7, Note payable for more information on the Company's notes payable. The Company made payments on notes payable of $9.9 million in 2021 and $4.1 million in 2020.
On August 19, 2021, the Company's Telecommunications segment 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. 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. In 2020, the $0.4 million line of credit balance was held at the Renewables segment. The Renewable segment line of credit was paid and closed in the first quarter of 2021.
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 Energy 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.
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, and available debt.
Orbital Energy 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.
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Recap of Liquidity and Capital Resources
The Company had a net loss of $61.2 million and cash used in operating activities of $45.7 million during 2021. As of December 31, 2021, the Company's accumulated deficit is $210.9 million. The Company has supplemented its liquidity by issuing $45 million of shares of stock in January 2021 and $38 million shares of 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 shall be repaid in consecutive quarterly installments of $262,500, commencing on June 30, 2022. The Credit Agreement provides for mandatory prepayments on the occurrence of events such as sales of assets, Consolidated Excess Cash Flow and Excess Receipts during the term. The Credit Agreement provides for prepayment premiums (initially 5% on prepayments made in the first 30 months of the term, declining to 1% in the final year of the term). The Term Loan matures on November 17, 2026, subject to acceleration on Events of Default. 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 a 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.
At December 31, 2021, and 2020 the Company had cash and cash equivalents balances of $26.9 million and $3.0 million. At December 31, 2021 and 2020, the Company had $2.3 million and $0.6 million, respectively, of cash and cash equivalents balances at domestic financial institutions, which were covered under the FDIC insured deposits programs and $0.4 million and $0.2 million, respectively, of cash and cash equivalents covered at foreign financial institutions. At December 31, 2021 and 2020, the Company held $2.1 million and $2.2 million, respectively, in foreign bank accounts.
The following tables present our contractual obligations as of December 31, 2021:

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
$ 5,729 $ 9,980 $ 576 $ — $ 16,285

Operating lease obligations:

Operating lease - minimum payments
5,767 8,789 4,093 2,714 21,363

Notes payable obligations:

Notes payable maturities plus interest
97,659 92,077 130,053 — 319,789
Total Obligations
$ 109,155 $ 110,846 $ 134,722 $ 2,714 $ 357,437
The above notes payable maturities reflects the agreement made with the Front Line sellers to extend the maturity date for those agreements from May 16, 2022 to May 31, 2023, with $35 million being due in 2022 and the remaining principal due in 2023.
As of December 31, 2021, the Company had an accumulated deficit of $210.9 million.
The Company expects the revenues from its continuing operations to cover operating and other expenses for the next twelve months of operations. However, in the short-term, the Company expects its operating units to need cash support as the Company acquires fixed assets to grow their businesses. Further equity issuance or borrowing may be required to fund future acquisitions.
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, 2021, the Company is an indemnitor on four surety bonds and had three letters of credit off-balance sheet for a total dollar value of approximately $131.8 million. Two bonds were with the Renewables segment for a total of $127.0 million dollars for two construction projects. At the Electric Power segment there were two bonds totaling $3.8 million for various unit-based construction jobs. For the projects related to these bonds, bonds, there was $110.7 million in costs left to complete the projects at December 31, 2021. The Company held three off-balance sheet letters of credit as of December 31, 2021. The Telecommunications segment had a letter of credit for $0.4 million, Discontinued UK operations for $54 thousand and Renewables for $0.6 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, 2021

Telecommunications

Electric Power

Renewables

Other

Total

Total Revenues
$ 27,799 $ 43,599 $ 11,550 $ — $ 82,948
Income (Loss) from operations
$ 43 $ (13,215 ) $ (19,043 ) $ (20,576 ) $ (52,791 )

(Dollars in thousands)
For the Year Ended December 31, 2020

Telecommunications

Electric Power

Renewables

Other

Total

Total Revenues
$ — $ 8,482 $ 13,005 $ — $ 21,487
Loss from operations
$ — $ (4,942 ) $ (5,479 ) $ (11,610 ) $ (22,031 )
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Revenue

For the Years Ended December 31,

Revenues by Segment

Percent

(Dollars in thousands)

2021

Change

2020

Telecommunications
$ 27,799 100.0 % $ —
Electric Power
43,599 414.0 % 8,482
Renewables
11,550 (11.2 )% 13,005
Total revenues
$ 82,948 286.0 % $ 21,487
2021 compared to 2020
Revenues in 2021 are attributable to newly acquired entities, continued sales, and marketing efforts. Net revenues for the year ended December 31, 2021 were greater than in 2020 due to the acquisitions in the Telecommunications and Electric Power segments and the development of the Company's Electric Power business. This increase was partially offset by lower renewables revenue at Orbital Solar Services during 2021. Revenues will fluctuate generally around the timing of customer project delivery schedules.
The Electric Power segment held backlogs of customer orders of approximately $207.7 million as of December 31, 2021 and $22.2 million at December 31, 2020. The Renewables segment held backlogs of customer orders of approximately $121.4 million as of December 31, compared to $8.1 million as of December 31, 2020. Telecommunications, had backlogs of customer orders of approximately $194.5 million compared to zero as of December 31, 2020.
Cost of Revenues
2021 compared to 2020
For the year ended December 31, 2021, the cost of revenues as a percentage of revenue increased to 94.8% from 91.1% during 2020. This increase was attributable to start-up costs at the Company’s Electric Power segment and lower margin projects during the period for Orbital Solar Services. 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 year ended December 31, 2021 was also affected negatively by the COVID-19 pandemic and the resulting world-wide economic slowdown.
The Company expects continued improvement in 2022 with the addition of the newly acquired companies Gibson Technical Services, IMMCO, Inc., Full Moon Telecom, LLC, and Front Line Power Construction, LLC. These acquired entities have been profitable from acquisition. With the addition of these entities, the Company expects synergies that will promote efficiencies and increase revenue in the years to come. Additionally, two large solar projects are scheduled to ramp up in 2022 and increase revenue.
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Selling, General and Administrative Expense
Selling, General and Administrative (SG&A) expenses includes 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 lines including Telecommunications, Electric Power, and Renewables segments and other new product and service introductions.
2021 compared to 2020
During the year ended December 31, 2021, SG&A increased $31.0 million compared to the year ended December 31, 2020. The increase in SG&A for 2021 compared to 2020 was due to the addition of entities in our Telecommunications and Electric Power segments. Additionally, the Electric Power segment experienced increased start-up SG&A costs around increased payroll and insurance expense. Also contributing to SG&A were increased corporate costs largely due to strategic initiatives, which included increased professional fees and costs associated with due diligence activities related to acquisitions.
SG&A decreased to 60.3% of total revenue in 2021 compared to 88.6% of total revenue during the year ended December 31, 2020 due to economies of scale on 286.0% higher consolidated revenues.
Depreciation and Amortization

For the Years Ended December 31,

Depreciation and Amortization by Segment

Percent

(Dollars in thousands)

2021

Change

2020

Telecommunications
$ 2,326 100.0 % $ —
Electric Power
5,969 1278.5 % 433
Renewables
2,931 (10.6 )% 3,278
Other
1,684 10.1 % 1,530
Total depreciation and amortization (1)
$ 12,910 146.3 % $ 5,241
(1) For the years ended December 31, 2021 and 2020, depreciation and amortization totals included $1.6 million and $1.5 million, respectively that were classified in income from discontinued operations on the Consolidated Statements of Operations in the Other segment. For the years ended December 31, 2021 and 2020, depreciation and amortization totals included $4.5 million and $0.5 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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2021 compared to 2020
Depreciation and amortization expense in the year ended December 31, 2021 was up compared to 2020 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 2021 represented less than 1% of total revenues and related to miscellaneous 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 2021 compared to 2020 as the 2020 provision for bad debt primarily related to accounts receivable write-offs on the Renewable 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)

2021

Change

2020

Foreign exchange gain (loss)
$ (500 ) (198.6 )% $ 507
Interest income
338 15.4 % 293
Sublet rental income
501 50.9 % 332
Financial instrument income (expense)
33 (100.0 )% —
Gain (loss) on extinguishment of debt and loan modifications
365 337.0 % (154 )
Other, net
40 900.0 % 4
Total other income (expense)
$ 777 (20.9 )% $ 982
Fluctuations in Other Income (Expense) are largely due to fluctuations in foreign currency rates. Foreign currency gains and losses are primarily related to intercompany receivables/payables between Orbital Energy Group and its U.K Orbital Gas Systems subsidiary. Additionally, increased gain on extinguishment of debt primarily relates to the forgiveness by the U.S. government of certain payroll protection loans partially offset by the loss on extinguishment of debt related to exchange of common stock for debt payments. The increase in financial instrument income relates to a standalone financial instrument included in the subscription agreement related to the $105 million credit agreement utilized in the funding of the acquisition of Front Line Power Construction, LLC. This financial instrument is discussed further in Note 7. Increased sublet rental income is due to an increase in the square footage subleased in 2021 related to the Company’s previous corporate office in Oregon.
Investment Income
Prior to the third quarter of 2020, based on its equity ownership and that the Company maintained a board seat and participated in operational activities of Virtual Power Systems ("VPS"), the Company maintained significant influence to account for the investment as an equity-method investment. Under the equity method of accounting, results are not consolidated, but the Company records a proportionate percentage of the profit or loss of VPS as an addition to or a subtraction from the VPS investment asset balance. With the decrease in ownership percentage following a Q3 2020 equity raise by VPS and additional board seats placed, Orbital Energy Group, Inc. no longer has significant influence to recognize the investment under the equity method. As such, the Company held the investment under the cost method as of December 31 2020 resulting in a $4.8 million loss on its equity-method investment in the six months ended June 30, 2020. The VPS investment continues to be held under the cost method and at December 31, 2021 and December 31, 2020, the Company’s basis in the investment was $1.1 million as reflected on the consolidated balance sheets.
Interest Expense
The Company incurred $8.3 million and $1.3 million of interest expense during 2021 and 2020, 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 increase in interest expense in 2021 is related to the increase in notes payable outstanding as of December 31, 2021. See note 7 for more information on the Company's notes payable.
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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. and U.K. net deferred tax assets as it is "not more likely than not," that the Company will realize a benefit from these ~~contracts is~~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."
2021 compared to 2020
In 2021, a net tax benefit of $10.5 million, was recorded to the ~~product~~income tax provision from continuing operations for the year ended December 31, 2021 resulting in an effective tax rate of 17.4% compared to a $1.5 million tax benefit from continuing operations for the year ended December 31, 2020 and an effective tax rate of 5.3%. 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. For the year ended December 31, 2020, the income tax benefit primarily represents a decrease in the U.S. valuation allowance as a result of the Reach Construction Group, LLC acquisition. As of December 31, 2021, we have federal, state and foreign net operating loss carry forwards of approximately $97.3 million, $21.3 million, and $16.5 million, respectively, and for which the federal and state net operating loss carry-forwards will expire between 2026 and 2037.
Loss from Continuing Operations, net of income taxes
2021 compared to 2020
The Company had a loss from continuing operations, net of income taxes of $49.8 million for the year ended December 31, 2021 compared to a loss of $25.7 million in 2020. The increased loss from continuing operations, net of income taxes was attributable to start-up costs at the Company's Electric Power segment and projects with lower than normal margins during the period for the Renewables segment due to supply chain delays caused by COVID-19 leading to inefficiencies. In addition, the Company faced increased administrative costs from acquisition due diligence for the four companies acquired in 2021.
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Income from Discontinued Operations, net of income taxes
2021 compared to 2020
The Company had loss from discontinued operations, net of income taxes of $11.4 million for the year ended December 31, 2021 compared to a loss of $1.7 million in 2020. The increase in loss from discontinued operations is ~~shipped~~primarily due to impairment recognized at Orbital UK in 2021 of $9.2 million. As of December 31, 2021, Orbital UK was considered held for sale and their assets were written down to their expected sale price.
Consolidated Net Loss
2021 compared to 2020
The Company had a net loss of $61.2 million for the year ended December 31, 2021 compared to a net loss of $27.4 million for the year ended December 31, 2020. The increased consolidated net loss was attributable to start-up costs at the Company's Electric Power segment and projects with lower than normal margins during the period for Renewables segment due to supply chain delays caused by COVID-19 leading to inefficiencies, as well as increased administrative costs from acquisition due diligence for the four companies acquired in 2021.
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.’’
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our 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.
The following sections provide quantitative information on the Company’s exposure to foreign currency exchange rate risk and stock price risk. The Company makes use of sensitivity analyses that are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.
Foreign Currency Exchange Rates
The Company conducts continuing operations in one principal currency: the U.S. dollar. This currency operates as the functional currency for the Company’s U.S. operations. Cash is managed centrally within the region with net earnings invested in the U.S. and working capital requirements met from existing U.S. intercompany liquid funds.
Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to the Company’s reporting currency, the U.S. dollar, for consolidation purposes. As currency exchange rates fluctuate, translation of our Statements of our foreign operations into U.S. dollars affects the comparability of revenues and operating expenses between years.
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Revenues and operating expenses are primarily denominated in the currencies of the countries in which our continuing operations are located, which is the U.S. Our U.K. operations were reclassified to discontinued operations in 2021 and so the Company's revenues and operating expenses from continuing operations were not materially affected by foreign currency translation. We have limited operations in India and Australia. Our consolidated results of operations and cash flows are, therefore, subject to limited fluctuations due to changes in foreign currency exchange rates and is not expected to be adversely affected in the future due to changes in foreign exchange rates.
To date, we have not entered into any hedging arrangements with respect to foreign currency risk and have limited activity with forward foreign currency contracts or other similar derivative instruments.
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 implemented an Investment Committee in 2019 to administer and operate the portfolio. At December 31, 2021, the Investment Committee is comprised of C. Stephen Cochennet, Corey A. Lambrecht, Chairman, and Nicholas M. Grindstaff, CFO. See Item 10 of this Form 10-K for more information on the Company’s Investment Committee.
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 15 of the Company's financial statements for more information on the Company's concentration risks.
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Item 8.  Financial Statements and Supplementary Data
This item includes the following financial information:
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
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Consolidated Balance Sheets
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Consolidated Statements of Operations
49
Consolidated Statements of Comprehensive Income and (Loss)
50
Consolidated Statements of Changes in Stockholders’ Equity
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Consolidated Statements of Cash Flows
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Notes to Consolidated Financial Statements
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REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Orbital Energy Group, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Orbital Energy Group, Inc. (a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income and (loss), changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the ~~customer takes ownership~~related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the ~~product. Determination~~Company as of ~~control transfer~~December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is ~~determined by shipping terms delineated~~to express an opinion on the ~~customer purchase orders~~Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and ~~is generally when shipped.~~are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Variable Consideration
The nature of our contracts gives rise to several types of variable ~~consideration, including new product returns and scrap return allowances.~~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. We include new product introduction and scrap return estimates in our calculation of net revenue when there is a basis to reasonably estimate the amount of the returns. These estimates are based on historical return experience, anticipated returns and our best judgment at the time. These amounts are included in our calculation of net revenue recorded for our contracts and the associated remaining performance obligations.
~~Significant Judgments~~
~~Our contracts with certain customers may be subject to contract cancellation clauses. Contracts with other cancellation provisions may require judgment in determining~~ Additionally, if the contract ~~term, including~~has a provision for liquidated damages in the ~~existence of material rights, transaction price~~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 ~~identifying~~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 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 includingof 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.

~~Liquidity~~Liquidity and Capital Resources
~~General~~
Company Conditions and Sources of Liquidity
The Company has experienced net losses and cash outflows from cash used in operating activities over the past years. As of and for the twelve months ended December 31, 2021, the Company had an accumulated deficit of $210.9 million, loss from continuing operations of $49.8 million, and net cash used in operating activities of $45.7 million.

As of December 31, ~~2019, CUI Global held~~2021, the Company had Cash and cash equivalents of ~~$23.4 million. Operations,~~$26.9 million available for working capital needs and planned capital asset expenditures and a working capital deficit of approximately $33.3 million, including current maturities of debt. These factors initially raise substantial doubt about our ability to continue as a going concern, but this doubt has been alleviated by the Company’s plans to raise sufficient capital to meet our current obligations over the next twelve months, in addition to the expected recovery of our assets to satisfy liabilities in the normal course of business.
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 the expansion; refer to Note – 10 Stockholders’ Equity and Stock-Based Compensation and Note 7 — Notes Payable. The Company has also funded some of its capital expenditures through long-term financing with lenders and other ~~intangible assets,~~investors as also described in further detail in Note 7— Notes Payable. 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 ~~equipment~~uncertainties, our creditworthiness and the uncertainty that we would be able to raise such additional capital at a price that is favorable to us. The Company currently has an effective S-3 shelf registration statement with $112 million of aggregate offering value available for the issuance of various types of securities, including common stock, preferred stock, debt securities and/or warrants. While management will look to continue funding future acquisitions, organic growth initiatives and continuing operations by raising additional capital from sources such as sales of its debt or equity securities or notes payable in order to meet operating cash requirements, there is no assurance that management’s plans will be successful.
As the Company continues its progression to build a full-service infrastructure services platform, a successful transition to attaining profitable operations is dependent upon achieving a level of positive cash flows through generating adequate revenue growth to support the Company’s cost structure. For the twelve months ended December 31, 2021, our revenues have ~~been funded through cash on hand and short-term credit facilities~~increased by $61.5 million resulting in a 286% increase in revenue from the prior year. The significant increase in revenues during the year was primarily driven by the strategic acquisitions of Front Line Power Construction, LLC, Gibson Technical Services, IMMCO, Inc., and Full Moon Telecom, LLC made coupled with organic growth within Orbital Power Services. In addition, two large utility scale solar projects were awarded to Orbital Solar Systems during the twelve-month period ended December 31, ~~2019.~~2021. We anticipate, based on currently proposed plans and assumptions relating to our operations, the Company to generate sufficient revenue growth required to achieve profitability and generate positive cash flows from operations over the next twelve months. No assurance can be made that we will be able to obtain profitability and positive cash flows from our continuing operations.

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 expected positive cash flows generated from operations. Given the considerations, we believe the mitigating effect of management’s plans has alleviated any substantial doubt about the Company’s ability to continue as a going concern.
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Cash used in Operations
There was a use of cash from operations of approximately ~~$11.5~~$45.7 million during the year ended December 31, ~~2019.~~2021 compared to a $15.0 million use of cash in 2020. This was ~~a decrease from~~an increase in the use of cash from operations of approximately ~~$12.3~~$30.7 million ~~and an increase~~ from ~~approximately $9.4 million for~~ the ~~years~~year ended December 31, ~~2018 and 2017, respectively.~~2020. Overall, the change in cash used in operations is primarily the result of the loss from continuing operations, net of income taxes in ~~2019 before non-cash expenses affected by~~2021 and changes in assets and liabilities.

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~~Table~~
Increased uses of ~~Contents~~
~~Cash~~cash in 2021 are primarily for normal administrative costs, and cash usage in the Electric Power segment primarily related to start-up costs and Renewables primarily related to its loss from operations. While the Company saw an initial cost increase from the Electric Power segment, management expects this segment to become cash flow positive, as the business environment normalizes and it continues to increase service crews deployed. The Company believes that revenue generated by recent Telecommunications and Electric Power acquisitions will improve cash flow from operating activities. The Company believes overall cash used in operations of $11.5 million in 2019 was a $0.8 million decrease in cash used compared to the amount used in operations in 2018. The year ended December 31, 2019 benefited from improved results in the Energy segment, which used $8.3 million of cash in 2019, a decrease from the $11.1 million used in 2018. The Company's discontinued operations included the Company's domestic powerwill improve through revenue growth associated with new customers and electromechanical businesses, which were divested in 2019, resulting in lower cash generated in 2019 compared to 2018, with $2.7 million generated in 2019 compared to $4.5 million in 2018. Cash used in the other category increased to $5.9 million in 2019 compared to $5.7 million in 2018. This increased use of cash by the other category was due primarily to increased merger, and acquisition activity in 2019 compared to 2018 culminating in the divestiture of the domestic power and electromechanical business in two separate transactions.larger projects.

During ~~2019,~~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 ~~accrued~~changes in contract liabilities. The change in trade accounts receivable accounted for ~~$1.5~~a $19.2 million ~~source~~use of cash in operating activities and was due to ~~lower overall fourth quarter revenues~~increased trades 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 ~~the Energy segment compared~~2021 related to the ~~revenues~~timing of payroll expense along with increased accrued expenses at the corporate level for interest payable on outstanding debt. Change in ~~the fourth quarter of 2018. Increased cash~~contract liabilities was a source of ~~$2.2 million from change in accrued liabilities was~~cash due to ~~a non-cash severance accrual recorded at CUI-Canada~~increased billings in ~~preparation for closing that facility in late 2020. Refund liabilities were a $1.3 million use~~excess of cash ~~as customers looked to utilize their refunds prior to~~at the divesture of the power and electromechanical business. A $14.1 million gain on the sale of the company's domestic power and electromechanical businesses and a $2.6 million deferred tax gain were non-cash income statement items that did not affect cash from operations.Renewables segment.

~~We believe cash used in operating activities will improve in~~During 2020, primarily due to the expected continued improvement in revenue from other integration related systems including biomethane to grid solutions and new product and service opportunities currently being pursued. We believe the cash usage rate in the other category will be flat to slightly higher due to continued merger and acquisition activity expected in 2020.
~~For the 2018 year,~~ 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~~accrued liabilities, accounts ~~receivable~~payable and ~~inventories. The change~~changes in ~~trade accounts receivable accounted for $3.8 million~~contract liabilities. A use of cash ~~used~~of $1.2 million in ~~operating activities and was due to higher fourth quarter revenues in the Energy segment and discontinued operations compared~~accrued liabilities related largely to the ~~revenues~~payout of severance at CUI Canada that was accrued for in the fourth quarter of 2017. Increased cash usage of $2.2 million from change in inventories were due to a build-up of inventories in our discontinued power and electromechanical business due to longer lead times for these products and timing related to customer order and delivery schedules, partially offset by positive changes to inventories in the Energy segment. Also contributing to the increased cash usage was a decrease in contract liabilities of $2.3 million. The increased cash usage was partially offset by a combined $3.4 million of cash provided by changes2019. Change in accounts payable, ~~accrued expenses and refund liabilities.~~
~~The cash from operations in 2017~~which was ~~negatively affected by~~ a larger net loss attributable to the Energy segment compared to 2016 and the timing of accounts receivable collections and accounts payable payments in both the Energy segment and discontinued operations.
During 2017, in addition to the change in trade accounts receivable and accounts payable, significant factors that impacted the cash used in operations included cash used for inventory purchases of approximately $0.4 million associated with timing of customer orders and ongoing projects, $0.5 million related to the change in deposits and other assets due to the increase in long-term prepaid royalties at Orbital-UK, $0.5$3.5 million use of cash, ~~related to changes in accrued expenses primarily~~was largely due to ~~a change~~the paydown of accounts payable at the Renewables segment, which was acquired on April 1, 2020. Accounts payable paid down did not get replaced at the same rate due to decreased business activity at the Renewables segment due to the COVID-19 pandemic and timing of customer projects. Change in accrued compensation in the Energy segment and a $0.4 million use of cash from changes in prepaid assets that affected the Energy segment, discontinued operations and the other category. Changes in the combined contract assets and contract liabilities ~~were~~was a ~~combined approximate $2.8 million~~ source of cash due to increased billings in excess of cash at the ~~period related to billings on projects in the Energy~~Renewables segment ~~and increases in deferred revenue from distributor activity within discontinued operations.~~
On a segment basis, in 2017, the discontinued Power and Electromechanical businesses contributed cash from operations of approximately $3.9 million while the Energy segment used cash of approximately $8.4 million and the Other category used cash of approximately $4.9 million. The Energy segment was hamperedpartially offset by the ~~continued costs of building brand awareness~~decrease in ~~North America and a regulatory issue in Italy unrelated to~~provision for loss contracts at the ~~technology that delayed~~Renewables segment as the ~~next phase of a significant GasPT project.~~estimated contract losses recorded on the acquisition date were realized as vendors were paid.

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During ~~2019, 2018~~2021 and ~~2017,~~2020, the Company used stock and options as a form of payment to certain vendors, consultants, directors and employees. For years ended December 31, ~~2019, 2018~~2021 and ~~2017,~~2020, the Company recorded a total of ~~$0.2 million, $0.2~~$12.2 million and ~~$0.4~~$0.3 million, respectively for share-based compensation related to equity given, or to be given, to employees, directors and consultants for services provided and as payment for royalties earned. The ~~decreases~~increase in ~~2019~~2021 compared to ~~2018 and in 2018 compared to 2017 were~~2020 was due to ~~lower~~greater stock-based bonuses, and ~~lower~~greater stock-based ~~services.~~director compensation. In addition, there was a fair value adjustment to stock appreciation rights of $2.1 million in 2021 compared to a fair value adjustment of $0.6 million in 2020. Stock appreciate rights were exchanged for restricted stock units in the first quarter of 2022. There ~~were~~was no stock option vesting expense in ~~2019, 2018,~~2021 or ~~2017.~~2020.

~~Proceeds from Sale of Businesses, Proceeds from Sale of Building,~~ Capital Expenditures and Investments
In ~~2019,~~2021, the Company ~~sold its domestic power and electromechanical businesses in two separate transactions~~paid $132.5 million cash for ~~total proceeds~~acquisitions, net of ~~$35.4 million.~~
~~In December 2018, the Company completed the sale and leaseback of its Tualatin headquarters. The sale for $8.1 million generated net~~ cash ~~proceeds of $4.2 million after transaction related expenses and after paying off the mortgage on the building and related interest rate swap derivative.~~received.

During the years ended ~~2019, 2018~~2021 and ~~2017, CUI Global~~2020, Orbital Energy Group invested ~~$0.3 million, $1.0~~$7.8 million and ~~$0.9~~$1.7 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 increase in 2021 was due to the 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 ~~2020~~2022 in support of its on-going business and continued development of product lines, technologies and services.

~~CUI Global~~Orbital Energy Group invested ~~$0.4 million, $0.5~~$0.7 million and ~~$0.6 million~~$11 thousand in other intangible assets during ~~2019, 2018~~2021 and ~~2017,~~2020, respectively. These investments typically include product certifications, technology rights, capitalized website development, software for engineering and research and development and software upgrades for office personnel. ~~Investments~~The increase in ~~2019, 2018 and 2017 primarily related to product certifications~~cash paid for investments in the current year primarily relates to VE Technology purchased by Orbital Gas Systems North America, now classified as discontinued ~~Power and Electromechanical businesses and investments~~operations.
In 2021, the Company entered into finance lease agreements that required payment of deposits. Per the agreement, these deposits should be returned 36 months after the lease commences. During 2021 the Company paid $0.8 million on finance lease deposits compared to zero in software in the Energy segment. In the short-term, investments in other intangibles are expected to be down due to the divestiture of the domestic power and electromechanical businesses. The Company expects to continue to invest in software and technology throughout 2020.

~~During 2019, CUI Global made cash~~In 2021 the Company recognized proceeds from notes receivable of $0.6 million compared to zero in 2020. Cash used in purchase of short-term investments of ~~$2.1~~$1.0 million ~~and elected~~in 2021 compared to ~~convert its $0.7~~zero in 2020.
The Company made an additional $0.3 million of convertible notes receivable to VPS stock. In addition to the cash investments, the Company contributed certain property and equipment, other intangible assets, inventories, prepaid assets, open purchases orders, research and development expenditures and theinvestment in a convertible note receivable ~~for a total investment of $5.9 million for a 21.4% equity investment in~~from Virtual Power Systems ("VPS")~~. Through December 31, 2019,~~ in 2020 including payments made related to the ~~noncash portion of the investment~~Company's transition agreement with VPS. This note was ~~$3.8 million. The Company's share ownership percentage was diluted to 20.58% as of December 31, 2019 due to additional share issuances by VPS.~~
During 2018, CUI Global made investments of $0.7 million in convertible notes receivable with Virtual Power Systems (“VPS”) to support the two companies’ continued collaboration and development of Software Defined Power technologies. The notes accrued interest at 2% per annum and the interest was compounded annually. These investments were converted to ~~VPS stock in 2019.~~
Investments made by the Company are subject to an investment policy, which limits our risk of loss exposure by setting appropriate credit quality requirements for investments held, limiting maturities to be one year or less, and setting appropriate concentration levels to prevent concentrations. This includes a requirement that no more than 3% of the portfolio, or $500,000, whichever is greater, may be invested in one particular issue. Since the investmentequity in VPS ~~was considered~~in the third quarter of 2020 along with an additional contribution of $0.5 million and a ~~strategic investment,~~non-cash contribution of inventory in the ~~board and management reviewed and approved the investment above the board set limit for individual issuers.~~amount of $0.3 million.

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Financing Activities
During the years ended December 31, ~~2019, 2018,~~2021 and ~~2017,~~2020, the Company issued payments of $2.0 million and $4 thousand, ~~$3 thousand and $29 thousand, respectively,~~ against ~~capital~~finance leases of ~~motor vehicles and~~ equipment. The Company ~~paid $3.4 million and $89 thousand against the mortgage note~~had proceeds from notes payable in ~~2018 and 2017, respectively, with the payoff coming~~2021 of $143.0 million, compared to $8.1 million in ~~2018 as part of the sale-leaseback of the Company's headquarters building. In addition, with the payoff of the mortgage~~2020. See Note 7, Note payable for more information on the Company's ~~headquarters building, the~~notes payable. The Company ~~also closed out its interest rate swap derivative with a payment~~made payments on notes payable of ~~$0.2 million. Also~~$9.9 million in ~~2018~~2021 and ~~2017, the Company issued payments of $45 thousand, and $61 thousand, respectively, toward the contingent liability associated with the Tectrol acquisition.~~$4.1 million in 2020.

On August 19, 2021, the Company's Telecommunications segment 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. At December 31, ~~2018,~~2021 the Company had ~~a 1.5 million British pound sterling overdraft facility (approximately $1.9 million at December 31, 2018) and a $5.0 million revolving~~an outstanding balance on the line of credit ~~(LOC).~~
~~During April 2019, CUI Global replaced~~of $2.5 million and $1.5 million was available for borrowing. In 2020, the ~~existing~~$0.4 million line of credit ~~and overdraft facilities with a new two-year credit facility with Bank of America for CUI Inc. and CUI-Canada, perfected by a first security lien on all assets of CUI Inc. and CUI-Canada.~~balance was held at the Renewables segment. The facility also included a $3 million sub-limit for use by CUI-Global non-loan party subsidiaries as a reserve under the borrowing base. The credit facility provided for working capital and general corporate purposes. The credit facility provided up to $10,000,000 in a Revolving Line of Credit Facility (“Revolver”), including a sub-limit for letters of credit. Interest was based upon Daily Floating LIBOR at LIBOR + 2.00%. The Company discontinued thisRenewable segment line of credit was paid and closed in ~~2019 upon~~ the ~~sale~~first quarter of the domestic power and electromechanical businesses. The additional credit was no longer needed due to the cash influx from the sale of the businesses, and the sold businesses were a primary source of collateral for the line of credit.2021.

~~For the year ended December 31, 2019, 2018,~~S-3 registration and 2017, the Company recorded proceeds of $6.8 million, $19.5 million, and $9.8 million, respectively, from the Company's overdraft facility in the U.K., and $27.5 million, $20.0 million, and $22.3 million respectively, from the Company's line of credit. Those proceeds were paid back during that time and in 2019 both facilities were discontinued.
~~S-3 registration~~share issuances
The Company filed an S-3 registration statement on ~~March 14, 2017~~July 17, 2020 containing a prospectus that was effective ~~March 29, 2017.~~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, ~~CUI Global~~Orbital Energy Group may from ~~time to time~~time-to-time issue various types of securities, including common stock, preferred stock, debt securities and/or warrants, up to an aggregate amount of ~~$100~~$150 million.
The Company utilized this S-3 registration to issue additional common stock in ~~October 2017, when the Company issued an additional 7,392,856 shares at a public offering price~~July 2021 for $38 million before costs of ~~$2.80 per share.~~approximately $2.3 million for net proceeds of approximately $35.7 million.

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 ~~its energy infrastructure services~~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, ~~including~~and possible proceeds from future issuances of equity through the S-3 registration statement, and available debt.

~~CUI Global~~Orbital Energy 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.

~~Financing activities – related party activity~~
During 2019, 2018 and 2017, $0.2 million, $0.3 million, and $0.3 million, respectively in interest payments were made in relation to the promissory notes issued to related party, IED, Inc. The promissory note terms included a due date of May 15, 2020 and an interest rate of 5% per annum, with interest payable monthly and the principal due as a balloon payment at maturity. In 2019, this note was assumed by the buyer as part of the sale of the Electromechanical operations.
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Recap of Liquidity and Capital Resources
~~During the year ended December 31, 2019, the~~The Company ~~generated $35.4~~had a net loss of $61.2 million ~~in cash through the sale of its domestic power~~ and electromechanical businesses. In 2019, the Company's Energy segment continued to use cash while the Company's discontinued operations generated cash while owned by the Company. Along with an ongoing focus on research and development and growth initiatives, cash usage was greater than what it will be when the Energy businesses are fully mature. The net cash used in operating activities ~~decreased~~of $45.7 million during 2021. As of December 31, 2021, the Company's accumulated deficit is $210.9 million. The Company has supplemented its liquidity by issuing $45 million of shares of stock in January 2021 and $38 million shares of 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 ~~$11.5 million in 2019 from $12.3 million in 2018 with much~~enable the Company to finance the acquisition of ~~that due~~Front Line Power Construction, LLC (“Front Line”) (the “Acquisition”). Pursuant to the ~~ongoing efforts~~Credit Agreement, the Lenders made a Term Loan to ~~grow~~Front Line in the ~~current businesses.~~
initial principal amount of $105 million for the purposes of financing the Acquisition and the associated expenses. The ~~Company's line~~Term Loan initially bears interest at the three-month Adjusted LIBOR Rate, plus the Applicable Margin, of ~~credit~~which 2.5% may be paid in-kind. The Term Loan shall be repaid in consecutive quarterly installments of $262,500, commencing on June 30, 2022. The Credit Agreement provides for mandatory prepayments on the occurrence of events such as sales of assets, Consolidated Excess Cash Flow and ~~overdraft facility were paid off~~Excess Receipts during the term. The Credit Agreement provides for prepayment premiums (initially 5% on prepayments made in ~~2019 and were made unnecessary by~~ the ~~cash generated from the sale~~first 30 months of the ~~Company's domestic power~~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 a maturity date of May 17, 2022 and ~~electromechanical businesses.~~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.

At December 31, ~~2019,~~2021, and 2020 the Company had cash and cash equivalents balances of ~~$23.4~~$26.9 million and $3.0 million. At December 31, ~~2019~~2021 and ~~2018,~~2020, the Company had ~~$1.0~~$2.3 million and ~~$0.3~~$0.6 million, respectively, of cash and cash equivalents balances at domestic financial institutions, which were covered under the FDIC insured deposits programs and ~~$0.3~~$0.4 million and ~~$67 thousand,~~$0.2 million, respectively, of cash and cash equivalents covered at foreign financial ~~institutions covered under the United Kingdom Financial Services Compensation (FSC) and the Canada Deposit Insurance Corporation (CDIC).~~institutions. At December 31, ~~2019~~2021 and ~~2018,~~2020, the Company held ~~$0.2~~$2.1 million and ~~$0.3~~$2.2 million, respectively, in ~~Japanese~~ foreign ~~bank accounts, $0.6 million and $0, respectively, in European foreign bank accounts and $0.2 million and $67 thousand, respectively, in Canadian~~ bank accounts.

The following tables present our contractual obligations as of December 31, ~~2019:~~2021:

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
$ 5,729 $ 9,980 $ 576 $ — $ 16,285

Operating lease obligations:

Operating lease - minimum payments
5,767 8,789 4,093 2,714 21,363

Notes payable obligations:

Notes payable maturities plus interest
97,659 92,077 130,053 — 319,789
Total Obligations
$ 109,155 $ 110,846 $ 134,722 $ 2,714 $ 357,437

Payments due by period

(In thousands)

Less than
1 year

1 to 3 years

3 to 5 years

After 5 years

Total

Financing lease obligations:

Minimum lease payments
$ 4 $ 1 $ — $ — $ 5

Operating lease obligations:

Operating leases
1,173 2,137 1,235 2,688 7,233

Notes payable obligations:

Notes payable maturities
473 — — — 473
Total Obligations
$ 1,650 $ 2,138 $ 1,235 $ 2,688 $ 8,076
The above notes payable maturities reflects the agreement made with the Front Line sellers to extend the maturity date for those agreements from May 16, 2022 to May 31, 2023, with $35 million being due in 2022 and the remaining principal due in 2023.

As of December 31, ~~2019,~~2021, the Company had an accumulated deficit of ~~$122.2~~$210.9 million.

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 its ~~Orbital operations in Houston and the U.K. to continue~~operating units to need cash support as the ~~businesses increase~~Company acquires fixed assets to grow their ~~market positions and revenue.~~businesses. Further equity issuance or borrowing may be required to fund future acquisitions.

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, ~~2019,~~2021, the Company is an indemnitor on four surety bonds and had three letters of credit off-balance sheet for a ~~surety bond~~total dollar value of approximately $131.8 million. Two bonds were with the Renewables segment for ~~an unconsolidated third party~~a total of $127.0 million dollars for two construction projects. At the Electric Power segment there were two bonds totaling $3.8 million for various unit-based construction jobs. For the projects related to these bonds, bonds, there was $110.7 million in costs left to complete the projects at December 31, 2021. The Company held three off-balance sheet letters of credit as of December 31, 2021. The Telecommunications segment had a ~~$4.6~~letter of credit for $0.4 million, ~~project that is approximately 90% complete~~Discontinued UK operations for $54 thousand and ~~expected to be completed in 2020.~~Renewables for $0.6 million. The Company does not expect any liability associated with ~~this~~these off-balance sheet ~~arrangement.~~arrangements.

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Table of Contents

Re~~sults~~Results of Operations
The following tables set forth, for the periods indicated, ~~certain financial information regarding revenue~~Revenue and ~~costs~~income (loss) from operations by segment:

(Dollars in thousands)

For the Year Ended December 31, 2019

Energy

Percent of
Segment
Revenues

Other

Percent
of
Segment
Revenues

Total

Percent of
Total
Revenues

Total revenues
$ 23,492 100.0
%
$ — —
%
$ 23,492 100.0
%
Cost of revenues
17,680 75.3
%
— —
%
17,680 75.3
%
Gross profit
5,812 24.7
%
— —
%
5,812 24.7
%
Operating expenses:

Selling, general and administrative expense
12,657 53.9
%
7,406 —
%
20,063 85.4
%
Depreciation and amortization
1,520 6.5
%
24 —
%
1,544 6.6
%
Research and development
139 0.6
%
— —
%
139 0.6
%
Provision for bad debt
131 0.5
%
— —
%
131 0.5
%
Other operating income
(20
)
(0.1
)%
— —
%
(20
)
(0.1
)%
Total operating expenses
14,427 61.4
%
7,430 —
%
21,857 93.0
%
Loss from operations
$ (8,615
)
(36.7
)%
$ (7,430
)
—
%
$ (16,045
)
(68.3
)%

(Dollars in thousands)
For the Year Ended December 31, 2021

Telecommunications

Electric Power

Renewables

Other

Total

Total Revenues
$ 27,799 $ 43,599 $ 11,550 $ — $ 82,948
Income (Loss) from operations
$ 43 $ (13,215 ) $ (19,043 ) $ (20,576 ) $ (52,791 )

(Dollars in thousands)
For the Year Ended December 31, 2020

Telecommunications

Electric Power

Renewables

Other

Total

Total Revenues
$ — $ 8,482 $ 13,005 $ — $ 21,487
Loss from operations
$ — $ (4,942 ) $ (5,479 ) $ (11,610 ) $ (22,031 )

(Dollars in thousands)

For the Year Ended December 31, 2018

Energy

Percent of
Segment
Revenues

Other

Percent
of
Segment
Revenues

Total

Percent of
Total
Revenues

Total revenues
$ 20,342 100.0
%
$ — —
%
$ 20,342 100.0
%
Cost of revenues
17,783 87.4
%
— —
%
17,783 87.4
%
Gross profit
2,559 12.6
%
— —
%
2,559 12.6
%
Operating expenses:

Selling, general and administrative expense
13,687 67.3
%
4,942 —
%
18,629 91.6
%
Depreciation and amortization
1,525 7.5
%
24 —
%
1,549 7.6
%
Research and development
155 0.7
%
— —
%
155 0.7
%
Provision (credit) for bad debt
13 0.1
%
— —
%
13 0.1
%
Impairment of goodwill and intangible assets
4,347 21.4
%
— —
%
4,347 21.4
%
Total operating expenses
19,727 97.0
%
4,966 —
%
24,693 121.4
%
Loss from operations
$ (17,168
)
(84.4
)%
$ (4,966
)
—
%
$ (22,134
)
(108.8
)%
(Dollars in thousands)

For the Year Ended December 31, 2017

Energy

Percent of
Segment
Revenues

Other

Percent
of
Segment
Revenues

Total

Percent of
Total
Revenues

Total revenues
$ 18,843 100.0
%
$ — —
%
$ 18,843 100.0
%
Cost of revenues
12,913 68.5
%
— —
%
12,913 68.5
%
Gross profit
5,930 31.5
%
— —
%
5,930 31.5
%
Operating expenses:

Selling, general and administrative expense
12,588 66.8
%
4,918 —
%
17,506 92.9
%
Depreciation and amortization
1,345 7.2
%
21 —
%
1,366 7.3
%
Research and development
222 1.2
%
— —
%
222 1.2
%
Provision for bad debt
(16
)
(0.1
)%
— —
%
(16
)
(0.1
)%
Impairment of goodwill and intangible assets
3,152 16.7
%
— —
%
3,152 21.4
%
Other operating expenses
5 —
%
— —
%
5 16.7
%
Total operating expenses
17,296 91.8
%
4,939 —
%
22,235 —
%
Loss from operations
$ (11,366
)
(60.3
)%
$ (4,939
)
—
%
$ (16,305
)
1.2
%

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Table of Contents

Revenue

For the Years Ended December 31,

For the Years Ended December 31,

Revenues by Segment

Percent

Percent

Percent

(Dollars in thousands)

2019

Change

2018

Change

2017

2021

Change

2020

Energy
$ 23,492 15.5
%
$ 20,342 8.0
%
$ 18,843
Other
— —
%
— —
%
—
Telecommunications
$ 27,799 100.0 % $ —
Electric Power
43,599 414.0 % 8,482
Renewables
11,550 (11.2 )% 13,005
Total revenues
$ 23,492 15.5
%
$ 20,342 8.0
%
$ 18,843 $ 82,948 286.0 % $ 21,487
~~2019~~2021 compared to ~~2018~~2020
Revenues in ~~2019~~2021 are attributable to newly acquired entities, continued sales, and marketing efforts. Net revenues for the year ended December 31, ~~2019~~2021 were greater than in ~~2018~~2020 due to ~~higher integration revenues~~the acquisitions in the Telecommunications and Electric Power segments and the development of the Company's ~~North America operations~~Electric Power business. This increase was partially offset by lower integration revenues in the Company's U.K. operations. North American operations had significantly higher overall revenues than in 2018 after a strong fourth quarter. U.K. operations were down overall for the year and had a weak fourth quarter with the continued delay in shipment of GasPTs toward a significant project in Italy. The U.K. market continues to face headwinds surrounding Brexit and the impact of the political environment on investment within the sector.renewables revenue at Orbital Solar Services during 2021. Revenues will fluctuate generally around the timing of customer project delivery schedules.

~~At December 31, 2019, the Energy~~The Electric Power segment held ~~a backlog~~backlogs of customer orders of approximately ~~$9.6~~$207.7 million ~~compared to approximately $15.7~~as of December 31, 2021 and $22.2 million at December 31, ~~2018.~~
~~2018 compared to 2017~~
~~Higher revenue in 2018 is associated with a strong fourth quarter for revenues due to the timing of customer project delivery schedules. Revenue was higher in both our UK and Houston facilities.~~
~~At December 31, 2018, the Energy~~2020. The Renewables segment held ~~a backlog~~backlogs of customer orders of approximately ~~$15.7~~$121.4 million as of December 31, compared to $8.1 million as of December 31, 2020. Telecommunications, had backlogs of customer orders of approximately $194.5 million compared to ~~approximately $12.6 million at~~zero as of December 31, ~~2017.~~2020.

Cost of Revenues

For the Years Ended December 31,

Cost of Revenues by Segment

Percent

Percent

(Dollars in thousands)

2019

Change

2018

Change

2017

Energy
$ 17,680 (0.6
)%
$ 17,783 37.7
%
$ 12,913
Other
— —
%
— —
%
—
Total cost of revenues
$ 17,680 (0.6
)%
$ 17,783 37.7
%
$ 12,913
~~2019~~2021 compared to ~~2018~~2020
~~The cost of revenues as a percentage of revenue decreased to 75% during~~For the year ended December 31, ~~2019 from 87% during~~2021, the year ended December 31, 2018. The decrease in the cost of revenues as a percentage of revenue was due largely to a 2018 increase to inventory reserves of $1.4 million related to a write-down of inventory and a 2018 $1.5 million write down of long-term deposits and other assets that were prepaid within the Energy segment. Both of these accounting adjustments increased the cost of sales as a percent of revenues in 2018. The Company expects improved cost of revenues as a percentage of revenues in 2020 as a result of increased sales of higher margin products and better mix of integration and service projects.
~~2018 compared to 2017~~
~~The~~ cost of revenues as a percentage of revenue increased to ~~87%~~94.8% from 91.1% during 2020. This increase was attributable to start-up costs at the Company’s Electric Power segment and lower margin projects during the period for Orbital Solar Services. 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 year ended December 31, ~~2018~~2021 was also affected negatively by the COVID-19 pandemic and the resulting world-wide economic slowdown.
The Company expects continued improvement in 2022 with the addition of the newly acquired companies Gibson Technical Services, IMMCO, Inc., Full Moon Telecom, LLC, and Front Line Power Construction, LLC. These acquired entities have been profitable from ~~69% during~~acquisition. With the ~~year ended December 31, 2017. The~~addition of these entities, the Company expects synergies that will promote efficiencies and increase revenue in the ~~cost of revenues as a percentage of revenue was due largely~~years to ancome. Additionally, two large solar projects are scheduled to ramp up in 2022 and increase to inventory reserves of $1.4 million related to a write-down of inventory and a $1.5 million write down of long-term deposits and other assets that were prepaid within the Energy segment in 2018. Also contributing to the higher percentage was a less favorable revenue mix of integration projects in 2018.
revenue.
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Table of Contents

Selling, General and Administrative Expense

For the Years Ended December 31,

Selling, General, and Administrative Expense by Segment

Percent

Percent

(Dollars in thousands)

2019

Change

2018

Change

2017

Energy
$ 12,657 (7.5
)%
$ 13,687 8.7
%
$ 12,588
Other
7,406 49.9
%
4,942 0.5
%
4,918
Total selling, general and administrative expense
$ 20,063 6.0
%
$ 18,629 6.4
%
$ 17,506

Selling, General and Administrative (SG&A) expenses includes 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 lines including ~~GasPT, VE,~~Telecommunications, Electric Power, and Renewables segments and other new product and service introductions.
~~2019~~2021 compared to ~~2018~~2020
During the year ended December 31, ~~2019,~~2021, SG&A increased ~~$1.4~~$31.0 million compared to the year ended December 31, ~~2018.~~2020. The increase in SG&A for ~~the year~~2021 compared to 2020 was due to the addition of entities in our Telecommunications and Electric Power segments. Additionally, the Electric Power segment experienced increased start-up SG&A costs around increased payroll and insurance expense. Also contributing to SG&A were increased corporate costs largely due to strategic initiatives, which included increased professional fees ~~including legal, accounting, tax, investor relations,~~ and costs associated with due diligence activities related to ~~prospective~~ acquisitions. Partially offsetting the increased SG&A costs in the Other category were decreased costs in the Energy segment primarily due to improved operating costs including lower professional fees in 2019 and lower translated costs at our U.K. operations due to generally lower foreign exchange rates and higher costs in the 2018 comparable period from increased marketing expenses related to the 2018 World Gas Conference.

SG&A decreased to ~~85%~~60.3% of total revenue in ~~2019~~2021 compared to ~~92%~~88.6% of total revenue during the year ended December 31, ~~2018~~2020 due to economies of scale on ~~16%~~286.0% higher consolidated revenues.

~~2018 compared to 2017~~
During the year ended December 31, 2018, SG&A increased $1.1 million compared to the year ended December 31, 2017. The increase for the year is due to increased costs in the Energy segment primarily due to higher selling expenses on the higher sales within the segment, higher professional fees in the Energy segment and higher SG&A expenses at the new Houston facility. Also contributing to the higher SG&A expenses in the Energy segment in 2018 were increased marketing expenses related to the World Gas Conference. SG&A decreased slightly to 92% of total revenue in 2018 compared to 93% of total revenue during the year ended December 31, 2017 due to economies of scale on 8% higher consolidated revenues.
Depreciation and Amortization

For the Years Ended December 31,

For the Years Ended December 31,

Depreciation and Amortization by Segment

Percent

Percent

Percent

(Dollars in thousands)

2019

Change

2018

Change

2017

2021

Change

2020

Energy
$ 1,520 (0.3
)%
$ 1,525 13.4
%
$ 1,345
Telecommunications
$ 2,326 100.0 % $ —
Electric Power
5,969 1278.5 % 433
Renewables
2,931 (10.6 )% 3,278
Other
841 (43.2
)%
1,480 (1.7
)%
1,505 1,684 10.1 % 1,530
Total depreciation and amortization (1)
$ 2,361 (21.4
)%
$ 3,005 5.4
%
$ 2,850 $ 12,910 146.3 % $ 5,241

(1) ~~The Other category included~~For the years ended December 31, 2021 and 2020, depreciation and amortization totals included $1.6 million and $1.5 million, respectively that were classified in income from discontinued operations on the Consolidated Statements of ~~discontinued operations.~~Operations in the Other segment. For the years ended December 31, 2021 and 2020, depreciation and amortization totals included $4.5 million and $0.5 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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Table of Contents

~~2019~~2021 compared to ~~2018~~2020
Depreciation and amortization decreased for the year ended December 31, 2019 compared to the comparable period in 2018. The majority of the decrease was in the Other category primarily as a result of the Company's sale and leaseback of the Tualatin facility in December 2018 and the transfer of certain fixed assets as part of the VPS equity-method investment. Depreciation included in the Other category is primarily related to the Company's discontinued operations.
~~2018 compared to 2017~~
Depreciation and amortization increased slightly for the year ended December 31, 2018 compared to the comparable period in 2017. The increase was a result of an increase in the Energy segment due to generally increased foreign currency translation rates in 2018 compared to 2017 and increased software amortization due to Orbital's new ERP system going into service in 2018.
~~Research and Development~~

For the Years Ended December 31,

Research and Development by Segment

Percent

Percent

(Dollars in thousands)

2019

Change

2018

Change

2017

Energy
$ 139 (10.3
)%
$ 155 (30.2
)%
$ 222
Other
— —
%
— —
%
—
Total research and development
$ 139 (10.3
)%
$ 155 (30.2
)%
$ 222
Research and development costs are associated with the continued research and development of new and existing technologies including GasPT and VE Technology and other products. Research and development expense ~~was down in the Energy segment for both the year ended December 31, 2019 compared to the year ended December 31, 2018 and~~ in the year ended December 31, ~~2018~~2021 was up compared to ~~2017. Research~~2020 primarily due to the amortization of Telecommunications and ~~development activities primarily focused on GasPT~~Electric Power segment acquisition intangibles and ~~VE technologies.~~
~~Impairment Loss~~
~~In 2018, management calculated an excess carrying amount for its Orbital-UK goodwill resulting in the remaining goodwill at Orbital-UK being written off, which was a total~~depreciation of $4.3 million impairment for the year. As of December 31, 2017, management calculated an excess carrying amount for its Orbital-UK goodwill resulting in a $3.2 million impairment. See Note 2 Summary of Significant Accounting Policies - Indefinite-Lived Intangiblesequipment used by Telecommunications and ~~Goodwill Assets for information on the impairment to goodwill in 2018 and 2017.~~Electric Power segments.

Provision ~~(Credit)~~ for Bad Debt

For the Years Ended December 31,

Provision for (Credit to) Bad Debt by Segment

Percent

Percent

(Dollars in thousands)

2019

Change

2018

Change

2017

Energy
$ 131 907.7
%
$ 13 (181.3
)%
$ (16
)
Other
— —
%
— —
%
—
Total provision for (credit to) bad debt
$ 131 907.7
%
$ 13 (181.3
)%
$ (16
)
Provision for ~~(credit to)~~ bad debt in ~~2019, 2018 and 2017 represents~~2021 represented less than 1% of total revenues and ~~relates~~related to miscellaneous receivables, which the Company ~~has~~had either recorded an allowance for doubtful collections of the receivable or for which the Company ~~has~~had determined the balance to be uncollectible. ~~Credits to the~~The provision for bad debt ~~are generated when aged receivables are collected at a higher rate than was previously reserved, which results~~decreased in 2021 compared to 2020 as the ~~calculated reserve being reduced.~~2020 provision for bad debt primarily related to accounts receivable write-offs on the Renewable segment's customer balances that were deemed to be uncollectible.

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Table of Contents

Other Income (Expense)

For the Years Ended December 31,

For the Years Ended December 31,

Percent

(Dollars in thousands)

2019

Percent
Change

2018

Percent
Change

2017

2021

Change

2020

Foreign exchange gain (loss)
$ 430 (189.4
)%
$ (481
)
(406.4
)%
$ 157 $ (500 ) (198.6 )% $ 507
Interest income
82 382.4
%
17 (5.6
)%
18 338 15.4 % 293
Non-cash gain and unrealized gain on derivative liability
— (100.0
)%
129 16.2
%
111
Sublet rental income
501 50.9 % 332
Financial instrument income (expense)
33 (100.0 )% —
Gain (loss) on extinguishment of debt and loan modifications
365 337.0 % (154 )
Other, net
55 189.5
%
19 (20.8
)%
24 40 900.0 % 4
Total other income (expense)
$ 567 (2.8
)%
$ (316
)
(2.0
)%
$ 310 $ 777 (20.9 )% $ 982

Fluctuations in Other Income (Expense) are largely due to fluctuations in foreign currency rates. Foreign currency gains and losses are primarily related to intercompany receivables/payables between ~~CUI Global~~Orbital Energy Group and its U.K Orbital Gas Systems subsidiary. Additionally, increased gain on extinguishment of debt primarily relates to the forgiveness by the U.S. government of certain payroll protection loans partially offset by the loss on extinguishment of debt related to exchange of common stock for debt payments. The ~~derivative liability was an interest rate derivative~~increase in financial instrument income relates to a standalone financial instrument included in the subscription agreement related to the ~~Company's mortgage interest rate and was settled~~$105 million credit agreement utilized in ~~2018 as part~~the funding of the ~~Company's sale leaseback transaction for it's headquarters building. The~~acquisition of Front Line Power Construction, LLC. This financial instrument is discussed further in Note 7. Increased sublet rental income is due to an increase in ~~interest income is primarily~~the square footage subleased in 2021 related to the ~~related-party note receivable the Company holds, which was received as part of the Company's sale of its electromechanical business~~Company’s previous corporate office in ~~2019.~~Oregon.

Investment Income
~~During~~Prior to the ~~three months ended March 31, 2016, CUI Global's investment~~third quarter of 2020, based on its equity ownership and that the Company maintained a board seat and participated in ~~Test Products International, Inc. ("TPI"), was exchanged for a note receivable from TPI~~operational activities of $0.4 million, which was the carrying value of the investment, earning interest at 5% per annum, through maturity. The Company recorded interest income on the note of $8 thousand, $17 thousand and $18 thousand for the years ended December 31, 2019, 2018 and 2017, respectively. The interest receivable was settled on a quarterly basis via a non-cash offset against the finders-fee royalties earned by TPI on GasPT sales. Any remaining finders-fee royalties balance was offset against the note receivable quarterly. The Company received full payment on the note during 2019.
~~During 2018, CUI Global made investments of $0.7 million in convertible notes receivable with~~ Virtual Power Systems ~~(“VPS”~~("VPS") to support the two companies’ continued collaboration and development of industry transforming Software Defined Power technologies. The notes accrued interest at 2% per annum and the interest was to compound annually. Unless converted into shares earlier, principal and accrued interest was to convert automatically on the maturity date (October 27, 2019) into shares of VPS common stock at the then current fair market value.
~~On March 30, 2019,~~, the Company converted its $0.7 million in notes receivable into preferred stock of VPS. In addition, the Company contributed $0.3 million of cash and $2.5 million of other assets, as well as $1.8 million of future expenditures recorded as liabilities by the Company, of which $1.7 million were paid in 2019. In return, the Company acquired a 21.4% ownership share of VPS. During the three months ended June 30, 2019, the Company recorded a $0.6 million gain based on the fair value of the non-cash assets contributed as part ofmaintained significant influence to account for the investment in VPS, which is included in discontinued operations. As of December 31, 2019, the Company's ownership percentage has been reduced to 20.58% following VPS's issuance of additional equity. Based on current accounting guidance, the Company will record its share of VPS's income or loss under the equity method of accounting.as an equity-method investment. Under the equity method of accounting, results ~~will~~are not be consolidated, but the Company ~~will record~~records a proportionate percentage of the profit or loss of VPS as an addition to or a subtraction from the VPS investment ~~asset.~~asset balance. With the decrease in ownership percentage following a Q3 2020 equity raise by VPS and additional board seats placed, Orbital Energy Group, Inc. no longer has significant influence to recognize the investment under the equity method. As such, the Company held the investment under the cost method as of December 31 2020 resulting in a $4.8 million loss on its equity-method investment in the six months ended June 30, 2020. The VPS investment ~~basis~~continues to be held under the cost method and at December 31, ~~2019~~2021 and December 31, 2020, the Company’s basis in the investment was ~~$4.9~~$1.1 million as reflected on the consolidated balance sheets.

Interest Expense
The Company incurred ~~$61 thousand, $0.2~~$8.3 million and ~~$0.2~~$1.3 million of interest expense during ~~2019, 2018~~2021 and ~~2017,~~2020, 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, ~~its secured note,~~insurance financing notes, secured promissory note, and ~~line~~lines of ~~credit and overdraft facility.~~credit. The ~~Company's secured~~increase in interest expense in 2021 is related to the increase in notes payable outstanding as of December 31, 2021. See note ~~was repaid in December 2018 as part of~~7 for more information on the Company's sale-leaseback transaction, and its secured promissory note, line of credit and overdraft facilities were paid off in 2019. At December 31, 2019 the Company was incurring interest only on its short-term note payable for $0.5 million related to certain financed insurance policies.notes payable.

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Table of Contents

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. and U.K. 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."

~~2019~~2021 compared to ~~2018~~2020
In ~~2019,~~2021, a net tax benefit of ~~$3.0~~$10.5 million, was recorded to the income tax provision from continuing operations for the year ended December 31, ~~2019~~2021 resulting in an effective tax rate of ~~17.8%~~17.4% compared to a ~~$1.3~~$1.5 million tax benefit from continuing operations for the year ended December 31, ~~2018~~2020 and an effective tax rate of ~~5.9%~~5.3%. For the year ended December 31, ~~2019,~~2021, the income tax benefit primarily represents ~~benefits from losses from continuing operations partially offset by foreign tax rates differing from USA tax rates and an increase~~a decrease in the U.S. valuation ~~allowance.~~allowance as a result of the GTS acquisition. For the year ended December 31, ~~2018,~~2020, the income tax benefit primarily represents ~~benefits from losses from continuing operations partially offset by foreign tax rates differing from USA tax rates, impairment of foreign purchased goodwill and an increase~~a decrease in the U.S. valuation ~~allowance.~~allowance as a result of the Reach Construction Group, LLC acquisition. As of December 31, ~~2019,~~2021, we have federal, state and foreign net operating loss carry forwards of approximately ~~$37.2~~$97.3 million, ~~$32.3~~$21.3 million, and ~~$15.5~~$16.5 million, respectively, and for which the federal and state net operating loss carry-forwards will expire between ~~2027~~2026 and ~~2038.~~2037.

During 2019, the Company provided for a partial valuation allowance against the Company’s Canada net deferred tax assets, which are included in assets held for sale, as it is not “more likely than not,” that the Company will realize a benefit from a portion of 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."
~~2018 compared to 2017~~
During 2018, the Company provided for a full valuation allowance against the Company’s U.K. net deferred tax assets as it was considered not “more likely than not,” that the Company will realize a benefit from these assets in a future period. In 2018, a net benefit of $1.3 million, was recorded to the income tax provision for the year ended December 31, 2018 resulting in an effective tax rate of 5.9% compared to a $2.3 million tax benefit for the year ended December 31, 2017 and an effective tax rate of 13.9%. For the year ended December 31, 2018, the income tax benefit primarily represents benefits from losses from continuing operations partially offset by foreign tax rates differing from USA tax rates, impairment of foreign purchased goodwill and an increase in the valuation allowance. For the year ended December 31, 2017, the income tax benefit primarily represents benefits from losses from continuing operations partially offset by foreign tax rates differing from USA tax rates, impairment of foreign purchased goodwill and an increase in the valuation allowance.
Loss from Continuing Operations, net of income taxes
~~2019~~2021 compared to ~~2018~~2020
The Company had a loss from continuing operations, net of income taxes of ~~$13.6~~$49.8 million for the year ended December 31, ~~2019~~2021 compared to a loss of ~~$21.3~~$25.7 million in 2018. The decreased loss from continuing operations, net of income taxes was due to higher sales and greater margins in 2019 compared to 2018, greater tax benefits and lower goodwill and other asset impairments in 2019 compared to 2018.
~~2018 compared to 2017~~
The Company had a loss from continuing operations, net of income taxes of $21.3 million for the year ended December 31, 2018 compared to a loss from continuing operations, net of income taxes of $13.9 million in 2017.2020. The increased loss from continuing operations, net of income taxes was attributable to start-up costs at the Company's Electric Power segment and projects with lower than normal margins during the period for the Renewables segment due to ~~lower margins~~supply chain delays caused by COVID-19 leading to inefficiencies. In addition, the Company faced increased administrative costs from acquisition due ~~largely to an increase to inventory reserves of $1.4 million related to a write-down of inventory and a $1.5 million write down of long-term deposits and other assets that were prepaid within~~diligence for the ~~Energy segment. Also contributing to the higher percentage was a less favorable revenue mix of integration projects~~four companies acquired in ~~2018 compared to 2017.~~2021.

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Income from Discontinued Operations, net of income taxes
~~2019~~2021 compared to ~~2018~~2020
The Company had ~~income~~loss from discontinued operations, net of income taxes of ~~$12.5~~$11.4 million for the year ended December 31, ~~2019~~2021 compared to ~~$4.0~~a loss of $1.7 million in ~~2018.~~2020. The increase in loss from discontinued operations is primarily due to ~~the gain on~~impairment recognized at Orbital UK in 2021 of $9.2 million. As of December 31, 2021, Orbital UK was considered held for sale ~~of businesses for 2019.~~and their assets were written down to their expected sale price.

Consolidated Net Loss
~~2018~~2021 compared to ~~2017~~
The Company had income from discontinued operations, net of income taxes of $4.0 million for the year ended December 31, 2018 compared to $1.4 million in 2017 due to a slightly more favorable product mix in the Power and Electromechanical businesses on greater volume.
~~Consolidated Net Loss~~
~~2019 compared to 2018~~2020
The Company had a net loss of ~~$1.1~~$61.2 million for the year ended December 31, ~~2019~~2021 compared to a net loss of ~~$17.3~~$27.4 million for the year ended December 31, ~~2018.~~2020. The ~~decrease in the~~increased consolidated net loss was attributable to start-up costs at the Company's Electric Power segment and projects with lower than normal margins during the period for ~~2019 was primarily~~Renewables segment due to supply chain delays caused by COVID-19 leading to inefficiencies, as well as increased administrative costs from acquisition due diligence for the ~~result of the gain on the sale of the domestic power and electromechanical businesses and lower goodwill and other asset impairments.~~four companies acquired in 2021.

~~2018 compared to 2017~~
The Company had a net loss of $17.3 million for the year ended December 31, 2018 compared to a net loss of $12.6 million for the year ended December 31, 2017. The increase in the consolidated net loss for 2018 was primarily the result of higher goodwill impairments, higher inventory reserves and impairment of deposits and other assets.
~~Effect of Inflation and Changing Prices~~
The Company believes, that during fiscal years ended December 31, 2019, 2018 and 2017, the effect of a hypothetical 100 basis point shift in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements.
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.’’

Item 7A. Quantitative and Qualitative Disclosure about Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our 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.

The following sections provide quantitative information on the Company’s exposure to foreign currency exchange rate risk and stock price risk. The Company makes use of sensitivity analyses that are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.

Foreign Currency Exchange Rates
The Company conducts continuing operations in ~~two~~one principal ~~currencies:~~currency: the U.S. ~~dollar, and the British pound sterling. These currencies operate primarily~~dollar. This currency operates as the functional currency for the Company’s U.S.~~, and UK~~ operations. Cash is managed centrally within ~~each of~~ the ~~two regions~~region with net earnings invested in the U.S. and working capital requirements met from existing U.S. intercompany liquid funds.

~~Because of fluctuations in currency exchange rates, the Company is subject to currency translation exposure on the results of its operations.~~ Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to the Company’s reporting currency, the U.S. dollar, for consolidation purposes. As currency exchange rates fluctuate, translation of our Statements of ~~Operations~~our foreign operations into U.S. dollars affects the comparability of revenues and operating expenses between years.

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Revenues and operating expenses are primarily denominated in the currencies of the countries in which our continuing operations are located, which is the U.S., Our U.K. operations were reclassified to discontinued operations in 2021 and ~~UK.~~so the Company's revenues and operating expenses from continuing operations were not materially affected by foreign currency translation. We have limited operations in India and Australia. Our consolidated results of operations and cash flows are, therefore, subject to limited fluctuations due to changes in foreign currency exchange rates and ~~may~~is not expected to be adversely affected in the future due to changes in foreign exchange rates.

~~The table below details the percentage of revenues and expenses by the two principal currencies for the fiscal years ended December 31, 2019, 2018 and 2017:~~

U.S. Dollar

British
Pound
Sterling

Fiscal year ended December 31, 2019

Revenues
40
%
60
%
Operating expenses
61
%
39
%
Fiscal year ended December 31, 2018

Revenues
23
%
77
%
Operating expenses
41
%
59
%
Fiscal year ended December 31, 2017

Revenues
18
%
82
%
Operating expenses
43
%
57
%
To date, we have not entered into any hedging arrangements with respect to foreign currency risk and have limited activity with forward foreign currency contracts or other similar derivative instruments.
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 implemented ~~a new~~an Investment Committee in 2019 to administer and operate the portfolio. At December 31, ~~2019,~~2021, the Investment Committee is comprised of C. Stephen Cochennet, Corey A. Lambrecht, Chairman, and ~~Daniel Ford,~~Nicholas M. Grindstaff, CFO. See Item 10 of this Form 10-K for more information on the Company’s Investment Committee.
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, which include a large~~customers. See Note 15 of the Company's financial statements for more information on the Company's concentration ~~of trade receivables and revenues in the United Kingdom.~~risks.

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Item 8.  Financial Statements and Supplementary Data

This item includes the following financial information:

Page
Reports of Independent Registered Public Accounting ~~Firms~~Firm (PCAOB ID Number 248)
4846

Consolidated Balance Sheets
5048

Consolidated Statements of Operations
5149

Consolidated Statements of Comprehensive Income and (Loss)
5250

Consolidated Statements of Changes in Stockholders’ Equity
5351

Consolidated Statements of Cash Flows
5452

Notes to Consolidated Financial Statements
5554 – 9089

~~Quarterly Financial Data~~
91

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REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and ~~Stockholders~~Shareholders

~~CUI Global,~~Orbital Energy Group, Inc.

Opinion on the financial statements
We have audited the accompanying consolidated balance ~~sheet~~sheets of ~~CUI Global,~~Orbital Energy Group, Inc. (a Colorado corporation) and subsidiaries (the “Company”) as of December 31, ~~2019,~~2021 and 2020, the related consolidated statements of operations, ~~and~~ comprehensive income and (loss), changes in stockholders’ equity, and cash flows for each of the ~~year then~~two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2019,~~2021 and 2020, and the results of its operations and its cash flows for each of the ~~year then~~two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
~~Adoption of new accounting standard~~
As discussed in Note 16 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.

Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
~~/s/ GRANT THORNTON LLP~~
~~We have served as the Company’s auditor since 2019.~~
~~Portland, Oregon~~
~~March 30, 2020~~
48
~~Table of Contents~~
~~Report of Independent Registered Public Accounting Firm~~
~~Stockholders and Board of Directors~~
~~CUI Global, Inc.~~
~~Tualatin, Oregon~~
~~Opinion on the Consolidated Financial Statements~~
We have audited the accompanying consolidated balance sheet of CUI Global, Inc. and Subsidiaries (the “Company”) as of December 31, 2018, the related consolidated statements of operations, comprehensive income and (loss), changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2018, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2018, ~~in conformity with accounting principles generally accepted in the United States of America.~~
~~Adoption of New Accounting Standard~~
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method for the recognition, measurement, presentation and disclosure of revenue in the year ended December 31, 2018 due to the adoption of ASC 606, ~~Revenue from Contracts with Customers~~.
~~Basis for Opinion~~
~~These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated~~ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the ~~consolidated~~ financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the ~~consolidated~~ financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the ~~consolidated~~ financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the ~~consolidated~~ financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~Emphasis~~Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a ~~Matter~~whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition
As ~~discussed~~described in Note 2 to the consolidated financial statements, ~~on September 30, 2019~~revenues derived from long-term fixed price contracts are recognized as the performance obligations are satisfied over time with the progress toward completion measured as a percentage of costs incurred to the total estimated cost for such performance obligation. In addition, the Company’s contracts may include variable considerations related to contract modifications through change orders or claims, and ~~on November 11, 2019,~~management must also estimate the variable consideration the Company ~~entered into agreements~~expects to ~~divest itself~~receive in order to estimate the total contract revenue. We identified revenue recognized over time for long-term fixed price contracts to be a critical audit matter.
46
Table of ~~certain businesses and components~~Contents
The principal considerations for our determination that revenue recognized over time for long-term fixed price contracts is a critical audit matter is that auditing management’s estimate of the progress towards completion of its ~~Power~~projects was complex and ~~Electromechanical segment and has also decided~~subjective. This is due to ~~discontinue~~ the ~~remaining businesses~~considerable judgment required to evaluate management’s determination of the ~~segment. The consolidated balance sheet~~forecasted costs to complete its long-term contracts as future results may vary significantly from past estimates due to changes in facts and circumstances. In addition, auditing the Company’s measurement of ~~December 31, 2018~~variable consideration is also complex and highly judgmental and can have a material effect on the ~~consolidated statements~~amount of ~~operations for each~~revenue recognized.
Our audit procedures related to the recognition of revenue over time included the following procedures, among others. i) We tested the Company’s cost-to-cost estimates by evaluating the appropriate application of the ~~two years~~cost to cost method; ii) tested management’s process for determining the total estimated contract cost which included evaluating the contracts and other documents that support those estimates, and testing the underlying contract costs; iii) evaluated management’s ability to reasonably estimate total contract costs by performing a comparison of the actual total estimate contract costs as compared with the prior period estimates, including evaluating the timely identification of circumstances that may warrant a modification to the total estimated contract cost and iv) tested the estimated variable consideration by evaluating the appropriate application of the most likely amount method, and tracing amounts to supporting documentation.
Acquisition of Gibson Technical Services, IMMCO, and Front Line Power Construction
As described in Note 17 to the ~~period ended December 31,2018 and the accompanying notes to~~ consolidated financial statements, ~~have been adjusted~~during the year ended December 31, 2021, the Company completed acquisitions of Gibson Technical Services (“GTS”), IMMCO Inc., and Front Line Power Construction LLC, and the assets acquired and liabilities assumed were required to ~~reflect~~be recorded at fair value as of the ~~Power~~acquisition date, for which the Company utilized a third party valuation firm. We identified the fair value of the acquired intangible assets, including customer relationships and ~~Electromechanical segment~~trade name to be a critical audit matter.
The principal considerations for our determination that the estimation of the Company’s methods and assumptions used in estimating the fair value of these acquired intangible assets is a critical audit matter, include the significant judgment required by management when estimating the fair value of these assets.. The estimation was significant primarily to the sensitivity of the respective fair value to the underlying assumptions used to estimate the future revenues and cash flows, including revenue growth rates, gross margins, the discount rate used and the valuation methodologies applied by the third party valuation firm. In addition, the audit effort involved the use of specialists to assist in performing these procedures and evaluating the audit evidence obtained.
Our audit procedures related to the fair value of the intangible assets acquired included the following, among others (i) evaluated the reasonableness of management’s forecasted financial results by testing the revenue growth rates and gross margins by comparing such items to actual historical results to identify material changes based on the Company’s future plans for the acquired entities, corroborating the basis for increases in forecasted revenue and gross margin, as ~~discontinued operations.~~
applicable (ii) utilized a valuation specialist to evaluate the methodologies used and whether they were acceptable for the underlying assets or operations and being applied correctly by performing an independent calculation, the appropriateness of the discount rate by recalculating the weighted average cost of capital, and the qualification of third-party valuation firm engaged by the Company based on their credentials and experience.

/s/ ~~Perkins & Company, P.C.~~GRANT THORNTON LLP

We have ~~previously~~ served as the ~~Company's~~Company’s auditor ~~from 2014 through 2018.~~since 2019.

~~Portland, Oregon~~
Dallas, Texas

March ~~18, 2019, except for Note 2, which is as of March 30, 2020~~31, 2022

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Table of Contents

~~CUI~~ ~~Global,~~Orbital Energy Group, Inc.
Consolidated Balance Sheets
As of December 31, ~~2019 and 2018~~

December 31,

December 31,

December 31,

December 31,

(In thousands, except share and per share amounts)

2019

2018

2021

2020

Assets:

Current Assets:

Cash and cash equivalents
$ 23,351 $ 3,979 $ 26,865 $ 3,046
Trade accounts receivable, net of allowance of $47 and $17, respectively
5,295 5,034
Restricted cash - current
150 452
Trade accounts receivable, net of allowance
48,752 5,689
Inventories
1,631 1,622 1,335 0
Contract assets
2,309 1,744 7,478 6,820
Note receivable, current portion
— 318
Notes receivable, current portion
3,536 44
Prepaid expenses and other current assets
2,215 1,512 6,919 2,601
Assets held for sale, current portion
6,893 21,272 6,679 6,146
Total current assets
41,694 35,481 101,714 24,798
Property and equipment, less accumulated depreciation of $1,441 and $1,284, respectively
4,454 4,540
Investment in VPS - equity method
4,865 —
Property and equipment, less accumulated depreciation
29,638 2,084
Investment
1,063 1,063
Right of use assets - Operating leases
5,524 — 18,247 6,268
Other intangible assets, less accumulated amortization of $11,191 and $9,601, respectively
4,298 5,353
Restricted cash
— 523
Right of use assets - Financing leases
14,702 0
Goodwill
100,899 7,006
Other intangible assets, net
142,656 10,553
Restricted cash, noncurrent portion
1,026 1,026
Note receivable
3,253 — 836 3,601
Convertible note receivable
— 655
Deposits and other assets
70 508 1,558 120
Assets held for sale, noncurrent portion
— 23,107 0 9,526
Total assets
$ 64,158 $ 70,167 $ 412,339 $ 66,045

Liabilities and Stockholders' Equity:

Current Liabilities:

Accounts payable
$ 2,904 $ 1,520 $ 10,111 $ 8,960
Short-term overdraft facility
— 1,344
Notes payable, current
473 — 72,774 11,681
Line of credit
2,500 441
Operating lease obligations - current portion
821 — 4,674 1,369
Financing lease obligations - current portion
4,939 0
Accrued expenses
5,159 1,893 28,301 4,372
Contract liabilities
1,668 1,956 6,503 4,873
Deferred gain on leaseback, current portion
— 289
Financial instrument liability
825 0
Liabilities held for sale, current portion
4,970 11,584 4,367 5,380
Total current liabilities
15,995 18,586 134,994 37,076

Deferred tax liabilities
260 0
Notes payable, less current portion
156,605 4,850
Operating lease obligations, less current portion
4,852 — 13,555 4,774
Deferred gain on leaseback, less current portion
— 2,599
Financing lease obligations, less current portion
9,939 0
Other long-term liabilities
720 1,368
Liabilities held for sale, noncurrent portion
— 7,241 0 830
Other long-term liabilities
194 203
Total liabilities
21,041 28,629 316,073 48,898

Commitments and contingencies


Stockholders' Equity:

Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at December 31, 2019 or December 31, 2018
— —
Common stock, par value $0.001; 325,000,000 shares authorized; 28,383,373 shares issued and outstanding at December 31, 2019 and 28,552,886 shares issued and outstanding at December 31, 2018
29 29
Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at December 31, 2021 or December 31, 2020
0 0
Common stock, par value $0.001; 325,000,000 shares authorized; 82,259,739 shares issued and 81,906,676 shares outstanding at December 31, 2021 and 31,029,642 shares issued and 30,676,579 shares outstanding at December 31, 2020
82 31
Additional paid-in capital
170,106 169,898 311,487 171,616
Treasury stock at cost; 353,063 shares held at December 31, 2019 and 0 shares held at December 31, 2018
(413
)
—
Treasury stock at cost; 353,063 shares held at December 31, 2021 and December 31, 2020
(413 ) (413 )
Accumulated deficit
(122,234
)
(123,993
)
(210,934 ) (149,681 )
Accumulated other comprehensive loss
(4,371
)
(4,396
)
(3,995 ) (4,406 )
Total Orbital Energy Group, Inc.'s stockholders' equity
96,227 17,147
Noncontrolling interest
39 0
Total stockholders' equity
43,117 41,538 96,266 17,147
Total liabilities and stockholders' equity
$ 64,158 $ 70,167 $ 412,339 $ 66,045

See accompanying notes to consolidated financial statements

5048

Table of Contents

~~CUI~~ ~~Global,~~Orbital Energy Group, Inc.

Consolidated Statements of Operations

For the Years Ended December 31, ~~2019, 2018 and 2017~~

(In thousands, except share and per share amounts)
	2019			2018			2017			2021			2020
Revenues	$	23,492		$	20,342		$	18,843		$	82,948		$	21,487
Cost of revenues		17,680			17,783			12,913			78,630			19,567
Gross profit		5,812			2,559			5,930			4,318			1,920
Operating expenses:
Selling, general and administrative expense		20,063			18,629			17,506			50,024			19,041
Depreciation and amortization		1,544			1,549			1,366			6,762			3,260
Research and development		139			155			222
Provision for (credit to) bad debt		131			13			(16	)
Impairment of goodwill		—			4,347			3,152
Provision for bad debt											346			1,626
Other operating (income) expenses		(20	)		—			5			(23	)		24
Total operating expenses		21,857			24,693			22,235			57,109			23,951
Continuing loss from operations		(16,045	)		(22,134	)		(16,305	)
Other income (expense)		567			(316	)		310
Loss from operations											(52,791	)		(22,031	)
Other income											777			982
Interest expense		(61	)		(216	)		(201	)		(8,337	)		(1,298	)
Loss from continuing operations before income taxes and equity in net loss of affiliate		(15,539	)		(22,666	)		(16,196	)		(60,351	)		(22,347	)
Net loss of affiliate		(1,043	)		—			—			0			(4,806	)
Loss from continuing operations before taxes		(16,582	)		(22,666	)		(16,196	)		(60,351	)		(27,153	)
Income tax benefit		(2,956	)		(1,342	)		(2,251	)		(10,508	)		(1,451	)
Loss from continuing operations, net of income taxes		(13,626	)		(21,324	)		(13,945	)		(49,843	)		(25,702	)
Discontinued operations (Note 2)
Income from operations of discontinued power and electromechanical components businesses (including gain on disposal of $14,100)		12,908			5,135			2,001
Income tax expense		411			1,136			645
Income from discontinued operations, net of income taxes		12,497			3,999			1,356
Loss from operations of discontinued businesses											(12,705	)		(3,097	)
Income tax benefit											(1,334	)		(1,352	)
Loss from discontinued operations, net of income taxes											(11,371	)		(1,745	)
Net loss	$	(1,129	)	$	(17,325	)	$	(12,589	)		(61,214	)		(27,447	)
Less: net income attributable to noncontrolling interest											39			0
Net loss attributable to Orbital Energy Group, Inc.										$	(61,253	)	$	(27,447	)

Basic and diluted weighted average number of shares outstanding		28,654,500			28,517,339			22,397,865			58,348,489			29,937,863
Loss from continuing operations per common share - basic and diluted	$	(0.48	)	$	(0.75	)	$	(0.62	)	$	(0.86	)	$	(0.86	)
Earnings from discontinued operations per common share - basic and diluted		0.44			0.14			0.06
Loss from discontinued operations per common share - basic and diluted										$	(0.19	)	$	(0.06	)
Loss per common share - basic and diluted	$	(0.04	)	$	(0.61	)	$	(0.56	)	$	(1.05	)	$	(0.92	)

~~The~~At December 31, 2021, the Company ~~obtained~~had a note receivable ~~in 2019~~from Back Porch International that was originated as part of the divestiture of the Company's electromechanical components business. The note has ~~a future~~an original stated value of $5 million, and is presented on the balance sheet as of December 31, 2021 and December 31, 2020 at its present value of $3.3 ~~million.~~

~~Test Products International, Inc. ("TPI") is a provider~~million and $3.5 million, respectively, including $2.5 million and $44 thousand of ~~handheld test and measurement equipment.~~current maturities, respectively. The Company ~~had~~obtained asecond note receivable ~~with TPI, which originated~~ in ~~2016 earning interest at 5% per annum with an original value of $0.4~~2020 from Back Porch International for $0.1 million ~~and which~~as payment for the Company's CUI Japan subsidiary. The second note receivable was ~~due June 30, 2019. The~~paid in 2021. Subsequent to December 31, 2021, the Company ~~recorded interest income~~received final payment on the note of $8 thousand, $17 thousand and $18 thousand for the years ended December 31, 2019, 2018 and 2017, respectively. The interest receivable was settled on a quarterly basis via a non-cash offset against the finders-fee royalties earned by TPI on GasPT sales. Finders-fee royalties of $36 thousand, $10 thousand and $16 thousand were earned by TPI in the years ended December 31, 2019, 2018 and 2017, respectively, and $13 thousand, $10, thousand and $16 thousand, respectively for those years, were offset against the note receivable on a quarterly basis. This note receivable was collected in 2019. Also, in 2018 and 2017, the Company received $19 thousand and $39 thousand, respectively, in cash payments against the note. The balance on the note receivable at December 31, 2019 and 2018 was $0 and $318 thousand, respectively.receivable.

During 2018, the Company made two strategic investments in convertible notes receivable with Virtual Power Systems ("VPS") for a total of $655 thousand. CUI Holdings, Inc. was the exclusive third-party design and development provider of VPS's ICE (Intelligent Control of Energy) products. These notes were converted to VPS stock in 2019. See Note 3, Investments and Fair Value Measurements for more information on these convertible notes.

Accounts receivable consist of the receivables associated with revenue derived from ~~product~~service sales including present amounts due to contracts accounted for under fixed price, cost-to-cost, cost plus, or output method. An allowance for uncollectible accounts is recorded to allow for any amounts that may not be recoverable, based on an analysis of prior collection experience, customer credit worthiness and current economic trends. Based on management’s review of accounts receivable, an allowance for doubtful accounts of ~~$47 thousand~~$1.5 million and ~~$17 thousand~~$1.2 million at December 31, ~~2019~~ 2021 and ~~2018,~~2020, respectively, is considered adequate. The reserve in both periods considers aged receivables that management believes should be specifically reserved for as well as historic experience with bad debts to determine the total reserve appropriate for each period. Receivables are determined to be past due based on the payment terms of original invoices. ~~The Company grants credit to its customers, with standard~~Payment terms ~~of Net 30 days.~~and conditions vary by contract, and are within industry standards across our business lines. The Company routinely assesses the financial strength of its customers and, therefore, believes that its accounts receivable credit risk exposure is limited.

Activity in the allowance for doubtful accounts for the years ended December 31, ~~2019, 2018~~ 2021 and ~~2017~~2020 is as follows:

At December 31, 2021, the Company had $1.5 million billed but not paid by customers under retainage provisions in contracts. These amounts are included as part of contract assets.

Inventories consist of finished and unfinished products and are stated at the lower of cost or market through either the ~~first-in, first-out~~first-in, first-out (FIFO) method as a cost flow convention or through the moving average cost method.

At December 31, ~~2019,~~2021, and ~~2018,~~2020, inventory is presented on the balance sheet net of reserves. The Company provides reserves for inventories estimated to be excess, obsolete or unmarketable. The Company’s estimation process for assessing the net realizable value is based upon its known backlog, projected future demand, historical usage and expected market conditions. ~~Manufactured inventory includes material, labor and overhead.~~ Inventory by category consists of:

~~Land, Buildings, Improvements, Furniture, Vehicles, Equipment,~~Property and ~~Leasehold Improvements~~equipment, less accumulated depreciation

Land is recorded at cost and includes expenditures made to ready it for use. Land is considered to have an infinite useful life.

Furniture, vehicles, and equipment are recorded at cost and include major expenditures, which increase productivity or substantially increase useful lives.

Leasehold improvements are recorded at cost and are depreciated over the lesser of the lease term or estimated useful life.

The cost of buildings, improvements, furniture, vehicles, and equipment is depreciated over the estimated useful lives of the related assets.

Depreciation is computed using the straight-line method for financial reporting purposes. The estimated useful lives for buildings, improvements, furniture, vehicles, and equipment are as follows:

Maintenance, repairs and minor replacements are charged to expenses when incurred. When buildings, improvements, furniture, equipment and vehicles are sold or otherwise disposed of, the asset and related accumulated depreciation are removed and any gain or loss is included in the statement of operations.

Long-lived assets including finite-lived intangible assets are periodically reviewed for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. In performing the review for recoverability, the future cash flows expected to result from the use of the asset and its eventual disposition are estimated. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the long-lived 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.

In the fourth quarter of 2018, the Company determined that certain long-term prepaid assets classified on the balance sheet as deposits and other assets, which were reliant on future revenue in order to be amortized to expense, did not have adequate forecasted revenue to justify the current valuation. This was primarily driven by the lack of substantial sales over a two-year period and uncertainty regarding the level of future sales. For that reason, the Company recorded a $1.5 million impairment to deposits and other assets and reclassified $0.1 million to prepaid assets. The amount reclassified to prepaid assets related to prepaid royalties associated with expected 2019 revenue.

~~Other than on goodwill, no~~NaN impairments were recognized on long-lived assets in ~~2019, 2018~~2021 or ~~2017. In 2018,~~2020 except in 2021, the Company ~~performed~~wrote down the assets held for sale of its discontinued Orbital U.K. operations by $9.2 million based on an ~~undiscounted cash flows impairment analysis as prescribed under ASC 360~~ ~~Property, Plant and Equipment~~ ~~on its long-lived fixed assets and its finite lived intangible assets~~expected selling price of 3 million GBP ($4.1 million at ~~Orbital-UK due to an indication that the overall carrying value of the operating unit was not recoverable. Based upon that analysis, no impairment was identified for those assets.~~December 31, 2021)

Intangible assets are stated at cost net of accumulated amortization and impairment. Finite-lived intangible assets includes customer relationships, technology know how, software, noncompete agreements, order backlog, and trade name. The fair value for intangible assets acquired through acquisitions is measured at the time of acquisition utilizing the following inputs, as needed:

The Company amortizes the intangible assets that are subject to amortization on a straight line basis, which the company believes approximates the estimated consumption of their economic benefits. Intangible assets are reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For instance, a significant change in business climate or a loss of a significant customer, among other things, may trigger the need for impairment testing of intangible assets. An impairment loss is recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value.

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. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. The unit of accounting for goodwill is at a level of the entity referred to as a reporting unit. Goodwill is assigned to specific reporting units for purposes of the impairment assessments. As of December 31, 2021, the Company has five operating segments that are also considered reporting units for goodwill impairment testing. The five operating segments are, Front Line Power Construction, LLC, Orbital Power Inc., Eclipse Foundation Group, Orbital Solar Services, Gibson Technical Services, which includes IMMCO, Inc. and Full Moon Telecom, LLC.

~~2019~~Annual Test. The Company tests for impairment of indefinite-lived intangibles and Goodwill ~~impairments~~

Inin the ~~fourth~~second quarter of ~~2019,~~each year and whenever events or circumstances indicate that the carrying amount of Goodwill exceeds its fair value and may not be recoverable. The Company’s qualitative assessment for indefinite-lived assets at May 31, 2021, followed the guidance in ASC 350-30-35-18A and 18B. In addition, since the May 31st assessment was the first year following the acquisition of Orbital Solar Services, the Company ~~determined that it~~elected to perform a third-party quantitative review. Following the quantitative and qualitative review, no impairment was ~~more likely than~~ identified.

Under current accounting guidance, the Company is not ~~that~~ required to calculate the fair value of ~~its goodwill at CUI-Canada and CUI Japan was less than its carrying amounts. The Company hired~~ a ~~third-party valuation expert to perform~~reporting unit unless the entity determines, based on a valuation and it was determined that the remaining goodwill held by CUI-Canada and CUI Japan should be written down to zero. With those write downs, the Company does not have any remaining goodwill on any of its subsidiaries.

~~During our review of Goodwill as of May 31, 2018, the Company determined that there were indicators present to suggest~~qualitative assessment, that it ~~was~~is more likely than not that ~~the~~its fair value ~~of the Orbital-UK reporting unit was less than its carrying amount.~~

The significant changes for the Orbital-UK reporting unit included a decline in the 2018 actual revenue, operating income and cash flows compared to prior forecasts for the same period and a negative change in the 2018 forecasted revenue, operating income and cash flows for the remainder of the year due in part to the longer than expected temporary halt in shipping of its GasPT product to a major customer in Italy and market uncertainty due to the continuing effects of Brexit.

The Company performed a quantitative test for the Orbital-UK reporting unit, which resulted in an impairment for the Orbital-UK reporting unit, and the Company recorded a Goodwill impairment charge of $1.3 million during the second quarter of 2018.

~~December 2018 Interim Test.~~ During the fourth quarter of 2018, the Company determined that there were additional indicators present to suggest that it was more likely than not that the fair value of the Orbital-UK reporting unit wasis less than its carrying amount. The ~~significant~~guidance includes a number of factors to consider in conducting the qualitative assessment. The Company tests for goodwill impairment in the second quarter of each year and whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.

As detailed in ASC 350-20-35-3A, in performing its testing for Goodwill and indefinite lived intangible as of May 31,2021, for the ~~Orbital-UK~~GTS reporting unit, ~~subsequent~~management completed a qualitative analysis to determine whether it was more likely than not that the ~~annual goodwill impairment test performed as~~fair value of ~~May 31, 2018 were driven by~~ a ~~slower recovery~~reporting unit is less than ~~what was originally forecasted. Actual GasPT revenue continued~~its carrying amount, including Goodwill. To complete the qualitative review, management follows the steps in ASC 350-20-35-3C to ~~lag behind forecasted revenue as acceptance~~evaluate the fair values of the ~~technology continued~~Goodwill and indefinite lived intangible and considers all known events and circumstances that might trigger an impairment of Goodwill or the indefinite lived intangible. At interim dates, the Company reviewed for triggering events. The Company did not identify any triggering events and no impairments to be slower than anticipated and continued delays associated with existing customer contracts that had not yet resumed. This slower than expected recovery, led to lower 2018 revenue, operating income and cash flows than originally forecasted.goodwill or indefinite lived assets were recorded.

As a result of its analysis, the Company performed another quantitative test of goodwill, which resulted in further impairment for the Orbital-UK reporting unit, and the Company recorded a goodwill impairment charge of $3.1 million during the fourth quarter of 2018, to write-off the remaining Energy segment goodwill. In addition, the reporting units in the discontinued Power and Electromechanical segment were also tested for impairment due to the overall decrease in market capitalization experienced in 2018, with no impairment required.

~~December 2017 Interim Test.~~ During the fourth quarter of 2017, the Company determined that there were indicators present to suggest that it was more likely than not that the fair value of the Orbital-UK reporting unit was less than its carrying amount. The significant changes for the Orbital-UK reporting unit subsequent to the annual goodwill impairment test performed as of May 31, 2017 included a decline in the 2017 actual revenue, operating income and cash flows compared to previously forecasted results and a decline in the 2018 forecasted revenue, operating income and cash flows due in part to the longer than expected halt in shipping of its GasPT product to a major customer in Italy and market uncertainty due to the continuing effects of Brexit.

The Company performed a quantitative analysis. As a result of the analysis, the Company concluded that the carrying value of the Orbital-UK reporting unit exceeded its estimated fair value. The quantitative test for the Orbital-UK reporting unit resulted in an impairment for the Orbital-UK reporting unit, and the Company recorded a goodwill impairment charge of $3.2 million during the fourth quarter of 2017.

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 December 31, ~~2019~~2021 and December 31, ~~2018,~~2020, accrued expenses of ~~$5.2~~$28.3 million and ~~$1.9~~$4.4 million, respectively included $1.1 million and $0.9 million, respectively, of accrued compensation and $0.2 million and $0.1 million, respectively, of accrued inventory payable. In addition, at December 31, 2019, accrued expenses included a $2.8 million working capital adjustment on the ~~sale of the domestic power business to Bel Fuse Inc that was paid out in January 2020.~~following components:

The Company uses various derivative instruments including forward currency contracts, and interest rate swaps to manage certain exposures. These instruments are entered into under the Company’s corporate risk management policy to minimize exposure and are not for speculative trading purposes. The Company recognizes all derivatives as either assets or liabilities in the consolidated balance sheet and measures those instruments at fair value. Changes in the fair value of derivatives are recognized in earnings. The Company has limited involvement with derivative instruments and does not trade them. From time to time, the Company may enter into foreign currency exchange contracts to minimize the risk associated with foreign currency exchange rate exposure from expected future cash flows. The Company had entered into one interest rate swap, which had a maturity date of ten years from the date of inception, and was used to minimize the interest rate risk on the variable rate mortgage. During the years ended 2018 and 2017, the Company had a non-cash gain and unrealized gains of $129 thousand and $111 thousand, respectively, related to the derivative liabilities. During the year ended December 31, 2018, the Company paid $227 thousand to close out the interest rate swap in conjunction with the repayment of the related variable rate mortgage.

The Company evaluates embedded conversion features pursuant to FASB Accounting Standards Codification No.815 (‘‘FASB ASC 815’’), ‘‘Derivatives and Hedging,’’ which requires a periodic valuation of the fair value of derivative instruments and a corresponding recognition of liabilities associated with such derivatives. The Company has limited involvement with derivative instruments and does not trade them. ~~Prior to 2019,~~ In November 2021, the Company ~~had an interest rate swap, which had~~identified a ~~maturity date~~subscription agreement with lenders of ~~ten years~~the $105 million syndicated debt agreement as a free standing financial instrument since it is legally separate from the ~~date of inception, and was used to minimize~~credit agreement. The subscription provides the ~~interest rate risk on the variable rate mortgage. The Company closed out this derivative in December 2018 as part~~lenders with shares of the Company's ~~sale/leaseback transaction~~ common stock, which was recorded by the Company as additional debt discount to be amortized over the life of the loan. The subscription agreement also provided the lenders with protection from downside risk in the event that the Company issues shares prior to paying off the Front Line seller notes at a price lower than the price when the shares were issued to the lenders. This financial instrument liability was recorded by the Company at $0.9 million and was valued at loan inception on November 17, 2021 using the Black Scholes option pricing model. The value of the liability decreased to $0.8 million as of December 31, 2021 and the difference was recorded as income in other income for the fourth quarter of 2021. The Company ~~has~~ did not ~~owned~~ own any derivative instruments in ~~2019.~~2020.

The Company records its stock-based compensation expense under its stock option plans and also issues stock for services. The Company accounts for stock-based compensation using FASB Accounting Standards Codification No.718 (‘‘FASB ASC 718’’), ‘‘Compensation – Stock Compensation.’’ FASB ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related service period.

Stock bonuses and restricted stock units ("RSU"s) issued to employees are recorded at fair value using the market price of the stock on the date of grant and expensed over the service period or immediately if fully vested on date of issuance. Employee stock options are recorded at fair value using the Black-Scholes or binomial option pricing model. The underlying assumptions ~~used~~ in the Black-Scholes and binomial option pricing ~~model~~models used by the Company are taken from publicly available sources including: ~~(1)~~(1) volatility and grant date stock price, which are sourced from historic stock price information; ~~(2)~~(2) the appropriate discount rates are sourced from the United States Federal Reserve; and ~~(3)~~(3) other inputs are determined based on previous experience and related estimates. With regards to expected volatility, the Company utilizes an appropriate period for historical share prices for ~~CUI Global~~Orbital Energy Group that best reflect the expected volatility for determining the fair value of its stock options.

See Note 10 Stockholders' Equity for additional disclosure and discussion of the employee stock plan and activity.

Common stock and stock options are also recorded on the basis of their fair value, as required by FASB ASC ~~505,~~718, which is measured as of the date required by FASB ASC ~~505, ‘‘Equity – Based Payments to Non-Employees.’’~~718. In accordance with FASB ASC ~~505,~~718, the stock options or common stock warrants are valued using the Black-Scholes or binomial option pricing model on the basis of the market price of the underlying common stock on the ‘‘valuation date,’’ which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the performance completion date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense is computed based off an estimate of the fair value of the stock award as valued under the Black-Scholes option pricing model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected in the expense recorded in the subsequent period in which that change occurs.

Common stock issued to other than employees or directors subject to performance (performance based awards) require interpretation ~~to include ASC 505-50-30-13 as to~~ when the counterparty’s performance is complete based on delivery, or other relevant performance criteria in accordance with the relevant agreement. When performance is complete, the common stock is issued and the expense recorded on the basis of their value as required by FASB ASC ~~505~~718 on the date the performance requirement is achieved.

The Company has a ~~401(k)~~401(k) retirement savings plan that allows employees to contribute to the plan after they have completed 60 days of service and are 18 years of age. The Company matches the employee's contribution up to 6% of total compensation. GTS, Orbital ~~Gas Systems, North America,~~Power, Inc., Orbital Solar Services, Front Line Power Construction, LLC, Eclipse Foundation, and ~~CUI Global~~Corporate made total employer contributions, net of forfeitures, of ~~$0.2 million, $0.1~~$0.6 million and ~~$74 thousand~~$0.3 million for ~~2019, 2018~~2021 and ~~2017,~~2020, respectively. In addition, in 2021 and 2020, the Company made contributions of ~~$0.3 million, $0.4 million,~~$72 thousand and ~~$0.3 million~~$145 thousand, respectively, associated with discontinued operations.

On January 1, 2018, we adopted the accounting standard ASC 606, “Revenue from Contracts with Customers” and all the related amendments (“new revenue standard"), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. This guidance includes the required steps to achieve the core principle that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new revenue standard was applied using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to accumulated deficit as of January 1, 2018. As a result of the adoption of this standard, certain changes have been made to the consolidated balance sheets. We expect the ongoing impact of the adoption of the new standard to primarily affect the timing of revenue recognition. For the majority of contracts, revenue is still measured over time using the cost-to-cost method. The change that most affected the transition adjustment on revenue was the requirement to limit revenue recognition on contracts without an enforceable right to payment for performance completed to date. Revenue on contracts without a specific enforceable right to payment on work performed to date was "clawed back" as part of the Company's transition adjustment. The cumulative effect adjustment recorded as of January 1, 2018 was a net $1.9 million decrease to accumulated deficit due to a $2.8 million transition adjustment from the discontinued Power and Electromechanical segment partially offset by a $(0.9) million transition adjustment from the Energy segment, net of deferred tax.

On January 1, 2018, we adopted ASC Topic 606 and the related amendments ("ASC 606") using the modified retrospective method applied to those contracts which were not completed as of December 31, 2017. Results for operating periods beginning after January 1, 2018 are presented under ASC 606, while comparative information has not been restated for 2017 and continues to be reported in accordance with the accounting standards in effect for those periods. The adoption of ASC 606 had no impact on the Company’s cash flows from operations.

The ~~Energy~~Electric Power segment ~~subsidiaries, collectively referred to as Orbital Gas Systems (Orbital), generate their revenue from a portfolio of products, services~~provides full service building, maintenance and ~~resources that offer a diverse range of personalized gas engineering solutions~~support to the ~~gas utilities,~~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 ~~petrochemical, emissions, manufacturing~~focused on utility scale solar and ~~automotive industries, among others.~~

Orbital accounts for a majority of its contract revenue proportionately over time. For our performance obligations satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of that performance obligation. The selection of the method to measure progress towards completion can be either an input method or an output method and requires judgment based on the nature of the goods or services to be provided.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. 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. Revenue is also generally recognized over time as the customer simultaneously receives and consumes the benefits of our performance as we perform the service.

The timing of revenue recognition ~~for Energy products~~ 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, generally when shipped.~~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 ~~output~~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 ~~indicate~~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.

Product-type contracts (for example, sale of GasPT units) for which revenue does not qualify to be recognized over time are recognized at a point in time. Revenues from extended warranty and maintenance activities are recognized ratably over the term of the warranty and maintenance period.

Accounts receivable are recognized in the period when our right to consideration is unconditional. We also assess our customers' 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, ~~although~~and are within industry standards across our ~~standard terms include a requirement of payment within 30 days.~~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 the input cost-to-cost ~~measure of progress~~method exceed 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 Consolidated Balance Sheets.

Contract liabilities from our construction contracts occur when amounts invoiced to our customers exceed revenues recognized under the input cost-to-cost ~~measure~~or output method of progress. Contract liabilities additionally include advanced payments from our customers on certain ~~contracts.~~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 years ended December 31, ~~2019~~ 2021 and ~~2018~~2020 is as follows:

⁽¹⁾ ~~Long-term contract liabilities are included in Other long-term liabilities on the Consolidated Balance Sheets.~~

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 December 31, ~~2019,~~2021, 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 $121.0 million in the aggregate of remaining performance obligations that are unsatisfied or partially unsatisfied as of December 31, 2021.

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. For separately priced extended warranty or product maintenance performance obligations, when estimates of total costs to be incurred on the performance obligation exceed total estimates of revenue to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is determined.

To determine the proper revenue recognition method for our contracts satisfied over time, 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.

Revenue from goods and services transferred to customers at a single point in time accounted for 29% and 22% of revenues for the year ended December 31, 2019 and 2018. Revenue on these contracts is recognized when the product is shipped and the customer takes ownership of the product. Determination of control transfer is determined by shipping terms delineated on the customer purchase orders and is generally when shipped.

The nature of our contracts gives rise to several types of variable ~~consideration, including new product returns and scrap return allowances primarily in the discontinued operations of Power and Electromechanical segment.~~consideration. In rare instances, ~~in our Energy segment,~~ 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. We include new product introduction and scrap return estimates in our calculation of net revenue when there is a basis to reasonably estimate the amount of the returns. These estimates are based on historical return experience, anticipated returns and our best judgment at the time. 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.

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~~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 table presents our revenues disaggregated by timing of revenue ~~recognition for the year ended December 31, 2019 and 2018:~~recognition:

The following table presents our revenues disaggregated by ~~region for the years ended December 31, 2019 and 2018:~~region:

~~As discussed above, ASC 606 was adopted on a modified retrospective basis and accordingly the 2017 financial statements were not restated for ASC 606. For 2017, revenue was recognized as follows.~~

For production-type contracts meeting the Company’s minimum threshold, revenues and related costs on these contracts were recognized using the ‘‘percentage of completion method’’ of accounting in accordance with ASC 605-35, ~~Accounting for Performance of Construction-Type and Certain Production Type Contracts~~ (‘‘ASC 605-35’’). Under this method, contract revenues and related expenses were recognized over the performance period of the contract in direct proportion to the costs incurred as a percentage of total estimated costs for the entirety of the contract. Costs included direct material, direct labor, subcontract labor and any allocable indirect costs. The Company captured certain job costs as work progressed, including labor, material and costs not invoiced. Margin adjustments were made as information pertaining to contracts changed. All un-allocable indirect costs and corporate general and administrative costs were charged to the periods as incurred. The amount of costs not invoiced were captured to ensure an estimated margin consistent with that expected at the completion of the project. In the event a loss on a contract was foreseen, the Company recognized the loss when it was determined. Contract costs plus recognized profits were accumulated as deferred assets, and billings and/or cash received were recorded to a deferred revenue liability account. The net of these two accounts for any individual project was presented as ‘‘Costs in excess of billings,’’ an asset account, or ‘‘Billings in excess of costs,’’ a liability account.

Production-type contracts that did not qualify for use of the percentage of completion method were accounted for using the ‘‘completed contract method’’ of accounting in accordance with ASC 605-35-25-57. Under this method, contract costs were accumulated as deferred assets, and billings and/or cash received was recorded to a deferred revenue liability account, during the periods of construction, but no revenues, costs, or profits were recognized in operations until the period within which completion of the contract occurred. A contract was considered complete when all costs except insignificant items were incurred; the equipment was operating according to specifications and was accepted by the customer.

For product sales, revenue was recognized in the period when persuasive evidence of an arrangement with a customer existed, the products were shipped and title had transferred to the customer, the price was fixed or determinable, and collection was reasonably assured.

~~Revenues from warranty and maintenance activities were recognized ratably over the term of the warranty and maintenance period and the unrecognized portion was recorded as deferred revenue.~~

The costs incurred for producing and communicating advertising are charged to operations as incurred. Advertising expense for the years ended December 31, ~~2019, 2018~~ 2021 and ~~2017~~2020 were ~~$0.4 million, $0.6~~$0.5 million and ~~$0.5 million,~~$41 thousand, respectively.

Income taxes are accounted for under the asset and liability method of FASB Accounting Standards Codification No.740 (‘‘FASB ASC 740’’), ‘‘Income Taxes.’’ Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance to the extent that management believes it is more likely than not that such deferred tax assets will not be realized.

Valuation allowances have been established against all domestic based deferred tax assets and U.K. based deferred tax assets due to uncertainties in the Company’s ability to generate sufficient taxable income in future periods to make realization of such assets more likely than not. In future periods, tax benefits and related domestic and U.K. deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not. In addition, the Company has provided for a partial valuation allowance in Canada. The Company has not provided for valuation allowances on deferred tax assets in any other jurisdiction.

The Company recognizes interest and penalties, if any, related to its tax positions in income tax expense.

~~CUI Global~~Orbital Energy Group files consolidated income tax returns with its U.S. based subsidiaries for federal and many state jurisdictions in addition to separate subsidiary income tax returns in Japan, the United Kingdom and Canada. After the sale of CUI Japan in September 2020, and the final disposition of CUI-Canada assets and liabilities, the Company will only be required to file returns in the U.S. and the United Kingdom. As of December 31, ~~2019,~~2021, the Company is not under examination by any income tax jurisdiction. The Company is no longer subject to ~~USA~~U.S. examination for years prior to ~~2015.~~2017.

In accordance with FASB Accounting Standards Codification No.260 (‘‘FASB ASC 260’’), ‘‘Earnings per Share,’’ basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net 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 net loss in ~~2019, 2018~~2021 and ~~2017,~~2020, the assumed exercise of stock options using the treasury stock method would have had an antidilutive effect and therefore all options for each of the ~~three~~two years were excluded from the calculation of diluted net loss per share. Accordingly, diluted net loss per share is the same as basic net loss per share for ~~2019, 2018~~2021 and 2017. The weighted average shares outstanding included 37,312; 1,844 and 63,602 of shares that are considered outstanding, but unissued as of December 31, 2019, 2018 and 2017, respectively, for shares to be issued in accordance with a royalty agreement pertaining to sales of the GasPT devices and unpaid equity share bonuses in 2017.2020.

The following table summarizes the number of stock options ~~outstanding excluding amounts applicable to contingent conversion option in 2018 and 2017:~~outstanding:

Any common shares issued as a result of stock options would come from newly issued common shares as granted under our equity incentive plans.

The financial statements of the Company's foreign offices have been translated into U.S. dollars in accordance with FASB ASC 830, ‘‘Foreign Currency Matters’’ (FASB ASC ~~830)~~830). All balance sheet accounts have been translated using the exchange rate in effect at the balance sheet date. Statement of Operations amounts have been translated using an appropriately weighted average exchange rate for the year. The translation gains and losses resulting from the changes in exchange rates during ~~2019, 2018~~2021 and ~~2017~~2020 have been reported in accumulated other comprehensive income (loss), except for gains and losses resulting from the translation of short-term intercompany receivables and payables, which are included in earnings for the period.

Operating segments are defined in accordance with ASC ~~280-10~~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 ~~three~~five operating segments based on the activities of the Company in accordance with ASC ~~280-10.~~280-10. These operating segments have been aggregated into ~~two~~three reportable segments. The ~~two~~three reportable segments are ~~Energy~~Electric Power, Telecommunications, and ~~Other.~~Renewables and an Other category. The ~~Energy~~Electric Power segment consists of Front Line Power Construction, LLC based in Houston, Texas, Orbital Power Services based in Dallas, Texas, and Eclipse Foundation Group based in Gonzales, Louisiana. The segment provides comprehensive solutions to customers in the electric power industries. Front Line Power, LLC is a Houston-based full-service electrical infrastructure service company that provides construction, maintenance, and emergency response services for customers since 2010. Services performed by Orbital Power Services generally include the design, installation, upgrade, repair and maintenance of electric power transmission and distribution infrastructure and substation facilities as well as emergency restoration services, including the repair of infrastructure damaged by inclement weather. 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, communication towers and disaster restoration market sectors, with expertise in water, marsh and rock terrains.

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:

The Renewables segment consists of Orbital Solar Services based in Sanford, North Carolina. Orbital Solar Services provides engineering, procurement and construction (“EPC”) services that support the development of renewable energy generation focused on ~~the operations~~utility-scale solar construction. The Company serves a wide variety of ~~Orbital Gas Systems Ltd.~~project types, including commercial, substation, solar farms and ~~Orbital Gas Systems, North America, Inc. which includes gas related test and measurement systems, including the GasPT.~~ public utility projects.

The Other ~~segment represents the remaining activities that are not included as part~~category is made up primarily of the ~~other reportable~~Company's corporate activities. This category does not include any operating segments and ~~represent primarily~~does not generate revenue. In addition, Orbital’s integrated operations and common administrative support for its operating units require that certain allocations be made to determine segment profitability, including allocations of shared and indirect costs (e.g., insurance costs) and general and administrative costs such as stock bonuses, and professional fees, including audit fees. Certain corporate ~~activity. In 2019, the Company sold its domestic power~~costs are not allocated and ~~electromechanical businesses~~include corporate employees’ salaries and ~~reclassified the income~~benefits, Board of ~~the former Power~~Director fees and ~~Electromechanical segment~~costs, certain legal fees, due diligence costs related to ~~income from~~prospective acquisitions, and regulatory costs associated with being a publicly traded company. Unallocated corporate expenses and costs associated with discontinued ~~operations. Unsold portions of the segment were reclassified to assets held for sale. Prior years have been reclassified to reflect this change, with assets held for sale~~operations are included in the ~~Other~~all-other category.

The following information represents segment activity as of and for the year ended December 31, 2021:

The following information represents segment activity as of and for the year ended December 31, ~~2019:~~2020:

~~The following information represents segment activity as of and for the year ended December 31, 2018:~~

~~The following information represents segment activity as of and for the year ended December 31, 2017:~~

The ~~following information represents~~Company's long-lived assets ~~(excluding deferred tax assets) by country:~~

~~Certain reclassifications primarily related to discontinued operations and assets and liabilities held for sale have been made to~~are located in the ~~2018 consolidated balance sheet, and 2018 and 2017 statements of operations in order to conform to the 2019 presentation.~~U.S.

On January 1, 2021, the Company adopted ASU No.2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting." ASU 2020-04 provides optional expedients and exceptions related to contract modifications and hedge accounting to address the transitions from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance permits an entity to consider contract modification due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. ASU 2020-04 also temporarily allows hedge relationships to continue without de-designation upon changes due to reference rate reform. The standard is effective upon issuance and can be applied as of March 12, 2020 through December 31, 2022. There is not a material effect on the ~~FASB issued~~Company's financial statements due to the Company not having any current financial instruments that are affected by this new guidance.

On January 1, 2021, the Company adopted ASU ~~2020-01,~~2020-01, Investments - Equity Securities (Topic ~~321)~~321), Investments - Equity Method and Joint Ventures (Topic ~~323)~~323), and Derivatives and Hedging (Topic ~~815)~~815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.ASU ~~2020-01~~2020-01 clarifies the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives, and is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. The amendments in ASU ~~2020-01~~2020-01 are effective for the Company's 2021 fiscal year, including interim periods. The ~~Company~~new guidance does not ~~expect~~ currently have a material impact ~~of this ASU~~ on ~~its~~the Company's consolidated financial statements ~~and~~due to the Company currently ~~expects to adopt the standard in 2021.~~not having any equity-method investments or any derivative instruments.

~~In December 2019,~~ On January 1, 2021, the ~~FASB issued~~Company adopted ASU ~~2019-12,~~ 2019-12,Simplifying the Accounting for Income Taxes, which is guidance intended to simplify various aspects related to accounting for income taxes, eliminate certain exceptions within ASC 740 and clarify certain aspects of the current guidance to promote consistency among reporting entities. The pronouncement is effective for the Company's 2021 fiscal year, including interim periods. The ~~Company~~ASU does not ~~expect~~ have a material impact ~~of this ASU~~ on ~~its~~the Company's consolidated financial ~~statements and currently expects to adopt the standard in 2021.~~

~~In August 2018, the FASB issued Accounting Standards Update ("ASU") No. 2018-15,~~ ~~Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~ ("ASU 2018-15"). The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The guidance will be effective for the fiscal year beginning after December 15, 2019, including interim periods within that year. The Company does not expect a material impact of this ASU on its consolidated financial statements and will adopt the standard in 2020.statements.

~~In August 2018,~~On October 28, 2021, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU No. 2018-13,~~Accounting Standards Update ("ASU") ~~Fair Value Measurement~~2021-08, Business Combinations (Topic ~~820)~~805): ~~Disclosure Framework - Changes~~Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This guidance will require entities to ~~the Disclosure Requirements~~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 ~~Fair Value Measurement~~ ~~(“ASU 2018-13”).~~revenue contracts with customers. Legacy guidance requires entities to record contract assets and contract liabilities acquired to be recorded at fair value. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including requiring the disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The guidance will be effective for the ~~fiscal year~~Company beginning after December 15, 2019, including interim periods within that year. The Company currently has two level three investments, for which we will evaluate on an ongoing basis to determine if there are significant unobservable inputs that will need to be disclosed as a range and weighted average upon adoption. We will adopt the standard in 2020.

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ (“ASU 2016-13”). ASU 2016-13 is intended to provide financial statement users with more useful information about expected credit losses on financial assets held by a reporting entity at each reporting date. The new standard replaces the existing incurred loss impairment methodology with a methodology that requires consideration of a broader range of reasonable and supportable forward-looking information to estimate all expected credit losses. This ASU is effective for fiscal years ~~and interim periods within those years~~ beginning after December 15, ~~2019.~~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 ~~does not expect~~is still reviewing the ~~impact~~standard and as of the reporting date of this ~~ASU on its consolidated financial statements~~filing has not elected to ~~be material and will adopt the standard in 2020.~~early adopt.

~~8. OVERDRAFT FACILITY AND LINE OF CREDIT~~

On October 5, 2016, Orbital Gas Systems Ltd. signed a $1.5 million pounds sterling five-year agreement with the London branch of Wells Fargo Bank N.A. for a multi-currency variable rate overdraft facility at a base rate plus a 2.25% margin (2.5% at December 31, 2018).

(In thousands)
	As of December 31,
	2021
2022	$	97,659
2023		76,848
2024		15,229
2025		15,030
2026		115,023
Less interest portion of payments		(90,410	)
Total	$	229,379

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8. LINE OF CREDIT

~~During April 2019, CUI Global replaced~~ On August 19, 2021, the ~~existing~~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. At December 31, 2021 the Company had a $2.5 million outstanding balance on the line of credit and ~~overdraft facilities~~$1.5 million was available for borrowing.

With the acquisition of Reach Construction Group, LLC in April 2020, the Company acquired with it a line of credit. The Company had a revolving line of credit with Truist bank with a ~~new two-year~~balance of $441 thousand at December 31, 2020. Interest was payable monthly at LIBOR plus 2.5% per annum, with a minimum rate of 2.5%. The interest rate was 6.65% at December 31,2020. The line of credit ~~facility with Bank of America for CUI Inc. and CUI-Canada, perfected~~was collateralized by ~~a first security lien on~~ all assets of ~~CUI Inc.~~Reach Construction Group, LLC and ~~CUI-Canada.~~guaranteed by the Seller of Reach Construction Group, LLC. The ~~facility also included a $3 million sub-limit for use by CUI-Global non-loan party subsidiaries as a reserve under~~line of credit did not have an established maturity date. There was 0 available balance at December 31, 2020 on the ~~borrowing base. The~~line of credit ~~facility provided for working capital~~ and general corporate purposes. The credit facility provided up to $10,000,000 in a Revolving Line of Credit Facility (“Revolver”), including a sub-limit for letters of credit. Interest was based upon Daily Floating LIBOR at LIBOR + 2.00%. Thethe Company ~~discontinued~~closed this line of credit in ~~2019 upon~~ the ~~sale~~first quarter of the domestic power and electromechanical businesses. The additional credit was no longer needed due to the cash influx from the sale of the businesses, and the sold businesses were a primary source of collateral for the line of credit.2021.

9. COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company may be involved in certain legal actions arising from the ordinary course of business. While it is not feasible to predict or determine the outcome of these matters, we do not anticipate that any of these matters, or these matters in the aggregate, will have a material adverse effect on the financial position or results of operations.

~~Commissions, Royalty and License Fee Agreements~~

Royalty and license fees are paid in accordance with their related agreements, either on a monthly or quarterly basis. We deal with a number of independent licensors for whose intellectual property we compete with other manufacturers. Rights to such intellectual property, when acquired by us, are usually exclusive and the agreements require us to pay the licensor a royalty on our net sales of the item. These license agreements, in some cases, also provide for advance royalties and minimum guarantees in order to maintain technical rights and exclusivity. As of December 31, 2019 and 2018, $9 thousand and $3 thousand, respectively, was accrued for royalty and license fees payable in accrued expenses.

~~Employment Agreements~~

~~As of the year ended December 31, 2019, the following employment agreements were in place:~~

~~William J. Clough, General Counsel of CUI Global, Inc. and Executive Chairman of the Company’s board of directors~~

Mr. Clough is employed under a three-year employment contract with the Company, which became effective May 14, 2019. Said contract provides, in relevant part, for salary in year 1 of $750 thousand, year 2 of $800 thousand and year 3 of $850 thousand. The employment agreement includes bonus provisions for each calendar year targeted at seventy-five percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Mr. Clough's employment agreement includes a grant for 1,600,000 options; however, the grant is subject to the approval of an equity incentive plan by shareholders within one year of the employment agreement. As of December 31, 2019, the shareholders have not approved an equity incentive plan. The agreement provides for up to $9,999 of annual premium life insurance expenses along with the ordinary benefits provided to employees of the Company. The agreement entitles Mr. Clough to severance package of 2.5 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. At December 31, 2019, 2018, and 2017, there was an accrual of $0, $30 thousand, and $33 thousand, respectively, for compensation owed to Mr. Clough.

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~~Daniel N. Ford, Chief Financial Officer of CUI Global Inc. and Subsidiaries, Chief Operating Officer of the Energy Division~~

Mr. Ford is employed under a three-year employment contract with the Company, which became effective May 14, 2019. Said contract provides, in relevant part, for salary in year 1 of $500 thousand, year 2 of $550 thousand and year 3 of $600 thousand. The employment agreement includes bonus provisions for each calendar year targeted at seventy-five percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Mr. Ford's employment agreement includes a grant for 960,000 options; however, the grants are subject to the approval of an equity incentive plan by shareholders within one year of the grant. As of December 31, 2019, the shareholders have not approved an equity incentive plan. The agreement provides for ordinary benefits provided to employees of the Company. The agreement entitles Mr. Ford to a severance package of 2.0 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. At December 31, 2019, 2018, and 2017, there was an accrual of $0, $21 thousand, and $22 thousand, respectively, for compensation owed to Mr. Ford.

~~James F. O’Neil III, Chief Executive Officer, Vice Chairman of the Board of Directors, and Chief Executive Officer of the Company’s wholly owned subsidiaries~~

Mr. O'Neil is employed under a three-year employment contract with the Company, which became effective October 1, 2019. Said contract provides, in relevant part, for salary in year 1 of $750 thousand, year 2 of $800 thousand and year 3 of $850 thousand. The employment agreement includes bonus provisions for each calendar year targeted at seventy-five percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Mr. O'Neil's employment agreement includes a grant for 1,000,000 options and he also received a grant for 600,000 options when he was initially appointed to the Board of Directors, however the grants are subject to the approval of an equity incentive plan by shareholders within one year of the grants. As of December 31, 2019, the shareholders have not approved an equity incentive plan. The agreement provides for up to $9,999 of annual premium life insurance expenses along with the ordinary benefits provided to employees of the Company. The agreement entitles Mr. O'Neil to a severance package of 2.5 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans.

Off-Balance Sheet Arrangements - ~~Obligations under Certain Guarantee Contracts~~Performance and Payment Bonds and Parent Guarantees

~~The Company may enter into guarantee arrangements in~~In the ~~normal~~ordinary course of business, Orbital Energy Group and its subsidiaries are required by certain customers to ~~facilitate commercial transactions~~provide performance and payment bonds for contractual commitments related to its 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. The bonds will remain in place as the Company completes projects and resolves any disputed matters with ~~third parties.~~the customers, vendors and subcontractors related to the bonded projects. As of December 31, ~~2019,~~ 2021 the ~~Company is an indemnitor~~total amount of the outstanding performance and payment bonds was approximately $131.8 million. Two of the bonds were on Orbital Solar Services jobs and two bonds were on Orbital Power Inc. construction jobs. The Orbital Solar Services. jobs were for unconsolidated third parties related to two separate projects that had $109.5 million left to complete the jobs, for a ~~surety~~combined bond amount of approximately $127.0 million. The two Orbital Power Inc. bonds were for ~~an unconsolidated~~ a third party related to two ongoing unit-based projects that as of December 31, 2021 had a ~~$4.6~~consolidated contract value of $3.8 million ~~project that is approximately 90%~~with costs left to complete ~~and expected to be completed in 2020.~~of $1.2 million. The Company does not expect any liability associated with ~~this~~these off-balance sheet ~~arrangement.~~arrangements.

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 Energy 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 Energy Group, Inc. records a reserve when it is probable that a liability has been incurred and the loss can be reasonably estimated. Orbital Energy 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 Energy 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.

10. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Common Stock Dividend Restrictions

As of December 31, ~~2019,~~2021, there are no restrictions on common stock dividends. Also, at December 31, ~~2019~~ 2021 and ~~2018,~~2020, retained earnings were not restricted upon involuntary liquidation.

~~Table of Contents~~

~~Common Stock Issuances~~

(Dollars in thousands)

Date of issuance

Type of
issuance

Expense/ Prepaid/
Cash

Stock issuance
recipient

Reason for
issuance

Total no. of
shares

Grant date
fair value or net proceeds
recorded at
issuance

January, April, July, and October 2019

Vested restricted common stock

Expense

Four board members

Director compensation
164,713 $ 162

May 2019

Common stock

Expense

Employee

Approved bonus
18,837 17
Total 2019 issuances
183,550 $ 179 ⁽¹⁾

January, April, July and October 2018

Vested restricted common stock

Expense

Four board members

Director compensation
72,157 $ 175
January and July 2018

Common stock

Expense

Three Employees

Approved bonuses
68,118 183 ⁽²⁾
July and December 2018

Common stock

Expense

Related Party, James McKenzie

Pursuant to royalty agreement
5,755 14 ⁽²⁾
Total 2018 issuances
146,030 $ 372 ⁽³⁾⁽⁴⁾

January, April, August and October 2017

Vested restricted common stock

Expense

Four board members

Director compensation
49,980 $ 200
January, February and June 2017

Common stock

Expense

Three Employees

Approved bonuses
28,634 182 ⁽⁵⁾
January and December 2017

Common stock

Expense

Related party, James McKenzie

Pursuant to royalty agreement
3,293 16 ⁽⁵⁾
January and February 2017

Common stock

Expense

Two Employees

Cashless stock option exercises
245 — ⁽⁶⁾
May 2017

Common stock

Prepaid expense/expense

Third-party consultant

Strategic investor marketing services
15,000 57 ⁽⁷⁾
October 2017

Common stock

Cash

Various third-party shareholders

Equity raise
7,392,856 18,905
Total 2017 issuances
7,490,008 $ 19,360 ⁽⁸⁾

~~(1)~~

Total excludes $36 thousand of 2019 stock compensation and $3 thousand of 2018 stock compensation related to royalties that were recorded as expense but not issued and outstanding as of December 31, 2019.

~~(2)~~

~~Includes bonus and royalty of $170 thousand that was accrued and expensed in 2017.~~

~~(3)~~

~~Total excludes $3 thousand of stock compensation related to royalties that were recorded as expense but not issued and outstanding as of December 31, 2018.~~

~~(4)~~

~~Excludes $24 thousand of stock compensation for stock issued in 2017 that was amortized from prepaid expense in 2018.~~

~~(5)~~

~~Includes bonuses and royalty of $176 thousand that were accrued and expensed in 2016.~~

~~(6)~~

~~The Company received $0 for the issuance in the cashless option exercises.~~

~~(7)~~

~~Amount includes $24 thousand that was included in prepaid expense at December 31, 2017.~~

~~(8)~~

~~Does not include stock expense of $170 thousand included in accrued liabilities at December 31, 2017 for unissued stock.~~

~~S-3~~S-3 registration and share issuances

The Company filed an ~~S-3~~S-3 registration statement on ~~March 14, 2017~~ July 17, 2020 containing a prospectus that was effective ~~March 29, 2017.~~ 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, ~~CUI Global~~ Orbital Energy Group may from ~~time to time~~time-to-time issue various types of securities, including common stock, preferred stock, debt securities and/or warrants, up to an aggregate amount of ~~$100~~$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 $35.7million.

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Stock Appreciation Rights ("SARS")

During the years ended December 31, 2021 and 2020, the Company issued SARS to five key executives in 2021 and four key executives in 2020. The number of SARS granted to each of the executives equated to the corresponding dollar amount of a portion of the cash bonus otherwise due to them pursuant to their employment agreements. The SARS are subject to acceleration upon a change in control or termination of the executive’s employment with the Company in certain circumstances. SARS granted in 2020 vest over 24 months and SARS granted in 2021 vest and are paid out on the anniversary of the grant in one-third increments on the first-, second-, and third-year anniversaries of the grant date. The Company recorded $2.1 million and $0.6 million of compensation related to SARs in the years ended December 31, 2021 and 2020. Unamortized expense for SARS at December 31, 2021 was $4.3 million.

	*2021*			*2020*
Month Issued	April 2021			June 2020
Number Issued		3,770,960			1,054,687
Interest Rate		0.34	%		6	%
Estimated Volatility		156	%		130	%
Stock Price at Issuance	$	4.17		$	0.72
Years to Maturity		1.5			6
Grant date Value per Right	$	3.56		$	0.64

~~On October 23, 2017,~~The 2020 grant was issued with a $1.00 exercise price. The $1.00 SAR exercise price represented approximately a 40% premium over the market price of the Company's common stock as reported on Nasdaq as of May 29, 2020. The issuance of the SARS conserved approximately $1,000,000 of the Company's cash reserves at the time of issuance. Upon exercise, the Company ~~closed on~~is obligated to pay the executive an ~~underwritten public offering of 7,392,856 shares at a public offering~~amount equal to the difference between the average closing price of ~~$2.80 per share, including 964,285 shares sold at~~ the ~~public offering~~Company's common stock, as reported on Nasdaq for the five (5) trading days preceding the exercise date, less the SAR exercise price ~~pursuant to the underwriter's exercise in full~~ of its option to purchase additional shares to cover over-allotments. The net proceeds to CUI Global (after deducting underwriting discount and other expenses payable by the Company) were approximately $18.9 million. The Company has used the net proceeds from the offering primarily for general corporate purposes, which includes operating expenses, working capital to improve and promote its commercially available products, advance product candidates, to expand international presence and commercialization.

~~Employee Stock Options~~

~~All options issued are presented at post reverse quantities.~~

On May 16, 2008 the Company’s board of directors adopted the 2008 Equity Incentive Plan (the ‘‘Equity Incentive Plan’’) and authorized 1,500,000 shares of Common Stock to fund the Plan. At the 2008 Annual Meeting of Shareholders held on September 15, 2008, the Equity Incentive Plan was approved by the Company shareholders. At the 2009 Annual Meeting of Shareholders held on September 29, 2009, the shareholders approved an amendment to the 2008 Equity Incentive Plan to increase the number of common shares issuable under the plan from 1,500,000 to 3,000,000. All of these shares have been registered under Form S-8.$1.00.

The 2008 Equity Incentive Plan is intended to: (a) provide incentive to employees of the Company and its affiliates to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company; (b) encourage stock ownership by employees, directors and independent contractors by providing them2021 grant was issued with a means to acquire a proprietary interest in the Company by acquiring shares of stock or to receive compensation, which is based upon appreciation in the value of Stock; and (c) provide a means of obtaining and rewarding employees, directors, independent contractors and advisors.$2.89 exercise price.

The ~~2008 Equity Incentive Plan provides~~SARS were valued using a binomial lattice model. Because the SARS will be settled in cash, the obligation for them is accounted for as a liability rather than equity. Quarterly, the ~~issuance of incentive stock options (ISOs)~~SARS are revalued and ~~Non-Statutory Options (NSOs) to employees, directors and independent contractors of~~ the ~~Company. The Board shall determine the exercise price per share in the case of an ISO at the time an option~~new value is granted and such price shall be not less than the fair market value or 110% of fair market value in the case of a ten percent or greater stockholder. In the case of an NSO, the exercise price shall not be less than the fair market value of one share of stockamortized. Information on the grant date ~~the option is granted. Unless otherwise determined by the Board, ISOs and NSOs granted under both plans have a maximum duration of ten years.~~

On January 5, 2009 the Company board of directors received and approved a written report and recommendations of the Compensation Committee, which included a detailed executive equity compensation report and market analysis and the recommendations of Compensia, Inc., a management consulting firm that provides executive compensation advisory services to compensation committees and senior management of knowledge-based companies. The Compensation Committee used the report and analysis as a basis for its formal written recommendation to the board. Pursuant to a January 8, 2009 board resolution the 2009 Equity Incentive Plan (Executive), a Non-Qualified Stock Option Plan, was created and funded with 4,200,000 shares of $0.001 par value common stock. The Compensation Committee was appointed as the Plan Administrator to manage the plan. On October 11, 2010, CUI Global authorized an additional 3,060,382 options under the 2009 Equity Incentive Plan (Executive). On September 21, 2012, CUI Global authorized an additional 330,000 options under the 2009 Equity Incentive Plan (Executive).

The 2009 Equity Incentive Plan (Executive) provides for the issuance of Incentive Non Statutory Options to attract, retain and motivate executive and management employees and directors and to encourage these individuals to acquire an equity interest in the Company, to make monetary payments to certain management employees and directors based upon the value of the ~~Company’s stock~~SARS and weighted average inputs to ~~provide these individuals with an incentive to maximize~~ the ~~success~~binomial lattice model are as follows:

	*2021*		*2020*
Weighted average expected term at December 31 (years)		1.55		3.42
Total fair value of all awards at December 31	$	6,979,824	$	2,232,491
Total fair value of all vested awards at December 31	$	2,701,802	$	648,180
Total intrinsic value at December 31	$	1,255,078	$	1,255,078

At December 31, 2021 and 2020 there were 3,126,000 and 748,000, respectively of non-vested cash-settled SARS outstanding at a weighted average fair value of $1.45 and $2.12, respectively. See Note 18 Subsequent Events regarding the ~~Company and further~~exchange of SARS for RSUS in the ~~interest~~first quarter of the shareholders. The Administrator of the plan is authorized to determine the exercise price per share at the time the option is granted, but the exercise price shall not be less than the fair market value on the date the option is granted. Stock options granted under the 2009 Plan have a maximum duration of ten years.2022.

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Restricted Stock Units:

In 2021 the Company granted Restricted stock units to certain key employees of the Company from the Company's 2020 Incentive Award Plan. RSUs generally vest over 3 years. In 2021, there were two grants totaling 367,319 units that immediately vested. New common shares are issued for vested RSUs. RSU activity in 2021 was as follows:

	*Number of restricted stock units*			*Weighted-average grant date fair value*

Non-vested shares, beginning of year		—		$	—
Granted		4,386,107			4.64
Vested		(1,367,319	)		4.26
Forfeited		—			—
Non-vested shares, end of year		3,018,788		$	4.81

The Company recorded $10.6 million of expense related to vested RSUs in 2021. Unamortized expense on unvested RSUs was $9.7 million at December 31, 2021. Unvested RSUs have a weighted average remaining life of 1.80 years.

Employee Stock Options and other share-based compensation

At the 2020 Annual Meeting of Shareholders, the Company’s shareholders approved the Orbital Energy Group 2020 Incentive Award Plan and authorized a share limit of 2,000,000 shares. In 2021, the Company's shareholder's approved an increase in shares available for the 2020 Incentive Award Plan from a total of 2 million shares to a total of 5 million shares. As of December 31, 2021 there are 4,130,665 remaining shares available to grant under the 2020 Incentive Award Plan. This Plan replaced the 2008 and 2009 Equity Incentive Plan, which had expired.

The purpose of the Orbital Energy Group 2020 Incentive Award Plan is to enhance our ability to attract, retain and motivate persons who make (or are expected to make) important contributions to Orbital Energy Group by providing these individuals with equity ownership opportunities. Equity awards are intended to motivate high levels of performance and align the interests of our directors, employees and consultants with those of our stockholders by giving directors, employees and consultants the perspective of an owner with an equity stake in Orbital Energy Group and providing a means of recognizing their contributions to the success of Orbital Energy Group. Our board of directors and management believe that equity awards are necessary to remain competitive in its industry and are essential to recruiting and retaining the highly qualified employees who help Orbital Energy Group meet its goals. A primary purpose of the plan is to provide OEG with appropriate capacity to issue equity compensation in anticipation of future acquisitions.

The Orbital Energy Group 2020 Incentive Award Plan provides for the grant of stock options, including ISOs and nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards. Certain awards under the Orbital Energy Group 2020 Incentive Award Plan may constitute or provide for payment of “nonqualified deferred compensation” under Section 409A of the Code. All awards under the Orbital Energy Group 2020 Incentive Award Plan will be set forth in the award agreement, which will detail the terms and conditions of awards, including any applicable vesting and payment terms and post termination exercise limitations. All awards shall be subject to a minimum vesting of one year from the Grant Date. A brief description of each award type follows.

	●	Stock Options and SARs. Stock options provide for the purchase of shares of common stock of Orbital Energy Group in the future at an exercise price set on the grant date. ISOs, in contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are satisfied. SARs entitle their holder, upon exercise, to receive from Orbital Energy Group an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The plan administrator will determine the number of shares covered by each option and SAR, the exercise price of each option and SAR and the conditions and limitations applicable to the exercise of each option and SAR. The exercise price of a stock option or SAR will not be less than 100% of the fair market value of the underlying share on the grant date (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction. The term of a stock option or SAR may not be longer than five years.
	●	Restricted Stock. Restricted stock is an award of nontransferable shares of common stock of Orbital Energy Group that remain forfeitable unless and until specified conditions are met and which may be subject to a purchase price. Upon issuance of restricted stock, recipients generally have the rights of a stockholder with respect to such shares, which generally include the right to receive dividends and other distributions in relation to the award. The terms and conditions applicable to restricted stock will be determined by the plan administrator, subject to the conditions and limitations contained in the Orbital Energy Group 2020 Incentive Award Plan.
	●	RSUs. RSUs are contractual promises to deliver shares of common stock of Orbital Energy Group in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of common stock of Orbital Energy Group prior to the delivery of the underlying shares (i.e., dividend equivalent rights). The Company accounts for forfeitures of employee awards as they occur. The plan administrator may provide that the delivery of the shares underlying RSUs will be deferred on a mandatory basis or at the election of the participant. The terms and conditions applicable to RSUs will be determined by the plan administrator, subject to the conditions and limitations contained in the Orbital Energy Group 2020 Incentive Award Plan.
	●	Other Stock or Cash Based Awards. Other stock or cash-based awards are awards of cash, shares of common stock of Orbital Energy Group and other awards valued wholly or partially by referring to, or otherwise based on, shares of common stock of Orbital Energy Group or other property. Other stock or cash-based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of compensation to which a participant is otherwise entitled. The plan administrator will determine the terms and conditions of other stock or cash-based awards, which may include any purchase price, performance goal, transfer restrictions and vesting conditions, subject to the conditions and limitations in the Orbital Energy Group 2020 Incentive Award Plan.

The Orbital Energy Group 2020 Incentive Award Plan provides that the plan administrator may establish compensation for non-employee directors from time to time subject to the Orbital Energy Group 2020 Incentive Award Plan’s limitations. The plan administrator will from time to time determine the terms, conditions and amounts of all non-employee director compensation in its discretion and pursuant to the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that, the sum of any cash compensation or other compensation and the grant date fair value of any equity awards granted under the Orbital Energy Group 2020 Incentive Award Plan as compensation for services as a non-employee director during any fiscal year may not exceed $250,000 per year of a non-employee director’s service as a non-employee director. The non-employee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving the non-employee Director.

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A summary of the stock options ~~issued~~granted to employees and directors and changes during the year are presented below:

	For the Year Ended December 31, 2019									For the Year Ended December 31, 2021
	Number of Options			Weighted Average Exercise Price ($)		Weighted Average Remaining Contract Life (years)		Aggregate Intrinsic Value ($ '000)		Number of Options			Weighted Average Exercise Price ($)		Weighted Average Remaining Contract Life (years)		Aggregate Intrinsic Value ($ '000)
Balance at beginning of year		923,898		$	6.32		3.64	$	—		790,648		$	6.06		2.11	$	—
Expired		(74,263	)		7.22
Exercised											(214,596	)	$	6.00		—		—
Forfeited in cash exercise											(338,067	)		6.05		—		—
Balance at end of year		849,635		$	6.24		2.95		—		237,985		$	6.14		1.41		—
Exercisable		849,635		$	6.24		2.95		—		237,985		$	6.14		1.41		—

As of December 31, ~~2019, 2018,~~ 2021 and ~~2017~~2020 all issued and outstanding stock options were fully vested. There was no unamortized expense related to unvested stock options at December 31, 2021 and 2020. There were no options granted during ~~2019, 2018 or 2017. As of December 31, 2019, there are no remaining shares available to grant under these equity incentive plans.~~2021 and 2020.

11. RELATED PARTY TRANSACTIONS

During 2019, 2018 and 2017, $0.2 million, $0.3 million and $0.3 million, respectively in interest payments were made in relation to the promissory notes issued to related party, IED, see Note 7 Notes Payable, for further details.

Executive Chairman of the Board of Directors, Chief Legal Counsel, and former Chief Executive Officer, William J. Clough’s son Nicholas J. Clough, serves as Vice President atof Greenfield Operations, Orbital ~~Gas Systems, North America, Inc., a wholly owned subsidiary of the Company,~~Energy Group. In 2021 and ~~as Chief Sales Officer for the Energy Division. In 2019, 2018, and 2017,~~2020, Mr. Clough received an aggregate salary of ~~$269 thousand, $213~~$360 thousand and ~~$200~~$335 thousand, respectively, and received a cash bonus of ~~$158 thousand, $150~~$309 thousand and ~~$150~~$60 thousand in fiscal ~~2019, 2018,~~2021 and ~~2017,~~2020, respectively. In April 2021, Mr. Clough was granted 235,876 stock appreciation rights with a grant date fair value of $840 thousand. These SARS were to vest and be payable on the first, second and third anniversaries of the grant date. In 2020, Mr. Clough was awarded 67,187 cash-settled stock appreciation rights with a grant date fair value of $40 thousand, vesting evenly over 2 years, an exercise price of $1.00 and a 6 year term. He also received other benefits valued at $43 thousand and $49 thousand ~~$49 thousand,~~in 2021 and ~~$41 thousand in 2019, 2018, and 2017,~~2020, respectively. As of December 31, ~~2019~~ 2021 and ~~2018,~~2020, there was an accrual of $0 thousand and ~~$13~~$142 thousand, respectively, for compensation accrued to Nicholas J. Clough. Nicholas J. Clough does not report to ~~the~~ William J. Clough nor does William J. Clough have input regarding Nicholas J. Clough’s salary, bonus, or performance. Mr. Clough’s salary and bonus is set by his direct supervisor and relevant market conditions, while his performance is evaluated and monitored by his direct supervisor. In addition, pursuant to Company policy, any related-party bonus and/or salary change in excess of $50,000 is independently reviewed and approved by the Company’s Compensation Committee, comprised of Independent Board Members from the Company’s Board of Directors.

The Company's Front Line Power Construction, LLC subsidiary has an operating lease for a facility with Danbury Property Company LLC in Rosharon, Texas with a base rental of $10,500 per month. Danbury Property Company, LLC is owned by Kurt Johnson and Tidal Power, which are greater than 5% shareholders of Orbital ~~employs three owners~~Energy Group, Inc.

The Company's Front Line Power Construction, LLC subsidiary has an operating lease for a facility with Manvel Property Management in Rosharon, Texas with a base rent of ~~EnDet, Ltd. from which~~$4,000 per month. Tidal Power, a greater than 5% shareholder of Orbital Energy Group, Inc. has an ownership interest in Manvel Property Management.

The Company's Front Line Power Construction, LLC subsidiary has an operating lease for a facility with Oak Property Group in Rosharon, Texas with a base rent of $2,000 per month. Tidal Power, a greater than 5% shareholder of Orbital Energy Group, Inc. has an ownership interest in Oak Property Group.

Kurt Johnson, a greater than 5% shareholder of Orbital Energy Group, Inc. has an employment contract with the Company's Front Line Power Construction, LLC facility with a base compensation ranging up to $250,000 per year.

Kurt Johnson, a greater than 5% shareholder has two unsecured promissory notes with the Company ~~licenses its VE Technology. See Note 9 - Commitments~~for $34,256,000 and ~~Contingencies - Commissions, Royalty~~$1,090,000, earning interest at 6% and ~~License Fee Agreements for more information~~maturing on ~~license fee agreements.~~May 17, 2022.

12. ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss are as follows:

(In thousands)	As of December 31,						As of December 31,
	2019			2018			2021			2020
Foreign currency translation adjustment	$	(4,371	)	$	(4,396	)	$	(3,995	)	$	(4,406	)
Accumulated other comprehensive loss	$	(4,371	)	$	(4,396	)	$	(3,995	)	$	(4,406	)

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13. RESTRUCTURING AND IMPAIRMENT CHARGES

Restructuring Charges

During the fourth quarter of 2019, the Company completed the sale of its largest group within the Power and Electromechanical segment. The ~~remaining assets remain held-for-sale. However, in conjunction with that~~Company completed the sale ~~it was concluded that should the remaining power and electromechanical~~of its Japan operations ~~not sell, the~~as of September 30, 2020. The Company ~~will fulfill its backlog obligations and wind down the remaining operations of CUI-Canada and CUI Japan during 2020. As such, the Company has~~ recorded an accrued liability of ~~$3.1~~$4.0 million Canadian dollars ($3.1 million US dollars at December 31, 2019) for estimated employee termination ~~costs. The termination~~ costs ~~are expected to begin during 2020 based around backlog production~~ and ~~delivery schedule requirements. The~~the lease for the CUI-Canada facility ~~completes during~~ expired in the fourth quarter of 2020. This termination accrual was adjusted down by $0.3 million Canadian dollars ($0.2 million US dollars) based on updated estimates in 2020. The termination costs began to be paid out in the third quarter of 2020 and the ~~CUI Japan lease includes a four-month notice period to terminate. During~~majority of the remaining accrual was paid in the fourth quarter of ~~2019,~~2020. The remaining termination accrual at December 31, 2020 was $0.4 million (see table below). All restructuring costs related to CUI-Canada are included in the ~~Company performed an impairment assessment for~~statement of operations on the ~~remaining power and electromechanical assets, resulting~~line labeled Income from operations of discontinued operations.

Activity in ~~$0.3 million of impairments associated with CUI-Canada goodwill, CUI-Japan goodwill, and certain CUI-Canada acquisition intangibles that were written off.~~the termination benefit liability in 2021 is as follows:

	For the Years ended December 31,
CUI-Canada termination benefits (In thousands)	2021			2020

January 1 liability balance	$	371		$	3,073
Severance accrual adjustments		0			(247	)
Severance payouts		(376	)		(2,448	)
Translation		5			(7	)
December 31 liability balance	$	0		$	371

14. INCOME TAXES

(Loss) income before income taxes consisted of the following:

(In thousands)	For the Years Ended December 31,									For the Years Ended December 31,
	2019			2018			2017			2021			2020
Continuing operations	$	(16,582	)	$	(22,666	)	$	(16,196	)	$	(60,351	)	$	(27,153	)
Discontinued operations		12,908			5,135			2,001			(12,705	)		(3,097	)
Loss before income taxes	$	(3,674	)	$	(17,531	)	$	(14,195	)	$	(73,056	)	$	(30,250	)

Loss from continuing operations before taxes consisted of the following:

(In thousands)	For the Years Ended December 31,									For the Years Ended December 31,
	2019			2018			2017			2021			2020
U.S. operations	$	(11,278	)	$	(9,684	)	$	(8,792	)	$	(60,351	)	$	(27,153	)
Foreign operations		(5,304	)		(12,982	)		(7,404	)
Loss before income taxes	$	(16,582	)	$	(22,666	)	$	(16,196	)	$	(60,351	)	$	(27,153	)

The income tax (benefit) expense allocation for the years ended December 31, ~~2019, 2018,~~2021 and ~~2017~~2020 consisted of the following:

(In thousands)	For the Years Ended December 31,									For the Years Ended December 31,
	2019			2018			2017			2021			2020
Continuing operations	$	(2,956	)	$	(1,342	)	$	(2,251	)	$	(10,508	)	$	(1,451	)
Discontinued operations		411			1,136			645			(1,334	)		(1,352	)
Total income tax (benefit)	$	(2,545	)	$	(206	)	$	(1,606	)	$	(11,842	)	$	(2,803	)

The income tax (benefit) expense from continuing operations consisted of the following:

(In thousands)	For the Years Ended December 31,									For the Years Ended December 31,
	2019			2018			2017			2021			2020
Current:
Federal	$	—		$	—		$	—		$	0		$	0
State and local		—			—			—			370			119
Foreign		—			—			—
Total current provision		—			—			—			370			119
Deferred:
Federal		(2,368	)		(894	)		(1,370	)		(8,714	)		(1,258	)
State and local		(588	)		(142	)		(1	)		(2,164	)		(312	)
Foreign		—			(306	)		(880	)
Total deferred (benefit)		(2,956	)		(1,342	)		(2,251	)		(10,878	)		(1,570	)
Total income tax (benefit)	$	(2,956	)	$	(1,342	)	$	(2,251	)	$	(10,508	)	$	(1,451	)

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The following table provides a reconciliation of the federal statutory tax at 21% to the recorded tax expense (benefit) from continuing operations for the years ended December 31, ~~2019~~2021 and ~~2018, respectively, and 34% to the recorded tax expense (benefit) for the year ended December 31, 2017:~~2020, respectively:

(In thousands)	For the Years Ended December 31,									For the Years Ended December 31,
	2019			2018			2017			2021			2020
Computed federal income taxes at the statutory rate (benefit)	$	(3,482	)	$	(4,760	)	$	(5,507	)	$	(12,674	)	$	(5,702	)
Permanent tax differences		(23	)		(122	)		(262	)
State taxes											292		$	94
Permanent tax differences and limited compensation											2,140			(34	)
Foreign tax rates and tax credits differing from USA		435			747			1,021			0			0
Purchased goodwill and intangible impairments		—			828			1,072
Expired NOL's											541			0
Refundable Foreign R&D Credits											—			—
Change in valuation allowance		114			1,965			1,425			(807	)		4,191
Total income tax (benefit)	$	(2,956	)	$	(1,342	)	$	(2,251	)	$	(10,508	)	$	(1,451	)

Effective tax rate		17.83	%		5.92	%		13.90	%		17.41	%		5.34	%

The Company accounts for income taxes under the asset-liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are provided when it is “more likely than not” that the benefits of existing deferred tax assets will not be realized in a future period. Significant components of the Company’s deferred tax assets and liabilities as

of December 31, ~~2019~~ 2021 and ~~2018,~~2020, respectively, are as follows:

(In thousands)	As of December 31,						As of December 31,
	2019			2018			2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	12,130		$	12,317		$	23,941		$	19,198
Inventory and accounts receivable reserves		306			234			1,826			2,104
Operating lease obligations								8,058			1,801
Accrued liabilities								786			927
Other		1,956			569			4,371			1,209
Valuation allowance		(12,447	)		(12,333	)		(20,129	)		(19,817	)
Deferred tax assets after valuation allowance		1,945			787			18,853			5,422
Deferred tax liabilities
Intangible assets		(476	)		(848	)		(9,426	)		(3,274	)
Property, plant and equipment		(1,469	)		61			(9,588	)		(2,050	)
Total deferred tax liabilities		(1,945	)		(787	)		(19,014	)		(5,324	)
Net deferred tax asset (liability)	$	—		$	—		$	(161	)	$	98

The Company adopted the provisions of ASU ~~2015-17~~2015-17 in 2015. ASU ~~2015-17~~2015-17 requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The net deferred tax asset as of December 31, 2021 is recorded within other assets and the net deferred tax liability is recorded as of December 31, ~~2019 and December 31, 2018 as follows were zero for both year-end dates:~~2020 was zero.

As of December 31, ~~2019~~ 2021 and ~~2018,~~2020, the Company recorded a valuation allowance of ~~$12.4~~$20.1 million and ~~$12.3~~$19.8 million, respectively. During the ~~year~~years ended December 31, ~~2019~~ 2021 and ~~2018,~~2020, the Company recorded an increase in valuation allowance of ~~$0.1~~$0.3 million and ~~$2.0~~$7.4 million, respectively. The state taxes included in the rate reconciliation table is net of the change in state valuation allowance. As of December 31, ~~2019,~~ 2021, the Company has available federal, state and foreign net operating loss carry forwards of approximately ~~$37.2~~$97.3 million, ~~$32.3~~$21.3 million and ~~$15.5~~$16.5 million, respectively which have various expiration dates beginning in ~~2027~~2026 through ~~2038.~~2037.

The Company files consolidated income tax returns for federal and many state jurisdictions in addition to separate subsidiary income tax returns in Australia, Canada, ~~Japan~~India and the United Kingdom. The Company has an insignificant amount of foreign taxes that have not been separately presented. As of December 31, ~~2019,~~ 2021, the Company is not under examination by any income tax jurisdiction. The Company is no longer subject to examination in the USA for years prior to ~~2016.~~2018.

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The Company accounts for income tax uncertainties using a threshold of ~~"more-likely-than-not"~~"more-likely-than-not" in accordance with the provisions of ASC Topic 740, Income Taxes ("ASC 740"). As of December 31, ~~2019,~~2021, the Company has reviewed all of its tax filings and positions taken on its returns and has not identified any material current or future effect on its consolidated results of operations, cash flows or financial position. As such, the Company has not recorded any tax, penalties or interest on tax uncertainties. It is Company policy to record any interest on tax uncertainties as a component of income tax expense.

15. CONCENTRATIONS

During ~~2019, 31%~~2021, 26% of revenues were derived from two customers that individually had over 10% of our total revenues: ~~S&B Engineers~~Customer 1 with ~~21%~~15% and ~~Costain Oil, Gas & Process Ltd~~Customer 2 with ~~10%~~11%. During ~~2018, 27%~~2020, 53% of revenues were derived from ~~two~~three customers that individually had over 10% of our total revenues: ~~National Grid~~Customer 3 with ~~15%~~31%, Customer 4 with 11% and S&B Engineers with 12%. During 2017, 55% of revenues were derived from three customers that individually had over 10% of our total revenues: National Grid with 26%, Scotia Gas Networks with 18%, and S&B EngineersCustomer 5 with 11%.

The Company’s major product lines in ~~2019, 2018~~2021 were electric power transmission and ~~2017~~distribution maintenance and service, utility-scale solar construction projects and telecommunications maintenance and services and in 2020 were electric power transmission and distribution maintenance and service, utility-scale solar construction projects and natural gas infrastructure solutions.

At December 31, ~~2019,~~ 2021, of the gross trade accounts receivable totaling approximately ~~$5.3~~$50.2 million, ~~three~~two individual customers ~~that~~ made up approximately ~~50%~~46% of the Company's total trade accounts receivable: ~~Energy Transfer~~Customer 2 at ~~24%, Costain Oil, Gas~~30% and ~~Process Ltd~~Customer 6 at ~~14% and S&B Engineers at 12%~~16%. At December 31, ~~2018,~~ 2020, of the gross trade accounts receivable totaling approximately ~~$5.1~~$6.9 million, approximately ~~38%~~70% was due from ~~two~~four customers: ~~Costain Oil, Gas & Process Ltd~~Customer 7 at ~~24%~~27%, Customer 8 at 16%, Customer 9 at 16% and ~~National Grid~~Customer 10 at ~~14%~~11%.

~~There~~For the 12 months endedDecember 31, 2021, there was one supplier concentration of approximately 12%. For the 12 months endedDecember 31, 2020, there were ~~no suppliers greater than 10%~~three supplier concentrations that made up 39% of ~~purchases in 2019, 2018 or 2017.~~expenditures at 14%, 13% and 12%.

~~With~~For the ~~operations of Orbital UK,~~years ended December 31, 2021 and 2020, the Company ~~has~~had no foreign revenue ~~and~~concentrations or foreign trade accounts receivable concentrations inoutside the United Kingdom. For the years ended December 31, 2019, 2018 and 2017, the Company had foreign revenue concentrations in the United Kingdom of 57%, 74%, and 77%, respectively. Also during the years ended December 31, 2019, 2018 and 2017, the Company had trade accounts receivable concentrations in the United Kingdom of 49%, 80%, and 79%, respectively.States.

16. LEASES

Effective January 1, 2019, the Company implemented the new accounting guidance on leases found in ASC 842, Leases. As part of its transition, the Company elected to utilize the transition method of adoption. Under the transition method, the Company includes the new required disclosures for the current period and provides the disclosures required by the previous guidance found in ASC 840 for the prior year comparative periods. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classifications and allowed the Company to exclude leases with an initial term of 12 months or less (after consideration of renewal options) from being recorded on the Company's consolidated balance sheet; the Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. At December 31, ~~2019~~2021 the Company did not factor in any renewal options when calculating its consolidated right-of-use assets and lease obligations as the options were not considered reasonably certain to be exercised. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company reviewed outstanding service contracts to determine if any of the Company's service contracts contained an embedded lease. Determining whether a contract contains a lease requires judgement. The Company did not identify any new leases through this process. The new lease accounting guidance also changes the name of leases formerly referred to as Capital leases under ASC 840 to Financing leases under ASC 842.

In December 2018, the Company entered into a sale-lease back transaction to sell and leaseback the CUI, Inc. Tualatin facility. The Company sold the Tualatin headquarters and warehouse for $8.1 million at a deferred gain of $2.9 million and has leased back the facility for approximately $53 thousand per month until December 2028. The lease includes two options to renew the term for periods of five years each at the then prevailing market rate per rentable square foot for the premises. As a result of the implementation and transition to the accounting guidance in ASC 842, the deferred gain was recognized on January 1, 2019 as a credit to accumulated deficit.

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~~Orbital-UK has a number of operating leases on vehicles, equipment,~~The Company rents office space and ~~accommodations~~warehouse space, which it uses for ~~visiting personnel.~~ the Corporate Headquarters in Houston, Texas through December 2022. During the year ended December 31, ~~2019, the monthly combined~~2021, rent expense on ~~these leases~~this lease was approximately ~~$35 thousand.~~$38 thousand per month. In addition, the company has two corporate leases in Portland, Oregon, one running through April 2022 and another running through December 2028. These leases when combined approximate $25 thousand monthly as of December 31, 2021.

The Company ~~rents~~sublets office ~~and warehouse~~ space in ~~Houston,~~Irving, Texas for corporate support services and Orbital Power Inc. office personnel; the lease runs through ~~December 2022 and have one truck~~2023. Orbital Power Inc. also maintains an equipment yard in Sherman, Texas that houses equipment primarily for Orbital Power, Inc. for which the lease ~~and a copier lease.~~runs until 2022. During the year ended December 31, ~~2019,~~ 2021, rent expense on these leases were a combined ~~approximately $33~~average of $11 thousand per month.

Eclipse Foundation Group entered into two property leases in 2021 in Gonzales, Louisiana, both with two-year lease terms. During the year ended December 31, 2021, rent expense on these leases were a combined average of $10 thousand per month.

Orbital Power Inc. and Eclipse Foundation Group rent equipment as well as vehicles for use on their jobs. These vehicle leases range from 3 to 7-year terms. During the year ended December 31, 2021, rent expense on operating leases when combined approximated $0.2 million monthly. Depreciation and interest expense on finance leases at Orbital Power, Inc. and Eclipse Foundation for the year ending December 31, 2021 averaged $0.2 million monthly.

Gibson Technical Services leases four properties, one in Georgia, North Carolina, Louisiana, and New York with lease terms ranging from 2-8 years. During the year ended December 31, 2021, rent expense on these leases were a combined average of $18 thousand per month. In addition, Gibson Technical Services rents multiple pieces of equipment. Rent expenses on these equipment leases combined were approximately $27 thousand per month. IMMCO, a subsidiary of Gibson Technical Services, rents three office spaces in Kochi, India. Rent expenses on these leases when combined approximate $5 thousand per month with one lease running through 2023 and two leases running through 2026.

Front Line Power Construction rents three office spaces in Rosharon, Texas that run through November 2024. Rent expense on these leases when combined approximate $17 thousand per month. In addition, Front Line Power Construction has finance equipment leases at December 31, 2021 that approximate $32 thousand monthly in depreciation and interest expense.

The Company rents office and ~~warehouse lease includes two options to renew the term for periods~~industrial space in Sanford, North Carolina through July 2022 as well as multiple pieces of ~~five years each at the then prevailing market rate~~equipment. Rent expense on these leases were a combined approximately $46 thousand per ~~rentable square foot for the premises.~~month.

Consolidated rental expense on operating leases was ~~$1.3~~$4.4 million and depreciation on financing leases was $2.2 million for the year ended December 31, ~~2019~~ 2021 and is included in cost of revenue and selling, general and administrative expense, on the condensed consolidated statement of operations. Interest expense for finance leases was $0.4 million for the year ended December 31, 2021.

Future minimum operating lease obligations for continuing operations at December 31, ~~2019~~2021 are as follows for the years ended December 31:

(In thousands)

2020
$ 1,173
2021
1,074
2022
1,063
2023
609
2024
626
Thereafter
2,688

Interest portion
(1,560
)

Total operating lease obligations
$ 5,673

(In thousands)
2022	$	5,767
2023		4,925
2024		3,864
2025		2,218
2026		1,875
Thereafter		2,714

Less interest portion		(3,134	)

Total operating lease obligations	$	18,229

Total lease cost and other lease information is as follows:

				For the Year			For the Year
				Ended			Ended
				December 31,			December 31,
	For the Year Ended December 31, 2019			2021			2020
(In thousands)
Operating lease cost	$	1,016		$	3,897		$	1,626
Short-term lease cost		205			265			12
Variable lease cost		122			732			408
Sublease income		(55	)		(501	)		(332	)
Total lease cost	$	1,288		$	4,393		$	1,714

Other information
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows used in operating leases	$	(1,210	)	$	(3,515	)	$	(1918	)
Right-of-use assets obtained in exchange for new operating lease obligations	$	6,473	*	$	13,707		$	2,050
Weighted-average remaining lease term - operating leases (in years)		7.4			4.6			5.5

Weighted-average discount rate - operating leases		6.4	%		6.9	%		6.6	%

* Includes $7.7 million recorded at the date of implementation of ASC 842 on January 1, 2019 less $1.5 million later reclassified to assets held for sale at our discontinued operations.Future minimum finance lease obligations are as follows:

(In thousands)
2022	$	5,729
2023		5,729
2024		4,251
2025		321
2026		255
Thereafter		0
Less interest portion		(1,407	)
Total financing lease obligations	$	14,878

Total financing lease costs are as follows:

	For the Year			For the Year
	Ended			Ended
	December 31,			December 31,
	2021			2020

Depreciation of financing lease assets	$	2,166		$	0
Interest on lease liabilities		402			0
Total finance lease cost	$	2,568		$	0


Other information
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows used in financing leases	$	(402	)	$	0
Financing cash flows from financing leases	$	(1,995	)	$	0
Right-of-use assets obtained in exchange for new financing lease obligations	$	16,868		$	0
Weighted-average remaining lease term - financing leases (in years)		2.9			—

Weighted-average discount rate - financing leases		6.5	%		0

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Variable lease costs primarily include common area maintenance costs, real estate taxes and insurance costs passed through to the Company from lessors.

17. Business Combinations

Front Line Power Construction, LLC

On November 17, 2021, Kurt A. Johnson, Jr. (the Active Seller) and Tidal Power Group LLC, a Texas limited liability company (the Passive Seller and together with the Active Seller, collectively, the Sellers), and Orbital Energy Group, Inc., a Colorado corporation (Buyer or the Company) entered into a Membership Unit Purchase Agreement (the Purchase Agreement). Under the Purchase Agreement, the Company purchased all of the issued and outstanding membership interests of Front Line Power Construction, LLC (FLP) from the Sellers for the purpose of expanding the Company’s market opportunities and creating synergies. FLP is a Houston-based full-service electrical infrastructure service company that provides construction, maintenance, and emergency response services. The Company has included the financial results of FLP in the consolidated financial statements from the date of acquisition and recorded $9.2 million of revenues and $98 thousand loss for the period from November 17, 2021 through December 31, 2021. The transaction costs associated with the acquisition were approximately $230 thousand and were recorded in general and administrative expense. The acquisition date fair value of the consideration transferred for FLP was approximately $219.2 million, which consisted of the following (in thousands):

Cash	$	101,536
Working capital adjustment payable		14,092
Fair value of unsecured promissory notes		86,001
Fair value of common stock issued to Sellers		17,612
Fair value of purchase consideration	$	219,241

The cash consideration paid by the Buyer includes cash paid to the Sellers of $101.5 million, cash paid for the Sellers indebtedness of $1.0 million, and cash paid for the Sellers transaction expenses of $4.4 million. The Company funded the FLP acquisition through the issuance of a $105 million term loan on November 17, 2021, with a maturity date of November 21, 2026 (see Note 7).

The Buyer issued two unsecured promissory notes to the Sellers of FLP, in the aggregate principal amount outstanding of $86.7 million (the Seller Notes) and an estimated fair value of $86.0 million. The Seller Notes are due in full, including any accrued and unpaid interest, on May 17, 2022 and accrue interest at a rate of 6% per annum. The Sellers also received a total of 11,622,018 shares of restricted common stock of the Buyer. The fair value of the unsecured promissory notes and the Buyer equity issued to Sellers was estimated using a market approach.

The Company accounted for the acquisition as a business combination in accordance with ASC Topic 805,Business Combinations. The Company applied the acquisition method, which requires the assets acquired and liabilities assumed be recorded at fair value with limited exceptions. The following table summarizes the fair values of assets and preliminary purchase price allocation for assets acquired and liabilities assumed as of the date of acquisition (in thousands):

Cash and cash equivalents	$	6,779
Trade accounts receivable		15,726
Contract assets		2,092
Prepaid expenses and other current assets		481
Property and equipment		18,730
Other long-term assets		531
Indefinite lived intangible assets		15,027
Definite lived intangible assets		93,211
Accounts payable		(620	)
Contract liabilities		(120	)
Accrued expenses		(2,747	)
Net assets acquired		149,090
Goodwill		70,151
Purchase price allocation	$	219,241

The excess of the fair value of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce, synergies, and expanded market opportunities, for which there is no basis for U.S. income tax purposes. Goodwill amounts are not amortized, but are rather tested for impairment at least annually during the second quarter.

The following ~~lease disclosures~~table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of ~~December 31, 2018 for continuing operations were required under previous accounting guidance under ASC 840 and under~~ the ~~transition guidance~~date of ~~ASC 842:~~acquisition (in thousands):

~~CUI executed~~

	Fair Value		Useful Life
Customer relationships	$	84,012	15 years
Backlog		9,186	1 year
Tradename		15,027	Indefinite
Software		13	3 years
Total intangible assets	$	108,238

Full Moon Telecom, LLC

Effective October 22, 2021, the Company's subsidiary, Gibson Technical Services, Inc. ("GTS") entered into and closed upon a ~~sale-leaseback transaction~~Purchase Agreement by and among the Company and the owners of ~~its Tualatin, Oregon headquarters facility in December~~Full Moon Telecom, LLC (“Full Moon”). Full Moon is a Florida-based privately-owned telecommunications service provider that offers an extensive array of ~~2018. There was $16 thousand~~wireless service capabilities and experience including Layer 2/Layer3 Transport, Radio Access Network (“RAN”) Integration, test and turn-up of ~~rent expense associated with this lease in 2018.~~Small Cell systems and Integration/Commissioning of Distributed Antenna (“DAS”) systems.

~~Orbital-UK~~The acquisition adds revenues and was accretive to earnings for GTS and OEG in its first fiscal quarter with the Company. Full Moon is a wholly-owned subsidiary of GTS, expanding GTS’s service offerings to its customers.

Full Moon’s additional capabilities include providing site surveys, regulatory support, project management, continuous wave testing, scanner walks, optimization/data collection and E911 data validation and testing. These additional skill sets combined with Full Moon’s RAN integration and DAS commissioning efforts have allowed for an expanded service offering and turnkey approach to ensuring the on time delivery and quality on end-to-end solutions to wireless customers.

Subject to the terms and conditions set forth in the Purchase Agreement, the purchase consideration for 100% of the ownership of Full Moon was $2.0 million, with the consideration structured as follows:

$1.2 million in cash paid at closing less the amount needed to pay certain outstanding debt of Full Moon; and plus or minus the amount needed for estimated closing working capital to equal a 2 to 1 ratio; and

227,974 shares of restricted common stock issued to the Full Moon owners with an aggregate fair value of $368 thousand based upon a per share value of $1.614.

The Purchase Agreement provided for the adjustment of the selling price to adjust the final closing working capital at the acquisition date as a post-closing adjustment for net working capital above or below a 2-1 ratio for the closing working capital ratio estimated on the acquisition date and to be finalized within 45 days after the closing date of October 22, 2021. This was calculated to be an additional $381 thousand of cash consideration.

The Purchase Agreement contains various customary representations, warranties and covenants.

The Company accounted for the acquisition as a business combination in accordance with ASC Topic 805,Business Combinations. The Company applied the acquisition method, which requires the assets acquired and liabilities assumed be recorded at fair value with limited exceptions. The following table summarizes the fair values and preliminary purchase of assets acquired and liabilities assumed as of the date of acquisition (in thousands):

Cash and cash equivalents	$	747
Trade accounts receivable		297
Property and equipment		124
Intangible, Tradename (indefinite)		159
Intangible, Customer relationships (10-year life)		210
Accounts payable		(197	)
Accrued expenses and other liabilities		(182	)
Net assets acquired		1,158
Goodwill		826
Purchase price allocation	$	1,984

The Company has included the financial results of Full Moon Telecom, LLC in the consolidated financial statements from the date of acquisition and recorded $1.0 million of revenues and $0.3 million of earnings for the period from October 22, 2021 through December 31, 2021.

IMMCO, Inc.

Effective July 28, 2021, the Company entered into a ~~number~~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 ~~leases, on vehicles, equipment,~~IMMCO (the "Seller"). Orbital Energy Group paid $16 million and ~~on accommodations~~issued 874,317 shares of restricted common stock issued to the Seller ($2.5 million estimated fair value as of July 28, 2021) plus a $0.6 million working capital adjustment for ~~visiting personnel. During~~a combined total of $19.1 million. Goodwill reflects the excess purchase price over the fair value of net assets. The Company recorded $11.0 million of goodwill as part of this transaction and all of this goodwill is deductible for tax purposes. Acquisition-related expenses incurred during the year ended December 31, ~~2018,~~2021 for the ~~monthly combined rent on these leases was~~IMMCO acquisitions were approximately ~~$32 thousand.~~$0.6 million before taxes, which were recognized within the Selling, general and administrative expense line of the Condensed Consolidated Statements of Operations.

In January 2015, the Company rented office and warehouse space in Houston, Texas for its Orbital North America operations. During the year ended December 31, 2017, the monthly rent of this lease, which terminated in January 2018,The purchase consideration was ~~approximately $10 thousand. In November 2017, the Company relocated to another rented office and warehouse space in Houston, Texas. Rent expense on this lease is approximately $30 thousand per month.~~as follows (in thousands):

Purchase Consideration

Cash payment	$	16,597
Fair value of common stock issued to Sellers		2,024
Total	$	18,621

~~Rental expense~~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):

Cash and cash equivalents	$	1,634
Trade accounts receivable, net		1,254
Contract assets		1,001
Prepaid expenses and other current assets		1,088
Property and equipment		760
Intangible, customer relationships		3,800
Intangible, trade name		1,162
Intangible, technology know how		1,459
Other long-term assets		76
Deferred tax liability		(2,090	)
Liabilities assumed		(2,100	)
Net assets acquired		8,044
Goodwill		10,577
Purchase price allocation	$	18,621

The Company has included the financial results of IMMCO, Inc.in the consolidated financial statements from ~~continuing operations~~the date of acquisition and recorded $3.7 million of revenues and $2.8 million of net income for the period from October 22, 2021 through December 31, 2021.The deferred tax liability recorded at acquisition was ~~$0.8 million~~offset against the Company's valuation allowance and recorded as a tax benefit in ~~2018~~2021 within the income tax benefit line of the Condensed Consolidated Statement of Operations and is included in ~~selling,~~the net income of IMMCO, Inc.

Gibson Technical Services, Inc.

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 Energy Group and the shareholders of GTS (the "Seller"). Orbital Energy 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 yearended December 31,2021 were approximately $0.9 million before tax which were recognized within the Selling, general and administrative expense online of the ~~statement~~Condensed Consolidated Statements of ~~operations~~Operations.

The purchase consideration was as follows (in thousands):

Cash payment	$	22,000
Fair value of common stock issued to Sellers		16,932
Total	$	38,932

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).

Cash and cash equivalents	$	610
Trade accounts receivable		7,871
Contract assets		1,686
Contingent receivable		1,424
Prepaid expenses and other current assets		408
Property and equipment		3,795
Right of use assets - Operating leases		860
Intangible, customer relationships (10-year life)		16,075
Intangible, tradename (indefinite life)		6,388
Intangible, non-compete agreements (5-year life)		385
Other long-term assets		123
Deferred tax liability		(9,048	)
Liabilities assumed		(3,984	)
Net assets acquired		26,593
Goodwill		12,339
Purchase price allocation	$	38,932

The Company has included the financial results of Gibson Technical Services, Inc.in the consolidated financial statements from the date of acquisition and recorded $23.1 million of revenues and $9.2 million of earnings for the ~~year ended~~ period from April 13, 2021 through December 31, ~~2018.~~2021. The deferred tax liability recorded at acquisition was offset against the Company's valuation allowance and recorded as a tax benefit 2021 within the income tax benefit line of the Condensed Consolidated Statement of Operations and is included in the total earnings of GTS.

~~Future minimum operating lease obligations from continuing operations as of December 31, 2018 were as follows:~~Reach Construction Group, LLC

(In thousands)

2019
$ 1,138
2020
1,060
2021
1,024
2022
1,013
2023
605
Thereafter
3,307
Total
$ 8,147

~~17. SUBSEQUENT EVENTS~~

~~Management has reviewed for subsequent events and identified~~ Effective April 1, 2020, the ~~following:~~

~~In December 2019, a novel strain of coronavirus (SARS-CoV-2), which causes COVID-19, was reported~~Company entered into an equity purchase agreement to have surfaced in China. The spread of this virus has caused business disruption beginning in the first quarter of 2020, including supply chain disruptions, delays in some customer projects, and adjustments for staffing to work from home, among other things. In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic, and the U.S. economy began to experience pronounced effects including a significant decline in the stock market, employee absences and adjustment to work from home situations, among other things. At this time, there is significant uncertainty relating to the potential effectacquire 100% of the ~~novel coronavirus on our business. Although our operations qualify as “Essential Critical Infrastructure Work” under the most recent US Department~~assets of Homeland Security guidelines, infections have become more widespread, which may worsen the supply shortage or force us to restrict our operations. In addition, due to the further spread of the outbreak where we have corporate offices, we have implemented various measures including remote working solutions, reduced hours, adjusted shifts, and placed various restrictions on access to our offices, which could negatively impact productivity, particularly if we restrict access to our offices for a longer period of time. Any of these occurrences may have a negative impact on our business, financial condition or results of operations. Therefore, while we expect this matter to negatively impact our results, the related financial impact cannot be reasonably estimated at this time.

~~On January 1~~^,2020, the Company agreed to the purchase of the VE Technology designated intellectual property for a total of 1.5 million British Pounds (approximately $2.0 million), payable 750 thousand GBP during Q1 2020 and the remaining balance due July 31, 2020. Through this acquisition, the Company will no longer owe royalties on sales of its VE Technology products and will control all rights to the use of the VE Technology.

~~CUI Global announced that on March 24, 2020, it entered into a definitive agreement to acquire~~ Reach Construction Group, LLC, an, industry-leading solar construction company. Headquartered in Sanford, North Carolina and renamed Orbital Solar Services, the business is an engineering, procurement and construction (“EPC”) company with expertise in the renewable energy industry. The ~~transaction will consist~~acquisition was effectuated pursuant to the Equity Purchase Agreement (the “Agreement”), dated as of ~~third-party debt~~April 1, 2020, between Orbital Energy Group and ~~company equity valued at approximately $37.0~~Brandon S. Martin (the "Seller"). Orbital Energy Group issued 2,000,000 shares of restricted common stock issued to the Seller ($1.2 million ~~(excluding~~estimated fair value as of April 1, 2020) along with two seller notes for a combined total of $35 million (Adjusted to $6.5 million following preliminary working capital adjustment as of April 1, 2020) and ~~certain other adjustments upon closing).~~ an earn-out not in excess of $30 million ($0.7 million estimated fair value as of April 1, 2020.) The ~~acquisition is expected to close in April 2020, subject to customary closing conditions. On March 13, 2020, the Company entered into~~seller notes were decreased by a ~~short-term promissory note receivable for $3~~$28.5 million with Reach Construction Group. The note accrues interest at 6% per annum and is payable in sixty days. Upon closing of the acquisition of Reach Construction Group, that note will become an intercompany receivable.working capital adjustment.

~~Stock Issuances in 2020~~(In thousands)

Purchase Consideration
Fair value of common stock issued to Sellers	$	1,224
18-Month Seller Note		5,000
3-year Seller Note		1,480
Contingent consideration		720
Cash payment		3,000
Total	$	11,424

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 fair values and purchase price allocation at the date of acquisition (in thousands).

Purchase price	$	11,424

Cash and cash equivalents	$	19
Trade accounts receivable, net of allowance		6,972
Contract assets		3,299
Prepaid expenses and other current assets		427
Property and equipment		382
Right of use assets - Operating leases		890
Intangible, customer relationships & backlog		8,647
Intangible, trade name		1,878
Intangible, non-compete agreements		3,212
Deferred tax liability		(1,570	)
Liabilities assumed		(19,738	)
Net assets acquired		4,418
Goodwill		7,006
Purchase price allocation	$	11,424

Revenue from April 1, 2020 acquisition date to December 31, 2020		$	13,005
Loss from continuing operations, net of income taxes from April 1, 2020 acquisition date to December 31, 2020		$	(4,243	)

~~On February 3, 2020, 37,312 shares of common stock were issued to~~The deferred tax liability recorded at acquisition was offset against the Company's valuation allowance and recorded as a ~~third party pursuant to a royalty agreement. The shares were valued at $39 thousand based on the dates earned under the royalty agreement.~~tax benefit in 2020.

The table below summarizes the unaudited condensed pro forma information of the results of operations of Orbital Energy Group, Inc. for the twelve months ended December 31,2021 and 2020 as though the Company's 2021 and 2020 acquisitions had been completed as of January 1, 2020 (in thousands):

	(Unaudited)
	For the Years Ended December 31,
	2021			2020
Gross revenue	$	158,625		$	135,189

Loss from continuing operations, net of income taxes	$	(69,671	)	$	(52,953	)

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~~QUARTERLY FINANCIAL DATA - UNAUDITED~~18. SUBSEQUENT EVENTS

~~CUI Global, Inc.~~

(Exchange agreements to exchange common shares for debt payments

Subsequent to the year ended December 31, 2021 and up through the date of issuance of the financial statements, the Company issued 2,653,365 shares of common stock as consideration for repayment of debt. The Company recorded a loss subsequent to year end in the amount of $0.7 million as a result of the share price issued being lower than the closing price on the days of the exchange.

Extension of maturity date of Front Line Power Construction seller notes payable

In ~~thousands, except share~~March 2022, the Company reached an agreement with Kurt Johnson and Tidal Power to extend the maturity dates for $52 million of promissory notes (holders of the Front Line Power Construction seller notes) from the original maturity date of May 16, 2022 until May 31, 2023. The remaining balance of $35 million remains due in May 2022. The Company also agreed to reduce the restriction period under the Tidal Lockup letter from two years to one year and to the extent that if the value of the shares previously issued to Tidal Power were less than $4.00 per share ~~information)~~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. Any shortfall would be made up by issuing Mr. Johnson additional common shares.

March 31

June 30

September 30

December 31
(1)

Quarter ended:

2019

Total revenue
$ 5,458 $ 6,261 $ 6,073 $ 5,700
Total cost of revenue
4,271 4,540 4,652 4,217
Gross profit
1,187 1,721 1,421 1,483
Gross profit percent
22
%
27
%
23
%
26
%
Selling, general and administrative
4,835 4,463 4,793 5,972
Depreciation and amortization
406 384 365 389
Research and development
52 51 20 16
Bad debt
67 61 (18
)
21
Other operating expenses
(2
)
— (11
)
(7
)
Operating loss
(4,171
)
(3,238
)
(3,728
)
(4,908
)
Income (loss) from continuing operations
(3,757
)
(3,689
)
(3,236
)
(2,944
)
Income from discontinued operations
754 1,424 2,924 7,395
Net income (loss)
$ (3,003
)
$ (2,265
)
$ (312
)
$ 4,451
Income (loss) per common share:

Basic and diluted income (loss) per common share from continuing operations
$ (0.13
)
$ (0.13
)
$ (0.11
)
$ (0.10
)
Basic and diluted income per common share from discontinued operations
0.02 0.05 0.10 0.26
Basic and diluted income (loss) per common share from net income
$ (0.11
)
$ (0.08
)
$ (0.01
)
$ 0.16
Basic and diluted weighted average common shares outstanding
28,583,600 28,634,766 28,691,206 28,706,671

Non-recourse payable agreements signed

In March 2021, The Company signed a non-recourse agreement with C6 Capital Funding, LLC to receive $13.0 million less a $650 thousand origination fee. In return, the Company will pay C6 Capital $18.6 million over 44 weeks. The agreement does not have any stated interest rate. Interest will be recorded as the discount is amortized using the interest method of accounting.

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Quarter ended:

2018

Total revenue
$ 4,946 $ 2,807 $ 5,155 $ 7,434
Total cost of revenue
3,598 2,427 3,834 7,924
Gross profit
1,348 380 1,321 (490
)
Gross profit percent
27
%
14
%
26
%
(7
)%
Selling, general and administrative
4,739 4,813 4,222 4,855
Depreciation and amortization
371 403 388 387
Research and development
31 38 47 39
Bad debt
1 — 4 8
Impairment of goodwill and intangible assets
— 1,263 — 3,084
Operating loss
(3,794
)
(6,137
)
(3,340
)
(8,863
)
Loss from continuing operations
$ (3,257
)
$ (6,157
)
$ (3,041
)
$ (8,869
)
Income (loss) from discontinued operations
(4
)
1,392 1,507 1,104
Net loss
$ (3,261
)
$ (4,765
)
$ (1,534
)
$ (7,765
)
Loss per common share:

Basic and diluted loss per common share from continuing operations
$ (0.11
)
$ (0.22
)
$ (0.11
)
$ (0.31
)
Basic and diluted income (loss) per common share from discontinued operations
— 0.05 0.06 0.04
Basic and diluted loss per common share from net loss
$ (0.11
)
$ (0.17
)
$ (0.05
)
$ (0.27
)
Basic and diluted weighted average common shares outstanding
28,488,032 28,506,154 28,527,234 28,547,149

~~(1) Total cost of revenue for the fourth quarter of 2018 includes a $1.4 million adjustment to inventory reserve and a $1.5 million impairment of Deposits and other assets in the Energy segment.~~

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

Effective June 20, 2019, Perkins & Company, P.C. (Perkins) was dismissed from the client-auditor relationship by CUI Global, Inc. (“the Company”). The termination of the relationship with the independent registered accounting firm was approved by the Audit Committee and ratified by the CUI Global Board of Directors.

In connection with the audit of CUI Global Inc., during the three fiscal years ended December 31, 2018, 2017 and 2016 and the subsequent period through June 20, 2019, there were no (1) disagreements between the Company and Perkins on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, or (2) reportable events as set forth in Item 304(a)(1)(iv) of Regulation S-K.

~~Effective June 20, 2019, the Audit Committee appointed Grant Thornton LLP, as its independent registered public accounting firm to audit CUI Global, Inc.~~None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and its Chief Financial Officer, 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 annual report. In designing and evaluating our disclosure controls and procedures, our 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 our 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 December 31, ~~2019,~~2021, the Company’s disclosure controls and procedures were ~~not~~ effective.

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Management's Annual Report on Internal Control over Financial Reporting

Management of ~~CUI Global,~~Orbital Energy Group, Inc. is responsible for establishing and maintaining effective internal control over financial reporting. The Company’s internal control over financial reporting is a process designed 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 in the United States of America (“U.S. GAAP”). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company assets that could have a material effect on the financial statements.

Internal control over financial reporting, no matter how well designed, has inherent limitations. Because of such inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2019,~~2021, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (“2013 framework”). ~~A material weakness is a deficiency, or combination of deficiencies, in~~Based on this evaluation, management concluded that the Company's internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weaknesswas effective as of December 31, ~~2019: insufficient resources within~~2021.

Orbital Energy Group management is responsible for establishing and maintaining adequate internal control over financial reporting for Orbital Energy Group, Inc. and its subsidiaries. Based on the ~~accounting function related to technical accounting interpretation and guidance,~~criteria for effective internal control over financial ~~transaction processing and reporting. Because of this material weakness,~~reporting established in the 2013 framework, management ~~concluded that~~has assessed the Company’s internal control over financial reporting ~~was not~~as effective as of December 31, 2019. The deficiencies largely have arisen during 2019 because of the divestiture of certain operations and the loss of personnel supporting the financial transaction processing and reporting functions. The deficiencies did not result in material adjustment to the fiscal year ended December 31, 2019.2021.

~~To remediate our internal control weakness, management has and will continue to implement subsequent to December 31, 2019 the following measures:~~

~~• Add sufficient accounting personnel or outside consultants to properly segregate duties and to effect timely, accurate preparation of the financial statements.~~
~~• Review, assess and replace as needed third party consultants and professional advisors involved in the accounting policies, procedures and financial reporting processes.~~
~~• Provide adequate training and resources for the additional personnel or outside consultants.~~

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 31, ~~2019~~2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Item 9B. Other Information

~~There are no matters to be reported under this Item.~~

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Our bylaws permit the number of directors to be fixed by resolution of the board of directors, but to be no less than one. The board of directors has set the maximum number of members to no more than ~~eight~~twelve members. Directors are elected by a majority of the votes cast by the stockholders and serve a one-year term or until their successors have been elected and qualified or their earlier resignation or removal. At December 31, ~~2019,~~2021, we have ~~seven~~nine directors, ~~four~~six of whom are ‘‘independent’’ in accordance with applicable rules promulgated by the Securities and Exchange Commission and within the meaning of Rule 5605(a)(2) of the ~~NASDAQ~~Nasdaq Stock Market.

The board of directors has five standing committees: Audit Committee, Compensation Committee, Disclosure Committee, Investment Committee and Nomination Committee, each of which has a written charter and/or statement of policy approved by our board. Our board currently appoints the members of each committee. Copies of the current committee charters and/or statement of policy for each committee are posted on our website at ~~www.CUIGlobal.com.~~www.OrbitalEnergyGroup.com. During ~~2019,~~2021, two directors missed ~~two~~one board ~~meetings~~meeting each. In each of those instances, the board members were informed of the meeting agenda and results. All directors attended, either in person or electronically, all of the meetings held by the committees on which such director served.

Sean P. Rooney Retired from the Board

On March 23, 2021, our director, Sean P. Rooney, formally notified the board of directors he will retire from the Orbital Energy Group board of directors when his term expired and would not seek reelection at the Company’s annual meeting in 2021.

The following are officers and directors of the Company with their ages as of December 31, ~~2019,~~2021, and a list of the members of our five standing committees: Audit Committee, Compensation Committee, Disclosure Committee, Investment Committee and Nomination Committee.

William J. Clough, Esq. ~~General Counsel of CUI Global, Inc. Mr. Clough is also a Director and~~ Executive Chairman of the ~~Company’s~~ board of directors and Chief Legal Officer of the Company and its wholly owned subsidiaries, age ~~68 (Seat 1)~~70.

Mr. Clough has served on the board of directors since ~~2006. Mr. Clough~~2006 and was reelected at the ~~2019~~2021 Annual Meeting of ~~Shareholders~~Stockholders to serve a one-year ~~term.~~

~~During~~term. A seasoned executive and entrepreneur, Mr. Clough joined the company’s Board in 2006 and was subsequently appointed chief executive officer in 2008. In his ~~tenure,~~role as CEO, a position he ~~has~~held until 2019 with the appointment of Jim O’Neil, he led ~~several strategic initiatives, including~~ the ~~Company’s acquisition~~establishment of ~~Orbital Gas Systems Limited and~~ the ~~Company’s natural gas technology line; the opening of Orbital Gas Systems,~~company’s Energy division, formed its Energy operations in North America, ~~Inc.;~~and guided the company to its largest Energy contract award in ~~addition, Mr. Clough steered~~its history while concurrently managing the ~~Company through its 2012, 2013,~~company’s Power & Electro-Mechanical division to greater than average electronics industry growth rates in recent years. As CEO, he directed company’s capital markets strategy, including leading several equity offerings to institutional investors and ~~2017 equity raises and its listing on~~spearheaded the company’s uplist to the Nasdaq Capital Market in 2012.

~~Before joining the Company,~~Mr. Clough ~~an attorney,~~previously founded and operated ~~his own~~a multi-state, multi-office law firm for 14 ~~years, with offices in Los Angeles, San Francisco and Honolulu. In that capacity, he successfully represented leading movie studios and media conglomerates.~~

~~Mr. Clough~~years. He received ~~his~~a Juris Doctorate, ~~cum laude,~~Cum Laude, from the University of California’s Hastings College of ~~the~~ Law in 1990. He ~~obtained one~~is a former law enforcement officer and U.S. Federal Air Marshal. Mr. Clough serves on the board of directors of privately-held Virtual Power Systems, creator of Software Defined Power®, in which Orbital Energy Group holds a minority equity investment.

James F. O’Neil III, Vice Chairman of the ~~largest ever non-wrongful death jury verdicts~~board of directors and Chief Executive Officer of the Company and its wholly owned subsidiaries, age 63.

Mr. O’Neil was appointed to the Board of Directors in ~~Los Angeles County Superior Court~~July 2019 and reelected at the 2021 Annual Meeting of Stockholders to serve a one-year term. James (Jim) O'Neil joined Orbital Energy Group as vice chairman in ~~2000~~July 2019 and ~~successfully represented parties~~was subsequently appointed chief executive officer in ~~multi-million-dollar cases throughout~~October 2019. He is a veteran executive of the ~~United States.~~ power industry and has been instrumental in formulating and is overseeing execution on Orbital Energy Group’s transformation plan that reshapes the company into a diversified energy services platform.

Mr. ~~Clough is certified~~O’Neil was previously chief operating officer, chief executive officer and president of Quanta Services, Inc. (Quanta) from 2008 to ~~practice law~~2016, an infrastructure solutions provider for the electric power, oil and natural gas, telecommunications and renewable industries. During this period, he grew the company into a Fortune 500 enterprise with $7+ billion in ~~state~~annual revenue at its peak through a combination of both organic growth and ~~federal courts~~many strategic acquisitions.

Mr. O’Neil joined Quanta in ~~California, Illinois, Hawaii,~~1999 and ~~before~~over his tenure was responsible for various initiatives including the company’s growth strategy, internal audit, and merger and acquisition initiatives. He began his career at Halliburton Company in 1980 where he held various positions, lastly as Director, Global Deepwater Development.

Mr. O’Neil holds a B.S. in Civil Engineering from Tulane University.

Nicholas M. Grindstaff, Chief Financial Officer, age 59.

Mr. Grindstaff assumed the role of Chief Financial Officer for Orbital Energy Group in November 2021. Prior to that, Mr. Grindstaff served as Vice President – Finance from May 2011 and Treasurer from October 1999 through October 2021 for Quanta Services, Inc., a leading provider of specialty contracting services, delivering comprehensive infrastructure solutions for the electric and gas utility, communications, pipeline and energy industries primarily in the United States, ~~Supreme Court.~~Canada and Australia.

As an executive officer at Quanta Services, Inc. he was responsible for capital structure, which included numerous capital raises across various markets, managing acquisitions, financial planning and analysis, internal and SOX control compliance, procurement, working capital allocation, treasury operations as well as numerous other strategic initiatives. Mr. Grindstaff holds a Master of Science degree in Accounting.

Daniel N. Ford, Executive Vice President of Orbital Energy Group, Inc., age 42

Mr. Ford has a background in audit with big 4 accounting firms, including KPMG. As the former CFO of Orbital Energy Group, Mr. Ford has consistently moved OEG into a position of efficiency, and forward thinking, transforming many of the Company's accounting and financial management processes while working directly with OEG’s operating groups.

Mr. Ford has implemented improved ERP systems, worked in conjunction with Mr. Clough ~~worked~~on the 2012, 2013 and 2017 equity raises, listing onto the Nasdaq Stock Market, various acquisitions including Orbital Gas Systems Ltd. and Reach Construction Group, LLC as well as the 2019 divestitures of the CUI Inc. power and electromechanical business units.

Mr. Ford serves on the board of the Portland Providence Medical Foundation whose purpose is to connect people with Providence to advance research, health care and wellness.

Mr. Ford earned his B.B.A with a ~~police officer for 16 years at~~double major in Finance and Accounting from the ~~local, state,~~University of Portland and ~~federal level including as a Federal Air Marshall flying in Southern Europe and the Middle East.~~holds an MBA from George Fox University.

C. Stephen Cochennet, Director, age ~~63 (Seat 2)~~65

Mr. Cochennet was ~~appointed~~elected to ~~the CUI Global Board of Directors at its December 1, 2017 annual meeting to fill~~serve as a director ~~vacancy~~at the 2018 Annual Meeting and continues to serve on the board of ~~directors. Mr. Cochennet is~~directors as an independent director within the meaning of Rule 5605(a)(2) of The ~~NASDAQ~~Nasdaq Stock Market. Mr. Cochennet was ~~elected~~reelected at the ~~2019~~2021 Annual Meeting of ~~Shareholders~~Stockholders to serve a one-year term.

~~Table~~

Mr. Cochennet, as an independent director, serves on the nominating committee along with Messrs. Lambrecht, Addison, Williams, Ms. Thornton and Ms. Tucker. Mr. Cochennet is also a member of ~~Contents~~

our Audit Committee, Compensation Committee and Investment Committee.

Mr. Cochennet has served as CEO/President, of Kansas Resource Development Company, a private oil and gas exploration company since 2011. From 2011 through 2015 he was also the CEO and president of Guardian 8 Corporation. From 2005 to 2010 Mr. Cochennet was the Chairman, President, and Chief Executive Officer of EnerJex Resources, Inc., a publicly traded SEC registered Oil and Gas Company. Prior to joining EnerJex, Mr. Cochennet was President of CSC Group, ~~LLC.~~LLC in which he supported several Fortune 500 ~~and~~corporations, international companies, and natural gas/electric utilities as well as ~~several natural gas/electric utilities and~~ various startup organizations. ~~Services~~The services provided included strategic planning, capital formation, corporate development, ~~human resources, executive compensation,~~ executive networking and transaction structuring. From 1985 to 2002, he held several executive positions with UtiliCorp United Inc. (Aquila) in Kansas City, Missouri. His responsibilities included finance, administration, operations, human resources, ~~benefits,~~ corporate development, natural gas/energy marketing, and ~~initiating~~managing several new startup operations. Prior to his experience at Aquila Mr. Cochennet served 6 years with the Federal Reserve System managing problem and failed banking institutions primarily within the oil and gas markets.

Mr. Cochennet graduated from the University of Nebraska with a B.A. in Finance and Economics.

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~~Daniel N. Ford~~Paul D. White, ~~Chief Financial Officer of CUI Global Inc.~~ Employee and ~~Subsidiaries and Chief Operating Officer of the Energy Division,~~Director, age 4061

Mr. ~~Ford has~~White was appointed in April 2014 as a ~~background in audit with big 4 accounting firms, including KPMG. As CFO~~director to fill a vacancy and continues to serve on the board of ~~CUI,~~directors. Mr. ~~Ford has consistently moved CUI into~~White was reelected at the 2021 Annual Meeting of Stockholders to serve a ~~position of efficiency, and forward thinking, transforming many of CUI's accounting and financial management processes while working directly with CUI’s operating groups.~~one-year term.

Mr. ~~Ford has implemented improved ERP systems, worked in conjunction with~~White is a graduate of Humboldt State University and brings to the Orbital Energy Group board of directors over 25 years of upper-level business management skills. Mr. ~~Clough on~~White served for two years as the ~~2012, 2013 and 2017 equity raises, listing onto the Nasdaq Capital Market, various acquisitions including~~President of Orbital Gas Systems, Ltd. ~~and~~Prior to working for the ~~2019 divestitures~~Company, Mr. White served as Vice President of the ~~CUI Inc. power~~Healthcare Division for North America of a global security company. His responsibilities included direct responsibility for profit and ~~electromechanical business units.~~loss statements with approximately $120 million in revenues, along with management, control, and supervision of approximately 3,000 employees working at 44 medical centers & hospitals and over 600 medical office buildings throughout the United States. He previously served in the Office of the General Counsel and Risk Services, as an Environmental Risk Consultant with Sutter Health Support Services - Corporate Services. His key responsibilities included: formulating best practice solutions to minimize/eliminate existing and potential risk and quality concerns, patient, employee health & safety and security exposures as well as consultations of state, federal, and professional standards for Risk Control/Environmental Health, & Safety programs from agencies such as OSHA, TJC, DHS, EPA, NFPA, and DOT.

As a results-oriented business leader, Mr. ~~Ford serves on the board of the Portland Providence Medical Foundation whose purpose is to connect people with Providence to advance research, health care~~White has skills in developing, managing and ~~wellness.~~

expanding business portfolios. Mr. ~~Ford earned his B.B.A with a double major~~White has senior management experience in ~~Finance~~contract management, public relations, program strategy and ~~Accounting from the University of Portland~~design and ~~holds an MBA from George Fox University.~~has been consistently recognized for effective financial management, leadership, integrity, teambuilding, and program management skills.

Corey A. Lambrecht, Director, age ~~50 (Seat 5)~~52

Mr. Lambrecht was elected to serve as a director at the 2007 Annual Meeting of ~~Shareholders~~Stockholders and continues to serve on the board of directors as an independent director within the meaning of Rule 5605(a)(2) of The ~~NASDAQ~~Nasdaq Stock Market. Mr. Lambrecht was reelected at the ~~2019~~2021 Annual Meeting ~~of Shareholders~~ to serve a one-year term.

Mr. Lambrecht, as an independent director, serves on the nominating committee along with Messrs. Cochennet, Addison, Williams, Ms. Thornton and Ms. Tucker. Mr. Lambrecht is also Chairman of our Compensation Committee and Investment Committee and a member of our Audit Committee.

Mr. Lambrecht is a 20+ year public company executive with broad experience in strategic acquisitions, corporate turnarounds, new business development, pioneering consumer products, corporate licensing, and interactive technology services. In addition, Mr. Lambrecht has held public company executive roles with responsibilities including day-to-day business operations, management, raising capital, board of directors' communication and investor relations. Mr. Lambrecht holds a certificate as a Certified Director from the UCLA Anderson Graduate School of Management Accredited Directors program.

Mr. Lambrecht, ~~has previously served~~ as an independent director, serves as one of six independent directors on the nominating committee along with Messrs. Cochennet, Williams, Ms. Thornton and Ms. Tucker. Mr. Lambrecht is also Chairman of our Compensation Committee.

Mr. Lambrecht is a director of ORHub, toa SaaS company as well as a strategic consultant for American Rebel Holdings, Inc. He served as Director of Sales for Leveraged Marketing Associates, the worldwide leader in licensed brand extension strategies. While Executive Vice President for Smith & Wesson Holding Corporation, he was responsible for Smith & Wesson Licensing, Advanced Technologies and Interactive Marketing divisions. He previously served as an independent Board Member for Lifestyle Wireless/Text-a-Day in conjunction with the Company's merger with publicly traded Carbon Credits International (now operating as SinglePoint), and recently rejoined the Company as its CFO. Previously, Mr. Lambrecht served as an independent director of Guardian 8 Holdings. He was the former President of A For Effort, an interactive database marketing company specializing in online content (advergaming) for clients such as the National Hockey League. Mr. Lambrecht's prior experience also includes Pre-IPO founder for Premium Cigars International and VP Sales/Marketing for ProductExpress.com.

~~Table of Contents~~

~~James F. O’Neil III~~~~, Chief Executive Officer, Vice Chairman of the Board of Directors, Director, as well as Chief Executive Officer of the Company’s wholly owned subsidiaries, age 61~~

James Francis O'Neil III, a veteran executive of the power industry, earned a B.S. in Civil Engineering from Tulane University in 1980. He is the principal owner of Forefront Solutions, LLC. since October 2017.

Mr. O’Neil joined Quanta Services, Inc. in 1999 as Vice President of Operations Integration and in 2002 advanced to Senior Vice President of Operations Integration & Audit. He continued to advance to Chief Operating Officer from October 2008 to 2011, then as the Chief Executive Officer from May 19, 2011 to March 14, 2016 and President from October 2008 to March 14, 2016. Throughout his tenure at Quanta, he was responsible for various initiatives including the company’s growth strategy, internal audit, and merger and acquisition initiatives.

Mr. O’Neil currently serves on the board of Hennessy Capital Acquisition Corp. IV (Independent Director since February 2019), FirstEnergy Corp. (Independent Director since 2017) and NRC Group Holdings Corp. (NYSE American: NRCG) (director since 2017).

~~From 1980 to 1999, Mr. O'Neil held various positions with Halliburton Company, lastly as Director, Global Deepwater Development.~~

Mr. O’Neil and his wife, Tracey, are personally active and loyal financial supporters of Waller/Austin Counties, Texas non-profit programs devoted to providing scholarship funds to students who participate in the 4H Club and fair programs throughout the year.

~~Sean P. Rooney~~~~, Director, age 48 (Seat 3)~~

Mr. Rooney was elected to serve as a director at the 2008 Annual Meeting of Shareholders and continues to serve on the board of directors as an independent director within the meaning of Rule 5605(a)(2) of The NASDAQ Stock Market. Mr. Rooney was reelected at the 2019 Annual Meeting of Shareholders to serve a one-year term.

Mr. Rooney is a veteran of the financial markets and has served on the board of CUI Global since 2008. He brings over 20 years of financial management experience to the board of directors. Mr. Rooney currently is a Financial Advisor at the Pinnacle Financial Group, which is part of LPL Financial, the largest independent broker dealer in the United States. Prior to working with LPL, Mr. Rooney served as Senior Director of Investments at Oppenheimer & Co., a full-service investment banking, securities and wealth management firm. He has also worked in similar capacity at Investec Ernst & Company, an international specialist bank headquartered in South Africa and the U.K. Mr. Rooney currently advises a clientele of high net worth investors, institutions and foundations. He is an active member of various industry and charitable organizations.

Mr. Rooney graduated from C.W. Post University in 1993 with a Bachelor of Arts degree in Business Administration and holds Series 7 (General Securities Representative), Series 63 (Uniform Securities Law), Series 24 (General Securities Principal) and Series 65 (Uniform Investment Adviser) licenses.

Sarah Tucker, Director, age 7476

Sarah Tucker was appointed to the Board of Directors ~~effective~~in October 1, 2019, and was elected at the 2020 Annual Meeting to serve a one-year term as an Independent Director within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market. Ms. Tucker was reelected at the 2021 Annual Meeting to serve a one-year term. Ms. Tucker, as an independent director, serves on the nominating committee along with Messrs. Cochennet, Lambrecht, Williams, Addison and Ms. Thornton.

Sarah Tucker is a veteran executive for the business strategy/development, risk management, planning, engineering, procurement and construction of oil and gas projects globally. She has led projects with budgets from ~~$5M~~$5 million to over ~~$3B~~$3 billion in refining, petrochemicals, power, and offshore (both shallow and deep-water) for oil and liquified natural gas in Angola, Brazil, China, India, Italy, Korea, Mexico, Nigeria, Oman, Qatar, Spain, the United Kingdom and the United States.

She has served as an ~~operation~~operations executive and managing director for major engineering, construction and petrochemical technology companies including Kellogg, KBR, Kellogg-Mitsubishi Development Company, Raytheon Engineers and Constructors, Kvaerner Engineering and Construction of ~~Norway.~~Norway and Silvertech of United Kingdom, a Process Control and High Integrity Safety System Solutions.

~~Table of Contents~~

Sarah headed the Pollution Prevention Task Force Committee with eight Oil Companies' representatives participating and contributing to the Study for "Refinery Crude Unit Pollution Prevention Project" which is now an American Petroleum Institute DC Publication number 31101.

Over the past several years, she has worked closely with Mexican national oil company PEMEX to establish the country’s first deep water project valued at ~~$14B.~~$14 billion.

According to her personal and professional philosophy, Sarah believes in developing strong relationships and respecting diverse cultures. As part of her philosophy, she led in 1992 a program to author a 51-page report which became the American Petroleum Institute publication, Environmental Design Considerations for Petroleum Refining Crude Processing Units.

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Her parallel and subsequent effort with the World Bank was successful in striking a balance between the interests of indigenous people and major oil companies allowing projects to proceed in Africa. The publication became an influential guide for doing business in the developing world.

Sarah has studied at the University of Kansas, Rice University and Lamar University. She is a licensed professional engineer and holds a bachelor’s degree in Civil/Structural Engineering from Lamar.

~~She served on the Rice University Engineering and Construction Global Forum from 2008 - 2016, serving as chair from 2008 - 2010.~~

As a leading woman in her industry, she has been the first woman to hold several positions including that of vice president of operations. Sarah is a recipient of the 2015 National Women’s Council Award. She is an Executive Member of Women’s Energy Network and a Member of Executive Business Women’s Council in Mexico City.

Paul ~~D. White~~T. Addison,~~Senior Vice President of CUI Global, Inc. and~~ Director, age ~~58 (Seat 4)~~74

~~Mr. White~~Paul T. Addison was appointed to the Board of Directors in ~~April 2014~~June 2021, as ~~a director to fill a vacancy and continues to serve on~~an Independent Director within the ~~board~~meaning of ~~directors.~~Rule 5605(a)(2) of The Nasdaq Stock Market. Mr. ~~White~~Addison was reelected at the ~~2019~~2021 Annual Meeting ~~of Shareholders~~ to serve a one-year term. Mr. Addison, as an independent director, serves on the nominating committee along with Messrs. Cochennet, Lambrecht, Williams, Ms. Thornton and Ms. Tucker.

Paul T. Addison earned a B. A. in political science and economics from Howard University in 1969 and a M.B.A. from Harvard University in 1972.

He began his career as a loan specialist for The Economic Development Administration of the US Department of Commerce in 1972 providing loan assistance for companies that agreed to expand operations in areas of high unemployment before moving to New York in 1974 to join a Chase Manhattan subsidiary as Vice President and Treasurer that provided financing and startup capital for minority small business enterprises (a MESBIC). In 1978, he joined Citibank/Citicorp as a banker in the firm’s energy and utilities department rising to the level of a senior credit officer and Managing Director.

In this capacity, he managed the bank’s significant exposure to a large segment of the gas and electric utility industry. He also provided financial advice to the firm’s clients and on numerous occasions provided testimony before state and federal regulatory commissions. He also developed financing structures which allowed a number of utilities to rate base large nuclear projects without which a number of utilities would have suffered significant losses. This was a particular issue during the last significant construction cycle for the industry.

He also approved and structured a number of large energy project financings for the firm.

Mr. ~~White~~Addison continued his work in the utility industry when he joined Solomon Smith Barney (Citigroup) in 1997 as a Managing Director in the electric and gas utility space until his retirement from the firm in 2002.

Upon retirement from Citigroup, Mr. Addison became an independent director of First Energy Corporation of Akron, Ohio, serving until his mandatory retirement in 2019. In his capacity as independent director, he served as Chair of the Finance Committee, and member of the Audit Committee as a designated financial expert. He was heavily involved in numerous financings over his term on the board and significantly participated in the company’s $4.7 billion acquisition of Allegheny Energy in 2010.

Mr. Addison is also a Trustee of the Maimonides Medical Center in Brooklyn New York, where he resides. Maimonides is the largest nonprofit hospital in Brooklyn with revenues approaching $1.5 billion and serves an extremely diverse population where over 60 languages are spoken. In his capacity as Trustee, Mr. Addison serves as Chair of the Budget and Finance Committee, member of the Legal and Audit Committee, member of the Quality and Safety Committee, and member of the Executive Committee. Mr. Addison also has served as the hospital’s representative on their self-insurance malpractice company, Hospital Insurance Company (HIC). Mr. Addison also served as Chair of the Audit Committee of HIC’s parent, the Federation of Jewish Philanthropies (FOJP), until its dissolution in 2019.

Jerry Sue Thornton, Director, age 74

Dr. Thornton was appointed to the Board of Directors in July 2021, as an Independent Director within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market.

Dr. Jerry Sue Thornton earned her B.A. and M. A. in Communications from Murray State University (Kentucky) and Ph.D. in Higher Education Leadership/Administration from The University of Texas (Austin). She earned a post-doctorate certificate from Harvard University.

Dr. Thornton is President of DreamCatcher Education Consulting providing professional development, coaching and mentoring for newly appointed presidents of colleges. She is President Emeritus of the Cuyahoga Community College District serving from 1992 to 2013 which is headquartered in Cleveland, Ohio. The College serves over 30,000 students on four campuses with a budget over $300 million. She brings over 45 years of experience in leading and managing higher education institutions in Chicago, Minnesota and Ohio with a focus on workforce training and professional education.

She also has extensive corporate board service beginning in 1992 with National City Bank/Corporation, Office Max, American Greetings and Bridgestreet Worldwide, Inc. until those companies had a change of control. She later served on the Boards of American Family Insurance, Applied Industrial Technologies, Inc., Republic Powdered Metals, (RPM, Inc.) and First Energy. She is currently serving on the Boards of Barnes and Noble Education (BNED) and Parkwood LLC (an Ohio financial planning company).

Gaining extensive business experience through her board director services of public and private companies, she has been a member of compensation, nominating and governance and audit committees. From manufacturing through distribution; industrial through commercial; financial through merchandizing and energy, Dr. Thornton has amassed over 29 years of business experience. During that tenure, she has served on Special Committees of the Board of Directors involved in acquisition.

Dr. Thornton brings to the Board of Directors broad leadership and business skills as well as an extensive background in workforce/talent acquisition, development and evaluation/assessment.

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La Forrest V. Williams,Director, age 70

Mr. Williams was appointed to the Board of Directors in July 2021, as an Independent Director within the meaning of Rule 5605(a)(2) of The Nasdaq Stock Market and was reelected at the 2021 Annual Meeting to serve a one-year term. Mr. Williams, as an independent director, serves on the nominating committee along with Messrs. Cochennet, Lambrecht, Addison, Ms. Thornton and Ms. Tucker.

Mr. Williams is a ~~graduate~~veteran executive of ~~Humboldt~~the communications, computer and information assurance business of the Department of Defense and Intelligence community. He served in the civilian Defense Intelligence Senior Executive Service and the United States Air Force senior officer corps as a communication/computer intelligence and information assurance strategist for more than 40 years. His activity in information assurance became a nexus with the vulnerabilities of the energy grid.

His accomplishments include serving as a leader in the original merging of communications and computer systems technology into one management structure for the United States Air Force. His energy focus evolved through his engagement in studying cybersecurity threats to our energy grid during his career at the National Security Agency. Mr. Williams has a history of leadership positions which includes, Chief Information Officer (CIO) of the National Security Agency (NSA), Director of Information Assurance for the U.S. European Command and Director of Legislative Affairs for the National Security Agency. Mr. Williams' experience includes leading a military Communications Group of more than 500 technicians and staff, supporting Nellis Air Force Base Nevada networks. He has installed, managed, upgraded and secured communication cable and space networks worldwide; to include the United States, Europe and South Pacific.

Mr. Williams holds a B.S. degree in Business Administration from San Jose State University and ~~brings~~an M.S. Degree in Technology of Management Information Systems from the American University, Washington D.C. He has served at the forefront in the Information Age and was an early leader at NSA in advocating concern about the vulnerability of our nation's energy grid. His advocacy led to the ~~CUI Global board over 25~~formation of customer assistance teams that he established to advise on the survivability of energy systems of national security concern. He later joined the National War College faculty in 2010 to teach National Security Strategy as a visiting Professor until 2013.

He is a proven results-oriented leader with broad experience as an Air Force Colonel and three years of ~~upper-level business management skills. Prior to being appointed Senior Vice President~~Board of ~~CUI Global~~Director experience with The Government Employees Benefit Association for federal employees. In his spare time, he is a volunteer Docent at the Smithsonian Institute in ~~2019, Mr. White served as President~~Washington D.C. and gives tours through the National Museum of Orbital Gas Systems, Ltd. for approximately two years. Prior to Orbital, Mr. White served as Vice President of the Healthcare Division for Securitas Security Services, a global security company. His responsibilities included direct responsibility for profit and loss statements with approximately $130 million in revenues, along with management, control, and supervision of approximately 3,000 employees working at 44 Medical Centers & Hospitals and over 600 Medical Office and client corporate buildings throughout the United States. He previously served in the Office of the General Counsel and Risk Services, as an Environmental Risk Consultant with Sutter Health Support Services - Corporate Services. His key responsibilities included: formulating best practice solutions to minimize/eliminate existing and potential employee health & safety and security exposures as well as consultations of state, federal, and professional standards for Risk Control/Environmental Health, Security & Safety programs such as OSHA, TJC, DHS, EPA, NFPA, and DOT.

As a results-oriented business leader, Mr. White has skills in developing, managing and expanding business portfolios. Mr. White has senior management experience in contract management, public relations, program strategy and design and has been consistently recognized for effective financial management, leadership, integrity, team-building, and program management skills.American History.

Corporate Governance and Board of Directors Matters

We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving our stockholders well and maintaining our integrity in the marketplace. We have adopted a Corporate Code of Ethics and Business Conduct, a code of business conduct and ethics for employees, directors and officers (including our principal executive officer and principal financial and accounting officer). We have also adopted the following governance guides: Charters for each of the Audit Committee, Compensation Committee, Disclosure Committee, Investment Committee, Nominating Committee, a policy for Director Independence, and Whistleblower Policy, all of which, in conjunction with our certificate of incorporation and bylaws, form the framework for our corporate governance. These corporate governance documents are available on the Internet at our website ~~www.CUIGlobal.com.~~www.OrbitalEnergyGroup.com.

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Our Corporate Governance Practices

We have always believed in strong and effective corporate governance procedures and practices. In that spirit, we have summarized several of our corporate governance practices below.

The Board of Director’s Role in Risk Oversight

The board of directors and its committees have an important role in the Company’s risk oversight, management and assessment process. The board regularly reviews with management the Company’s financial and business strategies, which include a discussion of relevant material risks as appropriate. The board discusses with the Company’s outside general counsel, as appropriate, its risk oversight and assessment as well as any material risks to the Company. In addition, the board delegates risk management responsibilities to the Audit Committee and Compensation Committee, which committees are each comprised of independent directors. The Audit Committee, as part of its charter, oversees the Company’s risk oversight, management and assessment of the Company and oversees and assesses the risks associated with the corporate governance and ethics of the Company. Risk considerations are a material aspect of the Compensation Committee. The Compensation Committee is responsible for overseeing the management of risks relating to executive compensation. In addition, the Compensation Committee also, as appropriate, assesses the risks relating to the Company’s overall compensation programs. The Investment Committee is responsible for overseeing and advising on possible investment opportunities as well as to administer and operate the Company’s investment portfolio. This includes aligning investment policies and strategies with the Company’s short and long-term goals, as well as setting benchmarks to evaluate long-term objectives and continual evaluation of the investment strategies. While the Committees oversee the management of the risk areas identified above, the entire board is regularly informed through committee reports about such risks. This enables the board and its committees to coordinate the risk management, assessment and oversight roles.

Adopting Governance Guidelines

Our board of directors has adopted a set of corporate governance guidelines to establish a framework within which it will conduct its business and to guide management in its running of the Company. The governance guidelines can be found on our website at ~~www.CUIGlobal.com~~www.OrbitalEnergyGroup.com and are summarized below.

Monitoring Board Effectiveness

It is important that our board of directors and its committees are performing effectively and in the best interest of the Company and its stockholders. The board of directors and each committee are responsible for annually assessing their effectiveness in fulfilling their obligations.

Conducting Formal Independent Director Sessions

On a regular basis, at the conclusion of regularly scheduled board meetings, the independent directors are encouraged to meet privately, without our management or any non-independent directors.

Hiring Outside Advisors

The board and each of its committees may retain outside advisors and consultants of their choosing at our expense, without management's consent.

Avoiding Conflicts of Interest

We expect our directors, executives and employees to conduct themselves with the highest degree of integrity, ethics and honesty. Our credibility and reputation depend upon the good judgment, ethical standards and personal integrity of each director, executive and employee. In order to provide assurances to the Company and its stockholders, we have implemented standards of business conduct, which provide clear conflict of interest guidelines to its employees and directors, as well as an explanation of reporting and investigatory procedures.

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Providing Transparency

We believe that it is important that stockholders understand our governance practices. In order to help ensure transparency of our practices, we have posted information regarding our corporate governance procedures on our website at ~~www.CUIGlobal.com.~~www.OrbitalEnergyGroup.com.

Whistleblower Policy

In furtherance of our governance transparency and ethical standards, we adopted a comprehensive Whistleblower Policy that encourages employees to report to proper authorities incorrect financial reporting, unlawful activity, activities that are not in line with the ~~CUI Global~~Orbital Energy Group Code of Business Conduct or activities, which otherwise amount to serious improper conduct. Our Whistleblower Policy is posted on our website at ~~www.CUIGlobal.com.~~www.OrbitalEnergyGroup.com.

Accuracy of All Public Disclosure

It is the Company's policy that all public disclosure made by the Company should be accurate and complete, fairly present, in all material respects, the Company's financial condition and results of operations, and be made on a timely basis as required by applicable laws and securities exchange requirements. In order to oversee this policy, a Disclosure Committee Charter has been adopted by the Chief Executive Officer and Chief Financial Officer and ratified by our Audit Committee. You can view a copy of this document on our website at ~~www.CUIGlobal.com~~www.OrbitalEnergyGroup.com or obtain a copy by making a written request to the Company at ~~CUI Global,~~Orbital Energy Group, Inc., ~~20050 SW 112th Avenue, Tualatin, Oregon 97062.~~1924 Aldine Western, Houston, Texas 77038.

Communications with the Board of Directors

Stockholders may communicate with the board of directors by writing to the Company at ~~CUI Global,~~Orbital Energy Group, Inc., ~~20050 SW 112th Avenue, Tualatin, Oregon 97062, or via telephone at (832) 467-1420.~~1924 Aldine Western, Houston, Texas 77038. Stockholders who would like their submission directed to a member of the board may so specify and the communication will be forwarded as appropriate.

Standards of Business Conduct

The board of directors has adopted a Code of Ethics and Business Conduct for all our employees and directors, including the Company's principal executive and senior financial officers. You can obtain a copy of these documents on our website at ~~www.CUIGlobal.com~~www.OrbitalEnergyGroup.com or by making a written request to the Company at ~~CUI Global,~~Orbital Energy Group, Inc., ~~20050 SW 112th Avenue, Tualatin, Oregon 97062, or via telephone at (832) 467-1420.~~1924 Aldine Western, Houston, Texas 77038. We will disclose any amendments to the Code of Ethics and Business Conduct or waiver of a provision therefrom on our website at ~~www.CUIGlobal.com.~~www.OrbitalEnergyGroup.com.

Ensuring Auditor Independence

We have taken several steps to ensure the continued independence of our independent registered public accounting firm. That firm reports directly to the Audit Committee, which also has the ability to pre-approve or reject any non-audit services proposed to be conducted by our independent registered public accounting firm.

Committees of the Board and Meetings

At December 31, ~~2019,~~2021, our board of directors consists of ~~seven~~nine directors. ~~Four~~Six of our ~~seven~~nine directors are ‘‘independent’’ as defined in Rule 5605(a)(2) of The ~~NASDAQ~~Nasdaq Stock Market. Our board of directors has the following standing committees: Audit Committee, Compensation Committee, Disclosure Committee, Investment Committee and Nominating Committee. Each of the committees operates under a written charter adopted by the board of directors. All committee charters are available on our website at ~~www.CUIGlobal.com.~~www.OrbitalEnergyGroup.com.

Audit Committee

The Audit Committee is established pursuant to the Sarbanes-Oxley Act of 2002 for the purposes of overseeing the company’s accounts and financial reporting processes and audits of its financial statements. The Audit Committee reviews the financial information that will be provided to the stockholders and others, the systems of internal controls established by management and the board and the independence and performance of the Company’s audit process. The Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm, review of financial reporting, internal company processes of business/financial risk and applicable legal, ethical and regulatory requirements. During ~~2019,~~2021, the Audit Committee held ~~six~~seven formal meetings.

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At December 31, ~~2019,~~2021, the Audit Committee is comprised of Sean P. Rooney, Chairman, C. Stephen Cochennet, and Corey A. Lambrecht. Messrs. Rooney, Cochennet, and Lambrecht are independent in accordance with Rule 10A-3 under the Securities Exchange Act of 1934 and Rule 5605(a)(2) of The ~~NASDAQ~~Nasdaq Stock Market.

Audit Committee Report

THE FOLLOWING REPORT OF THE AUDIT COMMITTEE DOES NOT CONSTITUTE SOLICITING MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY OTHER COMPANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES THIS REPORT BY REFERENCE THEREIN.

Audit Committee Report

The Audit Committee reviews the financial information that will be provided to the stockholders and others, the systems of internal controls established by management and the board and the independence and performance of the Company’s audit process.

The Audit Committee has:

~~reviewed and discussed with management the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K and the most recent Quarterly Report on Form 10-Q;~~

discussed with Grant Thornton LLP., the Company’s independent registered public accounting firm, the matters required to be discussed by General Auditing Standard 1301: Communications with Audit Committees as adopted by the Public Company Accounting Oversight Board; and

received the written disclosures and letter from Grant Thornton LLP as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with Grant Thornton LLP its independence from CUI Global.

•

reviewed and discussed with management the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K and the most recent Quarterly Report on Form 10-Q;

•

Based on these reviews and discussions, the Audit Committee has recommended that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2021. The Audit Committee has also considered whether the amount and nature of non-audit services provided by Grant Thornton LLP is compatible with the auditor’s independence and determined that it is compatible.

Submitted by: Audit Committee by

Sean P. Rooney, Chairman

C. Stephen Cochennet

Corey A. Lambrecht

~~Nominating~~Nominating Committee

The nominating committee consists of all of the members of the board of directors who are ‘‘independent directors’’ within the meaning of Rule 5605(a)(2) of The ~~NASDAQ~~Nasdaq Stock Market. The nominating committee is responsible for the evaluation of nominees for election as director, the nomination of director candidates for election by the stockholders and evaluation of sitting directors. The board has developed a formal policy for the identification and evaluation of nominees, Charter of the Nominating Committee of the Board of Directors, which can be reviewed on our website at ~~www.CUIGlobal.com.~~www.OrbitalEnergyGroup.com. In general, when the board determines that expansion of the board or replacement of a director is necessary or appropriate, the nominating committee will review, through candidate interviews with members of the board and management, consultation with the candidate's associates and through other means, a candidate's honesty, integrity, reputation in and commitment to the community, judgment, personality and thinking style, willingness to invest in the Company, residence, willingness to devote the necessary time, potential conflicts of interest, independence, understanding of financial statements and issues, and the willingness and ability to engage in meaningful and constructive discussion regarding Company issues. The committee reviews any special expertise, for example, that qualifies a person as an audit committee financial expert, membership or influence in a geographic or business target market, or other relevant business experience. To date the Company has not paid any fee to any third party to identify or evaluate, or to assist it in identifying or evaluating, potential director candidates.

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The nominating committee considers director candidates nominated by stockholders during such times as the Company is actively considering obtaining new directors. Candidates recommended by stockholders will be evaluated based on the same criteria described above. Stockholders desiring to suggest a candidate for consideration should send a letter to the Company's secretary and include: (a) a statement that the writer is a ~~shareholder~~stockholder (providing evidence if the person's shares are held in street name) and is proposing a candidate for consideration; (b) the name and contact information for the candidate; (c) a statement of the candidate's business and educational experience; (d) information regarding the candidate's qualifications to be director, including but not limited to an evaluation of the factors discussed above which the board would consider in evaluating a candidate; (e) information regarding any relationship or understanding between the proposing ~~shareholder~~stockholder and the candidate; (f) information regarding potential conflicts of interest and (g) a statement that the candidate is willing to be considered and willing to serve as director if nominated and elected. Because of the small size of the Company and the limited need to seek additional directors, there is no assurance that all ~~shareholder~~stockholder proposed candidates will be fully considered, that all candidates will be considered equally or that the proponent of any candidate or the proposed candidate will be contacted by the Company or the board and no undertaking to do so is implied by the willingness to consider candidates proposed by stockholders.

Disclosure Committee

We have formed a Disclosure Committee, which has been adopted by our CEO and CFO (‘‘Principal Officers’’) and ratified by our Audit Committee. The Disclosure Committee assists our Principal Officers in fulfilling their responsibility for oversight of the accuracy, completeness and timeliness of our public disclosures including, but not limited to our SEC filings, press releases, correspondence disseminated to security holders, presentations to analysts and release of financial information or earnings guidance to security holders or the investment community. The Disclosure Committee consists of our Principal Officers, the individual or representative of the firm primarily charged with investor/public relations, the Audit Committee Chairman and outside SEC counsel. Our Executive Chairman is Chairman of the committee. Our Senior Officers may replace or add new members from time to time. Our Senior Officers have the option to assume all the responsibilities of this committee or designate a committee member, who shall be a person with expertise in SEC and SRO rules and regulations with respect to disclosure, who shall have the power, acting together with our Senior Officers, to review and approve disclosure statements when time or other circumstances do not permit the full committee to meet. You may review the full text of our Disclosure Committee Charter on our website, ~~www.CUIGlobal.com,~~www.OrbitalEnergyGroup.com, under the link, governance.

Generally, the committee serves as a central point to which material information should be directed and a resource for people who have questions regarding materiality and the requirement to disclose. In discharging its duties, the committee has full access to all Company books, records, facilities and personnel, including the board of directors, Audit Committee, independent public accountants and outside counsel.

Investment Committee

The purpose of the investment committee is to administer and to operate the portfolio. The members of the investment committee are fiduciaries of the portfolio, with responsibility for overseeing investment policies, general policies, guidelines, investment performance and related risk management. Committee members will fulfill their duties solely on behalf of the company’s mission. In addition to aligning investment policies and strategies with the company’s short- and long-term goals, investment committees must set benchmarks to evaluate long-term objectives and continually evaluate their strategies to keep pace with market fluctuations and changes.

The Investment Committee shall also provide initial oversight and analysis of potential acquisition targets being considered by Management. In that capacity, Investment Committee members may, among other things, participate in reviewing initial due diligence; visit prospective acquisition targets; participate in strategy and other discussions with Management; and, where appropriate, more.

At December 31, ~~2019,~~2021, the Investment Committee is comprised of C. Stephen Cochennet, Corey A. Lambrecht, Chairman, and ~~Daniel Ford,~~Nicholas M. Grindstaff, CFO.

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Compensation Committee

The Compensation Committee discharges the board’s responsibilities relating to general compensation policies and practices and to compensation of our executives. In discharging its responsibilities, the Compensation Committee establishes principles and procedures in order to ensure to the board and the ~~shareholders~~stockholders that the compensation practices of the Company are appropriately designed and implemented to attract, retain and reward high quality executives and are in accordance with all applicable legal and regulatory requirements. In this context, the Compensation Committee’s authority, duties and responsibilities are:

~~To annually review the Company’s philosophy regarding executive compensation.~~

To periodically review market and industry data to assess the Company’s competitive position, and to retain any compensation consultant to be used to assist in the evaluation of directors’ and executive officers’ compensation.

~~To establish and approve the Company goals and objectives, and associated measurement metrics relevant to compensation of the Company’s executive officers.~~

~~To establish and approve incentive levels and targets relevant to compensation of the executive officers.~~

To annually review and make recommendations to the board to approve, for all principal executives and officers, the base and incentive compensation, taking into consideration the judgment and recommendation of the Chief Executive Officer for the compensation of the principal executives and officers.

To separately review, determine and approve the Chief Executive Officer’s applicable compensation levels based on the Committee’s evaluation of the Chief Executive Officer’s performance considering the Company’s and the individual goals and objectives.

To review for any related party employee situations, to ensure appropriate controls are implemented surrounding compensation changes, bonuses and performance reviews of the related party employee, and to participate in such controls as appropriate.

To periodically review and make recommendations to the board with respect to the compensation of directors, including board and committee retainers, meeting fees, equity-based compensation and such other forms of compensation as the Compensation Committee may consider appropriate.

~~To administer and annually review the Company’s incentive compensation plans and equity-based plans.~~

To review and make recommendations to the board regarding any executive employment agreements, any proposed severance arrangements or change in control and similar agreements/provisions, and any amendments, supplements or waivers to the foregoing agreements, and any perquisites, special or supplemental benefits.

To review and discuss with management, the Compensation Discussion and Analysis (CD&A), and determine the Committee’s recommendation for the CD&A’s inclusion in the Company’s annual report filed with the SEC on Form 10-K and proxy statement on Schedule 14A.

~~The Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser.~~

The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the Committee. The Company must provide for appropriate funding, as determined by the Committee, for payment of reasonable compensation to a compensation consultant, legal counsel or any other adviser retained by the Committee.

The Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Committee, other than in-house legal counsel, only after taking into consideration the following factors:

•

To annually review the Company’s philosophy regarding executive compensation.

•

To establish and approve the Company goals and objectives, and associated measurement metrics relevant to compensation of the Company’s executive officers.

•

To establish and approve incentive levels and targets relevant to compensation of the executive officers.

•

To administer and annually review the Company’s incentive compensation plans and equity-based plans.

•

The Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser.

•

(i)

the provision of other services to the Company by the person that employs the compensation consultant, legal counsel or other adviser;

(ii)

the amount of fees received from the Company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser;

~~(ii)~~(iii)

the ~~amount~~policies and procedures of ~~fees received from the Company by~~ the person that employs the compensation consultant, legal counsel or other adviser ~~as a percentage~~that are designed to prevent conflicts of ~~the total revenue of the person that employs the compensation consultant, legal counsel or other adviser;~~interest;

~~(iii)~~(iv)

~~the policies and procedures~~any business or personal relationship of ~~the person that employs~~ the compensation consultant, legal counsel or other adviser ~~that are designed to prevent conflicts~~with a member of ~~interest;~~the Committee;

~~(iv)~~(v)

any stock of the Company owned by the compensation consultant, legal counsel or other adviser; and

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(vi)

any business or personal relationship of the compensation consultant, legal counsel, or other adviser or the person employing the adviser with ~~a member~~an executive officer of the ~~Committee;~~Company.

~~(v)~~•

~~any stock~~The Committee is not required to implement or act consistently with the advice or recommendations of ~~the Company owned by~~ the compensation consultant, legal counsel or other ~~adviser; and~~adviser to the Committee.

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~~(vi)~~

~~any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the Company.~~

~~The Committee is not required to implement or act consistently with the advice or recommendations of the compensation consultant, legal counsel or other adviser to the Committee.~~

Compensation Committee Members

The Compensation Committee of the board of directors is appointed by the board of directors to discharge the board’s responsibilities with respect to all forms of compensation of the Company’s executive officers, to administer the Company’s equity incentive plans and to produce an annual report on executive compensation for use in the Company’s Form 10-K and the proxy statement on Schedule 14A. At December 31, ~~2019,~~2021, the Compensation Committee consists of two independent members of the board of directors, Messrs. Corey A. Lambrecht, and C. Stephen Cochennet, both of whom are ‘‘independent directors’’ within the meaning of Rule 5605(a) (2) of the ~~NASDAQ~~Nasdaq Stock Market.

Committee Meetings

Our Compensation Committee meets formally and informally as often as necessary to perform its duties and responsibilities. The Compensation Committee held three formal meetings during fiscal ~~2019.~~2021. On an as requested basis, our Compensation Committee receives and reviews materials prepared by management, consultants or committee members, in advance of each meeting. Depending on the agenda for the particular meeting, these materials may include, among other factors:

~~minutes and materials from the previous meeting(s);~~

~~reports on year-to-date Company financial performance versus budget;~~

~~reports on progress and levels of performance of individual and Company performance objectives;~~

~~reports on the Company’s financial and stock performance versus a peer group of companies;~~

~~reports from the Committee’s compensation consultant regarding market and industry data relevant to executive officer compensation;~~

reports and executive compensation summary worksheets, which sets forth for each executive officer: current total compensation and incentive compensation target percentages, current equity ownership holdings and general partner ownership interest and current and projected value of each and all such compensation elements, including distributions and dividends therefrom, over a five-year period.

•

minutes and materials from the previous meeting(s);

•

reports on year-to-date Company financial performance versus budget;

•

reports on progress and levels of performance of individual and Company performance objectives;

•

reports on the Company’s financial and stock performance versus a peer group of companies;

•

reports from the Committee’s compensation consultant regarding market and industry data relevant to executive officer compensation;

•

Compensation Committee Charter

Our Compensation Committee Charter is posted on our website at ~~www.CUIGlobal.com.~~www.OrbitalEnergyGroup.com.

Compensation Committee Interlocks and Insider Participation

None of the members of the Company’s Compensation Committee is or has at any time during the last completed fiscal year been an officer or employee of the Company. None of the Company’s executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on the Company’s board of directors or Compensation Committee during the last completed fiscal year.

~~Compensation Committee Report~~

We have reviewed and discussed the Compensation Discussion and Analysis with management and based on our review and discussion with management, we have recommended to the board of directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and the proxy statement on Schedule 14A for the 2020 Annual Meeting of Shareholders.

~~Submitted by:~~	~~Compensation Committee by~~
	~~Corey A. Lambrecht, Chairman~~
	~~C. Stephen Cochennet~~

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Item 11. Executive Compensation

~~Compensation Discussion and Analysis~~

~~General Philosophy~~

Our compensation philosophy is based on the premise of attracting, retaining and motivating exceptional leaders, setting high goals, working toward the common objectives of meeting the expectations of customers and stockholders and rewarding outstanding performance. Following this philosophy, in determining executive compensation, we consider all relevant factors, such as the competition for talent, our desire to link pay with performance, the use of equity to align executive interests with those of our stockholders, individual contributions, teamwork and performance, each executive’s total compensation package and internal pay equity. We strive to accomplish these objectives by compensating all employees with total compensation packages consisting of a combination of competitive base salary and incentive compensation.

~~Pay for Performance~~

At the core of our compensation philosophy is our strong belief that pay should be directly linked to performance. We believe in a pay for performance culture that places a significant portion of executive officer total compensation as contingent upon, or variable with, individual performance, Company performance and achievement of strategic goals including increasing shareholder value.

The performance based compensation for our executives may be in the form of (i) annual cash incentives to promote achievement of, and accountability for, shorter term performance plans and strategic goals and (ii) equity grants, designed to align the long-term interests of our executive officers with those of our shareholders, by creating a strong and direct link between executive compensation and shareholder return over a multiple year performance cycle. Long-term incentive equity awards are typically granted in restricted stock or stock options. These awards generally vest over a two to four-year period. This opportunity for share ownership was to provide incentive and retain key employees and align their interests with our long-term strategic goals. As of December 31, 2019, the Company does not have an approved equity incentive plan, and expects to submit a proposal for a new equity incentive plan to shareholders for approval during 2020.

~~Base Compensation to be Competitive within Industry~~

A key component of an executive’s total compensation base salary is designed to compensate executives commensurate with their respective level of experience, scope of responsibilities, sustained individual performance and future potential. The goal has been to provide for base salaries that are sufficiently competitive with other similar-sized companies, both regionally and nationally, to attract and retain talented leaders.

~~Compensation Setting Process~~

~~Management’s Role in the Compensation Setting Process~~

~~Management plays a significant role in the compensation-setting process. The most significant aspects of management’s role are:~~

~~assisting in establishing business performance goals and objectives;~~

~~evaluating employee and Company performance;~~

~~CEO and/or Executive Chairman recommending compensation levels and awards for executive officers;~~

~~implementing the board approved compensation plans; and~~

~~assistance in preparing agenda and materials for the Committee meetings.~~

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The Chief Executive Officer and/or Executive Chairman generally attends the Committee meetings; however, the Committee also regularly meets in executive session. The Chief Executive Officer and/or Executive Chairman makes recommendations with respect to financial and corporate goals and objectives and makes non-CEO executive compensation recommendations to the Compensation Committee based on Company performance, individual performance and the peer group compensation market analysis. The Compensation Committee considers and deliberates on this information and in turn makes recommendations to the board of directors, for the board’s determination and approval of the executives’ and other members of senior management’s compensation, as necessary, including base compensation, short-term cash incentives and long-term equity incentives. For related party employee matters, appropriate personnel meet with the Compensation Committee to determine compensation and incentives and to review ongoing performance of the employee. The Chief Executive Officer’s and/or Executive Chairman’s performance and compensation are reviewed, evaluated and established separately by the Compensation Committee and ratified and approved by the board of directors.

~~Setting Compensation Levels~~

To evaluate whether total compensation is competitive and provides appropriate rewards to attract and retain talented leaders, as discussed above, we may rely on analyses of peer companies performed by independent compensation consultants and on other industry and occupation specific survey data available. Our general benchmark is to establish both base salary and total compensation for the executive officers at or near the compensation of peer group data, recognizing that a significant portion of executive officer total compensation should be contingent upon, or variable with, achievement of individual and Company performance objectives and strategic goals, as well as being variable with stockholder value. Further, while the objective for base salary is at that of peer group data, executives’ base salaries are designed to reward core competencies and contributions to the Company and may be increased above this general benchmark based on (i) the individual’s increased contribution over the preceding year; (ii) the individual’s increased responsibilities over the preceding year; and (iii) any increase in median competitive pay levels.

~~Setting Performance Objectives~~

The Company’s business plans and strategic objectives are generally presented by management annually and as needed to the board of directors. The board engages in an active discussion concerning the financial targets, the appropriateness of the strategic objectives and the difficulty in achieving the same. In establishing the compensation plan, our Compensation Committee then utilizes the primary financial targets and strategic objectives from the adopted business plan as the primary targets for determining the executive officers’ short-term cash incentives and long-term equity incentive compensation. The Committee also establishes additional non-financial performance goals and objectives, the achievement of which is required for funding of a significant portion, approximately twenty five percent, of the executive officers’ incentive compensation. In 2019, these non-financial performance goals and objectives included among other factors, divestiture of significant portions of the Power and Electromechanical segment, the identification and procurement process to enhance and enable the growth of the Company through strategic industry-specific acquisitions; the continued growth of the Orbital Gas Systems, North America operations; investment in VPS and reduction of costs at CUI-Canada; continued expansion within the global natural gas and energy markets; continued product development and new product introductions including various VE technology-based sample systems; and general and administrative management responsibilities. In addition, such factors as revenue growth; new product adoption; market penetration; M&A activities; and investment banking transactions were and are considered in setting compensation levels.

~~Annual Evaluation~~

The Chief Executive Officer and/or Executive Chairman recommends the actual incentive award amounts for all other executives based on actual Company performance relative to the targets set as well as on individual performance and recommends the executives’ base salary levels. The Compensation Committee considers these recommendations generally following the end of each fiscal year in determining its recommendations to the board of directors for the final short-term cash incentive and long-term equity award amounts for each executive. Executive base salary levels are reviewed in accordance with their respective employment agreements. The actual incentive amounts awarded to each executive are ultimately subject to the discretion of the Compensation Committee and the board of directors.

~~Voting Results on Executive Compensation (Say-on-Pay) Advisory Vote~~

As required by Section 14A of the Exchange Act, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Compensation Committee considers the prior year shareholder advisory vote on the compensation of the Named Executive Officers as appropriate for making compensation decisions. At the annual meeting of shareholders held December 3, 2019, 41% percent of the shareholders present and voting on the proposal approved, on an advisory basis, the compensation disclosed in the Company’s proxy statement for the meeting filed with the Securities and Exchange Commission on October 2, 2019. As a result, the Compensation Committee concluded that the Company's shareholders were not supportive of the Company's executive compensation philosophy, policies and programs and the Compensation Committee will continue to reach out to shareholders regarding compensation matters. The Compensation Committee determined to review such philosophy, policies and programs, with such updates and modifications as appropriate for changing circumstances.

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~~Special Evaluation~~

Additional equity-based awards may also be granted to executives, as well as other employees, upon commencement of employment, promotions, for special performance recognition or for retention purposes, based on the recommendation of the Chief Executive Officer or Chief Financial Officer. In determining whether to recommend additional grants to an executive, the Chief Executive Officer typically considers the individual’s performance and any planned change in functional responsibility.

~~Elements of Executive Compensation~~

~~Total Compensation~~

Total compensation for our executives consists of three elements: (i) base salary; (ii) incentive cash award based on achieving specific performance targets as measured by revenues, cash flow and other objectives and (iii) equity incentive award, which is also performance based and may be paid out over a future period in the form of stock, restricted stock, stock appreciation rights, or stock purchase options. Base salaries are the value upon which both the incentive compensation percentage targets are measured against. For evaluation and comparison of overall compensation of the executives and to assist it in making its compensation decisions, the Compensation Committee reviews an executive compensation summary, which sets forth for each executive: current compensation and current equity ownership holdings as well as the projected value of each and all such compensation elements, including distributions and dividends therefrom. Also included in the summary are comparative performance numbers, specific milestones, strategic objectives, and other elements used to measure each executive's individual performance.

~~Base Salaries~~

Base salaries are designed to compensate executives commensurate with their respective level of experience, scope of responsibilities and to reward sustained individual performance and future potential. The goal has been to provide for base salaries that are sufficiently competitive with other similar-sized companies, both regionally and nationally, to attract and retain talented leaders.

~~Incentive Compensation~~

Incentive compensation is intended to align compensation with business objectives and performance and enable the Company to attract, retain and reward high quality executive officers whose contributions are critical to both the short and long-term success of the Company. The executives’ incentive awards are based upon three key performance metrics: (i) the Company’s earnings before interest, taxes, depreciation, and amortization (EBITDA); (ii) achievement of agreed-upon strategic and corporate performance goals; and/or (iii) existing Employment Agreement.

The strategic and corporate performance goals are not intended to be a specific agreed-upon goal, but rather a general objective. Management and the board of directors discuss these factors and set objectives that are dynamic and change periodically. In setting these periodic goals, the board of directors discusses with management the nature of the objective and management’s proposed method of achieving the goal. These goals change throughout the operational process because of changing dynamics such as economic conditions, current success of marketing, availability of materials, availability of funding and overall momentum toward achieving the goal.

~~Incentive Plan Compensation~~

Incentive awards are typically paid out in cash, restricted common stock or option awards. The incentive award targets for the executives are established at the beginning of the year, generally, as a percentage of their base salary and the actual awards are determined in the following year at a board of directors’ meetings based on actual Company performance relative to established goals and objectives, as well as on evaluation of the executive’s relevant departmental and individual performance during the past year. In many instances the award of restricted common stock and stock options vests over a multi-year term in equal periodic tranches. The award of restricted common stock purchased through options generally, although not in every instance, vests immediately upon exercise of the option and generally has a validity of up to ten years and a per share purchase price of no less than the fair market value of our common stock on the date of grant. The awards are intended to serve as a means of incentive compensation for performance.

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~~Retirement Plans~~

CUI Global and its wholly owned subsidiaries, CUI Inc. and Orbital Gas Systems, North America, Inc. maintain a 401(k) plan. The Company 401(k) retirement savings plan allows employees to contribute to the plan after they have completed 60 days of service and are 18 years of age. The Company matches the employee’s contribution up to 6% of total compensation. Total employer contributions, net of forfeitures were $0.5 million, $0.5 million, and $0.4 million for 2019, 2018 and 2017, respectively. These amounts include $0.3 million, $0.4 million, and $0.3 million associated with discontinued operations.

~~Involuntary Termination, Resignation for Good Reason and Change in Control~~

~~Our executives are awarded protection from involuntary termination, resignation for good reason and change in control specifically provided in their employment contracts.~~

Under involuntary termination without cause or resignation for good reason, the Executive Chairman and Chief Executive Officer each would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options and any deferred past bonuses that have been earned but not paid. Should the executive be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage.

Under involuntary termination without cause or resignation for good reason, our Chief Financial Officer would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options and any deferred past bonuses that have been earned but not paid. Should the executive be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage.

~~Perquisites~~

~~The Company does not provide for any perquisites or any other benefits for its senior executives that are not generally available to all employees.~~

~~Employment Agreements~~

~~During fiscal year 2019, four executive officers were employed under employment agreements. Those executive officers are:~~

~~Executive Chairman, General Counsel, former Chief Executive Officer;~~

~~Chief Executive Officer;~~

~~Chief Financial Officer of CUI Global, Inc. and Chief Operating Officer of the Energy Division; and~~

~~Former President of CUI Inc., and Chief Operating Officer of the Power and Electromechanical Division;~~

~~To see the material terms of each named executive officer’s employment agreement, please see the footnotes to the Summary Compensation Table.~~

~~Executive Salary and Bonus Performance Assessment Considerations~~

Bonuses for certain executive officers and employees of CUI Global and subsidiaries are calculated based on historical financial and non-financial information and accomplishments based on an ongoing review and approval by the Compensation Committee and the Chief Executive Officer. Accordingly, the Company accrues bonuses through components calculated on prior data. This review also considers ongoing performance and incentives for those officers and employees to increase their performance. As such, bonuses calculated based on fiscal 2019 data are not necessarily earned or owed to the employees as of December 31, 2019 and there is no legal right by the employees to receive such bonuses upon either termination by the Company or voluntary termination, unless they have been approved based on the subsequent review of subjective items.

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The performance assessment considerations for William J. Clough, Esq. in his capacity as President, Chief Executive Officer and General Counsel of CUI Global, Inc. and subsidiaries through September 30, 2019 and Chief Legal Officer and Executive Chairman, thereafter, include his successful management and implementation of acquisition and growth strategy, both domestically and internationally, that resulted in the March 2015 asset acquisition of Tectrol, Inc., a Canadian electronics company by CUI Inc. and the highly lucrative February 2016 purchase order from Europe’s largest natural gas transmission company for our GasPT product. This purchase order culminates several years of Mr. Clough’s personal effort. The Tectrol asset purchase entailed complex labor union negotiations and ongoing management support. Mr. Clough continues to expand new technology development, implementation, branding and sales by strategically expanding the VE Technology product recognition through adoption of mercury sampling and thermowells. As a primary initiator of the Company’s growth strategy, he engineered the Company’s launch of Orbital Gas Systems, North America, Inc. as a unified international GasPT and VE Technology sales headquarters. Mr. Clough continues to expand investor relations and strengthen investment banking relationships through regular investor meetings and conferences. In addition, Mr. Clough is the point-person for the Company's mergers and acquisition (M&A) strategy. In that capacity:

Mr. Clough spearheaded the divestiture of both the CUI Electromechanical Division (to a Management-led group) and divestiture of the CUI Power Division (to Bel Fuse) for a combined value of approximately $44.2 million - comprised of forgiveness of a $5.3 million Note; receipt of a $5.0 million Note Payable; and approximately $33.9 million in cash after working capital adjustments;

Mr. Clough identified and recruited James F. O’Neil, CUI Global’s chief executive officer, in order to begin a strategic acquisition and divestiture strategy designed to make CUI Global an energy-centric, services company along the lines of Quanta (Mr. O’Neil’s prior employer) and MasTec; and,

Mr. Clough provides insight, tactics, targets, and potential relationships to expand the Company's opportunities through strategic partnerships and acquisitions. His efforts have included strategic relationships with SAMSON AG, Socrate S.p.A., Daily Thermetrics, and others, along with various acquisition opportunities currently being explored by the Company.

As Corporate General Counsel, Mr. Clough is “hands on” in his management of corporate governance and legal issues, addressing employee concerns, providing personal direction and oversight of drafting revised and restated corporate bylaws and regularly communicating with the directors pertaining to various corporate matters as they arise.

The performance assessment considerations for James F. O’Neil, Chief Executive Officer of CUI Global, Inc. and its subsidiaries since October 1, 2019, include his extensive experience and prior success at building shareholder value and significant return-on-investment. Mr. O’Neil is a veteran executive of the energy infrastructure industry and has been instrumental in formulating and overseeing execution on CUI Global’s transformation plan that reshapes the company into a diversified energy services platform.

The performance assessment considerations for Daniel N. Ford, Chief Financial Officer of CUI Global, Inc. and subsidiaries and Chief Operating Officer of the Energy Division include his successful management of financial resources for CUI Global and subsidiaries including investments, corporate portfolio, cash and debt positions. Mr. Ford’s daily duties include ongoing development and oversight of global banking relationships and overall financial performance oversight and management of the accounting staff of CUI Global, Inc. and all subsidiaries. In 2016, Mr. Ford added the responsibility of Chief Operating Officer for the Energy Division including direct management of the Division's leadership teams as well as coordinating ongoing activities, planning and initiatives to continue growth within this division on a global basis. Mr. Ford efficiently communicates with the board pertaining to company activities, audit results and findings, growth and acquisition strategy and investment tactics. Mr. Ford oversees SEC filing compliance, internal reporting matters, and works directly with internal and external audit and tax firms. As an integral part of this management, it is necessary that he continue to be up to date on all current accounting and SEC regulatory standards such as ICFR and SOX. Mr. Ford works closely with the Executive Chairman and CEO regarding financial reporting, Energy Division activities, divestitures, M&A, investments, investor management and investor relations activities. Mr. Ford is integral to the M&A efforts and assists with analysis and identification of specific strategic partnerships and acquisitions. Mr. Ford has been particularly involved in the integration of previous acquisitions including Tectrol (CUI-Canada), Orbital-UK, and the greenfield startup of Orbital North America within the CUI Global portfolio.

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The performance assessment considerations for Matthew M. McKenzie, former President of CUI Inc. were directed toward corporate operations for the Power and Electromechanical Division. Mr. McKenzie managed the daily operations of CUI Inc., CUI Japan, and CUI-Canada, Inc. In 2019, Mr. McKenzie was instrumental in coordinating and consummating the sale of the CUI Power Division to Bel Fuse. Mr. McKenzie successfully managed the construction of our research and development facility and implementation of our ICE product development project. Mr. McKenzie was involved in the Company’s investment in Virtual Power Systems ("VPS") (the owner of the VPS software that empowers our ICE hardware) and in the Company's efforts to expand and strengthen its relationship with VPS. Mr. McKenzie’s employment contract allows for performance and discretionary bonuses. He and his management group (under the name Back Porch) purchased the CUI Electromechanical Division in late-2019.

~~Pay Ratio Disclosure Rule~~

In August 2015, pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd - Frank Act”), the Securities and Exchange Commission (“SEC”) adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer (‟PEO”). The Company’s PEO Mr. James F. O’Neil was appointed October 1, 2019. Mr. O’Neil’s compensation has been annualized for 2019 pay ratio purposes. The purpose of the new required disclosure is to provide a measure of the equitability of pay within the organization. The Company believes its compensation philosophy and process yield an equitable result and is presenting such information in compliance with the required disclosure as follows:

Median Employee total annual compensation
$ 42,336
Mr. O'Neil ("PEO") total annual compensation
$ 798,876
Ratio of PEO to Median Employee Compensation

19:1

~~When determining the median employee, we included the following compensation in our calculations:~~
~~Salary or wages~~
~~Bonuses~~
~~Stock awards~~
Other compensation including health insurance benefits, disability insurance benefits, life insurance benefits and 401(k) match benefits provided by the Company but excluding health and pension benefits provided by certain governments.
~~Mr. O’Neil’s actual compensation for 2019 along with details of his employment agreement can be reviewed in more detail in the Summary Compensation Table.~~
~~We elected to exclude our CUI-Japan sales office from the calculation due to there being less than 5% of the total number of employees there (5 employees).~~
Full and part-time employee compensation for employees that were hired during the year was annualized based on the average compensation they received during the period they were employed. The number of employees was determined as of December 31, 2019 when there were 252 total employees (Excluding CUI-Japan), 40 of which are considered US employees and 212 of which were considered non-US employees.
Summary Compensation Table
The following table sets forth the compensation paid and accrued to be paid by the Company for the fiscal years ~~2019, 2018~~2020 and ~~2017~~2019 to the Company’s Chief Executive Officer, Chief Financial Officer and ~~President of CUI Inc.~~Executive Chairman/Chief Legal Counsel
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Summary Compensation Table

Non-
equity
Incentive

Stock

Option

Plan

All Other

Name and
Principal Position

Year

Salary
($)

Awards
($)

Awards
($)

Compensation
($) (9)

Compensation
($)

Total
($)
William J. Clough, Executive Chairman/ Chief Legal Counsel/former CEO/ Director (1)

2019

687,018

⁽²⁾

—

—

710,966

⁽²⁾

31,833

1,429,817

2018

559,660

⁽²⁾

—

—

552,428

⁽²⁾

33,077

1,145,165

2017

538,135

⁽²⁾

—

—

497,672

⁽²⁾

30,869

1,066,676

Daniel N. Ford, CFO/ COO - Energy Division (3)

2019

449,000

⁽⁴⁾

—

—

456,667

⁽⁴⁾

41,456

947,123

2018

350,000

⁽⁴⁾

—

—

254,789

⁽⁴⁾

40,238

645,027

2017

320,000

⁽⁴⁾

—

—

244,888

⁽⁴⁾

38,532

603,420

James F. O'Neil, CEO/Director (5)

2019

187,896

⁽⁶⁾

—

—

—

⁽⁶⁾

19,269

207,165

Matthew M. McKenzie, former COO - PEM Division/ former President of CUI, Inc./ former Director (7)

2019

251,633

⁽⁶⁾

—

—

509,674

⁽⁶⁾

34,723

796,030

2018

320,000

⁽⁶⁾

—

—

206,540

⁽⁶⁾

39,508

566,048

2017

292,465

⁽⁶⁾

—

—

107,105

⁽⁶⁾

37,848

437,418

Paul D. White, Senior Vice President/ Director (9)

2018

225,000

⁽⁸⁾

—

—

155,000

⁽⁸⁾

32,717

412,717

2017

114,759

⁽⁸⁾

49,991

—

30,000

⁽⁸⁾

—

194,750

Name and Principal Position
Year
Salary (dollars) Stock Awards (dollars) Option Awards (dollars) Non-equity Incentive Plan Compensation (dollars) All Other Compensation (dollars) Total (dollars)
William J. Clough, Executive Chairman/ Chief Legal Officer/former CEO/ Director (1)
2021
$ 831,442 (2 ) $ — (2 ) $ 3,203,800 (2 ) $ 531,250 (2 ) $ 18,669 $ 4,585,161

2020
759,363 (2 ) 21,887 (2 ) 288,085 (2 ) 300,000 (2 ) 27,768 1,397,103
Daniel N. Ford, Executive Vice President (3)
2021
581,442 (4 ) — (4 ) 2,652,034 (4 ) 265,625 (4 ) 36,761 3,535,862

2020
512,346 (4 ) 18,904 (4 ) 224,066 (4 ) 150,000 (4 ) 43,121 948,437
James F. O'Neil, CEO/Vice Chairman/Director (5)
2021
800,000 (6 ) — (6 ) 5,695,644 (6 ) — (6 ) 41,271 6,536,915

2020
753,563 (6 ) 8,937 (6 ) 120,036 (6 ) — (6 ) 47,797 930,333

Footnotes:

1.
Mr. Clough joined the Company on September 1, 2005. Effective September 13, 2007, Mr. Clough was appointed CEO/President of ~~CUI Global~~Orbital Energy Group and Chief Executive Officer of all wholly owned subsidiaries of the Company. Effective October 1, 2019 Mr. Clough stepped down as Chief Executive Officer and was appointed Executive Chairman and Chief Legal ~~Counsel.~~
Officer.

2.
Mr. Clough is employed under a three-year employment contract with the Company, which became effective May 14, 2019. Said contract provides, in relevant part, for salary in year 1 of $750 thousand, year 2 of $800 thousand and year 3 of $850 thousand. The employment agreement includes bonus provisions for each calendar year targeted at seventy-five percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Mr. Clough's employment agreement includes a grant for 1,600,000 options; however, the grant is subject to the approval of an equity incentive plan by shareholders within one year of the employment agreement. As of December 31, 2019, the shareholders have not approved an equity incentive plan. The agreement provides for up to $9,999 of annual premium life insurance expenses along with the ordinary benefits provided to employees of the Company. The agreement entitles Mr. Clough to severance package of 2.5 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. ~~At December 31, 2019, 2018, and 2017, there was an accrual of $0, $30 thousand, and $33 thousand, respectively, for compensation owed to Mr. Clough.~~

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3.
Mr. Ford joined the Company May 15, 2008 and ~~serves~~served as Chief Financial Officer ~~of CUI Global and subsidiaries, and Chief Operating Officer of the Energy Division.~~
until November 15, 2021 when he was appointed Executive Vice President.

4.
Mr. Ford is employed under a three-year employment contract with the Company, which became effective May 14, 2019. Said contract provides, in relevant part, for salary in year 1 of $500 thousand, year 2 of $550 thousand and year 3 of $600 thousand. The employment agreement includes bonus provisions for each calendar year targeted at seventy-five percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Mr. Ford's employment agreement includes a grant for 960,000 options; however, the grants are subject to the approval of an equity incentive plan by shareholders within one year of the grant. As of December 31, 2019, the shareholders have not approved an equity incentive plan. The agreement provides for ordinary benefits provided to employees of the Company. The agreement entitles Mr. Ford to a severance package of 2.0 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. ~~At December 31, 2019, 2018, and 2017, there was an accrual of $0, $21 thousand, and $22 thousand, respectively, for compensation owed to Mr. Ford.~~

5.
Mr. O'Neil was appointed Director July 9, 2019 and was appointed Vice Chairman and Chief Executive Officer effective October 1, 2019.

6.
Mr. O'Neil is employed under a three-year employment contract with the Company, which became effective October 1, 2019. Said contract provides, in relevant part, for salary in year 1 of $750 thousand, year 2 of $800 thousand and year 3 of $850 thousand. The employment agreement includes bonus provisions for each calendar year targeted at seventy-five percent of base salary to be based on performance objectives, goals and milestones for each calendar year including company performance. Bonuses are approved based on various performance-related factors and an evaluation of current performance and includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. ~~Mr. O'Neil's employment~~The agreement ~~includes a grant~~provides for ~~1,000,000 options and he also received a grant for 600,000 options when he was initially appointed~~up to $9,999 of annual premium life insurance expenses along with the ~~Board of Directors, however the grants are subject~~ordinary benefits provided to ~~the approval of an equity incentive plan by shareholders within one year~~employees of the ~~grants.~~ Company. The agreement entitles Mr. O'Neil to a severance package of 2.5 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans.
7.
As of December 31, ~~2019, the shareholders have not approved an equity incentive plan. The agreement provides for up to $9,999~~2021, Mr. Ford held 112,598 outstanding options. As of ~~annual premium life insurance expenses along with the ordinary benefits provided to employees of the Company. The agreement entitles~~December 31, 2021, Mr. Clough, Mr. Ford and Mr. O'Neil ~~to a severance package of 2.5 times the sum of annual base salary~~held 1,350,000, 1,095,000, and ~~target bonus along with eighteen months of medical coverage under the Company's medical plans.~~
1,787,500 cash settled stock appreciation rights, respectively.

7.
Mr. McKenzie joined the Company May 15, 2008 and served as President of CUI Inc. and Chief Operating Officer of the Power and Electromechanical Division. Effective September 30, 2019 Mr. McKenzie's employment was terminated with the disposition of the non-power supply electromechanical products group to Back Porch International, Inc.
8.
~~Mr. McKenzie was employed under a multi-year employment contract with the Company, which became effective July 1, 2013~~All other compensation includes health care, insurance and which was extended to run to and through December 31, 2019. Said contract provides, in relevant part, for salary in 2018 of $320 thousand, an annual 4% cost of living adjustment, an eighteen-month severance package and bonus provisions up to one hundred twenty-five percent of base salary to be based on performance objectives, goals, and milestones for each calendar year, including revenue performance in the Power and Electromechanical segment. The bonus includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Bonuses are approved quarterly based on the above factors and an evaluation of current performance. All such bonus payments shall be paid to Mr. McKenzie in equal monthly installments following the period in which the bonus is earned and shall be paid on the 15th day of each month. At December 31, 2019, 2018, and 2017, there was an accrual of $0, $18 thousand, and $12 thousand, respectively, for compensation owed to Mr. McKenzie. Mr. McKenzie terminated his employment with CUI Inc. to lead Back Porch International Inc.'s purchase of the electromechanical components business that was announced in October 2019.401(k) matching benefits.

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9.
Mr. White served as President of Orbital Gas Systems, Ltd. from July 2017, initially in a consulting role, until July 2019. Upon accepting the permanent role of President of Orbital Gas Systems, Ltd. effective December 1, 2017, Mr. White ceased to be independent as a director of the Company. In July 2019, Mr. White became Senior Vice President for CUI Global.
~~10.~~
Mr. White is employed under a three-year employment contract with the Company through December 1, 2020 and provides, in relevant part, for an initial annual salary of $225 thousand in year 1 along with a $30 thousand one-time signing bonus, and increases to $250 thousand and $275 thousand in years 2 and 3, respectively, a severance of the Executive’s salary for the remainder of his severance term upon termination, bonus provisions to be based on performance objectives, goals, and milestones for each calendar year, including revenue performance at Orbital-UK. The bonus includes a discretionary bonus of up to twenty-five percent of salary based upon the reasonable judgment of the compensation committee. Employee has the ability to earn a larger bonus based on the performance criteria set forth and the reasonable judgment and discretion of the compensation committee. Bonuses are approved on an ongoing basis based on the above factors and an evaluation of current performance. All such bonus payments shall be paid to Mr. White following the period in which the bonus is earned. During 2017, Mr. White received $50 thousand of cash compensation and $50 thousand of stock awards for his services as an independent director. Further, during his time during the year ended December 31, 2017 serving as a consultant as interim President of Orbital Gas Systems, Limited, Mr. White received $46 thousand of compensation. At December 31, 2019, 2018 and 2017, there was an accrual of $0, $155 thousand, and $40 thousand, respectively, for compensation owed to Mr. White.
~~11.~~
As of December 31, 2019, William J. Clough, CEO/Director held 558,085 outstanding options, Daniel N. Ford, CFO held 125,196 outstanding options, Matthew M. McKenzie, COO/Director held 86,800 outstanding options, and Paul D. White, Senior Vice President/Director held 7,500 options.
~~12.~~
~~All other compensation includes health care, insurance and 401(k) matching benefits.~~
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The following table summarizes potential payments upon termination of employment to each of the named executive officers employed on the last day of our most recently completed fiscal year. The amounts set forth in the table are based on the assumption that the triggering event occurred on the last business day of our last completed fiscal year.

Involuntary

Termination or

Resignation for

Termination

Good Reason

upon Disability

Name

Benefit

Involuntary
Termination or
Resignation for
Good Reason
$

Termination
upon Disability
$

Benefit

William J. Clough, Executive Chairman/ Chief Legal Counsel/ former CEO/Director

Salary and bonus continuation

$
3,281,250
(1)

$
281,250
(1)

Benefits

47,750
(1)

71,624
(1)

Salary and bonus continuation
$ 3,718,750 (1) $ 318,750 (1)
Daniel N. Ford, Chief Financial Officer/ COO - Energy Division

Salary and bonus continuation

1,750,000
(2)

187,500
(2)

Benefits

36,984
(2)

55,476
(2)
William J. Clough, Executive Chairman/ Chief Legal Officer/ former CEO/Director

Benefits
28,003 (1) 28,003 (1)

Salary and bonus continuation
2,100,000 (2) 225,000 (2)
Daniel N. Ford, Chief Financial Officer

Benefits
29,042 (2) 29,042 (2)

Salary and bonus continuation
3,718,750 (3) 318,750 (3)
James F. O'Neil, CEO/ Director

Salary and bonus continuation

3,281,250
(3)

281,250
(3)

Benefits
37,906 (3) 37,906 (3)

Benefits

48,114
(3)

72,171
(3)

1.
Mr. Clough's employment contract with the Company entitles Mr. Clough to a severance package of 2.5 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. Under involuntary termination without cause or resignation for good reason, Mr. Clough would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options and any deferred past bonuses that have been earned but not paid. Should Mr. Clough be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage.

2.
Mr. Ford's employment contract with the Company entitles Mr. Ford to a severance package of 2.0 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. Under involuntary termination without cause or resignation for good reason, Mr. Ford would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options and any deferred past bonuses that have been earned but not paid. Should Mr. Ford be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage.

3.
Mr. O'Neil's employment contract with the Company entitles Mr. ~~Clough~~O'Neil to a severance package of 2.5 times the sum of annual base salary and target bonus along with eighteen months of medical coverage under the Company's medical plans. Under involuntary termination without cause or resignation for good reason, Mr. O'Neil would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options and any deferred past bonuses that have been earned but not paid. Should Mr. O'Neil be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage under the Company's medical plans. Under involuntary termination without cause or resignation for good reason, Mr. O'Neil would receive any amounts earned, accrued or owing but not yet paid; full vesting of any unvested stock options and any deferred past bonuses that have been earned but not paid. Should Mr. O'Neil be terminated on account of disability he is entitled to 75% of his then current annual base salary for six months and eighteen months of medical coverage.
~~2019 Grants of Plan-Based Awards~~

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1)

Name

Grant Date

Threshold

Target

Maximum

($)

($)

($)

William J. Clough

Non-equity award
— 515,264 858,773
Daniel N. Ford

Non-equity award
— 336,750 561,250
James F. O'Neil

Non-equity award
— 140,922 234,870
(1) These columns show the possible payouts for each named executive officer under the Incentive Plan for 2019 based on the goals set. Additional information is included in the Compensation Discussion and Analysis, and detail regarding actual awards under the Incentive Plan is reported in the Summary Compensation Table.

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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth the outstanding equity awards at December 31, ~~2019~~2021 to each of the named executive officers:

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
Name

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable

Option Exercise
Price ($)

Option
Expiration
William J. Clough⁽¹⁾
5,422 9.00
10/11/2020
Daniel N. Ford ⁽¹⁾
12,598 9.00
10/11/2020
Matthew M. McKenzie ⁽¹⁾
15,100 9.00
10/11/2020
Matthew M. McKenzie ⁽¹⁾
3,300 9.00
10/11/2020
William J. Clough ⁽²⁾
19,363 4.56
4/16/2022
William J. Clough ⁽²⁾
3,300 4.56
4/16/2022
Daniel N. Ford⁽²⁾
12,598 4.56
4/16/2022
Matthew M. McKenzie ⁽²⁾
15,100 4.56
4/16/2022
Matthew M. McKenzie ⁽²⁾
3,300 4.56
4/16/2022
William J. Clough ⁽³⁾
330,000 6.00
9/21/2022
William J. Clough ⁽⁴⁾
200,000 6.25
6/24/2023
Daniel N. Ford ⁽⁴⁾
100,000 6.25
6/24/2023
Matthew M. McKenzie ⁽⁴⁾
50,000 6.25
6/24/2023
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

Name

Number of Securities Underlying Unexercised Options (#)

Option Exercise Price ($)

Option Expiration

Payout Value of Unexercised In-the-Money Options/SARs at Fiscal Year-End ($)

Daniel N. Ford (1)
12,598 4.56
4/16/2022
—
Daniel N. Ford (2)
100,000 6.25
6/24/2023
—
William J. Clough (3)
450,000 1.00
6/1/2026
535,500
Daniel N. Ford (3)
350,000 1.00
6/1/2026
416,500
James F. O'Neil (3)
187,500 1.00
6/1/2026
223,125
William J. Clough (4)
900,000 2.89
4/23/2024
—
Daniel N. Ford (4)
745,000 2.89
4/23/2024
—
James F. O'Neil (4)
1,600,000 2.89
4/23/2024
—

Footnotes:

1.
Effective October 11, 2010, Mr. Clough, Mr. Ford and Mr. McKenzie received bonus options to purchase 37,177 (5,422 remaining outstanding), 12,598 and 15,100 common shares, respectively, within ten years from date of issuance, at a price of $9.00 per share that vested over 4 years: 25% at year one and thereafter in equal monthly installments. Additionally, effective October 11, 2010, for service as a director of the Company, Mr. McKenzie received an option to purchase 3,300 common shares within ten years from date of issuance at a price of $9.00 per share that vested one year after issuance.
2.
Effective April 16, 2012, Mr. ~~Clough, Mr.~~ Ford ~~and Mr. McKenzie~~ received bonus options to purchase ~~37,177 (19,363 remaining outstanding),~~ 12,598 ~~and 15,100~~ common shares ~~respectively,~~ within ten years from date of issuance, at a price of $4.56 per share that vested over 4 years: 25% at year one and thereafter in equal monthly installments. ~~Additionally, effective April 16, 2012, for their service as directors of the Company,~~
2.
Effective June 24, 2013, Mr. ~~Clough and Mr. McKenzie each~~Ford received ~~an option~~bonus options to purchase ~~3,300~~100,000 common shares within ten years from date of issuance, at a price of ~~$4.56~~$6.25 per share that vested one third per year ~~after issuance.~~over 3 years.

3.
Effective ~~September 21, 2012, under the terms of his contract extension,~~June 1, 2020, Mr. Clough, Mr. Ford and Mr. O'Neil received ~~a bonus option to purchase 330,000 common shares,~~450,000, 350,000 and 187,500 cash-settled stock appreciation rights, respectively, within ~~ten~~6 years from the date of issuance, at a price of ~~$6.00~~$1.00 per share that ~~vested~~vest in equal monthly installments over 42 years.

4.
Effective ~~June 24, 2013,~~April 23, 2021, Mr. Clough, Mr. Ford, and Mr. ~~McKenzie~~O'Neil received ~~bonus options to purchase 200,000, 100,000~~900,000, 745,000 and ~~50,000 common shares,~~1,600,000 cash-settled stock appreciation rights, respectively, within ~~ten~~3 years from the date of issuance, at a price of ~~$6.25~~$2.89 per share that ~~vested one third per year~~vests in equal monthly installments over 3 years.

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Director Compensation

For ~~2019,~~2021, each of our directors received the following compensation pursuant to our director compensation plan:

Non-employee directors earned/received annual compensation of $100,000.

The $100,000 annual compensation for non-employee directors is issued in the form of $50,000 cash compensation and $50,000 common stock calculated by using the Nasdaq Stock Market closing price per share on the date of issuance.
~~In addition, the Chairman and member of the Investment Committee received an additional $67,500 and $22,500, respectively, for their services.~~
At the election of each director, all or any portion of the cash compensation may be converted to stock purchase options calculated by using the strike price of ten percent (10%) above the Nasdaq Stock Market closing price per share on the date of grant.
~~At the election of each director, all or any portion of the cash compensation may be converted to stock calculated by using the Nasdaq Stock Market closing price per share on the date of conversion.~~
•
The $100,000 annual compensation for non-employee directors is issued in the form of $50,000 cash compensation and $50,000 common stock calculated by using the Nasdaq Stock Market closing price per share on the date of issuance. In addition, the chairman and member of the Investment Committee received $84,500 and $58,500, respectively of additional cash compensation for their services.
• In March 2021, each director received a 20,000 one-time award for director compensation under the Company's 2020 Equity Compensation Plan.
•
At the election of each director, all or any portion of the cash compensation may be converted to stock purchase options calculated by using the strike price of ten percent (10%) above the Nasdaq Stock Market closing price per share on the date of grant.
•
At the election of each director, all or any portion of the cash compensation may be converted to stock calculated by using the Nasdaq Stock Market closing price per share on the date of conversion.

The following table sets forth the compensation of the non-employee directors for the fiscal year ended December 31, ~~2019:~~2021:

Non-

Equity

Nonqualified

Fees

Incentive

Deferred

paid in

Stock

Option

Plan

Compensation

All Other

Fees
earned
or
paid in
Cash

Stock
Awards

Option
Awards

Non-
Equity
Incentive
Plan
Compensation

Nonqualified
Deferred
Compensation
Earnings

All Other
Compensation

Total

Cash

Awards

Awards

Compensation

Earnings

Compensation

Total

Name

($)

($)

($)

($)

($)

($)

($)

($) (1)

($)

($)

($)

($)

($)

($)

C. Stephen Cochennet
$ 72,503 $ 49,997 $ — $ — $ — $ — $ 122,500
Paul Addison, Director
$ 28,851 $ 28,842 $ — $ — $ — $ — $ 57,693

C. Stephen Cochennet, Director
146,006 159,194 — — — — 305,200

Corey A. Lambrecht, Director
117,503 49,997 — — — — 167,500 172,006 159,194 — — — — 331,200

Sean P. Rooney, Director
50,003 49,997 — — — — 100,000 75,006 146,694 — — — — 221,700

Sarah Tucker, Director (1)
12,501 12,499 — — — — 25,000
Jerry Sue Thornton, Director
20,837 20,830 — — — — 41,667

Sarah Tucker, Director
87,506 159,194 — — — — 246,700

La Forrest Williams, Director
20,837 20,830 — — — — 41,667

~~Footnotes:~~
⁽¹⁾ ~~Ms. Tucker was appointed to the Board of Directors, effective October 1, 2019.~~

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Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding beneficial ownership of our voting shares as of December 31, ~~2019~~2021 by: (i) each ~~shareholder~~stockholder known by us to be the beneficial owner of 5% or more of the outstanding voting shares, (ii) each of our directors and executives and (iii) all directors and executive officers as a group. Except as otherwise indicated, we believe that the beneficial owners of the voting shares listed below, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Shares of common stock issuable upon exercise of options and warrants that are currently exercisable or that will become exercisable within 60 days of December 31, ~~2019~~2021 have been included in the table.

No shares of preferred stock are outstanding at the date of this report.

Beneficial Interest Table

Name and Address of Beneficial Owner^⁽¹⁾

Number of
Securities
Owned

Percentages of
Shares
Beneficially
Owned^⁽²⁾

William J. Clough ⁽³⁾
693,251 2.40
%
James F O'Neil
495,212 1.74
%
C. Stephen Cochennet ⁽⁴⁾
104,333 *
Daniel N. Ford ⁽⁵⁾
206,000 *
Corey A. Lambrecht ⁽⁶⁾
116,638 *
Sean P. Rooney ⁽⁷⁾
134,465 *
Paul D. White ⁽⁸⁾
50,727 *
Sarah Tucker
14,044 *
Bleichroeder LP

1345 Avenue of the Americas, 47th Floor, New York, NY 10105
3,700,542 13.04
%
Heartland Advisors, Inc.

789 North Water Street, Milwaukee, WI 53202
1,756,090 6.19
%
Officers, Directors, Executives as Group
1,814,670 6.34
%

Percentages of

Number of

Shares

Securities

Beneficially

Name and Address of Beneficial Owner ⁽¹⁾

Owned

Owned (2)

Paul T. Addison ⁽³⁾
8,756 * %
William J. Clough ⁽⁴⁾
319,480 * %
James F. O'Neil (5)
1,200,263 1.47 %
C. Stephen Cochennet ⁽⁶⁾
184,667 * %
Daniel N. Ford ⁽⁷⁾
220,433 * %
Corey A. Lambrecht ⁽⁸⁾
193,672 * %
Jerry Sue Thornton ⁽⁹⁾
6,709 * %
Sarah Tucker ⁽¹⁰⁾
94,378 * %
Paul D. White ⁽¹¹⁾
50,727 * %
La Forrest V. Williams ⁽¹²⁾
6,709 * %
Kurt A. Johnson, Jr.

15502 Bayou Oaks Drive, Danbury, Texas 77534
4,408,807 5.38 %
Tidal Power Group LLC

4211 Chance Lane, Rosharon, Texas 77583
7,213,211 8.81 %
Officers, Directors, Executives as Group
2,435,740 2.97 %

Footnotes:

1.
Except as otherwise indicated, the address of each beneficial owner is c/o ~~CUI Global,~~Orbital Energy Group, Inc., ~~20050 SW 112th Avenue, Tualatin, Oregon 97062.~~1924 Aldine Western, Houston, Texas 77038.

2.
Calculated on the basis of ~~28,383,373~~81,906,676 shares of common stock ~~issued and~~ outstanding at December 31, ~~2019~~2021 except that shares of common stock underlying options exercisable within 60 days and issued within 60 days ~~and issued within 60 days~~ of the date hereof are deemed to be outstanding for purposes of calculating the beneficial ownership of securities of such holder of options and shares. A * denotes less than 1 percent beneficially owned.

3.
Mr. ~~Clough’s common stock includes vested options to purchase 558,085 common shares.~~ Addison is a Director.
4. Mr. Clough is a Director, Executive Chairman and Chief ~~Executive Officer/President/General Counsel~~Legal Officer of ~~CUI Global,~~Orbital Energy Group, Inc.

4.5.
Mr. O'Neil is a Director, and Chief Executive Officer of Orbital Energy Group, Inc.
6.
Mr. Cochennet ~~was appointed to the board of directors in December 2017.~~is a Director.

5.7.
Mr. Ford’s shares include vested options to purchase ~~125,196~~112,598 common shares. Mr. Ford is ~~the~~Executive Vice President and former Chief Financial Officer of ~~CUI Global,~~Orbital Energy Group, Inc. ~~and Chief Operating Officer for the Energy Division.~~

6.8.
Mr. Lambrecht’s shares include vested options to purchase ~~16,600~~13,300 common shares. Mr. Lambrecht is a Director.
9.
Ms. Thornton is a Director.
10. Ms. Tucker is a Director.

7.
~~Mr. Rooney’s shares include vested options to purchase 36,987 common shares. Mr. Rooney is a Director.~~
8.11.
Mr. White’s shares include vested options to purchase 7,500 common shares. Mr. White is a ~~Director and President of Orbital-UK.~~Director.
12. Mr. Williams is a Director.

We relied upon Section 4(2) of the Securities Act of 1933 as the basis for an exemption from registration for the issuance of the above securities.

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Employee Equity Incentive Plans
At December 31, ~~2019,~~2021, the Company had outstanding the following equity compensation plan information:

Number of
securities to
be issued upon
exercise
of outstanding
options,
warrants and
rights

Weighted-
average
exercise price
of
outstanding
options
warrants and
rights

Future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Future issuance under equity compensation plans (excluding securities reflected in column (a))

Plan Category

(a)

(b)

(c)

(a)

(b)

(c)

Equity compensation plans approved by security holders
10,167 $ 5.42 — 2,500 $ 4.58 4,130,665
Equity compensation plans not approved by security holders
839,468 6.25 — 235,485 6.16 —
849,635 $ 6.24 — 237,985 $ 6.14 4,130,665

Equity Compensation Plans Approved by ~~Shareholders~~Stockholders
On May 16, 2008 the Company’s board of directors adopted the 2008 Equity Incentive Plan and authorized 1,500,000 shares of Common Stock to fund the Plan which was approved by the Company shareholders at the 2008 Annual Meeting of Shareholders. At the 2009 Annual Meeting of Shareholders, the shareholders approved an amendment to the 2008 Equity Incentive Plan to increase the number of common shares issuable under the plan from 1,500,000 to 3,000,000. These shares have been registered under Form S-8.
As of December 31, ~~2019~~2020 there are no remaining shares available to grant under the 2008 Equity Incentive Plan.
At the 2020 Annual Meeting of Shareholders, the Company’s shareholders approved the Orbital Energy Group 2020 Incentive Award Plan and authorized a share limit of 2,000,000 shares. At the 2021 Annual Meeting of Shareholders, the Company's shareholders approved an increase in authorized share limit to 5,000,000.
The purpose of the Orbital Energy Group 2020 Incentive Award Plan is to enhance our ability to attract, retain and motivate persons who make (or are expected to make) important contributions to Orbital Energy Group by providing these individuals with equity ownership opportunities. Equity awards are intended to motivate high levels of performance and align the interests of our directors, employees and consultants with those of our stockholders by giving directors, employees and consultants the perspective of an owner with an equity stake in Orbital Energy Group and providing a means of recognizing their contributions to the success of Orbital Energy Group. Our board of directors and management believe that equity awards are necessary to remain competitive in its industry and are essential to recruiting and retaining the highly qualified employees who help Orbital Energy Group meet its goals. A primary purpose of the plan is to provide OEG with appropriate capacity to issue equity compensation in anticipation of future acquisitions.
The Orbital Energy Group 2020 Incentive Award Plan provides for the grant of stock options, including ISOs and nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards. Certain awards under the Orbital Energy Group 2020 Incentive Award Plan may constitute or provide for payment of “nonqualified deferred compensation” under Section 409A of the Code. All awards under the Orbital Energy Group 2020 Incentive Award Plan will be set forth in the award agreement, which will detail the terms and conditions of awards, including any applicable vesting and payment terms and post termination exercise limitations. All Awards shall be subject to a minimum vesting of one year from the Grant Date. A brief description of each award type follows.
●
Stock Options and SARs. Stock options provide for the purchase of shares of common stock of Orbital Energy Group in the future at an exercise price set on the grant date. ISOs, in contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are satisfied. SARs entitle their holder, upon exercise, to receive from Orbital Energy Group an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The plan administrator will determine the number of shares covered by each option and SAR, the exercise price of each option and SAR and the conditions and limitations applicable to the exercise of each option and SAR. The exercise price of a stock option or SAR will not be less than 100% of the fair market value of the underlying share on the grant date (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction. The term of a stock option or SAR may not be longer than five years and are subject to any limitations of the Plan or that the Administrator may impose or provide in the Award Agreement.
●
Restricted Stock. Restricted stock is an award of nontransferable shares of common stock of Orbital Energy Group that remain forfeitable unless and until specified conditions are met and which may be subject to a purchase price. Upon issuance of restricted stock, recipients generally have the rights of a stockholder with respect to such shares, which generally include the right to receive dividends and other distributions in relation to the award. The terms and conditions applicable to restricted stock will be determined by the plan administrator, subject to the conditions and limitations contained in the Orbital Energy Group 2020 Incentive Award Plan.
●
RSUs. RSUs are contractual promises to deliver shares of common stock of Orbital Energy Group in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of common stock of Orbital Energy Group prior to the delivery of the underlying shares (i.e., dividend equivalent rights). The Company accounts for forfeitures of employee awards as they occur. The plan administrator may provide that the delivery of the shares underlying RSUs will be deferred on a mandatory basis or at the election of the participant. The terms and conditions applicable to RSUs will be determined by the plan administrator, subject to the conditions and limitations contained in the Orbital Energy Group 2020 Incentive Award Plan or as provided in the Award Agreement.
●
Other Stock or Cash Based Awards. Other stock or cash-based awards are awards of cash, shares of common stock of Orbital Energy Group and other awards valued wholly or partially by referring to, or otherwise based on, shares of common stock of Orbital Energy Group or other property. Other stock or cash-based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of compensation to which a participant is otherwise entitled. The plan administrator will determine the terms and conditions of other stock or cash-based awards, which may include any purchase price, performance goal, transfer restrictions and vesting conditions, subject to the conditions and limitations in the Orbital Energy Group 2020 Incentive Award Plan or as provided in the Award Agreement.
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The Orbital Energy Group 2020 Incentive Award Plan provides that the plan administrator may establish compensation for non-employee directors from time to time subject to the Orbital Energy Group 2020 Incentive Award Plan’s limitations. The plan administrator will from time to time determine the terms, conditions and amounts of all non-employee director compensation in its discretion and pursuant to the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that, the sum of any cash compensation or other compensation and the grant date fair value of any equity awards granted under the Orbital Energy Group 2020 Incentive Award Plan as compensation for services as a non-employee director during any fiscal year may not exceed $250,000 per year of a non-employee director’s service as a non-employee director. The non-employee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving the non-employee Director.
As of December 31, 2021 there are 4,130,665 remaining shares available to grant under the 2020 Incentive Award Plan.
Equity Compensation Plans Not Approved by ~~Shareholders~~Stockholders
Pursuant to a board resolution in January 2009, following recommendation by the Compensation Committee, the 2009 Equity Incentive Plan (Executive), a Non-Qualified Stock Option Plan, was created and funded with 4,200,000 shares of $0.001 par value common stock. The Compensation Committee was appointed as the Plan Administrator to manage the plan. In October 2010 and September 2012, the board of directors authorized an additional 3,060,382 and 330,000 options, respectively, under the 2009 Equity Incentive Plan (Executive).

Issuances of stock options under the 2009 Equity Incentive Plan (Executive) were made to attract, retain and motivate executive and management employees and directors and to encourage these individuals to acquire an equity interest in the Company, to make monetary payments to certain management employees and directors based upon the value of the Company’s stock and to provide these individuals with an incentive to maximize the success of the Company and further the interest of the shareholders. The 2009 Plan allowed for the issuance of Incentive Non-Statutory Options.

The Company has outstanding at December 31, ~~2019,~~2021, the following options issued under equity compensation plans not approved by security holders:

During 2010, the Company issued options to purchase restricted common stock at $9.00 per share to officers and directors as follows: 19,800 options that vest one year after the October 11, 2010 grant date and 82,213 options that vest over four years, 25% at one year after the grant date, thereafter in equally monthly installments. Of these 2010 grants, 51,321 remain outstanding and fully vested at December 31, 2019.
During 2012, the Company granted options to purchase restricted common stock at $4.56 per share to officers and directors as follows: 19,800 options that vest one year after the April 16, 2012 grant date; 64,875 options that vest over four years, 25% at one year after the grant date, thereafter in equal monthly installments, and 330,000 options to purchase restricted common stock at $6.00 per share were granted to an officer that vest in equal monthly installments over the course of forty-eight consecutive months beginning September 2012. Of these 2012 grants, 390,261 remain outstanding and fully vested at December 31, 2019.
•
During 2012, the Company granted options to purchase restricted common stock at $4.56 per share to officers and directors as follows: 19,800 options that vest one year after the April 16, 2012 grant date; 64,875 options that vest over four years, 25% at one year after the grant date, thereafter in equal monthly installments, and 330,000 options to purchase restricted common stock at $6.00 per share were granted to an officer that vest in equal monthly installments over the course of forty-eight consecutive months beginning September 2012. Of these 2012 grants, 37,598 remain outstanding and fully vested at December 31, 2021.
•
During 2013, the Company issued 350,000 options to purchase restricted common stock at $6.25 per share to three officers as follows: one third that vest one year after the June 24, 2013 grant date, one third that vest two years after the grant date and the balance that vest three years after the grant date. At December 31, 2021, 150,000 of these 2013 granted options are outstanding and fully vested.
•
During 2014, the Company issued options to purchase 10,000 shares of restricted common stock at a price of $6.92 per share to each board member who is not an employee of the Company. The options vested in twelve equal installments during 2014. The Company issued options to purchase 42,890 restricted shares of common stock at a price of $6.92 per share to two board members, who chose to receive a portion of their annual board compensation in the form of equity. The Company granted options to purchase 7,500 restricted shares of common stock at a price of $8.15 per share to each of the two then newly elected directors that vested August 31, 2015. Of these 2014 options grants, 47,887 options are outstanding and fully vested at December 31, 2021.

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During 2013, the Company issued 350,000 options to purchase restricted common stock at $6.25 per share to three officers as follows: one third that vest one year after the June 24, 2013 grant date, one third that vest two years after the grant date and the balance that vest three years after the grant date. At December 31, 2019, 350,000 of these 2013 granted options are outstanding and fully vested.
During 2014, the Company issued options to purchase 10,000 shares of restricted common stock at a price of $6.92 per share to each board member who is not an employee of the Company. The options vested in twelve equal installments during 2014. The Company issued options to purchase 42,890 restricted shares of common stock at a price of $6.92 per share to two board members, who chose to receive a portion of their annual board compensation in the form of equity. The Company granted options to purchase 7,500 restricted shares of common stock at a price of $8.15 per share to each of the two newly elected directors that vested August 31, 2015. Of these 2014 options grants, 47,887 options are outstanding and fully vested at December 31, 2019.

As of December 31, ~~2019,~~2021, there are no remaining shares available to grant under the 2009 Equity Incentive Plan (Executive).

The description of the Company’s capital stock does not purport to be complete and is subject to and qualified by its Articles of Incorporation, Bylaws, and amendments thereto and by the provisions of applicable Colorado law. The Company’s transfer agent is Computershare Trust Company, Inc., 350 Indiana Street, Suite 800, Golden, Colorado 80401.

Item 13.  Certain Relationships and Related Transactions and Director Independence

The Board of Directors is responsible for the review and approval of all related party transactions. Although the Board does not have written policies and procedures with respect to the review of related party transactions, we intend that any such transactions will be reviewed by the Board of Directors or one of its committees, which will consider all relevant facts and circumstances and will consider, among other factors:

~~the material terms of the transaction;~~
~~the nature of the relationship between the Company and the related party;~~
~~the significance of the transaction to the Company; and~~
~~whether or not the transaction would be likely to impair (or create the appearance of impairing) the judgment of a director or executive officer to act in the best interest of the Company.~~
•
the material terms of the transaction;
•
the nature of the relationship between the Company and the related party;
•
the significance of the transaction to the Company; and
•
whether or not the transaction would be likely to impair (or create the appearance of impairing) the judgment of a director or executive officer to act in the best interest of the Company.

Except as set forth herein, no related party of the Company, including, but not limited to, any director, officer, nominee for director, immediate family member of a director or officer, immediate family member of any nominee for director, security holder that beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to its outstanding shares, or immediate family member of any such security holder, since the beginning of fiscal year ~~2019,~~2021, has any material interest, direct or indirect, in any transaction or in any presently proposed transaction with the Company where the amount involved exceeds $120,000 which has or will materially affect the Company.

Chief Legal ~~Counsel~~Officer and Executive Chairman of the Board of Directors, William J. Clough’s son, Nicholas J. Clough, serves as Vice President ~~at Orbital Gas Systems, North America, Inc., a wholly owned subsidiary~~ of ~~the Company.~~Greenfield Operations. Additional Information on Nicholas Clough’s compensation is included in Note 11 Related Party Transactions, to the Consolidated Financial Statements under Part II, Item 8, ‘‘Financial Statements and Supplementary Data.’’

~~119~~109
Table of Contents

Item 14.  Principal Accountants Fees and Services

Fees or controlled billings for services billed by the Company’s principal accountant, ~~Perkins & Company, P.C. through June 20, 2019 and~~ Grant Thornton LLP, ~~from June 20, 2019 through December 31, 2019,~~ were as follows:

For the Years Ended December 31,

For the Years Ended December 31,

(In thousands)

2019

2018

2021

2020

Audit fees (1)
$ 738 $ 614 $ 1,064 $ 725
Audit related fees
125 127
Tax fees and other fees (2)
30 83 242 106
Total Fees
$ 893 $ 824 $ 1,306 $ 831
(1)
~~Fees~~Includes fees for audit of the Company's consolidated financial statements, review of the related quarterly financial statements, and ~~expenses~~services that are normally provided by our independent registered public accounting firm in connection with the statutory and regulatory filings, including reviews of documents filed with the SEC.
(2)
Includes fees for tax planning and tax compliance/preparation fees for professional services rendered ~~in connection with the audit~~by our independent registered public accounting firm to certain subsidiaries of the ~~Company's financial statements and internal control over financial reporting and the reviews of the financial statements included in each of the Company's quarterly reports on Form 10-Q.~~
~~(2)~~
~~Tax fees are lower in 2019 as a result of the Company's tax returns prepared in 2019 not being prepared by the principal accountant.~~Company.

In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, the Audit Committee has adopted an informal approval policy that it believes will result in an effective and efficient procedure to pre-approve services performed by the independent registered public accounting firm.

Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons owning more than 10% of our common stock to file reports of ownership and reports of changes of ownership with the Securities and Exchange Commission. These reporting persons are required to furnish us with copies of all Section 16(a) forms that they file. We have made all officers and directors aware of their reporting obligations and have appointed an employee to oversee Section 16 compliance for future filings.

~~Shareholder~~Stockholder Communications
Company ~~shareholders~~stockholders who wish to communicate with the board of directors or an individual director may write to ~~CUI Global,~~Orbital Energy Group, Inc., ~~20050 SW 112th Avenue, Tualatin, Oregon 97062, phone (832) 467-1420~~1924 Aldine Western, Houston, Texas 77038 or to the attention of an individual director. Your letter should indicate that you are a ~~shareholder~~stockholder and whether you own your shares in street name. Letters received will be retained until the next Board meeting when they will be available to the addressed director. Such communications may receive an initial evaluation to determine, based on the substance and nature of the communication, a suitable process for internal distribution, review and response or other appropriate treatment. There is no assurance that all communications will receive a response.

Certain Provisions of the Articles of Incorporation and Colorado Business Corporation Act Relating to Indemnification of Directors and Officers
The Colorado General Corporation Act, as revised, provides that if so provided in the articles of incorporation, the corporation shall eliminate or limit the personal liability of a director to the corporation or to its ~~shareholders~~stockholders for monetary damages for breach of fiduciary duty as a director; except that any such provision shall not eliminate or limit the liability of a director to the corporation or to its ~~shareholders~~stockholders for monetary damages for any breach of the director's duty of loyalty to the corporation or to its ~~shareholders,~~stockholders, acts or omissions not in good faith or, which involve intentional misconduct or a knowing violation of law, unlawful distributions, or any transaction from which the director directly or indirectly derived an improper personal benefit.

Our Articles of Incorporation and bylaws provide that a person who is performing his or her duties shall not have any liability by reason of being or having been a director of the corporation and that the Company shall indemnify and advance expenses to a director or officer in connection with a proceeding to the fullest extent permitted or required by and in accordance with the indemnification sections of Colorado statutes.

Insofar as indemnification for liabilities may be invoked to disclaim liability for damages arising under the Securities Act of 1933, as amended, or the Securities Act of 1934 (collectively, the ‘‘Acts’’), as amended, it is the position of the Securities and Exchange Commission that such indemnification is against public policy as expressed in the Acts and are therefore, unenforceable.

~~120~~110
Table of Contents

Reports to ~~Shareholders~~Stockholders
We intend to voluntarily send Form 10-Ks to our ~~shareholders,~~stockholders, which will include audited consolidated financial statements. We are a reporting company and file reports with the Securities and Exchange Commission (SEC), including this Form 10-K as well as quarterly reports under Form 10-Q. The public may read and copy any materials filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The company files its reports electronically and the SEC maintains an Internet site that contains reports, proxy and information statements and other information filed by the company with the SEC electronically. The address of that site is www.sec.gov.

The company also maintains an Internet site, which contains information about the company, news releases, governance documents and summary financial data. The address of that site is ~~www.CUIGlobal.com.~~www.OrbitalEnergyGroup.com.

Part IV

Item 15. Exhibits, Financial Statement Schedules

No schedules are included because the required information is inapplicable, not required or are presented in the financial
statements or the related notes thereto.

~~121~~111
Table of Contents

EX~~HIBITS~~EXHIBITS

The following exhibits are included as part of this Form 10-K.

Exhibit
No.

Description
2.1 ¹

Asset purchase agreement between and among CUI, Inc., CUI Global, Inc. and Back Porch International, Inc.
2.2 ²

Asset purchase agreement between and among CUI, Inc., CUI Global, Inc. and Bel Fuse Inc.
2.3 ³ Agreement and Plan of Merger effectively changing the Company name to Orbital Energy Group, Inc., as filed with the Secretary of State of the State of Colorado.
3.11(i) ³⁴

Amended Restated Articles of Incorporation that compile prior amendments into a single document.
3.11(ii) ³ Articles of Amendment of Articles of Incorporation effectively changing the Company name to Orbital Energy Group, Inc. as filed with the Secretary of State of the State of Colorado.
~~3.12(ii)~~3.12(iii) ⁴³

Amended and restated corporate bylaws ~~that compile requirements for the nomination~~ of ~~persons for election to the Board of Directors and the proposal of other business to be considered by the corporation’s stockholders.~~Orbital Energy Group, Inc.
10.86 ⁵

Asset Purchase Agreement dated February 23, 2015 to acquire the assets of Tectrol, Inc. and commercial lease attached as exhibits to our Form 8-K filed with the commission March 3, 2015.
10.87 ⁸⁶

Promissory note dated March 13, 2020 for $3,000,000 with Reach Construction Group.
10.88⁸⁶

Security agreement with Reach Construction group dated March 13, 2020.
10.90 ⁸⁶

Three-year lease for Sherman, Texas facility effective December 1, 2019.
10.91 ⁸⁶

Four-year lease for Irving, Texas facility effective January 1, 2020.
10.92 ⁶⁷

Five-year lease for Houston, Texas facility effective November 1, 2017.
10.93^{6 7}

Employment agreement with Paul D. White effective December 1, 2017.
10.94^{4 8}

10-year lease for Tualatin, OR facility effective December 21, 2018.
10.95^{7 9}

Employment agreement with William J. Clough effective May 14, 2019.
10.96 ⁷⁹

Employment agreement with Daniel N. Ford effective May 14, 2019.
10.97 ¹

Employment agreement with James F. O'Neil effective October 1, 2019.
10.98 ⁸⁶

Agreement dated January 1, 2020 between Orbital Gas Systems Limited and VE Technology Limited to acquire VE Technology designated intellectual property.
10.99 ¹⁰ Unsecured Paycheck Protection Program loan agreement sponsored by the Small Business Administration between CUI Global, Inc and Bank of America dated April 30, 2020.
10.100 ¹⁰
Unsecured Paycheck Protection Program loan agreement sponsored by the Small Business Administration between Orbital Gas Systems, North America and Bank of America dated April 30, 2020.
10.101 ¹⁰
Unsecured Paycheck Protection Program loan agreement sponsored by the Small Business Administration between Orbital Power, Inc. and Bank of America dated April 30, 2020.
10.102 ¹⁰ Unsecured Paycheck Protection Program loan agreement sponsored by the Small Business Administration between Reach Construction Group, LLC and Dogwood State Bank dated May 2, 2020.
10.103 ¹¹ Securities Purchase Agreement with institutional investor for issuance of convertible securities dated November 13, 2020
10.104¹² Registered Direct Offering for the sale and issuance by the Company of an aggregate of 5,555,556 common shares for gross proceeds of $10.0 million filed January 4, 2021.
10.105 ¹³ Placement Agency Agreement for the sale of shares at a price to the public of $1.80 per share.
10.106 ¹⁴ Registered Direct Offering for the sale and issuance of an aggregate of 10,000,000 common shares at an offering price of $3.50.
10.107 ¹⁵ Placement Agency Agreement for the sale of shares at a price to the public of $3.50 per share.
10.108 ¹⁶ Amended and restated Securities Purchase Agreement with institutional investor dated February 12, 2021.
10.109 ¹⁷
Equity purchase agreement to purchase Reach Construction Group, LLC.
10.110 ¹⁷
Subordinated promissory note - 18 month seller financed note for the purchase of Reach Construction Group, LLC.
10.110 ¹⁷ Subordinated promissory note - 3 year seller financed note for the purchase of Reach Construction Group, LLC.
10.111 ¹⁸ Note Purchase Agreement with institutional investor for issuance of note payable dated March 23, 2021
10.113 ¹⁹ Note purchase Agreement with institutional investor
21.3 ⁸¹⁹

List of all subsidiaries, state of incorporation and name under which the subsidiary does business.
23.1 ⁸
~~Consent of Perkins & Company, P.C.~~
~~23.2~~ ⁸¹⁹

Consent of Grant Thornton LLP
31.1 ⁸¹⁹

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
31.2 ⁸¹⁹

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
32.1 ⁸¹⁹
Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2 ¹⁹

Certification of Chief ~~Executive~~Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of ~~the Securities Exchange Act of~~ 1934 and 18 U.S.C. Section 1350.
~~32.2~~ 101^8 19

~~Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.~~
~~101~~⁸
Inline XBRL-Related Documents.
101.INS⁸¹⁹

Inline XBRL Instance Document.
101.SCH⁸¹⁹

Inline XBRL Taxonomy Extension Schema Document.
101.CAL^8 19

Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF⁸¹⁹

Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB⁸¹⁹

Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE⁸¹⁹

Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 ¹⁹
Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)
104    Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

Footnotes to Exhibits:

1.
Incorporated by reference to our Report on Form 8-K filed with the Commission on October 2, 2019.
2.
Incorporated by reference to our Report on Form 8-K filed with the Commission on ~~October 2,~~November 14, 2019.
2.3.
Incorporated by reference to our Report on Form 8-K filed with the Commission on ~~November 14, 2019.~~May 8, 2020.
3.
4.
Incorporated by reference to our Proxy Statement and Notice of 2013 Annual ~~Shareholder~~Stockholder Meeting filed with the Commission September 17, 2013.
112
Table of Contents
4.5.
Incorporated by reference to our Report on Form 8-K filed with the Commission on March 3, 2015 and Form 8-K/A filed with the Commission on May 13, 2015.
6. Incorporated by reference to our Report on Form 10-K filed with the Commission on March 30, 2020.
7.
Incorporated by reference to our Report on Form 10-K filed with the Commission on March 14, 2018.
8. Incorporated by reference to our Report on Form 10-K filed with the Commission on March 18, 2019.
~~122~~
~~Table of Contents~~
5.9.
Incorporated by reference to our Report on Form 10-Q filed with the Commission on May 15, 2019.
10. Incorporated by reference to our Report on Form 10-Q filed with the Commission on May 20, 2020.
11. Incorporated by reference to our Report on Form 8-K filed with the Commission on November 18, 2020.
12. Incorporated by reference to our Report on Form 424B5 Prospectus supplement filed with the Commission on January 4, 2021.
13. Incorporated by reference to our Report on Form 8-K filed with the Commission on January 4, 2021.
14. Incorporated by reference to our Report on Form 424B5 Prospectus supplement filed with the Commission on January 15, 2021.
15. Incorporated by reference to our Report on Form 8-K filed with the Commission on January 15, 2021.
16. Incorporated by reference to our Report on Form 8-K filed with the Commission on February 16, 2021.
17. Incorporated by reference to our Report on Form 8-K filed with the Commission on April 6, 2020.
18. Incorporated by reference to our Report on Form 8-K filed with the Commission on March ~~3, 2015 and Form 8-K/A filed with the Commission on May 13, 2015.~~
26, 2021.
6.
~~Incorporated by reference to our Report on Form 10-K filed with the Commission on March 14, 2018.~~
7.
~~Incorporated by reference to our Report on Form 10-Q filed with the Commission on May 15, 2019.~~
8.19.
Filed herewith.

Item 16. Form 10-K Summary

None.

~~Signatures~~Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.

~~CUI Global,~~Orbital Energy Group, Inc.

Signature

Title

Date

By
/s/ James F. O'Neil

CEO/Principal Executive

March ~~30, 2020~~
31, 2022

James F. O'Neil

Officer/Director

By
/s/ ~~Daniel N. Ford~~Nicholas M. Grindstaff

CFO/ Principal Financial

March ~~30, 2020~~
31, 2022

~~Daniel N. Ford~~Nicholas M. Grindstaff

and Accounting Officer

~~123~~113
Table of Contents

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities on the dates indicated.

Signature

Title

Date

By
/s/ James F. O'Neil

CEO/Principal Executive

March ~~30, 2020~~
31, 2022

James F. O'Neil

Officer/Director

By
/s/ William J. Clough

Executive Chairman/Chief Legal

March ~~30, 2020~~
31, 2022

William J. Clough

Counsel/Director

By
/s/ ~~Daniel N. Ford~~Nicholas M. Grindstaff

CFO/ Principal Financial

March ~~30, 2020~~
31, 2022

Daniel N. Ford

and Accounting Officer

By
/s/ Paul Addison, Director
Director
March 31, 2022
Paul Addison
By
/s/ C. Stephen Cochennet

Director

March ~~30, 2020~~
31 2022

C. Stephen Cochennet

By
/s/ Corey A. Lambrecht

Director

March ~~30, 2020~~
31, 2022

Corey A. Lambrecht

By
/s/ ~~Sean P. Rooney~~Jerry Sue Thornton

Director

March ~~30, 2020~~
31, 2022

~~Sean P. Rooney~~Jerry Sue Thornton

By
/s/ Sarah Tucker

Director

March ~~30, 2020~~
31, 2022

Sarah Tucker

By /s/ Paul D. White
Director
March 31, 2022
Paul D. White
By
/s/ ~~Paul D. White~~La Forrest Williams

Director

March ~~30, 2020~~31, 2022

~~Paul D. White~~La Forrest Williams

~~124~~
114

Colorado	~~(3670)~~(1731)	84-1463284
(State or jurisdiction of	(Primary Standard Industrial	(~~Primary Standard Industrial~~I.R.S. Employer
incorporation or organization)	~~(I.R.S. Employer~~
~~incorporation or organization)~~Classification Code Number)	~~Classification Code Number)~~	Identification No.)

	2019			2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,129	)	$	(17,325	)	$	(12,589	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		724			1,103			1,009
Amortization of intangibles		1,637			1,902			1,841
Amortization of note receivable discount		(70	)		—			—
Stock issued and stock to be issued for compensation, royalties and services		215			229			425
Unrealized gain on derivative liability		—			(129	)		(111	)
Non-cash loss on equity method investment in affiliate		1,043			—			—
Non-cash fair value gain on equity method investment purchase		(629	)		—			—
Non-cash royalties, net (see Note 2 - Investment and Note Receivable)		5			(7	)		(3	)
Provision for (credit to) bad debt expense and returns allowances		136			33			(13	)
Deferred income taxes		(2,574	)		(352	)		(1,767	)
Non-cash unrealized foreign currency (gain) loss		(422	)		246			(362	)
Impairment of goodwill and other intangible assets		278			4,347			3,155
Inventory reserve		79			1,592			138
Impairment of deposits and other assets		—			1,509			—
Loss on disposal of assets		31			13			47
Gain on sale of businesses		(14,100	)		—			—

(Increase) decrease in operating assets:
Trade accounts receivable		1,510			(3,841	)		(1,150	)
Inventories		(119	)		(2,235	)		(411	)
Contract assets		(512	)		(61	)		591
Prepaid expenses and other current assets		121			(392	)		(421	)
Right of use assets - Operating leases		1,825			—			—
Deposits and other assets		31			(59	)		(506	)
Increase (decrease) in operating liabilities:
Accounts payable		1,708			1,436			(1,163	)
Operating lease liabilities		(1,755	)		—			—
Accrued expenses		2,189			1,116			(464	)
Refund liabilities		(1,339	)		852			130
Contingent consideration		—			—			3
Contract liabilities		(401	)		(2,260	)		2,252
NET CASH USED IN OPERATING ACTIVITIES		(11,518	)		(12,283	)		(9,369	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of businesses		35,396			—			—
Proceeds from sale of building, net		—			7,720			—
Proceeds from sale of restricted investment		400			—			—
Cash paid for restricted investment		—			(400	)		—
Purchases of property and equipment		(321	)		(1,042	)		(893	)
Proceeds from sale of property and equipment		21			—			8
Cash paid for other intangible assets		(353	)		(492	)		(638	)
Cash paid for convertible note receivable		—			(655	)		—
Cash paid for equity-method investment		(2,068	)		—			—
Proceeds from Notes receivable		313			19			39
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		33,388			5,150			(1,484	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from overdraft facility		6,842			19,532			9,782
Payments on overdraft facility		(8,208	)		(18,122	)		(9,782	)
Proceeds from line of credit		27,483			19,955			22,332
Payments on line of credit		(28,462	)		(18,976	)		(22,332	)
Payments on financing lease obligations		(4	)		(3	)		(29	)
Payments on mortgage note payable		—			(3,350	)		(89	)
Payments on notes payable		(303	)		—			—
Cash payments for repurchases of common stock		(413	)		—			—
Payment to closeout derivative liability		—			(227	)		—

Payments on contingent consideration		—			(45	)		(61	)
Proceeds from sales of common stock, net of offering costs		—			—			18,905
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(3,065	)		(1,236	)		18,726

Effect of exchange rate changes on cash		44			225			156
Net increase (decrease) in cash, cash equivalents and restricted cash		18,849			(8,144	)		8,029
Cash, cash equivalents and restricted cash at beginning of year		4,502			12,646			4,617
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR	$	23,351		$	4,502		$	12,646

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid	$	153		$	237		$	158
Interest paid, net of capitalized interest	$	315		$	520		$	500
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non-cash item for January 1, 2019 adoption of ASC 842 - establishment of right-of-use assets and offsetting lease obligations	$	7,703		$	—		$	—
Note payable, related party assumed by buyer of electromechanical business as partial consideration for purchase of business	$	5,304		$	—		$	—
Non-cash investment in equity method investment	$	3,839		$	—		$	—
Common stock issued and issuable for royalties payable pursuant to product agreements, related party	$	30		$	14		$	16
Common stock issued and to be issued for consulting services and compensation in common stock	$	178		$	358		$	439
Accrued property and equipment purchases at December 31	$	8		$	8		$	27
Accrued investment in other intangible assets at December 31	$	3		$	55		$	15
Payment of insurance policy with short-term note payable	$	776		$	—		$	—

	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(61,214	)	$	(27,447	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		5,208			820
Amortization of intangibles		7,702			4,421
Amortization of debt discount		3,392			75
Gain on extinguishment of debt and loan modifications		(1,134	)		0
Amortization of note receivable discount		(319	)		(288	)
Stock-based compensation and expense		12,168			280
Fair value adjustment to liability for stock appreciation rights		2,054			648
Fair value adjustment to financial instrument liability		(33	)		0
Net loss of affiliate		0			4,806
Provision for bad debt		343			1,639
Deferred income taxes		(10,878	)		(1,006	)
Non-cash unrealized foreign currency gain		492			(310	)
Impairment of assets held for sale		9,185			0
Inventory reserve		(350	)		(424	)
Gain (loss) on disposal of assets		(26	)		39
Gain on sale of businesses		0			(14	)

Change in operating assets and liabilities, net of acquisition:
Trade accounts receivable		(19,173	)		3,675
Inventories		(425	)		3,766
Contract assets		(296	)		(2,250	)
Prepaid expenses and other current assets		41			1,614
Right of use assets/lease liabilities, net of acquisitions:		49			(222	)
Deposits and other assets		(24	)		(1,197	)
Increase (decrease) in operating liabilities:
Accounts payable		(38	)		(3,521	)
Accrued expenses		4,540			(1,856	)
Contract liabilities		3,060			1,720
NET CASH USED IN OPERATING ACTIVITIES		(45,676	)		(15,032	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash received		(132,518	)		(2,981	)
Purchases of property and equipment		(7,779	)		(1,696	)
Deposits on financing lease property and equipment		(762	)		0
Cash paid for working capital adjustment on Power group disposition		0			(2,804	)
Sale of discontinued operations, net of cash		0			(227	)
Proceeds from sale of property and equipment		141			605
Purchase of other intangible assets		(705	)		(11	)
Purchase of convertible note receivable		0			(260	)
Purchase of investments		(1,025	)		(532	)
Proceeds from notes receivable		621			0
NET CASH USED IN INVESTING ACTIVITIES		(142,027	)		(7,906	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit		3,250			100
Payments on line of credit		(1,191	)		(109	)
Payments on financing lease obligations		(1,995	)		(4	)
Proceeds from notes payable, net of debt discounts and issuances costs		143,045			8,145
Payments on notes payable		(9,941	)		(4,131	)
Proceeds from sales of common stock		78,046			0
NET CASH PROVIDED BY FINANCING ACTIVITIES		211,214			4,001

Effect of exchange rate changes on cash		6			110
Net (decrease) increase in cash, cash equivalents and restricted cash		23,517			(18,827	)
Cash, cash equivalents and restricted cash at beginning of year		4,524			23,351
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR	$	28,041		$	4,524

	2021			2020
Income taxes paid (net refunded)	$	(316	)	$	(1,003	)
Interest paid	$	2,257		$	1,025
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non-cash investment in acquisitions including seller notes, equity issued and contingent consideration	$	123,457		$	8,424
Financing note payable issued for payment on certain insurance policies, net of insurance cancellation	$	2,854		$	2,457
Accrued property and equipment purchases at December 31	$	404		$	631

Part I
Item 1.	Business	4
Item 1A.	Risk Factors	97
Item 1B.	Unresolved Staff Comments	2122
Item 2.	Properties	2122
Item 3.	Legal Proceedings	22
Item 4.	Mine Safety Disclosure	22
Part II
Item 5.	Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2223
	Market Value	23
	Description of Securities	2223
Item 6.	~~Selected Financial Data~~Reserved	2823
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2927
	Critical Accounting Policies	2927
	Liquidity and Capital Resources	3431
	Results of Operations	3937
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	4543
Item 8.	Financial Statements and Supplementary Data	4745
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	9290
Item 9A.	Controls and Procedures	9290
Item 9B.	Other Information	9491
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	9592
	Our Corporate Governance Practices	9996
	Audit Committee	~~100~~97
	Audit Committee Report	~~101~~98
	Nominating Committee	~~101~~98
Item 11.	Executive Compensation	~~105~~102
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~117~~107
Item 13.	Certain Relationships, Related Transactions and Director Independence	~~119~~109
Item 14.	Principal Accounting Fees and Services	~~120~~110
Part IV
Item 15.	Exhibits, Financial Statement Schedules	~~121~~111
	Exhibits	~~122~~112
Item 16.	Form 10-K Summary	~~123~~113
	Signatures	~~123~~113
	Certifications

	•	Profitably grow organically and through acquisitions into infrastructure services within the electric power, telecommunications and renewables markets.
	•	~~The Company will continue~~We are committed to ~~identify~~fostering greater diversity within the industries we serve, ensuring that people of color and minority-owned and/or operated businesses have ample opportunities to ~~utilize the unique VE~~ ~~Technology~~ ~~beyond the existing product offering, with a focus on gas sampling, thermowells,~~join in and ~~trace element sampling applications.~~benefit from our growth.

	•	making it more difficult for us to meet our payment and other obligations under our outstanding debt;
	•	an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which event of default could result in an acceleration of our debt maturity and higher default-level interest rates.
	•	reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions or strategic investments, and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;
	•	subjecting us to the risk of increasing interest expense on variable rate indebtedness.
	•	limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to changes in our business, the industries in which we operate and the general economy;
	•	limiting our ability to pursue business opportunities that become available to us; and
	•	placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged.

	Period Ending
Index	12/31/2014 *		12/31/2015		12/31/2016		12/31/2017		12/31/2018		12/31/2019
CUI Global, Inc.	$	100.00	$	94.50	$	93.02	$	36.91	$	16.51	$	14.77
NASDAQ Composite		100.00		106.96		116.45		150.96		146.67		200.49
Russell 2000		100.00		95.59		115.95		132.94		118.30		148.49

(In thousands, except share data)	As of December 31,
	2019		2018		2017		2016		2015
Selected Balance Sheet Data:
Cash and cash equivalents	$	23,351	$	3,979	$	12,646	$	4,617	$	7,267
Total current assets		41,694		35,481		41,276		32,103		38,157
Total assets		64,158		70,167		87,909		79,843		90,848
Total current liabilities		15,995		18,586		18,914		17,738		17,055
Total liabilities		21,041		28,629		30,423		31,208		31,332
Total stockholders' equity		43,117		41,538		57,486		48,635		59,516
Common shares outstanding		28,383,373		28,552,886		28,406,856		20,916,848		20,806,219

	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	$	5,729	$	9,980	$	576	$	—	$	16,285

Operating lease obligations:
Operating lease - minimum payments		5,767		8,789		4,093		2,714		21,363

Notes payable obligations:
Notes payable maturities plus interest		97,659		92,077		130,053		—		319,789
Total Obligations	$	109,155	$	110,846	$	134,722	$	2,714	$	357,437


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


(Dollars in thousands)		For the Year Ended December 31, 2020
	Telecommunications		Electric Power			Renewables			Other			Total
Total Revenues	$	—	$	8,482		$	13,005		$	—		$	21,487
Loss from operations	$	—	$	(4,942	)	$	(5,479	)	$	(11,610	)	$	(22,031	)

	For the Years Ended December 31,
Revenues by Segment			Percent
(Dollars in thousands)	2021		Change			2020
Telecommunications	$	27,799		100.0	%	$	—
Electric Power		43,599		414.0	%		8,482
Renewables		11,550		(11.2	)%		13,005
Total revenues	$	82,948		286.0	%	$	21,487

	For the Years Ended December 31,
Depreciation and Amortization by Segment			Percent
(Dollars in thousands)	2021		Change			2020
Telecommunications	$	2,326		100.0	%	$	—
Electric Power		5,969		1278.5	%		433
Renewables		2,931		(10.6	)%		3,278
Other		1,684		10.1	%		1,530
Total depreciation and amortization (1)	$	12,910		146.3	%	$	5,241

	Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)	46

Consolidated Balance Sheets	48

Consolidated Statements of Operations	49

Consolidated Statements of Comprehensive Income and (Loss)	50

Consolidated Statements of Changes in Stockholders’ Equity	51

Consolidated Statements of Cash Flows	52

Notes to Consolidated Financial Statements	54 – 89

	Payments due by period
(In thousands)	Less than 1 year		1 to 3 years		3 to 5 years		After 5 years		Total
Financing lease obligations:
Minimum lease payments	$	4	$	1	$	—	$	—	$	5

Operating lease obligations:
Operating leases		1,173		2,137		1,235		2,688		7,233

Notes payable obligations:
Notes payable maturities		473		—		—		—		473
Total Obligations	$	1,650	$	2,138	$	1,235	$	2,688	$	8,076

(Dollars in thousands)	For the Year Ended December 31, 2019
	Energy			Percent of Segment Revenues			Other			Percent of Segment Revenues			Total			Percent of Total Revenues
Total revenues	$	23,492			100.0	%	$	—			—	%	$	23,492			100.0	%
Cost of revenues		17,680			75.3	%		—			—	%		17,680			75.3	%
Gross profit		5,812			24.7	%		—			—	%		5,812			24.7	%
Operating expenses:
Selling, general and administrative expense		12,657			53.9	%		7,406			—	%		20,063			85.4	%
Depreciation and amortization		1,520			6.5	%		24			—	%		1,544			6.6	%
Research and development		139			0.6	%		—			—	%		139			0.6	%
Provision for bad debt		131			0.5	%		—			—	%		131			0.5	%
Other operating income		(20	)		(0.1	)%		—			—	%		(20	)		(0.1	)%
Total operating expenses		14,427			61.4	%		7,430			—	%		21,857			93.0	%
Loss from operations	$	(8,615	)		(36.7	)%	$	(7,430	)		—	%	$	(16,045	)		(68.3	)%

(Dollars in thousands)	For the Year Ended December 31, 2018
	Energy			Percent of Segment Revenues			Other			Percent of Segment Revenues			Total			Percent of Total Revenues
Total revenues	$	20,342			100.0	%	$	—			—	%	$	20,342			100.0	%
Cost of revenues		17,783			87.4	%		—			—	%		17,783			87.4	%
Gross profit		2,559			12.6	%		—			—	%		2,559			12.6	%
Operating expenses:
Selling, general and administrative expense		13,687			67.3	%		4,942			—	%		18,629			91.6	%
Depreciation and amortization		1,525			7.5	%		24			—	%		1,549			7.6	%
Research and development		155			0.7	%		—			—	%		155			0.7	%
Provision (credit) for bad debt		13			0.1	%		—			—	%		13			0.1	%
Impairment of goodwill and intangible assets		4,347			21.4	%		—			—	%		4,347			21.4	%
Total operating expenses		19,727			97.0	%		4,966			—	%		24,693			121.4	%
Loss from operations	$	(17,168	)		(84.4	)%	$	(4,966	)		—	%	$	(22,134	)		(108.8	)%

(Dollars in thousands)	For the Year Ended December 31, 2017
	Energy			Percent of Segment Revenues			Other			Percent of Segment Revenues			Total			Percent of Total Revenues
Total revenues	$	18,843			100.0	%	$	—			—	%	$	18,843			100.0	%
Cost of revenues		12,913			68.5	%		—			—	%		12,913			68.5	%
Gross profit		5,930			31.5	%		—			—	%		5,930			31.5	%
Operating expenses:
Selling, general and administrative expense		12,588			66.8	%		4,918			—	%		17,506			92.9	%
Depreciation and amortization		1,345			7.2	%		21			—	%		1,366			7.3	%
Research and development		222			1.2	%		—			—	%		222			1.2	%
Provision for bad debt		(16	)		(0.1	)%		—			—	%		(16	)		(0.1	)%
Impairment of goodwill and intangible assets		3,152			16.7	%		—			—	%		3,152			21.4	%
Other operating expenses		5			—	%		—			—	%		5			16.7	%
Total operating expenses		17,296			91.8	%		4,939			—	%		22,235			—	%
Loss from operations	$	(11,366	)		(60.3	)%	$	(4,939	)		—	%	$	(16,305	)		1.2	%

	For the Years Ended December 31,
Cost of Revenues by Segment			Percent					Percent
(Dollars in thousands)	2019		Change			2018		Change			2017
Energy	$	17,680		(0.6	)%	$	17,783		37.7	%	$	12,913
Other		—		—	%		—		—	%		—
Total cost of revenues	$	17,680		(0.6	)%	$	17,783		37.7	%	$	12,913

	For the Years Ended December 31,
Selling, General, and Administrative Expense by Segment			Percent					Percent
(Dollars in thousands)	2019		Change			2018		Change			2017
Energy	$	12,657		(7.5	)%	$	13,687		8.7	%	$	12,588
Other		7,406		49.9	%		4,942		0.5	%		4,918
Total selling, general and administrative expense	$	20,063		6.0	%	$	18,629		6.4	%	$	17,506

	For the Years Ended December 31,
Research and Development by Segment			Percent					Percent
(Dollars in thousands)	2019		Change			2018		Change			2017
Energy	$	139		(10.3	)%	$	155		(30.2	)%	$	222
Other		—		—	%		—		—	%		—
Total research and development	$	139		(10.3	)%	$	155		(30.2	)%	$	222

	For the Years Ended December 31,
Provision for (Credit to) Bad Debt by Segment			Percent					Percent
(Dollars in thousands)	2019		Change			2018		Change			2017
Energy	$	131		907.7	%	$	13		(181.3	)%	$	(16	)
Other		—		—	%		—		—	%		—
Total provision for (credit to) bad debt	$	131		907.7	%	$	13		(181.3	)%	$	(16	)

	U.S. Dollar			British Pound Sterling
Fiscal year ended December 31, 2019
Revenues		40	%		60	%
Operating expenses		61	%		39	%
Fiscal year ended December 31, 2018
Revenues		23	%		77	%
Operating expenses		41	%		59	%
Fiscal year ended December 31, 2017
Revenues		18	%		82	%
Operating expenses		43	%		57	%

	Page
Reports of Independent Registered Public Accounting ~~Firms~~Firm (PCAOB ID Number 248)	4846

Consolidated Balance Sheets	5048

Consolidated Statements of Operations	5149

Consolidated Statements of Comprehensive Income and (Loss)	5250

Consolidated Statements of Changes in Stockholders’ Equity	5351

Consolidated Statements of Cash Flows	5452

Notes to Consolidated Financial Statements	5554 – 9089

~~Quarterly Financial Data~~	91

	December 31,			December 31,			December 31,			December 31,
(In thousands, except share and per share amounts)	2019			2018			2021			2020
Assets:
Current Assets:
Cash and cash equivalents	$	23,351		$	3,979		$	26,865		$	3,046
Trade accounts receivable, net of allowance of $47 and $17, respectively		5,295			5,034
Restricted cash - current								150			452
Trade accounts receivable, net of allowance								48,752			5,689
Inventories		1,631			1,622			1,335			0
Contract assets		2,309			1,744			7,478			6,820
Note receivable, current portion		—			318
Notes receivable, current portion								3,536			44
Prepaid expenses and other current assets		2,215			1,512			6,919			2,601
Assets held for sale, current portion		6,893			21,272			6,679			6,146
Total current assets		41,694			35,481			101,714			24,798
Property and equipment, less accumulated depreciation of $1,441 and $1,284, respectively		4,454			4,540
Investment in VPS - equity method		4,865			—
Property and equipment, less accumulated depreciation								29,638			2,084
Investment								1,063			1,063
Right of use assets - Operating leases		5,524			—			18,247			6,268
Other intangible assets, less accumulated amortization of $11,191 and $9,601, respectively		4,298			5,353
Restricted cash		—			523
Right of use assets - Financing leases								14,702			0
Goodwill								100,899			7,006
Other intangible assets, net								142,656			10,553
Restricted cash, noncurrent portion								1,026			1,026
Note receivable		3,253			—			836			3,601
Convertible note receivable		—			655
Deposits and other assets		70			508			1,558			120
Assets held for sale, noncurrent portion		—			23,107			0			9,526
Total assets	$	64,158		$	70,167		$	412,339		$	66,045

Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable	$	2,904		$	1,520		$	10,111		$	8,960
Short-term overdraft facility		—			1,344
Notes payable, current		473			—			72,774			11,681
Line of credit								2,500			441
Operating lease obligations - current portion		821			—			4,674			1,369
Financing lease obligations - current portion								4,939			0
Accrued expenses		5,159			1,893			28,301			4,372
Contract liabilities		1,668			1,956			6,503			4,873
Deferred gain on leaseback, current portion		—			289
Financial instrument liability								825			0
Liabilities held for sale, current portion		4,970			11,584			4,367			5,380
Total current liabilities		15,995			18,586			134,994			37,076

Deferred tax liabilities								260			0
Notes payable, less current portion								156,605			4,850
Operating lease obligations, less current portion		4,852			—			13,555			4,774
Deferred gain on leaseback, less current portion		—			2,599
Financing lease obligations, less current portion								9,939			0
Other long-term liabilities								720			1,368
Liabilities held for sale, noncurrent portion		—			7,241			0			830
Other long-term liabilities		194			203
Total liabilities		21,041			28,629			316,073			48,898

Commitments and contingencies

Stockholders' Equity:
Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at December 31, 2019 or December 31, 2018		—			—
Common stock, par value $0.001; 325,000,000 shares authorized; 28,383,373 shares issued and outstanding at December 31, 2019 and 28,552,886 shares issued and outstanding at December 31, 2018		29			29
Preferred stock, par value $0.001; 10,000,000 shares authorized; no shares issued at December 31, 2021 or December 31, 2020								0			0
Common stock, par value $0.001; 325,000,000 shares authorized; 82,259,739 shares issued and 81,906,676 shares outstanding at December 31, 2021 and 31,029,642 shares issued and 30,676,579 shares outstanding at December 31, 2020								82			31
Additional paid-in capital		170,106			169,898			311,487			171,616
Treasury stock at cost; 353,063 shares held at December 31, 2019 and 0 shares held at December 31, 2018		(413	)		—
Treasury stock at cost; 353,063 shares held at December 31, 2021 and December 31, 2020								(413	)		(413	)
Accumulated deficit		(122,234	)		(123,993	)		(210,934	)		(149,681	)
Accumulated other comprehensive loss		(4,371	)		(4,396	)		(3,995	)		(4,406	)
Total Orbital Energy Group, Inc.'s stockholders' equity								96,227			17,147
Noncontrolling interest								39			0
Total stockholders' equity		43,117			41,538			96,266			17,147
Total liabilities and stockholders' equity	$	64,158		$	70,167		$	412,339		$	66,045

																Accumulated
					Additional											Other			Total OEG				Non-	Total
	Common Stock				Paid-in		Treasury Stock						Accumulated			Comprehensive			Stockholders'			controlling		Stockholders'
	Shares		Amount		Capital		Shares			Amount			Deficit			Income (Loss)			Equity			Interest		Equity
Balance, January 1, 2020		28,736,436	$	29	$	170,106		(353,063	)	$	(413	)	$	(122,234	)	$	(4,371	)	$	43,117		$	0	$	43,117
Common stock issued for acquisition		2,000,000		2		1,222		0			0			0			0			1,224			0		1,224
Common stock issued for compensation, services, and royalty payments		293,206		0		288		0			0			0			0			288			0		288
Net loss for the year ended December 31, 2021		—		—		—		—			—			(27,447	)		—			(27,447	)		0		(27,447	)
Other comprehensive loss		—		—		—		—			—			—			(35	)		(35	)		0		(35	)
Balance, December 31, 2020		31,029,642	$	31	$	171,616		(353,063	)	$	(413	)	$	(149,681	)	$	(4,406	)	$	17,147		$	0	$	17,147
Issuance of common stock via equity raises		25,966,515		26		78,020		—			—			—			—			78,046			0		78,046
Common stock issued for acquisitions		18,653,576		18		36,917		0			0			0			0			36,935			0		36,935
Common stock issued and issuable for compensation, services and royalty payments		1,891,056		2		12,155		—			—			—			—			12,157			0		12,157
Common stock issued to lenders for OID for $105 million debt		1,636,651		2		3,811		0			0			0			0			3,813			0		3,813
Common stock issued for debt repayment		3,082,299		3		8,968		—			—			—			—			8,971			0		8,971
Net loss		—		—		—		—			—			(61,253	)		0			(61,253	)		39		(61,214	)
Other comprehensive loss		—		—		—		—			—			—			411			411			0		411
Balance, December 31, 2021		82,259,739	$	82		311,487		(353,063	)		(413	)		(210,934	)		(3,995	)		96,227			39		96,266

					Additional											Accumulated Other			Total
	Common Stock				Paid-in		Treasury Stock						Accumulated			Comprehensive			Stockholders'
	Shares		Amount		Capital		Shares			Amount			Deficit			Income (Loss)			Equity
Balance, December 31, 2016		20,916,848	$	21	$	150,174		—		$	—		$	(95,970	)	$	(5,590	)	$	48,635
Issuance of common stock		7,392,856		7		18,898		—			—			—			—			18,905
Common stock issued for exercises of options		245		—		—		—			—			—			—			—
Common stock issued for compensation, services and royalty payments		96,907		—		455		—			—			—			—			455
Net loss for the year ended December 31, 2017		—		—		—		—			—			(12,589	)		—			(12,589	)

Other comprehensive income		—		—		—		—			—			—			2,080			2,080
Balance, December 31, 2017		28,406,856		28		169,527		—			—			(108,559	)		(3,510	)		57,486

Cumulative effect of accounting change		—		—		—		—			—			1,891			—			1,891
Balance, January 1, 2018, adjusted		28,406,856		28		169,527		—			—			(106,668	)		(3,510	)		59,377
Common stock issued for compensation, services, and royalty payments		146,030		1		371		—			—			—			—			372
Net loss for the period ended December 31, 2018		—		—		—		—			—			(17,325	)		—			(17,325	)

Other comprehensive loss		—		—		—		—			—			—			(886	)		(886	)
Balance, December 31, 2018		28,552,886		29		169,898		—			—			(123,993	)		(4,396	)		41,538
Cumulative effect of accounting change		—		—		—		—			—			2,888			—			2,888
Balance, January 1, 2019, adjusted		28,552,886		29		169,898		—			—			(121,105	)		(4,396	)		44,426
Common stock issued for compensation, services, and royalty payments		183,550		—		208		—			—			—			—			208
Common stock purchased as treasury shares		—		—		—		(353,063	)		(413	)		—			—			(413	)
Net loss for the year ended December 31, 2019		—		—		—		—			—			(1,129	)		—			(1,129	)
Other comprehensive income		—		—		—		—			—			—			25			25
Balance, December 31, 2019		28,736,436	$	29	$	170,106		(353,063	)	$	(413	)	$	(122,234	)	$	(4,371	)	$	43,117

(In thousands)

	For the Year									For the Year
	Ended December 31,									Ended December 31,

Major classes of line items constituting pretax profit (loss) of discontinued operations	2019			2018			2017			2021			2020

Revenues	$	56,476		$	76,447		$	64,432		$	19,855		$	33,278
Cost of revenues		(37,086	)		(50,096	)		(42,493	)		(14,193	)		(23,637	)
Selling, general and administrative expense		(19,384	)		(17,712	)		(16,415	)		(8,550	)		(11,205	)
Depreciation and amortization		(300	)		(603	)		(797	)		(1,638	)		(1,489	)
Research and development		(854	)		(2,647	)		(2,303	)		(2	)		(45	)
Provision for bad debt		(5	)		(20	)		(3	)
Impairment of goodwill and intangible assets		(278	)		—			(3	)
(Provision) credit for bad debt											3			(13	)
Impairment of assets held for sale											(9,185	)		0
Gain on extinguishment of PPP loan											779			0
Interest expense		(277	)		(286	)		(299	)		(2	)		(5	)

Other income and expense		(113	)		52			(118	)
Pretax (loss) profit of discontinued operations related to major classes of pretax (loss) profit		(1,821	)		5,135			2,001
Other income and (expense)											228			(98	)
Pretax profit (loss) of discontinued operations related to major classes of pretax profit (loss)											(12,705	)		(3,214	)
Pretax gain on sale of certain power and electromechanical businesses		14,100			—			—			0			117
Pretax gain on assets contributed as part of the purchase of VPS		629			—			—
Total pretax income on discontinued operations		12,908			5,135			2,001			(12,705	)		(3,097	)
Income tax expense		411			1,136			645
Income tax benefit											(1,334	)		(1,352	)

Total income from discontinued operations	$	12,497		$	3,999		$	1,356		$	(11,371	)	$	(1,745	)

	Estimated Useful Life (in years)
Buildings and improvements	5	to	39
Furniture and equipment	3	to	10
Vehicles	3	to	5

	Estimated
	Useful
	Life (in years)
Leasehold improvements		5 to 10
Equipment		3 to 10

	Estimated
	Useful
	Life (in years)
Finite-lived intangible assets
Order backlog		1
Customer Relationships- Front Line Power Construction		15
Trade name - Reach Construction Group		1
Customer relationships - Reach Construction Group, LLC		5
Non-compete agreements - Reach Construction Group, LLC		5
Customer Relationships - Gibson Technical Services		10
Customer Relationships - IMMCO		10
Technology- Know How		3
Non-compete agreements-GTS		5
Software, at cost		3 to 5

(In thousands)	As of December 31,		As of January 1,
	2018		2018
Current contract liabilities	$	1,956	$	4,386
Long-term contract liabilities ⁽¹⁾		129		84
Total contract liabilities	$	2,085	$	4,470

	For the Year Ended December 31,
	2021			2020
Total contract liabilities - January 1	$	4,873		$	0
Contract liability additions acquired through acquisition		100			3,349
Contract additions, net		6,371			1,524
Contract settlements		(3,140	)		0
Revenue recognized		(1,701	)		0
Total contract liabilities - December 31	$	6,503		$	4,873