Orbital Energy Group, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1

Attached files

file	filename
8-K - FORM 8-K - Orbital Energy Group, Inc.	v342229_8k.htm
EX-99.3 - EXHIBIT 99.3 - Orbital Energy Group, Inc.	v342229_ex99-3.htm
EX-99.2 - EXHIBIT 99.2 - Orbital Energy Group, Inc.	v342229_ex99-2.htm

Exhibit 99.1 Financial Statements of Orbital Gas Systems Limited

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND SUPPLEMENTARY DATA

Orbital Gas Systems Limited		Page
Report of Independent Auditors		F-1
Profit and Loss Account for the Years Ended June 30, 2012 and 2011		F-2
Statement of Total Recognized Gains and Losses for the Years Ended June 30, 2012 and 2011		F-3
Note of Historical Cost Profits and Losses for the Years Ended June 30, 2012 and 2011		F-3
Balance Sheet for as of June 30, 2012 and 2011		F-4
Cash Flow Statement for the Years Ended June 30, 2012 and 2011		F-5
Reconciliation of Movements in Shareholders' Funds		F-7
Accounting Policies and Notes to the Financial Statements		F-8

Orbital Gas Systems Limited		Page
Unaudited Profit and Loss Account for the Six Months Ended June 30, 2012 and 2011		F-19
Unaudited Statement of Total Recognized Gains and Losses for the Six Months Ended June 30, 2012 and 2011		F-20
Unaudited Balance Sheet for as of June 30, 2012 and 2011		F-21
Unaudited Cash Flow Statement for the Six Months Ended June 30, 2012 and 2011		F-22
Unaudited Reconciliation of Movements in Shareholders' Funds for the Six Months Ended June 30, 2012 and 2011		F-23
Accounting Policies and Notes to the Financial Statements		F-24
Note of Historical Cost Profits and Losses for the Years Ended June 30, 2012 and 2011		F-27

INDEPENDENT AUDITOR’S REPORT

Shareholders and Board of Directors

Orbital Gas Systems Limited

We have audited the accompanying balance sheets of Orbital Gas Systems Limited as of June 30, 2012 and 2011, and the related profit and loss accounts, statements of total recognized gains and losses, note of historical cost profits and losses, reconciliation of net cash flow to movement in net funds, reconciliation of movements in shareholders’ funds, and statements of cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Orbital Gas Systems Limited as of June 30, 2012 and 2011, and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United Kingdom.

Generally accepted accounting principles in the United Kingdom vary in certain significant respects from generally accepted accounting principles in the United States of America. Application of generally accepted accounting principles in the United States of America (“U.S. GAAP”) would have affected the results of operations of the company for the years ended June 30, 2012 and 2011 to the extent summarized in Note 22 to the financial statements.

/s/ BAKER TILLY VIRCHOW KRAUSE, LLP

Minneapolis, Minnesota

March 2, 2013

F-1

Orbital Gas Systems Limited

PROFIT AND LOSS ACCOUNT

for the years ended 30 June 2012 and 2011

			2012			2011
	Note		£			£
TURNOVER – CONTINUING OPERATIONS		1		13,997,850			13,751,265
Cost of sales				(7,808,629	)		(8,844,758	)
GROSS PROFIT				6,189,221			4,906,507
Distribution costs				(282,498	)		(239,807	)
Administrative expenses				(3,640,460	)		(3,687,610	)
OPERATING PROFIT – CONTINUING OPERATIONS				2,266,263			979,090
Interest receivable and similar income		2		21,697			14,184
Interest payable and similar charges		3		(4,822	)		(836	)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION		4 – 5		2,283,138			992,438
Taxation		6		(493,617	)		(206,224	)
PROFIT FOR THE FINANCIAL YEAR		15		1,789,521			786,214

F-2

Orbital Gas Systems Limited

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

for the years ended 30 June 2012 and 2011

	2012		2011
	£		£
Profit for the financial year		1,789,521		786,214
Unrealised deficit on revaluation of properties		—		(42,547	)
TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE FINANCIAL YEAR		1,789,521		743,667

NOTE OF HISTORICAL COST PROFITS AND LOSSES

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION		2,283,138		992,438
Difference between a historical cost depreciation charge and the actual depreciation charge calculated on the revalued amount		2,768		(878	)
HISTORICAL COST PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION		2,285,906		991,560
HISTORICAL COST PROFIT FOR THE YEAR RETAINED AFTER TAXATION		1,792,289		785,336

F-3

Orbital Gas Systems Limited

BALANCE SHEET

for the years ended 30 June 2012 and 2011

	Note		2012						2011
	£		£			£			£			£
FIXED ASSETS
Tangible assets		7					865,834						735,819
CURRENT ASSETS
Stocks		9		386,937						683,034
Debtors		10		3,927,279						2,899,231
Cash at bank and in hand				3,883,485						4,393,293
				8,197,701						7,975,558
CREDITORS: Amounts falling due within one year		11		(6,294,482	)					(7,813,000	)
NET CURRENT ASSETS							1,903,219						162,558
TOTAL ASSETS LESS CURRENT LIABILITIES							2,769,053						898,377
CREDITORS: Amounts falling due after more than one year		12					(70,080	)					—
PROVISION FOR LIABILITIES		13					(28,268	)					(17,193	)
NET ASSETS							2,670,705						881,184
CAPITAL AND RESERVES
Called up share capital		14					3,817						3,817
Revaluation reserve		15					87,940						85,172
Capital redemption reserve		15					1,183						1,183
Profit and loss account		15					2,577,765						791,012
SHAREHOLDERS’ FUNDS							2,670,705						881,184

F-4

Orbital Gas Systems Limited

CASH FLOW STATEMENT

for the years ended 30 June 2012 and 2011

			2012			2011
	Note		£			£
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES		16		(228,288	)		2,430,757
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE		17a		16,875			13,348
TAXATION				(190,344	)		(133,287	)
CAPITAL EXPENDITURE		17b		(39,482	)		(96,118	)
				(441,239	)		2,214,700
FINANCING		17c		(68,569	)		(35,781	)
(DECREASE)/INCREASE IN CASH IN THE YEAR				(509,808	)		2,178,919

F-5

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

for the years ended 30 June 2012 and 2011

			2012			2011
	Note		£			£
(DECREASE)/INCREASE IN CASH IN THE YEAR				(509,808	)		2,178,919
New finance leases				(181,576	)		—
Change in net debt resulting from cash flows				68,569			35,781
MOVEMENT IN NET DEBT				(622,815	)		2,214,700
NET FUNDS AT START OF YEAR				4,388,852			2,174,152
NET FUNDS AT END OF YEAR		18		3,766,037			4,388,852

F-6

Orbital Gas Systems Limited

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS

for the years ended 30 June 2012 and 2011

	2012		2011
	£		£
PROFIT FOR THE FINANCIAL YEAR		1,789,521		786,214
Other recognised gains and losses relating to the year		—		(42,547	)
NET ADDITION TO SHAREHOLDERS’ FUNDS		1,789,521		743,667
Opening shareholders’ funds		881,184		137,517
CLOSING SHAREHOLDERS’ FUNDS		2,670,705		881,184

F-7

Orbital Gas Systems Limited

ACCOUNTING POLICIES

AUTHORIZATION OF NON-STATUTORY FINANCIAL STATEMENTS

The financial statements of Orbital Gas Systems Limited (‘‘Orbital’’ or ‘‘the company’’) were authorised for issue by the Board of Directors and the balance sheet was signed on the board’s behalf by a director. Orbital is a private limited company incorporated and domiciled in England and Wales.

PRINCIPAL ACTIVITIES

The principal activity of the company during the year was that of the supply and installation of gas control systems.

BASIS OF ACCOUNTING

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of freehold properties, and in accordance with applicable United Kingdom accounting standards.

The financial statements present information about the company as an individual undertaking and not about its group, as the company has taken advantage of the exemption provided by section 402 of the Companies Act 2006 not to prepare consolidated financial statements as the directors consider that the company’s subsidiary be excluded from consolidation on the grounds of it being immaterial for purpose of true and fair view. The subsidiary company is a dormant company.

The financial statements are presented in Sterling.

BASIS OF PREPARATION

The directors are constantly reviewing resource competence and availability and believe that the company has adequate current resources to continue in operational existence for at least the next twelve months. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

TANGIBLE FIXED ASSETS

Tangible fixed assets are stated at cost or valuation net of depreciation and any provision for impairment.

Depreciation is provided on all tangible fixed assets except for freehold land at rates calculated to write each asset down to its estimated residual value over its expected useful life, as follows:-

Freehold property	- 2% on cost
Improvements to freehold property	- 10% on cost
Plant and machinery	- 20% on cost
Fixtures and fittings	- 10% – 33% on cost
Computer equipment	- 33% on cost
Motor vehicles	- 25% on cost

Freehold properties are revalued in accordance with FRS 15 with a full valuation carried by professionally qualified Chartered Surveyors on an existing use open market value basis, in accordance with the Statement of Assets Valuation Practice No. 4 and the Guidance Notes of the Royal Institution of Chartered Surveyors every five years and an interim valuation is carried out in year three.

IMPAIRMENTS

Fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable or as otherwise required by relevant accounting standards.

Shortfalls between the carrying value of fixed assets and their recoverable amounts, being the higher of net realisable value and value-in-use, are recognised as impairments. Impairments of revalued assets, except those caused by a clear consumption of economic benefit, are recognised in the statement of total recognised gains and losses until the carrying amount reaches depreciated historic cost. All other impairment losses are recognised in the profit and loss account.

F-8

Orbital Gas Systems Limited

ACCOUNTING POLICIES

STOCKS AND WORK IN PROGRESS

Stocks are stated at the lower of cost and net realisable value. In determining the cost of raw materials, consumables and goods purchased for resale, the weighted average purchase price is used.

For work in progress and finished goods, cost is taken as production cost, which includes an appropriate proportion of attributable overheads.

LONG TERM CONTRACTS

Long term contracts are assessed on a contract by contract basis and reflected in the profit and loss account by recording turnover and related costs as contract activity progresses. Turnover is ascertained in a manner appropriate to the stage of completion of the contract, and credit taken for profit earned to date when the outcome of the contract can be assessed with reasonable certainty. In respect of contracts where the degree of work completed is certified by either a third party or the customer then turnover is recognised based on these work certificates. In respect of contracts where work certificates are not obtained then turnover is recognised based on a percentage of completion against the contract value. Percentage completion is measured on the basis of costs incurred to the year end against the estimated total costs of the contract. The amount by which turnover exceeds payments on account is classified as ‘‘amounts recoverable on contracts’’ and included in debtors; to the extent that payments on account exceed relevant turnover and long term contract balances, the excess is included as a creditor. The amount of long term contracts, at cost net of amounts transferred to cost of sales, less provision for foreseeable losses and payments on account not matched with turnover, is included within stocks.

DEFERRED TAXATION

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the company’s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax is measured at the average tax rates that are expected to apply in the years in which timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

FOREIGN CURRENCIES

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of ransaction. All differences are taken to the profit and loss account.

LEASED ASSETS AND OBLIGATIONS

Where assets are financed by leasing agreements that give rights approximating to ownership (‘‘finance leases’’), the assets are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments payable during the lease term. The corresponding leasing commitments are shown as obligations to the lessor.

Lease payments are treated as consisting of capital and interest elements, and the interest is charged to the profit and loss account in proportion to the remaining balance outstanding.

All other leases are ‘‘operating leases’’ and the annual rentals are charged to profit and loss on a straight line basis over the lease term.

F-9

Orbital Gas Systems Limited

ACCOUNTING POLICIES

RETIREMENT BENEFITS

The company operates a defined contribution scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The amount charged to the profit and loss account in respect of pension costs is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

RESEARCH AND DEVELOPMENT

Research and development is written off to the profit and loss account as it is incurred.

INVESTMENTS

Fixed asset investments are stated at cost. Provision is made for any impairment in the value of fixed asset investments.

TURNOVER

Turnover is recognised at the fair value of the consideration received or receivable for sale of goods and/or services in the ordinary nature of the business. Turnover is shown net of Value Added Tax, of goods sold and services provided to external customers and, in the case of long term contracts, credit is taken appropriate to the stage of completion when the outcome of the contract can be assessed with reasonable certainty. In respect of contracts where the degree of work completed is certified by either a third party or the customer then turnover is recognised based on these work certificates. In respect of contracts where work certificates are not obtained then turnover is recognised based on a percentage of completion against the contract value. Percentage completion is measured on the basis of costs incurred to the year end against the estimated total costs of the contract.

CASH AND CASH EQUIVALENTS

Cash for the purpose of the cash flow statement comprises cash in hand and deposits repayable on demand less overdrafts repayable on demand.

F-10

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the years ended 30 June 2012 and 2011

TURNOVER

The company’s turnover and profit before taxation were all derived from its principal activity.

In the year to 30 June 2012, 2% of the company’s turnover was derived from markets outside the United Kingdom (2011: 3%).

INTEREST RECEIVABLE AND SIMILAR INCOME

	2012		2011
	£		£
Bank interest		21,697		14,184

INTEREST PAYABLE AND SIMILAR CHARGES

	2012		2011
	£		£
Finance leases		4,822		836

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

	2012			2011
	£			£
Profit on ordinary activities before taxation is stated after charging/(crediting):

Depreciation and amounts written off tangible fixed assets:
Charge for the year:
Owned assets		53,124			33,089
Leased assets		54,465			38,551
Profit on disposal of tangible fixed assets		(16,546	)		(2,350	)
(Profit)/loss on foreign exchange		(235	)		4,625

Operating lease rentals:
Land and buildings		8,974			—
Plant and machinery		117,947			82,649

F-11

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the years ended 30 June 2012 and 2011

EMPLOYEES

The average monthly number of persons (including directors) employed by the company during the year was:

	2012		2011
	Number		Number
Management		10		9
Service		27		21
Administration		39		33
		76		63

Staff costs for the above persons:

	2012		2011
	£		£
Wages and salaries		4,241,649		4,097,003
Social security costs		498,777		442,366
Other pension costs		81,688		72,074
		4,822,114		4,611443

DIRECTORS’ REMUNERATION

	2012		2011
	£		£
Emoluments		1,981,379		2,199,427
Money purchase pension contributions		17,500		16,558
		1,998,879		2,215,985

The number of directors to whom retirement benefits were accruing was as follows:

	2012		2011
	Number		Number
Money purchase schemes		2		2

	Highest paid director
	2012		2011
	£		£
Emoluments		1,576,474		1,803,269
Money purchase pension contributions		10,000		9,475
		1,586,474		1,812,744

F-12

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the years ended 30 June 2012 and 2011

TAXATION

	2012					2011
	£			£		£			£
Current tax:
UK corporation tax on profits of the year		482,542					190,354
Adjustments in respect of previous years		—					(3	)
Total current tax					482,542					190,351

Deferred tax:
Origination and reversal of timing differences		12,398					15,966
Adjustment in respect of prior years		(1,323	)				(93	)
Total deferred tax					11,075					15,873
Tax on profit on ordinary activities					493,617					206,224

Factors affecting tax charge for year:

	2012			2011
	£			£
The tax assessed for the year is lower (2011: lower) than the standard rate of corporation tax in the UK 25.5% (2011: 27.5%). The differences are explained below:
Profit on ordinary activities before tax		2,283,138			992,438
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK 25.5% (2011: 27.5%)		582,262			272,934

Effects of:
Expenses not deductible for tax purposes		10,826			3,619
Fixed asset timing differences		(13,174	)		(16,888	)
Research and development tax credits		(97,372	)		(56,466	)
Marginal relief		—			(12,845	)
Adjustment in respect of previous year		—			(3	)
Current tax charge for the year		482,542			190,351

F-13

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the years ended 30 June 2012 and 2011

TANGIBLE FIXED ASSETS

						Fixtures
	Freehold		Plant and			and			Computer		Motor
	property		machinery			fittings			equipment		vehicles			Total
	£		£			£			£		£			£
Cost or valuation
At beginning of year		550,000		200,774			245,317			111,145		227,887			1,335,123
Additions		9,080		23,834			1,602			11,833		194,867			241,216
Disposals		—		(6,250	)		—			—		(112,114	)		(118,364	)
Reclassification		—		—			(9,847	)		9,847		—			—
At end of year		559,080		218,358			237,072			132,825		310,640			1,457,975
Depreciation
At beginning of year		—		172,060			140,994			91,039		195,211			599,304
Charged in the year		6,826		12,106			20,274			12,917		55,466			107,589
Disposals		—		(6,250	)		—			—		(108,502	)		(114,752	)
Reclassification		—		—			(5,960	)		5,960		—			—
At end of year		6,826		177,916			155,308			109,916		142,175			592,141
Net book value
At 30 June 2012		552,254		40,442			81,764			22,909		168,465			865,834
At 30 June 2011		550,000		28,714			104,323			20,106		32,676			735,819
Cost or valuation at 30 June 2012
Cost		9,080		218,358			237,072			132,825		310,640			907,975
Valuation		550,000		—			—			—		—			550,000
		559,080		218,358			237,072			132,825		310,640			1,457,975

Included in the cost or valuation of freehold property is freehold land of £275,000 (2011: £275,000) which is not depreciated. If the freehold property had not been revalued, they would have been included at the following historical cost:

	2012		2011
	£		£
Cost		609,992		600,913
Aggregate depreciation		175,497		165,903
Value of land in freehold property		200,000		200,000

On 23 May 2011 the freehold land and buildings were revalued by Butters John Bee, Chartered Surveyors. The open market value of the freehold interest in the property free from encumbrance, with the benefit of full possession is £550,000. The valuation has been carried out with the guidance notes issued by The Royal Institute of Chartered Surveyors for Asset Valuations.

The net book value of motor vehicles held under hire purchase contracts is £146,913 (2011: £31,245) and the depreciation charged on these assets was £54,465 (2011: £38,551).

F-14

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the years ended 30 June 2012 and 2011

FIXED ASSET INVESTMENTS

The company’s investments at the balance sheet date in share capital of companies include the following:

Name of company	Class and % of shares held	Activity
Orbital Gas (Process and	100% Ordinary	Dormant
Instrumentation) Limited

The subsidiary company is registered in England and Wales.

The carrying value of these investments is £nil (2011: £nil).

STOCKS

	2012		2011
	£		£
Raw materials and consumables		154,975		193,389
Work in progress		231,962		489,645
		386,937		683,034

DEBTORS

	2012		2011
	£		£
Due within one year:
Trade debtors		3,015,418		1,736,961
Amounts recoverable on contracts		872,654		1,122,377
Prepayments		39,207		39,893
		3,927,279		2,899,231

CREDITORS: Amounts falling due within one year

	2012		2011
	£		£
Obligations under finance leases and hire purchase contracts		47,368		4,441
Payments received on account		302,352		425,832
Trade creditors		1,557,231		1,705,085
Amounts owed to group undertakings		134,030		134,030
Corporation tax		482,552		190,354
Other taxation and social security		650,747		902,329
Accruals		3,120,202		4,450,929
		6,294,482		7,813,000

The bank facility is secured by a fixed and floating charge on all assets of the company.

The company also has guarantees and bonds to third parties in place issued by the National Westminster Bank Plc of £420,353 at 30 June 2012 (2011: £156,983).

F-15

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the years ended 30 June 2012 and 2011

CREDITORS: Amounts falling due after more than one year

	2012		2011
	£		£
Obligations under finance leases and hire purchase contracts		70,080		—

The maturity of obligations under finance leases and hire purchase contracts is as follows:

	2012		2011
	£		£
Within one year		47,368		4,441
Between one and two years		50,088		—
In more than two but no more than five years		19,992		—
		117,448		4,441

PROVISIONS FOR LIABILITIES

	Deferred
	taxation
	£
At beginning of year		17,193
Charge during the year		11,075
At end of year		28,268

	2012				2011
	Provided		Unprovided		Provided		Unprovided
	£		£		£		£
Provision for deferred tax has been made as follows:
Excess of tax allowances over depreciation		28,268		—		17,193		—

SHARE CAPITAL

	2012		2011
	£		£
Allotted, called up and fully paid:
3,817 ordinary shares of £1 each		3,817		3,817

RESERVES

						Capital
	Profit and			Revaluation		redemption
	loss account			reserve		reserve		Total
	£			£		£		£
At 1 July 2011		791,012			85,172		1,183		877,367
Profit for the year		1,789,521			—		—		1,789,521
Revaluation reserve transfer		(2,768	)		2,768		—		—
At 30 June 2012		2,577,765			87,940		1,183		2,666,888

F-16

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the years ended 30 June 2012 and 2011

RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES

	2012			2011
	£			£
Operating profit		2,266,263			979,090
Depreciation charges		107,589			71,640
Profit on disposal of fixed assets		(16,546	)		(2,350	)
Decrease/(increase) in stocks		296,097			(276,039	)
(Increase)/decrease in debtors		(1,028,048	)		403,668
(Decrease)/increase in creditors		(1,853,643	)		1,254,748
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES		(228,288	)		2,430,757

ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT

		2012		2011
		£		£
a	RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
	Interest received	21,697		14,184
	Interest element of hire purchase payments	(4,822	)	(836	)
	NET CASH INFLOW FOR RETURNS ON INVESTMENTS AND SERVICING OF FINANCE	16,875		13,348
b	CAPITAL EXPENDITURE
	Purchase of tangible fixed assets	(59,640	)	(98,468	)
	Sale of tangible fixed assets	20,158		2,350
	NET CASH OUTFLOW FOR CAPITAL EXPENDITURE	(39,482	)	(96,118	)
c	FINANCING
	Capital element of finance lease repayments	(68,569	)	(35,781	)
	NET CASH OUTFLOW FROM FINANCING	(68,569	)	(35,781	)

ANALYSIS OF CHANGES IN NET FUNDS

	At 1			New finance						At 30
	July 2011			leases			Cash flow			June 2012
	£			£			£			£
Net cash:
Cash at bank and in hand		4,393,293			—			(509,808	)		3,883,485

Debt:
Finance leases		(4,441	)		(181,576	)		68,569			(117,448	)
Total		4,388,852			(181,576	)		(441,239	)		3,766,037

F-17

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the years ended 30 June 2012 and 2011

OPERATING LEASE COMMITMENTS

At 30 June the company had annual commitments under non-cancellable leases as follows:

	2012						2011
	Land and		Plant and				Land and		Plant and
	buildings		machinery		Total		buildings		machinery		Total
	£		£		£		£		£		£
Other operating leases expiring within 1 year		9,081		30,336		39,417		—		—		—
Other operating leases expiring between 2 and 5 Years		—		11,559		11,559		10,896		34,545		45,441
		9,081		41,895		50,976		10,896		34,545		45,441

CAPITAL COMMITMENTS

There were no capital commitments (2011: £nil) at the end of the financial year.

PENSION COMMITMENTS

The company operates a defined contribution pension scheme.

The pension cost charge represents contributions payable by the company and amounted to £81,688 (2011: £72,074). There were no outstanding or prepaid contributions at either the beginning or end of the financial year.

U.S. GAAP RECONCILIATION

Management performed an analysis of the differences between U.K. GAAP and U.S. GAAP. Based upon this review, the following is the U.S. GAAP reconciliation of the Orbital financial statements prepared under U.K. GAAP:

	For the Year Ended June 30,
	2012						2011
	Profit and			Shareholders			Profit and			Shareholders
	Loss			Funds			Loss			Funds
RESULTS UNDER U.K. GAAP
Profit for the financial year	£	1,789,521					£	786,214
Surplus on Shareholders Funds				£	2,670,705					£	881,184

U.S. GAAP REPORTING ADJUSTMENTS
Reversal of revaluation reserve		—			(87,940	)		—			(85,172	)
Accrual for paid time off		(54,000	)		(54,000	)		(46,000	)		(46,000	)
RESULTS UNDER U.S. GAAP	£	1,735,521		£	2,528,765		£	740,214		£	750,012

U.K. GAAP allows for the revaluation of fixed assets. The Company has over time recorded a surplus balance in the revaluation reserve account. U.S. GAAP does not allow for the revaluation of fixed assets and therefore this balance has been reversed.

U.K. GAAP does not contain provisions for the accrual for vacation or paid time off. U.S. GAAP requires that an employer accrue for employees compensation of future absences that have been earned and are payable.

F-18

Orbital Gas Systems Limited

UNAUDITED PROFIT AND LOSS ACCOUNT

for the six months ended 31 December 2012 and 2011

		2012			2011
	Note	£			£
TURNOVER – CONTINUING OPERATIONS	1		6,634,890			6,101,593
Cost of sales			(3,590,721	)		(3,828,079	)
GROSS PROFIT			3,044,169			2,273,514
Distribution costs			(39,735	)		(56,290	)
Administrative expenses			(1,392,440	)		(1,100,497	)
OPERATING PROFIT – CONTINUING OPERATIONS			1,611,994			1,116,727
Interest receivable and similar income	2		15,921			8,152
Interest payable and similar charges	3		(2,951	)		(1,641	)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION	4 – 5		1,624,964			1,123,238
Taxation	6		(339,991	)		(241,543	)
PROFIT FOR THE FINANCIAL PERIOD	15		1,284,973			881,695

F-19

Orbital Gas Systems Limited

UNAUDITED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

for the six months ended 31 December 2012 and 2011

	2012		2011
	£		£
Profit for the financial period		1,284,973		881,695
Unrealised deficit on revaluation of properties		—		0
TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE FINANCIAL PERIOD		1,284,973		881,695

UNAUDITED NOTE OF HISTORICAL COST PROFITS AND LOSSES

for the six months ended 31 December 2012 and 2011

	2012		2011
	£		£
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION		1,624,964		1,123,238
Difference between a historical cost depreciation charge and the actual depreciation charge calculated on the revalued amount		—		—
HISTORICAL COST PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION		1,624,964		1,123,238
HISTORICAL COST PROFIT FOR THE PERIOD RETAINED AFTER TAXATION		1,284,973		881,695

F-20

Orbital Gas Systems Limited

UNAUDITED BALANCE SHEET

at 31 December 2012 and 2011

		2012						2011
	Note	£			£			£			£
FIXED ASSETS
Tangible assets	7					812,821						842,130
CURRENT ASSETS
Stocks	9		395,331						795,290
Debtors	10		2,097,906						1,778,428
Cash at bank and in hand			5,678,794						4,238,095
			8,172,031						6,811,813

CREDITORS: Amounts falling due within one year	11		(4,958,179	)					(5,798,531	)
NET CURRENT ASSETS						3,213,852						1,013,282
TOTAL ASSETS LESS CURRENT LIABILITIES						4,026,673						1,855,412
CREDITORS: Amounts falling due after more than one year	12					(42,727	)					(71,838	)
PROVISION FOR LIABILITIES	13					(28,268	)					(17,193	)
NET ASSETS						3,955,678						1,766,381
CAPITAL AND RESERVES
Called up share capital	14					3,817						3,817
Revaluation reserve	15					87,940						85,172
Capital redemption reserve	15					1,183						1,183
Profit and loss account	15					3,862,738						1,676,209
SHAREHOLDERS’ FUNDS						3,955,678						1,766,381

F-21

Orbital Gas Systems Limited

UNAUDITED CASH FLOW STATEMENT

for the six months ended 31 December 2012 and 2011

		2012			2011
	Note	£			£
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES	16		2,159,478			257,668
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE	17a		12,970			6,511
TAXATION			(339,991	)		(241,543	)
CAPITAL EXPENDITURE	17b		(18,357	)		(167,878	)
			1,814,100			(145,242	)
FINANCING	17c		(18,791	)		(9,956	)
(DECREASE)/INCREASE IN CASH IN THE PERIOD			1,795,309			(155,198	)

UNAUDITED RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

for the six months ended 31 December 2012 and 2011

		2012		2011
	Note	£		£
(DECREASE)/INCREASE IN CASH IN THE PERIOD			1,795,309		(155,198	)
New finance leases			—		(124,759	)
Change in net debt resulting from cash flows			18,791		13,458
MOVEMENT IN NET DEBT			1,814,100		(266,499	)
NET FUNDS AT START OF PERIOD			3,766,037		4,388,852
NET FUNDS AT END OF PERIOD	18		5,580,137		4,122,353

F-22

Orbital Gas Systems Limited

UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS

for the year ended 30 June 2012

		2012		2011
	Note	£		£
PROFIT FOR THE FINANCIAL PERIOD			1,284,973		881,695
Other additions to equity during the period			—		3,502
NET ADDITION TO SHAREHOLDERS’ FUNDS			1,284,973		885,197
Opening shareholders’ funds			2,670,705		881,184
CLOSING SHAREHOLDERS’ FUNDS			3,955,678		1,766,381

F-23

Orbital Gas Systems Limited

ACCOUNTING POLICIES

AUTHORIZATION OF NON-STATUTORY FINANCIAL STATEMENTS

PRINCIPAL ACTIVITIES

The principal activity of the company during the year was that of the supply and installation of gas control systems.

BASIS OF ACCOUNTING

The financial statements are presented in sterling.

BASIS OF PREPARATION

The unaudited interim financial statements and notes should be read in conjunction with the annual financial statements for the year ended 30 June 2012.

The directors are constantly reviewing resource competence and availability and believe that the company has adequate current resources to continue in operational existence for the next twelve months. Thus they continue to adopt the going concern basis of accounting in preparing the reviewed six months financial statements.

TANGIBLE FIXED ASSETS

Tangible fixed assets are stated at cost or valuation net of depreciation and any provision for impairment.

Depreciation is provided on all tangible fixed assets except for freehold land at rates calculated to write each asset down to its estimated residual value over its expected useful life, as follows:-

Freehold property		- 2% on cost
Improvements to freehold property		- 10% on cost
Plant and machinery		- 20% on cost
Fixtures and fittings		- 10% – 33% on cost
Computer equipment		- 33% on cost
Motor vehicles		- 25% on cost

IMPAIRMENTS

Fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable or as otherwise required by relevant accounting standards.

F-24

Orbital Gas Systems Limited

ACCOUNTING POLICIES

STOCKS AND WORK IN PROGRESS

Stocks are stated at the lower of cost and net realisable value. In determining the cost of raw materials, consumables and goods purchased for resale, the weighted average purchase price is used.

For work in progress and finished goods, cost is taken as production cost, which includes an appropriate proportion of attributable overheads.

LONG TERM CONTRACTS

DEFERRED TAXATION

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

FOREIGN CURRENCIES

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. All differences are taken to the profit and loss account.

LEASED ASSETS AND OBLIGATIONS

Lease payments are treated as consisting of capital and interest elements, and the interest is charged to the profit and loss account in proportion to the remaining balance outstanding.

All other leases are ‘‘operating leases’’ and the rentals are charged to profit and loss on a straight line basis over the lease term.

F-25

Orbital Gas Systems Limited

ACCOUNTING POLICIES

RETIREMENT BENEFITS

The company operates a defined contribution scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The amount charged to the profit and loss account in respect of pension costs is the contributions payable in the period. Differences between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

RESEARCH AND DEVELOPMENT

Research and development is written off to the profit and loss account as it is incurred.

INVESTMENTS

Fixed asset investments are stated at cost. Provision is made for any impairment in the value of fixed asset investments.

TURNOVER

Percentage completion is measured on the basis of costs incurred to the year end against the estimated total costs of the contract.

CASH AND CASH EQUIVALENTS

Cash for the purpose of the cash flow statement comprises cash in hand and deposits repayable on demand less overdrafts repayable on demand.

F-26

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 31 December 2012 and 2011

TURNOVER

The company’s turnover and profit before taxation were all derived from its principal activity.

In the six months to 31 December 2012 and 2011, 2% and 2%, respectively, of the company’s turnover was derived from markets outside the United Kingdom.

INTEREST RECEIVABLE AND SIMILAR INCOME

	2012		2011
	£		£
Bank interest		15,921		8,152

INTEREST PAYABLE AND SIMILAR CHARGES

	2012		2011
	£		£
Finance leases		2,951		1,641

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

	2012			2011
	£			£
Profit on ordinary activities before taxation is stated after charging/(crediting):

Depreciation and amounts written off tangible fixed assets:
Charge for the period:
Owned assets		28,027			23,606
Leased assets		24,410			25,303
Profit/(loss) on disposal of tangible fixed assets		(18,933	)		(12,658	)
(Profit)/loss on foreign exchange		988			596

Operating lease rentals:
Land and buildings		3,632			14,529
Plant and machinery		66,279			106,726

F-27

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31 December 2012 and 2011

EMPLOYEES

	2012		2011
	Number		Number
The average monthly number of persons (including directors) employed by the company during the period was:
Management		10		10
Service		29		26
Administration		40		36
		79		72

Staff costs for the above persons:

	2012		2011
	£		£
Wages and salaries		2,063,523		1,789,426
Social security costs		194,377		154,247
Other pension costs		32,304		30,804
		2,290,204		1,974,477

DIRECTORS’ REMUNERATION

	2012		2011
	£		£
Emoluments		619,408		372,701
Money purchase pension contributions		9,606		8,750
		629,014		381,451

The number of directors to whom retirement benefits were accruing was as follows:

	2012		2011
	Number		Number
Money purchase schemes		2		2

	Highest paid director
	2012		2011
	£		£
Emoluments		350,790		175,699
Money purchase pension contributions		5,000		5,000
		355,790		180,699

F-28

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31 December 2012 and 2011

TAXATION

	2012				2011
	£		£		£		£
Current tax:
UK corporation tax on profits of the period		339,991				241,543
Total current tax				339,991				241,543

TANGIBLE FIXED ASSETS

					Fixtures
	Freehold		Plant and		and		Computer		Motor
	property		machinery		fittings		equipment		vehicles			Total
	£		£		£		£		£			£
Cost or valuation
At beginning of period		559,080		218,358		237,072		132,825		310,640			1,457,975
Additions		—		2,495		869		14,993		—			18,357
Disposals		—		—		—		—		(29,429	)		(29,429	)
Reclassification		—		—		—		—		—			—
At end of period		559,080		220,853		237,941		147,818		281,211			1,446,903
Depreciation
At beginning of period		6,826		177,916		155,308		109,916		142,175			592,141
Charged in the period		3,582		5,859		10,023		7,779		25,194			52,437
Disposals		—		—		—		—		(10,496	)		(10,496	)
Reclassification		—		—		—		—		—			—
At end of period		10,408		183,775		165,331		117,695		156,873			634,082
Net book value
At 31 December 2012		548,672		37,078		72,610		30,123		124,338			812,821
At 31 December 2011		556,848		34,532		90,398		24,572		135,780			842,130
Cost or valuation at 31
December 2012
Cost		9,080		220,853		237,941		147,818		281,211			896,903
Valuation		550,000		—		—		—		—			550,000
		559,080		220,853		237,941		147,818		281,287			1,446,903

	2012		2011
	£		£
Cost		609,992		609,992
Aggregate depreciation		179,079		168,134
Value of land in freehold property		200,000		200,000

The net book value of motor vehicles held under hire purchase contracts is £122,501 (2011: £141,074) and the depreciation charged on these assets was £24,412 (2011: £13,458).

F-29

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 31 December 2012 and 2011

FIXED ASSET INVESTMENTS

The company’s investments at the balance sheet date in share capital of companies include the following:

Name of company	Class and % of shares held	Activity
Orbital Gas (Process and	100% Ordinary	Dormant
Instrumentation) Limited

The subsidiary company is registered in England and Wales.

The carrying value of these investments is £nil (2011: £nil).

STOCKS

	2012		2011
	£		£
Raw materials and consumables		140,222		195,209
Work in progress		255,109		600,081
		395,331		795,290

DEBTORS

	2012		2011
	£		£
Due within one year:
Trade debtors		1,815,942		1,342,564
Amounts recoverable on contracts		281,964		435,864
		2,097,906		1,778,428

CREDITORS: Amounts falling due within one year

	2012		2011
	£		£
Obligations under finance leases and hire purchase contracts		55,930		43,904
Payments received on account		359,041		118,369
Trade creditors		1,069,383		1,085,121
Amounts owed to group undertakings		134,030		134,030
Corporation tax		854,278		431,901
Other taxation and social security		407,838		366,947
Accruals		2,077,679		3,618,259
		4,958,179		5,798,531

The bank facility is secured by a fixed and floating charge on all assets of the company.

The company also has guarantees and bonds to third parties in place issued by the National Westminster Bank Plc of £256,422 and £381,370 at 31 December 2012 and 2011, respectively.

F-30

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31 December 2012 and 2011

CREDITORS: Amounts falling due after more than one year

	2012		2011
	£		£
Obligations under finance leases and hire purchase contracts		42,727		71,838

The maturity of obligations under finance leases and hire purchase contracts is as follows:

	2012		2011
	£		£
Within one year		55,930		43,904
Between one and two years		42,727		71,838
In more than two but no more than five years		—		—
		98,657		115,742

PROVISIONS FOR LIABILITIES

	Deferred
	taxation
	£
At beginning of period		28,268
Change during the period		—
At end of period		28,268

	2012				2011
	Provided		Unprovided		Provided		Unprovided
	£		£		£		£
Provision for deferred tax has been made as follows:
Excess of tax allowances over depreciation		28,268		—		17,193		—

SHARE CAPITAL

	2012		2011
	£		£
Allotted, called up and fully paid: 3,817 ordinary shares of £1 each		3,817		3,817

RESERVES

					Capital
	Profit and		Revaluation		redemption
	loss account		reserve		reserve		Total
	£		£		£		£
At 1 July 2012		2,577,765		87,940		1,183		2,666,888
Profit for the period		1,284,973		—		—		1,284,973
At 31 December 2012		3,862,738		87,940		1,183		3,951,861

F-31

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31 December 2012 and 2011

RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES

	2012			2011
	£			£
Operating profit		1,611,994			1,116,727
Depreciation charges		52,437			48,909
(Profit)/loss on disposal of fixed assets		18,933			12,658
Decrease/(increase) in stocks		(8,394	)		(112,256	)
(Increase)/decrease in debtors		1,829,373			1,120,803
(Decrease)/increase in creditors		(1,344,865	)		(1,929,173	)
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES		2,159,478			257,668

ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT

		2012			2011
		£			£
a	RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
	Interest received		15,921			8,152
	Interest element of hire purchase payments		(2,951	)		(1,641	)
	NET CASH INFLOW FOR RETURNS ON INVESTMENTS AND SERVICING OF FINANCE		12,970			6,511
b	CAPITAL EXPENDITURE
	Purchase of tangible fixed assets		(18,357	)		(167,878	)
	Sale of tangible fixed assets		536			12,658
	NET CASH OUTFLOW FOR CAPITAL EXPENDITURE		(17,821	)		(155,220	)
c	FINANCING
	Capital element of finance lease repayments		(18,791	)		(13,458	)
	Other additions to equity during the period		—			3,502
	NET CASH OUTFLOW FROM FINANCING		(18,791	)		(9,956	)

ANALYSIS OF CHANGES IN NET FUNDS

	At 1			New finance				At 30
	July 2011			leases		Cash flow		June 2012
	£			£		£		£
Net cash:
Cash at bank and in hand		3,883,485			—		1,795,309		5,678,794

Debt:
Finance leases		(117,448	)		—		18,791		(98,657	)
Total		3,766,037			—		1,814,100		5,580,137

F-32

Orbital Gas Systems Limited

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31 December 2012 and 2011

OPERATING LEASE COMMITMENTS

At 31 December the company had annual commitments under non-cancellable leases as follows:

	2012						2011
	Land and		Plant and				Land and		Plant and
	buildings		machinery		Total		buildings		machinery		Total
	£		£		£		£		£		£
Other operating leases expiring within 1 year		3,632		39,854		43,486		10,897		39,854		50,751
Other operating leases expiring between 2 and 5 Years		—		26,425		26,425		3,632		66,872		70,504
		3,632		66,279		69,911		14,529		106,726		121,255

CAPITAL COMMITMENTS

There were £nil and £nil capital commitments at 31 December 2012 and 2011, respectively.

PENSION COMMITMENTS

The company operates a defined contribution pension scheme.

The pension cost charge represents contributions payable by the company and amounted to £41,910 and £39,554 at 31 December 2012 and 2011, respectively. There were no outstanding or prepaid contributions at either the beginning or end of the financial period.

U.S. GAAP RECONCILIATION

	For the Six Months Ended December 31,
	2012						2011
	Profit and			Shareholders			Profit and			Shareholders
	Loss			Funds			Loss			Funds
RESULTS UNDER U.K. GAAP
Profit for the financial year	£	1,284,973					£	881,695
Surplus on Shareholders Funds				£	3,955,678					£	1,766,381

U.S. GAAP REPORTING ADJUSTMENTS
Reversal of revaluation reserve		—			(87,940	)		—			(85,172	)
Accrual for paid time off		(9,000	)		(9,000	)		(7,000	)		(7,000	)
RESULTS UNDER U.S. GAAP	£	1,275,973		£	3,858,738		£	874,695		£	1,674,209

F-33

Orbital Energy Group, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 24, 2013

Attached files

Orbital Energy Group, Inc. Reports