ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS O F FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section of this Form 10-K generally discusses fiscal year 2026 and fiscal year 2025 items and year over year comparisons between fiscal year 2026 and fiscal year 2025. Discussions of the fiscal year 2024 items and the year over year comparisons between fiscal year 2025 and fiscal year 2024 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2025.
Overview
We provide state-of-the-art light emitting diode (“LED”) lighting systems, wireless Internet of Things (“IoT”) enabled control solutions, project engineering, energy project management design and maintenance services and electric vehicle (“EV”) charging infrastructure solutions. We help our customers achieve their sustainability, energy savings and carbon footprint reduction goals through innovative technology and exceptional service. We research, design, develop, manufacture, market, sell, install, and implement energy management systems consisting primarily of high-performance, energy-efficient commercial and industrial interior and exterior LED lighting systems and related services. Our products are targeted for applications in the following primary market segments: commercial office and retail, area lighting, industrial applications and government, although we do sell and install products into other markets. Our services consist of turnkey installation and system maintenance. Virtually all of our sales occur within North America or for the US Department of Defense's military bases operating in foreign countries.
Our lighting products consist primarily of LED lighting fixtures, many of which include IoT enabled control systems. Our principal lighting customers include large national account end-users, federal and state government facilities, large regional account end-users, electrical distributors, electrical contractors and energy service companies (“ESCOs”). Currently, most of our interior lighting products are manufactured at our leased production facility located in Manitowoc, Wisconsin, although as the LED and related IoT market continues to evolve, we are increasingly sourcing products and components from third parties in order to provide versatility in our product development and offerings.
We differentiate ourselves from our competitors by offering comprehensive project management services to national account customers to retrofit their multiple locations. Our comprehensive services include initial site surveys and audits, utility incentive and government subsidy management, engineering design, and project management from delivery through to installation and controls integration. In addition, we offer lighting and electrical maintenance services which enables us to support a lifetime business relationship with our customer (which we call “Customers for Life”). We completed the acquisition of Voltrek on October 5, 2022, which further expanded our turnkey services capabilities as well as capitalized on the rapidly growing market for EV charging solutions. We completed the Stay-Lite Lighting acquisition on January 1, 2022, which further expanded our maintenance services capabilities.
We believe the market for LED lighting products and related controls continues to grow. Due to their size and flexibility in application, we also believe that LED lighting systems can address opportunities for retrofit applications that cannot be satisfied by other lighting technologies. Our LED lighting technologies have become the primary component of our revenue as we continue to strive to be a leader in the LED market.
We see opportunity to cross-sell our three platforms of lighting, maintenance services and EV charging installation systems to our commercial and industrial customer base. We are pursuing opportunities to cross-sell to direct customers, as well as through select partners. We also see opportunity for further integration of our service capabilities to expand our geographic reach and we currently intend to pursue growth organically.
Other than our multi-year maintenance service contracts, we generally do not have long-term contracts with our customers for product or turnkey services that provide us with recurring annual revenue. We typically generate substantially all of our revenue from sales of lighting and control systems and related services to governmental, commercial and industrial customers on a project-by-project basis. We also perform work under master services or product purchasing agreements with major customers with sales completed on a purchase order basis. In addition, in order to provide quality and timely service under our multi-location master retrofit agreements, we
make substantial working capital expenditures and advance inventory purchases that we intend to recoup through the completion of these or similar projects.
We typically sell our lighting systems in replacement of our customers’ existing fixtures. We call this replacement process a "retrofit". We frequently engage our customer’s existing electrical contractor to provide installation and project management services. We also sell our lighting systems on a wholesale basis, principally to electrical distributors and ESCOs to sell to their own customer bases.
The gross margins of our products can vary significantly depending upon the types of products we sell, with margins typically ranging from 10% to 50%. As a result, a change in the total mix of our sales among higher or lower margin products can cause our profitability to fluctuate from period to period.
Our fiscal year ends on March 31. We refer to our just completed fiscal year, which ended on March 31, 2026, as "fiscal 2026", and our prior fiscal years which ended on March 31, 2025 and March 31, 2024 as "fiscal 2025" and “fiscal 2024”, respectively. Our fiscal first quarter of each fiscal year ends on June 30, our fiscal second quarter ends on September 30, our fiscal third quarter ends on December 31 and our fiscal fourth quarter ends on March 31.
Reportable segments are components of an entity that have separate financial data that the entity's chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Our CODM is our chief executive officer. We have three segments: lighting segment, maintenance segment and EV segment.
Recent Developments
Reverse Stock Split
On August 22, 2025, we effected a 1-for-10 reverse stock split of our common stock in order to remain compliant with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”) for continued listing on the NASDAQ Capital Market (“NASDAQ”).
Voltrek Earnout Settlement
On March 17, 2026, we entered into a settlement agreement (the “Settlement Agreement”) with Final Frontier, LLC (“Final Frontier”) and Kathleen M. Connors (“Ms. Connors”), personally and as Trustee of the Kathleen M. Connors 2019 Revocable Trust (“Connors Trust” together with Final Frontier and Ms. Connors, the “Connors Parties”), in order to reach a final and complete resolution and settlement of the dispute between the Connors Parties and us regarding our remaining earnout obligations owed to Final Frontier pursuant to that certain Membership Interest Purchase Agreement, dated as of October 5, 2022, entered into by and among us and the Connors Parties (the “MIPA”), pursuant to which we acquired Voltrek, as well as to reach a final and complete resolution and settlement of related arbitrations and terminate related agreements, as described below.
Pursuant to the MIPA and a binding term sheet (as amended, the "Term Sheet"), we and the Connors Parties submitted our earn out statement dispute to CPA firm arbitration (the “CPA Firm Arbitration”). The Connors Parties asserted that the remaining earn out payments owed by us totaled approximately $10 million. Our position was that we owed the Connors Parties an additional $1.4 million. The CPA arbitrators determined that we owed an additional $3.4 million of earnout payments. Subsequently, we filed an arbitration demand with the American Arbitration Association in Milwaukee, Wisconsin against the Connors Parties in order to object to the CPA firm’s decision of the earnout statement dispute as manifest error (the “AAA Arbitration”).
By entering into the Settlement Agreement, we and the Connors Parties agreed to a final and complete resolution and settlement of the CPA Firm Arbitration and the AAA Arbitration, a final and complete resolution and settlement of the earnout statement dispute, termination of the MIPA, termination of all related earnout agreements and termination of any and all claims and counterclaims between or among us and the Connors Parties, without any admission of liability and without incurring of any further payment, cost, liability,
obligation, guaranty, expense or inconvenience with respect thereto.
Under the terms of the Settlement Agreement, we made a one-time cash payment of $3.0 million (the “Settlement Amount”) to Final Frontier on March 18, 2026. Upon receipt of the Settlement Amount, all earn out payment obligations, the MIPA, all earnout agreements, the CPA Firm Arbitration and the AAA Arbitration proceedings were terminated, cancelled and released, and all liens and security interests held by Final Frontier on our assets were automatically terminated and irrevocably released. Additionally, upon payment of the Settlement Amount, we and the Connors Parties exchanged mutual general releases of all claims arising from or related to the earn out disputes, the CPA Firm Arbitration and the AAA Arbitration proceedings, the MIPA and the earnout agreements. The releases did not affect Ms. Connors’ then part-time employment relationship with us or the Connors Parties’ rights as shareholders of our Company. We also agreed to facilitate the Connors Parties’ entry into a Rule 10b5-1 trading plan during our next insider open window period to facilitate the Connors Parties’ sale of their shares of our common stock.
Significant New Exterior Lighting Project
We have been awarded a new large-scale LED exterior lighting project with a leading international retail chain, anticipated to generate approximately $14 million to $15 million of revenue. The large-scale project began in our fourth quarter of fiscal 2026, with the majority of the project expected to be completed by the end of July 2026. This new order follows our October 31, 2025 announcement of a three-year renewal of a major LED lighting maintenance contract for this customer, with the renewal having an estimated total revenue potential of between $42 million to $45 million. We will continue to maintain LED lighting systems for more than 2,000 stores operated by this retailer. There is an additional potential for significant expansion of this customer relationship in our fiscal 2027.
Ongoing Cost Cutting Initiatives
Over the past two fiscal years, we have been successful in reducing our annual operating expenses by approximately $2.0 million. This cost cutting and overhead reduction initiative has resulted in improved gross margins and profitability.
Public Stock Offering
On February 2, 2026, we issued 500,000 shares of our common stock at a price to the public of $14.00 per share pursuant to a firmly underwritten public offering. Net proceeds from the offering of approximately $6.4 million were used to reduce amounts outstanding under our credit agreement, with the remainder used for working capital and general corporate purposes.
Replacing Reduced Revenue from Primary Customer
In fiscal 2026, 2025 and 2024, one customer accounted for 26.0%, 18.1% and 25.6% of our total revenue, respectively. We continue to attempt to diversify our customer base by expanding our reach to national accounts, ESCOs, the agent driven distribution channel, lighting maintenance customers and the EV market.
Solar Asset Termination Agreement
Effective March 19, 2026, we executed a termination agreement with a customer to terminate two power purchase agreements (“PPAs”) that commenced in 2010. The PPAs covered two solar panel arrays on two buildings in New Jersey under which we contracted to sell the solar power generation from the respective solar panel arrays through 2030. Under the terms of the termination agreement, we transferred ownership of the solar arrays to a third party and terminated any future obligations related to those assets in exchange for a cash payment of $1.3 million.
Credit Facility Extension
On May 29, 2026, we and Bank of America, N.A. as lender, executed Amendment No. 5 (“Amendment No. 5”) to our Loan and Security Agreement dated December 29, 2020 and amended previously on September 30, 2025 (as amended, the “credit agreement”). The primary purpose of Amendment No. 5 was to extend the maturity date of the Credit Facility from June 30, 2027 to June 30, 2030.
Tariff Relief
In February 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers
Act (“IEEPA”) were unlawful. On April 20, 2026, U.S. Customs and Border Protection launched a portal intended to automate and consolidate the related refund claim process, including associated interest payments. We submitted refund claims related to certain previously paid tariffs. Due to the uncertainly surrounding payment of any potential refund claims, no amounts are reflected in our fiscal 2026 financial statements. As of May 31, 2026, we have received approximately $219 thousand in tariff refunds, including approximately $13 thousand of interest income. The ultimate amount and timing of recovery remains subject to continued administrative review and claim approval.
Selected Financial Data
The selected historical consolidated financial data are not necessarily indicative of future results.
Fiscal Year Ended March 31,
(in thousands, except per share amounts)
Consolidated statements of operations data:
Product revenue
Service revenue
Total revenue
Cost of product revenue (1) (2) (8)
Cost of service revenue (1) (3) (8)
Total cost of revenue
Gross profit
General and administrative expenses (1) (4) (8)
Impairment of assets (5)
Acquisition related costs
Sales and marketing expenses (1) (5) (8)
Research and development expenses (1)(6) (8)
(Loss) income from operations
Other income
Interest expense
Amortization of debt issue costs
Loss on debt extinguishment
Dividend and interest income
(Loss) income before income tax
Income tax expense (benefit) (7)
Net (loss) income
Net (loss) income per share attributable to common
shareholders:
Basic
Diluted
Weighted-average shares outstanding:
Basic
Diluted
Includes stock-based compensation expense recognized under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation, or Accounting Standards Codification (ASC) 718, as follows:
Fiscal Year Ended March 31,
(in thousands)
Cost of product revenue
Cost of service revenue
General and administrative expenses
Sales and marketing expenses
Research and development expenses
Total stock-based compensation expense
Fiscal 2025 and fiscal 2024 includes expense of $295 thousand and $26 thousand related to restructuring, respectively.
Fiscal 2025 and fiscal 2024 includes expense of $176 thousand and $48 thousand related to restructuring, respectively.
Fiscal 2025 and fiscal 2024 include expenses of $442 thousand and $28 thousand related to restructuring, respectively.
Fiscal 2025 and fiscal 2024 includes expense of $26 thousand and $21 thousand related to restructuring, respectively.
Fiscal 2025 and fiscal 2024 includes expense of $109 thousand and $0 related to restructuring, respectively.
Fiscal 2021 includes tax benefit of $20.9 million related to the release of the valuation allowance on deferred tax assets. Fiscal 2023 includes tax expense of $17.8 million related to the recording of the valuation allowance on deferred tax assets.
Fiscal 2022 includes an offset to payroll expenses of $1.6 million related to the anticipated employee retention payroll tax credit (“payroll tax credit”), as expanded and extended by the American Rescue Plan Act of 2021, as follows:
Fiscal Year Ended March 31, 2022
(in thousands)
Cost of product revenue
Cost of service revenue
General and administrative expenses
Sales and marketing expenses
Research and development expenses
Total payroll tax credit
Results of Operations: Fiscal 2026 versus Fiscal 2025
The following table sets forth the line items of our consolidated statements of operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (in thousands, except percentages):
Fiscal Year Ended March 31,
Amount
Amount
Change
Revenue
Revenue
Product revenue
Service revenue
Total revenue
Cost of product revenue
Cost of service revenue
Total cost of revenue
Gross profit
General and administrative expenses
Sales and marketing expenses
Research and development expenses
(Loss) income from operations
Other income
Interest expense
Amortization of debt issue costs
Loss on debt extinguishment
Interest income
(Loss) income before income tax
Income tax expense
Net (loss) income
* NM = Not Meaningful
Revenue, Cost of Revenue and Gross Margin. Product revenue increased by 4.9%, or $2.7 million, for fiscal 2026 versus fiscal 2025. Service revenue increased by 15.5%, or $3.9 million, for fiscal 2026 versus fiscal 2025. The increase in product revenue was primarily due to an increase in the maintenance segment along with the contract modification of our solar agreement leading to additional recognized revenue. The increase in service revenue was due to an increase in projects in our lighting segment. Cost of product revenue decreased by 1.1%, or $0.4 million, in fiscal 2026 versus the comparable period in fiscal 2025. Cost of service revenue decreased by 3.8%, or $0.8 million, in fiscal 2026 versus fiscal 2025. The decreases were primarily due to the cost savings initiatives put into place in fiscal 2025. Gross margin increased to 32.6% of revenue in fiscal 2026 from 25.4% in fiscal 2025, due primarily to a more favorable sales mix along with better overall margins in the lighting and EV segments.
Operating Expenses
General and Administrative. General and administrative expenses increased 3.8%, or $0.7 million, in fiscal 2026 compared to fiscal 2025. This comparative increase was primarily due to earnout compensation costs, sign-on bonus costs and disposal of solar assets costs, which were partially offset by a reduction in workforce related to restructuring that occurred in the first half of fiscal 2025.
Sales and Marketing. Our sales and marketing expenses decreased 12.9%, or $1.5 million, in fiscal 2026 compared to fiscal 2025. The decrease was primarily due to decreases in employment costs throughout fiscal 2026.
Research and Development. Research and development expenses decreased 23.1%, or $0.3 million, in fiscal 2026 compared to fiscal 2025 primarily due to a decrease in employment costs.
Interest Expense. Interest expense in fiscal 2026 decreased by $0.2 million to $0.8 million primarily due to lower outstanding amounts on the line of credit throughout fiscal 2026.
Lighting Segment
Our lighting segment develops and sells lighting products and provides construction and engineering services for our commercial lighting and energy management systems. Our lighting segment provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers. Our lighting segment sells through ESCOs, Lighting Agents, Distributors and direct (turnkey) to end users.
The following table summarizes our lighting segment operating results (dollars in thousands):
Fiscal Year Ended March 31,
Revenues
Operating (loss) income
Operating margin
Fiscal 2026 Compared to Fiscal 2025
Lighting segment revenue increased in fiscal 2026 by 17.1%, or $8.2 million, and operating income increased $4.9 million, compared to fiscal 2025, due to increased project volumes in fiscal 2025 along with the recognition of solar revenue due to the contract modification in March of 2026. This increase in revenues led to a corresponding operating income increase in this segment, along with increased project margins.
Maintenance Segment
Our maintenance segment provides retailers, distributors and other businesses with maintenance, repair and replacement services for the lighting and related electrical components deployed in their facilities.
The following table summarizes our maintenance segment operating results (dollars in thousands):
Fiscal Year Ended March 31,
Revenues
Operating (loss) income
Operating margin
Fiscal 2026 Compared to Fiscal 2025
Maintenance segment revenue increased $0.9 million, or 5.6%, in fiscal 2026 compared to fiscal 2025 primarily due to increased projects for a large customer. As a result, operating income increased $2.4 million in fiscal 2026 compared to fiscal 2025 primarily due to better project margins throughout the segment.
EV Segment
Our EV segment offers leading electric vehicle charging expertise and provides EV turnkey installation solutions with ongoing support to all commercial verticals.
The following table summarizes our EV segment operations results (dollars in thousands):
Fiscal Year Ended March 31,
Revenues
Operating loss
Operating margin
Fiscal 2026 Compared to Fiscal 2025
EV segment revenue decreased 14.5%, or $2.4 million, in fiscal 2026 compared to fiscal 2025 primarily due to project delays. EV segment operating loss decreased $1.7 million, or 72.5%, in fiscal 2026 compared to fiscal 2025 primarily due to a more beneficial sales mix leading to higher margins.
Liquidity and Capital Resources
Overview
We had $3.3 million in cash and cash equivalents as of March 31, 2026, compared to $6.0 million at March 31, 2025. Our cash position decreased due to the results in our operations, satisfaction of the final Voltrek earnout obligation and paydown of our Credit Facility. These decreases were partially offset by net proceeds from our February 2026 underwritten public stock offering of approximately $6.4 million.
As of March 31, 2026, our borrowing base supported $15.6 million of availability under our credit facility, with $3.0 million drawn against that availability. As of March 31, 2025, our borrowing base supported $15.0 million of availability under our credit facility, with $7.0 million drawn against that availability.
Additional information on our credit agreement can be found in the “Indebtedness” section located below.
In March 2023, we filed a universal shelf registration statement with the Securities and Exchange Commission. Under our shelf registration statement, we currently have the flexibility to publicly offer and sell from time to time debt and/or equity securities. The filing of the shelf registration statement may help facilitate our ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes. Based on
our current market capitalization, we are subject to the "baby-shelf" rule which limits the amount of securities that can be issued at any given time.
On February 2, 2026, we issued 500,000 shares of our common stock at a price to the public of $14.00 per share pursuant to a firmly underwritten public offering. Net proceeds from the offering of approximately $6.4 million were used to reduce amounts outstanding under our credit agreement, with the remainder used for working capital and general corporate purposes.
In April 2024, we and our lender executed Amendment No.2 to our credit agreement to add a $3.5 million term loan to the credit facility. The amendment also expanded the pool of eligible receivables to include government receivables in the calculation of the borrowing base. See Note 12 - Debt to our accompanying audited consolidated financial statements for more information.
In October 2024, we and our lender executed Amendment No.3 to our credit agreement to extend the maturity date of the Credit Facility from December 29, 2025 to June 30, 2027.
On September 30, 2025, we and our lender executed Amendment No. 4 to our credit agreement, pursuant to which Bank of America consented to certain subordinated liens we granted in favor of Final Frontier and consented to the Remaining Earnout Amount (as defined herein) evidenced by the Subordinated Loan Agreement (as defined herein), subject to certain limitations, and to permit us to make cash interest and principal payments to Final Frontier as set forth in the Subordinated Loan Agreement. On March 18, 2026, the Subordinated Loan Agreement was terminated and cancelled, and all related liens and security interests held by Final Frontier on our assets were automatically terminated and irrevocably released.
On May 29, 2026, we and our lender executed Amendment No. 5 to our credit agreement to extend the maturity date of the Credit Facility from June 30, 2027 to June 30, 2030.
We regularly explore various alternative sources of liquidity to help ensure that we will have the best allocation of invested capital to satisfy our working capital needs.
Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, cost containment, working capital management, capital expenditures. While we believe that we will likely have adequate available cash and equivalents and credit availability under our credit agreement to satisfy our currently anticipated working capital and liquidity requirements during the next 12 months and beyond based on our current cash flow forecast, there can be no assurance to that effect. If we experience significant liquidity constraints, we may be required to issue equity or debt securities, reduce our sales efforts, implement additional cost savings initiatives or undertake other efforts to conserve our cash.
Cash Flows
The following table summarizes our cash flows for our fiscal 2026, fiscal 2025 and fiscal 2024:
Fiscal Year Ended March 31,
(in thousands)
Operating activities
Investing activities
Financing activities
(Decrease) increase in cash and cash equivalents
Cash Flows Related to Operating Activities. Cash used in operating activities for fiscal 2026 was $1.1 million and consisted of our net loss of $3.2 million adjusted for non-cash expense items and net cash provided by changes in operating assets of $2.1 million, the largest of which was an increase of $3.5 million in accounts receivable, a $3.1 million increase in revenue earned but not billed, an increase of $2.2 million in accounts payable, and an increase of $1.3 million in accrued expenses and other.
Cash provided by operating activities for fiscal 2025 was $0.6 million and consisted of our net loss of $11.8 million adjusted for non-cash expense items and net cash provided by changes in operating assets of $12.4 million, the largest of which was a decrease of $6.1 million in inventories, a $5.1 million decrease in accounts payable, and an increase of $1.9 million in accrued expenses.
Cash used in operating activities for fiscal 2024 was $10.1 million and consisted of our net loss of $11.7 million adjusted for non-cash expense items and net cash used in changes in operating assets of $1.6 million, the largest of which was a $5.0 million increase in accounts payable, an increase of $3.2 million in revenue earned but not billed, and a $2.3 million decrease in accrued liabilities.
Cash Flows Related to Investing Activities. Cash used in investing activities in fiscal 2026 was $0.1 million and consisted primarily of purchases of property and equipment.
Cash provided by investing activities in fiscal 2025 was $0.1 million and consisted primarily of $0.2 million of sales of property and equipment and $0.1 million of purchases of property and equipment.
Cash used in investing activities in fiscal 2024 was $0.7 million and consisted primarily of $0.8 million of purchases of property and equipment.
Cash Flows Related to Financing Activities. Cash used in financing activities in fiscal 2026 was $1.5 million and consisted primarily of payment of long-term debt and paying down the line of credit. These payments were partially offset by proceeds from a public stock issuance along with a draw on the line of credit.
Cash provided by financing activities in fiscal 2025 was $0.1 million and consisted primarily of proceeds from the term loan that originated in the first quarter of fiscal 2025, which was partially offset by payments on the revolving credit facility.
Cash used in financing activities in fiscal 2024 was $14 thousand.
Working Capital
Our net working capital as of March 31, 2026 was $11.0 million, consisting of $37.7 million of current assets and $26.7 million of current liabilities. Our net working capital as of March 31, 2025 was $8.7 million, consisting of $35.5 million of current assets and $26.8 million of current liabilities. The change was primarily due to an increase in accounts receivable, revenue earned but not billed, and decreases in our revolving line of credit and accrued expenses and other.
Our net working capital as of March 31, 2025 was $8.7 million, consisting of $35.5 million of current assets and $26.8 million of current liabilities. Our net working capital as of March 31, 2024 was $16.7 million, consisting of $44.8 million of current assets and $28.1 million of current liabilities. The change was primarily due to a decrease in inventories along with a decrease in accounts payable.
We generally attempt to maintain a three-month supply of on-hand inventory of purchased components and raw materials to meet anticipated demand, as well as to reduce our risk of unexpected raw material or component shortages or supply interruptions.
Indebtedness
Revolving Credit Agreement
Our credit agreement provides for a five-year $25.0 million revolving credit facility (the “Credit Facility”) that now matures on June 30, 2030. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of March 31, 2026, the borrowing base supported approximately $15.6 million of availability under the Credit Facility with $3.0 million drawn against that availability. As of March 31, 2025, the borrowing base supported approximately $15.0 million of availability under the Credit Facility with $7.0 million drawn against that availability.
The credit agreement is secured by a first lien security interest in substantially all of our assets.
Borrowings under the credit agreement are permitted in the form of SOFR or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to our availability under the credit agreement. Among other fees, we are required to pay an annual facility fee of $15,000 and a fee of 25 basis points on the unused portion of the Credit Facility.
The credit agreement includes a springing minimum fixed cost coverage ratio of 1.0 to 1.0 when excess availability under the Credit Facility falls below $4.0 million of the committed facility. Currently, the required springing minimum fixed cost coverage ratio is not required.
The credit agreement also contains customary events of default and other covenants, including certain restrictions on our ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, pay any dividend or distribution on our stock, redeem, retire or purchase shares of our stock, make investments or pledge or transfer assets. If an event of default under the credit agreement occurs and is continuing, then the lender may cease making advances under the credit agreement and declare any outstanding obligations under the credit agreement to be immediately due and payable. In addition, if we become the subject of voluntary or involuntary proceedings under any bankruptcy or similar law, then any outstanding obligations under the credit agreement will automatically become immediately due and payable.
Effective April 22, 2024, we, along with our lender, executed Amendment No. 2 (“Amendment No. 2”) to the credit agreement. The primary purpose of Amendment No. 2 was to add a $3.525 million mortgage loan facility to the credit agreement secured by our office headquarters property in Manitowoc, Wisconsin. Amendment No. 2 also broadened the definition of receivables to encompass government receivables as being eligible to be included in our borrowing base calculation for the purpose of establishing our monthly borrowing availability under the credit agreement. Quarterly installments of $88,125 are due on the first day of each fiscal quarter.
Effective October 30, 2024, we and our lender, executed Amendment No. 3 ("Amendment No. 3") to our credit agreement. The primary purpose of Amendment No. 3 was to extend the maturity date of the Credit Facility from December 29, 2025 to June 30, 2027.
On September 30, 2025, we and our lender executed Amendment No. 4 to our credit agreement, pursuant to which Bank of America consented to certain subordinated liens we granted in favor of Final Frontier and consented to the Remaining Earnout Amount evidenced by the Subordinated Loan Agreement, subject to certain limitations, and to permit us to make cash interest and principal payments to Final Frontier as set forth in the Subordinated Loan Agreement. On March 18, 2026, the Subordinated Loan Agreement was terminated and cancelled, and all related liens and security interests held by Final Frontier on our assets were automatically terminated and irrevocably released.
On March 17, 2026, we entered into the Settlement Agreement with Final Frontier and the Connors Parties, in order to reach a final and complete resolution and settlement of the dispute between the Connors Parties and us regarding our remaining earnout obligations owed to Final Frontier pursuant to the MIPA, pursuant to which we acquired Voltrek, as well as to reach a final and complete resolution and settlement of related arbitrations and terminate related agreements, as described below.
Under the terms of the Settlement Agreement, we made a one-time cash payment of the Settlement Amount to Final Frontier on March 18, 2026. Upon receipt of the Settlement Amount, all earn out payment obligations, the MIPA, all related earnout agreements, including the Subordinated Loan Agreement, the CPA Firm Arbitration and the AAA Arbitration proceedings were terminated, cancelled and released, and all liens and security interests held by Final Frontier on our assets were automatically terminated and irrevocably released. Additionally, upon payment of the Settlement Amount, we and the Connors Parties exchanged mutual general releases of all claims arising from or related to the earn out disputes, the CPA Firm Arbitration and the AAA Arbitration proceedings, the MIPA and the related earnout agreements. The releases did not affect Ms. Connors’ then part-time employment relationship with us or the Connors Parties’ rights as our shareholders. We also agreed to facilitate the Connors Parties’ entry into a Rule 10b5-1 trading plan during our next insider open window period to facilitate the Connors Parties’ sale of their shares of our common stock.
On May 29, 2026, we and our lender executed Amendment No. 5 to our credit agreement to extend the maturity date of the Credit Facility from June 30, 2027 to June 30, 2030.
Public Offering
On February 2, 2026, we issued 500,000 shares of our common stock at a price to the public of $14.00 per share pursuant to a firmly underwritten public offering. Net proceeds from the offering of approximately $6.4 million were used to reduce amounts outstanding under our credit agreement, with the remainder used for working capital and general corporate purposes.
Capital Spending
Our capital expenditures are primarily for general corporate purposes for our corporate headquarters and technology center, production equipment and tooling and for information technology systems. Our capital expenditures totaled $0.1 million in fiscal 2026, $0.1 million in fiscal 2025 and $0.8 million in fiscal 2024. Our capital spending plans predominantly consist of investments related to maintenance fleet vehicles, new product development tooling and equipment and information technology systems, exclusive of any capital spending for potential acquisitions. We expect to finance these capital expenditures primarily through our existing cash, equipment secured loans and leases, to the extent needed, long-term debt financing, or by using our Credit Facility. As discussed in Item 1A. Risk Factors, we will be commencing implementation efforts of a new ERP system in fiscal 2027, with an expected go-live date at the beginning of the second quarter of fiscal 2027. The expected cost for the project is approximately $2.0 million.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make certain estimates and judgments that affect our reported assets, liabilities, revenue and expenses, and our related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an ongoing basis, including those related to revenue recognition, inventory valuation, collectability of receivables, stock-based compensation, warranty reserves and income taxes. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. A summary of our critical accounting estimates is set forth below.
Revenue Recognition. We recognize revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of the goods or services being provided (which we refer to as a performance obligation) is transferred to a customer at an amount that reflects the consideration we expect to receive in exchange for those goods or services.
If there are multiple performance obligations in a single contract, the contract’s total transaction price per GAAP is allocated to each individual performance obligation based on their relative standalone selling price. A performance obligation’s standalone selling price is the price at which we would sell such promised good or service separately to a customer. We use an observable price to determine the stand-alone selling price for separate performance obligations or an expected cost-plus margin per GAAP approach when one is not available. When the expected cost-plus margin approach is used to determine the estimated stand-alone selling price it is based on average historical margins for that performance obligation in contracts with similar customers.
Revenue derived from customer contracts which include performance obligation(s) for the sale of lighting fixtures and components we manufacture, lighting fixtures we source, and EV charging stations and related software and warranty arrangements we source, are classified as product revenue in the consolidated statements of operations. The revenue for these transactions is recorded at the point in time when management believes that the customer obtains control of the products, generally either upon shipment or upon delivery to the customer’s facility. This point in time is determined separately for each contract and requires judgment by management of the contract terms and the specific facts and circumstances concerning the transaction.
Revenue from a customer contract which includes both the sale of our manufactured or sourced fixtures and the installation of such fixtures (which we refer to as a turnkey project) is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.
Revenue from turnkey projects that is allocated to the single installation performance obligation is reflected in Service revenue. Service revenue is recorded over-time as we fulfill our obligation to install the light fixtures. We measure our performance toward fulfilling our performance obligations for installations using an output method that calculates the number of light fixtures completely removed and installed as of the measurement date in comparison to the total number of light fixtures to be removed and installed under the contract.
Revenue from the maintenance offering that includes both the sale of our manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the consolidated statement of operations.
The sale of installation and services related to the EV charging business is presented in Service revenue. Revenue from the EV segment that includes both the sale of product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the consolidated statement of operations.
Inventories, Net. Inventories consist of raw materials and components, such as drivers, metal sheet and coil stock and molded parts; work in process inventories, such as frames and reflectors; and finished goods, including completed fixtures and systems, and accessories. All inventories are stated at the lower of cost or net realizable value with cost determined using the first-in, first-out (FIFO) method. In determining the lower of cost or net realizable value, we consider assumptions such as business and economic conditions, expected demand for our products, changes in technology or customer requirements, recent historical sales activity (including usage in the preceding 9 to 12 months) and selling prices, as well as estimates of future selling prices. When the net realizable value of inventories exceeds the carrying value, we record, as a charge to cost of product revenue, the amount required to reduce the carrying value of inventory to net realizable value.
Recoverability of Long-Lived Assets. We evaluate long-lived assets such as property, equipment and definite lived intangible assets, such as patents, for impairment whenever events or circumstances indicate that the carrying value of the assets recognized in our financial statements may not be recoverable. Factors that we consider include whether there has been a significant decrease in the market value of an asset, a significant change in the way an asset is being utilized, or a significant change, delay or departure in our strategy for that asset, or a significant change in the macroeconomic environment. Our assessment of the recoverability of long-lived assets involves significant judgment and estimation. These assessments reflect our assumptions, which, we believe, are consistent with the assumptions hypothetical marketplace participants use. Factors that we must estimate when performing recoverability and impairment tests include, among others, forecasted revenue, margin costs and the economic life of the asset. If impairment is indicated, we determine if the total estimated future cash flows on an undiscounted basis are less than the carrying amounts of the asset or assets. If so, an impairment loss is measured and recognized.
Our impairment loss calculations require that we apply judgment in identifying asset groups, estimating future cash flows, determining asset fair values, and estimating asset’s useful lives. To make these judgments, we may use internal discounted cash flow estimates, quoted market prices, when available, and independent appraisals, as appropriate, to determine fair value.
If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be required to recognize future impairment losses which could be material to our results of operations.
Indefinite Lived Intangible Assets and Goodwill. We test indefinite lived intangible assets and goodwill for impairment at least annually on the first day of our fiscal fourth quarter, or when indications of potential impairment exist. We monitor for the existence of potential impairment indicators throughout the fiscal year. Our annual impairment test may begin with a qualitative test to determine whether it is more likely than not that an indefinite lived intangible asset's carrying value is greater than its fair value. If our qualitative assessment reveals that asset impairment is more likely than not, we perform a quantitative impairment test by comparing the fair value of the indefinite lived intangible asset to its carrying value. Alternatively, we may bypass the qualitative test and initiate impairment testing with the quantitative impairment test.
We perform a qualitative assessment in conjunction with our annual impairment test of our indefinite lived intangible assets and goodwill as of January 1, 2026. This qualitative assessment considered our operating results for the first nine months of fiscal 2026 in comparison to prior years as well as our anticipated fourth quarter results and fiscal 2026 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was not deemed to be more likely than not and a quantitative analysis was not required.
We performed a qualitative assessment in conjunction with our annual impairment test of our indefinite lived intangible assets and goodwill as of January 1, 2025. This qualitative assessment considered our operating results for the first nine months of fiscal 2025 in comparison to prior years as well as our anticipated fourth quarter results and fiscal 2025 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was not deemed to be more likely than not and a quantitative analysis was not required.
Stock-Based Compensation. We currently issue time-based and performance-based restricted stock awards to our employees, consultants, executive officers and directors. In fiscal 2026, we also issued stock options to certain employees, consultants, and executive officers. We apply the provisions of ASC 718, Compensation - Stock Compensation , to these restricted stock and stock option awards which requires us to expense the estimated fair value of the awards based on the fair value of the award on the date of grant. Additionally, it is necessary to estimate the achievement of the performance-based awards to ensure the expense remains accurate. Compensation costs for equity incentives are recognized in earnings, on a straight-line basis over the requisite service period.
Accounting for Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to determine our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax expenses, together with assessing temporary differences resulting from recognition of items for income tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must reflect this increase as an expense within the tax provision in our statements of operations.
Our judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our net deferred tax assets. We continue to monitor the realizability of our deferred tax assets and adjust the valuation allowance accordingly. During fiscal 2023, we established a full valuation allowance on our net deferred tax assets due to end of the period of sustained profitability. In making these determinations, we considered all available positive and negative evidence, including projected future taxable income, tax planning strategies, recent financial performance and ownership changes.
We believe that past issuances and transfers of our stock caused an ownership change in fiscal 2007 that affected the timing of the use of our net operating loss carry-forwards, but we do not believe the ownership change affects the use of the full amount of the net operating loss carry-forwards. As a result, our ability to use our net operating loss carry-forwards attributable to the period prior to such ownership change to offset taxable income will be subject to limitations in a particular year, which could potentially result in increased future tax liability for us.
As of March 31, 2026, we had net operating loss carryforwards of approximately $87.2 million for federal tax purposes, $73.4 million for state tax purposes, and $0.6 million for foreign tax purposes.
We also had federal tax credit carryforwards of $1.1 million and state tax credit carryforwards of $0.1 million, which are reserved for as part of our valuation allowance. Of these tax attributes, $37.8 million of the federal and state net operating loss carryforwards are not subject to time restrictions on use but may only be used to offset 80% of future adjusted taxable income. The $123.4 million net operating loss and tax credit carryforwards will begin to expire in varying amounts between 2026 and 2056.
We recognize penalties and interest related to uncertain tax liabilities in income tax expense. Penalties and interest were immaterial as of the date of adoption and are included in unrecognized tax benefits.
By their nature, tax laws are often subject to interpretation. Further complicating matters is that in those cases where a tax position is open to interpretation, differences of opinion can result in differing conclusions as to the amount of tax benefits to be recognized under Financial Accounting Standards Board ("FASB") ASC 740, Income Taxes. ASC 740 utilizes a two-step approach for evaluating tax positions. Recognition (Step 1) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (Step 2) is only addressed if Step 1 has been satisfied. Under Step 2, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement. Consequently, the level of evidence and documentation necessary to support a position prior to being given recognition and measurement within the financial statements is a matter of judgment that depends on all available evidence. As of March 31, 2026, the balance of gross unrecognized tax benefits was approximately $0.2 million, all of which would reduce our effective tax rate if recognized. We believe that our estimates and judgments discussed herein are reasonable, however, actual results could differ, which could result in gains or losses that could be material.
Recent Accounting Pronouncements
See Note 2 – Summary of Significant Accounting Policies to our accompanying audited consolidated financial statements for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on results of operations and financial condition.
Item 7A. Quantitative and Qualita tive Disclosure About Market Risk
Market risk is the risk of loss related to changes in market prices, including interest rates, foreign exchange rates and commodity pricing that may adversely impact our consolidated financial position, results of operations or cash flows.
Inflation. We have experienced increases in various input costs including labor, components and transportation in the past year. In response, we have implemented multiple price increases, and we have substantially mitigated the inflationary pressures, such that our results from operations have not been materially affected by inflation. We are monitoring input costs and cannot currently predict the future impact to our operations by inflation.
Foreign Exchange Risk. We face minimal exposure to adverse movements in foreign currency exchange rates. Our foreign currency losses for all reporting periods have been nominal.
Interest Rate Risk. We do not believe that we are subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments. It is our policy not to enter into interest rate derivative financial instruments. As a result, we do not currently have any significant interest rate exposure.
As of March 31, 2026, we had $6.0 million of outstanding debt with floating interest rates.
Commodity Price Risk. We are exposed to certain commodity price risks associated with our purchases of raw materials, most significantly our aluminum purchases. During fiscal 2026, we have experienced commodity price increases; however, as of the date of this report, we are not able to predict the future impact of this risk. A hypothetical additional 20% increase in aluminum prices would have had a negative impact of $0.9 million on our net loss in fiscal 2026.
ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Number
Report of Independent Registered Public Accounting Firm ( BDO USA, P.C. ; Milwaukee, WI ; PCAOB ID# 243 )
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Orion Energy Systems, Inc.
Manitowoc, Wisconsin
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Orion Energy Systems, Inc. (the “Company”) as of March 31, 2026 and 2025, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2026, 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 at March 31, 2026 and 2025, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2026 , in conformity with accounting principles generally accepted in the United States of America.
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Inventory - Valuation
As described in Note 2 to the Company’s consolidated financial statements, the Company reports inventory using the first-in, first-out (FIFO) method. The Company records the amount required to reduce the carrying value of its inventories to net realizable value as a charge to cost of product revenue. As of March 31, 2026, the Company had inventories, net of approximately $10.3 million.
We identified Inventory Valuation as a critical audit matter. The principal considerations for this determination were management’s judgments utilized to determine the net realizable value of inventory, specifically the assumptions related to the recent historical sales activity (including usage in the preceding 9 to 12 months) and expected demand for the products. Auditing these elements involved especially subjective auditor judgment due to the nature and extent of audit effort required to address this matter.
The primary procedures we performed to address this critical audit matter included:
Assessing the reasonableness of management’s assumptions over historical sales activity, including testing the completeness and accuracy of underlying data and corroborating management’s considerations of usage trends during the preceding 9 to 12 months, on a sample basis.
Assessing the reasonableness of management’s assumptions over expected demand for products, by comparing parts identified for substitutions when applicable and testing usage subsequent to year-end and other subsequent transactions, on a sample basis.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2011.
Milwaukee, Wisconsin
June 4, 2026
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED B ALANCE SHEETS
March 31,
(in thousands, except share amounts)
Assets
Cash and cash equivalents
Accounts receivable, net
Revenue earned but not billed
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Other intangible assets, net
Other long-term assets, net
Total assets
Liabilities and Shareholders’ Equity
Accounts payable
Accrued expenses and other
Deferred revenue, current
Current maturities of long-term debt
Total current liabilities
Revolving credit facility
Long-term debt, less current maturities
Deferred revenue, long-term
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 14)
Shareholders’ equity:
Preferred stock, $ 0.01 par value: Shares authorized: 30,000,000 shares
at March 31, 2026 and 2025; no shares issued and outstanding at
March 31, 2026 and 2025
Common stock, no par value: Shares authorized: 20,000,000 at
March 31, 2026 and 2025; shares issued: 4,819,013 and
4,247,023 at March 31, 2026 and 2025; shares outstanding:
4,056,528 and 3,298,389 at March 31, 2026 and 2025
Additional paid-in capital
Treasury stock: 762,485 and 948,634 common shares at
March 31, 2026 and 2025
Accumulated deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these Consolidated Financial Statements.
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERA TIONS
Fiscal Year Ended March 31,
(in thousands, except share and per share amounts)
Product revenue
Service revenue
Total revenue
Cost of product revenue
Cost of service revenue
Total cost of revenue
Gross profit
Operating expenses:
General and administrative
Impairment on intangibles
Acquisition related costs
Sales and marketing
Research and development
Total operating expenses
Loss from operations
Other income (expense):
Other income
Interest expense
Amortization of debt issue costs
Loss on debt extinguishment
Interest income
Total other expense
Loss before income tax
Income tax expense
Net loss
Basic net loss per share attributable to common shareholders
Weighted-average common shares outstanding
Diluted net loss per share
Weighted-average common shares and share equivalents
outstanding
The accompanying notes are an integral part of these Consolidated Financial Statements.
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
STATEMENTS OF SHA REHOLDERS’ EQUITY
Shareholders’ Equity
Common Stock
(in thousands, except share amounts)
Shares
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Deficit
Total
Shareholders’
Equity
Balance, March 31, 2023
Issuance of stock and shares for services
Shares issued under Employee Stock Purchase
Plan
Stock-based compensation
Employee tax withholdings on stock-based
compensation
Net loss
Balance, March 31, 2024
Shares issued under Employee Stock Purchase
Plan
Stock-based compensation
Employee tax withholdings on stock-based
compensation
Net loss
Balance, March 31, 2025
Public stock offering, net of issuance costs
Issuance of stock for earnout payment
Issuance of stock for sign on bonus
Shares issued under Employee Stock Purchase
Plan
Stock-based compensation
Employee tax withholdings on stock-based
compensation
Net loss
Balance, March 31, 2026
The accompanying notes are an integral part of these Consolidated Financial Statements.
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEM ENTS OF CASH FLOWS
Fiscal Year Ended March 31,
(in thousands)
Operating activities
Net loss
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization
Stock-based compensation
Loss on debt extinguishment
Deferred taxes and impairment of property and equipment
Loss on asset disposals
Provision for inventory reserves
Provision for credit losses
Other
Changes in operating assets and liabilities:
Accounts receivable
Revenue earned but not billed
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Deferred revenue, current and long-term
Net cash provided by (used in) operating activities
Investing activities
Purchase of property and equipment
Additions to patents and licenses
Proceeds from sales of property and equipment
Net cash provided by (used in) investing activities
Financing activities
Payment of long-term debt
Proceeds from revolving credit facility
Payment of revolving credit facility
Proceeds from long-term debt
Unamortized debt issuance cost write-off
Issuance of treasury stock
Proceeds from public stock offering, net of issuance costs
Payments to settle employee tax withholdings on stock-based
compensation
Debt issue costs
Proceeds from employee equity exercises
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Cash paid for interest
Cash paid for income taxes
Supplemental disclosure of non-cash investing and financing activities:
Operating lease assets obtained in exchange for new operating lease liabilities
Issuance of common stock to Final Frontier, LLC as partial payment of earnout obligation
Issuance of subordinated debt for earnout obligation
The accompanying notes are an integral part of these Consolidated Financial Statements.
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF BUSINESS
Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion provides light emitting diode lighting systems, wireless Internet of Things enabled control solutions, project engineering, energy project management design, maintenance services and turnkey electric vehicle charging stations and related installation services to commercial and industrial businesses, and federal and local governments, predominantly in North America.
Orion’s corporate offices and leased primary manufacturing operations are located in Manitowoc, Wisconsin. Orion also leases office space in Jacksonville, Florida and Lawrence, Massachusetts.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Orion Energy Systems, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during that reporting period. Areas that require the use of management estimates include revenue recognition, net realizable value of inventory, allowance for credit losses, accruals for warranty and loss contingencies, earnout , income taxes, impairment analyses, and certain equity transactions. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
Orion considers all highly liquid, short-term investments with original maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Orion’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other, revolving credit facility and debt. In addition, other long-term assets, net includes an equity investment of $ 0.5 million that is carried at cost less impairment, of which there has been no impairment as of March 31, 2026, 2025, and 2024. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Level 1 — Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 — Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.
Level 3 — Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management's best estimate of what market participants would use in valuing the asset or liability at the measurement date.
The carrying amounts of Orion’s financial instruments and debt approximate their respective fair values due to the relatively short-term nature of these instruments. Orion's debt is considered Level 2 and is reflected in the consolidated balance sheets at carrying value, which approximate fair value because the stated interest rates are similar to interest rates currently available to Orion for similar obligations.
Allowance for Credit Losses
Orion performs ongoing evaluations of its customers and continuously monitors collections and payments. Orion estimates an allowance for credit losses based upon the historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. Orion also considers customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions.
Inventories, Net
Inventories consist of raw materials and components, such as drivers, metal sheet and coil stock and molded parts; work in process inventories, such as frames and reflectors; and finished goods, including completed fixtures and systems, and accessories. All inventories are stated at the lower of cost or net realizable value with cost determined using the first-in, first-out (FIFO) method. In determining the lower of cost or net realizable value, we consider assumptions such as business and economic conditions, expected demand for our products, changes in technology or customer requirements, recent historical sales activity (including usage in the preceding 9 to 12 months ) and selling prices, as well as estimates of future selling prices. When the net realizable value of inventories exceeds the carrying value, Orion records, as a charge to Cost of product revenue, the amount required to reduce the carrying value of inventory to net realizable value.
Incentive Plan
Orion’s human capital management and compensation committee annually approves an executive annual cash incentive program. Based upon the results for the fiscal years ended March 31, 2026, 2025, and 2024, Orion accrued approximately $ 1.0 million, $ 0.1 million and $ 0.2 million expense related to these programs, respectively.
Revenue Recognition
Orion generates revenues primarily by selling commercial lighting fixtures and components, installing these fixtures in its customers' facilities, and providing maintenance services including repairs and replacements for the lighting and related electrical components deployed in its customer’s facilities. Orion recognizes revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (ASC 606) when control of the goods or services being provided (which Orion refers to as a performance obligation) is transferred to a customer at an amount that reflects the consideration that management expects to receive in exchange for those goods or services. Prices are generally fixed at the time of order confirmation, either for the contract as a whole or for the hourly rates that will be charged for the type of maintenance services delivered.
If there are multiple performance obligations in a single contract, the contract’s total transaction price is allocated to each individual performance obligation based on their relative standalone selling price. A performance obligation’s standalone selling price is the price at which Orion would sell such promised good or service separately to a customer. Orion uses an observable price to determine the stand-alone selling price for separate performance obligations or an expected cost-plus margin approach when one is not available. When the expected cost-plus margin approach is used to determine the estimated stand-alone selling price it is based on average historical margins for that performance obligation in contracts with similar customers.
Revenue derived from customer contracts which include only performance obligation(s) for the sale of Orion manufactured or sourced lighting fixtures and components is classified as Product revenue in the consolidated statements of operations. The revenue for these transactions is recorded at the point in time when management believes that the customer obtains control of the products, generally either upon shipment or upon delivery to the customer’s facility. This point in time is determined separately for each contract and requires judgment by management of the contract terms and the specific facts and circumstances concerning the transaction.
Revenue from a customer contract, which includes both the sale of Orion manufactured or sourced fixtures and the installation of such fixtures (which Orion refers to as a turnkey project), is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.
Revenue from turnkey projects that is allocated to the sale of the lighting fixtures is recorded at the point in time when management believes the customer obtains control of the product(s) and is reflected in Product revenue. This point in time is determined separately for each customer contract based upon the terms of the contract and the nature and extent of Orion’s control of the light fixtures during the installation. Product revenue associated with turnkey projects can be recorded (a) upon shipment or delivery, (b) subsequent to shipment or delivery and upon customer payments for the light fixtures, (c) when an individual light fixture is installed and working correctly, or (d) when the customer acknowledges that the entire installation project is substantially complete. Determining the point in time when a customer obtains control of the lighting fixtures in a turnkey project is applied separately for each individual light fixture included in a contract. In making this judgment, management considers the timing of various factors, including, but not limited to, those detailed below:
when there is a legal transfer of ownership;
when the customer obtains physical possession of the products;
when the customer starts to receive the benefit of the products;
the amount and duration of physical control that Orion maintains on the products after they are shipped to, and received at, the customer’s facility;
whether Orion is required to maintain insurance on the lighting fixtures when they are in transit and after they are delivered to the customer’s facility;
when each light fixture is physically installed and working correctly;
when the customer formally accepts the product; and
when Orion receives payment from the customer for the light fixtures.
Revenue from turnkey projects that is allocated to the single installation performance obligation is reflected in Service revenue. Service revenue is recorded over-time as Orion fulfills its obligation to install the light fixtures. Orion measures its performance toward fulfilling its performance obligations for installations using an output method that calculates the number of light fixtures removed and installed as of the measurement date in comparison to the total number of light fixtures to be removed and installed under the contract.
Revenue from the maintenance offering that includes both the sale of Orion manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices using the cost-plus margin approach, and is recorded in Product revenue and Service revenue, respectively, in the consolidated statement of operations.
Orion offers a financing program, called an Orion Throughput Agreement, or OTA, for a customer’s lease of Orion’s energy management systems. The OTA is structured as a sales-type lease and upon successful installation of the system and customer acknowledgment that the system is operating as specified, revenue is recognized at Orion’s net investment in the lease, which typically is the net present value of the future cash flows.
Orion also records revenue in conjunction with limited power purchase agreements (“PPAs”) still outstanding. Those PPAs are supply-side agreements for the generation of electricity. Orion’s last PPA expires in 2031. Revenue associated with the sale of energy generated by the solar facilities under these PPAs is within the scope of ASC 606. Revenues are recognized over-time and are equal to the amount billed to the customer, which is calculated by applying the fixed rate designated in the PPAs to the variable amount of electricity generated each month. This approach is in accordance with the “right to invoice” practical expedient provided for in ASC 606. Orion also recognizes revenue upon the sale to third parties of tax credits received from operating the solar facilities and from amortizing a grant received from the federal government during the period starting when the power generating facilities were constructed until the expiration of the PPAs; these revenues are not derived from contracts with customers and therefore not under the scope of ASC
606. In March 2026, Orion executed a contract modification for its two remaining PPAs that immediately terminated the agreements and eliminated any remaining obligations with respect to those agreements. Orion recognized the $ 1.3 million payment received as a contract modification in accordance with ASC 606 in the period of termination.
During the third quarter of fiscal 2023, Orion acquired Voltrek LLC ("Voltrek"), which sells and installs sourced electric vehicle charging stations and related software subscriptions and renewals. The results of Voltrek are included in the EV segment and compliment Orion’s existing turnkey installation model.
The sale of charging stations and related software subscriptions, renewals and extended warranty is presented in Product revenue. Orion is the principal in the sales of charging stations as it has control of the physical products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis. For certain sales, primarily software subscriptions, renewals and extended warranty, Orion is the sales agent providing access to the content and recognize commission revenue net of amounts due to third parties who fulfill the performance obligation. For these sales, control passes at the point in time upon providing access of the content to the customer.
The sale of installation and services related to the EV charging business is presented in Service revenue. Revenue from the EV segment that includes both the sale of product and service is allocated between the product and service performance obligations based on relative standalone selling prices using the cost-plus margin approach, and is recorded in Product revenue and Service revenue, respectively, in the consolidated statement of operations.
From time to time, the EV segment enters into bill and hold arrangements, whereby the Company sells EV charging stations and the charging stations are warehoused at a Company location for a specified period of time in accordance with directions received from the Company's customers. Even though the charging stations are held at a Company location, a sale is recognized at the point in time when the customer obtains control of the product. Control is transferred to the customer in a bill and hold arrangement when: customer acceptance specifications have been met, legal title has transferred, the customer has a present obligation to pay for the product and the risk and rewards of ownership have transferred to the customer. Additionally, all the following bill and hold criteria have been met in order for control to be transferred to the customer: the reason for the bill and hold arrangement is substantive -the customer has requested the product be warehoused, the product has been identified as separately belonging to the customer, the product is currently ready for physical transfer to the customer, and the Company does not have the ability to use the product or direct it to another customer.
See Note 10 – Accrued Expenses and Other for a discussion of Orion’s accounting for the limited warranty it provides to customers for its products and services.
Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis.
Contract Fulfillment Costs
Costs associated with product sales are accumulated in inventory as the fixtures are manufactured and are transferred to Cost of product revenue at the time revenue is recorded. See Note 5 – Inventories. Costs associated with installation sales are expensed as incurred.
Practical Expedients and Exemptions
Orion expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within Sales and marketing expense. There are no other capitalizable costs associated with obtaining contracts with customers.
Orion’s performance obligations related to lighting fixtures and EV charging stations typically do not exceed nine months in duration. As a result, Orion has elected the practical expedient that provides an exemption to the disclosure requirements regarding information about value assigned to remaining performance obligations on contracts that have original expected durations of one year or less.
Orion also elected the practical expedient that permits companies to not disclose quantitative information about the future revenue when revenue is recognized as invoices are issued to customers for services performed.
Other than the turnkey projects which result in sales-type leases discussed above, Orion generally receives full payment for satisfied performance obligations in less than one year. Accordingly, Orion does not adjust revenues for the impact of any potential significant financing component as permitted by the practical expedients provided in ASC 606.
Shipping and Handling Costs
Orion records costs incurred in connection with shipping and handling of products as Cost of product revenue. Amounts billed to customers in connection with these costs are included in product revenue.
Research and Development
Orion expenses research and development costs as incurred. Amounts are included in the consolidated statement of operations on the line item Research and development.
Leases
From time to time, Orion leases assets from third parties. Orion also leases certain assets to third parties. Leases are accounted for, and reported upon, following the requirements of ASC 842.
Whether it is the lessee or the lessor, Orion’s determination of whether a contract includes a lease, and assessing how the lease should be accounted for, is a matter of judgment based on whether the risks and rewards, as well as substantive control of the assets specified in the contract, have been transferred from the lessor to the lessee. The judgment considers matters such as whether the assets are transferred from the lessor to the lessee at the end of the contract, the term of the agreement in relation to the asset’s remaining economic useful life, and whether the assets are of such a specialized nature that the lessor will not have an alternative use for such assets at the termination of the agreement. Other matters requiring judgment are the lease term when the agreement includes renewal or termination options and the interest rate used when initially determining the Right-of-Use (ROU) asset and lease liability.
ROU assets represent Orion’s right to use an underlying asset for the lease term and lease liabilities represent Orion’s obligation to make lease payments arising from the lease. Under ASC 842, both finance and operating lease ROU assets and lease liabilities for leases with initial terms in excess of 12 months are recognized at the commencement date based on the present value of lease payments over the lease term. When available, Orion uses the implicit interest rate in the lease when completing this calculation. However, as most of Orion’s operating lease agreements generating ROU assets do not provide the implicit rate, Orion’s incremental borrowing rate under its Credit Facility, adjusted for differences in duration and the relative collateral value in relation to the payment obligation, at the commencement of the lease is generally used in this calculation. The lease term includes options to extend or renew the agreement, or for early termination of the agreement, when it is reasonably certain that Orion will exercise such option. ROU assets are depreciated using the straight-line method over the lease term.
Orion recognizes lease expense for leases with an initial term of 12 months or less, referred to as short term leases, on a straight-line basis over the lease term.
Intangible Assets
Intangible assets that have a definite life are evaluated for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable based primarily upon whether expected future undiscounted cash flows are sufficient to support the asset recovery. If the actual useful life of the asset is shorter than the estimated life, the asset may be deemed to be impaired and accordingly a write-down of the value of the asset determined by a discounted cash flow analysis or shorter amortization period may be required.
Indefinite lived intangible assets and goodwill are evaluated for impairment at least annually on the first day of Orion’s fiscal fourth quarter, or when indications of potential impairment exist. This annual impairment review may begin with a qualitative test to determine whether it is more likely than not that an indefinite lived intangible asset's carrying value is greater than its fair value. If the qualitative assessment reveals that asset impairment is more likely than not, a quantitative impairment test is performed comparing the fair value of the indefinite lived intangible asset to its carrying value. Alternatively, the qualitative test may be bypassed and the quantitative impairment test may be immediately performed. If the fair value of the indefinite lived intangible asset exceeds its carrying value, the indefinite lived intangible asset is not impaired and no further review is performed. If the carrying value of the indefinite lived intangible asset exceeds its fair value, an impairment loss would be recognized in an amount equal to such excess. Once an impairment loss is recognized, the adjusted carrying value becomes the new accounting basis of the indefinite lived intangible asset.
Income Taxes
Orion recognizes deferred tax assets and liabilities for the future tax consequences of temporary differences between financial reporting and income tax basis of assets and liabilities, measured using the enacted tax rates and laws expected to be in effect when the temporary differences reverse. Deferred income taxes also arise from the future tax benefits of operating loss and tax credit carryforwards. A valuation allowance is established when management determines that it is more likely than not that all or a portion of a deferred tax asset will not be realized.
ASC 740, Income Taxes, also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination. Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as other liabilities (non-current) to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax expense.
Stock-based Compensation
Orion accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period. As more fully described in Note 16 – Restricted Shares, Orion currently awards non-vested restricted stock (and in some cases, in conjunction with associated cash award accounted for as a liability) to employees, executive officers and directors.
Concentration of Credit Risk and Other Risks and Uncertainties
Orion’s cash is primarily deposited with one financial institution. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. Orion has not experienced any losses in such accounts and believes that it is not exposed to any significant financial institution viability risk on these balances.
Orion purchases components necessary for its lighting products, including lamps and LED components, from multiple suppliers. For fiscal 2026, 2025 and 2024, no supplier accounted for more than 10 % of total c ost of revenue.
In fiscal 2026 , one customer account ed for 26.0 % of revenue. I n fiscal 2025 , one customer accounted for 18.1 % of total revenue. In fiscal 2024 , one customer accounted for 25.6 % of total revenue. The revenue from this customer is recorded in Orion's lighting and maintenance segments.
As of March 31, 2026 , one customer accounted for 33.1 % of accounts receivable. As of March 31, 2025 , one customer accounted for 13.0 % of accounts receivable.
Compliance with the Continued Listing Standards of the Nasdaq Capital Market (“NASDAQ”) and Reverse Stock Split
As previously disclosed, on September 20, 2024, Orion received written notice from the Listing Qualifications Department (the “Staff”) of NASDAQ notifying Orion that it was not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”) for continued listing on NASDAQ, as the closing bid price of the Orion’s common stock had been below $ 1.00 per share for 30 consecutive trading days.
Ultimately, in order to regain compliance with the Minimum Bid Price Rule, Orion effected a 1-for-10 reverse stock split of its common stock as of the opening of trading on August 22, 2025.
As a result of the effect of Orion's reverse stock split, on September 8, 2025, Orion received a written notification from the Staff indicating that Orion had regained compliance with the Minimum Bid Price Rule. Consequently, Orion is now in compliance with all applicable listing standards of, and remains listed on, the NASDAQ.
Recent Accounting Pronouncements
Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. Orion considers the applicability and impact of all ASUs.
Recently Adopted Standards
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity's income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2025. Orion adopted this standard on March 31, 2026, and it did not have a material effect on its results of operations, financial position, or cash flows. For additional information, see Note 13.
Issued: Not Yet Adopted
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting, which is intended to improve the navigability of the guidance in Accounting Standards Codification (ASC) 270 and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides "interim financial statements and notes in accordance with GAAP." The ASU also addresses the form and content of such financial statements, adds lists to ASC 270 of the interim disclosures required by all other codification topics, and establishes a principle under which an entity must "disclose events since the end of the last annual reporting period that have a material impact on the entity." As the FASB stated in the proposed guidance and reiterates in the ASU, the amendments are not intended to "change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements." The amendments will be effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Orion is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses (Topic 326), which modifies the current credit loss guidance in Topic 326 to expand on how an entity develops and estimate of expected credit losses. The amendments in this update provide (1) all entities with a practical expedient and (2) entities other than public business entities with an accounting policy election when estimating expected credit loses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, as follows: "1. Practical expedient. In developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. 2. Accounting policy election. An entity other than a public business entity that elects the practical expedient is permitted to make an accounting policy election to consider collection activity after the balance sheet date when estimating expected credit losses." The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. Orion is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which modifies the disclosure and presentation requirements relating to expenses shown on the statements of operations. The amendments in the update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: "1. Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil and gas-producing activities. 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4. Disclose the total amount of selling expense and, in annual reporting periods, an entity's definition of selling expenses." The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. Orion is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
NOTE 3 — REVENUE
Disaggregation of Revenue
The primary end-users of Orion’s lighting products and services are (a) the federal government, and (b) commercial or industrial companies.
The federal government obtains Orion products and services primarily through turnkey project sales that Orion makes to a select group of contractors who focus on the federal government. Revenues associated with government end-users are primarily included in the Orion lighting and EV segments.
Commercial or industrial end-users obtain Orion products and services through turnkey project sales or by purchasing products either direct from Orion or through distributors or energy service companies ("ESCOs"). Revenues associated with commercial and industrial end-users are included within each of Orion’s segments.
See Note 17 - Segment Data, for additional discussion concerning Orion’s reportable segments.
The following table provides detail of Orion’s total revenues for the year ended March 31, 2026, 2025, and 2024 (dollars in thousands):
Year Ended March 31, 2026
Year Ended March 31, 2025
Year Ended March 31, 2024
Product
Services
Total
Product
Services
Total
Product
Services
Total
Revenue from contracts with customers:
Lighting product and installation
Maintenance services
Electric vehicle charging
Solar energy-related revenues
Total revenues from contracts with customers
Revenue accounted for under other guidance (1)
Total revenue
(1) Revenue accounted for under other guidance is recognized as Product revenue in the consolidated statements of operations and includes $ 0.4 million, $ 0.7 million and $ 0 million derived from sales-type leases for light fixtures for the fiscal years ended March 31, 2026, 2025, and 2024, respectively; $ 0 million, $ 0 million, and $ 0.1 million derived from the sale of tax credits generated from Orion’s legacy operation for distributing solar energy for the fiscal years ended March 31, 2026, 2025, and 2024, respectively; and $ 0.4 million, $ 0 , and $ 0 derived from the amortization of federal grants received in 2010 and 2011 as reimbursement for a portion of the costs to construct the legacy solar facilities for the fiscal years ended March 31, 2026, 2025, and 2024, respectively.
Bill and hold revenue that had not shipped was $ 0 million and $ 0.1 million as of March 31, 2026 and 2025, respectively.
Cash Flow Considerations
Material only orders are short-term in nature generally having terms of significantly less than one year. We record revenue from these contracts when the customer obtains control of those goods, which is generally consistent with the payment due date. There is not a significant impact on the nature, amount, timing, and uncertainty of revenue or cash flows based on when control transfers.
Turnkey projects and repair services provided to commercial or industrial companies typically span between one week to three months. Customer payment requirements for these projects vary by contract. Some contracts provide for customer payments for products and services as they are delivered, other contracts specify that the customer will pay for the project in its entirety upon completion of the installation.
Turnkey projects where the end-user is the federal government typically span a three to six-month period. The contracts for these sales often provide for monthly progress payments equal to ninety percent ( 90 %) of the value provided by Orion during the month.
Orion provides long-term financing to one customer who frequently engages Orion in large turnkey projects that span between three and nine months. The customer executes an agreement providing for monthly payments of the contract price, plus interest, over a five-year period. The total transaction price in these contracts is allocated between product and services in the same manner as all other turnkey projects. The portion of the transaction associated with the installation is accounted for consistently with all other installation related performance obligations. The portion of the transaction associated with the sale of the multiple individual light fixtures is accounted for as sales-type leases in accordance with the guidance for leases. Revenues associated with the sales-type leases are included in Product revenue and recorded for each fixture separately based on the customer’s monthly acknowledgment that specified fixtures have been installed and are operating as specified.
The payments associated with these transactions that are due during the twelve months subsequent to March 31, 2026 are included in Accounts receivable, net in Orion’s consolidated balance sheets. The remaining amounts due that are associated with these transactions are included in Long-term accounts receivable in Orion’s consolidated balance sheets. As of March 31, 2026 and 2025, there were no such transactions included in Long-term accounts receivable.
The customer’s monthly payment obligation commences after completion of the turnkey project. Orion generally sells the receivable from the customer to a financial institution either during, or shortly after completion of, the installation period. Upon execution of the receivables purchase / sales agreement, all amounts due from the customer are included in Revenues earned but not billed on Orion’s consolidated balance sheets until cash is received from the financial institution. The financial institution releases funds to Orion based on the customer’s monthly acknowledgment of the progress Orion has achieved in fulfilling its installation obligation. Orion provides the progress certifications to the financial institution one month in arrears.
The total amount received from the sales of these receivables during the twelve months ended March 31, 2026, 2025, and 2024 was $ 1.5 million, $ 1.8 million and $ 0 million, respectively. Orion’s losses on these sales aggregated to $ 0 million, $ 0.1 million and $ 0 million for the fiscal years ended March 31, 2026, 2025, and 2024, respectively, and are included in Interest expense in the Consolidated Statements of Operations.
Contract Balances
A receivable is recognized when Orion has an enforceable right to payment in accordance with contract terms and an invoice has been issued to the customer. Payment terms on invoiced amounts are typically 30 days from the invoice date.
Revenue earned but not billed represents revenue that has been recognized in advance of billing the customer, which is a common practice in Orion contracts for turnkey installations and repairs / replacement services. Once Orion has an unconditional right to consideration under these contracts, Orion typically bills the customer accordingly and reclassifies the amount to Accounts receivable, net. The change in contract assets is due to higher fiscal 2024 revenue and timing of project completions and invoicing.
Deferred revenue, current as of March 31, 2026 , includes $ 0.1 million of contract liabilities which represent consideration received from customers on which installation has not yet begun or is partially complete and Orion has not fulfilled its contractual obligations.
The amount of revenues recognized in the period that were included in the opening deferred revenue balances were $ 0.4 million, $ 0.1 million, and $ 0.5 million for the years ended March 31, 2026, 2025, and 2024 respectively. This revenue consists primarily of work performed on previous billings to customers. The difference between the opening and closing balances of Orion's deferred revenue primarily results from the timing of Orion's billings in relation to the performance of work.
The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of March 31, 2026, and March 31, 2025 (dollars in thousands):
March 31, 2026
March 31, 2025
March 31, 2024
Accounts receivable, net
Revenue earned but not billed (1)
Deferred revenue (2)(3)
(1) Within the revenue earned but not billed line on the consolidated balance s heet, $ 0 million in f iscal 2026 and $ 0.4 million in fiscal 2025 is accounted for as a sales type lease under ASC 842, Leases, and therefore has been excluded from this table since it is not considered a "contract asset", which is an asset defined by ASC 606.
(2) Fiscal 2025 and 2024 included the unamortized portion of the funds received from the federal government in 2010 and 2011 as reimbursement for the costs to build the two facilities related to the PPAs. As the transaction is not considered a contract with a customer, this value is not a contract liability as defined by ASC 606.
(3) Fiscal 2026, 2025, and 2024 include revenue related to a patented technology related settlement. As the transaction is not considered a contract with a customer, this value is not a contract liability as defined by ASC 606.
NOTE 4 — ACCOUNT S RECEIVABLE
Orion’s accounts receivable are due from companies in the commercial, governmental, industrial and agricultural industries, as well as wholesalers. Credit is extended based on an evaluation of a customer’s financial condition. Generally, collateral is not required for end users; however, the payment of certain trade accounts receivable from wholesalers is secured by irrevocable standby letters of credit and/or guarantees. Accounts receivable are generally due within 30 days. Orion's accounts receivable and allowance for credit losses balances were as follows (dollars in thousands):
Accounts receivable, gross
Allowance for credit losses
Accounts receivable, net
Changes in Orion’s allowance for credit losses were as follows (dollars in thousands):
Fiscal Year Ended March 31,
Beginning of period
Reserve adjustment
Credit loss/bad debt expense
Write-off
End of period
NOTE 5 — INVENTORIES
As of March 31, 2026 and 2025, Orion's inventory balances, net of excess and obsolete reserves of $ 2.2 million and $ 1.8 million, respectively, were as follows (dollars in thousands):
Inventories
As of March 31, 2026
Raw materials and components
Work in process
Finished goods
Total
As of March 31, 2025
Raw materials and components
Work in process
Finished goods
Total
Costs associated with the procurement and warehousing of inventories, such as inbound freight charges and purchasing and receiving costs, are also included in Cost of product revenue.
NOTE 6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses consists primarily of prepaid insurance premiums, debt issue costs, prepaid subscription fees, prepaid networking services for EV products, ERP system implementation fees, and value added tax receivable. As of March 31, 2026 and March 31, 2025, prepaid expen ses totaled $ 1.4 million and $ 1.9 million, re spectively.
NOTE 7 — PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Expenditures for additions and improvements are capitalized, while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed as incurred. Properties and equipment sold, or otherwise disposed of, are removed from the property and equipment accounts, with gains or losses on disposal credited or charged to income from operations.
Orion periodically reviews the carrying values of property and equipment for impairment in accordance with ASC 360, Property, Plant and Equipment, if events or changes in circumstances indicate that the assets may be impaired. The estimated future undiscounted cash flows expected to result from the use of the assets and their eventual disposition are compared to the assets' carrying amount to determine if a write down to market value is required. In March 2026, Orion disposed of its remaining solar assets which resulted in a loss on disposal of $ 1.1 million and is reflected in the consolidated statements of operations in general and administrative expenses.
Property and equipment were comprised of the following (dollars in thousands):
March 31, 2026
March 31, 2025
Land and land improvements
Buildings and building improvements
Furniture, fixtures and office equipment
Leasehold improvements
Equipment leased to customers
Plant equipment
Vehicles
Construction in progress
Gross property and equipment
Less: accumulated depreciation and amortization
Total property and equipment, net
Depreciation and amortization is recognized over the estimated useful lives of the respective assets, using the straight-line method. Orion recorded depreciation and amortization expense of $ 0.9 million, $ 1.3 million and $ 1.4 million for the years ended March 31, 2026, 2025 and 2024, respectively.
Depreciable lives by asset category are as follows:
Land improvements
10 - 15 years
Buildings and building improvements
10 - 39 years
Furniture, fixtures and office equipment
2 - 10 years
Leasehold improvements
Shorter of asset life or life of lease
Equipment leased to customers under Power Purchase Agreements
20 years
Plant equipment
3 - 10 years
Vehicles
5 - 7 years
NOTE 8 — LEASES
Assets Orion Leases from Other Parties
On January 31, 2020, Orion entered into the current lease for its primary manufacturing and distribution facility in Manitowoc, Wisconsin, the term of which lease ends January 31, 2030. Orion is responsible for the costs of insurance and utilities for the facility. These costs are considered variable lease costs. The agreement is classified as an operating lease.
In February 2014, Orion entered into a multi-year lease agreement for use of office space in a multi-use office building in Jacksonville, Florida. The lease has since been extended, most recently during the first quarter of fiscal 2027, and presently terminates on June 30, 2029 . The agreement is classified as an operating lease.
We lease office space in Lawrence, Massachusetts. The lease presently terminates in August 2026 . The agreement is classified as an operating lease.
Additionally, we had a lease in Pewaukee, Wisconsin that was terminated early in August of fiscal 2025. The agreement was classified as an operating lease. Additional details regarding the early termination can be seen in Note 18 - Restructuring.
Orion has leased other assets from third parties, principally office and production equipment. The terms of our other leases vary from contract to contract and expire at various dates in the next five years .
The weighted average discount rate for Orion’s lease obligations as of March 31, 2026 and 2025 is 6.9 % and 6.8 %, respectively. The weighted average remaining lease term as of March 31, 2026 and 2025 is 3.7 years and 4.5 years, respectively.
A summary of Orion’s assets leased from third parties follows (dollars in thousands):
Balance sheet classification
March 31, 2026
March 31, 2025
Assets
Operating lease assets
Other long-term assets, net
Liabilities
Current liabilities
Operating lease liabilities
Accrued expenses and other
Non-current liabilities
Operating lease liabilities
Other long-term liabilities
Total lease liabilities
Orion had operating leas e costs of $ 1.2 million, $ 1.2 million, and $ 1.9 million for the years ended March 31, 2026, 2025, and 2024, respectively. This includes short-term leases and variable lease costs, which are immaterial.
The es timated maturity of lease liabilities for each of the future years is shown below (dollars in thousands):
Maturity of Lease Liabilities
Operating Leases
Fiscal 2027
Fiscal 2028
Fiscal 2029
Fiscal 2030
Total lease payments
Less: Interest
Present value of lease liabilities
Assets Orion Leases to Other Parties
Orion provides long-term financing to one customer who frequently engages Orion in large turnkey projects that span between three and nine months. The customer executes an agreement providing for monthly payments, at a fixed monthly amount, of the contract price, plus interest, over typically a five-year period. The total transaction price in these contracts is allocated between product and services in the same manner as all other turnkey projects. The portion of the transaction associated with the installation is accounted for consistently with all other installation related performance obligations under ASC 606.
While Orion retains ownership of the light fixtures during the financing period, the transaction terms and the underlying economics associated with used lighting fixtures results in Orion essentially ceding ownership of the lighting fixtures to the customer after completion of the agreement. Therefore, the portions of the transaction associated with the sale of the multiple individual light fixtures is accounted for as a sales-type lease under ASC 842.
Revenues, and production and acquisition costs, associated with sales-type leases are included in Product revenue and Costs of product revenues in the consolidated statement of operations. These amounts are recorded for each fixture separately based on the customer’s monthly acknowledgment that specified fixtures have been installed and are operating as specified. The execution of the acknowledgment is considered the commencement date as defined in ASC 842.
The following chart shows the amount of revenue and cost of sales arising from sales-type leases during the year ended March 31, 2026, 2025 and 2024 (dollars in thousands):
March 31, 2026
March 31, 2025
March 31, 2024
Product revenue
Cost of product revenue
The consolidated balance sheet as of March 31, 2026 and 2025 includes a net investment of $ 0 million and $ 0.4 million, respectively, in sales-type leases as all amounts due from the customer associated with lighting fixtures that were acknowledged to be installed and working correctly prior to period end were not transferred to the financing institution prior to the balance sheet date. During fiscal 2026, Orion sold receivables having an aggregate face value of $ 1.1 million to the financing institution in exchange for cash proceeds of $ 1.1 million. Related servicing fees for the period were immaterial.
Other Agreements where Orion is the Lessor
Orion has leased unused portions of its corporate headquarters to third parties. The length and payment terms of the leases vary from contract to contract and, in some cases, include options for the tenants to extend the lease terms. Annual lease payments are recorded as a reduction in administrative operating expenses and were no t material in the years ended March 31, 2026, 2025 and 2024 . Orion has accounted for these transactions as operating leases.
NOTE 9 — GOODWILL AND OTHER INTANGIBLE ASSETS
Orion has $ 0.9 million of goodwill related to its purchase of Voltrek in the third quarter of fiscal 2023, which is assigned to the EV segment.
Orion has $ 0.6 million of goodwill related to its purchase of Stay-Lite Lighting during fiscal year 2022, which is assigned to the Orion maintenance segment.
The costs of specifically identifiable intangible assets that do not have an indefinite life are amortized over their estimated useful lives. Goodwill and intangible assets with indefinite lives are not amortized.
Amortizable intangible assets are amortized over their estimated economic useful life to reflect the pattern of economic benefits consumed based upon the following lives and methods:
Patents
10 - 17 years
Straight-line
Licenses
7 - 13 years
Straight-line
Customer relationships
5 - 8 years
Accelerated based upon the pattern of economic benefits
consumed
Vendor relationships
5 - 8 years
Accelerated based upon the pattern of economic benefits
consumed
Developed technology
8 years
Accelerated based upon the pattern of economic benefits
consumed
Tradename
5 - 10 years
Straight-line
Orion performed a qualitative assessment in conjunction with its annual impairment test of its indefinite lived intangible assets and goodwill as of January 1, 2026. This qualitative assessment considered Orion’s operating results for the first nine months of fiscal 2026 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2026 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was not deemed to be more likely than not and a quantitative analysis was not required.
Orion performed a qualitative assessment in conjunction with its annual impairment test of its indefinite lived intangible assets and goodwill as of January 1, 2025. This qualitative assessment considered Orion’s operating results for the first nine months of fiscal 2025 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2025 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was not deemed to be more likely than not and a quantitative analysis was not required.
The components of, and changes in, the carrying amount of other intangible assets were as follows (dollars in thousands):
March 31, 2026
March 31, 2025
Gross
Carrying
Amount
Accumulated
Amortization
Net
Weighted Average Useful Life
Gross
Carrying
Amount
Accumulated
Amortization
Net
Amortized Intangible Assets
Patents
Licenses
Trade name and trademarks
Customer relationships
Vendor relationships
Developed technology
Total Amortized Intangible Assets
Indefinite-lived Intangible Assets
Trade name and trademarks
Total Indefinite-lived Intangible Assets
Total Other Intangible Assets
The estimated amortization expense for each of the next five years is shown below (dollars in thousands):
Fiscal 2027
Fiscal 2028
Fiscal 2029
Fiscal 2030
Fiscal 2031
Thereafter
Amortizat ion expense is set forth in the following table (dollars in thousands):
Fiscal Year Ended March 31,
Amortization included in cost of revenue:
Patents
Total
Amortization included in operating expenses:
Customer relationships
Vendor relationships
Tradename
Total
Total amortization of intangible assets
Orion’s management periodically reviews the carrying value of patent applications and related costs. When a patent application is probable of being unsuccessful or a patent is no longer in use, Orion writes off the remaining carrying value as a charge to general and administrative expense within its consolidated statements of operations. In fiscal years 2026, 2025, and 2024 , write-offs were immaterial.
NOTE 10 — ACCRUED EXPENSES AND OTHER
As of March 31, 2026 and March 31, 2025, Accrued expenses and other included the following (dollars in thousands):
March 31, 2026
March 31, 2025
Accrued acquisition earnout
Other accruals
Compensation and benefits
Credits due to customers
Accrued project costs
Warranty
Sales tax
Legal and professional fees
Sales returns reserve
Total
Orion generally offers a limited warranty of one to 10 years on its lighting products including the pass through of standard warranties offered by major original equipment component manufacturers. The manufacturers’ warranties cover lamps, ballasts, LED modules, LED chips, LED drivers, control devices, and other fixture related items, which are significant components in Orion's lighting products.
Changes in Orion’s warranty accrual (both current and long-term) were as follows (dollars in thousands):
March 31,
Beginning of year
Accruals
Warranty claims (net of vendor reimbursements)
Ending balance
As of March 31, 2025, the balance of the accrued earnout liability with respect to Orion’s October 5, 2022 acquisition of Voltrek was $ 3.3 million. During the second quarter of fiscal 2026, Orion issued common stock to the prior owner of Voltrek with a value of $ 1 million and paid $ 875 thousand in cash as partial payment of the accrued acquisition earnout. These compensatory payments have been expensed over the course of the earnout periods.
On March 17, 2026, Orion entered into a settlement agreement (the “Settlement Agreement”) with Final Frontier, LLC (“Final Frontier”) and Kathleen M. Connors (“Ms. Connors”), personally and as Trustee of the Kathleen M. Connors 2019 Revocable Trust (“Connors Trust” together with Final Frontier and Ms. Connors, the “Connors Parties”), in order to reach a final and complete resolution and settlement of the dispute regarding Orion’s remaining earnout obligations owed to Final Frontier, as well as to reach a final and complete resolution and settlement of related arbitrations and terminate related agreements, as described in Note 12 – Debt, below.
Under the terms of the Settlement Agreement, the Company made a one-time cash payment of $ 3.0 million (the “Settlement Amount”) to Final Frontier on Marc h 18, 2026. This compensatory payment has been expensed over the course of the earnout periods. As a result of the payment of the Settlement Amount, the balance of the accrued earnout liability with respect to the Voltrek acquisition as of March 31, 2026 was $ 0 million. See Note 12 - Debt, below for additional details around the previously accrued earnout liability and the settlement of the earnout liability.
NOTE 11 — NET (LOSS) INCOME PER COMMON SHARE
Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding for the period and does not consider common stock equivalents.
Diluted net (loss) income per common share reflects the dilution that would occur if stock options were exercised and restricted shares vested. In the computation of diluted net (loss) income per common share, Orion uses the treasury stock method for outstanding options and restricted shares. Net (loss) income per common share is calculated based upon the following shares:
Fiscal Year Ended March 31,
Numerator:
Net (loss) income (dollars in thousands)
Denominator:
Weighted-average common shares outstanding
Weighted-average effect of assumed conversion of stock options and restricted stock
Weighted-average common shares and share equivalents outstanding
Net (loss) income per common share:
Basic
Diluted
The following table indicates the number of potentially dilutive securities excluded from the calculation of Diluted net (loss) income per common share because their inclusion would have been anti-dilutive. The number of shares is as of the end of each period:
March 31,
Time-Based Restricted Shares
Performance-Based Restricted Shares
Total
NOTE 12 — DEBT
D ebt, including the revolving credit facility as of March 31, 2026 and 2025 consisted of the following (dollars in thousands):
March 31,
Revolving credit facility
Term loan
Total long-term debt
Less current maturities
Long-term debt, less current maturities
Revolving Credit Agreement
On December 29, 2020, Orion entered into a Loan and Security Agreement with Bank of America, N.A., as lender (the “Credit Agreement”). The Credit Agreement provides for a five-year $ 25.0 million revolving credit facility (the “Credit Facility”) that, as of March 31, 2026, was scheduled to mature on June 30, 2027. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of March 31, 2026, the borrowing base of the Credit Facility supports $ 15.6 million of availability, with $12.6 million remaining availability subject to a $0.5 million availability block, net of $3 .0 million borrowed.
The Credit Agreement is secured by a first lien security interest in substantially all of Orion’s assets.
Borrowings under the Credit Agreement are permitted in the form of Secured Overnight Financing Rate ("SOFR") or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to Orion’s availability under the Credit Agreement. Among other fees, Orion is required to pay an annual facility fee and a fee on the unused portion of the Credit Facility.
The Credit Agreement includes a springing minimum fixed cost coverage ratio of 1.0 to 1.0 when excess availability under the Credit Facility falls below $ 4.0 million of the committed facility. Currently, the required springing minimum fixed cost coverage ratio is not required.
The Credit Agreement also contains customary events of default and other covenants, including certain restrictions on Orion’s ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, pay any dividend or distribution on Orion’s stock, redeem, retire or purchase shares of Orion’s stock, make investments or pledge or transfer assets. If an event of default under the Credit Agreement occurs and is continuing, then the lender may cease making advances under the Credit Agreement and declare any outstanding obligations under the Credit Agreement to be immediately due and payable. In addition, if Orion becomes the subject of voluntary or involuntary proceedings under any bankruptcy or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable.
Effective November 4, 2022, Orion, with Bank of America, N.A. as lender, executed Amendment No. 1 to its Credit Agreement. The primary purpose of the amendment was to include the assets of the acquired subsidiaries, Stay-Lite Lighting and Voltrek, as secured collateral under the Credit Agreement and to document the conversion from LIBOR to SOFR based loans. Accordingly, eligible assets of Stay-Lite and Voltrek will be included in the borrowing base calculation for the purpose of establishing the monthly borrowing availability under the Credit Agreement. The amendment also clarifies that the earnout liabilities associated with the Stay-Lite and Voltrek transactions are permitted under the Credit Agreement and that the expenses recognized in connection with those earnouts should be added back in the computation of EBITDA, as defined, under the Credit Agreement.
Effective April 22, 2024, Orion, with Bank of America, N.A. as lender, executed Amendment No. 2 to its Credit Agreement (“Amendment No. 2”). The primary purpose of Amendment No. 2 was to add a $ 3.525 million mortgage loan facility to the Credit Agreement secured by Orion’s office headquarters property in Manitowoc, Wisconsin. Amendment No. 2 also broadened the definition of receivables to encompass government receivables as being eligible to be included in Orion’s borrowing base calculation for the purpose of establishing Orion’s monthly borrowing availability under the Credit Agreement. Quarterly installments of $ 88,125 are due on the first day of each fiscal quarter.
Effective October 30, 2024, Orion, with Bank of America, N.A. as lender, executed Amendment No. 3 ("Amendment No. 3") to its Credit Agreement. The primary purpose of Amendment No. 3 was to extend the maturity date of the Credit Facility from December 29, 2025 to June 30, 2027.
As of March 31, 2026, Orion was in compliance with all debt covenants.
Aggregate Maturities
As of March 31, 2026, aggregate maturities of debt, including the revolving credit facility were as follows (dollars in thousands):
Fiscal 2027
Fiscal 2028
Effective on June 23, 2025, Orion entered into a binding term sheet (the “Initial Term Sheet”) with Final Frontier, LLC (“Final Frontier”) and its owner Kathleen Connors (“Ms. Connors”), the prior owner of Voltrek, with respect to Orion’s remaining earnout obligations owed to Final Frontier pursuant to that certain Membership Interest Purchase Agreement, dated as of October 5, 2022, entered into by and among us and Final Frontier and Ms. Connors (the “MIPA”), pursuant to which Orion acquired Voltrek on October 5, 2022. Pursuant to the Initial Term Sheet, on August 1, 2025, Orion paid Final Frontier $ 500,000 , and on September 2, 2025, Orion paid an additional $ 375,000 , in full and final payment of its fiscal 2024 Voltrek acquisition earnout obligations. Additionally, pursuant
to the Initial Term Sheet, on July 16, 2025, Orion issued $ 1.0 million in common stock of Orion, constituting 164,908 shares, to Kathleen Connors and the Kathleen M. Connors 2019 Revocable Trust in partial payment of Orion’s fiscal 2025 and aggregate fiscal 2023 through fiscal 2025 Voltrek acquisition earnout obligations. On July 31, 2025, Orion entered into an amendment to the Initial Term Sheet (the “Term Sheet Amendment”, and together with the Initial Term Sheet, the “Term Sheet”), pursuant to which Orion agreed with Final Frontier to pay the remainder of the finally determined remaining amount of Orion’s fiscal 2025 Voltrek acquisition earnout obligations (the “Remaining Earnout Amount”) pursuant to a subordinated loan agreement, entered into by Orion, as borrower, Great Lakes Energy Technologies, LLC (“Great Lakes”), Clean Energy Solutions, LLC (“Clean Energy”), Orion Asset Management, LLC (“Asset Management”), Orion Technologies Ventures, LLC (“Orion Technology”, and together with Voltrek, Clean Energy, Asset Management and Orion Technology, the “Company Subsidiaries”) and Voltrek, as guarantors, and Final Frontier, as lender (the “Subordinated Loan Agreement”). In addition, Orion and Final Frontier agreed to submit the final determination of its Remaining Earnout Amount to binding arbitration.
Orion’s obligation to pay the Remaining Earnout Amount was further evidenced by a Senior Subordinated Note. On September 30, 2025, in order to secure Orion’s obligations to Final Frontier under the Subordinated Loan Agreement and Senior Subordinated Note, Orion, the Company Subsidiaries and Final Frontier entered into a security agreement (the “Security Agreement”), pursuant to which Orion and each Company Subsidiary granted Final Frontier a security interest in, and lien upon, substantially all of Orion’s and each Company Subsidiary’s assets, which security interest and lien were subordinated pursuant to the Subordination Agreement (as defined below) to the first priority security interest and lien of Bank of America.
Additionally, on September 30, 2025, Orion, the Company Subsidiaries, Final Frontier and Bank of America, entered into a subordination and intercreditor agreement (the “Subordination Agreement”), pursuant to which Orion and the Company Subsidiaries’ obligations under the Subordinated Loan Agreement and Senior Subordinated Note and liens granted under the Security Agreement were subordinated to Orion’s credit facilities with Bank of America, as set forth in more detail in the Subordination Agreement.
In connection with Orion’s entry into the Subordinated Loan Agreement, Senior Subordinated Note, Security Agreement and Subordination Agreement, on September 30, 2025, Orion, the Company Subsidiaries and Bank of America entered into an Amendment No. 4 to its Credit Agreement (“Amendment No. 4”), pursuant to which Bank of America consented to the subordinated liens granted by Orion and the Company Subsidiaries in favor of Final Frontier and consented to the Remaining Earnout Amount evidenced by the Subordinated Loan Agreement, subject to: (a) a maximum amount of up $ 3.0 million following the final determination in binding arbitration of the Remaining Earnout Amount or (b) such higher amount as consented to in writing by Bank of America promptly following its receipt of notice of the binding arbitration decision. In addition, Amendment No. 4 permitted Orion to make the cash interest and principal payments to Final Frontier as set forth in the Subordinated Loan Agreement, subject to the terms set forth in Amendment No. 4 and the Subordination Agreement.
Voltrek Earnout Settlement
On March 17, 2026, Orion entered into the Settlement Agreement with Connors Parties, in order to reach a final and complete resolution and settlement of the dispute between the Connors Parties and Orion regarding Orion’s remaining Voltrek acquisition earnout obligations, as well as to reach a final and complete resolution and settlement of related arbitrations and terminate related agreements, as described below.
Pursuant to the MIPA and the Term Sheet, Orion and the Connors Parties submitted the earnout statement dispute to CPA firm arbitration (the “CPA Firm Arbitration”). The Connors Parties asserted that the remaining earn out payments owed by Orion totaled approximately $ 10 million. Orion’s position was that Orion owed the Connors Parties an additional $ 1.4 million. The CPA arbitrators determined that Orion owed an additional $ 3.4 million of earnout payments. Subsequently, Orion filed an arbitration demand with the American Arbitration Association in Milwaukee, Wisconsin against the Connors Parties in order to object to the CPA firm’s decision of the earnout statement dispute as manifest error (the “AAA Arbitration”).
By entering into the Settlement Agreement, Orion and the Connors Parties agreed to a final and complete resolution and settlement of the CPA Firm Arbitration and the AAA Arbitration, a final and complete resolution and settlement of the earnout statement dispute, termination of the MIPA, termination of all related earnout agreements, including the Subordinated Loan Agreement, the Senior Subordinated Note, the Security Agreement and the Subordination Agreement, and termination of any and all claims and counterclaims
between or among Orion and the Connors Parties, without any admission of liability and without incurring of any further payment, cost, liability, obligation, guaranty, expense or inconvenience with respect thereto.
Under the terms of the Settlement Agreement, the Company made a one-time cash payment of the Settlement Amount to Final Frontier on March 18, 2026. Upon receipt of the Settlement Amount, all earn out payment obligations, the MIPA, all earnout agreements, the CPA Firm Arbitration and the AAA Arbitration proceedings were terminated, cancelled and released, and all liens and security interests held by Final Frontier on Orion’s assets were automatically terminated and irrevocably released. Additionally, upon payment of the Settlement Amount, Orion and the Connors Parties exchanged mutual general releases of all claims arising from or related to the earnout disputes, the CPA Firm Arbitration and the AAA Arbitration proceedings, the MIPA and the related earnout agreements. The releases did not affect Ms. Connors’ then part-time employment relationship with Orion or the Connors Parties’ rights as shareholders of Orion. Orion also agreed to facilitate the Connors Parties’ entry into a Rule 10b5-1 trading plan during Orion’s next insider open window period to facilitate the Connors Parties’ sale of their shares of Orion’s common stock.
NOTE 13 — INCOME TAXES
The total provision for income taxes consists of the following for the fiscal years ended (dollars in thousands):
Fiscal Year Ended March 31,
Pretax Book Income/(Loss)
United States Federal & State
Canada
Total Pretax Book Loss
Current:
United States Federal
State
Canada
Total Current
Deferred:
United States Federal
State
Canada
Total Deferred
Provision (benefit) for income taxes
A reconciliation of the statutory federal income tax rate and effective income tax rate is as follows:
Fiscal Year Ended March 31,
Amount (thousands)
Percent
Percent
Percent
Statutory federal tax rate
State taxes, net (1)
State tax credits, net
Foreign tax effects, Canada
Statutory tax rate differential
Change in valuation reserve
Federal tax credit
Change in valuation reserve
Effect of cross-border tax laws, global intangible low-tax income
Other permanent items
Change in tax contingency reserve
Equity compensation cancellations
State return to provision
Other, net
Effective income tax rate
(1) State taxes in Texas make up the majority (greater than 50 percent) of the tax effect in this category.
The net deferred tax assets reported in the accompanying consolidated financial statements include the following components (dollars in thousands):
March 31,
Deferred tax assets:
Inventory, accruals and reserves
Interest deduction carry-forward
Federal and state operating loss carry-forwards
Tax credit carry-forwards
Equity compensation
Deferred revenue
Fixed assets
Lease liabilities
Intangible assets
Other
Total deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Lease ROU assets
Fixed assets
Total deferred tax liabilities
Total net deferred tax (liabilities) assets
For fiscal year ended March 31, 2026 , Orion’s deferred tax assets were primarily the result of U.S. net operating loss ("NOL") and tax credit carryforwards. Orion recorded a valuation allowance of $ 28.6 million and $ 28.1 million against its net deferred tax asset balance as of March 31, 2026 and March 31, 2025, respectively, due to the uncertainty of its realization value in the future. For fiscal
years ended March 31, 2026 and March 31, 2025, the valuation allowance against Orion’s deferred tax assets increased by $ 0.5 million, primarily due to the current and prior year book losses.
As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event that Orion determines that the more or less of its deferred tax assets are able to be realized, an adjustment to the valuation allowance would be reflected in the company’s provision for income taxes.
As of March 31, 2026, Orion has federal NOL carryforwards of approximately $ 87.2 million, state NOL carryforwards of approximately $ 73.4 million, and foreign NOL carryforwards of approximately $ 0.6 million. Orion also had federal tax credit carryforwards of approximately $ 1.1 million and state tax credits of $ 0.1 million. All of Orion’s tax credit carryforwards and $ 123.4 million of its NOL carryforwards will begin to expire in varying amounts between 2026 and 2056. The remaining $ 37.8 million of its federal and state NOL carryforwards are not subject to time restrictions but may only be used to offset 80 % of adjusted taxable income. Orion believes it is more likely than not that the benefit from its state credit carryforwards, foreign NOL carryforwards, federal credit carryforwards, and state loss carryforwards will not be realized. In recognition of this risk, Orion has provided a net valuation allowance of $ 28.6 million on the deferred tax assets related to these carryforwards.
Generally, a change of more than 50% in the ownership of Orion's stock, by value, over a three-year period constitutes an ownership change for federal income tax purposes as defined under Section 382 of the Internal Revenue Code. As a result, Orion's ability to use its net operating loss carryforwards, attributable to the period prior to such ownership change, to offset taxable income can be subject to limitations in a particular year, which could potentially result in increased future tax liability for Orion. There was no limitation of NOL carryforwards that occurred for fiscal 2026, fiscal 2025, or fiscal 2024.
Orion records its tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where Orion believes that a tax position is supportable for income tax purposes, the item is included in their income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations and facts of each matter. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities, or the expiration of the statute of limitations.
Orion files income tax returns in the United States federal jurisdiction and in several state jurisdictions. The Company's federal tax returns for tax years beginning April 1, 2021 or later are open. For states in which Orion files state income tax returns, the statute of limitations is generally open for tax years beginning April 1, 2021 or later.
State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The state effect of any federal changes remains subject to examination by various states for a period of up to two years after formal notification to the states. Orion currently has no state income tax return positions in the process of examination, administrative appeals or litigation.
Uncertain tax positions
As of March 31, 2026 , the balance of gross unrecognized tax benefits was approximately $ 0.3 million, all of which would affect Orion’s effective tax rate if recognized.
Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as other liabilities (non-current) to the extent that payment is not anticipated within one year. Accrued interest and penalties for such unrecognized tax benefits as of March 31, 2026 and 2025 were $ 0.1 million. Orion had the following unrecognized tax benefit activity (dollars in thousands):
Fiscal Year Ended March 31,
Unrecognized tax benefits as of beginning of fiscal year
Additions based on tax positions related to the current period positions
Additions for tax positions of prior years
Unrecognized tax benefits as of end of fiscal year
NOTE 14 — COMMITMENTS AND CONTINGENCIES
Purchase Commitments
Orion enters into non-cancellable purchase commitments for certain inventory items in order to secure better pricing and ensure materials on hand. As of March 31, 2026 , Orion had entered into $ 7.8 million of purchase commitments related primarily to inventory purchases. Orion expects the purchase commitments to be fulfilled during fiscal 2027.
Retirement Savings Plan
Orion sponsors a tax deferred retirement savings plan that permits eligible employees to contribute varying percentages of their compensation up to the limit allowed by the Internal Revenue Service. This plan also provides for discretionary contributions by Orion. In fiscal 2026, 2025 and 2024 , Orion made matching contributions of approximately $ 0.1 million, $ 0.1 million, and $ 0.2 million, respectively.
Litigation
Orion is subject to various claims and legal proceedings arising in the ordinary course of business. As of the date of this report, Orion does not believe that the final resolution of any of such claims or legal proceedings would have a material adverse effect on its future results of operations.
NOTE 15 — SHAREHOLDERS’ EQUITY
Reverse Stock Split
On August 22, 2025, Orion effected a 1-for-10 reverse stock split of its common stock in order to remain compliant with the Minimum Bid Price Rule. The par value was not adjusted for the reverse stock split. All share and per share data have been adjusted for all periods presented to reflect the reverse stock split.
Employee Stock Purchase Plan
In August 2010, Orion’s Board of Directors approved a non-compensatory employee stock purchase plan, or ESPP. The ESPP authorizes 250,000 shares to be issued from treasury or authorized shares to satisfy employee share purchases under the ESPP. All full-time employees of Orion are eligible to be granted a non-transferable purchase right each calendar quarter to purchase directly from Orion up to $ 20,000 of Orion’s common stock at a purchase price equal to 100 % of the closing sale price of Orion’s common stock on The NASDAQ Capital Market on the last trading day of each quarter.
Sale of Shares
In March 2023, Orion filed a universal shelf registration statement with the Securities and Exchange Commission. Under the shelf registration statement, Orion currently has the flexibility to publicly offer and sell from time to time up to $ 100 million of debt and/or
equity securities. The filing of the shelf registration statement may help facilitate Orion’s ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes.
In March 2021, Orion entered into an At Market Issuance Sales Agreement to undertake an “at the market” (ATM) public equity capital raising program pursuant to which Orion may offer and sell shares of common stock, having an aggregate offering price of up to $ 50 million from time to time through or to the Agent, acting as sales agent or principal. In March 2025, the ATM was terminated .
On February 2, 2026, Orion issued 500,000 shares of its common stock at a price to the public of $ 14.00 per share pursuant to a firmly underwritten public offering. Net proceeds form the offering of approximately $ 6.4 million were used to reduce amounts outstanding under Orion's Credit Agreement, with the remainder used for working capital and general corporate purposes.
NOTE 16 — RESTRICTED SHARES
At Orion’s 2023 annual meeting of shareholders, Orion’s shareholders approved the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, as amended and restated (the “Amended 2016 Plan”). Approval of the Amended 2016 Plan increased the number of shares of Orion’s common stock available for issuance under the Amended 2016 Plan from 350,000 shares to 600,000 shares (an increase of 250,000 shares). As of March 31, 2026 , the number of shares available for grant under the Amended 2016 Plan was 56,587 .
The Amended 2016 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Amended 2016 Plan may consist of stock options, stock appreciation rights, performance shares, performance units, common stock, restricted stock, restricted stock units, incentive awards or dividend equivalent units.
Prior to the Amended 2016 Plan, the Company maintained its 2004 Stock and Incentive Awards Plan, as amended, which authorized the grant of cash and equity awards to employees (the “2004 Plan”). No new awards are being granted under the 2004 Plan; and no awards granted under the 2004 Plan remain outstanding. Forfeited awards originally issued under the 2004 Plan are canceled and are not available for subsequent issuance under the 2004 Plan or under the Amended 2016 Plan.
Certain non-employee directors have from time to time elected to receive stock awards in lieu of cash compensation pursuant to elections made under Orion’s non-employee director compensation program. The Amended 2016 Plan also permits accelerated vesting in the event of certain changes of control of Orion as well as under other special circumstances.
Orion historically granted stock options and restricted stock under the 2004 Plan. Orion did not issue stock options from fiscal 2015 through fiscal 2025 and instead had issued only restricted stock and performance shares. In fiscal 2026, stock options were granted along with restricted stock.
Orion added performance conditions to a portion of the annual long-term incentive grants for Orion's executive compensation program. The performance-vesting restricted stock will vest to the extent Orion achieves revenue growth targets over a three-year period. Orion recognizes performance-vesting restricted stock expense ratably over the requisite service period based on the likelihood of meeting the performance conditions. For the fiscal years ended March 31, 2026, 2025, and 2024, Orion recognized $ 0 million, $ 0 million, and $ 0.3 million in stock-based compensation expense for performance-vesting restricted stock, respectively.
The following amounts of stock-based compensation expense for restricted shares were recorded (dollars in thousands):
Fiscal Year Ended March 31,
Cost of product revenue
General and administrative (1)
Sales and marketing
Research and development
The termination of Michael Jenkins on April 14, 2025, led to the acceleration of approximately $ 251 thousand in relation to approximately 322 thousand restricted shares. Mr. Jenkins forfeited approximately 646 thousand performance shares and approximately 78 thousand shares of restricted stock in connection with his termination. The expense was recognized as of March 31, 2025 as it was determined estimable. The shares were accelerated and forfeited as of the termination date, April 14, 2025.
The following table summarizes information with respect to performance-vesting restricted stock and time vesting-restricted stock activity:
Time-Based
Restricted Shares
Performance-Based
Restricted Shares
Shares
Weighted
Average
Fair Value
Price
Shares
Weighted
Average
Fair Value
Price
Balance at March 31, 2025
Shares issued
Shares vested
Shares forfeited
Shares outstanding at March 31, 2026
Per share price on grant date
During fiscal 2026, Orion re cognized $ 0.5 million of sto ck-based compensation expense related to restricted shares.
As of March 31, 2026, 2025 and 2024 , the weighted average grant-date fair value of restricted shares granted was $ 6.13 , $ 10.68 and $ 14.16 , respectively. The total fair value of shares vested during fiscal years ended March 31, 2026, 2025 and 2024 are $1.1 million, $ 0.9 million and $ 0.8 million, respectively.
Unrecognized compensation cost related to non-vested common stock-based compensation as of March 31, 2026 is expected to be recognized as follows (dollars in thousands):
Fiscal 2027
Fiscal 2028
Fiscal 2029
Total
Remaining weighted average expected years
NOTE 17 — SEGMENT DATA
Orion evaluates and reports its business using three segments: Orion lighting segment, Orion maintenance segment and Orion electric vehicle charging segment. Orion configured its fiscal 2025 budget in order to compare actual performance to plan performance for these segments. Orion's CODM is the chief executive officer. The Company's CODM focuses primarily on each segment's ability to generate sufficient revenues and manage cost of services along with operating expenses. As such, the CODM measures operating performance at the segment level based on operating income or loss, including evaluation of budget to actual variances. Reportable segments are components of an entity that have separate financial data that the CODM regularly reviews when allocating resources and assessing performance.
Lighting Segment
The lighting segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. The lighting segment provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers. The lighting segment
sells mostly through direct sales, but it also sells lighting products though manufacturer representative agencies and to the wholesale contractor markets through energy service companies and contractors.
Maintenance Segment
The maintenance segment provides retailers, distributors and other businesses with maintenance, repair and replacement services for the lighting and related electrical components deployed in their facilities.
EV Segment
The EV segment offers leading electric vehicle charging expertise, sells and installs sourced electric vehicle charging stations with related software subscriptions and renewals and provides EV turnkey installation solutions with ongoing support to all commercial verticals.
Corporate and Other
Corporate and other is comprised of operating expenses not directly allocated to Orion’s segments and adjustments to reconcile to consolidated results.
Year ended March 31, 2026
(dollars in thousands)
Lighting
Maintenance
Corporate & Other
Total
Product revenue
Service revenue
Total revenue
Cost of product revenue
Cost of service revenue
Total cost of revenue
Gross profit
Operating expenses:
General and administrative
Sales and marketing
Research and development
Total operating expenses
Loss from operations
Other income (expense):
Other income
Interest income
Interest expense
Amortization of debt issue costs
Loss on debt extinguishment
Total other expense
Loss before income tax
Year ended March 31, 2025
(dollars in thousands)
Lighting
Maintenance
Corporate & Other
Total
Product revenue
Service revenue
Total revenue
Cost of product revenue
Cost of service revenue
Total cost of revenue
Gross profit
Operating expenses:
General and administrative
Sales and marketing
Research and development
Total operating expenses
Loss from operations
Other income (expense):
Other income
Interest income
Interest expense
Amortization of debt issuance cost
Total other expense
Loss before income tax
Year ended March 31, 2024
(dollars in thousands)
Lighting
Maintenance
Corporate & Other
Total
Product revenue
Service revenue
Total revenue
Cost of product revenue
Cost of service revenue
Total cost of sales
Gross profit
Operating expenses:
General and administrative
Impairment of intangibles
Sales and marketing
Research and development
Acquisition-related costs
Total operating expenses
Loss from operations
Other income (expense):
Other income
Interest income
Interest expense
Amortization of debt issuance cost
Other income (expense)
Loss before income tax
Depreciation and Amortization
Capital Expenditures
For the year ended March 31,
For the year ended March 31,
(dollars in thousands)
Segments:
Lighting Segment
Maintenance Segment
EV Segment
Corporate and Other
Total Assets
(dollars in thousands)
March 31, 2026
March 31, 2025
Segments:
Lighting Segment
Maintenance Segment
EV Segment
Corporate and Other
Orion’s lighting segment revenue outside the United States was $ 1.5 million, $ 1.8 million and $ 6.4 million for the fiscal years ended March 31, 2026, 2025 and 2024 , respectively. All other revenues are generated from the United States. Orion attributes revenues from external customers to individual countries based on the geographic location in which the work is performed. Orion has no long-lived assets outside the United States.
NOTE 18 - RESTRUCTURING
As part of Orion's restructuring effort, a further reduction in workforce was completed in the fourth quarter of fiscal 2025. Total severance expense for fiscal 2025 was $ 595 thousand. In addition, an inventory write-off of approximately $ 197 thousand was recognized in the first quarter of fiscal 2025 for inventory related to a customer Orion no longer does business with due to the restructuring, along with a lease breakage fee of $ 125 thousand that occurred in the second quarter of fiscal 2025 due to the closing of the Pewaukee office. Orion's restructuring expense and other related costs for the 12 months ended March 31 2026, 2025 and 2024 are reflected within its consolidated statement of operations as follows (dollars in thousands):
Fiscal Year Ended March 31,
Cost of product revenue
Cost of service revenue
General and administrative
Sales and marketing
Research and development
Total restructuring expense and other related costs by segment was recorded as follows (dollars in thousands):
Fiscal Year Ended March 31,
Segments:
Lighting
Maintenance
Corporate and Other
NOTE 19 - SUBSEQUENT EVENTS
On May 29, 2026, Orion, with Bank of America, N.A. as lender, executed Amendment No. 5 (“Amendment No. 5”) to its Credit Agreement. The primary purpose of Amendment No. 5 was to extend the maturity date of the Credit Facility from June 30, 2027 to June 30, 2030.
In February 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unlawful. On April 20, 2026, U.S. Customs and Border Protection launched a portal intended to automate and consolidate the related refund claim process, including associated interest payments. Orion submitted refund claims related to certain previously paid tariffs. Due to the uncertainly surrounding payment of any potential refund claims, no amounts are reflected in the fiscal 2026 financial statements. As of May 31, 2026, Orion has received approximately $ 219 thousand in tariff refunds, including approximately $ 13 thousand of interest income. The ultimate amount and timing of recovery remain subject to continued administrative review and claim approval.
