Financial Analysis

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. …

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The following table provides detail of Orions 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 $ 38,995 $ 14,707 $ 53,702 $ 39,247 $ 7,659 $ 46,906 $ 50,229 $ 10,783 $ 61,012 Maintenance services 7,293 8,749 16,042 5,902 9,288 15,190 4,687 12,460 17,147 Electric vehicle charging 8,563 5,821 14,384 8,421 8,405 16,826 8,301 4,031 12,332 Solar energy-related revenues 1,353 1,353 17 17 28 28 Total revenues from contracts with customers 56,204 29,277 85,481 53,587 25,352 78,939 63,245 27,274 90,519 Revenue accounted for under other guidance (1) 825 825 781 781 62 62 Total revenue $ 57,029 $ 29,277 $ 86,306 $ 54,368 $ 25,352 $ 79,720 $ 63,307 $ 27,274 $ 90,581 (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 Orions 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 th …

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NOTE 16 RESTRICTED SHARES At Orions 2023 annual meeting of shareholders, Orions 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 Orions 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 pursu …

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"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, 2026 2025 2024 Pretax Book Income/(Loss) United States Federal & State $ ( 3,264 ) Canada 161 Total Pretax Book Loss ( 3,103 ) Current: United States Federal $ $ $ State 55 35 46 Canada Total Current 55 35 46 Deferred: United States Federal 2 2 ( 1 ) State 3 5 ( 4 ) Canada Total Deferred 5 7 ( 5 ) Provision (benefit) for income taxes $ 60 $ 42 $ 41 A reconciliation of the statutory federal income tax rate and effective income tax rate is as follows: Fiscal Year Ended March 31, 2026 2025 2024 Amount (thousands) Percent Percent Percent Statutory federal tax rate $ ( 652 ) 21.0 % 21.0 % 21.0 % State taxes, net (1) 44 ( 1.4 )% 4.1 % 3.2 % State tax credits, net ( 0.2 )% ( 0.2 )% Foreign tax effects, Canada Statutory tax rate differential 10 ( 0.3 )% Change in valuation reserve ( 36 ) 1.2 % Federal tax credit 111 ( 3.6 )% ( 0.5 )% ( 0.4 )% Change in valuation reserve 507 ( 16.3 )% ( 23.7 )% ( 22.7 )% Effect of cross-border tax laws, global intangible low-tax income 21 ( 0.7 )% Other permanent items 38 ( 1.2 )% ( 0.9 )% ( 0.8 )% Change in tax contingency reserve 11 ( 0.4 )% ( 0.1 )% ( 0.1 )% Equity compensation cancellations ( 0.2 )% State return to provision 0.1 % 0.1 % Other, net 6 ( 0.2 )% ( 0.2 )% ( 0.3 )% Effective income tax rate $ 60 ( 1.9 )% ( 0.4 )% ( 0.4 )% (1) State taxes in Texas make up the majority (gre …

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"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, 2026 2025 Revolving credit facility $ 3,000 $ 7,000 Term loan 2,972 3,324 Total long-term debt 5,972 10,324 Less current maturities ( 353 ) ( 353 ) Long-term debt, less current maturities $ 5,619 $ 9,971 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 Orions 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 Orions availability under the Credit Agreement. Among other fees, Orion is required to pay an annual facilit …

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"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 FASBs 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 h …

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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, 2026 2025 2024 Cost of product revenue $ $ 295 $ 26 Cost of service revenue 176 48 General and administrative 442 28 Sales and marketing 26 21 Research and development 109 $ $ 1,048 123 Total restructuring expense and other related costs by segment was recorded as follows (dollars in thousands): Fiscal Year Ended March 31, 2026 2025 2024 Segments: Lighting $ $ 246 $ 52 Maintenance 720 48 EV 14 Corporate and Other 68 23 $ $ 1,048 $ 123 …

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"NOTE 3 REVENUE Disaggregation of Revenue The primary end-users of Orions 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 Orions segments. See Note 17 - Segment Data, for additional discussion concerning Orions reportable segments. The following table provides detail of Orions 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 $ 38,995 $ 14,707 $ 53,702 $ 39,247 $ 7,659 $ 46,906 $ 50,229 $ 10,783 $ 61,012 Maintenance services 7,293 8,749 16,042 5,902 9,288 15,190 4,687 12,460 17,147 Electric vehicle charging 8,563 5,821 14,384 8,421 8,405 16,826 8,301 4,031 12,332 Solar energy- …

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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, distribu …

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"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 Orions 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 les …

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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, Orions 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 Orions common stock at a purchase price equal to 100 % of the closing sale price of Orions 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 Orions ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, …

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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. …

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