We increasingly rely on third-party manufacturers for the manufacture and development of our products and product components
We have increased our utilization of third-party manufacturers for the manufacture and development of our products and product components. Our business, prospects, results of operations, financial condition orand cash flows could be materially adversely affected if our third-party manufacturers were to experience problems with product quality, credit or liquidity issues, or disruptions or delays in thetheir manufacturing process or delivery of the finished products and components or the raw materials used to make such products and components.
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Macroeconomic pressures in the markets in which we operate or anticipate operating in the future may adversely affect our financial results.
Geopolitical issues around the world can impact macroeconomic conditions in where we operate and where we anticipate operating in the future and could have a material adverse impact on our financial results. For example, the ultimate impact of the conflict in Ukraine on fuel prices, inflation, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect global economic growth, disrupting discretionary spending habits and generally decreasing demand for our products and services, including our planned retrofit project in Germany in fiscal 2024. While we do not purchase any of our significant raw materials directly from Russia, it is a significant global producer of fuel, nickel and copper. Disruptions in the markets for those inputs could negatively impact the macroeconomy. We cannot predict the extent or duration of sanctions in response to the conflict in Ukraine, nor can we predict the effects of legislative or other governmental actions or regulatory scrutiny of Russia and Belarus, Russia's other allies or other countries with which Russia has significant trade or financial ties, including China. The conflict in Ukraine may also continue to exacerbate geopolitical tensions globally.
We operate in a highly competitive industry and, if we are unable to compete successfully, our results of operations, financial condition and cash flows will likely be materially adversely affected.
We face strong competition, primarily from manufacturers and distributors of energy management products and services, as well as from ESCOs and electrical contractors. We are increasingalso facing increased competition from manufacturers in low-cost countries. We compete primarily on the basis of customer relationships, price, quality, energy efficiency, customer service and marketing support. Our products are in direct competition with the expanding availability of LED products, as well as other technologies in the lighting systems retrofit market.
Many of our competitors are better capitalized than we are and have strong customer relationships, greater name recognition, and more extensive engineering, manufacturing, sales and marketing capabilities. In addition, the LED market has seen increased convergence in recent years, resulting in our competition gaining increased market share and resources. Competitors could focus their substantial resources on developing a competing business model or energy management products or services that may be potentially more attractive to customers than our products or services. In addition, we may face competition from other products or technologies that reduce demand for electricity. Our competitors may also offer energy management products and services at reduced prices in order to improve their competitive positions. Any of these competitive factors could make it more difficult for us to attract and retain customers, or require us to lower our average selling prices in order to remain competitive, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.
If we fail to establish and maintain effective internal controls over financial reporting, our business and financial results could be harmed.
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our consolidated financial statements or fraud. As of March 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that our internal controls for fiscal 2023 were designed and operating effectively. However, there can be no assurance that we will not experience a material weakness in our internal control over financial reporting in the future. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. A failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and in a timely manner or to detect and prevent fraud, could result in a restatement of our consolidated financial statements, and could also cause a loss of investor confidence and decline in the market price of our common stock.
The revenue growth of our EV Division ultimately depends on consumers’ willingness to adopt electric vehicles in a market which is still in its early stages.
The growth of our EV Division is highly dependent upon the adoption by consumers of EVs, and we are subject to a risk of any reduced demand for EVs. If the market for EVs does not gain broader market acceptance or develops slower than we expect, our
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business, prospects, financial condition and operating results will be harmed. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements, long development cycles for EV original equipment manufacturers, and changing consumer demands and behaviors. Factors that may influence the purchase and use of alternative fuel vehicles, specifically EVs, include:
● | perceptions about EV quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of EVs; | |
● | the limited range over which EVs may be driven on a single battery charge and concerns about running out of power while in use; | |
● | concerns regarding the stability of the electrical grid; | |
● | improvements in the fuel economy of the internal combustion engine; | |
● | consumers’ desire and ability to purchase a luxury automobile or one that is perceived as exclusive; | |
● | the environmental consciousness of consumers; | |
● | volatility in the cost of oil and gasoline; | |
● | consumers’ perceptions of the dependency of the United States on oil from unstable or hostile countries and the impact of international conflicts; | |
● | government regulations and economic incentives promoting fuel efficiency and alternate forms of energy; | |
● | access to charging stations, standardization of EV charging systems and consumers’ perceptions about convenience and cost to charge an EV; and | |
● | the availability of tax and other governmental incentives to purchase and operate EVs or future regulation requiring increased use of nonpolluting vehicles. |
The influence of any of the factors described above may negatively impact the widespread consumer adoption of EVs, which could materially and adversely affect our EV Division business, operating results, financial condition and prospects.
Our business was, and could again in the future be, negatively impacted by the COVID-19 pandemic.
The COVID-19 pandemic disrupted business, trade, commerce, financial and credit markets in the United States and globally. Our business was adversely impacted by measures taken by customers, suppliers, government entities and others to control the spread of the virus beginning in March 2020, the last few weeks of our fiscal 2020, and continuing most significantly into the second quarter of fiscal 2021. During the third quarter of fiscal 2021, we experienced a rebound in business, with a full quarter of project installations for our largest customer, as well as installations for a new large specialty retail customer, and no significant COVlD-19 impacts. However, some customers continue to refrain from awarding new projects and potential future risks remain due to the COVID-19 pandemic. If the COVID-19 pandemic experiences a resurgence in markets recovering from the spread of COVID-19, or if another significant natural disaster or pandemic were to occur in the future, our results of operation would likely be materially adversely affected.
Financial Risks
Our existing liquidity and capital resources may not be sufficient to allow us to effectively pursue our evolving growth strategies, complete potential acquisitions or otherwise fund or sustain our growth initiatives.
Our existing liquidity and capital resources may not be sufficient to allow us to effectively pursue our evolving growth strategies, complete potential acquisitions or otherwise fund or sustain our growth initiatives. If we require additional capital resources, we may
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not be able to obtain sufficient equity capital and/or debt financing on acceptable terms or conditions, or at all. Factors affecting the availability to us of additional equity capital or debt financing on acceptable terms and conditions, or in sufficient amounts, include:
Our inability to obtain the equity capital or debt financing necessary to pursue our evolving growth strategy could force us to scale back our growth initiatives or abandon potential acquisitions. If we are unable to pursue our evolving growth strategy and growth initiatives, our results of operations, financial condition and cash flows could be materially adversely affected.
We do not have major sources of recurring revenue and we depend upon a limited number of customers in any given period to generate a substantial portion of our revenue. The reduction of revenue from our prior most significant customer has had, and the loss of other significant customers or a major customer would likely have, a materially adverse effect on our results of operations, financial condition and cash flows.
We do not have any significant long-term contracts with our customers that provide us with recurring revenue from period to period. We currently generate a substantial portion of our revenue by securing large retrofit and multi-facility roll-out projects from new and existing customers. As a result, our dependence on individual key customers can vary from period to period due to the significant size of some of our retrofit and multi-facility roll-out projects. Our top 10 customers accounted for approximately 48.9%, 69.4% and 80.0% respectively, of our total revenue for fiscal 2023, 2022 and 2021. In fiscal 2021, one customer accounted for 56.0% of our total revenue compared to 49.1% in fiscal 2022 and in fiscal 2023, this customer accounted for 16.2% of our total revenue. In fiscal 2024, we expect our customer concentration will continue at the approximate level experienced in fiscal 2023. The reduction in revenue from this customer over the past three fiscal years has hada material adverse effect on our results of operations, financial condition and cash flows. While we continue to try to diversify and expand our customer base, there can be no assurance we will be successful doing so. We expect large retrofit and rollout projects to continue to remain a significant component of our total revenue.
The multi-location master retrofit agreements we have entered into with several of our key customers (including our current largest customer) generally require that the customer issue individual facility location work orders or purchase orders before we may install our products at that location. These master agreements do not guarantee that our key customers will make individual facility location purchases from us and they also generally allow any individual location purchase order or work order to be terminated prior to shipment. As a result, the relative amount and concentration of our revenues may fluctuate year over year and period over period depending on the number of purchase orders or work orders issued by our key customers, which may fluctuate due to factors such as our customers’ capital expenditure budgets and general economic conditions. The loss of, or substantial reduction in sales to, any of our significant customers, or a major customer, or the termination or delay of a significant volume of purchase orders by one or more key customers, would likely have a material adverse effect on our results of operations, financial condition and cash flows in any given future period.
Our net operating loss carry-forwards provide a future benefit only if we regain sustained profitability and may be subject to limitation based upon ownership changes.
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We have significant federal net operating loss carry-forwards and state net operating loss carry-forwards. If we are unable to regain sustained profitability, we will not be able to fully utilize these tax benefits. Furthermore, generally a change of more than 50% in the ownership of a company’s stock, by value, over a three-year period constitutes an ownership change for federal income tax purposes. An ownership change may limit a company’s ability to use its net operating loss carry-forwards attributable to the period prior to such change. 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 could be subject to limitations in a particular year, which could potentially result in our increased future tax liability.
We experienced a net loss in fiscal 2023 and, until fiscal 2020, we had a history of losses and negative cash flow. We may be unable to regain sustained profitability and positive cash flows in the future.
We experienced a net loss in fiscal 2023, and prior to fiscal 2020, we experienced net losses and negative cash flows for the prior five fiscal years. There is no guarantee that we will be able to regain or sustain profitability and positive cash flows in the future. Our inability to successfully regain or sustain our profitability and positive cash flows could materially and adversely affect our ability to pursue our evolving strategies and growth initiatives.
Adverse conditions in the global economy have negatively impacted, and could in the future negatively impact, our customers, suppliers and business.
Our operations and financial performance are impacted by worldwide economic conditions. Uncertainty about global economic conditions has contributed to customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors. The occurrence of these circumstances will likely have a material negative effect on demand for our products and services and, accordingly, on our results of operations, financial condition and cash flows. For example, any economic and political uncertainty caused by the United States tariffs imposed on other countries, and any corresponding tariffs from such other countries in response, may negatively impact demand and/or increase the cost for our products and components used in our products.
The new United States administration may pursue a wide range of monetary, regulatory and trade policies, including the continued imposition of the previous United States administration’s tariffs on certain imports. Certain sourced finished products and certain of the components used in our products are impacted by tariffs imposed on China imports. Our efforts to mitigate the impact of added costs resulting from these tariffs include a variety of activities, such as sourcing from non-tariff impacted countries and raising prices. If we are unable to successfully mitigate the impacts of these tariffs and other trade policies, our results of operations, financial condition and cash flows may be materially adversely affected.
In addition, global economic and political uncertainty has led many customers to adopt strategies for conserving cash, including limits on capital spending. Our lighting systems are often purchased as capital assets and therefore are subject to our customers’ capital availability. Uncertainty around such availability has led customers to delay their purchase decisions, which has elongated the duration of our sales cycles. Weak economic conditions in the past have adversely affected our customers’ capital budgets, purchasing decisions and facilities managers and, as a result, have adversely affected our results of operations, financial condition and cash flows. The return to a recessionary state of the global economy could potentially have negative effects on our near-term liquidity and capital resources, including slower collections of receivables, delays of existing order deliveries, postponements of incoming orders and reductions in the number and volume of purchase orders received from key customers as a result of reduced capital expenditure budgets. Our business and results of operations will be adversely affected to the extent these adverse economic conditions affect our customers’ purchasing decisions.
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We are subject to financial and operating covenants in our credit agreement and any failure to comply with such covenants, or obtain waivers in the event of non-compliance, could limit our borrowing availability under the credit agreement, resulting in our being unable to borrow under our credit agreement and materially adversely impact our liquidity.
Our credit agreement contains provisions that limit our future borrowing availability and sets forth other customary covenants, including certain restrictions on our ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, make investments, pay any dividend or distribution on our stock, redeem, repurchase or retire shares of our stock, or pledge or dispose of assets.
There can be no assurance that we will be able to comply with the financial and other covenants in our credit agreement. Our failure to comply with these covenants could cause us to be unable to borrow under the credit agreement and may constitute an event of default which, if not cured or waived, could result in the acceleration of the maturity of any indebtedness then outstanding under the credit agreement, which would require us to pay all amounts then outstanding. Such an event could materially adversely affect our financial condition and liquidity. Additionally, such events of non-compliance could impact the terms of any additional borrowings and/or any credit renewal terms. Any failure to comply with such covenants may be a disclosable event and may be perceived negatively. Such perception could adversely affect the market price for our common stock and our ability to obtain financing in the future.
Strategic Risks
As we evolve our business strategy to increase our focus on new product and service offerings, including our comprehensive energy management and maintenance services and our IoT, “smart-building,” “connected ceilings” and other related technology, software and controls products and services, the nature of our business may be significantly changed, or transformed, and our results of operations, financial condition and cash flows may be materially adversely affected.
Our future growth and profitability are tied in part to our ability to successfully bring to market new and innovative product and service offerings. We have begun to evolve our business strategy to focus on further expanding the nature and scope of our products and services offered to our customers. This further expansion of our products and services includes pursuing projects to develop recurring revenue streams, including beginning to offer lighting, electrical, heating and ventilation, and other energy maintenance services to large customers with numerous locations. Our expansion efforts also involve utilizing control sensor technology to collect data and assisting customers in the digitization of this data, along with other potential services. We have experienced recent success offering our comprehensive energy project management services to national account customers to retrofit their multiple locations. We also plan to pursue the expansion of our IoT “smart-building” and “connected ceiling” and other related technology, software and controls products and services we offer to our customers. We have invested, and plan to continue to invest, significant time, resources and capital into expanding our offerings in these areas with no expectation that they will provide material revenue in the near term and without any assurance they will succeed or be profitable. In fact, these efforts have reduced our profitability, and will likely continue to do so, at least in the near term. Moreover, as we continue to explore, develop and refine new offerings, we expect that market preferences will continue to evolve, our offerings may not generate sufficient interest by end-user customers and we may be unable to compete effectively with existing or new competitors, generate significant revenues or achieve or maintain acceptable levels of profitability.
If we are successful in introducing new product and services offerings, including expanded energy management and maintenance services and products with new technology, software and controls, the nature of our business may significantly change or be transformed away from being principally lighting products focused. Additionally, our experience providing energy maintenance services and technology, software and controls products and services is limited. If we do not successfully execute our strategy or anticipate the needs of our customers, our credibility as a provider of energy maintenance services and technology, software and controls products could be questioned and our prospects for future revenue growth and profitability may never materialize.
As we expand our product and services offerings to new markets, the overall complexity of our business will likely increase at an accelerated rate and we may become subject to different market dynamics. The new markets into which we are expanding, or may expand, may have different characteristics from the markets in which we have historically competed. These different characteristics may include, among other things, rapidly changing technologies, different supply chains, different competitors and methods of competition,
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new product development rates, client concentrations and performance and compatibility requirements. Our failure to make the necessary adaptations to our business model to address these different characteristics, complexities and new market dynamics could adversely affect our operating results.
Accordingly, if we fail to successfully launch, manage and maintain our evolving business strategy, our future revenue growth and profitability would likely be limited and our results of operations, financial condition and cash flows would likely be materially adversely affected.
Our evolving business strategies may include exploring potential acquisitions, including potential acquisitions that could significantly change, or even transform, the nature of our business. These potential acquisitions could be unsuccessful or consume significant resources, which could materially adversely affect our results of operations, financial condition and cash flows.
We may explore additional potential business acquisitions which could more quickly add expanded and different capabilities to our product and services offerings, including potential acquisitions that could significantly change, or even transform, the nature of our business. There can be no assurance that we will identify or successfully complete transactions with suitable acquisition candidates in the future. Similarly, there can be no assurance that our recently completed acquisitions will be successful. Acquisitions may involve significant cash expenditures, debt incurrence, stock issuances, operating losses and expenses that would otherwise be directed to investments in our existing business and could have a material adverse effect on our financial condition, results of operations and cash flows. To pursue acquisitions and other strategic transactions, we may need to raise additional debt and/or equity capital in the future, which may not be available on acceptable terms, in sufficient amounts or at all. In addition, we may issue new shares of our common stock as consideration in such transactions, which may have a dilutive impact on our existing shareholders and may also result in a reduction in the market price of our shares once those newly issued shares are resold in the market. In addition, acquisitions involve numerous other risks, including:
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Many of these factors will be outside of our control and any one of them could result in increased costs and reduced profitability, decreases in the amount of expected revenues and diversion of our management’s time and attention. They may also delay, decrease or eliminate the realization of some or all of the benefits we anticipate when we enter into the transaction.
Our management team has limited experience in, and limited time to dedicate to, pursuing, negotiating or integrating acquisitions. If we do identify suitable candidates, we may not be able to negotiate or consummate such acquisitions on favorable terms or at all. Any acquisitions we complete may not achieve their initially intended results and benefits, and may be viewed negatively by investors and other stakeholders.
We may undertake acquisitions financed in part through public offerings or private placements of debt or equity securities, including through the new issuance of our common stock or debt securities as consideration in an acquisition transaction. Such acquisition financing could result in dilution to our current shareholders, a decrease in our earnings and/or adversely affect our financial condition, liquidity or other leverage measures.
In addition to committing additional capital resources to complete any acquisitions, substantial additional capital may be required to operate the acquired businesses following their acquisition. Moreover, these acquisitions may result in significant financial losses if the intended objectives of the transactions are not achieved. Some of the businesses we may acquire may have significant operating and financial challenges, requiring significant additional capital commitments to overcome such challenges and adversely affecting our financial condition and liquidity.
Failure to implement our acquisition strategy, including successfully integrating acquired businesses, could have a material adverse effect on our results of operations, financial condition and cash flows.
Our continued emphasis on indirect distribution channels to sell our products and services.services to supplement our direct distribution channels has had limited success to date. If we are unable to attract, incentivize and retain our third-party distributors and sales agents, or our distributors and sales agents do not sell our products and services at the levels expected, our revenues could decline and our costs could increase.
We have significantly expanded the number of ourutilize manufacturer representative sales agencies that sell our products through broadlinedistributors. Many of these sales agents and distributors many of which are not exclusive, which means that these sales agents and distributors may sell other third-party products and services in direct competition with us. Since many of our competitors use sales agents and distributors to sell their products and services, competition for such agents and distributors is intense and may adversely affect our product pricing and gross margins. Additionally, due to mismanagement, industry trends, macro-economic developments, or other reasons, our sales agents and distributors may be unable to effectively sell our products at the levels desired or anticipated. In addition, we have historically relied on direct sales to sell our products and services, which were often made in competition with sales agents and distributors. In order to attract and form lasting partnerships with sales agents and distributors, in the future, we will be requiredare attempting to overcome our historical perception as a direct sales competitor. As a result, we may have difficulty attracting and retaining sales agents and distributors and any inability to do so could have a negative effect on our ability to attract and obtain customers, which could have an adverse impact on our business.
The success of our business depends upon our adaptation to the quickly changing market conditions in the lighting industry and on market acceptance of our lighting retrofit solutions using new LED and control technologies.
The market for lighting products has experienced a significant technology shift to LED lighting systems. AsIn addition, we continue to explore utilizing our system platform as a result, we are focusing“connected ceiling” or “smart ceiling”, or a framework or network that can support the installation and integration of other business technology or data information solutions on our business primarily on providing lighting retrofit solutions using new LED technologies in lieu of traditional HIF lighting upon which our business has historically relied.
As a result, our future success depends significantly upon the adoption rate of LED products within our primary markets, and our ability to participate in this ongoing market trend.trend and our ability to expand into complementary markets. To be an effective participant in this growingthe LED market, opportunity, we must keep up with the evolution of LED technology,and related technologies, which has been movingcontinue to move at a fast pace. We may be unable to successfully develop and market new LED products or services that keep pace with technological or industry changes, differentiate ourselves from our competition, satisfy changes in customer demands or comply with present or emerging government and
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industry regulations and technology standards. The development and introduction of new LED products and services may result in increased warranty expenses and other new product and services introduction expenses. In addition, we will likely continue to incur substantial costs to research and develop new LED products and services, which will increase our expenses, without guarantee that our new products and services will be commercially viable. We may also spend time and resources to develop and release new LED products and services only to discover that a competitor has also introduced similar new products and services with superior performance.performance, at a lower price or on better delivery terms. Moreover, if new sources of lighting or lighting-based solutions are developed, our current products and technologies could become less competitive or obsolete, which could result in reduced revenue, reduced earnings or increased losses, and/or inventory and other impairment charges. Additionally, as the lighting retrofit market continues to shift to LED lighting products from HIF and other traditional lighting products, customer purchasing decisions have been delayed as they evaluate the relative advantages and disadvantages of the lighting retrofit product alternatives and wait for further decreases in the price of LED lighting products. These circumstances have led, and may continue to lead, to reduced revenue for us in the periods affected.
Finally, in connection with our historical primary focus on selling our LED products, we expect our results of operations to continue to fluctuate from quarter to quarter asto the extent that customers may continue to delay purchasing decisions as they evaluate their return on investment from purchasing new LED products compared to alternative lighting solutions, the pricing of LED products continues to fall and LED products continue to gain more widespread customer acceptance. Similarly, these circumstances have adversely impacted, and may continue to adversely impact, our product gross margins and our profitability from quarter to quarter.
If we are unable to achieve market acceptance of our lighting retrofit solutions using new LED technologies and our system platform as a “connected ceiling” or “smart ceiling” or realize the expected benefits from our emphasisfocus on promoting our LED technologies,new products and services, our results of operations, and financial condition and cash flows will likely be materially adversely affected.
Our financial performance is dependent on our ability to achieve growth in our average selling price of our products.
The gross margins of our products can vary significantly, with margins ranging from 10% to 50%. While we continue to implement our strategy of transitioning to higher-margin products and reducing the material cost of our products, a change in the total mix of our sales toward lower margin products, a decrease in the margins on our products as a result of competitive pressures driving down the average selling price of our products, lower sales volumes, and promotional programs to increase sales volumes could reduce our profitability and result in a material adverse effect on our results of operations, financial condition and cash flows. Furthermore, the average selling price of our products has been, and may be further, negatively impacted by market over-supply conditions, product feature cannibalization by competitors or component providers, low-cost non-traditional sales methods by new market entrants, and comparison of our retrofit fixture products with replacement lamp equivalents. While we have previously implemented general price increases applicable to many new product orders, there is no assurance that such price increases will be accepted by our customers or succeed in increasing the average selling price of our products. In our highly competitive lighting industry, we must be able to innovate and release new products on a regular basis with features and benefits that generate increases in our average selling price and average gross margin. There can be no assurance we will be successful in achieving these goals.
The success of our LED lighting retrofit solutions depend,depends, in part, on our ability to claim market share aheadaway from our competitors. If we are unable to expand our customer base and increase sales in our targeted markets, our results of our competitors.
Participants in the LED market who are able to quickly establish customer relationships and achieve market penetration are likely to gain a competitive advantage as the lighting retrofit solutions offered by us and our competitors generally have a product life of several years following installation. If we are unable to establishbroaden our customer relationshipsbase and achieve greater market penetration in the LED market in a timely manner, we may lose the opportunity to market our LED products and services to significant portions of the lighting systems retrofit market for several years and may be at a disadvantage in securing future business opportunities from customers that have previously established relationships with one or more of our competitors. These disadvantages could reduce our revenue and profitability, whichcircumstances could have a material adverse effect on our results of operations, financial condition and financial condition.
In addition, because the market for energy management products and services is rapidly evolving,as we may not be able to accurately assess the size of the market, and we may have limited insight into trends that may emerge and affect our business. If the market for our lighting systems and energy management products and services does not continue to develop, or if the market does not acceptseek to expand our
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Legal, Regulatory and Compliance Risks
Our retrofitting process frequently involves responsibility for the removal and disposal of competitioncomponents containing hazardous materials.
When we retrofit a customer’s facility, we typically assume responsibility for removing and disposing of its existing lighting fixtures. Certain components of these fixtures typically contain trace amounts of mercury and other hazardous materials. Older components may also contain trace amounts of polychlorinated biphenyls, or PCBs. We currently rely on contractors to remove the components containing such hazardous materials at the customer job site. The contractors then arrange for the disposal of such components at a licensed disposal facility. Failure by such contractors to remove or dispose of the components containing these hazardous materials in the case of employees, inadequate compensationa safe, effective and lawful manner could give rise to liability for us, or could expose our workers or other factors,persons to these hazardous materials, which could result in claims against us which may have a material adverse effect on our results of operations, financial condition and cash flows.
Government tariffs and other actions may adversely affect our business.
The United States government has, from time to time, implemented various monetary, regulatory, and trade importation restraints, penalties, and tariffs. Certain sourced finished products and certain of the components used in our products have been impacted by tariffs imposed on China imports. Our efforts to mitigate the impact of added costs resulting from these government actions include a variety of activities, such as sourcing from non-tariff impacted countries and raising prices. If we are unable to successfully mitigate the impacts of these tariffs and other trade policies, our results of operations may be adversely affected. Any future policy changes that may be implemented by the current or future United States administration could have a negative consequence on our financial performance.
The reduction or elimination of investments in, or incentives to adopt, LED lighting or the elimination of, or changes in, policies, incentives or rebates in certain states or countries that encourage the use of LEDs over some traditional lighting technologies could cause the growth in demand for our products to slow, which could have a material adverse affect on our results of operations, financial condition and cash flows.
Reductions in (including as a result of any budgetary constraints), or the elimination of, government investment and favorable energy policies designed to accelerate the adoption of LED lighting could result in decreased demand for our products and adversely affect our results of operations, financial condition and cash flows. Further, if our products fail to qualify for any financial incentives or rebates provided by governmental agencies or utilities for which our competitors’ products qualify, such programs may diminish or eliminate our ability to execute our operating plan could be adversely affected.
Changes in government budget priorities and political gridlock, and future potential government shutdown, could negatively impact our business.
Actual and perceived changes in the loss of numerous long-term employees, along with their institutional knowledgegovernmental budget priorities, and expertise, and the reallocation of certain employment responsibilities, all of whichfuture potential government shutdowns, could adversely affect operational efficiencies, employee performanceour results of operations, financial condition and retention. Such turnover has also placedcash flows. Certain government agencies purchase certain products and services directly from us. When the government changes budget priorities, such as in times of war, financial crisis, or a significant burden onchanged administration, or reallocates spending to areas unrelated to our current employees, has resulted in higher recruiting expenses as we seek to recruitbusiness, our results of operations, financial condition and train employees,cash flows can be negatively impacted. For example, demand and introduced increased instability in our operations as responsibilities are reallocated to new or different employees. To the extent that we are unable to effectively reallocate employee responsibilities, retain key employees and reduce employee turnover, our operations and our ability to execute our operating plan could be adversely affected.
Product liability claims could adversely affect our business, results of operations and financial condition.
We face exposure to product liability claims in the event that our energy management products fail to perform as expected or cause bodily injury or property damage. Since virtually all of our products use electricity, it is possible that our products could result in injury, whether by product malfunctions, defects, improper installation or other causes. Particularly because our products often incorporate new technologies or designs, we cannot predict whether or not product liability claims will be brought against us in the future or result in negative publicity about our business or adversely affect our customer relations. Moreover, we may not have adequate
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resources in the event of a successful claim against us. A successful product liability claim against us that is not covered by insurance or is in excess of our available insurance limits could require us to make significant payments of damages and could materially adversely affect our results of operations, financial condition and financial condition.
Our inability to protect our intellectual property, or our involvement in damaging and disruptive intellectual property litigation, could adversely affect our business, results of operations, and financial condition and cash flows or result in the loss of use of the related product or service.
We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as employee and third-party nondisclosure and assignment agreements. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations, financial condition and financial condition.
We own United States patents and patent applications for some of our products, systems, business methods and technologies. We offer no assurance about the degree of protection which existing or future patents may afford us. Likewise, we offer no assurance that our patent applications will result in issued patents, that our patents will be upheld if challenged, that competitors will not develop similar or superior business methods or products outside the protection of our patents, that competitors will not infringe upon our patents, or that we will have adequate resources to enforce our patents. Effective protection of our United States patents may be unavailable or limited in jurisdictions outside the United States, as the intellectual property laws of foreign countries sometimes offer less protection or have onerous filing requirements. In addition, because some patent applications are maintained in secrecy for a period of time, we could adopt a technology without knowledge of a pending patent application, and such technology could infringe a third party’s patent.
We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise learn of our unpatented technology. To protect our trade secrets and other proprietary information, we generally require employees, consultants, advisors and collaborators to enter into confidentiality agreements. We cannot assure you that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. If we are unable to maintain the proprietary nature of our technologies, our business could be materially adversely affected.
We rely on our trademarks, trade names, and brand names to distinguish our company and our products and services from our competitors. Some of our trademarks may conflict with trademarks of other companies. Failure to obtain trademark registrations could limit our ability to protect our trademarks and impede our sales and marketing efforts. Further, we cannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks.
In addition, third parties may bring infringement and other claims that could be time-consuming and expensive to defend. Also, parties making infringement and other claims against us may be able to obtain injunctive or other equitable relief that could effectively block our ability to provide our products, services or business methods and could cause us to pay substantial damages. In the event of a successful claim of infringement against us, we may need to obtain one or more licenses from third parties, which may not be available at a reasonable cost, or at all. It is possible that our intellectual property rights may not be valid or that we may infringe upon
The cost of compliance with environmental laws and regulations and any related environmental liabilities could adversely affect our results of operations, or financial condition.
Our operations are subject to federal, state and local laws and regulations governing, among other things, emissions to air, discharge to water, the remediation of contaminated properties and the generation, handling, storage, transportation, treatment and disposal of, and exposure to, waste and other materials, as well as laws and regulations relating to occupational health and safety. These laws and regulations frequently change, and the violation of these laws or regulations can lead to substantial fines, penalties
30
Risks Related to Our Common Stock
We expect our quarterly revenue and operating results to fluctuate. If we fail to meet the expectations of market analysts or investors, the market price of our common stock could decline substantially, and we could become subject to securities litigation.
Our quarterly revenue and operating results have fluctuated in the past and will likely vary from quarter to quarter in the future. TheOur results of onefor any particular quarter are not an indication of our future performance. Our revenue and operating results may fall below the expectations of market analysts or investors in some future quarter or quarters. Our failure to meet these expectations could cause the market price of our common stock to decline substantially. If the price of our common stock is volatile or falls significantly below our current price, we may be the target of securities litigation. If we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs, management’s attention could be diverted from the operation of our business, and our reputation could be damaged, which could adversely affect our business, results of operations, or financial condition.
If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will continue to depend, in part, on the research and reports that securities or industry analysts publish about us orand our business.peer group companies. If these analysts do not continue to provide adequate research coverage or if one or more of the analysts who covers us downgrades our stock, lowers our stock’s price target or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
The price of our common stock has been, and may continue to be, volatile.
Historically, the market price of our common stock has fluctuated over a wide range, and it is likely that the price of our common stock will continue to be volatile in the future. The trading price of our common stock has ranged from $1.45 to $2.94 per share during the period from April 1, 2022 to March 31, 2023. The market price of our common stock could be impacted due to a variety of factors, including:
In addition, due to one or more of the foregoing factors in one or more future quarters, our results of operations may fall below the expectations of securities analysts and investors. In the event any of the foregoing occur, the market price of our common stock could be highly volatile and may materially decline
31
The market price of our common stock could be adversely affected by future sales of our common stock in the public market by us or our executive officers and directors.
We and our executive officers and directors may from time to time sell shares of our common stock in the public market or otherwise. We cannot predict the size or the effect, if any, that future sales of shares of our common stock by us or our executive officers and directors, or the perception of such sales, wouldwill have on the market price of our common stock.
We are not currently paying dividends on our common stock and will likely continue not paying dividends for the foreseeable future.
We have never paid or declared any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to fund the continued development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. In addition, the terms of our existing revolving credit agreement restrict the payment of cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, contractual restrictions and other factors that our board of directors deems relevant. The restrictionrestrictions on, and decision not to, pay dividends on our common stock may impact our ability to attract certain investors and raise funds, if necessary, in the capital markets.
Anti-takeover provisions included in the Wisconsin Business Corporation Law, provisions in our amended and restated articles of incorporation or bylaws and the common share purchase rights that accompany shares of our common stock could delay or prevent a change of control of our company, which could adversely impact the value of our common stock and may prevent or frustrate attempts by our shareholders to replace or remove our current board of directors or management.
A change of control of our company may be discouraged, delayed or prevented by certain provisions of the Wisconsin Business Corporation Law. These provisions generally restrict a broad range of business combinations between a Wisconsin corporation and a shareholder owning 15% or more of our outstanding common stock. These and other provisions in our amended and restated articles of incorporation, including our staggered board of directors and our ability to issue “blank check” preferred stock, as well as the provisions of our amended and restated bylaws and Wisconsin law, could make it more difficult for shareholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by theour then-current board of directors, including to delay or impede a merger, tender offer or proxy contest involving our company.
In addition, our employment arrangements with senior management provide for severance payments and accelerated vesting of benefits, including accelerated vesting of stock options and restricted stock awards, upon a change of control.control and a subsequent qualifying termination. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby adversely affecting the market price of our common stock. These provisions may also discourage or prevent a change of control or result in a lower price per share paid to our shareholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
32
ITEM 2. PROPERTIES
We lease our approximately 266,000 square foot manufacturing and distribution facility located in Manitowoc, Wisconsin. On MarchJanuary 31, 2016,2020, we entered into a purchasenew lease for the facility with a ten-year term, and sale agreement ("Agreement") with Tramontina U.S. Cookware, Inc. ("Tramontina")an option to sell our manufacturing and distribution facility for a cash purchase price of approximately $2,600,000. Pursuant to the Agreement, we are negotiating a lease with Tramontina under which we will lease approximately 200,000 square feet of the building for not less than three years, with rent at $2.00 per square foot per annum. The lease will contain options by
We recorded an impairment charge of $1,614,000 in fiscal 2016 based on the related assets' carrying values exceeding the expected proceeds from this sale transaction.
The Manitowoc and Jacksonville facilities noted above are utilized by all our business segments, the Lawrence facility by our EV Division and the Pewaukee facility by our Orion Services Group Division.
ITEM 3. LEGAL PROCEEDINGS
We are subject to various claims and legal proceedings arising in the ordinary course of business. As of the date hereof,of this report, we are unable to currently assess whetherdo not believe that the final resolution of any of such claims or legal proceedings maywould have a material adverse effect on Orion’sour future results of operations. In addition to ordinary-course litigation, we are a party to the proceedings described below.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Shares of our Common Stock
| High | Low | ||||||
| Fiscal 2016 | |||||||
| First Quarter | $ | 3.48 | $ | 2.17 | |||
| Second Quarter | $ | 2.59 | $ | 1.73 | |||
| Third Quarter | $ | 2.50 | $ | 1.58 | |||
| Fourth Quarter | $ | 2.25 | $ | 1.18 | |||
| Fiscal 2015 | |||||||
| First Quarter | $ | 2.51 | $ | 2.00 | |||
| Second Quarter | $ | 4.44 | $ | 2.30 | |||
| Third Quarter | $ | 7.22 | $ | 3.50 | |||
| Fourth Quarter | $ | 8.11 | $ | 4.71 | |||
Shareholders
As of June 9, 2016,May 31, 2023, there were approximately 229160 record holders of the 28,059,35132,295,408 outstanding shares of our common stock. The number of record holders does not include shareholders for whom shares are held in a “nominee” or “street” name.
Dividend Policy
We have never paid or declared any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. In addition, the terms of our existing credit agreement restrict the payment of cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, contractual restrictions (including those under our loan agreements) and other factors that our board of directors deems relevant.
33
Securities Authorized for Issuance under Equity Compensation Plans
The following table represents shares outstanding under our 20032004 Stock Optionand Incentive Awards Incentive Plan, and our 2004 Equity2016 Omnibus Incentive Plan as of March 31, 2016.
Equity Compensation Plan Information |
| |||||||||||
Plan Category |
| Number of |
|
| Weighted |
|
| Number of |
| |||
Equity Compensation plans approved by security holders |
|
| 816,590 |
|
| $ | 2.41 |
|
|
| 545,146 |
|
Equity Compensation plans not approved by security holders |
|
| — |
|
|
| — |
|
|
| — |
|
Total |
|
| 816,590 |
|
| $ | 2.41 |
|
|
| 545,146 |
|
| Equity Compensation Plan Information | ||||||||||
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options and Vesting of Restricted Shares | Weighted Average Exercise Price of Outstanding Options and Restricted Shares | Number of Securities Remaining Available for Future Issuances Under the Equity Compensation Plans (1) | |||||||
| Equity Compensation plans approved by security holders | 3,070,435 | $ | 3.32 | 787,686 | ||||||
| Equity Compensation plans not approved by security holders | — | — | — | |||||||
| Total | 3,070,435 | $ | 3.32 | 787,686 | ||||||
We did not purchase shares of our common stock during the fiscal year ended March 31, 2016.
Unregistered Sales of Securities
ITEM 6. [RESERVED]
34
ITEM | |
| Fiscal Year Ended March 31, | |||||||||||||||||||
| 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||||||
| Consolidated statements of operations data: | |||||||||||||||||||
| Product revenue | $ | 64,897 | $ | 65,881 | $ | 71,954 | $ | 72,604 | $ | 90,782 | |||||||||
| Service revenue | 2,745 | 6,329 | 16,669 | 13,482 | 9,780 | ||||||||||||||
| Total revenue | 67,642 | 72,210 | 88,623 | 86,086 | 100,562 | ||||||||||||||
| Cost of product revenue(1)(5) | 49,630 | 68,388 | 54,423 | 49,551 | 62,842 | ||||||||||||||
| Cost of service revenue | 2,015 | 4,959 | 11,220 | 9,805 | 7,682 | ||||||||||||||
| Total cost of revenue | 51,645 | 73,347 | 65,643 | 59,356 | 70,524 | ||||||||||||||
| Gross profit (loss) | 15,997 | (1,137 | ) | 22,980 | 26,730 | 30,038 | |||||||||||||
| General and administrative expenses(1)(2)(3) | 16,884 | 14,908 | 14,951 | 13,946 | 11,399 | ||||||||||||||
| Goodwill and long lived asset impairment (6) | 6,023 | — | — | — | — | ||||||||||||||
| Acquisition and integration related expenses (4) | — | 47 | 819 | — | — | ||||||||||||||
| Sales and marketing expenses(1)(2) | 11,343 | 13,290 | 13,527 | 17,129 | 15,599 | ||||||||||||||
| Research and development expenses(1) | 1,668 | 2,554 | 2,026 | 2,259 | 2,518 | ||||||||||||||
| Income (Loss) from operations | (19,921 | ) | (31,936 | ) | (8,343 | ) | (6,604 | ) | 522 | ||||||||||
| Interest expense | (297 | ) | (376 | ) | (481 | ) | (567 | ) | (551 | ) | |||||||||
| Gain on sale of OTA contract receivables | — | — | — | — | 32 | ||||||||||||||
| Dividend and interest income | 128 | 300 | 567 | 845 | 850 | ||||||||||||||
| Income (loss) before income tax | (20,090 | ) | (32,012 | ) | (8,257 | ) | (6,326 | ) | 853 | ||||||||||
| Income tax expense (benefit)(2)(3) | 36 | 49 | (2,058 | ) | 4,073 | 370 | |||||||||||||
| Net income (loss) and comprehensive income (loss) | $ | (20,126 | ) | $ | (32,061 | ) | $ | (6,199 | ) | $ | (10,399 | ) | $ | 483 | |||||
| Net income (loss) per share attributable to common shareholders: | |||||||||||||||||||
| Basic | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | $ | (0.50 | ) | $ | 0.02 | |||||
| Diluted | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | $ | (0.50 | ) | $ | 0.02 | |||||
| Weighted-average shares outstanding: | |||||||||||||||||||
| Basic | 27,628 | 22,353 | 20,988 | 20,997 | 22,953 | ||||||||||||||
| Diluted | 27,628 | 22,353 | 20,988 | 20,997 | 23,387 | ||||||||||||||
| Fiscal Year Ended March 31, | |||||||||||||||||||
| 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
| (in thousands) | |||||||||||||||||||
| Cost of product revenue | $ | 36 | $ | 50 | $ | 70 | $ | 114 | $ | 189 | |||||||||
| General and administrative expenses | 1,148 | 1,056 | 1,025 | 578 | 548 | ||||||||||||||
| Sales and marketing expenses | 235 | 360 | 485 | 451 | 501 | ||||||||||||||
| Research and development expenses | 43 | 33 | 13 | 21 | 29 | ||||||||||||||
| Total stock-based compensation expense | $ | 1,462 | $ | 1,499 | $ | 1,593 | $ | 1,164 | $ | 1,267 | |||||||||
| As of March 31, | |||||||||||||||||||
| 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
| (in thousands) | |||||||||||||||||||
| Consolidated balance sheet data: | |||||||||||||||||||
| Cash and cash equivalents | $ | 15,542 | $ | 20,002 | $ | 17,568 | $ | 14,376 | $ | 23,011 | |||||||||
| Short-term investments | — | — | 470 | 1,021 | 1,016 | ||||||||||||||
| Total assets | 70,875 | 87,805 | 98,940 | 102,097 | 125,650 | ||||||||||||||
| Long-term debt, less current maturities | 4,021 | 3,222 | 3,151 | 4,109 | 6,704 | ||||||||||||||
| Shareholder notes receivable | (4 | ) | (4 | ) | (50 | ) | (265 | ) | (221 | ) | |||||||||
| Total shareholders’ equity | $ | 45,983 | $ | 64,511 | $ | 77,012 | $ | 77,769 | $ | 92,769 | |||||||||
Overview
We are a leading designerprovide 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 manufacturer of high-performance, energy-efficient lighting platforms.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, design, 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 three primary market segments: commercial office and retail, area lighting, and 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. We operate in three operating segments, which we refer to as Orion U.S. Markets Division ("USM"), Orion Engineered Systems Division ("OES") and Orion Distribution Services Division ("ODS"). USM focuses on selling our lighting solutions into the wholesale markets with customers including domestic energy service companies, or ESCOs, and electrical contractors. OES focuses on selling lighting products and construction and engineering services direct to end users. OES completes the construction management services related to existing contracted projects. Its customers include national accounts, governments, municipalities and schools. ODS focuses on selling our lighting products to a developing network of broadline distributors.
Our lighting products consist primarily of LED and HIF lighting fixtures.fixtures, many of which include IoT enabled control systems. Our principal lighting customers include large national accounts, ESCOs,account end-users, federal and state government facilities, large regional account end-users, electrical distributors, electrical contractors and electrical distributors.energy service companies (“ESCOs”). Currently, substantially allmost of our lighting products are manufactured at our leased production facility locationlocated in Manitowoc, Wisconsin, although as the LED and related IoT market continues to evolve, we are increasingly sourcing products and components from third parties as the LED market continues to evolve and in order to provide us with versatility in our product development.
We differentiate ourselves from our competitors through 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 continuebegan to provide some solutions usingoffer lighting and electrical maintenance services in fiscal 2021 which enables us to support a lifetime business relationship with our legacy HIF technology,customer (which we call “Customers for Life”). We completed the acquisition of Voltrek on October 5, 2022, which is intended to further expand our turnkey services capabilities as well as capitalize on the rapidly growing market for EV charging solutions. We completed the Stay-Lite Lighting acquisition on January 1, 2022, which is intended to further expand our maintenance services capabilities.
We believe the market for LED lighting products is currently in a significant technology shiftand related controls continues to LED lighting systems. Compared to legacy lighting systems, we believe that LED lighting
In fiscal 2022, we continued to successfully capitalize on our capability of being a full service, turn-key provider of LED lighting technology. Basedand controls systems with design, build, installation and project management services, as we continued a very large project for a major national account. As a result of this success, we have begun to evolve our business strategy to focus on a July 2015 United States Departmentfurther expanding the nature and scope of Energy report,our products and services offered to our customers. This further expansion of our products and services includes pursuing projects to develop recurring revenue streams, including providing lighting and electrical maintenance services and utilizing control sensor technology to collect data and assisting customers in the digitization of this data, along with other potential services. We also are pursuing the expansion of our IoT, “smart-building” and “connected ceiling” and other related technology, software and controls products and services that we estimate the potential North American LED retrofit market withinoffer to our key product categories to be approximately 1.1 billion lighting fixtures. We plan to continuecustomers. While we currently intend to primarily focus on developing pursue these expansion strategies organically, we also may explore potential additional business acquisitions, like our acquisition of Stay-Lite Lightingand selling innovative LED products, although we will continueVoltrek, which have more quickly added these types of expanded and different capabilities to marketour product and sell legacy HIF solutions in circumstances in which LED solutions may not be our customers' best alternative.
35
We generally do not have long-term contracts with our customers for product or turnkey services that provide us with recurring revenue from period to period and weannual revenue. However, our maintenance services contracts usually consist of multi-year arrangements. 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 projectproject-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 are required to make substantial working capital expenditures and advance inventory purchases that we may not be able to recoup if the agreements or a substantial volume of purchase orders under the agreements are delayed or terminated. The loss of, or substantial reduction in sales to, any of our significant customers, or our current single largest customer, or the termination or delay of a significant volume of purchase orders by project basis. one or more key customers, could have a material adverse effect on our results of operations in any given future period.
We typically sell our lighting systems in replacement of our customers’ existing fixtures. We call this replacement process a “retrofit.”"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 contractors,distributors and ESCOs and electrical distributors 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 15%10% to 50%. As a result, a change in the total mix of our sales towardamong higher or lower margin products couldcan cause our profitability to fluctuate from period to period. Despite recent economic challenges, we remain optimistic about our near-term and long-term financial performance. We believe that customer purchases of LED lighting systems will continue to increase in the near-term as expected improvements in LED performance and expected decreases in LED product costs to make our LED products even more economically compelling to our customers. Our near-term optimism is based upon: (i) our efforts to expand our Distribution Services customer base; (ii) our intentions to continue to selectively expand our sales force; (iii) our investments into new high-performance LED industrial lighting fixtures; (iv) our expected fiscal 2017 increase in revenue and gross margin as we increase sales of these product lines; (v) our recent improvements in gross margin as a result of our cost containment initiatives and development of higher-performance LED products; and (vi) the increasing volume of unit sales of our new products, specifically our LED high bay lighting fixtures. Our long-term optimism is based upon the considerable size of the existing market opportunity for lighting retrofits, including the market opportunities in commercial office, government and retail markets, the continued development of our new products and product enhancements, including our new LED product offerings, and our efforts to expand our channels of distribution and our cost reduction initiatives. As we attempt to adapt our business organization to the quickly evolving lighting market, we are implementing significant changes to our manufacturing operations to increase our flexibility, remain competitive and lower our cost structure. Implementing these initiatives may result in additional cost and expenses, including asset impairment or write-down charges and other repositioning expenses and charges, which would likely materially adversely affect our reported results of operations. Our anticipated increase in revenues in fiscal 2017 may impact our available cash and borrowing capacity as a result of the high capital costs associated with the increase in the sales of our products from existing levels. As a result, we are pursuing various alternative sources of liquidity, including the sale and leaseback of our manufacturing facility, which is expected to be completed by the end of June 2016, subject to various closing conditions.
Our fiscal year ends on March 31. We refer to our just completed fiscal year, which ended on March 31, 2023, as "fiscal 2023", and our prior fiscal years which ended on March 31, 2014 as “fiscal 2014”,2022 and the year ended on March 31, 2015,2021 as "fiscal 2022" and “fiscal 2015”2021”, and our current fiscal year, which ended on March 31, 2016, as “fiscal 2016.”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 four reportable segments: Orion Services Group Division ("OSG"), Orion Distribution Services Division ("ODS"), Orion U.S. Markets Division (“USM”) and Orion Electric Vehicle Charging Division (“EV Division”).
36
Selected Financial Data
The selected historical consolidated financial data are not necessarily indicative of future results.
|
| Fiscal Year Ended March 31, |
| |||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||||
|
| (in thousands, except per share amounts) |
| |||||||||||||||||
Consolidated statements of operations data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Product revenue |
| $ | 57,210 |
|
| $ | 91,889 |
|
| $ | 87,664 |
|
| $ | 113,352 |
|
| $ | 56,261 |
|
Service revenue |
|
| 20,173 |
|
|
| 32,494 |
|
|
| 29,176 |
|
|
| 37,489 |
|
|
| 9,493 |
|
Total revenue |
|
| 77,383 |
|
|
| 124,383 |
|
|
| 116,840 |
|
|
| 150,841 |
|
|
| 65,754 |
|
Cost of product revenue (1) (2) (7) |
|
| 42,979 |
|
|
| 65,249 |
|
|
| 63,233 |
|
|
| 83,588 |
|
|
| 44,111 |
|
Cost of service revenue (1) (3) (7) |
|
| 16,893 |
|
|
| 25,222 |
|
|
| 23,483 |
|
|
| 30,130 |
|
|
| 7,091 |
|
Total cost of revenue |
|
| 59,872 |
|
|
| 90,471 |
|
|
| 86,716 |
|
|
| 113,718 |
|
|
| 51,202 |
|
Gross profit |
|
| 17,511 |
|
|
| 33,912 |
|
|
| 30,124 |
|
|
| 37,123 |
|
|
| 14,552 |
|
General and administrative expenses (1) (4) (7) |
|
| 19,487 |
|
|
| 11,680 |
|
|
| 11,262 |
|
|
| 11,184 |
|
|
| 10,231 |
|
Acquisition related costs |
|
| 765 |
|
|
| 512 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Sales and marketing expenses (1) (5) (7) |
|
| 11,392 |
|
|
| 11,628 |
|
|
| 10,341 |
|
|
| 11,113 |
|
|
| 9,104 |
|
Research and development expenses (1) (7) |
|
| 1,852 |
|
|
| 1,701 |
|
|
| 1,685 |
|
|
| 1,716 |
|
|
| 1,374 |
|
(Loss) income from operations |
|
| (15,985 | ) |
|
| 8,391 |
|
|
| 6,836 |
|
|
| 13,110 |
|
|
| (6,157 | ) |
Other income |
|
| — |
|
|
| 1 |
|
|
| 56 |
|
|
| 28 |
|
|
| 80 |
|
Interest expense |
|
| (339 | ) |
|
| (80 | ) |
|
| (127 | ) |
|
| (279 | ) |
|
| (493 | ) |
Amortization of debt issue costs |
|
| (73 | ) |
|
| (62 | ) |
|
| (157 | ) |
|
| (243 | ) |
|
| (101 | ) |
Loss on debt extinguishment |
|
| — |
|
|
| — |
|
|
| (90 | ) |
|
| — |
|
|
| — |
|
Dividend and interest income |
|
| 34 |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| 11 |
|
(Loss) income before income tax |
|
| (16,363 | ) |
|
| 8,250 |
|
|
| 6,518 |
|
|
| 12,621 |
|
|
| (6,660 | ) |
Income tax expense (benefit) (6) |
|
| 17,978 |
|
|
| 2,159 |
|
|
| (19,616 | ) |
|
| 159 |
|
|
| 14 |
|
Net (loss) income |
| $ | (34,341 | ) |
| $ | 6,091 |
|
| $ | 26,134 |
|
| $ | 12,462 |
|
| $ | (6,674 | ) |
Net (loss) income per share attributable to common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
| $ | (1.08 | ) |
| $ | 0.20 |
|
| $ | 0.85 |
|
| $ | 0.41 |
|
| $ | (0.23 | ) |
Diluted |
| $ | (1.08 | ) |
| $ | 0.19 |
|
| $ | 0.83 |
|
| $ | 0.40 |
|
| $ | (0.23 | ) |
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
|
| 31,704 |
|
|
| 31,018 |
|
|
| 30,635 |
|
|
| 30,105 |
|
|
| 29,430 |
|
Diluted |
|
| 31,704 |
|
|
| 31,295 |
|
|
| 31,304 |
|
|
| 30,965 |
|
|
| 29,430 |
|
|
| Fiscal Year Ended March 31, |
| |||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Cost of product revenue |
| $ | 4 |
|
| $ | 5 |
|
| $ | 4 |
|
| $ | 3 |
|
| $ | 2 |
|
Cost of service revenue |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| 3 |
|
General and administrative expenses |
|
| 1,596 |
|
|
| 793 |
|
|
| 716 |
|
|
| 576 |
|
|
| 764 |
|
Sales and marketing expenses |
|
| 8 |
|
|
| 12 |
|
|
| 29 |
|
|
| 38 |
|
|
| 54 |
|
Research and development expenses |
|
| 4 |
|
|
| 3 |
|
|
| 4 |
|
|
| 2 |
|
|
| 2 |
|
Total stock-based compensation expense |
| $ | 1,612 |
|
| $ | 813 |
|
| $ | 753 |
|
| $ | 618 |
|
| $ | 825 |
|
37
|
| Fiscal Year Ended March 31, 2022 |
| |
|
| (in thousands) |
| |
Cost of product revenue |
| $ | 649 |
|
Cost of service revenue |
|
| 144 |
|
General and administrative expenses |
|
| 273 |
|
Sales and marketing expenses |
|
| 416 |
|
Research and development expenses |
|
| 105 |
|
Total payroll tax credit |
| $ | 1,587 |
|
Fiscal 2024 Outlook
In fiscal 2024, we plan on focusing on the following initiatives:
Executing and marketing our turnkey LED retrofit capabilities to large national account customers. We believe one of our competitive advantages is our ability to deliver full turnkey LED lighting project capabilities. These turnkey services were the principal reason we achieved significant recent revenue growth as we executed on our commitment to retrofit multiple locations for a major national account customer. Our success in the national account market segment centers on our turnkey design, engineering, manufacturing and project management capabilities, which represent a very clear competitive advantage for us among large enterprises seeking to benefit from the illumination benefits and energy savings of LED lighting industryacross locations nationwide. We believe one of our competitive advantages is that we are organized to serve every step of a custom retrofit project in a comprehensive, non-disruptive and timely fashion, from legacycustom fixture design and initial site surveys to final installations. We are also able to help customers deploy state-of-the-art control systems that provide even greater long-term value from their lighting system investments.
Looking forward, we are focused on continuing to successfully execute on existing national account opportunities while also actively pursuing new national account opportunities that leverage our customized, comprehensive turnkey project solutions, and expanding our addressable market with high-quality, basic lighting systems to meet the needs of value-oriented customer segments served by our other market channels. Given our compelling value proposition, capabilities and focus on customer service, we are optimistic about our business prospects and working to build sales momentum with existing and new customers.
Continued Product Innovation. We continue to innovate, developing lighting fixtures and features that address specific customer requirements, while also working to maintain a leadership position in energy efficiency, smart product design and installation benefits. For interior building applications, we recently expanded our product line to include a family of ceiling air movement solutions, some of which incorporate LED lighting and others which utilize ultraviolet C light waves to kill viruses, bacteria and germs. We also continue to deepen our capabilities in the integration of smart lighting controls. Orion is launching a new line of exterior products in FY’24 Q2 designed to increase sales and market share in the application market. Our goal is to provide state-of-the-art lighting products with modular plug-and-play designs to LEDenable lighting products has caused ussystem customization from basic controls to adoptadvanced IoT capabilities.
Leverage of our Smart Lighting Systems to Support Internet of Things Applications. We believe we are ideally positioned to help customers to efficiently deploy new strategies, approachesIoT controls and processes in order to respond proactively to this paradigm shift. These changing underlying business fundamentals in this paradigm shift include:
Increase our Maintenance Service Offerings. We believe we can leverage our construction management process expertise to develop a high-quality, quick-response, multi-location maintenance service offering. Our experience with large national customers and our large installed base of fixtures positions us well to extend a maintenance offering to historical customers, as well as to new customers.
38
Development of this recurring revenue stream is making progress and we believe there is significant market opportunity. In fiscal 2021, we began providing energy maintenance services, and, on January 1, 2022, we completed the acquisition of Stay-Lite Lighting. The acquisition of Stay-Lite Lighting is intended to further increase our energy maintenance services capabilities.
Support success of our ESCO and agent-driven distribution sales channels.
Grow EV Charging Installation Business. We acquired Voltrek, a turnkey EV charging installation business, in fiscal 2023. We believe there are significant growth opportunities in Voltrek’s existing east coast geographic market, as well as on a national basis. We plan to focus our growth plans on maximizing the initial positive momentum realized in fiscal 2023 from our Voltrek acquisition and on cross selling our LED product linesEV charging solutions into our historical market channels and customers.
Recent Acquisitions
Acquisition of Voltrek
Effective on October 5, 2022, we acquired all of the outstanding membership interests of Voltrek LLC, a leading electric vehicle charging company that provides turnkey installation solutions with ongoing support to respondall commercial verticals. The initial purchase price consisted of $5.0 million cash and $1.0 million of stock. We will also pay an additional $3.0 million based on Voltrek's performance in fiscal 2023 and could pay up to the rapidly changing market dynamicsan additional $3.5 million and $7.15 million in the lighting industry, we face intense competitioncompensatory consideration if Voltrek exceeds certain earnings targets in fiscal 2024 and 2025, respectively. The acquisition was funded from an increased number of other LED product companies, a number of which have substantially greaterexisting cash and credit resources and more experiencehas been operating as Voltrek, a division of Orion Energy Systems.
Acquisition of Stay-Lite Lighting
Effective on January 1, 2022, we acquired all of the issued and history with LEDoutstanding capital stock of Stay-Lite Lighting, a nationwide lighting products than we do.
Replacing Reduced Revenue from Primary Customer
In fiscal 2016, we continued to see improvements in our LED product gross margin related to LED products as a result2023, one customer accounted for 16.2% of our negotiated price decreasestotal revenue. In fiscal 2022, that same customer accounted for lighting components and the benefits49.1% of our total revenue, and in fiscal 2015 fourth quarter cost containment initiatives. During the fiscal 2016 second quarter, we experienced an increase in sales2021, this same customer accounted for 56.0% of our LED door retrofit, or LDR, product line which has lower gross margins as compared to our other LED product lines. This increase in volume negatively impacted our overall gross margin during thetotal revenue. In fiscal 2016 second quarter.
39
Results of Operations: Fiscal 20162023 versus Fiscal 2015
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 and per share amounts)percentages):
| Fiscal Year Ended March 31, | ||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Amount | Amount | % Change | % of Revenue | % of Revenue | ||||||||||||
| Product revenue | $ | 64,897 | $ | 65,881 | (1.5 | )% | 95.9 | % | 91.2 | % | ||||||
| Service revenue | 2,745 | 6,329 | (56.6 | )% | 4.1 | % | 8.8 | % | ||||||||
| Total revenue | 67,642 | 72,210 | (6.3 | )% | 100.0 | % | 100.0 | % | ||||||||
| Cost of product revenue | 49,630 | 68,388 | (27.4 | )% | 73.4 | % | 94.7 | % | ||||||||
| Cost of service revenue | 2,015 | 4,959 | (59.4 | )% | 3.0 | % | 6.9 | % | ||||||||
| Total cost of revenue | 51,645 | 73,347 | (29.6 | )% | 76.4 | % | 101.6 | % | ||||||||
| Gross profit (loss) | 15,997 | (1,137 | ) | NM | 23.6 | % | (1.6 | )% | ||||||||
| General and administrative expenses | 16,884 | 14,908 | 13.3 | % | 25.0 | % | 20.6 | % | ||||||||
| Goodwill and long lived asset impairment | 6,023 | — | NM | 8.9 | % | — | % | |||||||||
| Acquisition and integration related expenses | — | 47 | (100.0 | )% | — | % | 0.1 | % | ||||||||
| Sales and marketing expenses | 11,343 | 13,290 | (14.7 | )% | 16.8 | % | 18.4 | % | ||||||||
| Research and development expenses | 1,668 | 2,554 | (34.7 | )% | 2.5 | % | 3.5 | % | ||||||||
| Loss from operations | (19,921 | ) | (31,936 | ) | 37.6 | % | (29.5 | )% | (44.2 | )% | ||||||
| Interest expense | (297 | ) | (376 | ) | 21.0 | % | (0.4 | )% | (0.5 | )% | ||||||
| Interest income | 128 | 300 | (57.3 | )% | 0.2 | % | 0.4 | % | ||||||||
| Loss before income tax | (20,090 | ) | (32,012 | ) | 37.2 | % | (29.7 | )% | (44.3 | )% | ||||||
| Income tax expense | 36 | 49 | (26.5 | )% | 0.1 | % | 0.1 | % | ||||||||
| Net loss and comprehensive loss | $ | (20,126 | ) | $ | (32,061 | ) | 37.2 | % | (29.8 | )% | (44.4 | )% | ||||
|
| Fiscal Year Ended March 31, |
| |||||||||||||||||
|
| 2023 |
|
| 2022 |
|
|
|
|
| 2023 |
|
| 2022 |
| |||||
|
| Amount |
|
| Amount |
|
| % |
|
| % of |
|
| % of |
| |||||
Product revenue |
| $ | 57,210 |
|
| $ | 91,889 |
|
|
| (37.7 | )% |
|
| 73.9 | % |
|
| 73.9 | % |
Service revenue |
|
| 20,173 |
|
|
| 32,494 |
|
|
| (37.9 | )% |
|
| 26.1 | % |
|
| 26.1 | % |
Total revenue |
|
| 77,383 |
|
|
| 124,383 |
|
|
| (37.8 | )% |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of product revenue |
|
| 42,979 |
|
|
| 65,249 |
|
|
| (34.1 | )% |
|
| 55.5 | % |
|
| 52.5 | % |
Cost of service revenue |
|
| 16,893 |
|
|
| 25,222 |
|
|
| (33.0 | )% |
|
| 21.8 | % |
|
| 20.3 | % |
Total cost of revenue |
|
| 59,872 |
|
|
| 90,471 |
|
|
| (33.8 | )% |
|
| 77.4 | % |
|
| 72.7 | % |
Gross profit |
|
| 17,511 |
|
|
| 33,912 |
|
|
| (48.4 | )% |
|
| 22.6 | % |
|
| 27.3 | % |
General and administrative expenses |
|
| 19,487 |
|
|
| 11,680 |
|
|
| 66.8 | % |
|
| 25.2 | % |
|
| 9.4 | % |
Acquisition related costs |
|
| 765 |
|
|
| 512 |
|
|
| 49.4 | % |
|
| 1.0 | % |
|
| 0.4 | % |
Sales and marketing expenses |
|
| 11,392 |
|
|
| 11,628 |
|
|
| (2.0 | )% |
|
| 14.7 | % |
|
| 9.3 | % |
Research and development expenses |
|
| 1,852 |
|
|
| 1,701 |
|
|
| 8.9 | % |
|
| 2.4 | % |
|
| 1.4 | % |
(Loss) income from operations |
|
| (15,985 | ) |
|
| 8,391 |
|
| NM |
|
|
| (20.7 | )% |
|
| 6.7 | % | |
Other income |
|
| — |
|
|
| 1 |
|
| NM |
|
|
| 0.0 | % |
|
| 0.0 | % | |
Interest expense |
|
| (339 | ) |
|
| (80 | ) |
|
| (323.8 | )% |
|
| (0.4 | )% |
|
| (0.1 | )% |
Amortization of debt issue costs |
|
| (73 | ) |
|
| (62 | ) |
|
| (17.7 | )% |
|
| (0.1 | )% |
|
| (0.0 | )% |
(Loss) income before income tax |
|
| (16,363 | ) |
|
| 8,250 |
|
| NM |
|
|
| (21.1 | )% |
|
| 6.6 | % | |
Income tax expense |
|
| 17,978 |
|
|
| 2,159 |
|
| NM |
|
|
| 23.2 | % |
|
| 1.7 | % | |
Net (loss) income |
| $ | (34,341 | ) |
| $ | 6,091 |
|
| NM |
|
|
| (44.4 | )% |
|
| 4.9 | % | |
*NM = Not Meaningful
Revenue, Cost of Revenue and Gross Margin. Product revenue decreased 1.5%by 37.7%, or $984,000.$34.7 million, for fiscal 2023 versus fiscal 2022. Service revenue decreased by 37.9%, or $12.3 million, for fiscal 2023 versus fiscal 2022. The slight decrease in product revenue was primarily due to the completion of a result of the impact of the softening macro-economic environmentsignificant project for our largest customer and delays in the back halfcommencement of fiscal 2016. Strong customer response to our next generation high bay product offering drove increased LED sales which werecertain projects partially offset by tempered demandrevenue associated with the Stay-Lite and Voltrek acquisitions. The decrease in the industrial sector as a result of macro-economic uncertainty. LED lighting revenue increased by 48% from $30,800,000 in fiscal 2015 to $45,679,000 in fiscal 2016. Service revenue decreased 56.6%, or $3,584,000, due to higher service revenue in fiscal 2015 primarily due to more solar revenue and project revenue from a significant customer. Total revenue decreased by 6.3%, or $4,568,000,was primarily due to the items discussed above.
Operating Expenses
General and Administrative.
Acquisition Related Costs. In fiscal 2023, we incurred acquisition costs of $0.8 million, primarily relating to the pending sale and leasebackVoltrek acquisition. In fiscal 2022, we incurred acquisition expenses of our manufacturing facility were impaired by $1,614,000$0.5 million relating to properly represent the fair valueacquisition of the property being sold.
Sales and Marketing.
Our sales and marketing expenses decreased40
Research and Development.
Interest Expense. Interest expense in fiscal 2023 increased by $0.2 million to $0.3 million primarily due to a reduction in consulting feesbecause of higher borrowings on Orion’s credit facility and customer field sample testingincreased third party financing costs related to our new products asthe sale of receivables.
Income Taxes. In fiscal 2023, we continue to increase our cost effectiveness related to launching new products and decrease our reliance on higher-cost third parties.
Results of Operations: Fiscal 20152022 versus Fiscal 2014
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 percentagespercentages):
|
| Fiscal Year Ended March 31, |
| |||||||||||||||||
|
| 2022 |
|
| 2021 |
|
|
|
|
| 2022 |
|
| 2021 |
| |||||
|
| Amount |
|
| Amount |
|
| % |
|
| % of |
|
| % of |
| |||||
Product revenue |
| $ | 91,889 |
|
| $ | 87,664 |
|
|
| 4.8 | % |
|
| 73.9 | % |
|
| 75.0 | % |
Service revenue |
|
| 32,494 |
|
|
| 29,176 |
|
|
| 11.4 | % |
|
| 26.1 | % |
|
| 25.0 | % |
Total revenue |
|
| 124,383 |
|
|
| 116,840 |
|
|
| 6.5 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of product revenue |
|
| 65,249 |
|
|
| 63,233 |
|
|
| 3.2 | % |
|
| 52.5 | % |
|
| 54.1 | % |
Cost of service revenue |
|
| 25,222 |
|
|
| 23,483 |
|
|
| 7.4 | % |
|
| 20.3 | % |
|
| 20.1 | % |
Total cost of revenue |
|
| 90,471 |
|
|
| 86,716 |
|
|
| 4.3 | % |
|
| 72.7 | % |
|
| 74.2 | % |
Gross profit |
|
| 33,912 |
|
|
| 30,124 |
|
|
| 12.6 | % |
|
| 27.3 | % |
|
| 25.8 | % |
General and administrative expenses |
|
| 11,680 |
|
|
| 11,262 |
|
|
| 3.7 | % |
|
| 9.4 | % |
|
| 9.6 | % |
Acquisition related costs |
|
| 512 |
|
|
| — |
|
| NM |
|
|
| 0.4 | % |
|
| 0.0 | % | |
Sales and marketing expenses |
|
| 11,628 |
|
|
| 10,341 |
|
|
| 12.4 | % |
|
| 9.3 | % |
|
| 8.9 | % |
Research and development expenses |
|
| 1,701 |
|
|
| 1,685 |
|
|
| 0.9 | % |
|
| 1.4 | % |
|
| 1.4 | % |
Income from operations |
|
| 8,391 |
|
|
| 6,836 |
|
|
| 22.7 | % |
|
| 6.7 | % |
|
| 5.9 | % |
Other income |
|
| 1 |
|
|
| 56 |
|
|
| (98.2 | )% |
|
| 0.0 | % |
|
| 0.0 | % |
Interest expense |
|
| (80 | ) |
|
| (127 | ) |
|
| 37.0 | % |
|
| (0.1 | )% |
|
| (0.1 | )% |
Amortization of debt issue costs |
|
| (62 | ) |
|
| (157 | ) |
|
| 60.5 | % |
|
| (0.0 | )% |
|
| (0.1 | )% |
Loss on debt extinguishment |
|
| — |
|
|
| (90 | ) |
| NM |
|
|
| 0.0 | % |
|
| (0.1 | )% | |
Income before income tax |
|
| 8,250 |
|
|
| 6,518 |
|
|
| 26.6 | % |
|
| 6.6 | % |
|
| 5.6 | % |
Income tax expense (benefit) |
|
| 2,159 |
|
|
| (19,616 | ) |
| NM |
|
|
| 1.7 | % |
|
| (16.8 | )% | |
Net income |
| $ | 6,091 |
|
| $ | 26,134 |
|
|
| (76.7 | )% |
|
| 4.9 | % |
|
| 22.4 | % |
* NM = Not Meaningful
Revenue, Cost of Revenue and per share amounts):
| Fiscal Year Ended March 31, | ||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Amount | Amount | % Change | % of Revenue | % of Revenue | ||||||||||||
| Product revenue | $ | 65,881 | $ | 71,954 | (8.4 | )% | 91.2 | % | 81.2 | % | ||||||
| Service revenue | 6,329 | 16,669 | (62.0 | )% | 8.8 | % | 18.8 | % | ||||||||
| Total revenue | 72,210 | 88,623 | (18.5 | )% | 100.0 | % | 100.0 | % | ||||||||
| Cost of product revenue | 68,388 | 54,423 | 25.7 | % | 94.7 | % | 61.4 | % | ||||||||
| Cost of service revenue | 4,959 | 11,220 | (55.8 | )% | 6.9 | % | 12.7 | % | ||||||||
| Total cost of revenue | 73,347 | 65,643 | 11.7 | % | 101.6 | % | 74.1 | % | ||||||||
| Gross profit (loss) | (1,137 | ) | 22,980 | (104.9 | )% | (1.6 | )% | 25.9 | % | |||||||
| General and administrative expenses | 14,908 | 14,951 | (0.3 | )% | 20.6 | % | 16.9 | % | ||||||||
| Acquisition and integration related expenses | 47 | 819 | (94.3 | )% | 0.1 | % | 0.9 | % | ||||||||
| Sales and marketing expenses | 13,290 | 13,527 | (1.8 | )% | 18.4 | % | 15.3 | % | ||||||||
| Research and development expenses | 2,554 | 2,026 | 26.1 | % | 3.5 | % | 2.2 | % | ||||||||
| Loss from operations | (31,936 | ) | (8,343 | ) | (282.8 | )% | (44.2 | )% | (9.4 | )% | ||||||
| Interest expense | (376 | ) | (481 | ) | 21.8 | % | (0.5 | )% | (0.4 | )% | ||||||
| Interest income | 300 | 567 | (47.1 | )% | 0.4 | % | 0.6 | % | ||||||||
| Loss before income tax | (32,012 | ) | (8,257 | ) | (287.7 | )% | (44.3 | )% | (9.2 | )% | ||||||
| Income tax expense (benefit) | 49 | (2,058 | ) | 102.4 | % | 0.1 | % | (2.2 | )% | |||||||
| Net loss and comprehensive loss | $ | (32,061 | ) | $ | (6,199 | ) | (417.2 | )% | (44.4 | )% | (7.0 | )% | ||||
41
increase in product costs was primarily due to the increase in product revenue. Gross margin on solar PV revenues was 25.6% duringincreased to 27.3% of revenue in fiscal 2014 compared2022 from 25.8% in fiscal 2021, due primarily to 25.3% during fiscal 2015.
Operating Expenses
General and Administrative.
Acquisition Related Costs. In fiscal 2015 actually increased slightly over fiscal 2014 when excluding the loss mentioned above. Increases in fiscal 2015 were slightly higher in almost every category2022, we incurred acquisition expenses of expense with larger amounts attributable to compensation related expenses and amortization expense.
Sales and Marketing.
Our sales and marketing expensesResearch and Development.
Interest Expense. Interest expense in fiscal 2022 decreased by 37.0%, or $47 thousand, from fiscal 2014 to fiscal 2015 by 26.1%, or $528,000. The increase was due to spending for samples, testing and certification of our new LED products as we expanded our LED product lines during fiscal 2015.
Loss on Debt Extinguishment. Loss on debt for our Orion Throughput Agreement (“OTA”) projectsextinguishment in fiscal 2015 compared2021 related to the write-off of fees incurred with respect to our prior year.
Income Taxes. In fiscal 2022, we continue to utilize third party finance providers for our OTA projects.
Orion Services Group Division
Our OSG segment (a) develops and minimum state tax liabilities.
| For the year ended March 31, | |||||||||||
| (dollars in thousands) | 2016 | 2015 | 2014 | ||||||||
| Revenues | $ | 38,841 | $ | 37,778 | $ | 38,766 | |||||
| Operating loss | $ | (4,958 | ) | $ | (12,542 | ) | $ | (1,012 | ) | ||
| Operating margin | (12.8 | )% | (33.2 | )% | (2.6 | )% | |||||
The following table summarizes OESour OSG segment operating results:
| For the year ended March 31, | |||||||||||
| (dollars in thousands) | 2016 | 2015 | 2014 | ||||||||
| Revenues | $ | 26,325 | $ | 33,454 | $ | 49,857 | |||||
| Operating income (loss) | $ | (6,982 | ) | $ | (12,431 | ) | $ | 1,260 | |||
| Operating margin | (26.5 | )% | (37.2 | )% | 2.5 | % | |||||
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Revenues |
| $ | 38,002 |
|
| $ | 82,568 |
|
| $ | 84,243 |
|
Operating (loss) income |
| $ | (6,982 | ) |
| $ | 6,462 |
|
| $ | 7,472 |
|
Operating margin |
|
| (18.4 | )% |
|
| 7.8 | % |
|
| 8.9 | % |
Fiscal 20162023 Compared to Fiscal 2015
OSG segment revenue decreased in fiscal 20162023 by 21.3%54.0%, or $7,129,000,$44.6 million, and operating income decreased $13.4 million to an operating loss, compared to fiscal 2015.2022, due to an overall reduction in project volume performed for our largest customer, partially offset
42
by revenue from the acquisition of Stay-Lite Lighting. This decrease in revenue was primarily dueled to customer contraction of capital spending within the manufacturing and industrial sector.
Fiscal 2022 Compared to Fiscal 2021
OSG segment revenue decreased in fiscal 2022 by 2.0%, or $5,449,000, from fiscal 2015$1.7 million, and operating income decreased by 13.5%, or $1.0 million, compared to fiscal 2016. The decrease2021, due to an overall reduction in operating loss was due to: (i) the segment's long-term inventory controls impairment charge of $5,544,000 incurred during fiscal 2015; (ii) improvements toproject volume performed for our fiscal 2016 gross margin related to cost decreases on LED components; and (iii) a decrease in operating expenses for compensation and discretionary expenses resulting from our fourth quarter fiscal 2015 cost containment initiative,largest customer, partially offset by the segment's fiscal 2016 goodwill impairment charge of $2,038,000 and fiscal 2016 fixed asset impairment charge of $804,000.
Orion Distribution Services Division
Our Orion Distribution Services Division ("ODS") sellsODS segment focuses on selling lighting products tothrough manufacturer representative agencies and a developing network of North American broadline distributors.
The following table summarizes our ODS segment operating results:
| For the year ended March 31, | ||||||||
| (dollars in thousands) | 2016 | 2015 | 2014 | |||||
| Revenues | 2,476 | 978 | — | |||||
| Operating loss | (632 | ) | (455 | ) | — | |||
| Operating margin | (25.5 | )% | (46.5 | )% | — | % | ||
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Revenues |
| $ | 15,395 |
|
| $ | 22,209 |
|
| $ | 21,122 |
|
Operating (loss) income |
| $ | (186 | ) |
| $ | 3,114 |
|
| $ | 2,430 |
|
Operating margin |
|
| (1.2 | )% |
|
| 14.0 | % |
|
| 11.5 | % |
Fiscal 20162023 Compared to Fiscal 2015
ODS segment revenue increaseddecreased $6.8 million, or 30.7%, and operating income decreased $3.3 million, or 106.0%, in fiscal 2016 from2023 compared to fiscal 2015 by 153%, or $1,498,000. The increase in revenue in fiscal 2016 was2022 primarily due to the relatively low base line of revenue following the April 2014 start-up ofreduced sales to a large global on-line retailer. Operating income in this business unit and to variability in the timing of customer orders as this business unit develops.
Fiscal 2022 Compared to Fiscal 2021
ODS segment revenue in fiscal 2015.
Orion U.S. Markets Division
Our USM segment sells commercial lighting systems and energy management systems to the wholesale contractor markets. USM customers include ESCOs and contractors.
The following table summarizes our USM segment operating loss forresults (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Revenues |
| $ | 17,710 |
|
| $ | 19,606 |
|
| $ | 11,475 |
|
Operating income |
| $ | 1,605 |
|
| $ | 3,963 |
|
| $ | 1,683 |
|
Operating margin |
|
| 9.1 | % |
|
| 20.2 | % |
|
| 14.7 | % |
Fiscal 2023 Compared to Fiscal 2022
USM segment revenue decreased $1.9 million, or 9.7%, and operating income decreased by $2.4 million, or 59.5%, in fiscal 2015 was2023 compared to fiscal 2022, primarily due to a less diversified customer base. Operating income in this segment decreased as a result of lower revenue and increased allocation of corporate costs.
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Fiscal 2022 Compared to Fiscal 2021
USM segment revenue increased $8.1 million, or 70.9%, and operating income increased by $2.3 million, or 135.5%, in fiscal 2022 compared to fiscal 2021, primarily due to the impact of low factory utilization levelsCOVID-19 on gross marginfiscal 2021 and an increased focus on sales opportunities in this segment.
Orion EV Charging Division
We acquired Voltrek effective October 5, 2022, upon which it became an additional reporting segment. The results shown below are since the acquisition date and include the accrual of compensatory earn-out payments. Absent allocations and earn-out payment expenses, the EV Division had a positive effect on our investmentconsolidated earnings in selling costs to start-upfiscal 2023.
The following table summarizes our EV Division operations results (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Revenues |
| $ | 6,275 |
|
| $ | — |
|
| $ | — |
|
Operating (loss) |
| $ | (4,133 | ) |
| $ | — |
|
| $ | — |
|
Operating margin |
|
| (65.9 | )% |
|
| — |
|
|
| — |
|
EV Division revenue generated by Voltrek in fiscal 2023 was $6.3 million. Operating loss in this business unit.
Liquidity and Capital Resources
Overview
We had approximately $15,542,000$16.0 million in cash and cash equivalents as of March 31, 2016,2023, compared to $20,002,000$14.5 million at March 31, 2015. In February 2015, we completed an underwritten public offering2022. Our cash position increased primarily as a result of 5.46a $10.0 million sharesdraw made on our Credit Facility, together with positive changes in working capital changes, partially offset by the results of our common stock, at an offering price tooperations and the publicfunding of $3.50 per share. Net proceedsour acquisition of Voltrek.
As of March 31, 2023, our borrowing base supported $17.3 million of availability under our Credit Facility, with $10.0 million drawn against that availability. As of March 31, 2022, no amounts were borrowed under the offering approximated $17,465,000.
Additional information on our Credit Agreement can be found in the “Indebtedness” section located below.
In January 2014,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 up to $55,000,000$100 million of debt and/or equity securities, although, we are currently limited to selling an amount of securities equal to one-third of our public float on such registration statement.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.
In February 2015, OrionMarch 2021, we entered into a creditan At Market Issuance Sales Agreement to undertake an “at the market” (ATM) public equity capital raising program pursuant to which we may offer and security agreement ("Credit Agreement") with Wells Fargo Bank, National Association. The Credit Agreement provides for a revolving credit facility ("Credit Facility") that matures on February 6, 2018. Borrowings under the Credit Facility are initially limitedsell shares of our common stock, having an aggregate offering price of up to $15,000,000 subject$50 million from time to a borrowing base requirement based on eligible receivables and inventory. Such limit may increase to $20,000,000 subjecttime through or to the borrowing base requirement, after July 31, 2016, if we satisfy certain conditions. The Credit Facility includes a $2,000,000 sublimit forAgent, acting as sales agent or principal. No share sales have yet been effected pursuant to the issuance of letters of credit.
We also are exploring various alternative sources of credit. Borrowings underliquidity to help ensure that we will have the Credit Agreement outstanding asbest allocation of March 31, 2016, amountedinvesting capital to approximately $3,719,000. Orion estimates that as of March 31, 2016, it was eligible to borrow an additional $229,000 under the Credit Facility based upon current levels of eligible inventory and accounts receivable. Orion was in compliance with its covenants in the Credit Agreement as of March 31, 2016.
Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, capital expenditures, pending or future litigation results, cost containment, measures and future potential acquisition transactions. In addition, we tend to experience high working capital costs when we increase sales from existing levels. Based on our current expectations, while we anticipate realizing improved net income performance during fiscal 2017, we also currently believe that we will experience negative workingmanagement, capital cash flows during some quarters of fiscal 2017.expenditures. While we believe that we
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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 near-term,next 12 months and beyond based on our current cash flow forecast, there can be no assurance to that effect. We are pursuing various alternative sources of liquidity, including the pending sale and leaseback of our manufacturing facility, to help ensure that we will have adequate available cash to satisfy our working capital needs. We are also implementing certain inventory management practices which should help to reduce our inventory levels and enhance our cash position. 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 2016,2023, fiscal 20152022 and fiscal 2014:
| Fiscal Year Ended March 31, | |||||||||||
| 2016 | 2015 | 2014 | |||||||||
| (in thousands) | |||||||||||
| Operating activities | $ | (3,473 | ) | $ | (12,812 | ) | $ | 9,901 | |||
| Investing activities | (372 | ) | (730 | ) | (4,814 | ) | |||||
| Financing activities | (615 | ) | 15,976 | (1,895 | ) | ||||||
| (Decrease) increase in cash and cash equivalents | $ | (4,460 | ) | $ | 2,434 | $ | 3,192 | ||||
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
|
| (in thousands) |
| |||||||||
Operating activities |
| $ | (2,291 | ) |
| $ | (113 | ) |
| $ | 1,729 |
|
Investing activities |
|
| (6,195 | ) |
|
| (4,918 | ) |
|
| (946 | ) |
Financing activities |
|
| 10,012 |
|
|
| 104 |
|
|
| (10,141 | ) |
Increase (decrease) in cash and cash equivalents |
| $ | 1,526 |
|
| $ | (4,927 | ) |
| $ | (9,358 | ) |
Cash Flows Related to Operating Activities.
CashCash used in operating activities for fiscal 20162023 was $3,473,000$2.3 million and consisted of our net loss of $34.3 million adjusted for non-cash expense items and net cash providedused in changes in operating assets of $32.1 million, the largest of which was a $17.8 million decrease in deferred income tax assets as a result of the valuation allowance.
Cash used in operating activities for fiscal 2022 was $0.1 million and consisted of a net income of $6.1 million adjusted for non-cash expense items of $5.0 million and offset by net cash used by changes in operating assets and liabilities of $3,621,000 and a net loss adjusted for non-cash expense items of $7,094,000.$11.2 million. Cash providedused by changes in operating assets and liabilities consisted primarily of decreases in accounts payable of $8.1 million and accrued liabilities of $6.9 million, partially offset by cash provided by a decrease of $7,116,000 in accounts receivable of $4.4 million, all caused by changes in business volume late in fiscal 2022 compared to late fiscal 2021.
Cash provided by operating activities for fiscal 2021 was $1.7 million and consisted of a net income adjusted for non-cash expense items of $9.1 million and net cash used by changes in operating assets and liabilities of $7.4 million. Cash used by changes in operating assets and liabilities consisted primarily of an increase in inventory of $5.3 million due to the increaserelease of new product lines and pre-ordering due to supply chain delays as a result of COVID-19, a decrease in lighting revenue and collections from customers,accounts payable of $2.6 million due to the timing of payments, an increase in accounts payablereceivable of $713,000$2.4 million due to the timing of billing and customer collections, and an increase in inventory purchases to support our growth in lighting product revenue during fiscal 2016, an increaseRevenue earned but not billed of $1,803,000 in accrued expenses$2.4 million due to a loss contingency reserve and accrued project installation costs, and a decrease in deferred contract costs of $137,000 duetiming on revenue recognition compared to the completion of solar projects.invoicing. Cash usedprovided by changes in operating assets and liabilities included an increase of $3,249,000 in inventory due to the increase in purchases to support our anticipated growth in lighting product revenue, an increase in prepaid and other assets of $2,645,000 for project billings that increased unbilled revenue, and a decrease in deferred revenue of $254,000 due to project completions.
Cash Flows Related to Investing Activities.
Cash used in investing activitiesCash used in investing activities was $4,814,000 in fiscal 2014. 2022 was $4.9 million and consisted primarily of the $4.0 million acquisition of Stay-Lite Lighting, and an investment of a non-controlling equity stake in ndustrial, Inc. of $0.5 million and purchases of property and equipment.
Cash used primarily included $4,992,000 for the acquisition of Harris and $410,000 for capital improvements related to product development tooling and information technology systems. Cash provided fromin investing activities in fiscal 20142021 was $0.9 million and consisted primarily included $555,000 from the sales of short-term investmentspurchases of property and $80,000 in proceeds from the sale of assets.
Cash Flows Related to Financing Activities.
Cash provided by financing activities in fiscal 2023 was $10.0 million which consisted of proceeds from the revolving credit facility.45
Cash provided by financing activities in fiscal 2022 was $0.1 million.
Cash used in financing activities in fiscal 2021 was $615,000 for fiscal 2016.$10.1 million. This included $1,901,000 cash used for the repaymentconsisted primarily of long-term debt, partially offset by $1,218,000a net payment of net proceeds from$10.0 million under our Credit Facility and $104,000 received from stock option exercises.
Working Capital
Our net working capital as of March 31, 20162023 was $29,239,000,$25.9 million, consisting of $48,530,000 in$50.4 million of current assets and $19,291,000 in$24.5 million of current liabilities. Our net working capital as of March 31, 20152022 was $36,726,000,$32.9 million, consisting of $55,045,000$51.2 million in current assets and $18,319,000$18.4 million in current liabilities. The change was primarily due to decreases in inventory and collection of the employee retention tax credit plus increases in accounts payable, accrued expenses and accounts receivable.
Our net working capital as of March 31, 2021 was $26.2 million, consisting of $56.5 million in current accounts receivable balance decreased by $7,374,000assets and $30.4 million in current liabilities. The increase in our working capital from the fiscal 20152021 year-end due to strengthened emphasis on collection efforts in the back half of fiscal 2016. Our current inventory increased from the fiscal 2015 year-end by $2,741,000 due to increases in LED component inventories to support the increase in LED product orders. Our prepaid and other current assets increased by $2,631,000was primarily due to an increaseoverall reduction in unbilled revenueproject volume performed for completed projects. Our accounts payable increasedour largest customer and partially offset by $713,000 on the increase in inventory, increased sourced products and improvements in negotiated vendor payment terms as we transition our supply chain to an increasing numberacquisition of new LED vendors. Our accrued expenses increased from our fiscal 2015 year-end by $1,389,000 due to a loss contingency reserve recorded in the fourth quarter of fiscal 2016.
We generally attempt to maintain at least 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. Because of recent supply chain challenges, we have been making additional incremental inventory purchases. Our accounts receivables, inventory and payables may increase to the extent our revenue and order levels increase.
Indebtedness
Revolving Credit Agreement
Our Credit Agreement provides for a Credit Facilityfive-year $25.0 million revolving credit facility (the “Credit Facility”) that matures on February 6, 2018.December 29, 2025. Borrowings under the Credit Facility are initially limited to $15,000,000 subject to a borrowing base requirement based on eligible receivables, inventory and inventory. Such limit may increase to $20,000,000 subject tocash. As of March 31, 2023, the borrowing base requirement, after July 31, 2016, if we satisfy certain conditions. The Credit Facility includes a $2,000,000 sublimit for the issuancesupported approximately $17.3 million of letters of credit.
The Credit Agreement is secured by a first lien security interest in substantially all of our assets.
Borrowings under the Credit Agreement will require usare permitted in the form of LIBOR or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to maintain, asour 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 endCredit Facility.
The Credit Agreement includes a springing minimum fixed cost coverage ratio of each month, a1.0 to 1.0 when excess availability under the Credit Facility falls below the greater of $3.0 million or 15% of the committed facility. Currently, the required springing minimum fixed cost coverage ratio for the trailing twelve-month period of (i) earnings before interest, taxes, depreciation and amortization, subject to certain adjustments, to (ii) the sum of cash interest expense, certain principal payments on indebtedness and certain dividends, distributions and stock redemptions, equal to at least 1.10 to 1.00. is not required.
The Credit Agreement also contains customary events of default and other customary covenants, including certain restrictions on our ability to incur additional indebtedness,
We did not incur any early termination fees in connection with the termination of March 31, 2016, amounted to approximately $3,719,000. We estimate that, as of March 31, 2016, we were only eligible to borrow an additional $229,000 under the Credit Facility based upon the then current levels of eligible inventory and accounts receivable. We were in compliance with our covenants in thePrior Credit Agreement, asbut did recognize a loss on debt extinguishment of March 31, 2016.
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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 $401,000$0.7 million in fiscal 2016, $2,006,0002023, $0.5 million in fiscal 2015,2022 and $410,000$0.9 million in fiscal 2014. We plan to incur approximately $1,000,000 in capital expenditures in fiscal 2017.2021. Our capital spending plans predominantly consist of investments related to maintenance fleet vehicles, new product development tooling and investments inequipment and information technology systems.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 available capacity under our Credit Facility.
Inflation
We have experienced increases in various input costs including labor, components and transportation in the following table:
| Payments Due By Period | |||||||||||||||||||
| Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | |||||||||||||||
| (in thousands) | |||||||||||||||||||
| Bank debt obligations | $ | 4,282 | $ | 563 | $ | 3,719 | $ | — | $ | — | |||||||||
| Other debt obligations | 140 | 119 | 16 | 5 | |||||||||||||||
| Capital lease obligations | 345 | 64 | 91 | 190 | |||||||||||||||
| Cash interest payments on debt | 316 | 157 | 159 | — | — | ||||||||||||||
| Operating lease obligations | 1,647 | 512 | 1,037 | 98 | — | ||||||||||||||
| Purchase order and capital expenditure commitments(1) | 2,189 | 2,189 | — | — | — | ||||||||||||||
| Total | $ | 8,919 | $ | 3,604 | $ | 5,022 | $ | 293 | $ | — | |||||||||
Critical Accounting Policies and 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
Revenue Recognition.
We recognize revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of theIf there are completed and acceptance provisions, if any, have been met. In certain of our contracts, we provide multiple deliverables. We recordperformance obligations in a single contract, the revenue associated with each element of these arrangements by allocating thecontract’s total contract revenuetransaction price per GAAP is allocated to each elementindividual performance obligation based on their relative standalone selling prices. Inprice. A performance obligation’s standalone selling price is the price at which we would sell such circumstances, wepromised good or service separately to a customer. We use a hierarchyan observable price to determine the selling price to be used for allocating revenue to deliverables: (1) vendor-specific objective evidence, or “VSOE” of selling price, if available, (2) third-party evidence, or “TPE” of selling price if VSOE is not available, and (3) best estimate of the selling price if neither VSOE nor TPE is available. We determine thestand-alone selling price for our lighting and energy management system products, installation and recycling services and for solar renewable product and services using management’s best estimate ofseparate performance obligations or an expected cost-plus margin per GAAP approach when one is not available. The expected cost-plus margin per GAAP approach is used to determine the stand-alone selling price as VSOE or TPE evidence does not exist. We consider external and internal factors including, but not limited to, pricing practices, margin objectives, competition, geographies in which we offer our products and services, internal costs, and the scope and size of projects. Our Power Purchase Agreement (“PPA”) contracts are supply side agreements for the generation of electricity for which we recognize revenue on a monthly basis over the life of the PPA contract, typically in excess of 10 years. For sales of our solar PV systems, we recognize revenue using the percentage-of-completion method by measuring project progress by the percentage of costs incurred to date of the total estimated costs for each contract as materials are installed. Revenue from sales of our solar PV systems is generally recognized over a period of three to 15 months. Additionally, we offer our OTA sales-type financing program under which we finance the customer’s purchase of our energy management systems. Our OTA contracts are sales-type capital leases under GAAP and we record revenue at the net present value of the future payments at the time customer acceptance of the installed and operating system is complete. Our OTA contracts under this sales-type financing are either structured with a fixed term, typically 60 months, and a bargain purchase option at the end of term, or are one year in duration and, at the completion of the initial one-year term, provide for (i) one to four automatic one-year renewals at agreed upon pricing; (ii) an early buyout for cash; or (iii) the return of the equipment at the customer’s expense. The revenue that we are entitled to receive from the sale of our lighting fixtures under our OTA financing program is fixedinstallation performance obligation and is based on average historical installation margin.
Revenue derived from customer contracts which include only performance obligation(s) for the costsale of the lighting fixtures and applicable profit margin. Ourcomponents we manufacture, or source is classified as product revenue from agreements entered into under this programin the Consolidated Statements of Operations. The revenue for these transactions is not dependent upon our customers’ actual energy savings. Upon completionrecorded at the point in time when management believes that the customer obtains control of the installation, we may choose to sell the future cash flows and residual rightsproducts, generally either upon shipment or upon delivery to the equipmentcustomer’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 we refer to as a turnkey project) is allocated between each lighting fixture and the installation performance obligation based on a non-recourse basisrelative standalone selling prices.
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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 unrelated third party finance companyoutput method that calculates the number of light fixtures completely removed and installed as of the measurement date in exchange for cashcomparison to the total number of light fixtures to be removed and future payments.
Revenue from the maintenance offering that includes both the sale of costOrion manufactured or market valuesourced product and include raw materials, workservice is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in processProduct revenue and finished goods. Items are removedService 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 inventory using the first-in, first-out method. WorkEV 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 process inventories are comprisedProduct revenue and Service revenue, respectively, in the Consolidated Statement of raw materials that have been converted into components for final assembly. Inventory amounts include the cost to manufacture the item, such as the cost of raw materials and related freight, labor and other applied overhead costs.Operations.
Inventories. We review our inventory for obsolescence and marketability.obsolescence. If the estimated marketnet realizable value, which is based upon assumptions about future demandthe estimated selling price, less estimated costs of completion, disposal, and market conditions,transportation, falls below cost, then the inventory value is reduced to its marketnet realizable value. During fiscal 2015, we recorded an impairment charge of $12,130,000 to our wireless controls inventory. Our inventory obsolescence reserves at March 31, 20162023 were $2,127,000,$1.8 million, or 11.1%8.9% of gross inventory, and $1,619,000,$2.1 million, or 10.2%9.5% of gross inventory, at March 31, 2015.
Recoverability of Long-Lived Assets.
We evaluate long-lived assets such as property, equipment and definite lived intangible assets, such as patents,As of $1,614,000 relatedDecember 31, 2022, due to a change in our forecast, a triggering event occurred requiring us to evaluate the long-lived assets in its enterprise asset group for impairment. The enterprise asset group includes the corporate assets that support the revenue producing activities of other asset groups. We performed the recoverability test for the asset group by comparing its carrying value to the write-down of our Manitowoc
Our impairment loss calculations require that we apply judgment in identifying asset groups, estimating future cash flows, anddetermining asset fair values, includingand estimating asset’s useful lives of the assets.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 additionalfuture 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 annually48
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 performed a quantitative test on indefinite lived intangible assets related to our Harris tradename and determined that its fair value exceeded its carrying value and was not impaired. This test was performedqualitative assessment in conjunction with our annual impairment test of our indefinite lived intangible assets and goodwill after determiningas of January 1, 2023. These qualitative assessments considered our operating results for the goodwillfirst nine months of fiscal 2023 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2023 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was impaired.
Stock-Based Compensation.
WeAccounting 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. ForPrior to fiscal 2014,2021, we reversed $2,315,000 of our valuation reserve to offset deferred tax liabilities created by the acquisition of Harris. For fiscal 2015 and fiscal 2016, we increased ourrecorded a full valuation allowance against our net federal and our net state deferred tax assets due to our cumulative three yearthree-year taxable losses. During fiscal 2021, we reduced our valuation allowance on the basis of our reassessment of the amount of our deferred tax assets that are more likely than not to be realized. During fiscal 2023, we reestablished 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 carryforwards,carry-forwards, but we do not believe the ownership change affects the use of the full amount of the net operating loss carryforwards.carry-forwards. As a result, our ability to use our net operating loss carryforwardscarry-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, 2016,2023, we had net operating loss carryforwards of approximately $55,807,000$71.4 million for federal tax purposes, and $42,181,000$66.1 million for state tax purposes, and $0.8 million for foreign tax purposes. Included in theseAs of the fiscal 2018, this amount is inclusive of the entire loss carryforwards were $3,586,000 for federal and $3,941,000 for state tax expenses that were associated withcarryforward on the exercise of non-qualified stock options. The benefit from our net operating losses created from these compensation expenses has not yet been recognized in our financial statements and will be accounted for in our shareholders’ equity as a credit to additional paid-in-capital as the deduction reduces our income taxes payable. We first recognize tax benefits from current period stock option expenses against current period income. The remaining current period income is offset by net operating losses under the tax law ordering approach. Under this approach, we will utilize the net operating losses from stock option expenses last.
We also had federal tax credit carryforwards of $1,475,000$1.3 million and state tax credit carryforwards of $769,000,$0.3 million, which are fully reserved for as part of our valuation allowance. BothOf these tax attributes, $19.7 million of the federal and state net operating lossesloss carryforwards are not subject to time restrictions on use but may only be used to offset 80% of future adjusted taxable income. The $120.2 million net operating loss and tax credit carryforwards will begin to expire in varying amounts between 20202023 and 2036. 2033.
49
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. Due to the existence of net operating loss and credit carryforwards, all years since 2002 are open to examination by tax authorities.
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)("FASB") Accounting Standards Codification (ASC)("ASC") 740,
Recent Accounting Pronouncements
See Note 2 —Summary3 – 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 Qualitative 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.
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.
As of March 31, 2016, $3,719,000 of our $4,767,0002023, we had $10 million of outstanding debt was atwith floating interest rates. An increase of 1.0% in the prime rate would result in an increase in our interest expense of approximately $37,200 per year.
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 2023, we have experienced commodity price increases; however, as of the date of this report, we are not able to predict the future impact of on this risk. A hypothetical50
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Number | |
| (BDO USA, LLP; Milwaukee, WI; PCAOB ID#243) | 52 |
54 | |
55 | |
56 | |
57 | |
58 | |
51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors and Stockholders
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, 20162023 and 2015 and2022, the related consolidated statements of operations, and comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2016. In connection with our audits of2023, and the related notes (collectively referred to as the “consolidated financial statements, we have also audited the financial statement schedule II, Valuation and Qualifying Accounts for each of the three years in the period ended March 31, 2016. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
Basis for Opinion
These consolidated financial statements taken as a whole, present fairly, in all material respects,are the information set forth therein.
We conducted our auditaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effectivethe 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 was maintained in all material respects. Our audit included obtainingreporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting assessingbut not for the riskpurpose 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 material weakness exists,test basis, evidence regarding the amounts and testing anddisclosures in the consolidated financial statements. Our audits also included evaluating the designaccounting principles used and operating effectivenesssignificant estimates made by management, as well as evaluating the overall presentation of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.consolidated financial statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a process designed to provide reasonable assurance regardingmatter arising from the reliabilitycurrent period audit of financial reporting and the preparation ofconsolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertainwas communicated or required to be communicated to the maintenanceaudit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of records that,critical audit matter does not alter in reasonable detail, accuratelyany way our opinion on the consolidated financial statements, taken as a whole, and fairly reflectwe are not, by communicating the transactionscritical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it
52
relates.
Realizability of Deferred Tax Assets
As described in Note 13 to the Company’s consolidated financial statements, during the year ended March 31, 2023, the Company recorded approximately $17.8 million in valuation allowance on a significant portion of its deferred tax assets. In evaluating the realizability of deferred tax assets, the available positive and dispositionsnegative evidence, including projected future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance are considered.
We identified the Company’s evaluation of the realizability of deferred tax assets as a critical audit matter. Significant management judgments are required in evaluating and weighing the collective positive and negative evidence that are used to assess the realizability of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,deferred tax assets, which include various assumptions surrounding projected future taxable (loss) income. Auditing these elements involved complex and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
The primary procedures we performed to address this critical audit matter included:
/s/BDO USA, LLP
We have served as the Company's auditor since 2012.
Milwaukee, Wisconsin
June
53
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
|
| March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 15,992 |
|
| $ | 14,466 |
|
Accounts receivable, net |
|
| 13,728 |
|
|
| 11,899 |
|
Revenue earned but not billed |
|
| 1,320 |
|
|
| 2,421 |
|
Inventories, net |
|
| 18,205 |
|
|
| 19,832 |
|
Prepaid expenses and other current assets |
|
| 1,116 |
|
|
| 2,631 |
|
Total current assets |
|
| 50,361 |
|
|
| 51,249 |
|
Property and equipment, net |
|
| 10,470 |
|
|
| 11,466 |
|
Goodwill |
|
| 1,484 |
|
|
| 350 |
|
Other intangible assets, net |
|
| 6,004 |
|
|
| 2,404 |
|
Deferred tax assets |
|
| — |
|
|
| 17,805 |
|
Other long-term assets |
|
| 3,260 |
|
|
| 3,543 |
|
Total assets |
| $ | 71,579 |
|
| $ | 86,817 |
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
| ||
Accounts payable |
| $ | 13,405 |
|
| $ | 9,855 |
|
Accrued expenses and other |
|
| 10,552 |
|
|
| 8,427 |
|
Deferred revenue, current |
|
| 480 |
|
|
| 76 |
|
Current maturities of long-term debt |
|
| 17 |
|
|
| 16 |
|
Total current liabilities |
|
| 24,454 |
|
|
| 18,374 |
|
Revolving credit facility |
|
| 10,000 |
|
|
| — |
|
Long-term debt, less current maturities |
|
| 3 |
|
|
| 19 |
|
Deferred revenue, long-term |
|
| 489 |
|
|
| 564 |
|
Other long-term liabilities |
|
| 3,384 |
|
|
| 2,760 |
|
Total liabilities |
|
| 38,330 |
|
|
| 21,717 |
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
| ||
Shareholders’ equity: |
|
|
|
|
|
| ||
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 shares |
|
| — |
|
|
| — |
|
Common stock, no par value: Shares authorized: 200,000,000 at |
|
| — |
|
|
| — |
|
Additional paid-in capital |
|
| 160,907 |
|
|
| 158,419 |
|
Treasury stock: 9,471,684 and 9,473,037 common shares at |
|
| (36,237 | ) |
|
| (36,239 | ) |
Retained deficit |
|
| (91,421 | ) |
|
| (57,080 | ) |
Total shareholders’ equity |
|
| 33,249 |
|
|
| 65,100 |
|
Total liabilities and shareholders’ equity |
| $ | 71,579 |
|
| $ | 86,817 |
|
54
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
| March 31, | |||||||
| 2016 | 2015 | ||||||
| Assets | |||||||
| Cash and cash equivalents | $ | 15,542 | $ | 20,002 | |||
| Accounts receivable, net | 10,889 | 18,263 | |||||
| Inventories, net | 17,024 | 14,283 | |||||
| Deferred contract costs | 37 | 90 | |||||
| Prepaid expenses and other current assets | 5,038 | 2,407 | |||||
| Total current assets | 48,530 | 55,045 | |||||
| Property and equipment, net | 17,004 | 21,223 | |||||
| Goodwill | — | 4,409 | |||||
| Other intangible assets, net | 5,048 | 6,335 | |||||
| Long-term accounts receivable | 108 | 426 | |||||
| Other long-term assets | 185 | 367 | |||||
| Total assets | $ | 70,875 | $ | 87,805 | |||
| Liabilities and Shareholders’ Equity | |||||||
| Accounts payable | $ | 11,716 | $ | 11,003 | |||
| Accrued expenses and other | 6,586 | 5,197 | |||||
| Deferred revenue, current | 243 | 287 | |||||
| Current maturities of long-term debt | 746 | 1,832 | |||||
| Total current liabilities | 19,291 | 18,319 | |||||
| Revolving credit facility | 3,719 | 2,500 | |||||
| Long-term debt, less current maturities | 302 | 722 | |||||
| Deferred revenue, long-term | 1,022 | 1,231 | |||||
| Other long-term liabilities | 558 | 522 | |||||
| Total liabilities | 24,892 | 23,294 | |||||
| Commitments and contingencies | |||||||
| Shareholders’ equity: | |||||||
| Preferred stock, $0.01 par value: Shares authorized: 30,000,000 shares at March 31, 2016 and 2015; no shares issued and outstanding at March 31, 2016 and 2015 | — | — | |||||
| Common stock, no par value: Shares authorized: 200,000,000 at March 31, 2016 and 2015; shares issued: 37,192,559 and 36,837,864 at March 31, 2016 and 2015; shares outstanding: 27,767,138 and 27,421,533 at March 31, 2016 and 2015 | — | — | |||||
| Additional paid-in capital | 152,140 | 150,516 | |||||
| Treasury stock: 9,425,421 and 9,416,331 common shares at March 31, 2016 and 2015 | (36,075 | ) | (36,049 | ) | |||
| Shareholder notes receivable | (4 | ) | (4 | ) | |||
| Retained deficit | (70,078 | ) | (49,952 | ) | |||
| Total shareholders’ equity | 45,983 | 64,511 | |||||
| Total liabilities and shareholders’ equity | $ | 70,875 | $ | 87,805 | |||
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Product revenue |
| $ | 57,210 |
|
| $ | 91,889 |
|
| $ | 87,664 |
|
Service revenue |
|
| 20,173 |
|
|
| 32,494 |
|
|
| 29,176 |
|
Total revenue |
|
| 77,383 |
|
|
| 124,383 |
|
|
| 116,840 |
|
Cost of product revenue |
|
| 42,979 |
|
|
| 65,249 |
|
|
| 63,233 |
|
Cost of service revenue |
|
| 16,893 |
|
|
| 25,222 |
|
|
| 23,483 |
|
Total cost of revenue |
|
| 59,872 |
|
|
| 90,471 |
|
|
| 86,716 |
|
Gross profit |
|
| 17,511 |
|
|
| 33,912 |
|
|
| 30,124 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
| |||
General and administrative |
|
| 19,487 |
|
|
| 11,680 |
|
|
| 11,262 |
|
Acquisition related costs |
|
| 765 |
|
|
| 512 |
|
|
| — |
|
Sales and marketing |
|
| 11,392 |
|
|
| 11,628 |
|
|
| 10,341 |
|
Research and development |
|
| 1,852 |
|
|
| 1,701 |
|
|
| 1,685 |
|
Total operating expenses |
|
| 33,496 |
|
|
| 25,521 |
|
|
| 23,288 |
|
Income from operations |
|
| (15,985 | ) |
|
| 8,391 |
|
|
| 6,836 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
| |||
Other income |
|
| — |
|
|
| 1 |
|
|
| 56 |
|
Interest expense |
|
| (339 | ) |
|
| (80 | ) |
|
| (127 | ) |
Amortization of debt issue costs |
|
| (73 | ) |
|
| (62 | ) |
|
| (157 | ) |
Loss on debt extinguishment |
|
| — |
|
|
| — |
|
|
| (90 | ) |
Interest income |
|
| 34 |
|
|
| — |
|
|
| - |
|
Total other expense |
|
| (378 | ) |
|
| (141 | ) |
|
| (318 | ) |
Income before income tax |
|
| (16,363 | ) |
|
| 8,250 |
|
|
| 6,518 |
|
Income tax expense (benefit) |
|
| 17,978 |
|
|
| 2,159 |
|
|
| (19,616 | ) |
Net (loss) income |
| $ | (34,341 | ) |
| $ | 6,091 |
|
| $ | 26,134 |
|
Basic net (loss) income per share attributable to common shareholders |
| $ | (1.08 | ) |
| $ | 0.20 |
|
| $ | 0.85 |
|
Weighted-average common shares outstanding |
|
| 31,703,712 |
|
|
| 31,018,356 |
|
|
| 30,634,553 |
|
Diluted net (loss) income per share |
| $ | (1.08 | ) |
| $ | 0.19 |
|
| $ | 0.83 |
|
Weighted-average common shares and share equivalents |
|
| 31,703,712 |
|
|
| 31,294,573 |
|
|
| 31,303,727 |
|
55
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
(in thousands, except share and per share amounts)
| Fiscal Year Ended March 31, | |||||||||||
| 2016 | 2015 | 2014 | |||||||||
| Product revenue | $ | 64,897 | $ | 65,881 | $ | 71,954 | |||||
| Service revenue | 2,745 | 6,329 | 16,669 | ||||||||
| Total revenue | 67,642 | 72,210 | 88,623 | ||||||||
| Cost of product revenue | 49,630 | 68,388 | 54,423 | ||||||||
| Cost of service revenue | 2,015 | 4,959 | 11,220 | ||||||||
| Total cost of revenue | 51,645 | 73,347 | 65,643 | ||||||||
| Gross profit (loss) | 15,997 | (1,137 | ) | 22,980 | |||||||
| Operating expenses: | |||||||||||
| General and administrative | 16,884 | 14,908 | 14,951 | ||||||||
| Goodwill and long lived asset impairment | 6,023 | — | — | ||||||||
| Acquisition and integration related expenses | — | 47 | 819 | ||||||||
| Sales and marketing | 11,343 | 13,290 | 13,527 | ||||||||
| Research and development | 1,668 | 2,554 | 2,026 | ||||||||
| Total operating expenses | 35,918 | 30,799 | 31,323 | ||||||||
| Loss from operations | (19,921 | ) | (31,936 | ) | (8,343 | ) | |||||
| Other income (expense): | |||||||||||
| Interest expense | (297 | ) | (376 | ) | (481 | ) | |||||
| Interest income | 128 | 300 | 567 | ||||||||
| Total other income (expense) | (169 | ) | (76 | ) | 86 | ||||||
| Loss before income tax | (20,090 | ) | (32,012 | ) | (8,257 | ) | |||||
| Income tax expense (benefit) | 36 | 49 | (2,058 | ) | |||||||
| Net loss and comprehensive loss | $ | (20,126 | ) | $ | (32,061 | ) | $ | (6,199 | ) | ||
| Basic net loss per share attributable to common shareholders | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | ||
| Weighted-average common shares outstanding | 27,627,693 | 22,353,419 | 20,987,964 | ||||||||
| Diluted net loss per share | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | ||
| Weighted-average common shares and share equivalents outstanding | 27,627,693 | 22,353,419 | 20,987,964 | ||||||||
|
| Shareholders’ Equity |
| |||||||||||||||||
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Shares |
|
| Additional |
|
| Treasury |
|
| Retained |
|
| Total |
| |||||
Balance, March 31, 2020 |
|
| 30,265,997 |
|
| $ | 156,503 |
|
| $ | (36,163 | ) |
| $ | (89,305 | ) |
| $ | 31,035 |
|
Exercise of stock options for cash |
|
| 99,000 |
|
|
| 229 |
|
|
| — |
|
|
| — |
|
|
| 229 |
|
Shares issued under Employee Stock Purchase |
|
| 1,146 |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| 7 |
|
Stock-based compensation |
|
| 450,481 |
|
|
| 753 |
|
|
| — |
|
|
| — |
|
|
| 753 |
|
Employee tax withholdings on stock-based |
|
| (11,324 | ) |
|
| — |
|
|
| (84 | ) |
|
| — |
|
|
| (84 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 26,134 |
|
|
| 26,134 |
|
Balance, March 31, 2021 |
|
| 30,805,300 |
|
|
| 157,485 |
|
|
| (36,240 | ) |
|
| (63,171 | ) |
|
| 58,074 |
|
Exercise of stock options for cash |
|
| 31,845 |
|
|
| 121 |
|
|
| — |
|
|
| — |
|
|
| 121 |
|
Shares issued under Employee Stock Purchase |
|
| 1,617 |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| 6 |
|
Stock-based compensation |
|
| 260,014 |
|
|
| 813 |
|
|
|
|
|
|
|
|
| 813 |
| ||
Employee tax withholdings on stock-based |
|
| (904 | ) |
|
| — |
|
|
| (5 | ) |
|
| — |
|
|
| (5 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,091 |
|
|
| 6,091 |
|
Balance, March 31, 2022 |
|
| 31,097,872 |
|
|
| 158,419 |
|
|
| (36,239 | ) |
|
| (57,080 | ) |
|
| 65,100 |
|
Issuance of common stock for acquisition |
|
| 620,067 |
|
|
| 800 |
|
|
| — |
|
|
| — |
|
|
| 800 |
|
Issuance of stock and shares for services |
|
| 12,848 |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
Exercise of stock options for cash |
|
| 26,646 |
|
|
| 54 |
|
|
| — |
|
|
| — |
|
|
| 54 |
|
Shares issued under Employee Stock Purchase |
|
| 2,274 |
|
|
| — |
|
|
| 4 |
|
|
|
|
|
| 4 |
| |
Stock-based compensation |
|
| 536,622 |
|
|
| 1,612 |
|
|
| — |
|
|
| — |
|
|
| 1,612 |
|
Employee tax withholdings on stock-based |
|
| (921 | ) |
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Net loss |
|
|
|
|
| — |
|
|
| — |
|
|
| (34,341 | ) |
|
| (34,341 | ) | |
Balance, March 31, 2023 |
|
| 32,295,408 |
|
| $ | 160,907 |
|
| $ | (36,237 | ) |
| $ | (91,421 | ) |
| $ | 33,249 |
|
56
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share amounts)
| Shareholders’ Equity | ||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||
| Shares | Additional Paid-in Capital | Treasury Stock | Shareholder Notes Receivable | Retained Earnings (Deficit) | Total Shareholders’ Equity | |||||||||||||||||
| Balance, March 31, 2013 | 20,162,397 | $ | 128,104 | $ | (38,378 | ) | $ | (265 | ) | $ | (11,692 | ) | $ | 77,769 | ||||||||
| Issuance of stock and warrants for services | 33,641 | 129 | — | — | — | 129 | ||||||||||||||||
| Stock activity for acquisition | 940,940 | — | 2,382 | — | — | 2,382 | ||||||||||||||||
| Exercise of stock options and warrants for cash | 446,059 | 1,152 | — | — | — | 1,152 | ||||||||||||||||
| Shares issued under Employee Stock Purchase Plan | 2,373 | (4 | ) | 10 | — | — | 6 | |||||||||||||||
| Tax benefit from exercise of stock options | — | 13 | — | — | — | 13 | ||||||||||||||||
| Collection of shareholder notes receivable | — | — | — | 215 | — | 215 | ||||||||||||||||
| Stock-based compensation | 23,084 | 1,593 | — | — | — | 1,593 | ||||||||||||||||
| Treasury stock purchase | (20,168 | ) | — | (48 | ) | — | — | (48 | ) | |||||||||||||
| Net loss | — | — | — | — | (6,199 | ) | (6,199 | ) | ||||||||||||||
| Balance, March 31, 2014 | 21,588,326 | $ | 130,987 | $ | (36,034 | ) | $ | (50 | ) | $ | (17,891 | ) | $ | 77,012 | ||||||||
| Issuance of common stock for cash, net of issuance costs | 5,462,500 | 17,465 | — | — | — | 17,465 | ||||||||||||||||
| Issuance of stock and warrants for services | 27,931 | 131 | — | — | — | 131 | ||||||||||||||||
| Exercise of stock options and warrants for cash | 178,387 | 430 | — | — | — | 430 | ||||||||||||||||
| Shares issued under Employee Stock Purchase Plan | 1,486 | 4 | 7 | — | — | 11 | ||||||||||||||||
| Collection of shareholder notes receivable | — | — | — | 46 | — | 46 | ||||||||||||||||
| Stock-based compensation | 170,055 | 1,499 | — | — | — | 1,499 | ||||||||||||||||
| Employee tax withholdings on stock-based compensation | (7,152 | ) | — | (22 | ) | — | — | (22 | ) | |||||||||||||
| Net loss | — | — | — | — | (32,061 | ) | (32,061 | ) | ||||||||||||||
| Balance, March 31, 2015 | 27,421,533 | $ | 150,516 | $ | (36,049 | ) | $ | (4 | ) | $ | (49,952 | ) | $ | 64,511 | ||||||||
| Issuance of stock and warrants for services | 35,290 | 66 | — | — | — | 66 | ||||||||||||||||
| Exercise of stock options and warrants for cash | 46,410 | 97 | — | — | — | 97 | ||||||||||||||||
| Shares issued under Employee Stock Purchase Plan | 3,925 | (1 | ) | 8 | — | — | 7 | |||||||||||||||
| Collection of shareholder notes receivable | — | — | — | — | — | — | ||||||||||||||||
| Stock-based compensation | 270,303 | 1,462 | — | — | — | 1,462 | ||||||||||||||||
| Employee tax withholdings on stock-based compensation | (10,323 | ) | — | (34 | ) | — | — | (34 | ) | |||||||||||||
| Net loss | — | — | — | — | (20,126 | ) | (20,126 | ) | ||||||||||||||
| Balance, March 31, 2016 | 27,767,138 | $ | 152,140 | $ | (36,075 | ) | $ | (4 | ) | $ | (70,078 | ) | $ | 45,983 | ||||||||
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Operating activities |
|
|
|
|
|
|
|
|
| |||
Net (loss) income |
| $ | (34,341 | ) |
| $ | 6,091 |
|
| $ | 26,134 |
|
Adjustments to reconcile net (loss) income to net cash used in |
|
|
|
|
|
|
|
|
| |||
operating activities: |
|
|
|
|
|
|
|
|
| |||
Depreciation |
|
| 1,369 |
|
|
| 1,327 |
|
|
| 1,190 |
|
Amortization of intangible assets |
|
| 653 |
|
|
| 227 |
|
|
| 290 |
|
Stock-based compensation |
|
| 1,612 |
|
|
| 813 |
|
|
| 753 |
|
Amortization of debt issue costs |
|
| 73 |
|
|
| 62 |
|
|
| 157 |
|
Loss on debt extinguishment |
|
| — |
|
|
| — |
|
|
| 90 |
|
Deferred income tax benefit |
|
| 17,881 |
|
|
| 1,980 |
|
|
| (19,860 | ) |
Loss (gain) on sale of property and equipment |
|
| 27 |
|
|
| (77 | ) |
|
| 1 |
|
Provision for inventory reserves |
|
| 628 |
|
|
| 623 |
|
|
| 275 |
|
Provision for bad debts |
|
| 65 |
|
|
| 10 |
|
|
| — |
|
Other |
|
| 96 |
|
|
| 26 |
|
|
| 106 |
|
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|
| |||
Accounts receivable |
|
| (586 | ) |
|
| 4,407 |
|
|
| (2,384 | ) |
Revenue earned but not billed |
|
| 1,426 |
|
|
| 851 |
|
|
| (2,370 | ) |
Inventories |
|
| 1,879 |
|
|
| (420 | ) |
|
| (5,322 | ) |
Prepaid expenses and other assets |
|
| 2,017 |
|
|
| (888 | ) |
|
| (396 | ) |
Accounts payable |
|
| 2,372 |
|
|
| (8,125 | ) |
|
| (2,637 | ) |
Accrued expenses and other liabilities |
|
| 2,209 |
|
|
| (6,933 | ) |
|
| 5,797 |
|
Deferred revenue, current and long-term |
|
| 329 |
|
|
| (87 | ) |
|
| (95 | ) |
Net cash (used in) provided by operating activities |
|
| (2,291 | ) |
|
| (113 | ) |
|
| 1,729 |
|
Investing activities |
|
|
|
|
|
|
|
|
| |||
Cash to fund acquisitions, net of cash received |
|
| (5,600 | ) |
|
| (4,012 | ) |
|
| — |
|
Cash paid for investment |
|
| — |
|
|
| (500 | ) |
|
| — |
|
Purchase of property and equipment |
|
| (586 | ) |
|
| (518 | ) |
|
| (902 | ) |
Additions to patents and licenses |
|
| (9 | ) |
|
| (10 | ) |
|
| (51 | ) |
Proceeds from sales of property, plant and equipment |
|
| — |
|
|
| 122 |
|
|
| 7 |
|
Net cash used in investing activities |
|
| (6,195 | ) |
|
| (4,918 | ) |
|
| (946 | ) |
Financing activities |
|
|
|
|
|
|
|
|
| |||
Payment of long-term debt |
|
| (15 | ) |
|
| (14 | ) |
|
| (35 | ) |
Proceeds from revolving credit facility |
|
| 10,000 |
|
|
| — |
|
|
| 8,000 |
|
Payment of revolving credit facility |
|
| — |
|
|
| — |
|
|
| (18,013 | ) |
Payments to settle employee tax withholdings on stock-based |
|
| (2 | ) |
|
| (5 | ) |
|
| (84 | ) |
Debt issue costs |
|
| (29 | ) |
|
| (4 | ) |
|
| (245 | ) |
Proceeds from employee equity exercises |
|
| 58 |
|
|
| 127 |
|
|
| 236 |
|
Net cash provided by (used in) financing activities |
|
| 10,012 |
|
|
| 104 |
|
|
| (10,141 | ) |
Net increase (decrease) in cash and cash equivalents |
|
| 1,526 |
|
|
| (4,927 | ) |
|
| (9,358 | ) |
Cash and cash equivalents at beginning of period |
|
| 14,466 |
|
|
| 19,393 |
|
|
| 28,751 |
|
Cash and cash equivalents at end of period |
| $ | 15,992 |
|
| $ | 14,466 |
|
| $ | 19,393 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
| |||
Cash paid for interest |
| $ | (346 | ) |
| $ | (68 | ) |
| $ | (118 | ) |
Cash paid for income taxes |
| $ | (87 | ) |
| $ | (203 | ) |
| $ | (175 | ) |
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
| |||
Operating lease assets obtained in exchange for new operating lease liabilities |
| $ | — |
|
| $ | — |
|
| $ | 355 |
|
Issuance of common stock in connection with acquisition |
| $ | 800 |
|
| $ | — |
|
| $ | — |
|
57
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
| Fiscal Year Ended March 31, | |||||||||||
| 2016 | 2015 | 2014 | |||||||||
| Operating activities | |||||||||||
| Net loss | $ | (20,126 | ) | $ | (32,061 | ) | $ | (6,199 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) | |||||||||||
| operating activities: | |||||||||||
| Depreciation | 2,950 | 2,853 | 3,798 | ||||||||
| Amortization | 1,215 | 1,327 | 704 | ||||||||
| Stock-based compensation expense | 1,462 | 1,499 | 1,593 | ||||||||
| Accretion of fair value on contingent consideration | — | — | 11 | ||||||||
| Deferred income tax (benefit) expense | — | — | (2,123 | ) | |||||||
| Impairment on assets | 6,023 | 12,130 | — | ||||||||
| Loss (gain) on sale of property and equipment | 40 | (21 | ) | 1,733 | |||||||
| Provision for inventory reserves | 509 | 361 | 1,995 | ||||||||
| Provision for bad debts | 575 | 285 | 174 | ||||||||
| Other | 258 | 265 | 165 | ||||||||
| Changes in operating assets and liabilities, net of changes from acquisitions: | |||||||||||
| Accounts receivable, current and long-term | 7,116 | (1,909 | ) | 8,395 | |||||||
| Inventories, current and long-term | (3,249 | ) | (2,356 | ) | 3,962 | ||||||
| Deferred contract costs | 137 | 651 | 1,376 | ||||||||
| Prepaid expenses and other current assets | (2,645 | ) | 1,261 | (1,072 | ) | ||||||
| Accounts payable | 713 | 2,475 | (762 | ) | |||||||
| Accrued expenses and other | 1,803 | 838 | (1,575 | ) | |||||||
| Deferred revenue, current and long-term | (254 | ) | (410 | ) | (2,274 | ) | |||||
| Net cash (used in) provided by operating activities | (3,473 | ) | (12,812 | ) | 9,901 | ||||||
| Investing activities | |||||||||||
| Cash paid for acquisition, net of cash acquired | — | — | (4,992 | ) | |||||||
| Purchase of property and equipment | (401 | ) | (2,006 | ) | (410 | ) | |||||
| Purchase of short-term investments | — | (2 | ) | (4 | ) | ||||||
| Sale of short-term investments | — | 472 | 555 | ||||||||
| Additions to patents and licenses | (6 | ) | (234 | ) | (43 | ) | |||||
| Proceeds from sales of property, plant and equipment | 35 | 1,040 | 80 | ||||||||
| Net cash used in investing activities | (372 | ) | (730 | ) | (4,814 | ) | |||||
| Financing activities | |||||||||||
| Payment of long-term debt | (1,901 | ) | (4,494 | ) | (3,229 | ) | |||||
| Proceeds from revolving credit facility | 65,767 | 2,500 | — | ||||||||
| Repayments of revolving credit facility | (64,549 | ) | — | — | |||||||
| Proceeds from long-term debt | — | 446 | — | ||||||||
| Proceeds from repayment of shareholder notes | — | 46 | 215 | ||||||||
| Proceeds from issuance of common stock, net of issuance costs | (2 | ) | 17,465 | — | |||||||
| Payments to settle employee tax withholdings on stock-based compensation | (34 | ) | (22 | ) | — | ||||||
| Excess tax benefits from stock-based compensation | — | — | 13 | ||||||||
| Deferred financing costs | — | (406 | ) | (19 | ) | ||||||
| Net proceeds from employee equity exercises | 104 | 441 | 1,125 | ||||||||
| Net cash (used in) provided by financing activities | (615 | ) | 15,976 | (1,895 | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | (4,460 | ) | 2,434 | 3,192 | |||||||
| Cash and cash equivalents at beginning of period | 20,002 | 17,568 | 14,376 | ||||||||
| Cash and cash equivalents at end of period | $ | 15,542 | $ | 20,002 | $ | 17,568 | |||||
| Supplemental cash flow information: | |||||||||||
| Cash paid for interest | $ | 191 | $ | 287 | $ | 423 | |||||
| Cash paid for income taxes | $ | 18 | $ | 42 | $ | 22 | |||||
| Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
| Vendor financed capital lease addition | $ | 396 | $ | — | $ | — | |||||
| Shares returned to treasury in satisfaction of receivable | $ | — | $ | — | $ | 48 | |||||
| Acquisition related contingent consideration liability | $ | — | $ | — | $ | 612 | |||||
| Acquisition financed through debt | $ | — | $ | — | $ | 3,123 | |||||
| Common stock issued for acquisition | $ | — | $ | — | $ | 2,416 | |||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF BUSINESS
Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion is a developer, manufacturerprovides light emitting diode lighting systems, wireless Internet of Things enabled control solutions, project engineering, energy project management design, maintenance services and seller of lighting and energy management systemsturnkey electric vehicle charging station 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; Chicago, Illinois;Florida, Lawrence, Massachusetts and Houston, Texas.Pewaukee, Wisconsin.
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 significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles, or 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 significant management estimates include revenue recognition, inventory obsolescence, and bad debt reserves,allowance for doubtful accounts, accruals for warranty expenses and loss contingencies, 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 long-term debt. The carrying amountsIn addition, other long-term assets includes an equity investment of Orion’s financial instruments approximate their respective fair values due to the relatively short-term nature$0.5 million that is carried at cost less impairment, of these instruments, or in the casewhich there has been no impairment as of long-term debt and revolving credit facility, because of the interest rates currently available to Orion for similar obligations.March 31, 2023. 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’smanagement's best estimate of what market participants would use in valuing the asset or liability at the measurement date.
58
The carrying amounts of Orion’s accounts receivablefinancial instruments approximate their respective fair values due to the relatively short-term nature of these instruments. Long-term debt and revolving credit facility are due from companiesclassified as Level 2 in the commercial, industrialfair value hierarchy because of the interest rates currently available to Orion for similar obligations.
Allowance for Doubtful Accounts
Orion performs ongoing evaluations of its customers 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 30-60 days. Accounts receivable are stated at the amountcontinuously monitors collections and payments. Orion expects to collect from outstanding balances. Orion provides for probable uncollectible amounts through a charge to earnings
| 2016 | 2015 | ||||||
| Accounts receivable, gross | $ | 11,394 | $ | 18,721 | |||
| Allowance for doubtful accounts | (505 | ) | (458 | ) | |||
| Accounts receivable, net | $ | 10,889 | $ | 18,263 | |||
| Not Past Due | 1-90 days past due | Greater than 90 days past due | Total past due | Total sales-type leases | |||||||||||||||
| Lease balances included in consolidated accounts receivable—current | $ | 294 | $ | 4 | $ | 10 | $ | 14 | $ | 308 | |||||||||
| Lease balances included in consolidated accounts receivable—long-term | 101 | — | — | — | 101 | ||||||||||||||
| Total gross sales-type leases | 395 | 4 | 10 | 14 | 409 | ||||||||||||||
| Allowance | — | — | (9 | ) | (9 | ) | (9 | ) | |||||||||||
| Total net sales-type leases | $ | 395 | $ | 4 | $ | 1 | $ | 5 | $ | 400 | |||||||||
| Not Past Due | 1-90 days past due | Greater than 90 days past due | Total past due | Total sales-type leases | |||||||||||||||
| Lease balances included in consolidated accounts receivable—current | $ | 1,346 | $ | 47 | $ | 186 | $ | 233 | $ | 1,579 | |||||||||
| Lease balances included in consolidated accounts receivable—long-term | 398 | — | — | — | 398 | ||||||||||||||
| Total gross sales-type leases | 1,744 | 47 | 186 | 233 | 1,977 | ||||||||||||||
| Allowance | (12 | ) | (3 | ) | (141 | ) | (144 | ) | (156 | ) | |||||||||
| Total net sales-type leases | $ | 1,732 | $ | 44 | $ | 45 | $ | 89 | $ | 1,821 | |||||||||
| Balance at beginning of period | Provisions charged to expense | Write offs and other | Balance at end of period | |||||||||||||
| March 31, | (in Thousands) | |||||||||||||||
| 2016 | Allowance for Doubtful Accounts on financing receivables | $ | 156 | $ | 30 | $ | 177 | $ | 9 | |||||||
| 2015 | Allowance for Doubtful Accounts on financing receivables | $ | 94 | $ | 62 | $ | — | $ | 156 | |||||||
| 2014 | Allowance for Doubtful Accounts on financing receivables | $ | 74 | $ | 96 | $ | 76 | $ | 94 | |||||||
| Cost | Obsolescence Reserve | Net | |||||||||
| As of March 31, 2016 | |||||||||||
| Raw materials and components | $ | 10,556 | $ | (1,052 | ) | $ | 9,504 | ||||
| Work in process | 2,045 | (119 | ) | 1,926 | |||||||
| Finished goods | 6,550 | (956 | ) | 5,594 | |||||||
| Total | $ | 19,151 | $ | (2,127 | ) | $ | 17,024 | ||||
| As of March 31, 2015 | |||||||||||
| Raw materials and components | $ | 9,150 | $ | (677 | ) | $ | 8,473 | ||||
| Work in process | 1,683 | (94 | ) | 1,589 | |||||||
| Finished goods | 5,069 | (848 | ) | 4,221 | |||||||
| Total | $ | 15,902 | $ | (1,619 | ) | $ | 14,283 | ||||
| March 31, 2016 | March 31, 2015 | ||||||
| Unbilled accounts receivable | $ | 4,307 | $ | 1,710 | |||
| Other prepaid expenses | 731 | 697 | |||||
| Total | $ | 5,038 | $ | 2,407 | |||
| March 31, 2016 | March 31, 2015 | ||||||
| Land and land improvements | $ | 421 | $ | 1,511 | |||
| Buildings and building improvements | 11,849 | 14,441 | |||||
| Furniture, fixtures and office equipment | 7,233 | 8,600 | |||||
| Leasehold improvements | 148 | 148 | |||||
| Equipment leased to customers under Power Purchase Agreements | 4,997 | 4,997 | |||||
| Plant equipment | 10,805 | 11,084 | |||||
| Construction in progress | 128 | 379 | |||||
| 35,581 | 41,160 | ||||||
| Less: accumulated depreciation and amortization | (18,577 | ) | (19,937 | ) | |||
| Net property and equipment | $ | 17,004 | $ | 21,223 | |||
| March 31, 2016 | March 31, 2015 | ||||||
| Equipment | $ | 408 | $ | — | |||
| Less: accumulated depreciation and amortization | (65 | ) | — | ||||
| Net Equipment | $ | 343 | $ | — | |||
| Balance at March 31, 2014 | $ | 4,409 | |
| Impairments | — | ||
| Balance at March 31, 2015 | 4,409 | ||
| Impairments | (4,409 | ) | |
| Balance at March 31, 2016 | $ | — | |
| March 31, 2016 | March 31, 2015 | ||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||
| Patents | $ | 2,377 | $ | (1,053 | ) | $ | 1,324 | $ | 2,447 | $ | (906 | ) | $ | 1,541 | |||||||||
| Licenses | 58 | (58 | ) | — | 58 | (58 | ) | — | |||||||||||||||
| Trade name and trademarks | 1,956 | — | 1,956 | 1,958 | — | 1,958 | |||||||||||||||||
| Customer relationships | 3,600 | (2,512 | ) | 1,088 | 3,600 | (1,620 | ) | 1,980 | |||||||||||||||
| Developed technology | 900 | (265 | ) | 635 | 900 | (109 | ) | 791 | |||||||||||||||
| Non-competition agreements | 100 | (55 | ) | 45 | 100 | (35 | ) | 65 | |||||||||||||||
| Total | $ | 8,991 | $ | (3,943 | ) | $ | 5,048 | $ | 9,063 | $ | (2,728 | ) | $ | 6,335 | |||||||||
| Fiscal 2017 | $ | 877 | |
| Fiscal 2018 | 602 | ||
| Fiscal 2019 | 426 | ||
| Fiscal 2020 | 340 | ||
| Fiscal 2021 | 266 | ||
| Thereafter | 581 | ||
| $ | 3,092 | ||
| Fiscal Year Ended March 31, | |||||||||||
| 2016 | 2015 | 2014 | |||||||||
| Amortization included in cost of sales: | |||||||||||
| Patents | $ | 139 | $ | 132 | $ | 135 | |||||
| Total | $ | 139 | $ | 132 | $ | 135 | |||||
| Amortization included in operating expenses: | |||||||||||
| Customer relationships | $ | 891 | $ | 1,085 | $ | 535 | |||||
| Developed technology | 156 | 90 | 19 | ||||||||
| Non-competition agreements | 20 | 20 | 15 | ||||||||
| Patents | 9 | — | — | ||||||||
| Total | 1,076 | 1,195 | 569 | ||||||||
| Total amortization | $ | 1,215 | $ | 1,327 | $ | 704 | |||||
| March 31, 2016 | March 31, 2015 | ||||||
| Deferred financing costs | $ | 92 | $ | 202 | |||
| Security deposits | 87 | 73 | |||||
| Deferred contract costs | — | 83 | |||||
| Other | 6 | 9 | |||||
| Total | $ | 185 | $ | 367 | |||
| March 31, 2016 | March 31, 2015 | ||||||
| Compensation and benefits | $ | 1,794 | $ | 1,314 | |||
| Sales tax | 913 | 1,168 | |||||
| Contract costs | 586 | 1,267 | |||||
| Legal and professional fees (1) | 2,348 | 479 | |||||
| Warranty | 554 | 705 | |||||
| Other accruals | 391 | 264 | |||||
| Total | $ | 6,586 | $ | 5,197 | |||
| March 31, | |||||||
| 2016 | 2015 | ||||||
| Beginning of year | $ | 1,015 | $ | 263 | |||
| Provision to product cost of revenue | 159 | 776 | |||||
| Charges | (310 | ) | (24 | ) | |||
| End of year | $ | 864 | $ | 1,015 | |||
Incentive Compensation
Orion’s compensation committee approved an Executive Fiscal Year 2016 Annual Cash Incentive Program under its 2004 Stock and Incentive Awards Plan. The plan provided for performance cash bonus payments ranging from 35-100% of the fiscal 2016 base salaries of Orion’s named executive officers and other key employees. The plan provided for bonuses to be paid out on the basis of the achievement in fiscal 2016 of at least (i) $110,000 of profit before taxes and (ii) revenue growth of 10% more than fiscal year 2015.Program. Based upon the results for the yearfiscal years ended March 31, 2016,2023, 2022, and 2021, Orion did not accrue anyaccrued approximately $0, $0.1 million, and $0.7 million expense related to this plan.plan, respectively.
Revenue Recognition
Orion generates revenues primarily by selling commercial lighting fixtures and components, installing these fixtures in its 2004 Stockcustomer’s facilities, and Incentive Awards Plan. The plan provided for performance cash bonus payments ranging from 35-100% of the fiscal 2015 base salaries of Orion’s named executive officersproviding maintenance services including repairs and other key employees. The plan provided for bonuses to be paid out on the basis of the achievement in fiscal 2015 of at least (i) $2,300,000 of profit before taxes and (ii) revenue of at least $90,400,000. Based upon the resultsreplacements for the year ended March 31, 2015, Orion did not accrue any expense related to this plan.
If there are multiple performance obligations in a single contract, the contract’s total contract revenuetransaction price is allocated to each elementindividual performance obligation based on their relative standalone selling prices in accordance with ASC 605-25,
Revenue derived from customer contracts which include only performance obligation(s) for the sale of itsOrion manufactured or sourced lighting fixtures and energycomponents 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 technologiesbelieves 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 similar to a construction project, with materials being delivereddetermined separately for each contract and contracting and projectrequires judgment by management activities occurring according to an installation schedule. The significant deliverables includeof the shipment of products and related transfer of titlecontract terms and the installation.
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 price in multiple-element arrangements, Orion establishesprices.
59
Revenue from turnkey projects that is allocated to the selling price for its HIF lighting and energy management system products using management's best estimatesale of the selling price, as VSOE or TPE does not exist.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 recognizedinstalled and working correctly, or (d) when products are shipped. For product revenue, management's best estimate of selling pricethe customer acknowledges that the entire installation project is determined usingsubstantially complete. Determining the point in time when a cost plus gross profit margin method. In addition, Orion records in service revenue the selling price for its installation and recycling services using management’s best estimate of selling price, as VSOE or TPE does not exist. Service revenue is recognized when services are completed and customer acceptance has been received. Recycling services provided in connection with installation entail the disposalobtains control of the customer’s legacy lighting fixtures. Orion’s service revenues, other thanfixtures in a turnkey project can be a complex judgment and is applied separately for installation and recycling that are completed prior to delivery of the product, areeach individual light fixture included in product revenue using management’s best estimatea contract. In making this judgment, management considers the timing of selling price, as VSOE or TPE does not exist. These services include comprehensive site assessment, site field verification, utility incentive and government subsidy management, engineering design, and project management. For these services, along with Orion's installation and recycling services, under a multiple-element arrangement, management’s best estimate of selling price is determined by considering several external and internalvarious factors, including, but not limited to, economic conditions and trends,those detailed below:
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 construction, Orion recognizes revenue from fixed price construction contracts using the percentage-of-completion method in accordance with ASC 605-35, Construction-Typelight fixtures removed and Production-Type Contracts. Under this method, revenue arising from fixed price construction contracts is recognizedinstalled as work is performed based upon the percentage of incurred costs to estimated total forecasted costs. Orion has determined that the appropriate method of measuring progress on these sales is measured by the percentage of costs incurred to date of the measurement date in comparison to the total estimated costs for each contract as materials are installed. The percentage-of-completion method requires revenue recognitionnumber of light fixtures to be removed and installed under the contract.
Revenue from the deliverymaintenance offering that includes both the sale of products to be deferredOrion manufactured or sourced product and service is allocated between the cost of such products to be capitalized as a deferred costproduct and current assetservice performance obligations based on the balance sheet. Orion performs periodic evaluations of the progress of the installation of the solar photovoltaic systems using actual costs incurred over total estimated costs to complete a project. Provisions for estimated losses on uncompleted contracts, if any, are recognizedrelative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the period in which the loss first becomes probable and reasonably estimable.
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 offers a financing program, called aalso records revenue in conjunction with several limited power purchase agreement, or PPA, for Orion’s renewable energy product offerings. A PPA is a supply side agreementagreements (“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 and subsequentgenerated 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 end user. Uponsolar facilities and from amortizing a grant received from the customer’s acknowledgment thatfederal government during the systemperiod 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.
60
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 Orion EV segment and compliment Orion’s existing turnkey installation model.
The sale of charging stations and related software subscriptions and renewals is operatingpresented in Product revenue. Orion is the principal in the sales of charging stations as specified, productit has control of the physical products prior to transfer to the customer. Accordingly, revenue is recognized on a monthly basis overgross basis. For certain sales, primarily software subscriptions and renewals, Orion is the lifesales 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 PPA contract, which is typically in excesscontent to the customer.
The sale of 10 years.
See Note 10 – Accrued Expenses and Other for a discussion of Orion’s accounting for the maintenance is readily determinable based upon pricingwarranty it provides to customers for its products and services.
Sales taxes collected from third-party vendors. Deferred revenue relatedcustomers and remitted to maintenance services is recognized when the servicesgovernmental authorities are delivered, which occurs in excess ofaccounted for on a year after the original OTA contract is executed.net (excluded from revenues) basis.
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 Statement of Operations and Comprehensive Income on the line item Research and development.
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. For the fiscal year ended March 31, 2016,2023, Orion recordedrecognized a valuation allowance for all of $5,740,000 against its net deferred tax assets.
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. Penalties and interest are immaterial and are included in the unrecognized tax benefits.Stock Based Compensation
Orion’s share-based payments to employees are measured at fair value and are recognized inagainst earnings, net of estimated forfeitures, on a straight-line basis over the requisite service period.
61
Orion accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Under the fair value recognition provisions of ASC718,ASC 718, stock-based compensation is measured at the grant date based on the fair value
Acquisition Related Costs
Acquisition related costs includes legal fees, consulting and success fees, and other integration related costs.
| Fiscal Year Ended March 31, | |||||||||||
| 2016 | 2015 | 2014 | |||||||||
| Numerator: | |||||||||||
| Net loss (dollars in thousands) | $ | (20,126 | ) | $ | (32,061 | ) | $ | (6,199 | ) | ||
| Denominator: | |||||||||||
| Weighted-average common shares outstanding | 27,627,693 | 22,353,419 | 20,987,964 | ||||||||
| Weighted-average effect of assumed conversion of stock options and restricted stock | — | — | — | ||||||||
| Weighted-average common shares and share equivalents outstanding | 27,627,693 | 22,353,419 | 20,987,964 | ||||||||
| Net income (loss) per common share: | |||||||||||
| Basic | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | ||
| Diluted | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | ||
| March 31, | ||||||||
| 2016 | 2015 | 2014 | ||||||
| Common stock options | 2,017,046 | 2,426,836 | 2,716,317 | |||||
| Restricted shares | 1,053,389 | 704,688 | 539,204 | |||||
| Common stock warrants | — | — | 38,980 | |||||
| Total | 3,070,435 | 3,131,524 | 3,294,501 | |||||
Concentration of Credit Risk and Other Risks and Uncertainties
Orion’s cash is primarily deposited with threeone financial institutions.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 ballasts, lamps and LED components, from multiple suppliers. For fiscal 2016, 20152023, 2022 and 2014, 2021, no supplier accounted for more than 10%10% of total cost of revenue.
In fiscal 2016, no2023, one customer accounted for more than 10%16.2% of revenue. In fiscal 2015, 2022, one customer accounted for 12%49.1% of total revenue. In fiscal 2014, 2021, one customer accounted for 23%56.0% of total revenue.
As of March 31, 2016 2023, one customer accounted for more than 10%10.8% of accounts receivable. As of March 31, 2022, two customers accounted for 11.8 % and 10.4 % of accounts receivable, and as of March 31, 2015, no customer accounted for more than 10% of accounts receivable.respectively.
Recent Accounting Pronouncements
Issued: Not Yet Adopted
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows. The ASU is effective for Orion in the first quarter of Orion's fiscal 2018. Management is currently assessing the impact of adoption on its consolidated financial statements.
In November 2015,October 2021, the FASB issued ASU 2015-17, “Income TaxesNo. 2021-08, Business Combinations (Topic 740)805): Balance Sheet Classification of Deferred Taxes,”Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires an entity to simplifyuse the presentation of deferred taxes. The amendmentsguidance in this update require that deferred taxASC 606, Revenue from Contracts with Customers, rather than using fair value, when recognizing and measuring contract assets and contract liabilities be classified as non-current on the balance sheet. Thisrelated to customer contracts assumed in a business combination. The provisions of ASU is2021-08 are effective for Orion's annualOrion for fiscal years (and interim reporting period, and interim periods therein,within those years) beginning on April 1, 2017 with earlier adoption permitted. The guidance may be adopted either prospectively or retrospectively. Managementafter December 15, 2022. Orion is currently assessingevaluating the impact of adoption of this standard on its consolidated financial statements.balance sheet.
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NOTE 3 — REVENUE
Revenue Recognition
See Note 3 – Summary of Significant Accounting Policies for a discussion of Orion’s accounting policies related to revenue recognition.
Contract Fulfillment Costs
Costs associated with product sales are accumulated in inventory as the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifyingfixtures are manufactured and are transferred to Cost of product revenue at the Measurementtime revenue is recorded. See Note 6 – Inventories. Costs associated with installation sales are expensed as incurred.
Disaggregation of Inventory,”Revenue
Orion’s Product revenue includes revenue from contracts with customers accounted for under the scope of ASC 606 and revenue which changes the measurement principleis accounted for inventoryunder other guidance. For fiscal year 2023, Product revenue included $2.8 million derived from sales-type leases for light fixtures, $0.1 million derived from the sale of tax credits generated from Orion’s legacy operation for distributing solar energy, and $0.1 million 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 which are not under the scope of ASC 606. All remaining Product revenue, and all Service revenue, are derived from contracts with customers as defined in ASC 606.
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 Engineered Systems Division segment.
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, dependent on the sales channel.
See Footnote 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, 2023 (dollars in thousands):
|
| Year Ended March 31, 2023 |
|
| Year Ended March 31, 2022 |
|
| Year Ended March 31, 2021 |
| |||||||||||||||||||||||||||
|
| Product |
|
| Services |
|
| Total |
|
| Product |
|
| Services |
|
| Total |
|
| Product |
|
| Services |
|
| Total |
| |||||||||
Revenue from contracts with customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Lighting product and installation |
| $ | 46,500 |
|
| $ | 7,088 |
|
| $ | 53,588 |
|
| $ | 89,827 |
|
| $ | 27,242 |
|
| $ | 117,069 |
|
| $ | 84,659 |
|
| $ | 29,081 |
|
| $ | 113,740 |
|
Maintenance Services |
|
| 3,266 |
|
|
| 11,289 |
|
|
| 14,555 |
|
|
| 573 |
|
|
| 5,252 |
|
|
| 5,825 |
|
|
| — |
|
|
| 95 |
|
|
| 95 |
|
Electric Vehicles |
|
| 4,479 |
|
|
| 1,796 |
|
|
| 6,275 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Solar energy related revenues |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 42 |
|
|
| — |
|
|
| 42 |
|
|
| 57 |
|
|
| — |
|
|
| 57 |
|
Total revenues from contracts with customers |
|
| 54,245 |
|
|
| 20,173 |
|
|
| 74,418 |
|
|
| 90,442 |
|
|
| 32,494 |
|
|
| 122,936 |
|
|
| 84,716 |
|
|
| 29,176 |
|
|
| 113,892 |
|
Revenue accounted for under other guidance |
|
| 2,965 |
|
|
| — |
|
|
| 2,965 |
|
|
| 1,447 |
|
|
| — |
|
|
| 1,447 |
|
|
| 2,948 |
|
|
| — |
|
|
| 2,948 |
|
Total revenue |
| $ | 57,210 |
|
| $ | 20,173 |
|
| $ | 77,383 |
|
| $ | 91,889 |
|
| $ | 32,494 |
|
| $ | 124,383 |
|
| $ | 87,664 |
|
| $ | 29,176 |
|
| $ | 116,840 |
|
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.
63
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, 2023 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, 2023, 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, 2023, 2022, and 2021 was $6.3 million, $2.8 million and $5.1 million, respectively. Orion’s losses on these sales aggregated to $0.1 million, $13 thousand and $0.1 million for the twelve months ended March 31, 2023, 2022, and 2021, respectively, and are included in Interest expense in the Consolidated Statements of Operations.
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 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.
64
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. Revenue earned but not billed as of March 31, 2023 includes $0 and March 31, 2022 includes $0.5 million, respectively, which was not derived from contracts with customers and therefore not classified as a contract asset as defined by the standards. The change in contract assets is due to lower fiscal 2023 revenue and timing of cost project completions and invoicing. This was partially offset by the acquisition of Voltrek. As of March 31, 2023, Voltrek had $0.5 million of contract assets.
Deferred revenue, current as of March 31, 2023, includes $0.5 million of contract liabilities which represent consideration received from a new customer contract on which installation has not yet begun and Orion has not fulfilled the promises included.
Deferred revenue, long-term consists of 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 the new standards.
The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of March 31, 2023, and March 31, 2022 (dollars in thousands):
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||
Accounts receivable, net |
| $ | 13,728 |
|
| $ | 11,899 |
|
Contract assets |
| $ | 1,320 |
|
| $ | 1,966 |
|
Contract liabilities |
| $ | 480 |
|
| $ | — |
|
NOTE 4 — ACCOUNTS 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 marketguarantees. Accounts receivable are generally due within 30-60 days. Accounts receivable are stated at the amount Orion expects to collect from outstanding balances. Orion provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based on its assessment of the current status of individual accounts. Balances that are still outstanding after Orion has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to accounts receivable. Orion's accounts receivable and allowance for doubtful accounts balances were as follows (dollars in thousands):
|
| 2023 |
|
| 2022 |
| ||
Accounts receivable, gross |
| $ | 13,814 |
|
| $ | 11,907 |
|
Allowance for doubtful accounts |
|
| (86 | ) |
|
| (8 | ) |
Accounts receivable, net |
| $ | 13,728 |
|
| $ | 11,899 |
|
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NOTE 5 — INVENTORIES
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 for entities that measure inventorywith cost determined using the first-in, first-out (FIFO) or average cost. Netmethod. Orion reduces the carrying value of its inventories for differences between the cost and estimated net realizable value, taking into consideration usage in the preceding 9 to 12 months, expected demand, and other information indicating obsolescence. Orion records, as a charge to cost of product revenue, the amount required to reduce the carrying value of inventory to net realizable value. As of March 31, 2023 and 2022, Orion's inventory balances were as follows (dollars in thousands):
|
| Cost |
|
| Excess and |
|
| Net |
| |||
As of March 31, 2023 |
|
|
|
|
|
|
|
|
| |||
Raw materials and components |
| $ | 9,988 |
|
| $ | (1,094 | ) |
| $ | 8,894 |
|
Work in process |
|
| 693 |
|
|
| (135 | ) |
|
| 558 |
|
Finished goods |
|
| 9,313 |
|
|
| (560 | ) |
|
| 8,753 |
|
Total |
| $ | 19,994 |
|
| $ | (1,789 | ) |
| $ | 18,205 |
|
As of March 31, 2022 |
|
|
|
|
|
|
|
|
| |||
Raw materials and components |
| $ | 10,781 |
|
| $ | (1,140 | ) |
| $ | 9,641 |
|
Work in process |
|
| 1,529 |
|
|
| (267 | ) |
|
| 1,262 |
|
Finished goods |
|
| 9,593 |
|
|
| (664 | ) |
|
| 8,929 |
|
Total |
| $ | 21,903 |
|
| $ | (2,071 | ) |
| $ | 19,832 |
|
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
As of March 31, 2023, and March 31, 2022, prepaid expenses and other current assets include the following (dollars in thousands):
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||
Payroll tax credit |
| $ | — |
|
| $ | 1,587 |
|
Other prepaid expenses |
|
| 1,116 |
|
|
| 1,044 |
|
Total |
| $ | 1,116 |
|
| $ | 2,631 |
|
During fiscal 2022, Orion recorded a $1.6 million current asset for the anticipated employee retention payroll tax credit (“payroll tax credit”), as expanded and extended by the American Rescue Plan Act of 2021. The credit was recorded as an offset to payroll expense, in accordance with IAS 20, in the following income statement categories: $0.7 million in cost of product revenue, $0.1 million in cost of service revenue, $0.3 million in general and administrative, $0.4 million in sales and marketing, and $0.1 million in research and development expenses. The refund was collected in fiscal 2023.
66
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 defined asrequired.
Property and equipment were comprised of the following (dollars in thousands):
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||
Land and land improvements |
| $ | 433 |
|
| $ | 433 |
|
Buildings and building improvements |
|
| 9,491 |
|
|
| 9,491 |
|
Furniture, fixtures and office equipment |
|
| 7,782 |
|
|
| 7,650 |
|
Leasehold improvements |
|
| 540 |
|
|
| 490 |
|
Equipment leased to customers |
|
| 4,997 |
|
|
| 4,997 |
|
Plant equipment |
|
| 11,234 |
|
|
| 11,130 |
|
Vehicles |
|
| 720 |
|
|
| 796 |
|
Construction in progress |
|
| 37 |
|
|
| 3 |
|
|
| 35,234 |
|
|
| 34,990 |
| |
Less: accumulated depreciation and amortization |
|
| (24,764 | ) |
|
| (23,524 | ) |
Net property and equipment |
| $ | 10,470 |
|
| $ | 11,466 |
|
Depreciation is recognized over the estimated selling pricesuseful lives of the respective assets, using the straight-line method. Orion recorded depreciation expense of $1.4 million, $1.3 million and $1.2 million for the years ended March 31, 2023, 2022 and 2021, 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 |
No interest was capitalized for construction in progress during fiscal 2023 or fiscal 2022.
As of December 31, 2022, due to a change in Orion's forecast, a triggering event occurred requiring Orion to evaluate the long-lived assets in its enterprise asset group for impairment. The enterprise asset group includes the corporate assets that support the revenue producing activities of other asset groups. Orion performed the recoverability test for the asset group by comparing its carrying value to the group’s expected future undiscounted cash flows. Orion concluded that the undiscounted cash flows of the long-lived asset group exceeded its carrying value. As such the asset group was deemed recoverable and no impairment was recorded.
NOTE 8 — LEASES
From time to time, Orion leases assets from third parties. Orion also leases certain assets to third parties. Effective April 1, 2019, leases are accounted for, and reported upon, following the requirements of ASC 842, Leases.
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
67
specified in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Orion is currently assessingcontract, have been transferred from the impact of this standard on its consolidated financial statements.
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 line-of-credit arrangement. These ASU’s were effective forpresent value of lease payments over the lease term. When available, Orion on April 1, 2016. Asuses the Company’s only deferred debt issuance costs relate toimplicit 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 revolving line of credit, upon adoption of these standards a reclassificationadjusted for differences in duration and the relative collateral value in relation to the payment obligation, at the commencement of the deferredlease 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.
One of Orion’s frequent customers purchases products and installation services under agreements that provide for monthly payments, at a fixed monthly amount, of the contract price, plus interest, typically over a five-year period. 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. The portions of the transaction associated with the sale of the light fixtures is accounted for as a sales-type lease. The total transaction price in these contracts is allocated between the lease and non-lease components in the same manner as the total transaction price of other turnkey projects containing lighting fixtures and installation services.
Orion leases portions of its corporate headquarters to third parties; all such agreements have been, and continue to be, classified as operating leases under the applicable authoritative accounting guidance. The assets being leased continue to be included in Property and equipment, net. Lease payments earned are recorded as a reduction in administrative expenses.
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, WI. The lease has a 10-year term, with the option to terminate after six years. The lease also has an option to renew for two additional successive periods of five years each. The renewal option is not in the calculation of the right of use asset or liability as the company has considered the termination option in the calculation. 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 2021, and presently terminates on June 30, 2023. Subsequent to year-end, this lease was extended for another three-year term. The agreement is classified as an operating lease.
We lease office space in Lawrence, Massachusetts. The lease presently terminates in October, 2026. The agreement is classified as an operating lease.
We also lease office space in Pewaukee, Wisconsin. The lease has an option to renew one additional period of five years. The lease presently terminates in December, 2026. The renewal option is not requiredin the calculation of the right of use asset or liability as the company has considered the termination option in the calculation. The agreement is classified as an operating lease.
Orion has leased other assets from third parties, principally office and there was no impactproduction equipment. The terms of our other leases vary from contract to contract and expire at various dates in the next five years.
68
The weighted average discount rate for Orion’s lease obligations as of March 31, 2023 is 5.4%. The weighted average remaining lease term as of March 31, 2023 is 3.0 years.
A summary of Orion’s assets leased from third parties follows (dollars in thousands):
|
| Balance sheet classification |
| March 31, 2023 |
|
| March 31, 2022 |
| ||
Assets |
|
|
|
|
|
|
|
| ||
Operating lease assets |
| Other long-term assets |
| $ | 2,174 |
|
| $ | 2,440 |
|
Liabilities |
|
|
|
|
|
|
|
| ||
Current liabilities |
|
|
|
|
|
|
|
| ||
Operating lease liabilities |
| Accrued expenses and other |
|
| 823 |
|
|
| 768 |
|
Non-current liabilities |
|
|
|
|
|
|
|
| ||
Operating lease liabilities |
| Other long-term liabilities |
|
| 1,826 |
|
|
| 2,271 |
|
Total lease liabilities |
|
|
| $ | 2,649 |
|
| $ | 3,039 |
|
Orion had operating lease costs of $1.6 million for the year ended March 31, 2023. This includes short-term leases and variable lease costs, which are immaterial.
The estimated maturity of lease liabilities for each of the next five years is shown below (dollars in thousands):
Maturity of Lease Liabilities |
| Operating Leases |
| |
Fiscal 2024 |
| $ | 946 |
|
Fiscal 2025 |
|
| 949 |
|
Fiscal 2026 |
|
| 845 |
|
Fiscal 2027 |
|
| 142 |
|
Thereafter |
|
| — |
|
Total lease payments |
| $ | 2,882 |
|
Less: Interest |
|
| (233 | ) |
Present value of lease liabilities |
| $ | 2,649 |
|
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 Company’s financial statements.
The following chart shows the amount of applying the purchase accounting provisionsrevenue and cost of ASC 805, Business Combinations, the shares of common stock issued in the acquisition were valued at $2.41 per share, which was the closing sale price of Orion's common stock as reported on the NYSE MKT on the July 1, 2013, date of acquisition.
|
| March 31, 2023 |
|
| March 31, 2022 |
|
| March 31, 2021 |
| |||
Product revenue |
| $ | 2,818 |
|
| $ | 1,169 |
|
| $ | 2,758 |
|
Cost of product revenue |
|
| 2,771 |
|
|
| 1,073 |
|
|
| 2,512 |
|
69
The Purchase Agreement contained customary representationsConsolidated Balance Sheet as of March 31, 2023 does not include a net investment in sales-type leases as all amounts due from the customer associated with lighting fixtures that were acknowledged to be installed and warranties, as well as indemnification obligations, and limitations thereon, by Orion and the Harris Shareholders.
Other Agreements where Orion is the Lessor
Orion has leased unused portions of its corporate headquarters to paythird parties. The length and payment terms of the Harris Shareholders upleases vary from contract to $1,000,000 in unregistered shares of Orion's common stock upon Harris' achievement of certain revenue milestones in calendar year 2013 and/or 2014,contract and, in the case of certain Harris Shareholders who became employees of Orion, their continued employment by Orion. The potential undiscounted amount of all future payments that Orion could have been required to make under the contingent consideration arrangement was between $0 and $1,000,000. Orion recorded $612,000some cases, include options for the non-employee Harris Shareholder portion oftenants to extend the contingent consideration liability on the acquisition date. Duringlease terms. Annual lease payments are recorded as a reduction in administrative operating expenses and were not material in the years ended March 31, 2015,2023, 2022 and 2021. Orion accounts 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 has an indefinite life, and is assigned to the EV Charging operating segment.
Orion has $0.6 million of goodwill related to its purchase of Stay-Lite Lighting during fiscal year 2022, which has an indefinite life, and is assigned to the Orion Services Group operating segment. Goodwill related to the Stay-Lite Lighting acquisition increased by $0.2 million to $0.6 million as compared to March 31, 2022. This increase was due to updates to purchase accounting within the measurement period.
See Note 18 – Acquisition for further discussion of the Stay-Lite Lighting and Voltrek acquisitions.
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 | ||
Vendor relationships | 5-8 years | Accelerated based upon the pattern of economic benefits | ||
Developed technology | 8 years | Accelerated based upon the pattern of economic benefits | ||
Tradename | 5-10 years | Straight-line |
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
70
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.
Orion performed a qualitative assessment in conjunction with its annual impairment test of its indefinite lived intangible assets as of January 1, 2023. This qualitative assessment considered Orion’s operating results for the first nine months of fiscal 2023 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2024 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 goodwill as of January 1, 2023. This qualitative assessment considered Orion segment's operating results for the first nine months of fiscal 2023 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2024 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, 2023 |
|
| March 31, 2022 |
| ||||||||||||||||||||||
|
| Gross |
|
| Accumulated |
|
| Net |
|
| Weighted Average Useful Life |
|
| Gross |
|
| Accumulated |
|
| Net |
| |||||||
Amortized Intangible Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Patents |
| $ | 2,521 |
|
| $ | (1,930 | ) |
| $ | 591 |
|
|
| 8.1 |
|
| $ | 2,652 |
|
| $ | (1,932 | ) |
| $ | 720 |
|
Licenses |
|
| 58 |
|
|
| (58 | ) |
|
| — |
|
|
| — |
|
|
| 58 |
|
|
| (58 | ) |
|
| — |
|
Trade name and trademarks |
|
| 464 |
|
|
| (73 | ) |
|
| 391 |
|
|
| 4.3 |
|
|
| 118 |
|
|
| (6 | ) |
|
| 112 |
|
Customer relationships |
|
| 5,509 |
|
|
| (3,914 | ) |
|
| 1,595 |
|
|
| 3.9 |
|
|
| 4,178 |
|
|
| (3,618 | ) |
|
| 560 |
|
Vendor relationships |
|
| 2,600 |
|
|
| (183 | ) |
|
| 2,417 |
|
|
| 6.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Developed technology |
|
| 900 |
|
|
| (900 | ) |
|
| — |
|
|
| — |
|
|
| 900 |
|
|
| (900 | ) |
|
| — |
|
Total Amortized Intangible Assets |
| $ | 12,052 |
|
| $ | (7,058 | ) |
| $ | 4,994 |
|
|
| 5.6 |
|
| $ | 7,906 |
|
| $ | (6,514 | ) |
| $ | 1,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Indefinite-lived Intangible Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Trade name and trademarks |
| $ | 1,010 |
|
| $ | — |
|
| $ | 1,010 |
|
|
|
|
| $ | 1,012 |
|
| $ | — |
|
| $ | 1,012 |
| |
Total Indefinite-lived Intangible Assets |
| $ | 1,010 |
|
| $ | — |
|
| $ | 1,010 |
|
|
|
|
| $ | 1,012 |
|
| $ | — |
|
| $ | 1,012 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total Other Intangible Assets |
| $ | 13,062 |
|
| $ | (7,058 | ) |
| $ | 6,004 |
|
|
|
|
| $ | 8,918 |
|
| $ | (6,514 | ) |
| $ | 2,404 |
| |
The estimated amortization expense for each of the next five years is shown below (dollars in thousands):
Fiscal 2024 |
| $ | 1,093 |
|
Fiscal 2025 |
|
| 1,084 |
|
Fiscal 2026 |
|
| 846 |
|
Fiscal 2027 |
|
| 588 |
|
Fiscal 2028 |
|
| 517 |
|
Thereafter |
|
| 866 |
|
| $ | 4,994 |
|
71
Amortization expense is set forth in the following table (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Amortization included in cost of sales: |
|
|
|
|
|
|
|
|
| |||
Patents |
| $ | 107 |
|
| $ | 183 |
|
| $ | 175 |
|
Total |
| $ | 107 |
|
| $ | 183 |
|
| $ | 175 |
|
Amortization included in operating expenses: |
|
|
|
|
|
|
|
|
| |||
Customer relationships |
| $ | 296 |
|
| $ | 27 |
|
| $ | 47 |
|
Vendor relationships |
|
| 183 |
|
|
| — |
|
|
| — |
|
Developed technology |
|
| — |
|
|
| 11 |
|
|
| 68 |
|
Tradename |
|
| 67 |
|
|
| 6 |
|
|
| — |
|
Total |
|
| 546 |
|
|
| 44 |
|
|
| 115 |
|
Total amortization of intangible assets |
| $ | 653 |
|
| $ | 227 |
|
| $ | 290 |
|
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 2023, 2022, and 2021, write-offs were immaterial.
NOTE 10 — ACCRUED EXPENSES AND OTHER
As of March 31, 2023 and March 31, 2014, 2022, Accrued expenses and other included the following (dollars in thousands):
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||
Accrued acquisition earn-out |
| $ | 3,000 |
|
| $ | 234 |
|
Other accruals |
|
| 2,598 |
|
|
| 1,987 |
|
Compensation and benefits |
|
| 1,412 |
|
|
| 1,668 |
|
Credits due to customers |
|
| 1,310 |
|
|
| 1,209 |
|
Accrued project costs |
|
| 1,218 |
|
|
| 2,215 |
|
Warranty |
|
| 497 |
|
|
| 728 |
|
Sales tax |
|
| 274 |
|
|
| 157 |
|
Legal and professional fees |
|
| 172 |
|
|
| 106 |
|
Sales returns reserve |
|
| 71 |
|
|
| 123 |
|
Total |
| $ | 10,552 |
|
| $ | 8,427 |
|
Accrued earn-out is related to recent acquisitions. Refer to discussion of acquisitions at Note 18 – Acquisitions.
Orion expensed $147,000generally 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 $334,000, respectively,other fixture related items, which are significant components in compensation expenseOrion's lighting products.
Changes in Orion’s warranty accrual (both current and long-term) were as contingent considerationfollows (dollars in thousands):
|
| March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Beginning of year |
| $ | 860 |
|
| $ | 1,009 |
|
Accruals |
|
| 382 |
|
|
| 434 |
|
Warranty claims (net of vendor reimbursements) |
|
| (596 | ) |
|
| (583 | ) |
Ending balance |
| $ | 646 |
|
| $ | 860 |
|
72
NOTE 11 — NET (LOSS) INCOME PER COMMON SHARE
Basic net (loss) income per common share is computed by dividing net (loss) income attributable to common shareholders by the weighted-average number of common shares outstanding for employee Harris shareholdersthe period and during fiscal 2014, recorded $278,000does 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 additional earn-out expensediluted net (loss) income per common share, Orion uses the treasury stock method for non-employee Harris shareholders.outstanding options and restricted shares. Net (loss) income per common share is calculated based upon the following shares:
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Numerator: |
|
|
|
|
|
|
|
|
| |||
Net (loss) income (dollars in thousands) |
| $ | (34,341 | ) |
| $ | 6,091 |
|
| $ | 26,134 |
|
Denominator: |
|
|
|
|
|
|
|
|
| |||
Weighted-average common shares outstanding |
|
| 31,703,712 |
|
|
| 31,018,356 |
|
|
| 30,634,553 |
|
Weighted-average effect of assumed conversion of stock options and restricted stock |
|
| — |
|
|
| 276,217 |
|
|
| 669,174 |
|
Weighted-average common shares and share equivalents outstanding |
|
| 31,703,712 |
|
|
| 31,294,573 |
|
|
| 31,303,727 |
|
Net (loss) income per common share: |
|
|
|
|
|
|
|
|
| |||
Basic |
| $ | (1.08 | ) |
| $ | 0.20 |
|
| $ | 0.85 |
|
Diluted |
| $ | (1.08 | ) |
| $ | 0.19 |
|
| $ | 0.83 |
|
The following table indicates the number of potentially dilutive securities excluded from an entity in the amountcalculation of $21,000, $38,000, and $20,000, respectively, for which a directorDiluted net (loss) income per common share because their inclusion would have been anti-dilutive. The number of Orion servesshares is as a minority owner and chairman of the boardend of directors.each period:
|
| March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Common stock options |
|
| — |
|
|
| — |
|
|
| — |
|
Restricted shares |
|
| — |
|
|
| 17,803 |
|
|
| — |
|
Total |
|
| — |
|
|
| 17,803 |
|
|
| — |
|
NOTE 512 — LONG-TERM DEBT
Long-term debt as of March 31, 20162023 and 20152022 consisted of the following (dollars in thousands):
|
| March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Revolving credit facility |
| $ | 10,000 |
|
| $ | — |
|
Equipment debt obligations |
|
| 20 |
|
|
| 35 |
|
Total long-term debt |
|
| 10,020 |
|
|
| 35 |
|
Less current maturities |
|
| (17 | ) |
|
| (16 | ) |
Long-term debt, less current maturities |
| $ | 10,003 |
|
| $ | 19 |
|
| March 31, | |||||||
| 2016 | 2015 | ||||||
| Revolving credit facility | $ | 3,719 | $ | 2,500 | |||
| Harris seller's note | 546 | 1,607 | |||||
| Equipment lease obligations | 345 | — | |||||
| Customer equipment finance notes payable | 90 | 827 | |||||
| Other long-term debt | 67 | 120 | |||||
| Total long-term debt | 4,767 | 5,054 | |||||
| Less current maturities | (746 | ) | (1,832 | ) | |||
| Long-term debt, less current maturities | $ | 4,021 | $ | 3,222 | |||
Revolving Credit Agreement
On February 6, 2015,December 29, 2020, Orion entered into a new Loan and Security Agreement with Bank of America, N.A., as lender (the “Credit Agreement”). The Credit Agreement replaced Orion’s prior $20.15 million secured revolving credit and security agreement (Credit Agreement) with Wells Fargodated as of October 26, 2018, as amended, by and among Orion and Western Alliance Bank, National Association. Association, as lender (the “Prior Credit Agreement”). The replacement of the Prior Credit Agreement with the Credit Agreement provides Orion with increased financing capacity and liquidity to fund its operations and implement its strategic plans.
The Credit Agreement provides for a five-year $25.0 million revolving credit facility (Credit Facility)(the “Credit Facility”) that matures on February 6, 2018.December 29, 2025. Borrowings under the Credit Facility are initially limited to $15,000,000, subject to a borrowing base requirement based on eligible receivables, inventory and inventory. The Credit Facility includes a $2,000,000 sublimit forcash. As of March 31, 2023, the issuanceborrowing base of letters of credit.
73
The Credit Agreement is secured by a first lien security interest in substantially all of Orion’s assets.
Borrowings under the Credit Agreement will requireare 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 Orion’s availability under the Credit Agreement. Among other fees, Orion is required to maintain, aspay an annual facility fee and a fee on the unused portion of the endCredit Facility.
The Credit Agreement includes a springing minimum fixed cost coverage ratio of each month, a1.0 to 1.0 when excess availability under the Credit Facility falls below the greater of $3.0 million or 15% of the committed facility. Currently, the required springing minimum fixed cost coverage ratio for the trailing twelve-month period of (i) earnings before interest, taxes, depreciation and amortization, subject to certain adjustments, to (ii) the sum of cash interest expense, certain principal payments on indebtedness and certain dividends, distributions and stock redemptions, equal to at least 1.10 to 1.00. is not required.
The Credit Agreement also contains customary events of default and other customary covenants, including certain restrictions on Orion’s ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, guarantee obligations of third parties, make loans or advances, declare or pay any dividend or distribution on Orion’s stock, redeem, retire or repurchasepurchase shares of Orion’s stock, make investments or pledge or disposetransfer assets. If an event of assets.
Orion did not incur any early termination fees in connection with the termination of $130,000, regardlessthe Prior Credit Agreement, but did recognize a loss on debt extinguishment of usage. $0.1 million on the write-off of unamortized debt issue costs related to the Prior Credit Agreement. The Prior Credit Agreement was scheduled to mature on October 26, 2021.
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 earn-out liabilities associated with the Stay-Lite and Voltrek transactions are permitted under the Credit Agreement and that the expenses recognized in connection with those earn-outs should be added back in the computation of EBITDA, as defined, under the Credit Agreement.
As of March 31, 2016, the interest rate was 3.63%.2023, Orion must pay an unused line fee of 0.25% per annum of the daily average unused amount of the Credit Facility and a letter of credit fee at the rate of 3.0% per annum on the undrawn amount of letters of credit outstanding from time to time under the Credit Facility.
Equipment Debt Obligation
In February 2019, Orion issued an unsecured and subordinated promissory noteentered into additional debt agreements with a financing company in the principal amount of $3,124,000 to partially fund the acquisition of Harris. The note is included in the table above as Harris seller's note. The note bears interest at the rate of 4% per annum. Principal$44 thousand and interest are payable quarterly and the note matures in July 2016.
Aggregate Maturities
As of March 31, 2016 Orion was in compliance with the debt service covenant.
Fiscal 2024 |
| $ | 17 |
|
Fiscal 2025 |
|
| 3 |
|
Fiscal 2026 |
|
| 10,000 |
|
| $ | 10,020 |
|
74
| Fiscal 2017 | $ | 746 | |
| Fiscal 2018 | 3,826 | ||
| Fiscal 2019 | 83 | ||
| Fiscal 2020 | 83 | ||
| Fiscal 2021 | 29 | ||
| Thereafter | — | ||
| $ | 4,767 | ||
NOTE 613 — INCOME TAXES
The total provision (benefit) for income taxes consists of the following for the fiscal years endingended (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Current |
| $ | 97 |
|
| $ | 179 |
|
| $ | 244 |
|
Deferred |
|
| 17,881 |
|
|
| 1,980 |
|
|
| (19,860 | ) |
Total |
| $ | 17,978 |
|
| $ | 2,159 |
|
| $ | (19,616 | ) |
|
|
|
|
|
|
|
|
|
| |||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Federal, Current |
| $ | — |
|
| $ | — |
|
| $ | — |
|
Federal, Deferred |
|
| 14,557 |
|
|
| 1,658 |
|
|
| (16,217 | ) |
Total Federal |
|
| 14,557 |
|
|
| 1,658 |
|
|
| (16,217 | ) |
State, Current |
|
| 97 |
|
|
| 179 |
|
|
| 244 |
|
State, Deferred |
|
| 3,324 |
|
|
| 322 |
|
|
| (3,643 | ) |
Total State |
|
| 3,421 |
|
|
| 501 |
|
|
| (3,399 | ) |
Total |
| $ | 17,978 |
|
| $ | 2,159 |
|
| $ | (19,616 | ) |
| Fiscal Year Ended March 31, | |||||||||||
| 2016 | 2015 | 2014 | |||||||||
| Current | $ | 36 | $ | 49 | $ | 19 | |||||
| Deferred | — | — | (2,077 | ) | |||||||
| $ | 36 | $ | 49 | $ | (2,058 | ) | |||||
| 2016 | 2015 | 2014 | |||||||||
| Federal | $ | 15 | $ | — | $ | (1,830 | ) | ||||
| State | 21 | 49 | (228 | ) | |||||||
| $ | 36 | $ | 49 | $ | (2,058 | ) | |||||
A reconciliation of the statutory federal income tax rate and effective income tax rate is as follows:
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Statutory federal tax rate |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
State taxes, net |
|
| 4.0 | % |
|
| 5.2 | % |
|
| 5.3 | % |
State tax credits, net |
|
| (1.9 | )% |
|
| — | % |
|
| — | % |
Change in valuation reserve |
|
| (131.3 | )% |
|
| (0.4 | )% |
|
| (321.4 | )% |
Permanent items |
|
| (1.0 | )% |
|
| (1.9 | )% |
|
| (3.4 | )% |
Change in tax contingency reserve |
|
| (0.1 | )% |
|
| 0.1 | % |
|
| (0.5 | )% |
Equity compensation cancellations |
|
| (0.1 | )% |
|
| 0.1 | % |
|
| 0.6 | % |
State return to provision |
|
| (0.9 | )% |
|
| 2.3 | % |
|
| (1.7 | )% |
Other, net |
|
| 0.4 | % |
|
| (0.2 | )% |
|
| (0.9 | )% |
Effective income tax rate |
|
| (109.9 | )% |
|
| 26.2 | % |
|
| (301.0 | )% |
75
| Fiscal Year Ended March 31, | ||||||||
| 2016 | 2015 | 2014 | ||||||
| Statutory federal tax rate | 34.0 | % | 34.0 | % | 34.0 | % | ||
| State taxes, net | 2.8 | % | 3.6 | % | 2.8 | % | ||
| Federal tax credit | — | % | 0.2 | % | 0.9 | % | ||
| State tax credit | — | % | 0.1 | % | 0.4 | % | ||
| Change in valuation reserve | (29.1 | )% | (37.0 | )% | (10.2 | )% | ||
| Permanent items | (7.5 | )% | (0.1 | )% | (2.9 | )% | ||
| Change in tax contingency reserve | (0.1 | )% | — | % | (0.3 | )% | ||
| Other, net | (0.3 | )% | (1.0 | )% | 0.2 | % | ||
| Effective income tax rate | (0.2 | )% | (0.2 | )% | 24.9 | % | ||
The net deferred tax assets and liabilities reported in the accompanying consolidated financial statements include the following components (dollars in thousands):
|
| March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Inventory, accruals and reserves |
|
| 680 |
|
|
| 809 |
|
Interest deduction carry-forward |
|
| 71 |
|
|
| — |
|
Federal and state operating loss carry-forwards |
|
| 18,849 |
|
|
| 16,485 |
|
Tax credit carry-forwards |
|
| 1,537 |
|
|
| 1,847 |
|
Equity compensation |
|
| 188 |
|
|
| 231 |
|
Deferred revenue |
|
| 25 |
|
|
| 29 |
|
Lease liability |
|
| 669 |
|
|
| 670 |
|
Intangible assets |
|
| 984 |
|
|
| — |
|
Other |
|
| 798 |
|
|
| 247 |
|
Total deferred tax assets |
|
| 23,801 |
|
|
| 20,318 |
|
Valuation allowance |
|
| (22,731 | ) |
|
| (1,249 | ) |
Deferred tax assets, net of valuation allowance |
|
| 1,070 |
|
|
| 19,069 |
|
|
|
|
|
|
| |||
Deferred tax liabilities: |
|
|
|
|
|
| ||
Lease ROU asset |
|
| (549 | ) |
|
| (518 | ) |
Fixed assets |
|
| (598 | ) |
|
| (529 | ) |
Intangible assets |
|
| — |
|
|
| (217 | ) |
Total deferred tax liabilities |
|
| (1,147 | ) |
|
| (1,264 | ) |
|
|
|
|
|
| |||
Total net deferred tax (liabilities) assets |
| $ | (77 | ) |
| $ | 17,805 |
|
| March 31, | |||||||
| 2016 | 2015 | ||||||
| Inventory, accruals and reserves | $ | 3,686 | $ | 5,297 | |||
| Other | 187 | 159 | |||||
| Deferred revenue | 73 | 91 | |||||
| Valuation allowance | (3,946 | ) | (5,547 | ) | |||
| Total net current deferred tax assets and liabilities | $ | — | $ | — | |||
| Federal and state operating loss carryforwards | 19,727 | 13,154 | |||||
| Tax credit carryforwards | 1,475 | 1,475 | |||||
| Non-qualified stock options | 3,125 | 2,914 | |||||
| Deferred revenue | (31 | ) | 7 | ||||
| Fixed assets | (1,493 | ) | (1,698 | ) | |||
| Intangible assets | (1,297 | ) | (1,687 | ) | |||
| Valuation allowance | (21,506 | ) | (14,165 | ) | |||
| Total net long-term deferred tax assets and liabilities | $ | — | $ | — | |||
| Total net deferred tax assets | $ | — | $ | — | |||
For the fiscal year ended March 31, 2016,2023, Orion’s deferred tax assets were primarily the result of U.S. NOL and tax credit carryforwards. Orion has recorded a valuation allowance of $25,452,000, equaling the$22.7 million and $1.2 million against its net deferred tax asset balance as of March 31, 2023 and March 31, 2022, respectively, due to the uncertainty of its realization value in the future. For the fiscal years endedOrion realized a 36-month cumulative loss as of March 31, 20162023 and March 31, 2015,the accounting forecast, as revised in the previous quarter, projects losses in the near term. As such, Orion management has concluded that it is more likely than not that the domestic deferred tax assets will not be realized and an increase to the valuation allowance against Orion's net federalhas been recorded in the third quarter, which increased tax expense by $17.8 million.
As of each reporting date, management considers new evidence, both positive and net statenegative, that could affect its view of the future realization of deferred tax assets increased $5,740,000 and $11,802,000, respectively.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, 2023, Orion has federal NOL carryforwards of approximately $71.4 million, state NOL carryforwards of approximately $66.1 million, and foreign NOL carryforwards of approximately $0.8 million. Orion also had federal tax credit carryforwards of approximately $1.3 million and state tax credits of $0.3 million. All of Orion's tax credit carryforwards and $118.6 million of its NOL carryforwards will begin to expire in varying amounts between 2023 and 2033. The remaining $19.7 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 $22.7 million on the deferred tax asset would increase income in the period such determination is made.
Generally, a change of more than 50% in the ownership of Orion's stock, by value, over a three yearthree-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
76
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 incomejurisdiction and in several state jurisdictions. The Company's federal tax returns for tax years 2009 to 2011 was complete. The resolutionbeginning April 1, 2019 or later are open. For states in which Orion files state income tax returns, the statute of this examination did not have a material effect on its business, financial condition, results of operationslimitations is generally open for tax years beginning April 1, 2019 or liquidity.
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, 2016,2023, the balance of gross unrecognized tax benefits was approximately $227,000,$0.2 million, all of which would reduceaffect 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. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax expense. Penalties and interest are included in the unrecognized tax benefits. Accrued interest and penalties for such unrecognized tax benefits as of March 31, 2023 and 2022 were $0.1 million. Orion had the following unrecognized tax benefit activity (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Unrecognized tax benefits as of beginning of fiscal year |
| $ | 215 |
|
| $ | 285 |
|
| $ | 259 |
|
Additions based on tax positions related to the current period positions |
|
| 1 |
|
|
| 39 |
|
|
| 123 |
|
Additions/(reductions) for tax positions of prior years |
|
| 9 |
|
|
| (109 | ) |
|
| (97 | ) |
Unrecognized tax benefits as of end of fiscal year |
| $ | 225 |
|
| $ | 215 |
|
| $ | 285 |
|
| Fiscal Year Ended March 31, | |||||||||||
| 2016 | 2015 | 2014 | |||||||||
| Unrecognized tax benefits as of beginning of fiscal year | $ | 212 | $ | 210 | $ | 188 | |||||
| Additions based on tax positions related to the current period positions | 15 | 2 | 22 | ||||||||
| Unrecognized tax benefits as of end of fiscal year | $ | 227 | $ | 212 | $ | 210 | |||||
NOTE 714 — COMMITMENTS AND CONTINGENCIES
| Fiscal 2017 | $ | 512 | |
| Fiscal 2018 | 611 | ||
| Fiscal 2019 | 426 | ||
| Fiscal 2020 | 98 | ||
| Thereafter | — | ||
| $ | 1,647 | ||
Purchase Commitments
Orion enters into non-cancellable purchase commitments for certain inventory items in order to secure better pricing and ensure materials on hand and capital expenditures.hand. As of March 31, 2016,2023, Orion had entered into $2,189,000$9.0 million of purchase commitments related primarily to fiscal 2017 for inventory purchases.
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 2016, 20152023, Orion made matching contributions of $0.2 million. In both fiscal 2022 and 2014,2021, Orion made matching contributions of approximately $10,000, $23,000 and $26,000, 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 is unable to currently assess whetherdoes not believe that the final resolution of any of such claims or legal proceedings maywould have a material adverse effect on Orion.its future results of operations. In addition to ordinary-course litigation, Orion iswas a party to the proceedings described below.
77
State Tax Assessment
During fiscal year 2018, Orion was named asnotified of a defendant in a civil lawsuit filedpending sales and use tax audit by Neal R. Verfuerth, Orion's former chief executive officer who was terminated for cause in November 2012, in the United States District CourtWisconsin Department of Revenue for the Eastern District of Wisconsin (Green Bay Division). The plaintiff alleges, among other things, thatperiod covering April 1, 2013 through March 31, 2017. This sales and use tax audit was settled during the quarter ended June 30, 2022 with no tax adjustment.
NOTE 15 — SHAREHOLDERS’ EQUITY
Shareholder Rights Plan
On January 3, 2019, Orion breached certain agreements entered into with the plaintiff, including the plaintiff’s employment agreement, and violated certain laws. The complaint seeks, among other relief, unspecified pecuniary and compensatory damages, fees and such other relief as the court may deem just and proper. On November 4, 2014, the court granted Orion's motion to dismiss six of the plaintiff's claims. On January 9, 2015, the plaintiff filed an amended complaint re-alleging claims that were dismissed by the court, including, among other things, a retaliation claim and certain claims with respect to prior management agreements and certain intellectual property rights. On January 22, 2015, Orion filed a motion to dismiss and a motion to strike certain of the claims made in the amended complaint. On May 18, 2015, the court dismissed the intellectual property claims re-alleged in the January 9, 2015 amended complaint. At the court's direction, the parties attempted to mediate the matter in May 2016, but were unsuccessful in resolving the matter. Orion intends to continue to defend against the claims vigorously. Orion believes that it has substantial legal and factual defensesAmendment No. 1 to the claimsRights Agreement, which amended the Rights Agreement dated as of January 7, 2009 and allegations remaining in the case and that Orion will prevail in this proceeding. Based upon the current status of the lawsuit, Orion does not believe that it is reasonably possible that the lawsuit will have a material adverse impact onextended its future continuing results of operations.
Employee Stock Purchase Plan
In November 2011,August 2010, Orion’s Board of Directors approved an increase to the share repurchase program authorizing Orion to repurchase in aggregate up to a maximum of $2,500,000 of Orion’s outstanding common stock. In April 2012, Orion's Board approved another increase to the share repurchase program authorizing Orion to repurchase in aggregate up to a maximum of $7,500,000 of Orion's outstanding common stock. As of March 31, 2016, Orion had repurchased 3,022,349 shares of common stock at a cost of $6,791,000 under the program. Orion did not repurchase any shares in fiscal 2016, fiscal 2015 or fiscal 2014 and does not intend to repurchase any additional common stock under this program in the near-term.
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 ESPP allowsfiling 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 employee loansother 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. No share sales have been effected pursuant to the ATM program through March 31, 2023.
NOTE 16 — STOCK OPTIONS AND RESTRICTED SHARES
At Orion’s 2019 annual meeting of shareholders held on August 7, 2019, Orion’s shareholders approved the Orion exceptEnergy 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 Section 16 officers,issuance under the Amended 2016 Plan from 1,750,000 shares to 3,500,000 shares (an increase of 1,750,000 shares); added a minimum vesting period for all awards granted under the Amended 2016 Plan (with limited to 20% of an individual’s annual incomeexceptions); and no more than $250,000 outstanding at any one time. Interestadded a specific prohibition on the loans is charged at the 10-year loan IRS ratepayment of dividends and is payable at the end of each calendar year or upon loan maturity. The loans are secured by a pledge of any and all Orion’s shares purchased by the participant under the ESPP and Orion has full recourse against the employee, including offset against compensation payable.dividend equivalents on unvested awards. As of March 31, 2013, Orion had halted2023, the loan program. Orion hadnumber of shares available for grant under the following shares issued from treasury during fiscalAmended 2016 Plan was 545,146.
The Amended 2016 Plan authorizes grants of equity-based and fiscal 2015:
| As of March 31, 2016 | |||||||||||||||
| Shares Issued Under ESPP Plan | Closing Market Price | Shares Issued Under Loan Program | Dollar Value of Loans Issued | Repayment of Loans | |||||||||||
| Quarter Ended March 31, 2016 | 1,435 | $1.39 | — | $ | — | $ | — | ||||||||
| Quarter Ended December 31, 2015 | 1,170 | $2.17 | — | — | — | ||||||||||
| Quarter Ended September 30, 2015 | 779 | $1.80 | — | — | — | ||||||||||
| Quarter Ended June 30, 2015 | 541 | $2.51 | — | — | — | ||||||||||
| Total | 3,925 | $1.39 - 2.51 | — | $ | — | $ | — | ||||||||
| As of March 31, 2015 | |||||||||||||||
| Shares Issued Under ESPP Plan | Closing Market Price | Shares Issued Under Loan Program | Dollar Value of Loans Issued | Repayment of Loans | |||||||||||
| Quarter Ended March 31, 2015 | 492 | $3.14 | — | $ | — | $ | 35,400 | ||||||||
| Quarter Ended December 31, 2014 | 289 | $5.50 | — | — | — | ||||||||||
| Quarter Ended September 30, 2014 | 322 | $5.35 | — | — | 1,000 | ||||||||||
| Quarter Ended June 30, 2014 | 383 | $4.07 | — | — | 9,600 | ||||||||||
| Total | 1,486 | $3.14 - 5.50 | — | $ | — | $ | 46,000 | ||||||||
Prior to the 2016 Omnibus Incentive Plan, the Company maintained its 2003 Stock Option and 2004 Stock and Incentive Awards Plans (Plans). UnderPlan, as amended, which authorized the termsgrant of the Plans, Orion has reserved 13,500,000 shares for issuance to key employees, consultantscash and directors. The options generally vest and become exercisable ratably between one month and five years although longer and shorter vesting periods have been used in certain circumstances. Exercisability of the options grantedequity awards to employees (the “2004 Plan”). No new awards are generally contingent on the employees’ continued employment and non-vested options are subject to forfeiture if employment terminates
78
Certain non-employee directors have elected to receive stock awards in lieu of cash compensation pursuant to elections made under Orion’s non-employee director compensation program. The PlansAmended 2016 Plan and the 2004 Plan also provide to certain employeespermit 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 has not issued stock options since fiscal 2014 and instead has issued restricted stock.
Orion accounts for stock-based compensation in accordance with ASC 718, Compensation Committee- 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 Board of Directors changed Orion's long-term equity incentive grant policy so that only restricted shares are issued to all employees under the Plans instead of stock options. The restricted shares are settled in Company stock when the restriction period ends. Compensation cost for restricted shares granted to employeesaward and is recognized as expense ratably over the vesting term, which is typically between threerequisite service period. Orion recognizes forfeitures as they occur.
In fiscal 2023, Orion added performance conditions to five years, although on occasion, the vesting term may be one year or less. Settlementa portion of the shares is contingentannual long-term incentive grants for fiscal 2023 for Orion's executive compensation program. The performance-vesting restricted stock will vest to the extent Orion achieves revenue growth targets over fiscal 2023-2025. Orion recognizes performance-vesting restricted stock expense ratably over the requisite service period based on the employees’ continued employment and non-vested shares are subject to forfeiture if employment terminates forlikelihood of meeting the performance conditions. As of March 31, 2023, Orion has not recognized any reason. In fiscal 2016, an aggregate of 795,805 restricted shares were granted valued at a price per share between $1.34 and $2.62, which was the closing market price as of each grant date. In fiscal 2015, an aggregate of 410,496 restricted shares were granted valued at a price per share between $4.16 and $7.23, which was the closing market price as of each grant date. In fiscal 2014, an aggregate of 526,663 restricted shares were granted valued at a price per share between $2.41 and $6.97, which was the closing market price as of each grant date.
The following amounts of stock-based compensation expense for restricted shares and options were recorded (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
Cost of product revenue |
| $ | 4 |
|
| $ | 5 |
|
| $ | 4 |
|
General and administrative |
|
| 1,596 |
|
|
| 793 |
|
|
| 716 |
|
Sales and marketing |
|
| 8 |
|
|
| 12 |
|
|
| 29 |
|
Research and development |
|
| 4 |
|
|
| 3 |
|
|
| 4 |
|
| $ | 1,612 |
|
| $ | 813 |
|
| $ | 753 |
| |
| Fiscal Year Ended March 31, | |||||||||||
| 2016 | 2015 | 2014 | |||||||||
| Cost of product revenue | $ | 36 | $ | 50 | $ | 70 | |||||
| General and administrative | 1,148 | 1,056 | 1,025 | ||||||||
| Sales and marketing | 235 | 360 | 485 | ||||||||
| Research and development | 43 | 33 | 13 | ||||||||
| $ | 1,462 | $ | 1,499 | $ | 1,593 | ||||||
The following table summarizes information with respect to outstanding stock options:
|
| Number of |
|
| Weighted |
| ||
Outstanding at March 31, 2022 |
|
| 142,428 |
|
| $ | 2.28 |
|
Granted |
|
| — |
|
| $ | — |
|
Exercised |
|
| (26,646 | ) |
| $ | 2.18 |
|
Forfeited |
|
| (42,646 | ) |
| $ | 2.22 |
|
Outstanding at March 31, 2023 |
|
| 73,136 |
|
| $ | 2.41 |
|
Exercisable at March 31, 2023 |
|
| 73,136 |
|
| $ | 2.41 |
|
| Number of Shares | Weighted Average Exercise Price | Weighted Average Fair Value of Options Granted | Aggregate Intrinsic Value | ||||||||||
| Outstanding at March 31, 2013 | 3,312,523 | $ | 3.42 | 1.23 | |||||||||
| Granted | 305,544 | $ | 1.98 | ||||||||||
| Exercised | (446,059 | ) | $ | 2.25 | |||||||||
| Forfeited | (455,691 | ) | $ | 3.26 | |||||||||
| Outstanding at March 31, 2014 | 2,716,317 | $ | 3.43 | 1.32 | |||||||||
| Granted | — | $ | — | ||||||||||
| Exercised | (139,407 | ) | $ | 2.46 | |||||||||
| Forfeited | (150,074 | ) | $ | 3.13 | |||||||||
| Outstanding at March 31, 2015 | 2,426,836 | $ | 3.50 | — | |||||||||
| Granted | — | $ | — | ||||||||||
| Exercised | (46,410 | ) | $ | 2.09 | |||||||||
| Forfeited | (363,380 | ) | $ | 4.68 | |||||||||
| Outstanding at March 31, 2016 | 2,017,046 | $ | 3.32 | — | $ | — | |||||||
| Exercisable at March 31, 2016 | 1,811,146 | $ | — | ||||||||||
The following table summarizes the range of exercise prices on outstanding stock options at March 31, 2016:
|
| March 31, 2023 |
| |||||||||
|
| Outstanding and Vested Shares |
|
| Weighted |
|
| Weighted |
| |||
$2.41 |
|
| 73,136 |
|
|
| 0.16 |
|
|
| 2.41 |
|
|
| 73,136 |
|
|
| 0.16 |
|
| $ | 2.41 |
| |
The aggregate intrinsic value of outstanding stock options is $0 at March 31, 2023 based on the closing share price of $2.03.
79
The following table summarizes information with respect to performance-vesting restricted stock and time vesting-restricted stock activity:
|
| Shares |
|
| Weighted |
| ||
Balance at March 31, 2022 |
|
| 450,458 |
|
| $ | 4.80 |
|
Shares issued |
|
| 856,738 |
|
| $ | 2.16 |
|
Shares vested |
|
| (536,622 | ) |
| $ | 3.58 |
|
Shares forfeited |
|
| (27,120 | ) |
| $ | 3.96 |
|
Shares outstanding at March 31, 2023 |
|
| 743,454 |
|
| $ | 2.90 |
|
Per share price on grant date |
| $1.82 - 2.18 |
|
|
|
| ||
| March 31, 2016 | |||||||||||
| Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Vested | Weighted Average Exercise Price | |||||||
| $1.62 - 2.20 | 684,476 | 4.93 | $1.98 | 558,776 | $1.98 | ||||||
| $2.41 - 2.75 | 373,144 | 6.24 | 2.45 | 360,744 | 2.44 | ||||||
| $2.86 - 4.28 | 719,971 | 4.07 | 3.41 | 652,171 | 3.44 | ||||||
| $4.49 - 4.76 | 25,400 | 2.40 | 4.64 | 25,400 | 4.64 | ||||||
| $5.35 - 5.44 | 77,204 | 3.03 | 5.39 | 77,204 | 5.39 | ||||||
| $9.00 | 27,000 | 1.87 | 9.00 | 27,000 | 9.00 | ||||||
| $10.14 - 11.61 | 109,851 | 1.66 | 10.87 | 109,851 | 10.87 | ||||||
| 2,017,046 | 4.54 | $3.32 | 1,811,146 | $3.43 | |||||||
During fiscal 2016,2023, Orion grantedrecognized $1.6 million of stock-based compensation expense related to restricted shares as follows (which are included in the above stock plan activity tables):
| Balance at March 31, 2015 | 704,688 | ||
| Shares issued | 795,805 | ||
| Shares vested | (240,633 | ) | |
| Shares forfeited | (206,471 | ) | |
| Shares outstanding at March 31, 2016 | 1,053,389 | ||
| Per share price on grant date | $1.34-2.62 | ||
| Compensation expense | $ | 1,306,191 | |
As of March 31, 2016,2023, 2022 and 2021, the weighted average grant-date fair value of restricted shares granted was $2.06.
Unrecognized compensation cost related to non-vested common stock-based compensation as of March 31, 20162023 is expected to be recognized as follows (dollars in thousands):
Fiscal 2024 |
|
| 704 |
|
Fiscal 2025 |
|
| 467 |
|
Fiscal 2026 |
|
| 503 |
|
Thereafter |
|
| — |
|
Total |
| $ | 1,674 |
|
Remaining weighted average expected term |
| 2.0 years |
| |
| Fiscal 2017 | $ | 1,113 | |
| Fiscal 2018 | 771 | ||
| Fiscal 2019 | 274 | ||
| Fiscal 2020 | 72 | ||
| Fiscal 2021 | 12 | ||
| Thereafter | — | ||
| $ | 2,242 | ||
| Remaining weighted average expected term | 2.6 years | ||
| Number of Shares | Weighted Average Exercise Price | |||||
| Outstanding at March 31, 2013 | 38,980 | $ | 2.25 | |||
| Issued | — | — | ||||
| Exercised | — | $ | — | |||
| Cancelled | — | $ | — | |||
| Outstanding at March 31, 2014 | 38,980 | $ | 2.25 | |||
| Issued | — | — | ||||
| Exercised | (38,980 | ) | 2.25 | |||
| Cancelled | — | — | ||||
| Outstanding at March 31, 2015 and March 31,2016 | — | $ | — | |||
NOTE 1017 — SEGMENT DATA
Orion reorganized its business intohas the following business segments: Orion U.S. MarketsServices Group Division ("USM"(“OSG”), Orion Engineered Services Division ("OES") and Orion Distribution Services Division (“ODS”), Orion U.S. Markets Division (“USM”) and Orion Electric Vehicle Charging Systems Division ("ODS"EV Division"). The accounting policies are the same for each business segment as they are on a consolidated basis.
Orion Services Group Division
The descriptionsOSG segment (a) develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems and (b) provides retailers, distributors and other businesses with maintenance, repair and replacement services for the lighting and related electrical components deployed in their facilities. OSG provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers.
Orion Distribution Services Division
The ODS segment sells lighting products through manufacturer representative agencies and a network of Orion’s segmentsNorth American broadline electrical distributors and their summary financial information are presented below.
Orion U.S. Markets Division ("USM")
The USM segment sells commercial lighting systems and energy management systems to the wholesale contractor markets. USM customers include domestic energy service companies, or ESCOs and electrical contractors.
80
Orion Engineered SystemsElectric Vehicle Charging Division ("OES")
Our EV Division segment develops and sells lighting productsoffers leading electric vehicle charging expertise and provides construction and engineering services for Orion'sturnkey installation solutions with ongoing support to all commercial LED and High Intensity Fluorescent ("HIF") lighting and energy management systems. OES provides turnkey solutions for large national accounts, governments, municipalities and schools.
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, which primarily include intercompany eliminations.
|
| Revenues |
|
| Operating Income (Loss) |
| ||||||||||||||||||
|
| For the year ended March 31, |
|
| For the year ended March 31, |
| ||||||||||||||||||
(dollars in thousands) |
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
| ||||||
Segments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Orion Services Group |
| $ | 38,002 |
|
| $ | 82,568 |
|
| $ | 84,243 |
|
| $ | (6,982 | ) |
| $ | 6,462 |
|
| $ | 7,472 |
|
Orion Distribution Services |
|
| 15,395 |
|
|
| 22,209 |
|
|
| 21,122 |
|
|
| (186 | ) |
|
| 3,114 |
|
|
| 2,430 |
|
Orion U.S. Markets |
|
| 17,710 |
|
|
| 19,606 |
|
|
| 11,475 |
|
|
| 1,605 |
|
|
| 3,963 |
|
|
| 1,683 |
|
Orion Electric Vehicle Charging Systems |
|
| 6,275 |
|
|
| — |
|
|
| — |
|
|
| (4,133 | ) |
|
| — |
|
|
| — |
|
Corporate and Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,289 | ) |
|
| (5,148 | ) |
|
| (4,749 | ) |
|
| $ | 77,383 |
|
| $ | 124,383 |
|
| $ | 116,840 |
|
| $ | (15,985 | ) |
| $ | 8,391 |
|
| $ | 6,836 |
|
|
| Depreciation and Amortization |
|
| Capital Expenditures |
| ||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
| ||||||
Segments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Orion Services Group |
| $ | 987 |
|
| $ | 997 |
|
| $ | 913 |
|
| $ | 227 |
|
| $ | 224 |
|
| $ | 516 |
|
Orion Distribution Services |
|
| 195 |
|
|
| 205 |
|
|
| 231 |
|
|
| 17 |
|
|
| 63 |
|
|
| 158 |
|
Orion U.S. Markets |
|
| 229 |
|
|
| 185 |
|
|
| 128 |
|
|
| 21 |
|
|
| 58 |
|
|
| 107 |
|
Orion Electric Vehicle Charging Systems |
|
| 465 |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| — |
|
Corporate and Other |
|
| 219 |
|
|
| 229 |
|
|
| 208 |
|
|
| 316 |
|
|
| 153 |
|
|
| 121 |
|
|
| $ | 2,095 |
|
| $ | 1,616 |
|
| $ | 1,480 |
|
| $ | 586 |
|
| $ | 498 |
|
| $ | 902 |
|
|
| Total Assets |
| |||||
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||
Segments: |
|
|
|
|
|
| ||
Orion Services Group |
| $ | 19,167 |
|
| $ | 26,642 |
|
Orion Distribution Services |
|
| 6,021 |
|
|
| 6,723 |
|
Orion U.S. Markets |
|
| 10,191 |
|
|
| 8,017 |
|
Orion Electric Vehicle Charging Systems |
|
| 11,502 |
|
|
| — |
|
Corporate and Other |
|
| 24,698 |
|
|
| 45,435 |
|
| $ | 71,579 |
|
| $ | 86,817 |
| |
| Revenues | Operating (Loss) Profit | ||||||||||||||||||||||
| (dollars in thousands) | For the year ended March 31, | For the year ended March 31, | |||||||||||||||||||||
| 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||
| Segments: | |||||||||||||||||||||||
| U.S. Markets | $ | 38,841 | $ | 37,778 | $ | 38,766 | $ | (4,958 | ) | $ | (12,542 | ) | $ | (1,012 | ) | ||||||||
| Engineered Systems | 26,325 | 33,454 | 49,857 | (6,982 | ) | (12,431 | ) | 1,260 | |||||||||||||||
| Distribution Services | 2,476 | 978 | — | (632 | ) | (455 | ) | — | |||||||||||||||
| Corporate and Other | — | — | — | (7,349 | ) | (6,508 | ) | (8,591 | ) | ||||||||||||||
| $ | 67,642 | $ | 72,210 | $ | 88,623 | $ | (19,921 | ) | $ | (31,936 | ) | $ | (8,343 | ) | |||||||||
| Depreciation and Amortization | Capital Expenditures | ||||||||||||||||||||||
| For the year ended March 31, | For the year ended March 31, | ||||||||||||||||||||||
| 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||
| Segments: | |||||||||||||||||||||||
| U.S. Markets | $ | 1,168 | $ | 1,711 | $ | 2,667 | $ | 72 | $ | 626 | $ | 276 | |||||||||||
| Engineered Systems | 1,987 | 1,404 | 302 | 43 | 495 | — | |||||||||||||||||
| Distribution Services | 71 | 32 | — | 10 | 40 | — | |||||||||||||||||
| Corporate and Other | 939 | 1,036 | 1,569 | 276 | 845 | 134 | |||||||||||||||||
| $ | 4,165 | $ | 4,183 | $ | 4,538 | $ | 401 | $ | 2,006 | $ | 410 | ||||||||||||
| Total Assets | Deferred Revenue | ||||||||||||||
| March 31, 2016 | March 31, 2015 | March 31, 2016 | March 31, 2015 | ||||||||||||
| Segments: | |||||||||||||||
| U.S. Markets | $ | 18,503 | $ | 27,769 | $ | 167 | $ | 157 | |||||||
| Engineered Systems | 21,885 | 27,435 | 1,098 | 1,361 | |||||||||||
| Distribution Services | 1,386 | 261 | — | — | |||||||||||
| Corporate and Other | 29,101 | 32,340 | — | — | |||||||||||
| $ | 70,875 | $ | 87,805 | $ | 1,265 | $ | 1,518 | ||||||||
Orion’s revenue outside the United States is insignificantwas $0.2 million in fiscal 2023 and $0.0 million in fiscal 2022 and fiscal 2021, respectively. Orion has no long-lived assets outside the United States.
Fiscal 2022 Operating Income above includes a payroll tax credit, in accordance with IAS 20.
NOTE 18 — ACQUISITION
Acquisition of Voltrek
Effective on October 5, 2022, Orion acquired all the membership interests of Voltrek, an electric vehicle charging station solutions provider for a purchase price of $5.0 million in cash and $1.0 million of shares of common stock of Orion, subject to normal and customary closing adjustments of $0.9 million (the “Voltrek Acquisition”). In addition, depending upon the relative EBITDA growth of Voltrek’s business in fiscal 2023, 2024 and 2025, Orion could pay up to an additional $3.0 million, $3.5 million and $7.15 million, respectively, in earn-out payments. These compensatory payments do not fall within the scope of ASC 805, Business Combinations, and will be expensed over the course of the earn-out periods to the extent they are earned. As of March 31, 2023, Orion recorded $3.0 million to accrued expenses for the fiscal 2023 earn-out opportunity and an additional $1.0 million to other long-term liabilities for the
81
cumulative potential earn-out opportunity which would be paid in fiscal 2026. The Voltrek Acquisition was funded with cash and Orion shares. Voltrek operates as Voltrek, an Orion Energy Systems business. The Voltrek Acquisition leverages Orion’s project management and maintenance expertise into a rapidly growing sector.
Orion has accounted for the Voltrek Acquisition as a business combination. Orion has preliminarily allocated the purchase price of approximately $6.9 million to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill. The purchase price and closing adjustments were paid in cash and 620,067 shares of common stock with a total fair market value of $1.0 million, which is recorded in the opening balance sheet at fair value of $0.8 million, the discount on which is due to lock-up requirements on the shares. Orion is in the process of finalizing third party valuations of intangible assets.
The following table summarizes the purchase price allocation for Voltrek, including any adjustments during the measurement period:
(in thousands) |
| Preliminary Opening Balance Sheet |
|
| Adjustments |
|
| Adjusted Opening Balance Sheet |
| |||
Cash |
| $ | 416 |
|
| $ | — |
|
| $ | 416 |
|
Accounts receivable |
|
| 1,438 |
|
|
| (75 | ) |
|
| 1,363 |
|
Revenue earned but not billed |
|
| 365 |
|
|
| (40 | ) |
|
| 325 |
|
Inventory |
|
| 880 |
|
|
| — |
|
|
| 880 |
|
Prepaid expenses and other current assets |
|
| 39 |
|
|
| — |
|
|
| 39 |
|
Property and equipment |
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Goodwill |
|
| 861 |
|
|
| 59 |
|
|
| 920 |
|
Other intangible assets |
|
| 4,200 |
|
|
| 100 |
|
|
| 4,300 |
|
Other long-term assets |
|
| 211 |
|
|
| 12 |
|
|
| 223 |
|
Accounts payable |
|
| (1,199 | ) |
|
| 66 |
|
|
| (1,133 | ) |
Accrued expenses and other |
|
| (286 | ) |
|
| — |
|
|
| (286 | ) |
Other long-term liabilities |
|
| (180 | ) |
|
| — |
|
|
| (180 | ) |
Net purchase consideration |
| $ | 6,749 |
|
| $ | 122 |
|
| $ | 6,871 |
|
Goodwill recorded from the Voltrek Acquisition is attributable to the skillset of the acquired workforce. The goodwill resulting from the Voltrek Acquisition is expected to be deductible for tax purposes. The intangible assets include amounts recognized for the fair value of the trade name, vendor relationship and customer relationships.
The tradename intangible asset was valued using a relief from royalty method. The significant assumptions used include the estimated revenue and royalty rate, among other factors.
The vendor relationship intangible asset was valued using the income approach - excess earnings method. The significant assumptions include estimated revenue, cost of goods sold, and probability of renewal, among other factors.
The customer relationship intangible asset was valued using the income approach - with-and-without method. The significant assumptions include estimated cash flows (including appropriate revenue, cost of revenue and operating expenses attributable to the asset, retention rate, among other factors), and discount rate, reflecting the risks inherent in the future cash flow stream, among other factors.
The categorization of the framework used to measure fair value of the intangible assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used.
The following table presents the details of the intangible assets acquired at the date of Voltrek Acquisition (dollars in thousands):
|
| Estimated |
| Estimated Useful Life (Years) |
| ||
Tradename |
| $ | 300 |
|
| 5 |
|
Vendor relationship |
| $ | 2,600 |
|
| 7 |
|
Customer relationships |
| $ | 1,400 |
|
| 3 |
|
Voltrek's post-acquisition results of operations since October 5, 2022 are included in Orion’s Consolidated Statements of Operations. The operating results of Voltrek are included in the EV Division segment. See note 17 - Segments, for results.
82
Acquisition of Stay-Lite Lighting
Effective on January 1, 2022, Orion acquired all of the issued and outstanding capital stock of Stay-Lite Lighting, a nationwide lighting and electrical maintenance service provider, for $4.3 million (the “Stay-Lite Acquisition”). Stay-Lite Lighting operates as Stay-Lite Lighting, an Orion Energy Systems business. The Stay-Lite Acquisition accelerates the growth of Orion's maintenance services offerings through its Orion Services Group, which provides lighting and electrical services to customers.
Orion has accounted for this transaction as a business combination. Orion has allocated the purchase price of approximately $4.3 million, which included an estimate of the earn-out liability of $0.2 million and $0.1 million for the working capital adjustment received in the first quarter fiscal 2023, to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill. The remaining was $4.0 million funded with cash. Orion could pay up to $0.7 million in earn-out related purchase price, which is based on performance during the 2022 and 2023 calendar years. During fiscal 2023, the earn-out liability of $0.2 million was reversed, through acquisition related costs, based on Stay-Lite Lighting's actual performance during fiscal 2023 and Orion's assessment of expected performance in fiscal 2024.
The following table summarizes the purchase price allocation for Voltrek, including any adjustments during the measurement period:
(in thousands) |
| Preliminary Opening Balance Sheet |
|
| Adjustments |
|
| Adjusted Opening Balance Sheet |
| |||
Cash |
| $ | 95 |
|
| $ | — |
|
| $ | 95 |
|
Accounts receivable |
|
| 2,690 |
|
|
| — |
|
|
| 2,690 |
|
Revenue earned but not billed |
|
| 342 |
|
|
| — |
|
|
| 342 |
|
Inventory |
|
| 504 |
|
|
| — |
|
|
| 504 |
|
Prepaid expenses and other current assets |
|
| 41 |
|
|
| — |
|
|
| 41 |
|
Property and equipment |
|
| 958 |
|
|
| (233 | ) |
|
| 725 |
|
Goodwill |
|
| 350 |
|
|
| 214 |
|
|
| 564 |
|
Other intangible assets |
|
| 696 |
|
|
| (23 | ) |
|
| 673 |
|
Other long-term assets |
|
| 537 |
|
|
| — |
|
|
| 537 |
|
Accounts payable |
|
| (965 | ) |
|
| — |
|
|
| (965 | ) |
Accrued expenses and other |
|
| (550 | ) |
|
| 58 |
|
|
| (492 | ) |
Other long-term liabilities |
|
| (412 | ) |
|
| 1 |
|
|
| (411 | ) |
Net purchase consideration |
| $ | 4,286 |
|
| $ | 17 |
|
| $ | 4,303 |
|
Goodwill recorded from the Stay-Lite Acquisition is attributable to the expected synergies from the business combination. The goodwill resulting from the Stay-Lite Acquisition is deductible for tax purposes. The intangible assets include amounts recognized for the fair value of the trade name and customer relationships. The fair value of the intangible assets was determined based upon the income (discounted cash flow) approach.
The following table presents the details of the intangible assets acquired at the date of Stay-Lite Acquisition (dollars in thousands):
|
| Estimated |
| Estimated Useful Life (Years) |
| ||
Tradename |
| $ | 164 |
|
| 5 |
|
Customer relationships |
|
| 509 |
|
| 8 |
|
Stay-Lite Lighting’s post-acquisition results of operations since January 1, 2022 are included in Orion’s Consolidated Statements of Operations. Fiscal 2022 net sales of Stay-Lite Lighting for the period were $2.7 million and operating loss was $0.7 million. The operating results of Stay-Lite Lighting are included in the Orion Services Group segment.
Unaudited pro forma
The pro forma information was determined based on the historical results of Orion and unaudited financial results from Stay-Lite Lighting and Voltrek. These proforma results reflect additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant, and equipment and intangible asset occurred at the beginning of the period, along with consequential tax effects. The unaudited pro forma results have been prepared for comparative purposes only and are not necessarily
83
indicative of what would have occurred had the business combinations been completed at the beginning of the period or the results that may occur in the future. Furthermore, the unaudited pro forma financial information does not reflect the impact of any synergies resulting from the acquisitions.
If Voltrek was acquired on April 1, 2022, the pro forma Orion revenue for the twelve-month period ended on March 31, 2023 would have been $79.8 million and proforma net loss would have been $(33.5) million. Orion pro-forma fiscal 2022 revenue would have been $128.0 million and net income would have been $5.9 million.
If Stay-Lite was acquired on April 1, 2020, the pro forma Orion full year fiscal 2022 revenue would have been $131.3 million and net income would have been $6.0 million. Orion pro-forma fiscal 2021 revenue would have been $125.4 million and net income would have been $25.5 million.
Transaction costs related to the Stay-Lite Acquisition and the Voltrek Acquisition are recorded in acquisition related costs in the Consolidated Statements of Operations. Transaction costs totaled $0.8 million in the twelve months ending March 31, 2023 and $0.5 million twelve months ended March 31, 2022, respectively.
NOTE 1119 — SUBSEQUENT EVENTS
Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and noted no subsequent event requiring accrual or additional disclosure.
NOTE 1220 — QUARTERLY FINANCIAL DATA (UNAUDITED)
Summary quarterly results for the years ended March 31, 20162023 and March 31, 20152022 are as follows:
|
| Three Months Ended |
|
|
|
| ||||||||||||||
|
| Jun 30, 2022 |
|
| Sep 30, 2022 |
|
| Dec 31, 2022 |
|
| March 31, 2023 |
|
| Total |
| |||||
|
| (in thousands, except per share amounts) |
|
|
|
| ||||||||||||||
Total revenue |
| $ | 17,906 |
|
| $ | 17,560 |
|
| $ | 20,288 |
|
| $ | 21,629 |
|
| $ | 77,383 |
|
Gross profit |
| $ | 3,554 |
|
| $ | 4,435 |
|
| $ | 4,781 |
|
| $ | 4,741 |
|
| $ | 17,511 |
|
Net loss (1) |
| $ | (2,835 | ) |
| $ | (2,331 | ) |
| $ | (24,059 | ) |
| $ | (5,116 | ) |
| $ | (34,341 | ) |
Basic net loss per share (1) |
| $ | (0.09 | ) |
| $ | (0.07 | ) |
| $ | (0.75 | ) |
| $ | (0.16 | ) |
| $ | (1.08 | ) |
Shares used in basic per share calculation |
|
| 31,138 |
|
|
| 31,031 |
|
|
| 32,048 |
|
|
| 32,294 |
|
|
| 31,704 |
|
Diluted net loss per share (1) |
| $ | (0.09 | ) |
| $ | (0.07 | ) |
| $ | (0.75 | ) |
| $ | (0.16 | ) |
| $ | (1.08 | ) |
Shares used in diluted per share calculation |
|
| 31,138 |
|
|
| 31,031 |
|
|
| 32,048 |
|
|
| 32,294 |
|
|
| 31,704 |
|
|
| Three Months Ended |
|
|
|
| ||||||||||||||
|
| Jun 30, 2021 |
|
| Sep 30, 2021 |
|
| Dec 31, 2021 |
|
| Mar 31, 2022 |
|
| Total |
| |||||
|
| (in thousands, except per share amounts) |
|
|
|
| ||||||||||||||
Total revenue |
| $ | 35,101 |
|
| $ | 36,510 |
|
| $ | 30,714 |
|
| $ | 22,058 |
|
| $ | 124,383 |
|
Gross profit |
| $ | 10,230 |
|
| $ | 10,788 |
|
| $ | 7,641 |
|
| $ | 5,253 |
|
| $ | 33,912 |
|
Net income (loss) |
| $ | 2,510 |
|
| $ | 3,659 |
|
| $ | 1,102 |
|
| $ | (1,180 | ) |
| $ | 6,091 |
|
Basic net income (loss) per share |
| $ | 0.08 |
|
| $ | 0.12 |
|
| $ | 0.04 |
|
| $ | (0.04 | ) |
| $ | 0.20 |
|
Shares used in basic per share calculation |
|
| 30,860 |
|
|
| 31,031 |
|
|
| 31,085 |
|
|
| 31,097 |
|
|
| 31,018 |
|
Diluted net income (loss) per share |
| $ | 0.08 |
|
| $ | 0.12 |
|
| $ | 0.04 |
|
| $ | (0.04 | ) |
| $ | 0.19 |
|
Shares used in diluted per share calculation |
|
| 31,290 |
|
|
| 31,288 |
|
|
| 31,235 |
|
|
| 31,097 |
|
|
| 31,295 |
|
| Three Months Ended | |||||||||||||||||||
| Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Total | |||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||||||
| Total revenue | $ | 18,576 | $ | 16,751 | $ | 15,728 | $ | 16,587 | $ | 67,642 | |||||||||
| Gross profit | $ | 4,618 | $ | 4,708 | $ | 2,913 | $ | 3,758 | $ | 15,997 | |||||||||
| Net income (loss) | $ | (10,870 | ) | $ | (2,004 | ) | $ | (3,600 | ) | $ | (3,652 | ) | $ | (20,126 | ) | ||||
| Basic net income per share | $ | (0.39 | ) | $ | (0.07 | ) | $ | (0.13 | ) | $ | (0.13 | ) | $ | (0.73 | ) | ||||
| Shares used in basic per share calculation | 27,759 | 27,672 | 27,598 | 27,482 | 27,628 | ||||||||||||||
| Diluted net income per share | $ | (0.39 | ) | $ | (0.07 | ) | $ | (0.13 | ) | $ | (0.13 | ) | $ | (0.73 | ) | ||||
| Shares used in diluted per share calculation | 27,759 | 27,672 | 27,598 | 27,482 | 27,628 | ||||||||||||||
| Three Months Ended | |||||||||||||||||||
| Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Total | |||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||||||
| Total revenue | $ | 19,366 | $ | 26,138 | $ | 13,393 | $ | 13,313 | $ | 72,210 | |||||||||
| Gross profit | $ | 2,982 | $ | 3,824 | $ | (10,555 | ) | $ | 2,612 | $ | (1,137 | ) | |||||||
| Net income (loss) | $ | (4,693 | ) | $ | (4,663 | ) | $ | (18,346 | ) | $ | (4,359 | ) | $ | (32,061 | ) | ||||
| Basic net income per share | $ | (0.19 | ) | $ | (0.21 | ) | $ | (0.84 | ) | $ | (0.20 | ) | $ | (1.43 | ) | ||||
| Shares used in basic per share calculation | 24,071 | 21,883 | 21,820 | 21,669 | 22,353 | ||||||||||||||
| Diluted net income per share | $ | (0.19 | ) | $ | (0.21 | ) | $ | (0.84 | ) | $ | (0.20 | ) | $ | (1.43 | ) | ||||
| Shares used in diluted per share calculation | 24,071 | 21,883 | 21,820 | 21,669 | 22,353 | ||||||||||||||
The four quarters for net earnings per share may not add to the total year because of differences in the weighted average number of shares outstanding during the quarters and the year.
84
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures and our internal control over financial reporting as of March 31, 2016,2023, pursuant to Exchange Act Rule 13a-15(b) and 15d-15. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have identified a material weaknesses in internal controls over financial reporting described below in Management’s Report on Internal Control and have, therefore, concluded that our disclosure controls and procedures were not effective at a level of reasonable assurance as of March 31, 2016.
Management, including our Chief Executive Officer and Chief Financial Officer, believes the consolidated financial statements included in this Annual Report on Form 10-K fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principal executivethe Chief Executive Officer and principal financial officersChief Financial Officer, or persons performing similar functions, and effected by ourthe board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles,GAAP and includes those policies and procedures that:
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. ProjectionsAlso, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies andor procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, our management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2016 based on the frameworkcriteria set forth in
85
Changes in Internal Controls OverControl over Financial Reporting
There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) underduring the Exchange Act) that occurred during the
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
86
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item with respect to directors, executive officers and corporate governance is incorporated by reference to Orion'sour Proxy Statement for its
Code of Conduct
We have adopted a Code of Conduct that applies to all of our directors, employees and officers, including our principal executive officer, our principal financial officer, our controller and persons performing similar functions. Our Code of Conduct is available on our web site at www.orionlighting.com. Future material amendments or waivers relating to the Code of Conduct will be disclosed on our web site referenced in this paragraph within four business days following the date of such amendment or waiver.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to Orion'sour Proxy Statement for its
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
See Item 5, Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchaser of Securities, under the heading “Equity Compensation Plan Information” for information regarding our securities authorized for issuance under equity compensation plans. The additional information required by this item is incorporated by reference to Orion'sour Proxy Statement for its
The information required by this item is incorporated by reference to Orion'sour Proxy Statement for its
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to Orion'sour Proxy Statement for its
87
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Our financial statements are set forth in Item 8 of this Form 10-K.
88
| SCHEDULE II VALUATION and QUALIFYING ACCOUNTS | ||||||||||||||||
| Balance at beginning of period | Provisions charged to expense | Write offs and other | Balance at end of period | |||||||||||||
| March 31, | (in Thousands) | |||||||||||||||
| 2016 | Allowance for Doubtful Accounts | $ | 458 | $ | 575 | $ | 528 | $ | 505 | |||||||
| 2015 | Allowance for Doubtful Accounts | $ | 384 | $ | 285 | $ | 211 | $ | 458 | |||||||
| 2014 | Allowance for Doubtful Accounts | $ | 900 | $ | 174 | $ | 690 | $ | 384 | |||||||
| 2016 | Inventory Obsolescence Reserve | $ | 1,619 | $ | 509 | $ | 1 | $ | 2,127 | |||||||
| 2015 | Inventory Obsolescence Reserve | $ | 2,527 | $ | 10,505 | $ | 11,413 | $ | 1,619 | |||||||
| 2014 | Inventory Obsolescence Reserve | $ | 2,301 | $ | 1,995 | $ | 1,769 | $ | 2,527 | |||||||
EXHIBIT INDEX
Number | Exhibit Title | ||
3.1 | |||
3.2 | |||
4.1 | |||
10.1 | |||
10.2 | |||
10.3 | |||
10.4 | |||
10.5 | |||
10.6 | |||
10.7 | |||
10.8 | |||
10.9 | |||
10.10 | |||
10.11 | |||
10.12 | |||
10.13 | |||
10.14 | |||
10.15 | |||
10.16 | |||
89
10.17 | |||
10.18 | |||
10.19 | |||
10.20 | |||
10.21 | |||
10.22 | |||
10.23 | |||
10.24 | |||
10.25 | |||
10.26 | |||
10.27 | Cooperation Agreement, dated January 3, 2023, by and among Orion Energy Systems, Inc., Kanen Wealth Management, LLC, Philotimo Fund, LP and David Kanen and Charles McDulin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 4, 2023). | ||
10.28 | Consulting Agreement, dated as of August 2, 2022 and effective as of August 4, 2022, between Orion Energy Systems, Inc. and Alan Howe, filed as Exhibit 10.3 to the Registrant's Form 8-K filed on August 3, 2022, is hereby incorporated by reference.* | ||
21.1 | |||
23.1 | |||
31.1 | |||
31.2 | |||
32.1 | |||
101 | 101.INS Inline XBRL Instance Document+ | ||
101.SCH Inline XBRL Taxonomy extension schema | |||
101.CAL Inline XBRL Taxonomy extension calculation linkbase | |||
101.DEF Inline XBRL Taxonomy extension definition linkbase document+ | |||
101.LAB Inline XBRL Taxonomy extension label linkbase | |||
101.PRE Inline XBRL Taxonomy extension presentation linkbase | |||
| document+ | ||||
104 | The cover page from the | |||
90
Documents incorporated by reference by Orion Energy Systems, Inc. are filed with the Securities and Exchange Commission under File No. 001-33887.
* Management contract or compensatory plan or arrangement.
+ Filed herewith
ITEM 16. FORM 10-K SUMMARY
None.
91
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on June 23, 2016.
ORION ENERGY SYSTEMS, INC. | ||||
By: | /s/ Michael H. Jenkins | |||
Michael H. Jenkins | ||||
Chief Executive Officer | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant in the capacities indicated on June 23, 2016.
Signature | Title | |
/s/ | Chief Executive Officer and Director (Principal | |
Michael H. | Executive Officer) | |
/s/ | Chief Financial Officer, Executive Vice President, Chief Accounting Officer and | |
J. Per Brodin | Treasurer (Principal Financial Officer) | |
/s/ | Board Chair | |
Anthony L. Otten | ||
/s/ Michael W. Altschaefl | Director | |
Michael W. Altschaefl | ||
/s/ | Director | |
Ellen B. Richstone | ||
/s/ | Director | |
Sally Washlow | ||
/s/ | Director | |
Richard A. Shapiro | ||
92