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, and reduce our revenue and profitability, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.

Our ability to balance customer demand and production capacity and increased difficulty in obtaining permanent employee staffing could negatively impact our business.

As customer demand for our products changes, we must be able to adjust our production capacity, including increasing or decreasing our employee workforce, to meet demand. We are continually taking steps to address our manufacturing capacity needs for our products. If we are not able to increase or decrease our production capacity at our targeted rate or if there are unforeseen costs associated with adjusting our capacity levels, our ability to execute our operating plan could be adversely affected

We have recently experienced increased difficulty in hiring sufficient permanent employees to support our production demands. This circumstance has resulted in our increased reliance on temporary employee staffing to support our production operations. Temporary employees can be less reliable and require more ongoing training than permanent employees. These factors can adversely affect our operational efficiencies. This situation has also placed a significant burden on our continuing employees, has resulted in higher recruiting expenses as we have sought to recruit and train additional new permanent employees, and introduced increased instability in our operations to the extent responsibilities are reallocated to new or different employees. To the extent that we are unable to effectively hire a sufficient number of permanent employees, and our reliance on temporary staffing continues to increase, our operations and our ability to execute our operating plan could be adversely affected.

Our inability to attract and retain key employees, our reseller network members or manufacturer representative agencies could adversely affect our operations and our ability to execute on our operating plan and growth strategy.

We rely upon the knowledge, experience and skills of key employees throughout our organization, particularly our senior management team, our sales group that requires technical knowledge or contacts in, and knowledge of, the LED industry, and our innovation and engineering team. In addition, our ability to attract talented new employees, particularly in our sales group and our innovation and engineering team, is also critical to our success. We also depend on our distribution channels and network of manufacturer sales representative agencies. If we are unable to attract and retain key employees, resellers, and manufacturer sales representative agencies because of competition or, in the case of employees, inadequate compensation or other factors, our results of operations and our ability to execute our operating plan could be adversely affected.

If our information technology systems security measures are breached or fail, our products may be perceived as not being secure, customers may curtail or stop buying our products, we may incur significant legal and financial condition.exposure, and our results of operations, financial condition and cash flows could be materially adversely affected.

Our information technology systems involve the storage of our confidential information and trade secrets, as well as our customers’ personal and proprietary information in our equipment, networks and corporate systems. Security breaches expose us to a risk of loss of this information, litigation and increased costs for security measures, loss of revenue, damage to our reputation and potential liability. Security breaches or unauthorized access may result in a combination of significant legal and financial exposure, increased remediation and other costs, theft and/or unauthorized use or publication of our trade secrets and other confidential business information, damage to our reputation and a loss of confidence in the security of our products, services and networks that could have an adverse effect upon our business. While we take steps to prevent unauthorized access to our corporate systems, because the techniques used to obtain unauthorized access, disable or sabotage systems change frequently or may be designed to remain dormant until a triggering event, we may be unable to anticipate these techniques or implement adequate preventative measures. Further, the

risk of a security breach or disruption, particularly through cyber attacks, or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as cyber attacks have become more prevalent and harder to detect and fight against. In addition, hardware, software or applications we procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise network and data security. Any breach or failure of our information technology systems could result in decreased revenue, increased expenses, increased capital expenditures, customer dissatisfaction and potential lawsuits, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.

Some of our existing information technology systems are in need of enhancement, updating and replacement. If our information technology systems fail, or if we experience an interruption in their operation, then our business, results of operations and financial condition could be materially adversely affected.

The efficient operation of our business is dependent on our information technology systems, some of which are in need of enhancement, updating and replacement. We rely on these systems generally to manage day-to-day operations, manage relationships with our customers, maintain our research and development data, and maintain our financial and accounting records. The failure of our information technology systems, our inability to successfully maintain, enhance and/or replace our information technology systems, or any compromise of the integrity or security of the data we generate from our information technology systems, could have a material adverse affect on our results of operations, disrupt our business and product development and make us unable, or severely limit our ability, to respond to customer demands. In addition, our information technology systems are vulnerable to damage or interruption from:

Any interruption of our information technology systems could result in decreased revenue, increased expenses, increased capital expenditures, customer dissatisfaction and potential lawsuits, 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, 2021, our Chief Executive Officer and Chief Financial Officer concluded that our internal controls for fiscal 2021 were designed and operating effectively. 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.

Financial Risks

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.

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 loss of any 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 80%, 83% and 48% respectively, of our total revenue for fiscal 2021, 2020 and 2019. In fiscal 2020, one customer accounted for 74.1% of our total revenue compared to 20.7% in fiscal 2019. In fiscal 2021, this customer accounted for 56.0% of our total revenue. We expect that we will continue to experience significant customer concentration in fiscal 2022, although we expect this relative concentration level to diminish during fiscal 2022. The loss of this customer or our failure to satisfy its installation requirements could have a material adverse effect on our results of operations, financial condition and cash flows, as well as on our reputation and our ability to execute our business strategy. 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 continue to be profitable and may be subject to limitation based upon ownership changes.

We have significant federal net operating loss carry-forwards and state net operating loss carry-forwards. If we are unable to maintain our recent profitability, we may 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.

Given our current earnings and potential future earnings, as of March 31, 2021, we recorded a valuation allowance release of $20.9 million against our deferred tax assets. This resulted in substantially and disproportionately increasing our reported net income and our earnings per share compared to our operating results. Historical and future comparisons to these amounts are not, and will not be, indicative of actual profitability trends for our business.

We may not be able to obtain equity capital or debt financing necessary to effectively pursue our evolving strategy and sustain our growth initiatives.

Our existing liquidity and capital resources may not be sufficient to allow us to effectively pursue our evolving growth strategy, complete potential acquisitions or otherwise fund or sustain our growth initiatives. If we require additional capital resources, we may 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.

Until fiscal 2020, we had a history of losses and negative cash flow and we may be unable to sustain our recent profitability and positive cash flows in the future.

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 sustain our recent profitability and positive cash flows in the future. Our inability to successfully sustain our

profitability and positive cash flows could materially and adversely affect our ability to pursue our evolving strategy and growth initiatives.

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, 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 strategy includes actively exploring potential acquisitions, including potential acquisitions that could significantly change, or even transform, the nature of our business. These acquisitions could be unsuccessful or consume significant resources, which could materially adversely affect our results of operations, financial condition and cash flows.

We are actively exploring potential business acquisitions which would 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 any 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:

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.

Because we have historically only made one acquisition to date, our ability to do so again successfully is unproven. Moreover, 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.

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. As a result,In addition, we are focusing 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. We are also looking atcontinue to explore utilizing our system platform as a “digital”“connected ceiling” or “connected“smart ceiling”, or a framework or network that can support the installation and integration of other business technology or data information solutions on our digitallighting platform.

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 the growing LED market, 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 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.

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 circumstances could reduce our revenue and profitability, which could have a material adverse effect on our results of operations, financial condition and financial condition.

We have significantly expanded the number of ourutilize manufacturer representative sales agencies that sell our products through distributors, manydistributors. Many of whichthese sales agents and distributors 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, 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.

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.

Legal, Regulatory and Compliance Risks

Government tariffs and other actions may adversely affect our business.

The United States government has been implementing 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 securing large retrofittariffs 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 multi-facility roll-out projects fromraising prices. If we are unable to successfully mitigate the impacts of these tariffs and other trade policies (including any new or different tariffs or policies implemented by the new United States administration), our results of operations may be adversely affected. Any future policy changes that may be implemented by the new 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 existing customers and our dependence on individual key customers can vary from period to periodcash flows.

Reductions in (including as a result of any budgetary constraints), or the significant sizeelimination of, somegovernment investment and favorable energy policies designed to accelerate the adoption of LED lighting could result in decreased demand for our retrofitproducts and multi-facility roll-out projects. Our top 10 customers accountedadversely affect our results of operations, financial condition and cash flows. Further, if our products fail to qualify for approximately 42%, 33%, and 37% respectively, ofany financial incentives or rebates provided by governmental agencies or utilities for which our total revenue for fiscal 2018, 2017 and 2016. In fiscal 2018, two customers accounted for 11.7% and 10.8% of total revenue. In fiscal 2017 and fiscal 2016, there was no single customer that accounted for morecompetitors’ products qualify, such programs may diminish or eliminate our ability to compete by offering products at lower prices than 10% of our revenue. While we are making efforts to increase our sources of recurring revenue, we expect large retrofit and rollout projects to continue to remain a significant component of our total revenue. Additionally, commercial office lighting retrofits provide for single large project opportunities. As a result, we may continue to experience customer concentration in future periods. ours.

The losselimination of, or substantial reductionchanges in, salespolicies, incentives or rebates in certain states that encourage the use of solar power over other traditional power sources could cause the revenue from our sale of solar-related tax credits to any of our significant customers, or a major customer,third parties to decrease, which could have a material adverse effect on our results of operations, in any given future period.

We have increasedlong-lived assets associated with our utilizationlegacy solar business and recognize revenue from the sale to third parties of third-party manufacturers fortax credits received from operating these solar assets. There is currently legislation pending which may decrease the manufacture and developmentfuture cash flows associated with the sale of these tax credits. Such a decrease could have a material adverse effect on our products and product components. Our business, prospects, results of operations, financial condition orand cash flows could be materially adversely affected if our manufacturers were to experience problems with product quality, credit or liquidity issues, or disruptions or delays inflows. Depending on the manufacturing process or delivery of the finished products and components or the raw materials used to make such products and components.

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 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.

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 and our executive officers and directors may from time to time sell shares of our common stock in the public market or otherwise. On February 18, 2021, we reported that Michael W. Altschaefl, our Chief Executive Officer and Board Chair, and Scott A. Green, our Chief Operating Officer and Executive Vice President, had each adopted separate prearranged trading plans for a specified number of their shares of our common stock, in accordance with guidelines specified by Rule 10b5-1 under the Exchange Act and our policies regarding transactions by insiders in our common stock. 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.

If our stock price does not increase, our common stock may be subject to delisting from the NASDAQ Capital Market.

Our common stock is currently listed on The NASDAQ Capital Market. Continued listing of a security on The NASDAQ Capital Market is conditioned upon compliance with certain continued listing requirements and continued listing standards set forth in the NASDAQ Listing Rules.

On November 28, 2017, we received written notice from the Listing Qualifications Department of The NASDAQ Stock Market LLC notifying us that we were is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market due to the shares of our common stock trading below the minimum bid price of $1.00 per share for a period of thirty (30) consecutive business days.

To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share for a minimum of ten (10) consecutive business days. We were unable to regain compliance with the minimum bid price requirement during the initial 180-day compliance period. On May 30, 2018, we were granted an additional 180-day compliance period following our written notification to NASDAQ of our intention to cure the deficiency during the second compliance period. If we fail to regain compliance during the second 180-day period, then NASDAQ will notify us of its determination to delist our common stock, at which point we would have an opportunity to appeal the delisting determination to a hearings panel.

If we are unable to regain compliance with the minimum bid price requirement and our common stock is delisted from Nasdaq, this could, among other things, reduce the liquidity and trading price of our common stock, negatively impact our ability to raise additional funds and result in a loss of institutional investor interest.

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.

company or result in a lower price per share paid to our shareholders.

Each currently outstanding share of our common stock includes, and each newly issued share of our common stock will include, a common share purchase right. TheThese rights are attached to, and trade with, the shares of our common stock and generally are not currently exercisable. TheThese rights will become exercisable if a person or group acquires, or announces an intention to acquire, 20% or

more of our outstanding common stock. TheThese rights have some anti-takeover effects and generally will cause substantial dilution to a person or group that attempts to acquire control of us without conditioning the offer on either redemption of the rights or amendment of the rights to prevent this dilution. TheThese rights could have the effect of delaying, deferring or preventing a change of control.

control or result in a lower price per share paid to our shareholders.

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 and a subsequent qualifying termination.termination (other than for our Chief Executive Officer). 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.

None.

ITEM 2.	PROPERTIES PROPERTIES

On March 31, 2016, we entered into a purchase and sale agreement with a third party to sell and leaseback

We lease our approximately 266,000 square foot manufacturing and distribution facility located in Manitowoc, Wisconsin. The transaction closed on June 30, 2016. Pursuant to the agreement,On January 31, 2020, we entered a lease was entered into on June 30, 2016, in which we are leasing approximately 197,000 square feet of the building for not less than three years. The lease contains options by either party to reduce the amount of leased space after March 1, 2017. On March 22, 2018, we renewed thenew lease for our manufacturingthe facility with a ten-year term, and distribution facility for an additional 18 months until December 31, 2020.

option to terminate after six years.

We own our approximately 70,000 square foot technology center and corporate headquarters adjacent to our leased Manitowoc manufacturing and distribution facility, of which we leasesub-lease a portion to a third party.parties. We also lease approximately 10,500 square feet of office space in Jacksonville, Florida.

In fiscal 2018, we did not renew the leases for our 5,600 square foot of office space in Houston, Texas and our 3,100 square foot of office space in Chicago, Illinois.

The leases terminate as of April 30, 2018 and May 31, 2018, respectively.

Facilitiesfacilities noted above are utilized by all our business segments.

ITEM 3.	LEGAL PROCEEDINGS

We are subject to various claims and legal proceedings arising in the ordinary course of business. As of the date 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 our future results of operations. In addition to ordinary-course litigation, we were a party to the proceedings described below.

On March 27, 2014, we were named as a defendant in a civil lawsuit filed by Neal R. Verfuerth, a former chief executive officer who left the company in November 2012, in the United States District Court for the Eastern District of Wisconsin (Green Bay Division). The plaintiff alleged, among other things, that we breached certain agreements entered into with the plaintiff, including the plaintiff’s employment agreement, and violated certain laws. The complaint sought, among other relief, unspecified pecuniary and compensatory damages, fees and such other relief as the court may deem just and proper.

On January 11, 2018, a three-judge panel of the United States Court of Appeals Seventh Circuit unanimously affirmed the dismissal of all of the plaintiff’s claims against us. With the conclusion of this case during the fourth quarter of fiscal 2018, we released our loss contingency accrual of $1.4 million dollars, the impact of which is included in our general and administrative expenses on the face of our consolidated statement of operations.

On November 10, 2017, a purported shareholder, Stephen Narten, filed a civil lawsuit in the Circuit Court for Manitowoc County against those individuals who served on our Board of Directors during fiscal years 2015, 2016, and 2017 and certain current and former officers during the same period. The plaintiff, who purports to bring the suit derivatively on behalf of our company, alleged that the director defendants breached their fiduciary duties in connection with granting certain stock-based incentive awards under our 2004 Stock and Incentive Awards Plan and that the directors and current and former officers breached their fiduciary duties by accepting those awards.  On January 22, 2018, we moved to dismiss the lawsuit on the grounds that the complaint failed to state a claim upon which relief may be granted.  Subsequent to the end of fiscal 2018, the parties reached a settlement of the claims, filed a stipulation for dismissal of the case and the judge is expected to approve the settlement. The settlement did not, and will not, have a material impact on our results of operations or financial condition.

ITEM 4.	MINE SAFETY DISCLOSURES

None.

None.

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Price Range

Shares of our Common Stock

Our common stock is currently listedare traded on Thethe NASDAQ Capital Market under the symbol “OESX”. The following table sets forth the range of high and low sales prices per share as reported on The NASDAQ Capital Market for the periods indicated.

	High				Low
Fiscal 2018
First Quarter	$	1.95			$	1.24
Second Quarter	$	1.32			$	0.85
Third Quarter	$	1.08			$	0.83
Fourth Quarter	$	0.93			$	0.77
Fiscal 2017
First Quarter	$	1.55			$	1.13
Second Quarter	$	1.45			$	1.18
Third Quarter	$	2.49			$	1.17
Fourth Quarter	$	2.31			$	1.76

Shareholders

As of May 31, 2018,21, 2021, there were approximately 216159 record holders of the 29,044,35730,806,390 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.

Securities Authorized for Issuance under Equity Compensation Plans

The following table represents shares outstanding under our 2003 Stock Option Plan, our 2004 Stock and Incentive Awards Incentive Plan, and our 2016 Omnibus Incentive Plan as of March 31, 2018.

2021.

Equity Compensation Plan Information	Equity Compensation Plan Information										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)			Number of Shares to be Issued Upon Exercise of Outstanding Options and Vesting of Restricted Shares				Weighted Average Exercise Price of Outstanding Options				Number of Shares Remaining Available for Future Issuances Under the 2016 Omnibus Incentive Plan Plans (1)
Equity Compensation plans approved by security holders		2,115,466			$	2.01			601,064				665,957			$	2.74				1,578,445
Equity Compensation plans not approved by security holders		—			—				—				—				—				—
Total		2,115,466			$	2.01			601,064				665,957			$	2.74				1,578,445

(1)
(1)	Excludes shares reflected in the column titled “Number of SecuritiesShares to be Issued Upon Exercise of Outstanding Options and Vesting of Restricted Shares”.

Issuer Purchase of Equity Securities

We did not purchase shares of our common stock during the fiscal fourth quarteryear ended March 31, 2018.

2021.

Unregistered Sales of Securities

We did not make any unregistered sales of our common stock during the year ended March 31, 20182021 that were not previously disclosed in a Quarterly Report on formForm 10-Q or a current report on Form 8-K during such period.

Stock Price Performance Graph

The following graph shows the total shareholder return of an investment of $100 in cash on March 31, 2013 through March 31, 2018, for (1) our common stock, (2) the Russell 2000 Index and (3) The NASDAQ Clean Edge Green Energy Index. Data for the Russell 2000 Index and the NASDAQ Clean Edge Green Energy Index assume reinvestment of dividends. The stock price performance graph should not be deemed filed or incorporated by reference into any other filing made by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate the stock performance graph by reference in another filing.

ITEM 6.	SELECTED FINANCIAL DATA

You should read the following selected consolidated financial data in conjunction with Item 7. “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations" and our consolidated financial statements and the related notes included in Item 8. "Financial Statements and Supplementary Data" of this report. The selected historical consolidated financial data are not necessarily indicative of future results.

	Fiscal Year Ended March 31,																				Fiscal Year Ended March 31,
	2018				2017				2016				2015				2014				2021				2020				2019				2018				2017
	(in thousands, except per share amounts)																				(in thousands, except per share amounts)
Consolidated statements of operations data:
Product revenue	$	55,595			$	66,224			$	64,897			$	65,881			$	71,954			$	87,664			$	113,352			$	56,261			$	55,595			$	66,224
Service revenue	4,705				3,987				2,745				6,329				16,669					29,176				37,489				9,493				4,705				3,987
Total revenue	60,300				70,211				67,642				72,210				88,623					116,840				150,841				65,754				60,300				70,211
Cost of product revenue (1)(2)	41,415				49,630				49,630				68,388				54,423					63,233				83,588				44,111				41,415				49,630
Cost of service revenue	4,213				3,244				2,015				4,959				11,220
Cost of service revenue (1) (3)																						23,483				30,130				7,091				4,213				3,244
Total cost of revenue	45,628				52,874				51,645				73,347				65,643					86,716				113,718				51,202				45,628				52,874
Gross profit	14,672				17,337				15,997				(1,137		)		22,980					30,124				37,123				14,552				14,672				17,337
General and administrative expenses (1)(3)	13,159				14,777				16,884				14,908				14,951
Impairment of assets (4)	710				250				6,023				—				—
Acquisition and integration related expenses (5)	—				—				—				47				819
General and administrative expenses (1)(4)																						11,262				11,184				10,231				13,159				14,777
Impairment of assets (5)																						—				—				—				710				250
Sales and marketing expenses (1) (6)	11,879				12,833				11,343				13,290				13,527					10,341				11,113				9,104				11,879				12,833
Research and development expenses (1) (7)	1,905				2,004				1,668				2,554				2,026					1,685				1,716				1,374				1,905				2,004
Loss from operations	(12,981		)		(12,527		)		(19,921		)		(31,936		)		(8,343		)
Income (loss) from operations																						6,836				13,110				(6,157	)			(12,981	)			(12,527	)
Other income	248				215				—				—				—					56				28				80				248				215
Interest expense	(425		)		(273		)		(297		)		(376		)		(481		)			(127	)			(279	)			(493	)			(333	)			(163	)
Amortization of debt issue costs																						(157	)			(243	)			(101	)			(92	)			(110	)
Loss on debt extinguishment																						(90	)			—				—				—				—
Dividend and interest income	15				36				128				300				567					—				5				11				15				36
Loss before income tax	(13,143		)		(12,549		)		(20,090		)		(32,012		)		(8,257		)
Income (loss) before income tax																						6,518				12,621				(6,660	)			(13,143	)			(12,549	)
Income tax (benefit) expense (8)	(15		)		(261		)		36				49				(2,058		)			(19,616	)			159				14				(15	)			(261	)
Net loss and comprehensive loss	$	(13,128	)		$	(12,288	)		$	(20,126	)		$	(32,061	)		$	(6,199	)
Net loss per share attributable to common shareholders:
Basic	$	(0.46	)		$	(0.44	)		$	(0.73	)		$	(1.43	)		$	(0.30	)
Diluted	$	(0.46	)		$	(0.44	)		$	(0.73	)		$	(1.43	)		$	(0.30	)
Net income (loss)																					$	26,134			$	12,462			$	(6,674	)		$	(13,128	)		$	(12,288	)
Net income (loss) per share attributable to common shareholders:
Basic (8)																					$	0.85			$	0.41			$	(0.23	)		$	(0.46	)		$	(0.44	)
Diluted (8)																					$	0.83			$	0.40			$	(0.23	)		$	(0.46	)		$	(0.44	)
Weighted-average shares outstanding:
Basic	28,784				28,156				27,628				22,353				20,988					30,635				30,105				29,430				28,784				28,156
Diluted	28,784				28,156				27,628				22,353				20,988					31,304				30,965				29,430				28,784				28,156

(1)
(1)	Includes stock-based compensation expense recognized under Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, as follows:

	Fiscal Year Ended March 31,
	2018				2017				2016				2015				2014
	(in thousands)
Cost of product revenue	$	12			$	30			$	36			$	50			$	70
General and administrative expenses	929				1,337				1,148				1,056				1,025
Sales and marketing expenses	155				139				235				360				485
Research and development expenses	6				99				43				33				13
Total stock-based compensation expense	$	1,102			$	1,605			$	1,462			$	1,499			$	1,593

		Fiscal Year Ended March 31,
		2021				2020				2019				2018				2017
		(in thousands)
Cost of product revenue		$	4			$	3			$	2			$	12			$	30
Cost of service revenue			—				(1	)			3				—				—
General and administrative expenses			716				576				764				929				1,337
Sales and marketing expenses			29				38				54				155				139
Research and development expenses			4				2				2				6				99
Total stock-based compensation expense		$	753			$	618			$	825			$	1,102			$	1,605

(2)
(2)	In fiscal Fiscal 2020 includes expenses of $0.1 million related to restructuring. Fiscal 2018 includes expenses of $34 thousand related to restructuring expense. In fiscalrestructuring. Fiscal 2017 includes expenses of $2,209$2.2 million related to an increase in inventory reserves and other inventory adjustments. In fiscal 2015,

(3)	Fiscal 2020 includes expenses of $12,130$0.1 million related to the impairment of wireless control inventory, fixed assets and intangible assets.restructuring.

(3) In fiscal 2018, includes a $1,822 restructuring expense and a $1,400 accrual for a loss contingency reversal. In fiscal 2016, includes a $1,400 loss contingency. In fiscal 2014, includes a $1,507 loss on the sale of a leased corporate jet.

(4)	In fiscal Fiscal 2020 includes expenses of $28 thousand related to restructuring. Fiscal 2018 includes $1.8 million of restructuring expense and $1.4 million benefit on the reversal of an accrual for a loss contingency. Fiscal 2016 includes a $1.4 million loss contingency accrual.

(5)

Fiscal 2018 includes an intangible asset impairment of $710. In fiscal$0.7 million. Fiscal 2017 includes an intangible asset impairment of $250. In fiscal$0.3 million. Fiscal 2016 includes expenses of $4,409$4.4 million related to the impairment of goodwill and $1,614$1.6 million related to the write-down to fair value of the manufacturing facility.

(6)
(5)	In fiscal 2014, Fiscal 2020 includes expenses of $515$0.2 million related to the acquisition and integration of Harris.

(6)	In fiscalrestructuring. Fiscal 2018 includes expenses of $211$0.2 million related to restructuring.

(7)
(7)	In fiscal Fiscal 2018 includes expenses of $79$0.1 million related to restructuring.

(8)
(8)	In fiscal 2014, Fiscal 2021 includes a $2,315tax benefit forof $20.9 million related to the release of the valuation allowance on deferred tax liabilities created by the acquisition of Harris.assets.

		As of March 31,
		2021				2020				2019				2018				2017
		(in thousands)
Consolidated balance sheet data:
Cash and cash equivalents		$	19,393			$	28,751			$	8,729			$	9,424			$	17,307
Total assets			92,821				72,563				56,021				45,325				62,051
Long term borrowings			35				10,063				9,283				4,013				6,819
Shareholder notes receivable			—				—				—				—				(4	)
Total shareholders’ equity			58,074				31,035				17,970				23,424				35,450

	As of March 31,
	2018				2017				2016				2015				2014
	(in thousands)
Consolidated balance sheet data:
Cash and cash equivalents	$	9,424			$	17,307			$	15,542			$	20,002			$	17,568
Short-term investments	—				—				—				—				470
Total assets	45,325				62,051				70,875				87,805				98,940
Long term borrowings	4,013				6,819				4,021				3,222				3,151
Shareholder notes receivable	—				(4		)		(4		)		(4		)		(50		)
Total shareholders’ equity	23,424				35,450				45,983				64,511				77,012

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and related notes included in this Annual Report on Form 10-K for the fiscal year ended March 31, 2018.2021. See also “Forward-Looking Statements” and Item 1A “Risk Factors”.

Overview

We provide enterprise-grade LEDstate-of-the-art light emitting diode (“LED”) lighting andsystems, wireless Internet of Things (“IoT”) enabled control solutions, project engineering, design energy project solutions.management and maintenance services. We help our customers achieve energy savings with healthy, safe and sustainable solutions that enable them to reduce their carbon footprint and digitize their business. 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, although we do sell and install products into other markets. Virtually all of our sales occur within North America.

Our lighting products consist primarily of light emitting diode ("LED")LED lighting fixtures.fixtures, many of which include IoT enabled control systems. Our principal customers include large national account end-users, federal and state government facilities, large regional account end-users, electrical distributors, electrical contractors and energy service companies ("ESCOs") and electrical contractors.. Currently, substantially allmost of our 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 in order to provide versatility in our product development.

We have experienced recent success offering our 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.

We believe the market for LED lighting products has shiftedand related controls continues to LED lighting systems, and that the customer base for our legacy high intensity fluorescent ("HIF") technology products will continue to decline. Compared to our legacy lighting systems, we believe that LED lighting technology allows for better optical performance, significantly reduced maintenance costs due to performance longevity and reduced energy consumption.grow. Due to their size and flexibility in application, we also believe that LED lighting systems can address opportunities for retrofit applications that cannot be satisfied by fluorescent or other legacylighting technologies. Our LED lighting technologies have become the primary component of our revenue as we continue to strive to be a leader in the LED market. Although

In fiscal 2021, we continuesuccessfully capitalized on our capability of being a full service, turn-key provider of LED lighting and 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 sell some lighting products usingevolve our legacy HIF technology, we do not buildbusiness strategy to stock HIFfocus on further expanding the nature and scope of our products and instead buildservices offered to committed customer orders as received.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 plan to maintainpursue the expansion of our primary focusIoT, “smart-building” and “connected ceiling” and other related technology, software and controls products and services that we offer to our customers. We currently plan on developinginvesting significant time, resources and selling innovative LED products.

capital into expanding our offerings in these areas with no expectation that they will result in us realizing material revenue in the near term and without any assurance they will succeed or be profitable. In fact, it is likely that these efforts will reduce our profitability, at least in the near term as we invest resources and incur expenses to develop these offerings. While we intend to pursue these expansion strategies organically, we also are actively exploring potential business acquisitions which would more quickly add these types of expanded and different capabilities to our product and services offerings. It is possible that one or more of such potential acquisitions, if successfully completed, could significantly change, and potentially transform, the nature and extent of our business.

We generally do not have long-term contracts with our customers that provide us with recurring revenue from period to period and we typically generate substantially all of our revenue from sales of lighting and control systems and related services to governmental, commercial and industrial customers on a project-by-project basis. We also perform work under master services or product purchasing agreements with major customers with sales completed on a purchase order basis. In addition, in order to provide quality and timely service under our multi-location master retrofit agreements we 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 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". 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, electrical distributors and ESCOs to sell to their own customer bases.

Our ability to achieve our desired revenue growth and profitability goals depends on our ability to effectively engage distribution and sales agents, develop recurring revenue streams, implement our cost reduction initiatives, and improve our marketing, new product development, project execution, customer service, margin enhancement and operating expense management, as well as other factors. In addition, the

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 among higher or lower margin products can cause our profitability to fluctuate from period to period.

Our fiscal year ends on March 31. We refer to our just completed fiscal year, which ended on March 31, 2018,2021, as “fiscal 2018”"fiscal 2021", and our prior fiscal yearyears which ended on March 31, 20172020 and March 31, 2019 as "fiscal 2017".2020" and “fiscal 2019”, 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. Orion has three reportable segments: Orion U.S. Markets Division ("USM"), Orion Engineered Systems Division ("OES"), and Orion Distribution Services Division ("ODS").

Market Shift to Light Emitting Diode Products

The rapid market shift in the lighting industry from legacy lighting products to LED lighting products has caused us to adopt new strategies, approaches, and processes in order to respond proactively to this industry transition. These changing underlying business fundamentals in this transition include:

Rapidly declining LED component costs and LED product end user customer pricing pressure.

Improving LED product performance and reducing customer return on investment payback periods resulting in increased customer preference for LED lighting products compared to legacy lighting products.

Increasing LED lighting product customer sales compared to decreasing HIF product sales.

A broader and more diverse customer base and market opportunities compared to our historical commercial and industrial facility customers.

Increased importance of highly innovative product designs and features and enhanced product research and development capabilities requiring rapid new product introduction and new methods of product and company differentiation.

Significantly reduced product technology life cycles; significantly shorter product inventory shelf lives and the related increased risk of rapidly occurring product technology obsolescence.

Increased reliance on international component sources.

Less internal product fabrication and production capabilities needed to support LED product assembly.

Different and broader types of components, fabrication and assembly processes needed to support LED product assembly compared to our legacy products.

Expanding customer bases and sales channels.

Significantly longer end user product warranty requirements for LED products compared to our legacy products.

As we continue to focus our primary business on selling our LED product lines to respond to the rapidly changing market dynamics in the lighting industry, we face intense competition from an increased number of other LED product companies, a number of which have substantially greater resources and more experience and history with LED lighting products than we do.

Management Restructuring and Focus on Profitability

In early fiscal 2018, our Board of Directors restructured our management team. As part of this restructuring, our Chief Executive Officer, John Scribante, left our company and Mike Altschaefl, our then-current Board Chair, assumed the role of Chief Executive Officer. In addition, Scott Green, our then-current Executive Vice President, became our new Chief Operating Officer, with ongoing primary responsibility for improving our revenue generation. Mike Potts and Marc Meade, our then-current Executive Vice Presidents, remained in their positions and were assigned primary responsibility for substantially reducing our cost structure and for streamlining operations. Bill Hull remained in his position as Chief Financial Officer.

On August 30, 2017, Mike Potts retired as our Chief Risk Officer and Executive Vice President and continues to serve as a member of our Board of Directors and provides consulting services to us on an as needed basis.

Our market and product strategies have not changed. We have renewed our focus on sales channel execution, and implemented a reduction in our cost structure. Our management team continues to implement its plan to achieve breakeven earnings (excluding employee separation costs) before interest, taxes, depreciation, and amortization, or EBITDA, through the implementation of the following cost reduction measures:

Constant monitoring and management of manufacturing overhead costs to ensure we continue to deliver strong gross margins amid an increasingly competitive market landscape;

Reduction of staff positions through a targeted reduction in existing headcount;

Reduced total compensation of our executive management and board of directors;

Reductions in operating expenses, including better control of legal spending, elimination of our racing program and removal of various non-critical back office programs and initiatives.

We believe that our cost reduction plan taken during fiscal 2018 resulted in annualized cost savings of approximately $6.0 million, which we expect to be fully recognized beginning in fiscal 2019. These cost reductions, coupled with our renewed focus on sales channel execution, will help to drive revenue growth and accelerate our path to profitability.

During fiscal 2018, we executed on this cost reduction plan by entering into separation agreements with multiple employees and recognized $2.1 million of expense in fiscal 2018 in employee separation related costs. Our restructuring expense for fiscal 2018 is reflected within our consolidated statements of operations as follows (dollars in thousands):

	Year Ended March 31,
	2018
Cost of product revenue	$	34
General and administrative	1,822
Sales and marketing	211
Research and development	79
Total	$	2,146

Total restructuring expense by segment was recorded as follows (dollars in thousands):

	Year Ended March 31,
	2018
Orion Distribution Systems	$	117
Corporate and Other	2,029
Total	$	2,146

We recorded no restructuring expense to the Orion U.S. Markets or Orion Engineered Systems segments.

Cash payments for employee separation costsDivision (“USM”).

Impact of COVID-19 and Fiscal 2022 Outlook

The COVID-19 pandemic has disrupted business, trade, commerce, financial and credit markets, in connection withthe U.S. and globally. Our business was adversely impacted by measures taken by government entities and others to control the spread of the virus beginning in March 2020, the last few weeks of our reorganizationprior fiscal year, and cost reduction plan were $1.8 million for fiscal 2018. The remaining reorganization of business accruals as of March 31, 2018 were $0.3 million, of which $0.2 million relates to employee separation costs that are expected to be paid within one year. The remaining accrual of $0.1 million represents post-retirement medical benefits for one former employee which will be paid over several years.

Impairment of Intangible Assets

Duringcontinuing most significantly into the second quarter of fiscal 2018,2021. During the second half of fiscal 2021, we reviewedexperienced a rebound in business. Project installations for our definitelargest customer recommenced, as well installations for a new large specialty retail customer began, with no further significant COVID-19 impacts. However, some customers continue to refrain from awarding new projects and indefinite lived assetspotential future risks remain due to the COVID-19 pandemic, including supply chain disruption for impairmentcertain components.

As a deemed essential business, we provide products and services to ensure energy and lighting infrastructure and we therefore have continued to operate throughout the pandemic. We have implemented a number of safety protocols, including limiting travel and restricting access to our facilities along with monitoring processes, physical distancing, physical barriers, enhanced cleaning procedures and requiring face coverings.

As part of our response to the impacts of the COVID-19 pandemic, during the fourth quarter of fiscal 2020 we implemented a number of cost reduction and cash conservation measures, including reducing headcount. While certain restrictions began to initially lessen in certain jurisdictions during fiscal 2021, stay-at-home, face mask or lockdown orders remain in effect in others, with employees asked to work remotely if possible. Some customers and projects are in areas where travel restrictions have been imposed, certain customers have either closed or reduced on-site activities, and timelines for the completion of several projects have been delayed, extended or terminated. These modifications to our business practices, including any future actions we take, may cause us to experience reductions in productivity and disruptions to our business routines. In addition, we are required to make substantial working capital expenditures and advance inventory purchases that we may not be able to recoup if our customer agreements or a substantial volume of purchase orders under our customer agreements are delayed or terminated as a result of COVID-19. At this time, it is not possible to predict the overall impact the COVID-19 pandemic will have on our lower than anticipatedbusiness, liquidity, capital resources or financial results, although the economic and regulatory impacts of COVID-19 significantly reduced our revenue and profitability in the first half of fiscal 2021. If the COVID-19 pandemic becomes more pronounced in our markets or experiences a resurgence in markets recovering from the spread of COVID-19, our operations in areas impacted by such events could experience further material adverse financial impacts due to market changes and other resulting events and circumstances.

The impact of COVID-19 has caused significant uncertainty and volatility in the credit markets. We rely on the credit markets to provide us with liquidity to operate and grow our businesses beyond the liquidity that operating cash flows provide. If our access to capital were to become significantly constrained or if costs of capital increased significantly due the impact of COVID-19, including volatility in the capital markets, a reduction in our credit ratings or other factors, then our financial condition, results of operations and forecast revisions.cash flows could be adversely affected.

In addition to the managing the adverse financial impact of the COVID-19 pandemic, our ability to achieve our desired revenue growth and profitability goals depends on our ability to effectively execute on the following key strategic initiatives. We may identify strategic acquisition candidates that would help support these initiatives.

Focus on 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 across 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 custom 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. Our goal is to provide state-of-the-art lighting products with modular plug-and-play designs to enable lighting system customization from basic controls to advanced IoT capabilities.

Leverage of Orion’s Smart Lighting Systems to Support Internet of Things Applications. We believe we are ideally positioned to help customers to efficiently deploy new IoT controls and applications by leveraging the “Smart Ceiling” capabilities of their Orion solid state lighting system. IoT capabilities can include the management and tracking of facilities, personnel, resources and customer behavior, driving both sales and lowering costs. As a result, of these assessments, we determined thatadded capabilities provide customers an even greater return on investment from their lighting system and make us an even more attractive partner. We plan to pursue the carrying valueexpansion of our indefinite lived intangible assetIoT, “smart-building” and “connected ceiling” and other related technology, software and controls products and services that we offer to the Harris trade name exceeded the asset’s fair value. Asour customers. While we intend to pursue these expansion strategies organically, we also are actively exploring potential business acquisitions which would more quickly add these types of expanded and different capabilities to our product and services offerings.

Develop Maintenance Service Offerings. We believe we can leverage our construction management process expertise to develop a result, we recorded an impairment chargehigh-quality, quick-response, multi-location maintenance service offering. Our experience with large national customers and our large installed base of $0.7 million. A change in these assumptions orfixtures position us well to extend a change in circumstances could result in an additional impairment charge in a future period.

Fiscal 2019 Outlook

Despite lower than anticipated results for fiscal year ended March 31, 2018, we remain optimistic about our near-term and long-term financial performance. Our executive leadership team has developed a fiscal 2019 strategic planmaintenance offering to reflect our current business environment and the continuing opportunities and challenges of the LED and connected lighting marketplace. The overall goal of the plan is to grow, become more profitable and increase shareholder value, considering this environmenthistorical customers, as well as to new customers. Development of this recurring revenue stream is making progress and we believe there is significant market opportunity.

Support success of our ESCO and agent-driven distribution sales channels. We continue to focus on building our relationships and product and sales support for our ESCO and agent driven distribution channels. These efforts include an array of product and sales training efforts as well as the development of new products to cater to the unique needs of these sales channels.

Major Developments in Fiscal 2021

During fiscal years 2021 and 2020, we executed on a series of master contracts for a major national account customer with our state-of-the-art LED lighting systems and wireless IoT enabled control solutions at locations nationwide. This single national account customer represented 56.0% of our total revenue in fiscal 2021 and 74.1% of our total revenue in fiscal 2020. During March 2020, due to the COVID-19 pandemic, this customer temporarily suspended our installations at a significant number of locations that were scheduled for installation during our fiscal 2020 fourth quarter and our fiscal 2021 first quarter. These originally scheduled installations resumed during the second quarter of fiscal 2021 and continued through the second half of fiscal 2021.

Additionally, we added a large specialty retail customer and are providing turnkey LED lighting retrofit solutions for a number of its stores. This project generated product and service revenue of $8.1 million during the second half fiscal 2021. We expect to retrofit additional stores for this customer in fiscal 2022.

We also completed several initial retrofit projects at facilities for a major global logistics company. This customer is expected to be a significant source of revenue as we move forward, although these installations are likely to occur more slowly than we had originally anticipated. We expect to work with the customer on a project-by-project basis, versus larger-scale multi-site commitments, which limits visibility on the timing of future revenue contributions. We also have been selected to work with another major logistics company that is also expected to be a significant source of revenue in the future.

Given our current financial situation.

Our outlookearnings and potential future earnings, as of March 31, 2021, we recorded a net valuation allowance release of $20.9 million against our deferred tax assets. This resulted in substantially and disproportionately increasing our reported net income and our earnings per share compared to our operating results. Historical and future comparisons to these amounts are not, and will not be, indicative of actual profitability trends for fiscal 2019 is positive as we believe that the following factors will directly or indirectly drive customer spending on lighting solutions:

LED adoption continues to grow in all sectors;

Commercial and industrial sentiment remains strong;

Utility incentives continue to be available and are increasing as a percent of project costs in many areas;

Capital spending is increasing;

Business profits are increasing; and

Consumer spending remains strong.

Beyond the benefits of our lighting fixtures, we believe that there is also an opportunity to utilize our system platform as a “digital” or “connected ceiling”, or a framework or network that can support the installation and integration of other business solutions on our digital platform. This anticipated potential growth opportunity is also known as the “Industrial Internet of Things” or IoT, and is still early in its development; however, we have already participated in a few compelling applications that deliver cost savings and efficiency in areas outside of lighting.

business.

Results of Operations: Fiscal 20182021 versus Fiscal 2017

2020

The following table sets forth the line items of our consolidated statements of operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (in thousands, except percentages):

		Fiscal Year Ended March 31,
		2021				2020								2021				2020
		Amount				Amount				% Change				% of Revenue				% of Revenue
Product revenue		$	87,664			$	113,352				(22.7	)%			75.0	%			75.1	%
Service revenue			29,176				37,489				(22.2	)%			25.0	%			24.9	%
Total revenue			116,840				150,841				(22.5	)%			100.0	%			100.0	%
Cost of product revenue			63,233				83,588				(24.4	)%			54.1	%			55.4	%
Cost of service revenue			23,483				30,130				(22.1	)%			20.1	%			20.0	%
Total cost of revenue			86,716				113,718				(23.7	)%			74.2	%			75.4	%
Gross profit			30,124				37,123				(18.9	)%			25.8	%			24.6	%
General and administrative expenses			11,262				11,184				0.7	%			9.6	%			7.4	%
Sales and marketing expenses			10,341				11,113				(6.9	)%			8.9	%			7.4	%
Research and development expenses			1,685				1,716				(1.8	)%			1.4	%			1.1	%
Income from operations			6,836				13,110				(47.9	)%			5.9	%			8.7	%
Other income			56				28				100.0	%			0.0	%			0.0	%
Interest expense			(127	)			(279	)			54.5	%			(0.1	)%			(0.2	)%
Amortization of debt issue costs			(157	)			(243	)			35.4	%			(0.1	)%			(0.2	)%
Loss on debt extinguishment			(90	)			—			NM					(0.1	)%			—
Interest income			—				5				(100.0	)%			—				0.0	%
Income before income tax			6,518				12,621				(48.4	)%			5.6	%			8.4	%
Income tax (benefit) expense			(19,616	)			159			NM					-16.8	%			0.1	%
Net income		$	26,134			$	12,462				109.7	%			22.4	%			8.3	%

*	NM = Not Meaningful

	Fiscal Year Ended March 31,
	2018				2017							2018			2017
	Amount				Amount				% Change			% of Revenue			% of Revenue
Product revenue	$	55,595			$	66,224			(16.1	)%		92.2	%		94.3	%
Service revenue	4,705				3,987				18.0	%		7.8	%		5.7	%
Total revenue	60,300				70,211				(14.1	)%		100.0	%		100.0	%
Cost of product revenue	41,415				49,630				(16.6	)%		68.7	%		70.7	%
Cost of service revenue	4,213				3,244				29.9	%		7.0	%		4.6	%
Total cost of revenue	45,628				52,874				(13.7	)%		75.7	%		75.3	%
Gross profit	14,672				17,337				(15.4	)%		24.3	%		24.7	%
General and administrative expenses	13,159				14,777				(10.9	)%		21.8	%		21.0	%
Impairment of assets	710				250				NM			1.2	%		0.3	%
Sales and marketing expenses	11,879				12,833				(7.4	)%		19.7	%		18.3	%
Research and development expenses	1,905				2,004				(4.9	)%		3.1	%		2.9	%
Loss from operations	(12,981		)		(12,527		)		(3.6	)%		(21.5	)%		(17.8	)%
Other income	248				215				15.3	%		0.4	%		0.3	%
Interest expense	(425		)		(273		)		55.7	%		(0.7	)%		(0.4	)%
Interest income	15				36				(58.3	)%		—	%		—	%
Loss before income tax	(13,143		)		(12,549		)		(4.7	)%		(21.8	)%		(17.9	)%
Income tax (benefit) expense	(15		)		(261		)		NM			—	%		(0.4	)%
Net loss and comprehensive loss	$	(13,128	)		$	(12,288	)		(6.8	)%		(21.8	)%		(17.5	)%

*NM = Not Meaningful

Revenue. Product revenue decreased 16.1%by 22.7%, or $10.6$25.7 million, for fiscal 20182021 versus fiscal 2017.2020. Service revenue decreased by 22.2%, or $8.3 million, for fiscal 2021 versus fiscal 2020. The decrease in product and service revenue was primarily a resultdue to multiple projects put on hold during the first half of the continued decline in fluorescent product sales, $6.5 million year over year, and a decrease of $3.9 million in LED lighting revenue. LED lighting revenue decreased 6.2% from $53.1 million in fiscal 2017 to $49.8 million in fiscal 2018, primarily2021 as a result of a decrease in our LED Troffer Door Retrofit product as well asCOVID-19, including the impactprojects for one large national account customer which represented 56.0% of our transition of our distribution sales channel to an agent driven model. Service revenue increased 18.0%, or $0.7 million, primarily due to the timing of installation projects in fiscal 2018 compared to2021, and 74.1% of revenue in fiscal 2017.2020. The project installations for this large national account customer resumed during the second quarter of fiscal 2021. Total revenue decreased by 14.1%22.5%, or $9.9$34.0 million, due to the items discussed above.

Cost of Revenue and Gross Margin.Cost of product revenue decreased 16.6%by 24.4%, or $8.2$20.4 million, in fiscal 20182021 versus the comparable period in fiscal 20172020. Cost of service revenue decreased by 22.1%, or $6.6 million, in fiscal 2021 versus fiscal 2020. The decrease in product and service costs was primarily due to the declinedecrease in sales and the resulting lower overhead absorption compared to the prior year period. Cost of service revenue increased 29.9%, or $1.0 million, in fiscal 2018 versus fiscal 2017 primarily due to the timing of completion and costs on large projects.revenue. Gross margin decreasedincreased from 24.7%24.6% of revenue in fiscal 20172020 to 24.3%25.8% in fiscal 2018. Our product gross margin decreased as2021, due primarily to cost management and a result of under-absorption within our manufacturing facility and an increasechange in customer sales of products sourced from third party manufacturers.mix.

Operating Expenses

General and Administrative. General and administrative expenses decreased 10.9%increased 0.7%, or $1.6$0.1 million, in fiscal 20182021 compared to fiscal 2017,2020, primarily due to decreases in employee costs of $1.6 million due to headcount reductions, the release of a loss contingency reserve for $1.4 million, and a decrease in amortizationtravel as a result of $0.3 due to a lower intangible balance, partiallyCOVID-19 restrictions, offset by employee separation costs of $1.8 million. The decreasean increase in employee costs of $1.6 million included the reduction of stock-based compensation expense of $0.4 million. Excluding the employee separation costsservices and the loss contingency release, general and administrative expenses decreased $2.0 million, or 13.8%.insurance costs.

Impairment of assets. During fiscal 2018 and fiscal 2017, we performed a review of our definite and indefinite-lived tangible and intangible assets for impairment. In conjunction with this review, we determined that the carrying value of our Harris trade name intangible asset exceeded its fair value. As a result, we recorded an impairment charge of $0.7 million and $0.3 million, respectively in fiscal 2018 and fiscal 2017.

Sales and Marketing. Our sales and marketing expenses decreased 7.4%6.9%, or $0.9$0.8 million, in fiscal 20182021 compared to fiscal 2017.2020. The decrease year over year was primarily due to a decrease in commission expense on lower employee costssales and reduced consulting and professional fees related to special events and field sales, partially offset by $0.2 milliona decrease in employee separation costs.travel, both a result of COVID-19 restrictions.

Research and Development. Research and development expenses decreased by 4.9%1.8%, or $0.1 million$31 thousand in fiscal 20182021 compared to fiscal 20172020 primarily due to a decreased testing and supplylower travel costs due to COVID-19 restrictions, partially offset by $0.1 millionan increase in employee separation costs.site testing.

Other income. Other income in fiscal 2018 and fiscal 2017 represented product royalties received from licensing agreements for our patents.

Interest Expense. Interest expense in fiscal 2018 increased2021 decreased by 55.7%54.5%, or $0.1$0.2 million, from fiscal 2017.2020. The increasedecrease in interest expense was due to increased third party financing costs.fewer sales of receivables.

Loss on Debt ExtinguishmentInterest Income. Interest income. Loss on debt extinguishment in fiscal 2018 decreased by 58.3%, or twenty-one thousand dollars, from2021 related to the write-off of fees incurred with respect to our prior credit facility, which was recognized upon execution of our new credit facility during the third quarter of fiscal 2017. Our interest income decreased as a result of the continued run-off legacy customer financed projects.2021.

Income Taxes. Income tax benefit in fiscal 2018 decreased $0.2 million from fiscal 2017. In fiscal 2017,2021, we received refunds from previously filed tax returns and reversed a valuation allowance resulting inrecognized a tax benefit in fiscal 2017. In fiscal 2018 we received refunds from previously filed tax returns. Both periods include income tax expense for minimum state tax liabilities. In fiscal 2018,of $19.6 million. The benefit was driven by the impactrelease of the Tax Cutsvaluation allowance on a significant portion of our deferred tax assets. This resulted in substantially and Jobs Act on tax expense was immaterial duedisproportionately increasing our reported net income and our earnings per share compared to the full valuation allowance.our operating results. Historical and future comparisons to these amounts are not, and will not be, indicative of actual profitability trends for our business.

Results of Operations: Fiscal 20172020 versus Fiscal 2016

2019

The following table sets forth the line items of our consolidated statements of operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (in thousands, except percentages):

		Fiscal Year Ended March 31,
		2020				2019								2020				2019
		Amount				Amount				% Change				% of Revenue				% of Revenue
Product revenue		$	113,352			$	56,261				101.5	%			75.1	%			85.6	%
Service revenue			37,489				9,493				294.9	%			24.9	%			14.4	%
Total revenue			150,841				65,754				129.4	%			100.0	%			100.0	%
Cost of product revenue			83,588				44,111				89.5	%			55.4	%			67.1	%
Cost of service revenue			30,130				7,091				324.9	%			20.0	%			10.8	%
Total cost of revenue			113,718				51,202				122.1	%			75.4	%			77.9	%
Gross profit			37,123				14,552				155.1	%			24.6	%			22.1	%
General and administrative expenses			11,184				10,231				9.3	%			7.4	%			15.6	%
Sales and marketing expenses			11,113				9,104				22.1	%			7.4	%			13.8	%
Research and development expenses			1,716				1,374				24.9	%			1.1	%			2.1	%
Income (loss) from operations			13,110				(6,157	)		NM					8.7	%			(9.4	)%
Other income			28				80				(65.0	)%			0.0	%			0.1	%
Interest expense			(279	)			(493	)			43.4	%			(0.2	)%			(0.7	)%
Amortization of debt issue costs			(243	)			(101	)			(140.6	)%			(0.2	)%			(0.2	)%
Interest income			5				11				(54.5	)%			0.0	%			0.0	%
Income (loss) before income tax			12,621				(6,660	)		NM					8.4	%			(10.1	)%
Income tax expense			159				14				1035.7	%			0.1	%			0.0	%
Net income (loss)		$	12,462			$	(6,674	)		NM					8.3	%			(10.1	)%

*	NM = Not Meaningful

	Fiscal Year Ended March 31,
	2017				2016							2017			2016
	Amount				Amount				% Change			% of Revenue			% of Revenue
Product revenue	$	66,224			$	64,897			2.0	%		94.3	%		95.9	%
Service revenue	3,987				2,745				45.2	%		5.7	%		4.1	%
Total revenue	70,211				67,642				3.8	%		100.0	%		100.0	%
Cost of product revenue	49,630				49,630				—	%		70.7	%		73.4	%
Cost of service revenue	3,244				2,015				61.0	%		4.6	%		3.0	%
Total cost of revenue	52,874				51,645				2.4	%		75.3	%		76.4	%
Gross profit	17,337				15,997				8.4	%		24.7	%		23.6	%
General and administrative expenses	14,777				16,884				(12.5	)%		21.0	%		25.0	%
Impairment of assets	250				6,023				NM			0.3	%		8.9	%
Sales and marketing expenses	12,833				11,343				13.1	%		18.3	%		16.8	%
Research and development expenses	2,004				1,668				20.1	%		2.9	%		2.4	%
Loss from operations	(12,527		)		(19,921		)		37.1	%		(17.8	)%		(29.5	)%
Other income	215				—				NM			0.3	%		—	%
Interest expense	(273		)		(297		)		8.1	%		(0.4	)%		(0.4	)%
Interest income	36				128				(71.9	)%		—	%		0.2	%
Loss before income tax	(12,549		)		(20,090		)		37.5	%		(17.9	)%		(29.7	)%
Income tax (benefit) expense	(261		)		36				NM			(0.4	)%		0.1	%
Net loss and comprehensive loss	$	(12,288	)		$	(20,126	)		38.9	%		(17.5	)%		(29.8	)%

Revenue. Product revenue increased 2.0%by 101.5%, or $1.3 million. The$57.1 million, for fiscal 2020 versus fiscal 2019. This increase in product revenue in fiscal 2017 was primarily a result of strengtheninghigher sales volume through our national account channel, and almost exclusively as a result of LED fixtures and sales of new products introduced during the year. Our increase in product

revenue was partially offset by negative impacts resulting from the transitiona major retrofit project for multiple locations for one of our distribution sales channel to an agent driven model, that did not gain traction until late in the second quarter of fiscal 2017. LED lightingnational account customers. Service revenue increased by 16.3% to $53.1 million in fiscal 2017 as compared to $45.7 million in fiscal 2016. Service revenue increased 45.2%294.9%, or $1.2$28.0 million, primarily due to more installationhigher sales volume through our national account channel for the major retrofit project revenue infor one customer and the timing of those project installations. In fiscal 2017 when compared2020, sales to fiscal 2016.this one national account customer represented 74.1% of our total revenue. Total revenue increased by 3.8%129.4%, or $2.6$85.1 million, primarily due to the items discussed above.

Cost of Revenue and Gross Margin. Our costCost of product revenue remainedincreased by 89.5%, or $39.5 million, in fiscal 2020 versus the same althoughcomparable period in fiscal 2017 had higher sales and better absorption. Our fiscal 2017 gross margin includes the adverse impact of $2.2 million of charges to increase the inventory reserve by $1.7 million and an adjustment to write off supplies inventory of $0.5 million. The increase2019 primarily due to the reserve reflects a growing customer preference for higher performing LED lighting technologies and the related slowdowncorresponding increase in demand for lower priced earlier generation solutions. Our costsales. Cost of service revenue increased 61.0%by 324.9%, or $1.2$23.0 million, in fiscal 20172020 versus fiscal 20162019 primarily due to additional costs associated with our increasedthe corresponding increase in service revenue in fiscal 2017.revenue. Gross margin increased from 23.6%22.1% of revenue in fiscal 20162019 to 24.7%24.6% in fiscal 2017. Lighting gross margin was positively impacted by a favorable mix of higher-priced2020, due to our higher sales levels covering fixed costs.

Operating Expenses

General and higher-margin LED high bay fixtures, better absorptionAdministrative. General and administrative expenses increased 9.3%, or $1.0 million, in fiscal 2020 compared to fiscal 2019, primarily due to higher volumes, negotiated price decreases for lighting components,bonus and the benefits of our cost containment initiatives.employment costs.

Operating Expenses

General and Administrative. Our general and administrative expenses decreased 12.5%, or $2.1 million, in fiscal 2017 primarily due to a reduction in legal costs, depreciation and amortization expense, offset by increases in employee costs, stock compensation, auditing and consulting expenses.

Impairment of assets. We performed an impairment test as of March 31, 2017 due to a triggering event for our indefinite-lived intangible asset. As a result of this impairment test, we determined that $0.3 million of our intangible asset for the Harris trade name was impaired. In 2016, we performed our annual goodwill impairment test in the fourth quarter and we determined that the entire amount of our recorded goodwill of $4.4 million was impaired. Also in fiscal 2016, our long-lived assets related to the pending sale and leaseback of our manufacturing facility were impaired by $1.6 million to properly represent the fair value of the property being sold.

Sales and Marketing. Our sales and marketing expenses increased 13.1%22.1%, or $1.5$2.0 million, in fiscal 20172020 compared to fiscal 2016.2019. The increase year over year was primarily due to increased commissions related to our agency channelan increase in commission expense on higher sales and rebranding costs, offset by a reduction in bad debt expense incurred in fiscal 2017 when compared to fiscal 2016.higher employment costs.

Research and Development. Our researchResearch and development expenses increased 20.1%by 24.9%, or $0.3 million in fiscal 20172020 compared to fiscal 2019 primarily due to our investment in product innovation related to new product development.higher employment costs.

Other income. Other income in fiscal 2017 represented product royalties received from licensing agreements for our patents.

Interest Expense. Our interestInterest expense in fiscal 20172020 decreased by 8.1%43.4%, or $24,000$0.2 million, from fiscal 2016.2019. The reductiondecrease in interest expense is attributablewas due to fewer sales of receivables.

Orion Engineered Systems Division

Our OES segment develops and sells lighting products and provides construction and engineering services for our commercial lighting and energy management systems. OES provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers.

The following table summarizes our OES segment operating results (dollars in thousands):

		Fiscal Year Ended March 31,
		2021				2020				2019
Revenues		$	84,243			$	122,744			$	30,925
Operating income (loss)		$	7,472			$	16,164			$	(1,237	)
Operating margin			8.9	%			13.2	%			(4.0	)%

Fiscal 2021 Compared to Fiscal 2020

OES segment revenue decreased in fiscal 2021 by 31.4%, or $38.5 million, compared to fiscal 2020, due to multiple projects put on hold as a result of COVID-19, including the projects to one large national account customer that represented 56.0% in fiscal 2021 and 74.1% of total revenue in fiscal 2020. The project installations for this customer resumed during the second quarter of fiscal 2021. This sales decrease led to a corresponding decrease in our outstanding debt.

Interest Income. Our interestoperating income in this segment.

Fiscal 2020 Compared to Fiscal 2019

OES revenue increased in fiscal 2017 decreased2020 by 71.9%296.9%, or $0.1$91.8 million, compared to fiscal 2019 almost exclusively as the result of a major retrofit project for multiple locations for one of our national account customers. This sales increase led to a corresponding increase in operating income in this segment from a net loss position in fiscal 2016. 2019.

Orion Distribution Services Division

Our interest income decreasedODS segment focuses on selling lighting products through manufacturer representative agencies and a network of North American broadline and electrical distributors and contractors.

The following table summarizes our ODS segment operating results (dollars in thousands):

		Fiscal Year Ended March 31,
		2021				2020				2019
Revenues		$	21,122			$	15,087			$	24,173
Operating income (loss)		$	2,430			$	(852	)		$	(1,742	)
Operating margin			11.5	%			(5.6	)%			(7.2	)%

Fiscal 2021 Compared to Fiscal 2020

ODS segment revenue in fiscal 2021 increased 40.0%, or $6.0 million, compared to fiscal 2020, primarily due to ansales to one customer who represented 5.9% of fiscal 2021 total consolidated revenue. This sales increase led to a corresponding increase in customers optingoperating income in this segment based on operating leverage.

Fiscal 2020 Compared to utilize outside third party finance providers.

Income Taxes. Our income tax benefitFiscal 2019

ODS revenue decreased $0.3 million from fiscal 2017. In fiscal 2017, we received refunds from previously filed tax returns and reversed a valuation allowance resulting in a tax benefit in fiscal 2017. Our income tax expense is typically2020 by 37.6%, or $9.1 million, compared to fiscal 2019, primarily due to changesa decrease in expected minimum state tax liabilities.sales volume through our distribution channel. ODS operating loss in fiscal 2020 improved to $(0.9) million. The decrease in segment operating loss was primarily due to lower operating costs on lower employment expenses and commissions.

Orion U.S. Markets Division

The

Our USM segment sells commercial lighting systems and energy management systems to the wholesale contractor markets. USM customers include ESCOs and electrical contractors. During fiscal 2017 and fiscal 2018, a significant portion of the historic sales of this division have migrated to distribution channel sales as a result of the implementation of our agent distribution strategy. The migrated sales are included in our ODS Division.

The following table summarizes our USM segment operating results (dollars in thousands):

		Fiscal Year Ended March 31,
		2021				2020				2019
Revenues		$	11,476			$	13,010			$	10,656
Operating income		$	1,683			$	2,447			$	1,132
Operating margin			14.7	%			18.8	%			10.6	%

	For the year ended March 31,
	2018				2017				2016
Revenues	$	8,567			$	17,852			$	38,841
Operating loss	$	(3,123	)		$	(1,357	)		$	(4,958	)
Operating margin	(36.5		)%		(7.6		)%		(12.8		)%

Fiscal 20182021 Compared to Fiscal 2017

2020

USM segment revenue in fiscal 2021 decreased 11.8%, or $1.5 million, from fiscal 2017 by 52.0%, or $9.3 million. The decrease in revenue during fiscal 2018 compared to fiscal 2017 included the continued transition to our distribution sales model through the migration of sales to our ODS segment. Sales made through independent manufacturer representative agents are reflected within our ODS segment. The decrease also reflects a $1.3 million decline in sales to select large direct customers.

The USM segment’s operating loss increased $1.8 million in fiscal 2018 as compared to fiscal 2017. The segment's operating loss was the result of the significant decline in sales due to the migration of customers to the distribution sales channel resulting in lost operating expense leverage and an intangible asset impairment in the second quarter of fiscal 2018 of $0.2 million.

Fiscal 2017 Compared to Fiscal 2016

USM segment revenue decreased from fiscal 2016 by 54.0%, or $21.0 million. The decrease in revenue during fiscal 2017 compared to fiscal 2016 was primarily due to our transition to more sales through manufacturer representative agents. These sales are now reflected within ODS.

USM segment operating loss improved from fiscal 2016 by 72.6%, or $3.6 million. The decrease in operating loss in fiscal 2017 was2020, primarily due to the non-recurrenceimpact of costs associated with the segment's fiscal 2016 goodwill impairment charge of $2.4 millionCOVID-19, and fiscal 2016 fixed asset impairment charge of $0.7 million.

Engineered Systems Division

The OESresulted in a corresponding decrease in operating income in this segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. OES provides turnkey solutions for large national accounts, governments, municipalities and schools.

The following table summarizes our OES segmentbased on operating results (dollars in thousands):

	For the year ended March 31,
	2018				2017				2016
Revenues	$	23,827			$	29,501			$	26,325
Operating income (loss)	$	(3,792	)		$	(3,647	)		$	(6,982	)
Operating margin	(15.9		)%		(12.4		)%		(26.5		)%

leverage.

Fiscal 20182020 Compared to Fiscal 2017

OES2019

USM revenue decreasedincreased in fiscal 20182020 by 19.2%22.1%, or $5.7$2.4 million, compared to fiscal 20172019, primarily as a result of the timing of delivery of our turnkey projects and reduced florescent purchases by a large retail customer.

OES segment operating loss in fiscal 2018 increased by $0.1 million from fiscal 2017. The segment's operating loss was the result of the decline in sales resulting in lost operating leverage and an intangible asset impairment in the second quarter of fiscal 2018 of $0.5 million.

Fiscal 2017 Compared to Fiscal 2016

OES revenue increased in fiscal 2017 by 12.1%, or $3.2 million compared to fiscal 2016. This increase in revenue was primarily driven by an increase in lighting revenue due to an increase in customer capital spending within the manufacturing and industrial sector. OES completed more turnkey jobs in fiscal 2017 when compared to fiscal 2016

OES segment operating loss decreased 47.8%, or $3.3 million from fiscal 2017 compared to fiscal 2016. The decreased loss was due to improvements to fiscal 2017 revenues and increases in gross margin related to cost decreases on LED components. The decrease in operating loss was also due to non-recurrence of the segment's fiscal 2016 goodwill impairment charge of $2.0 million and fiscal 2016 fixed asset impairment charge of $0.8 million.

Orion Distribution Services Division

The ODS segment focuses on selling lighting products through manufacturer representative agencies and a network of broadline North American distributors. This segment has expanded in fiscal 2017 and fiscal 2018 as a result of increased sales through distributors as Orion continues to develop its agent distribution strategy. This expansion includes the migration of customers from direct sales previously included in the USM division.

The following table summarizes our ODS segment operating results (dollars in thousands):

	For the year ended March 31,
	2018			2017			2016
Revenues	27,906			22,858			2,476
Operating loss	(325	)		(927	)		(632	)
Operating margin	(1.2	)%		(4.1	)%		(25.5	)%

Fiscal 2018 Compared to Fiscal 2017

ODS segment revenue increased in fiscal 2018 from fiscal 2017 by $5.0 million. The increase in revenue was primarily due to our transition to a distribution channel sales model migrating direct sales through our manufacturer representative agents. In addition, ODS revenue grewvolume as a result of our expanding manufacturer representative agencies andreengagement in the continued ramp of sales through these agencies. The total number of manufacturer representative agencies were approximately 50 in fiscal 2017 and fiscal 2018.

ODS segment operating loss decreased by $0.6 million in fiscal 2018 compared to fiscal 2017, primarily duechannel. This sales increase led to a decrease in selling expenses.

Fiscal 2017 Compared to Fiscal 2016

ODS segment revenue increased in fiscal 2017 from fiscal 2016 by $20.4 million. Thecorresponding increase in revenueoperating income in fiscal 2017 was due to our transition from ESCOs to distribution channel sales through manufacturer representative agents expanding our customer base. Sales further increased due to the shift of customers from the USM division to this division as a result of our transition to the distribution model.

ODS segment based on operating loss increased by 46.7%, or $0.3 million in fiscal 2017. The operating loss increase was minimized by our continued investment in selling costs and increasing commission expenses due to our manufacturer representative agents as we complete our selling channel transition.

leverage.

Liquidity and Capital Resources

Overview

We had $9.4$19.4 million in cash and cash equivalents as of March 31, 2018,2021, compared to $17.3$28.8 million at March 31, 2017.2020. Our cash position decreased primarily as a result of the paydown of our net loss, separation payments to terminated employees in conjunction with our management reorganization and cost reduction initiatives, and the net repaymentline of $2.7 million on our revolving credit facility.

In February 2015,credit.

On December 29, 2020, we entered into a new Loan and Security Agreement (the “Credit Agreement”) with Bank of America, N.A., as lender (the “Lender”). The Credit Agreement replaced our existing $20.15 million secured revolving credit and security agreement ("Credit Agreement")dated as of October 26, 2018, as amended, with Wells FargoWestern Alliance Bank, National Association. In fiscal 2017, we amendedAssociation, as lender (the “Prior Credit Agreement”). The replacement of the existing credit agreement with the Credit Agreement provides us with increased financing capacity and liquidity to extend the maturity date to February 6, 2019fund our operations and eliminate a $5.0 million excess availability reserve that had limited the amount available to be drawn under the Credit Agreement by such amount. In fiscal 2018, we again amended the Credit Agreement to extend the maturity date to February 6, 2021. The Credit Agreement provides for a revolving credit facility ("Credit Facility") subject to a borrowing base requirement based on eligible receivables and inventory. implement our strategic plans.

As of March 31, 2018, our2021, the borrowing base was approximately $4.0 million. Borrowingssupported the full availability of the Credit Facility. As of March 31, 2021, no amounts were borrowed under the Credit Facility.

Additional information on our Credit Agreement outstandingcan be found in the “Indebtedness” section located below.

In March 2020, 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 $100.0 million of debt and/or equity securities. The filing of the shelf registration statement may help facilitate our ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes. The COVID-19 pandemic has had a negative near-term impact on the capital markets and may impact our ability to access this capital.

In March 2021, we entered into an At Market Issuance Sales Agreement to undertake an “at the market” (ATM) public equity capital raising program pursuant to which we may offer and sell shares of our common stock, having an aggregate offering price of up to $50 million from time to time through or to the Agent, acting as ofsales agent or principal. No share sales were effected pursuant to the ATM program through March 31, 2018, amounted2021.

We also are exploring various alternative sources of liquidity to approximately $3.9 million. As a result,help ensure that we estimate that aswill have the best allocation of March 31, 2018, we were eligibleinvesting capital to borrow an additional $0.1 million under the Credit Facility based upon current levels of eligible inventory and accounts receivable. The Credit Facility includes a $2.0 million sublimit for the issuance of letters of credit.

satisfy our working capital needs.

Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, cost reduction initiatives,containment, working capital management, capital expenditures, pending or future litigation results and cost containment measures. 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 operating resultsexpenditures. Further, as discussed in the future,“Risk Factors,” we also currently believe that we may experience negative working capitalexpect our forecasted cash flows during some interim periods.

to be materially adversely impacted by the COVID-19 pandemic, the magnitude and period of impact of which is uncertain. While we believe that we will likely have adequate available cash and equivalents and credit availability under our Credit Agreement to satisfy our currently anticipated working capital and liquidity requirements during the next 12 months based on our current cash flow forecast, there can be no assurance to that effect. We are pursuing various alternative sources of liquidity, including exploring a sale or mortgage of our tech center office building, to help ensure that we will have the best allocation of investing capital to satisfy our working capital needs. We are also implementing certain inventory management practices that we anticipate will 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.

In February 2017, 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 $75.0 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. 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.

On November 28, 2017, we received written notice from the Listing Qualifications Department of The NASDAQ Stock Market LLC notifying us that we were is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market due to the shares of our common stock trading below the minimum bid price of $1.00 per share for a period of thirty (30) consecutive business days.

To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share for a minimum of ten (10) consecutive business days. We were unable to regain compliance with the minimum bid price requirement during the initial 180-day compliance period. On May 30, 2018, we were granted an additional 180-day compliance period following our written notification to NASDAQ of our intention to cure the deficiency during the second compliance period. If we fail to regain compliance during the second 180-day period, then NASDAQ will notify us of its determination to delist our common stock, at which point we would have an opportunity to appeal the delisting determination to a hearings panel. We would remain listed on Nasdaq pending the hearings panel’s decision. There can be no assurance that, if we do appeal any delisting determination by Nasdaq to the hearings panel, that such appeal would be successful.

We intend to continue to monitor the closing bid price of our common stock and may, if appropriate, consider implementing available options to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules.

Cash Flows

The following table summarizes our cash flows for our fiscal 2018,2021, fiscal 20172020 and fiscal 2016:2019:

		Fiscal Year Ended March 31,
		2021				2020				2019
		(in thousands)
Operating activities		$	1,729			$	20,343			$	(5,058	)
Investing activities			(946	)			(936	)			(449	)
Financing activities			(10,141	)			615				4,812
(Decrease) increase in cash and cash equivalents		$	(9,358	)		$	20,022			$	(695	)

	Fiscal Year Ended March 31,
	2018				2017				2016
	(in thousands)
Operating activities	$	(4,415	)		$	(1,903	)		$	(3,473	)
Investing activities	(585		)		1,649				(372		)
Financing activities	(2,883		)		2,019				(615		)
(Decrease) increase in cash and cash equivalents	$	(7,883	)		$	1,765			$	(4,460	)

Cash Flows Related to Operating Activities. Cash provided by or used in(used in) operating activities primarily consistedconsists of a net lossincome adjusted for certain non-cash items, including depreciation, and amortization of intangible assets, stock-based compensation, expenses,amortization of debt issue costs, provisions for reserves, and the effect of changes in working capital and other activities.

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 release of new product lines and pre-ordering due to supply chain delays as a result of COVID-19, a decrease in accounts payable of $2.6 million due to the timing of payments, an increase in accounts receivable of $2.4 million due to the timing of billing and customer collections, and an increase in Revenue earned but not billed of $2.4 million due to timing on revenue recognition compared to invoicing. Cash provided by changes in operating assets and liabilities included an increase in accrued expenses of $5.8 million due to the timing of project completions and the receipt of invoices.

Cash provided by operating activities for fiscal 2020 was $20.3 million and consisted of a net income adjusted for non-cash expense items of $15.2 million and net cash provided by changes in operating assets and liabilities of $5.2 million. Cash used by changes in operating assets and liabilities consisted primarily of an increase in Inventory of $1.3 million due to delayed shipments at the end of the fiscal year as a result of COVID-19. Cash provided by changes in operating assets and liabilities included a decrease in Accounts receivable of $3.6 million due to the timing of billing and customer collections, a decrease in Revenue earned but not billed of $3.2 million due to timing on revenue recognition compared to invoicing.

Cash used in operating activities for fiscal 20182019 was $4.4$5.1 million and consisted of a net loss adjusted for non-cash expense items of $8.1$4.1 million and net cash provided byused in changes in operating assets and liabilities of $3.7$1.0 million. Cash used by changes in operating assets and liabilities consisted of a decreasean increase of $1.7$5.8 million in accrued expenses and other primarily due to the timing of payment of commissions and lower accrued bonuses in the current fiscal year, a decrease of $0.1 million in deferred revenue due to the timing of project completion and a decrease of $0.1 million in deferred contract costs due to the timing of project completions. Cash provided by changes in operating assets and liabilities included a decrease of $0.4 million in accounts receivable due to the decline in sales and the timing of customer collections, a decrease in inventory of $4.7 million as a result of increased focus on inventory management in consideration of the lower sales volume, a decrease of $0.5 million in prepaid and other assets primarily due to the timing of project billings, and a negligible decrease in accounts payable.

Cash used in operating activities for fiscal 2017 was $1.9 million and consisted of net cash provided by changes in operating assets and liabilities of $3.7 million and a net loss adjusted for non-cash expense items of $5.6 million. Cash provided by changes in operating assets and liabilities consisted of a decrease of $1.7 million in accountsAccounts receivable due to the timing of billing and customer collections from customers, a decreaseon comparatively higher fourth quarter sales, an increase in inventoryInventory of $1.2$4.7 million due to decreasing inventory prices, a decrease in prepaid expenses and other assets of $2.1 million due to project billings that decreased unbilled revenuehigher backlog for anticipated first quarter fiscal 2020 sales, and an increase of $1.4 million in deferred revenue of $0.3 million. Cash used by changes in operating assets and liabilities included an increase in deferred contract costs of $0.9 millionRevenue earned but not billed due to projects still in process, a decrease in accounts payable of $0.1 million duetiming on revenue recognition compared to the increase in purchases to support our anticipated growth in lighting product revenue, and decrease in accrued expenses and other of $0.6 million for increased commissions as a result of Orion’s distribution model changes.

Cash used in operating activities for fiscal 2016 was $3.5 million and consisted of net cash provided by changes in operating assets and liabilities of $3.6 million and a net loss adjusted for non-cash expense items of $7.1 million.invoicing. Cash provided by changes in operating assets and liabilities consisted of a decrease of $7.1 million in accounts receivable due to the increase in lighting revenue and collections from customers, an increase in accounts payable of $0.7 million due to the increase in inventory purchases to support our growth in lighting product revenue during fiscal 2016, an increase of $1.8 million in accrued expenses due to a loss contingency reserve and accrued project installation costs, and a decrease in deferred contract costs of $0.1 million due to the completion of solar projects. Cash used by changes in operating assets and liabilities included an increase of $3.2$8.9 million in inventoryAccounts payable based on timing of payments and an increase of $2.0 million in Accrued expenses and other primarily due to the increase in purchases to support our anticipated growth in lighting product revenue, an increase in prepaid and other assets of $2.6 million forincreased accrued project billings that increased unbilled revenue, and a decrease in deferred revenue of $0.3 million due to project completions.costs on higher installation volume.

Cash Flows Related to Investing Activities. Cash used byin investing activities was $0.6 million in fiscal 2018 which2021 was $0.9 million and consisted primarily of purchases of property and equipment.

Cash used in investing activities in fiscal 2020 was $0.9 million and consisted primarily of purchases of property and equipment of $0.5 million and investment in patents and licenses of $0.1$0.8 million.

Cash provided by investing activities was $1.6 million in fiscal 2017 which consisted of spend of $0.7 million for capital expenditures and $0.3 million of investment in patents, offset by $2.6 million of proceeds from the sale of the Manitowoc manufacturing facility.

Cash used in investing activities in fiscal 2019 was $0.4 million in fiscal 2016 thatand consisted primarily of purchases of property and equipment of $0.4 million for capital improvements related to LED production. Cash provided by investing activities in fiscal 2016 included $35,000 related to the sale of property, plant, and equipment.

million.

Cash Flows Related to Financing Activities. Cash used in financing activities in fiscal 2021 was $2.9$10.1 million. This cash used consisted primarily of a net payment of $10.0 million for fiscal 2018 and was due almost entirely to the net repayment ofunder our revolving credit facility.Credit Facility.

Cash provided by financing activities was $2.0 million forin fiscal 2017. This included net proceeds from the revolving credit facility of $2.9 million, offset by $0.9 million in cash used for the repayment of long-term debt and $11,000 for stock option related tax settlements.

Cash used in financing activities2020 was $0.6 million for fiscal 2016.million. This included $1.9 million cash used for the repayment of long-term debt, partially offset by $1.2 millionprovided consisted primarily of net proceeds of $0.8 million from our Credit Facility, offset by $0.1 million in debt issue costs due to the Credit Facility and $0.1 million receivedof payment of long-term debt.

Cash provided by financing activities in fiscal 2019 was $4.8 million. This cash provided consisted primarily of net proceeds of $5.3 million from stock option exercises.

our Credit Facility, offset by $0.4 million in debt issue costs due to the Credit Facility and $0.1 million of payment of long-term debt.

Working Capital

Our net working capital as of March 31, 20182021 was $13.0$26.2 million, consisting of $29.4$56.5 million in current assets and $16.4$30.4 million in current liabilities. Our net working capital as of March 31, 20172020 was $25.5$27.8 million, consisting of $43.9$55.0 million in current assets and $18.4$27.2 million in current liabilities. Our current accounts receivableCash and cash equivalents, net balance decreased by $0.4$9.4 million from the fiscal 20172020 year-end due primarily to the paydown of our line of credit. Our current Accounts receivable, net balance increased by $3.1 million from the fiscal 2020 year-end due to the decline in salestiming of billing and customer collections. Our Revenue earned but not billed balance increased by $2.4 million from the fiscal 2020 year-end due to the timing of customer collections.billing. Our inventory decreasedInventories, net increased $5.0 million from the fiscal 20172020 year-end by $5.8 million due to continued management of purchasing activities and inventory management initiatives. Our prepaid and other current assets decreased by $0.4 million due to a decrease in unbilled revenue as a result of the timing of customer billings. Our accounts payable remained relatively flat compared to fiscal 2017 year-end. Our accrued expenses decreased from our fiscal 2017 year-end by $1.8 million due to the paymentrelease of commissionsnew product lines and a decrease in accrued bonuses inpre-purchases of components for our products to help mitigate the current fiscal year.

impact of the COVID-19 pandemic on our supply chain.

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.

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, including purchases to support the provision of products and services to our largest customer.

Indebtedness

Revolving Credit Agreement

We have an amended credit agreement ("

The Credit Agreement") thatAgreement provides for a five-year $25.0 million revolving credit facility ("(the “Credit Facility”) that matures on December 29, 2025. Borrowings under the Credit Facility")Facility are subject to a borrowing base requirement based on eligible receivables, inventory and inventory.cash. As of March 31, 2018 our2021, the borrowing base was approximately $4.0 million. Thesupports the full availability of the Credit Facility has a maturity date of February 6, 2021 and includes a $2.0 million sublimit for the issuance of letters of credit.Facility. As of March 31, 2018, we had2021, no outstanding lettersamounts were borrowed under the Credit Facility.

The Credit Agreement is secured by a first lien security interest in substantially all of credit. our assets.

Borrowings outstanding as of March 31, 2018, amounted to approximately $3.9 million andunder the Credit Agreement are included in non-current liabilitiespermitted in the accompanying consolidated balance sheet. We estimate that asform of March 31, 2018,LIBOR or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to our availability under the Credit Agreement. Among

other fees, we were eligibleare required to borrowpay an additional $0.1 millionannual facility fee of $15,000 and a fee of 25 basis points on the unused portion of the Credit Facility.

The Credit Agreement includes a springing minimum fixed cost coverage ratio of 1.0 to 1.0 when excess availability under the Credit Facility based upon current levelsfalls below the greater of eligible inventory and accounts receivable.

Subject in each case to our applicable borrowing base limitations, the Credit Agreement otherwise provides for a $15.0$3.0 million Credit Facility. This limit may increase up to $20.0 million, subject to a borrowing base requirement, if we satisfy certain conditions. We did not meet the requirements to increase the borrowing limit to $20.0 million as of July 31, 2017, the most recent measurement date.

From and after any increase in the Credit Facility limit from $15.0 million to $20.0 million, the Credit Agreement requires that we maintain, asor 15% of the end of each month, acommitted 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 additional customary events of default and other covenants, including certain restrictions on our 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 our stock, redeem, retire or repurchasepurchase shares of our stock, make investments or pledge or disposetransfer assets. If an event of assets. We were in compliance with our covenants indefault under the Credit Agreement as of March 31, 2018.

Each of our subsidiariesoccurs and is a joint and several co-borrower or guarantorcontinuing, then the Lender may cease making advances under the Credit Agreement and the Credit Agreement is secured by a security interest in substantially all of our and each subsidiary’s personal property (excluding various assets relating to customer OTAs) and a mortgage on certain real property.

Borrowingsdeclare any outstanding obligations under the Credit Agreement bear interest atto be immediately due and payable. In addition, if we become the daily three-month LIBOR plus 3.0% per annum, with a minimum interest charge for each yearsubject of voluntary or portion of a year during the term ofinvoluntary proceedings under any bankruptcy or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable.

We did not incur any early termination fees in connection with the termination of the Prior Credit Agreement, but did recognize a loss on debt extinguishment of $0.1 million regardless of usage. As of March 31, 2018, the interest rate was 5.31%. 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 amountwrite-off of letters of credit outstanding from timeunamortized debt issue costs related to time under the Prior Credit Facility.

Agreement. The Prior Credit Agreement was scheduled to mature on October 26, 2021.

Capital Spending

Over the past three fiscal years, we have made

Our capital expenditures are primarily for production equipment and tooling, for information technology systems, and for general corporate purposes for our corporate headquarters and technology center.center, production equipment and tooling and for information technology systems. Our capital expenditures totaled $0.5$0.9 million in fiscal 2018, $0.72021, $0.8 million in fiscal 2017,2020, and $0.4$0.5 million in fiscal 2016. We plan to incur approximately $0.6 million in capital expenditures in fiscal 2019. Our capital spending plans predominantly consist of investments related to 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.

Contractual Obligations

Information regarding our known contractual obligations of the types described below as of March 31, 20182021 is set forth in the following table (dollars in thousands):

		Payments Due By Period
		Total				Less than 1 Year				1-3 Years				3-5 Years				More than 5 Years
		(in thousands)
Bank debt obligations		$	—			$	—			$	—			$	—			$	—
Other debt obligations			49				14				31				4				—
Cash interest payments on debt			9				3				5				1				—
Lease obligations			3,739				810				1,566				1,363				—
Purchase order and capital expenditure commitments (1)			13,117				13,117				—				—				—
Total		$	16,914			$	13,944			$	1,602			$	1,368			$	—

	Payments Due By Period
	Total				Less than 1 Year				1-3 Years				3-5 Years				More than 5 Years
	(in thousands)
Bank debt obligations	$	3,908			$	—			$	3,908			$	—			$	—
Capital lease obligations	184				79				105				—
Cash interest payments on debt	273				139				134				—				—
Operating lease obligations	1,642				647				995				—				—
Purchase order and capital expenditure commitments(1)	1,882				1,882				—				—				—
Total	$	7,889			$	2,747			$	5,142			$	—			$	—

(1)
(1)	Reflects non-cancellable purchase commitments primarily for certain inventory items entered into in order to secure better pricing and ensure materials on hand.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Inflation

Our results from operations have not been and we do not expect them to be, materially affected by inflation.

We are monitoring input costs and cannot currently predict the future impact to our operations by inflation.

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 compensation, warranty reserves and income taxes. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. A summary of our critical accounting policies is set forth below.

Revenue Recognition. We generate revenue primarily by selling commercial lighting fixtures and components and by installing these fixtures in our customer’s facilities. We recognize revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of the following criteria have been met: (i)goods or services being provided (which we refer to as a performance obligation) is transferred to a customer at an amount that reflects the consideration we expect to receive in exchange for those goods or services. Prices are generally fixed at the time of order confirmation. The amount of expected consideration includes estimated deductions and early payment discounts calculated based on historical experience, customer rebates based on agreed upon terms applied to actual and projected sales levels over the rebate period, and any amounts paid to customers in conjunction with fulfilling a performance obligation.

If there are multiple performance obligations in a single contract, the contract’s total transaction price per GAAP is persuasive evidence of an arrangement; (ii) delivery has occurred and title has passed to the customer; (iii) the sales price is fixed and determinable and no further obligation exists; and (iv) collectability is reasonably assured. Virtually all of our revenue is recognized when title and risk of loss transfers to the customer or when services are completed and acceptance provisions, if any, have been met. In certain of our contracts, we provide multiple deliverables. We record the revenue associated with each element of these arrangements by allocating the total contract revenueallocated 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 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 for the installation performance obligation and is based on average historical installation margin.

Revenue derived from customer contracts which include only performance obligation(s) for the sale of lighting fixtures and components is classified as VSOEProduct revenue in the Consolidated Statements of Operations. The revenue for these transactions is recorded at the point in time when management believes that the customer obtains control of the products, generally either upon shipment or TPE evidence does not exist. We consider externalupon delivery to the customer’s facility. This point in time is determined separately for each contract and internalrequires 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 fixtures and the installation of such fixtures (which we refer to as a turnkey project) is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.

Revenue from turnkey projects that is allocated to the sale of the lighting fixtures is recorded at the point in time when management believes the customer obtains control of the product(s) and is reflected in Product revenue. This point in time is determined separately for each customer contract based upon the terms of the contract and the nature and extent of our control of the light fixtures during the installation. Product revenue associated with turnkey projects can be recorded (a) upon shipment or delivery, (b) subsequent to shipment or delivery and upon customer payments for the light fixtures, (c) when an individual light fixture is installed and working correctly, or (d) when the customer acknowledges that the entire installation project is substantially complete. Determining the point in time when a customer obtains control of the lighting fixtures in a turnkey project can be a complex judgment and is applied separately for each individual light fixture included in a contract. In making this judgment, management considers the timing of various factors, including, but not limited to, pricing practices, margin objectives, competition, geographiesthose detailed below:

when there is a legal transfer of ownership;

when the customer obtains physical possession of the products;

when the customer starts to receive the benefit of the products;

the amount and duration of physical control that we maintain on the products after they are shipped to, and received at, the customer’s facility;

whether we are required to maintain insurance on the lighting fixtures when they are in whichtransit and after they are delivered to the customer’s facility;

when each light fixture is physically installed and working correctly;

when the customer formally accepts the product; and

when we offer our products and services, internal costs, andreceive payment from the scope and size of projects.

We have limited Power Purchase Agreement (“PPA”) contracts still outstanding. Those PPA’s outstanding are supply side agreementscustomer for the generationlight fixtures.

Revenue from turnkey projects that is allocated to the single installation performance obligation is reflected in Service revenue. Service revenue is recorded over-time as we fulfill our obligation to install the light fixtures. We measure our performance toward fulfilling our performance obligations for installations using an output method that calculates the number of electricity for which we recognize revenue on a monthly basis over the lifelight fixtures completely removed and installed as of the PPA contract, typicallymeasurement date in excesscomparison to the total number of 10 years.

Historically we have offered our customers long-termlight fixtures to be removed and installed under the contract.

We offer a financing through ourprogram, called an Orion Throughput Agreement, or OTA, sales-type financing program. Under this program we finance thefor a customer’s purchaselease of our energy management systems. OurThe OTA contracts areis structured as a sales-type capital leases under GAAPlease and we recordupon successful installation of the system and customer acknowledgment that the system is operating as specified, revenue is recognized at our net investment in the lease, which typically is the net present value of the future payments atcash flows.

We also record revenue in conjunction with several limited power purchase agreements (“PPAs”) still outstanding. Those PPAs are supply-side agreements for the time customer acceptancegeneration of the installed and operating system is complete.electricity. Our OTA contracts under this sales-type financing are either structuredlast PPA expires in 2031. Revenue associated with a fixed term, typically 60 months, and contain 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 fixturesenergy generated by the solar facilities under our OTA financing programthese PPAs is within the scope of ASC 606. Revenues are recognized over-time and are equal to the amount billed to the customer, which is calculated by applying the fixed rate designated in the PPAs to the variable amount of electricity generated each month. This approach is in accordance with the “right to invoice” practical expedient provided for in ASC 606. We also recognize revenue upon the sale to third parties of tax credits received from operating the solar facilities and is based onfrom amortizing a grant received from the costfederal government during the period starting when the power generating facilities were constructed until the expiration of the lighting fixturesPPAs; these revenues are not derived from contracts with customers and applicable profit margin. Our revenue from agreements entered intotherefore not under this program is not dependent upon our customers’ actual energy savings. Upon completionthe scope of the installation, we may choose to sell the future cash flows and residual rights to the equipment on a non-recourse basis to an unrelated third-party finance company in exchange for cash and future payments.

ASC 606.

Inventories. Inventories are stated at the lower of cost or net realizable value and include raw materials, work in process and finished goods. Items are removed from inventory using the first-in, first-out method. Work in process inventories are comprised 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. We review our inventory for obsolescence. If the net realizable value, which is based upon the estimated selling price, less estimated costs of completion, disposal, and transportation, falls below cost, then the inventory value is reduced to its net realizable value. Our inventory obsolescence reserves at March 31, 20182021 were $3.4$1.9 million, or 30.1%8.9% of gross inventory, and $3.5$2.4 million, or 20.4%14.3% of gross inventory, at March 31, 2017.2020.

Allowance for Doubtful Accounts. We perform ongoing evaluations of our customers and continuously monitor collections and payments and estimate an allowance for doubtful accounts based upon the aging of the underlying receivables, our historical experience with write-offs and specific customer collection issues that we have identified. While such credit losses have historically been within our expectations, and we believe appropriate reserves have been established, we may not adequately predict future credit losses. If the financial condition of our customers were to deteriorate and result in an impairment of their ability to make payments, additional allowances might be required which would result in additional general and administrative expense in the period such determination is made. Our allowance for doubtful accounts was $0.2 million,eleven thousand dollars, or 1.7%0.1% of gross receivables, at March 31, 20182021 and $0.1 million,twenty-eight thousand dollars, or 1.5%0.3% of gross receivables, at March 31, 2017.2020.

Recoverability of Long-Lived Assets. We evaluate long-lived assets such as property, equipment and definite lived intangible assets, such as patents, customer relationships, developed technology, and non-competition agreements, for impairment whenever events or circumstances indicate that the carrying value of the assets recognized in our financial statements may not be recoverable. Factors that we consider include whether there has been a significant decrease in the market value of an asset, a significant change in the way an asset is being utilized, or a significant change, delay or departure in our strategy for that asset, or a significant change in the macroeconomic environment, such as the lossimpact of a customer in the case of customer relationships.COVID-19 pandemic. Our assessment of the recoverability of long-lived assets involves significant judgment and estimation. These assessments reflect our assumptions, which, we believe, are consistent with the assumptions hypothetical marketplace participants use. Factors that we must estimate when performing recoverability and impairment tests include, among others, forecasted revenue, margin costs and the economic life of the asset. If impairment is indicated, we first

determine if the total estimated future cash flows on an undiscounted basis are less than the carrying amounts of the asset or assets. If so, an impairment loss is measured and recognized.

As of March 31, 2020, due to the forecasted change in the macroeconomic conditions due to the COVID-19 pandemic, a result of lower than anticipated operating results fortriggering event occurred requiring us to evaluate our non-solar business during fiscal 2018, we reviewed our definite livedlong-lived assets for impairment in accordance with the applicable accounting guidance. Under this guidance, assets are identified to asset groups that are then tested for recoverability by comparing the asset group’s carrying value to the sum of undiscounted cash flows to be generated through the use and eventual disposition of the assets. If the asset group fails the recoverability test, an impairment and reduction in the asset value is recorded if the carrying value of the assets exceeds the asset group's fair value. In conjunction with the fiscal 2018 review, we determined that our fixed and intangible assets represented two asset groups. The first asset group represents our solar power generating assets that are installed at a customer location and generate distinct and separately identifiable cash flows under a long-term contract with this customer for the use of the power they generate. The operating results for the solar generating assets were consistent with forecasts, and therefore no impairment review was performed. The second asset group consists of all of our other fixed and intangible assets.impairment. Due to the central nature of our operations, theseour tangible and intangible definite-lived assets support our full operations, and are utilized by all three of our reportable segments, and do not generate separately identifiable cash flows belowflows. As such, these assets together represent a single asset group. We performed the total asset group level. The primary asset withinrecoverability test for the asset group is the machinery and equipment with a remaining useful life of five years. As such, in accordance with the accounting guidance, our review for recoverability of this asset group comparedby comparing the carrying value ofto the asset group to ourgroup’s expected future undiscounted cash flows for the next five years plus estimated proceeds at the end of the five-year period.flows. We concluded that the undiscounted cash flows forof the other non-solardefinite lived asset group exceeded theirthe carrying values.value. As such the assets wereasset group was deemed recoverable and no impairment was recorded.

As a result of our reoccurring losses, during fiscal 2017 we reviewed our definite lived assets for impairment in accordance with the applicable accounting guidance. Under this guidance assets are identified to asset groups that are then tested for recoverability by comparing the asset group’s carrying value to the sum of undiscounted cash flows to be generated through the use and eventual disposition of the assets. If the asset group fails the recoverability test, an impairment and reduction in the asset value is recorded if the carrying value of the assets exceeds the asset group's fair value. In conjunction with the fiscal 2017 review, we determined that our fixed and intangible assets represented two asset groups. The first asset group represents our solar power generating assets that are installed at a customer location and generate distinct and separately identifiable cash flows under a long-term contract with this customer for the use of the power they generate. The second asset group consists of all of our other fixed and intangible assets. Due to the central nature of our operations, these assets support our full operations and are utilized by all three of our reportable segments and do not generate separately identifiable cash flows below the total asset group level. The primary asset within the asset group is the machinery and equipment with a remaining useful life of five years. As such, in accordance with the accounting guidance, our review for recoverability of this asset group compared the carrying value of the asset group to our expected undiscounted cash flows for the next five years plus estimated proceeds at the end of the five-year period. We concluded that the undiscounted cash flows for the other non-solar asset group exceeded their carrying values. As such the assets were deemed recoverable and no impairment was recorded.

During fiscal 2016, we recorded an impairment loss of $1.6 million related to the write-down of our Manitowoc manufacturing facility based upon the net realizable value of the pending sale leaseback transaction which occurred during the first fiscal quarter of fiscal 2017.

After an impairment loss is recognized, a new, lower cost basis for that long-lived asset is established. Subsequent changes in facts and circumstances do not result in the reversal of a previously recognized impairment loss.

Our impairment loss calculations require that we apply judgment in identifying asset groups, estimating future cash flows, determining asset fair values, and estimating asset’s useful lives. To make these judgments, we may use internal discounted cash flow estimates, quoted market prices, when available, and independent appraisals, as appropriate, to determine fair value.

If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be required to recognize future impairment losses which could be material to our results of operations.

Goodwill. As of March 31, 2016, we no longer carry goodwill on our balance sheet. Prior to that date, we tested goodwill for impairment at least annually as of the first day of the fiscal fourth quarter, or when indications of potential impairment existed. In addition, we monitored for the existence of potential impairment indicators throughout the fiscal year. We conducted impairment testing for goodwill at the reporting unit level. Reporting units, as defined by Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other, may be operating segments as a whole or an operation one level below an operating segment, referred to as a component. For fiscal 2016, our reporting units consisted of our segments: USM and OES. The ODS segment had no goodwill.

We performed a quantitative test for impairment in conjunction with our fiscal 2016 annual goodwill impairment review, due to the decline in our stock price, continued operating losses and a decline in our enterprise market capitalization to below our book value. As a result of that test, during fiscal 2016, we recorded an impairment loss of $4.4 million related to all of our goodwill which was determined to be in excess of its implied fair value based upon the second step of the goodwill impairment test. As a result, we no longer carry a goodwill balance on our balance sheet and further goodwill impairment tests are not required.

Indefinite Lived Intangible Assets. We test indefinite lived intangible assets for impairment at least annually on the first day of our fiscal fourth quarter, or when indications of potential impairment exist. We monitor for the existence of potential impairment indicators throughout the fiscal year. Our annual impairment test may begin with a qualitative test to determine whether it is more likely than not that an indefinite lived intangible asset's carrying value is greater than its fair value. If our qualitative assessment reveals that asset impairment is more likely than not, we perform a quantitative impairment test by comparing the fair value of the indefinite lived intangible asset to its carrying value. Alternatively, we may bypass the qualitative test and initiate impairment testing with the quantitative impairment test.

Determining the fair value of indefinite-lived intangible assets entails significant estimates and assumptions including, but not limited to, estimating future cash flows from product sales, perpetuation of employment agreements containing non-competition clauses, continuation of customer relationships and renewal of customer contracts, and approximating the useful lives of the intangible assets acquired.

If the fair value of the indefinite lived intangible asset exceeds its carrying value, we conclude that no indefinite lived intangible asset impairment has occurred. If the carrying value of the indefinite lived intangible asset exceeds its fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value. Once an impairment loss is recognized, the adjusted carrying value becomes the new accounting basis of the indefinite lived intangible asset.

We performed a qualitative assessment in conjunction with itsour annual impairment test of itsour indefinite lived intangible assets as of January 1, 2018.2021. This qualitative assessment considered our operating results for the first nine months of fiscal 20182021 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 20182022 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.

During the second quarter of fiscal 2018, as a result of lower than anticipated operating results in the first half of fiscal 2018, we revised our full year fiscal 2018 forecast. As such, a triggering event occurred as of September 30, 2017, requiring us to evaluate our indefinite lived intangible assets for impairment. We performed a quantitative impairment review of our indefinite lived intangible assets related to the Harris trade name applying the royalty replacement method to determine the asset’s fair value as of September 30, 2017. Under the royalty replacement method, the fair value of the Harris tradename was determined based on a market participant’s view of the royalty that would be paid to license the right to use the tradename. This quantitative analysis incorporated several assumptions including forecasted future revenues and cash flows, estimated royalty rate, based on similar licensing transactions and market royalty rates, and discount rate, which incorporates assumptions such as weighted-average cost of capital and risk premium. As a result of this impairment test, the carrying value of the Harris trade name exceeded its estimated fair value and an impairment of $0.7 million was recorded to Impairment of intangible assets during the quarter ended September 30, 2017 to reduce the asset’s carrying value to its calculated fair value. This fair value determination was categorized as Level 3 in the fair value hierarchy.

During the fourth quarter of fiscal 2017, we achieved lower than anticipated operating results, made a strategic shift in our manufacturing strategy and approach to the fluorescent and LED exterior lighting market, and revised our fiscal 2018 forecast. As a result, a triggering event occurred requiring us to assess our indefinite lived intangible assets for impairment. As such we performed a quantitative impairment review of our indefinite lived intangible asset related to our Harris trade name as of March 31, 2017 using the royalty replacement method to determine the asset’s fair value. Under the royalty replacement method, the fair value of the Harris trade name was determined based on a market participant’s view of the royalty that would be paid to license the right to use the trade name. This quantitative analysis incorporated several assumptions including forecasted future revenues and cash flows, estimated royalty rate, based on similar licensing transactions and market royalty rates, and discount rate, which incorporates assumptions such as weighted-average cost of capital and risk premium. As a result of this quantitative test the carrying value of the Harris trade name exceeded its estimated fair value and an impairment of $0.3 million was recorded to Impairment of assets during the quarter ended March 31, 2017, to reduce the asset’s carrying value to its calculated fair value.

During fiscal 2016, we also performed a quantitative test on indefinite lived intangible assets related to our Harris trade name and determined that its fair value exceeded its carrying value and was not impaired. This test was performed in conjunction with our annual impairment test of goodwill after determining the goodwill was impaired.

An additional impairment loss could result from a future annual or interim impairment test. Such a loss could have a material adverse effect on our results of operations.

Stock-Based Compensation. We currently issue restricted stock awards to our employees, executive officers and directors. Prior to fiscal 2015, we also issued stock options to these individuals. We apply the provisions of ASC 718, Compensation - Stock Compensation, to these restricted stock and stock option awards which requires us to expense the estimated fair value of stock options and similarthe awards based on the fair value of the award on the date of grant. Compensation costs for equity incentives are recognized in earnings, on a straight-line basis over the requisite service period.

We last issued stock options during fiscal 2014. The fair value of each option for financial reporting purposes was estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of

certain assumptions, including fair value, expected term, risk-free interest rate, expected volatility, expected dividends, and expected forfeiture rate to calculate the fair value of stock-based payment awards.

We estimated the expected term of our stock options based on the vesting term of our options and expected exercise behavior.

Our risk-free interest rate was based on the implied yield available on United States treasury zero-coupon issues as of the option grant date with a remaining term approximately equal to the expected life of the option.

We determined volatility based upon the historical market price of our common share price.

Since the closing of our IPO in December 2007, we have solely used the closing sale price of our common shares as reported by the national securities exchange on which we were listed on the date of grant to establish the exercise price of our stock options.

As of March 31, 2018, $1.3 million of total stock-based compensation cost was expected to be recognized by us over a weighted average period of 1.9 years. We expect to recognize $0.8 million of stock-based compensation expense in fiscal 2019 based on restricted stock awards outstanding as of March 31, 2018. This expense will increase further to the extent we have granted, or will grant, additional stock options or restricted stock awards in the future.

Accounting for Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to determine our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax expenses, together with assessing temporary differences resulting from recognition of items for income tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must reflect this increase as an expense within the tax provision in our statements of operations.

Our judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our net deferred tax assets. We continue to monitor the realizability of our deferred tax assets and adjust the valuation allowance accordingly. For fiscal 2018, 2017,2020 and 20162019 we have recorded a full valuation allowance against our net federal and net state deferred tax assets due to our cumulative three-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. In making these determinations, we considered all available positive and negative evidence, including projected future taxable income, tax planning strategies, recent financial performance and ownership changes.

We believe that past issuances and transfers of our stock caused an ownership change in fiscal 2007 that affected the timing of the use of our net operating loss carry-forwards, but we do not believe the ownership change affects the use of the full amount of the net operating loss carry-forwards. As a result, our ability to use our net operating loss carry-forwards attributable to the period prior to such ownership change to offset taxable income will be subject to limitations in a particular year, which could potentially result in increased future tax liability for us.

As of March 31, 2018,2021, we had net operating loss carry-forwardscarryforwards of approximately $82.5$69.4 million for federal tax purposes, and $66.4$61.8 million for state tax purposes, and $0.8 million for foreign tax purposes. As of the currentprior fiscal year, this amount is representativeinclusive of the entire loss carryforward on the filed returns.

We also had federal tax credit carry-forwardscarryforwards of $1.3 million and state tax credit carry-forwardscarryforwards of $0.8 million, which are fullypartially reserved for as part of our valuation allowance. BothOf these tax attributes, $8.4 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 $123.6 million net operating loss and tax credit carry-forwardscarryforwards will begin to expire in varying amounts between 20202022 and 2038.

2040.

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 carry-forwards, 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") Accounting Standards Codification ("ASC") 740, Income Taxes. ASC 740 utilizes a two-step approach for evaluating tax positions. Recognition (Step 1) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (Step 2) is only addressed if Step 1 has been satisfied. Under Step 2, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement. Consequently, the level of evidence and documentation necessary to support a position prior to being given recognition and measurement within the financial statements is a matter of judgment that depends on all available evidence. As of March 31, 2018,2021, the balance of gross unrecognized tax benefits was approximately $0.1$0.3 million, all of which would reduce our effective tax rate if recognized. We believe that our estimates and judgments discussed herein are reasonable, however, actual results could differ, which could result in gains or losses that could be material.

The Tax Cut and Jobs Act ("Act") was enacted on December 22, 2017. The Act significantly changes U.S. tax law by, among other things, reducing the U.S. federal corporate tax rate from 35% to 21%, imposing a one-time transition tax on earnings of

certain foreign subsidiaries that were previously tax deferred, and creating new taxes on certain foreign sourced earnings. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address accounting for income tax effects of the Tax Reform Act. At March 31, 2018, Orion has not completed its accounting for the tax effects of enactment of the Act. Additional information on the impacts of the Act can be found in Note 13, Income Taxes to our accompanying audited consolidated financial statements.

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 QualitativeQualitative 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. Our results from operations have not historically been and we do not expect them to be, materially affected by inflation. We are monitoring input costs and cannot currently predict the future impact to our operations by inflation.

Foreign Exchange Risk. We face minimal exposure to adverse movements in foreign currency exchange rates. Our foreign currency losses for all reporting periods have been nominal.

Interest Rate Risk. Our investments consist primarily of investments in money market funds. While the instruments we hold are subject to changes in the financial standing of the issuer of such securities, we do not believe that we are subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments. It is our policy not to enter into interest rate derivative financial instruments. As a result, we do not currently have any significant interest rate exposure.

As of March 31, 2018, $3.8 million of our $3.9 million of2021, we had no 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 thirty-eight thousand 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. A hypothetical 20% fluctuationincrease in aluminum prices would have anhad a negative impact of $0.4$0.6 million on earningsour net income in fiscal 2019.2021. We have not experienced any material adverse impacts from commodity price risk due to the COVID-19 pandemic; however, as of the date of this report, we are not able to predict the future impact of COVID-19 on this risk.

ITEM 8.	FINANCIAL STATEMENTSSTATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page Number
	INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page Number
Reports of Independent Registered Public Accounting FirmsFirm	43 52
Consolidated Balance Sheets	46 55
Consolidated Statements of Operations and Comprehensive Income	47 56
Consolidated Statements of Shareholders’ Equity	48 57
Consolidated Statements of Cash Flows	49 58
Notes to Consolidated Financial Statements	50 59

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Orion Energy Systems, Inc.

Manitowoc, Wisconsin

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Orion Energy Systems, Inc. (the “Company”) as of March 31, 20182021 and 2017,2020, the related consolidated statements of operation and comprehensive income,operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2018,2021, and the related notes and Schedule II, Valuation and Qualifying Accounts for each of the three years in the period ended March 31, 2018 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 20182021 and 2017,2020, and the results of theirits operations and theirits cash flows for each of the three years in the period ended March 31, 2018,2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of March 31, 2018,2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated June 13, 20181, 2021 expressed an adverseunqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

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

Critical Audit Matters

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

Revenue Recognition - Standalone selling price estimations on turnkey contracts

As described in Note 3 to the consolidated financial statements, the Company generates revenue by selling commercial lighting fixtures and components and by installing these fixtures. For contracts that contain multiple performance obligations, the contract’s transaction price is allocated to the performance obligations based on their relative standalone selling prices.  For turnkey contracts, the standalone selling price for installation service is estimated using an expected cost-plus a margin approach.

We identified the estimation of the standalone selling price of installation service in turnkey contracts as a critical audit matter. Under the expected cost-plus a margin approach, management estimates the cost of services and applies an estimated margin. The margin estimate requires significant management judgment and is based on a variety of factors such as geographical location, quantity and type of product to be removed and/or installed, and average historical installation margins. Auditing this estimate involved subjective and complex auditor judgment.

The primary procedures we performed to address this critical audit matter included:

Testing the design and operating effectiveness of internal controls over revenue recognition; specifically, inspecting the Company’s controls over estimation of the margin, including their review of a sample of completed turnkey contracts to compare the actual margins achieved to the estimated margin.

Evaluating the reasonableness of assumptions used by management in estimating standalone selling price for installation services by (i) examining a sample of turnkey contracts and assessing the reasonableness of the factors considered including geographical location, product type and historical experience; and (ii) examining the most significant contract on a disaggregated level and comparing management’s assumptions to our independently-developed assumptions and evaluating the reasons for significant differences.

Assessing that the estimated margin is applied consistently and calculated accurately by testing the calculation for a sample of turnkey contracts and vouching the historical cost inputs incurred for installation and recycling services and verifying the estimated margin fell within a reasonable range of historical margins

Deferred Tax Asset Valuation Allowance

As described in Note 14 to the Company’s consolidated financial statements, during the year ended March 31, 2021, the Company released approximately $20.9 million of the valuation allowance on a significant portion of its deferred tax assets. In evaluating the realizability of deferred tax assets, the available positive and negative evidence, including projected future taxable income exclusive of reversing temporary differences, history of book losses, tax planning strategies, and results of recent operations, 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 deferred tax assets, which include various assumptions surrounding projected future taxable income, the rate of continued growth, and forecasted timing of reversal of temporary differences. Auditing these elements involved complex and subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the need to involve personnel with specialized skill and knowledge.

The primary procedures we performed to address this critical audit matter included:

Testing the design and operating effectiveness of internal controls over income taxes, specifically, inspecting the Company’s controls over the evaluation of the realizability of deferred tax assets and controls over the development and review of the projected future taxable income.

Assessing the reasonableness of the Company’s ability to generate future taxable income and utilize the deferred tax assets by evaluating: (i) the forecast of future taxable income , (ii) the rate of continued growth, including performing independent estimates of the expected growth against the Company’s historical performance, and (iii) the timing of future reversal of temporary differences.

Utilizing personnel with specialized knowledge and skill in taxes to assist in the evaluation of the Company’s assessment of positive and negative evidence, and whether the estimated future sources of taxable income were sufficient to utilize the deferred tax assets in the relevant time period.

/s/BDO USA, LLP

We have served as the Company's auditor since 2012

2012.

Milwaukee, Wisconsin

June 13, 2018

1, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Orion Energy Systems, Inc.

Manitowoc, Wisconsin

Opinion on Internal Control over Financial Reporting

We have audited Orion Energy Systems, Inc.’s (the “Company’s”) internal control over financial reporting as of March 31, 2018,2021, based on criteria established in Internal Control -– Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain,maintained, in all material respects, effective internal control over financial reporting as of March 31, 2018,2021, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of March 31, 20182021 and 2017,2020, 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, 2018,2021, and the related notes and schedule (collectively referred to as “the financial statements”)” and our report dated June 13, 20181, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A material weakness is 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 the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness regarding management review controls over the accounting close process, contract costs and forecasts used in support of certain fair value estimates has been identified and described in management’s assessment. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 financial statements, and this report does not affect our report dated June 13, 2018 on those financial statements.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets 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, 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/BDO USA, LLP

Milwaukee, Wisconsin

June 13, 2018

1, 2021

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

		March 31,
		2021				2020
Assets
Cash and cash equivalents		$	19,393			$	28,751
Accounts receivable, net			13,572				10,427
Revenue earned but not billed			2,930				560
Inventories, net			19,554				14,507
Prepaid expenses and other current assets			1,082				723
Total current assets			56,531				54,968
Property and equipment, net			11,369				11,817
Other intangible assets, net			1,952				2,216
Deferred tax assets			19,785				—
Long-term accounts receivable			—				760
Other long-term assets			3,184				2,802
Total assets		$	92,821			$	72,563
Liabilities and Shareholders’ Equity
Accounts payable		$	17,045			$	19,834
Accrued expenses and other			13,226				7,228
Deferred revenue, current			87				107
Current maturities of long-term debt			14				35
Total current liabilities			30,372				27,204
Revolving credit facility			—				10,013
Long-term debt, less current maturities			35				50
Deferred revenue, long-term			640				715
Other long-term liabilities			3,700				3,546
Total liabilities			34,747				41,528
Commitments and contingencies (Note 15)
Shareholders’ equity:
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 shares    at March 31, 2021 and 2020; no shares issued and outstanding at    March 31, 2021 and 2020			—				—
Common stock, no par value: Shares authorized: 200,000,000 at    March 31, 2021 and 2020; shares issued: 40,279,050 and    39,729,569 at March 31, 2021 and 2020; shares outstanding:    30,805,300 and 30,265,997 at March 31, 2021 and 2020			—				—
Additional paid-in capital			157,485				156,503
Treasury stock: 9,473,750 and 9,463,572 common shares at    March 31, 2021 and 2020			(36,240	)			(36,163	)
Retained deficit			(63,171	)			(89,305	)
Total shareholders’ equity			58,074				31,035
Total liabilities and shareholders’ equity		$	92,821			$	72,563

	March 31,
	2018				2017
Assets
Cash and cash equivalents	$	9,424			$	17,307
Accounts receivable, net	8,736				9,171
Inventories, net	7,826				13,593
Deferred contract costs	1,000				935
Prepaid expenses and other current assets	2,467				2,877
Total current assets	29,453				43,883
Property and equipment, net	12,894				13,786
Other intangible assets, net	2,868				4,207
Other long-term assets	110				175
Total assets	$	45,325			$	62,051
Liabilities and Shareholders’ Equity
Accounts payable	$	11,675			$	11,635
Accrued expenses and other	4,171				5,988
Deferred revenue, current	499				621
Current maturities of long-term debt	79				152
Total current liabilities	16,424				18,396
Revolving credit facility	3,908				6,629
Long-term debt, less current maturities	105				190
Deferred revenue, long-term	940				944
Other long-term liabilities	524				442
Total liabilities	21,901				26,601
Commitments and contingencies (Note 14)
Shareholders’ equity:
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 shares at March 31, 2018 and 2017; no shares issued and outstanding at March 31, 2018 and 2017	—				—
Common stock, no par value: Shares authorized: 200,000,000 at March 31, 2018 and 2017; shares issued: 38,384,575 and 37,747,227 at March 31, 2018 and 2017; shares outstanding: 28,953,183 and 28,317,490 at March 31, 2018 and 2017	—				—
Additional paid-in capital	155,003				153,901
Treasury stock: 9,431,392 and 9,429,737 common shares at March 31, 2018 and 2017	(36,085		)		(36,081		)
Shareholder notes receivable	—				(4		)
Retained deficit	(95,494		)		(82,366		)
Total shareholders’ equity	23,424				35,450
Total liabilities and shareholders’ equity	$	45,325			$	62,051

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except share and per share amounts)

		Fiscal Year Ended March 31,
		2021				2020				2019
Product revenue		$	87,664			$	113,352			$	56,261
Service revenue			29,176				37,489				9,493
Total revenue			116,840				150,841				65,754
Cost of product revenue			63,233				83,588				44,111
Cost of service revenue			23,483				30,130				7,091
Total cost of revenue			86,716				113,718				51,202
Gross profit			30,124				37,123				14,552
Operating expenses:
General and administrative			11,262				11,184				10,231
Sales and marketing			10,341				11,113				9,104
Research and development			1,685				1,716				1,374
Total operating expenses			23,288				24,013				20,709
Income (loss) from operations			6,836				13,110				(6,157	)
Other income (expense):
Other income			56				28				80
Interest expense			(127	)			(279	)			(493	)
Amortization of debt issue costs			(157	)			(243	)			(101	)
Loss on debt extinguishment			(90	)			—				—
Interest income			—				5				11
Total other expense			(318	)			(489	)			(503	)
Income (loss) before income tax			6,518				12,621				(6,660	)
Income tax (benefit) expense			(19,616	)			159				14
Net income (loss)		$	26,134			$	12,462			$	(6,674	)
Basic net income (loss) per share attributable to common shareholders		$	0.85			$	0.41			$	(0.23	)
Weighted-average common shares outstanding			30,634,553				30,104,552				29,429,540
Diluted net income (loss) per share		$	0.83			$	0.40			$	(0.23	)
Weighted-average common shares and share equivalents    outstanding			31,303,727				30,964,777				29,429,540

	Fiscal Year Ended March 31,
	2018				2017				2016
Product revenue	$	55,595			$	66,224			$	64,897
Service revenue	4,705				3,987				2,745
Total revenue	60,300				70,211				67,642
Cost of product revenue	41,415				49,630				49,630
Cost of service revenue	4,213				3,244				2,015
Total cost of revenue	45,628				52,874				51,645
Gross profit	14,672				17,337				15,997
Operating expenses:
General and administrative	13,159				14,777				16,884
Impairment of assets	710				250				6,023
Sales and marketing	11,879				12,833				11,343
Research and development	1,905				2,004				1,668
Total operating expenses	27,653				29,864				35,918
Loss from operations	(12,981		)		(12,527		)		(19,921		)
Other income (expense):
Other income	248				215				—
Interest expense	(425		)		(273		)		(297		)
Interest income	15				36				128
Total other expense	(162		)		(22		)		(169		)
Loss before income tax	(13,143		)		(12,549		)		(20,090		)
Income tax (benefit) expense	(15		)		(261		)		36
Net loss and comprehensive loss	$	(13,128	)		$	(12,288	)		$	(20,126	)
Basic net loss per share attributable to common shareholders	$	(0.46	)		$	(0.44	)		$	(0.73	)
Weighted-average common shares outstanding	28,783,830				28,156,382				27,627,693
Diluted net loss per share	$	(0.46	)		$	(0.44	)		$	(0.73	)
Weighted-average common shares and share equivalents outstanding	28,783,830				28,156,382				27,627,693

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

		Shareholders’ Equity
		Common Stock
		Shares				Additional Paid-in Capital				Treasury Stock				Retained Earnings (Deficit)				Total Shareholders’ Equity
Balance, March 31, 2018			28,953,183			$	155,003			$	(36,085	)		$	(95,494	)		$	23,424
Shares issued under Employee Stock Purchase    Plan			4,642				—				4				—				4
Stock-based compensation			653,394				825				—				—				825
Employee tax withholdings on stock-based    compensation			(11,061	)			—				(10	)			—				(10	)
Cumulative effect of accounting change due to adoption of ASC 606			—				—				—				401				401
Net loss			—				—				—				(6,674	)			(6,674	)
Balance, March 31, 2019			29,600,158				155,828				(36,091	)			(101,767	)			17,970
Exercise of stock options and warrants for cash			22,362				57				—				—				57
Shares issued under Employee Stock Purchase    Plan			2,361				—				7				—				7
Stock-based compensation			669,238				618				—				—				618
Employee tax withholdings on stock-based    compensation			(28,122	)			—				(79	)			—				(79	)
Net income			—				—				—				12,462				12,462
Balance, March 31, 2020			30,265,997				156,503				(36,163	)			(89,305	)			31,035
Exercise of stock options and warrants for cash			99,000				229				—				—				229
Shares issued under Employee Stock Purchase    Plan			1,146				—				7				—				7
Stock-based compensation			450,481				753				—				—				753
Employee tax withholdings on stock-based    compensation			(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

	Shareholders’ Equity
	Common Stock
	Shares			Additional Paid-in Capital				Treasury Stock				Shareholder Notes Receivable				Retained Earnings (Deficit)				Total Shareholders’ Equity
Balance, March 31, 2015	27,421,533			$	150,516			$	(36,049	)		$	(4	)		$	(49,952	)		$	64,511
Issuance of stock 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
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
Issuance of stock for services	110,566			156				—				—				—				156
Shares issued under Employee Stock Purchase Plan	5,156			—				8				—				—				8
Stock-based compensation	444,102			1,605				—				—				—				1,605
Employee tax withholdings on stock-based compensation	(9,472	)		—				(14		)		—				—				(14		)
Net loss	—			—				—				—				(12,288		)		(12,288		)
Balance, March 31, 2017	28,317,490			$	153,901			$	(36,081	)		$	(4	)		$	(82,366	)		$	35,450
Issuance of stock for services	24,747			—				—				—				—				—
Shares issued under Employee Stock Purchase Plan	10,057			—				11				—				—				11
Stock-based compensation	612,601			1,102				—				—				—				1,102
Employee tax withholdings on stock-based compensation	(10,482	)		—				(11		)		—				—				(11		)
Collections on stockholder notes	(1,230	)		—				(4		)		4				—				—
Net loss	—			—				—				—				(13,128		)		(13,128		)
Balance, March 31, 2018	28,953,183			$	155,003			$	(36,085	)		$	—			$	(95,494	)		$	23,424

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

		Fiscal Year Ended March 31,
		2021				2020				2019
Operating activities
Net income (loss)		$	26,134			$	12,462			$	(6,674	)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation			1,190				1,203				1,339
Amortization of intangible assets			290				359				444
Stock-based compensation			753				618				825
Amortization of debt issue costs			157				243				101
Loss on debt extinguishment			90				—				—
Deferred income tax benefit			(19,860	)			—				—
Loss on sale of property and equipment			1				10				—
Provision for inventory reserves			275				205				(202	)
Provision for bad debts			—				—				56
Other			106				57				57
Changes in operating assets and liabilities:
Accounts receivable			(2,384	)			3,616				(5,840	)
Revenue earned but not billed			(2,370	)			3,186				(1,390	)
Inventories			(5,322	)			(1,319	)			(4,689	)
Prepaid expenses and other assets			(396	)			66				68
Accounts payable			(2,637	)			(79	)			8,916
Accrued expenses and other liabilities			5,797				(192	)			1,975
Deferred revenue, current and long-term			(95	)			(92	)			(44	)
Net cash provided by (used in) operating activities			1,729				20,343				(5,058	)
Investing activities
Purchase of property and equipment			(902	)			(814	)			(381	)
Additions to patents and licenses			(51	)			(131	)			(68	)
Proceeds from sales of property, plant and equipment			7				9				—
Net cash used in investing activities			(946	)			(936	)			(449	)
Financing activities
Payment of long-term debt			(35	)			(92	)			(80	)
Proceeds from revolving credit facility			8,000				74,100				60,270
Payment of revolving credit facility			(18,013	)			(73,289	)			(54,976	)
Payments to settle employee tax withholdings on stock-based    compensation			(84	)			(76	)			(10	)
Debt issue costs			(245	)			(91	)			(396	)
Net proceeds from employee equity exercises			236				63				4
Net cash (used in) provided by financing activities			(10,141	)			615				4,812
Net (decrease) increase in cash and cash equivalents			(9,358	)			20,022				(695	)
Cash and cash equivalents at beginning of period			28,751				8,729				9,424
Cash and cash equivalents at end of period		$	19,393			$	28,751			$	8,729
Supplemental cash flow information:
Cash paid for interest		$	(118	)		$	(254	)		$	(176	)
Cash (paid) received for income taxes		$	(175	)		$	(28	)		$	12
Supplemental disclosure of non-cash investing and financing activities:
Purchase of property, plant and equipment by issuing a debt		$	—			$	—			$	74
Operating lease assets obtained in exchange for new operating lease liabilities		$	355			$	2,757			$	—

	Fiscal Year Ended March 31,
	2018				2017				2016
Operating activities
Net loss	$	(13,128	)		$	(12,288	)		$	(20,126	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation	1,404				1,451				2,950
Amortization	607				881				1,215
Stock-based compensation expense	1,102				1,605				1,462
Impairment of assets	710				250				6,023
Loss on sale of property and equipment	—				1				40
Provision for inventory reserves	1,261				2,212				509
Provision for bad debts	22				132				575
Other	(94		)		177				258
Changes in operating assets and liabilities:
Accounts receivable, current and long-term	419				1,687				7,116
Inventories, current	4,706				1,220				(3,249		)
Deferred contract costs	(65		)		(899		)		137
Prepaid expenses and other current assets	483				2,084				(2,645		)
Accounts payable	20				(81		)		713
Accrued expenses and other	(1,736		)		(635		)		1,803
Deferred revenue, current and long-term	(126		)		300				(254		)
Net cash used in operating activities	(4,415		)		(1,903		)		(3,473		)
Investing activities
Purchase of property and equipment	(512		)		(660		)		(401		)
Additions to patents and licenses	(73		)		(291		)		(6		)
Proceeds from sales of property, plant and equipment	—				2,600				35
Net cash (used in) provided by investing activities	(585		)		1,649				(372		)
Financing activities
Payment of long-term debt	(158		)		(880		)		(1,901		)
Proceeds from revolving credit facility	68,734				87,935				65,767
Repayments of revolving credit facility	(71,456		)		(85,025		)		(64,549		)
Proceeds from issuance of common stock, net of issuance costs	—				—				(2		)
Payments to settle employee tax withholdings on stock-based compensation	(9		)		(19		)		(34		)
Net proceeds from employee equity exercises	6				8				104
Net cash (used in) provided by financing activities	(2,883		)		2,019				(615		)
Net (decrease) increase in cash and cash equivalents	(7,883		)		1,765				(4,460		)
Cash and cash equivalents at beginning of period	17,307				15,542				20,002
Cash and cash equivalents at end of period	$	9,424			$	17,307			$	15,542
Supplemental cash flow information:
Cash paid for interest	$	147			$	164			$	191
Cash (received) paid for income taxes	$	(17	)		$	(153	)		$	18
Supplemental disclosure of non-cash investing and financing activities:
Vendor financed capital lease addition	$	—			$	175			$	396

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS

Organization

Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion is a developer, manufacturer and seller of lighting and energy management systems 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.

NOTE 2 — IMPACT OF COVID-19

The COVID-19 pandemic has disrupted business, trade, commerce, financial and Houston, Texas.credit markets, in the U.S. and globally. Orion’s business was adversely impacted by measures taken by government entities and others to control the spread of the virus beginning in March 2020, the last month of Orion’s fiscal 2020 year, and continuing most significantly into the second quarter of fiscal 2021. During the second half of fiscal 2021, Orion also leases warehouse spaceexperienced a rebound in Manitowoc, Wisconsin. Duringbusiness. Project installations resumed for Orion’s largest customer and started installations for a new large specialty retail customer began, with no further significant COVID-19 impacts. However, some customers continue to refrain from awarding new projects and potential future risks remain due to the COVID-19 pandemic.

As an essential business, Orion provides products and services to ensure energy and lighting infrastructure and Orion therefore has continued to operate throughout the pandemic.

As part of Orion’s response to the impacts of the COVID-19 pandemic, during the fourth quarter of fiscal 20182020 Orion implemented a number of cost reduction and cash conservation measures, including reducing headcount. While certain restrictions began to initially lessen in certain jurisdictions during fiscal 20172021, stay-at-home, face mask or lockdown orders remain in effect in others, with employees asked to work remotely if possible. Some customers and projects are in areas where travel restrictions have been imposed, certain customers have either closed or reduced on-site activities, and timelines for the completion of several projects have been delayed, extended or terminated. These modifications to Orion’s business practices, including any future actions Orion had leased warehouse spacetakes, may cause Orion to experience reductions in Augusta, Georgia, butproductivity and disruptions to Orion’s business routines. In addition, Orion is required to make substantial working capital expenditures and advance inventory purchases that Orion may not be able to recoup if Orion’s customer agreements or a substantial volume of purchase orders under Orion’s customer agreements are delayed or terminated as a result of COVID-19. At this time, it is not possible to predict the overall impact the COVID-19 pandemic will have on Orion’s business, liquidity, capital resources or financial results, although the economic and regulatory impacts of COVID-19 significantly reduced Orion’s revenue and profitability in the first half of fiscal 2021. If the COVID-19 pandemic becomes more pronounced in Orion’s markets or experiences a resurgence in markets recovering from the spread of COVID-19, Orion’s operations in areas impacted by such events could experience further material adverse financial impacts due to market changes and other resulting events and circumstances.

Due to the forecasted change in macroeconomic conditions due to the COVID-19 pandemic, as of March 31, 2018,2020, a triggering event occurred requiring Orion had vacated this storage location.to evaluate its long-lived assets for impairment. Orion performed the Step 1 recoverability test for the asset group, and the asset group was deemed recoverable. See Note 8 – Property and Equipment.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law and includes certain income tax provisions relevant to businesses. Orion is required to recognize the effect on the consolidated financial statements in the period the law was enacted, which was the period ended March 31, 2020. For the fiscal years ended March 31, 2021, and March 31, 2020, the CARES Act did not have a material impact on Orion’s consolidated financial statements. See Note 14 – Income Taxes.

NOTE 23 — 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.

Reclassifications

Where appropriate, certain reclassifications have been made to prior years’ financial statements to conform to the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with 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 allowance for doubtful accounts, accruals for warranty 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 amounts of Orion’s financial instruments approximate their respective fair values due to the relatively short-term nature of these instruments, or in the case of long-term debt and revolving credit facility, because of the interest rates currently available to Orion for similar obligations. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

Level 1 — Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

Level 3 — Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management's best estimate of what market participants would use in valuing the asset or liability at the measurement date.

Allowance for Doubtful Accounts

Orion performs ongoing evaluations of its customers and continuously monitors collections and payments. Orion estimates an allowance for doubtful accounts based upon the aging of the underlying receivables, historical experience with write-offs and specific customer collection issues that have been identified. See Note 3 -5 – Accounts Receivable for further discussion of the allowance for doubtful accounts.

Deferred Contract Costs

Deferred contract costs consist primarily of the costs of products delivered, and services performed, that are subject to additional performance obligations or customer acceptance. These deferred contract costs are expensed at the time the related revenue is recognized. Deferred costs amounted to $1.0 million as of March 31, 2018 and $0.9 million as of March 31, 2017.

Incentive Compensation

Plan

Orion’s compensation committee approved an Executive Fiscal Year 2018 Annual Cash Incentive Program. The program provided for performance cash bonus payments ranging from 50-100% of the fiscal 2018 base salaries of Orion’s named executive officers and other key employees. The program provided for bonuses to be paid out on the basis of achieving positive EBITDA in fiscal 2018. Based upon the results for the yearfiscal years ended March 31, 2018,2021, 2020 and 2019, Orion did not accrue anyaccrued approximately $0.7 million, $0.8 million, and no expense related to this plan.

Orion’s compensation committee approved an Executive Fiscal Year 2017 Annual Cash Incentive Program. The program provided for performance cash bonus payments rangingplan, respectively.

Revenue Recognition

Orion generates revenues primarily by selling commercial lighting fixtures and components and by installing these fixtures in its customer’s facilities. Orion recognizes revenue in accordance with the guidance in “Revenue from 35-100%Contracts with Customers” (Topic 606) (“ASC 606”) when control of the fiscal 2017 base salariesgoods or services being provided (which Orion refers to as a performance obligation) is transferred to a customer at an amount that reflects the consideration that management expects to receive in exchange for those goods or services. Prices are generally fixed at the time of Orion’s named executive officersorder confirmation. The amount of expected consideration includes estimated deductions and other key employees. The program provided for bonusesearly payment discounts calculated based on historical experience, customer rebates based on agreed upon terms applied to beactual and projected sales levels over the rebate period, and any amounts paid out onto customers in conjunction with fulfilling a performance obligation.

If there are multiple performance obligations in a single contract, the basis of the achievement in fiscal 2018 of at least (i) $0.5 million of profit before taxes and (ii) revenue growth of 10% more than fiscal year 2016. Based upon the results for the year ended March 31, 2017, Orion did not accrue any expense related to this plan.

Orion’s compensation committee approved an Executive Fiscal Year 2016 Annual Cash Incentive Program. The program 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 program provided for bonuses to be paid out on the basis of the achievement in fiscal 2016 of at least (i) $0.1 million of profit before taxes and (ii) revenue growth of 10% more than fiscal year 2015. Based upon the results for the year ended March 31, 2016, Orion did not accrue any expense related to this plan.

Revenue Recognition

Revenue is recognized on the sales of Orion's lighting and related energy-efficiency systems and products when the following four criteria are met:

1.persuasive evidence of an arrangement exists;

2.delivery has occurred and title has passed to the customer;

3.the salescontract’s total transaction price is fixed and determinable and no further obligation exists; and

4.collectability is reasonably assured.

These four criteria are met for Orion’s product-only revenue upon delivery of the product and title passing to the customer. At that time, Orion provides for estimated costs that may be incurred for product warranties and sales returns. Revenues are presented net of sales tax and other sales related taxes.

For sales of Orion’s lighting and energy management technologies under multiple element arrangements, consisting of a combination of product sales and services, Orion determines revenue by allocating the total contract revenueallocated to each elementindividual performance obligation based on their relative standalone selling prices in accordance with ASC 605-25, Revenue Recognition - Multiple Element Arrangements. Inprice. A performance obligation’s standalone selling price is the price at which Orion would sell such circumstances,promised good or service separately to a customer. Orion uses a hierarchyan observable price to determine the stand-alone selling price for separate performance obligations or an expected cost-plus margin approach when one is not available. The expected cost-plus margin approach is used to be used for allocating revenue to deliverables: (1) vendor-specific objective evidence ("VSOE") of fair value, if available, (2) third-party evidence ("TPE") ofdetermine the estimated stand-alone selling price if VSOEfor the installation performance obligation and is not available, and (3) best estimate of the selling price if neither VSOE nor TPE is available (a description as to how Orion determines estimated selling price is provided below).

The nature of Orion’s multiple element arrangementsbased on average historical installation margin.

Revenue derived from customer contracts which include only performance obligation(s) for the sale of its 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 similardetermined 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 fixtures and the installation of such fixtures (which Orion refers to as a constructionturnkey project) is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.

Revenue from turnkey projects that is allocated to the sale of the lighting fixtures is recorded at the point in time when management believes the customer obtains control of the product(s) and is reflected in Product revenue. This point in time is determined separately for each customer contract based upon the terms of the contract and the nature and extent of Orion’s control of the light fixtures during the installation. Product revenue associated with turnkey projects can be recorded (a) upon shipment or delivery, (b) subsequent to shipment or delivery and upon customer payments for the light fixtures, (c) when an individual light fixture is installed and working correctly, or (d) when the customer acknowledges that the entire installation project with materials being deliveredis substantially complete. Determining the point in time when a customer obtains control of the lighting fixtures in a turnkey project can be a complex judgment and contracting and projectis applied separately for each individual light fixture included in a contract. In making this judgment, management activities occurring accordingconsiders the timing of various factors, including, but not limited to, an installation schedule. The significant deliverables include the shipment of products and relatedthose detailed below:

when there is a legal transfer of title andownership;

when the installation.

To determine the selling price in multiple-element arrangements, Orion establishes the selling price for its energy management system products using management's best estimatecustomer obtains physical possession of the selling price, as VSOEproducts;

when the customer starts to receive the benefit of the products;

the amount and TPE do not exist. Product revenueduration of physical control that Orion maintains on the products after they are shipped to, and received at, the customer’s facility;

whether Orion is recognizedrequired to maintain insurance on the lighting fixtures when titlethey are in transit and risk of lossafter they are delivered to the customer’s facility;

when each light fixture is physically installed and working correctly;

when the customer formally accepts the product; and

when Orion receives payment from the customer for the products transfers. For product revenue, management's best estimate of selling pricelight fixtures.

Revenue from turnkey projects that is determined using a cost plus gross profit margin method.

In addition, Orion recordsallocated to the single installation performance obligation is reflected in service revenue the selling price for its installation and recycling services using management’s best estimate of selling price, as VSOE and TPE do not exist.Service revenue. Service revenue is recognized when services are completedrecorded over-time as Orion fulfills its obligation to install the light fixtures. Orion measures its performance toward fulfilling its performance obligations for installations using an output method that calculates the number of light fixtures removed and customer acceptance has been received. Recycling services provided in connection with installation entail the disposalinstalled as of the customer’s legacy lighting fixtures. Orion’s service revenues, other than for installationmeasurement date in comparison to the total number of light fixtures to be removed and recycling that are completed prior to delivery ofinstalled under the product, are included in product revenue using management’s best estimate of selling price, as VSOE and TPE do 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 using a cost plus gross profit margin method with consideration given to other relevant economic conditions and trends, customer demand, pricing practices, and margin objectives. The determination of an estimated selling price is made through consultation with and approval by management, taking into account the preceding factors.

contract.

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 hasalso records revenue in conjunction with several limited Power Purchase Agreementpower purchase agreements (“PPA”PPAs”) contracts still outstanding. Those PPA’s outstandingPPAs are supply sidesupply-side agreements for the generation of electricity. Orion’s last PPA expires in 2031. Revenue associated with the sale of energy generated by the solar facilities under these PPAs is within the scope of ASC 606. Revenues are recognized over-time and are equal to the amount billed to the customer, which is calculated by applying the fixed rate designated in the PPAs to the variable amount of electricity generated each month. This approach is in accordance with the “right to invoice” practical expedient provided for which we recognizein ASC 606. Orion also recognizes revenue upon the sale to third parties of tax credits received from operating the solar facilities and from amortizing a grant received from the federal government during the period starting when the power generating facilities were constructed until the expiration of the PPAs; these revenues are not derived from contracts with customers and therefore not under the scope of ASC 606.

See Note 11 – Accrued Expenses and Other for a discussion of Orion’s accounting for the warranty it provides to customers for its products and services.

Sales taxes collected from customers and remitted to governmental authorities are accounted for on a monthly basis over the life of the PPA contract, typically in excess of 10 years.

Deferred revenue relates to advance customer billings, investment tax grants received related to PPAs and long term maintenance contracts on OTAs and is classified as a liability on the consolidated balance sheet. The fair value of the maintenance is readily determinable based upon pricingnet (excluded from third-party vendors. Deferred revenue related to maintenance services is recognized when the services are delivered, which occurs in excess of a year after the original OTA contract is executed.

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.

Advertising

Advertising costs of seventeen thousand, $0.1 million and four thousand for fiscal 2018, 2017 and 2016, respectively, were charged to operations as incurred.

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 carry-forwards.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, 2018,2021, Orion decreased its full valuation allowance by $6.8$20.9 million against its deferred tax assets due toon the decrease inbasis of management’s reassessment of the amount of its deferred tax assets.

assets that are more likely than not to be realized.

ASC 740, Income Taxes, also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination. Orion has classified the amounts recorded for uncertain tax

benefits in the balance sheet as other liabilities (non-current) to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax expense. Penalties and interest are immaterial and are included in the unrecognized tax benefits.

The Tax Cut and Jobs Act ("ACT") was enacted December 22, 2017. Further information on the impacts of the Act can be found in Note 13, Income Taxes.

Stock Based Compensation

Orion’s share-based payments to employees are measured at fair value and are recognized inagainst earnings, on a straight-line basis over the requisite service period.

Cash flows from the exercise of stock options resulting from tax benefits in excess of recognized cumulative compensation costs (excess tax benefits) are classified as financing cash flows. Orion realized no such tax benefits during the years ended March 31, 2018, 2017 and 2016.

Orion uses the Black-Scholes option-pricing model for issued stock options. Orion calculated volatility based upon the historical market price of its common stock. The risk-free interest rate is the rate available as of the option date on zero-coupon U.S. Government issues with a remaining term equal to the expected term of the option. The expected term was based upon the vesting term of Orion’s options and expected exercise behavior.

Orion accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period. As more fully described in Note 16,17 – Stock Options and Restricted Shares, Orion currently awards non-vested restricted stock (and in some cases, in conjunction with associated cash award accounted for as a liability) to employees, executive officers and directors. Orion did not issue any stock options during fiscal 2018, fiscal 2017 or fiscal 2016.

Orion has not paid dividends in the past and does not plan to pay any dividends in the foreseeable future. Orion estimates its forfeiture rate of unvested stock awards based on historical experience.

Concentration of Credit Risk and Other Risks and Uncertainties

Orion’s cash is deposited with twothree financial institutions. 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 2018, 2017 and 2016,2021, no supplier accounted for more than 10% of total cost of revenue.

For fiscal 2020, one supplier accounted for 11.8% of total cost of revenue. For fiscal 2019, no supplier accounted for more than 10% of total cost of revenue.

In fiscal 2018, two customers2021, one customer accounted for 11.7% and 10.8%56.0% of revenue. In fiscal 2020, one customer accounted for 74.1% of total revenue. In fiscal 2017 and fiscal 2016, no2019, one customer accounted for 10%20.7% of total revenue.

As of March 31, 2018, one customer2021, three customers accounted for 13.2%33.9%, 16.4% and 10.1% of accounts receivable, respectively, and as of March 31, 2017, one customer2020, two customers accounted for 11.6%37.3% and 13.0% of accounts receivable.

receivable, respectively.

Recent Accounting Pronouncements

Issued: Not Yet Adopted

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, "Classification of Certain Cash Receipts and Cash Payments," which provides clarification and additional guidance as to the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU provides guidance as to the classification of a number of transactions including: contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investees. The new standard will be effective for Orion in the first quarter of fiscal 2019 and will be applied through retrospective adjustment to all periods presented. Orion does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In FebruaryJune 2016, the FASB issued ASU 2016-02, “Leases (Subtopic 842)." This No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires that lessees recognize right-of-use assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and disclose additional quantitative and qualitative information about leasing arrangements. Under this ASU, leases will be classified as either finance or operating, with classification affecting the patternan entity to assess impairment of expense recognition. Similarly, lessors will be required to classify leases as sales-type, finance or operating leases, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will beits financial instruments based on an assessmentits estimate of whether risksexpected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and rewards, as well as substantive control, have been transferred throughclarify the lease contract. Thisimplementation guidance. The provisions of ASU also provides guidance on2016-13 and the presentation of the effects of leases in the income statement and statement of cash flows. This guidance will berelated amendments are effective for Orion on April 1, 2019. Early adoptionfor fiscal years (and interim reporting periods within those years) beginning after December 15, 2022. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the standard is permitted and a modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparativefirst reporting period presented in which the financial statements, with certain practical expedients available.guidance is effective. Orion has not yet completed its review of the full provisions of this standard against its outstanding lease arrangements and is in the process of quantifying the lease liability and related right of use asset which will be recorded to its consolidated balance sheets upon adoption of the standard. In addition, management continues to assess currently evaluating the impact of adoption of this standard on its consolidated statements of operations, cash flows, and the related footnote disclosures.

Recently Adopted Standards

In May 2014,December 2019, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The pronouncement, and subsequent amendments, which is included inNo. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting Standards Codification as Topic 606 (“ASC 606”) and Sub-Topic 340-40 (“ASC 340-40”), supersedes the revenue recognition requirements in ASC 605 “Revenue Recognition” (ASC 605) and provides guidance onfor Income Taxes, which simplifies the accounting for other assets and deferred costs associated with contracts with customers. ASC 606

requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASC 340-40 limits the circumstances that an entity can recognize an asset from the costs incurred to obtain or fulfill a contract that are not subjectincome taxes by removing certain exceptions to the guidance in other portions in the Accounting Standards Codification, such as those related to inventory.general rules of Topic 740. The provisions of ASC 606 and ASC 340-40 (the “new standards”) require entities to use more judgments and estimates than under previous guidance when allocating the total consideration in a contract to the individual promises to customers (which we refer to as “performance obligations”) and determining when a performance obligation has been satisfied and revenue can be recognized. Additional disclosures regarding the nature, composition and timing of revenue and cash flow; and the significant judgments in measurement and recognition also are required.

Orion evaluated the provisions of ASC 606 against a sample of its customer contracts to determine the impact, if any, on the timing, measurement and presentation of revenue recognition and the cost of goods and services sold. The review considered among other matters, the evaluation and identification of distinct performance obligations, measurement of Orion's progress toward satisfying identified performance obligations, and the timing for recognizing costs associated with satisfying performance obligations. The amount and timing of revenues and costs of sales associated with the contracts which include only performance obligations for lighting fixtures will largely be unaffected by the new standards. While the impact of the new standards vary for each contract where Orion also installs products at the customer’s facilities based on the contract’s specific terms, the new standards result in Orion (a) delaying the recognition of some of its product revenues from the point of shipment until a later date during the installation period, (b) recording services revenue associated with installing lighting fixtures as such fixtures are installed instead of recording all services revenue at the completion of the installation, and (c) recording costs associated with installing lighting fixtures as they are incurred instead of deferring such costs and recognizing them at the time service revenue was recorded.

Under ASC 606, incremental contract costs, which for Orion includes sales commissions and costs paid to independent contractors for field audits, are required to be capitalized as contract assets and amortized over the period these costs are expected to be recovered. Although Orion incurs such costs, its contracts are typically completed within one year. As such, Orion plans to elect the practical expedient provided in ASC 606 and expense incremental contract costs when incurred.

Orion implemented ASC 606 at the start of the first quarter of the fiscal year ending March 31, 2019 using the modified retrospective transition method under which the new standards are being applied only to the most current period presented and the cumulative effect of applying the new standards to open contracts as of April 1, 2018 is recognized at the date of initial application as a cumulative adjustment to retained earnings. Orion is finalizing the cumulative adjustment to retained earnings, and will complete this adjustment prior to the filing its first quarter 10-Q for fiscal year end 2019. Based on the analysis to date, Orion does not expect a material impact from the adoption of the new standards.

Orion implemented the appropriate changes to business processes and controls to support recognition and disclosure under the new standard, including the new qualitative and quantitative disclosures that will include information on the nature, amount, timing and significant judgments impacting revenue from contracts with customers.

In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting” which provides guidance about which changes to the terms or conditions of a share-based payment award would require an entity to apply modification accounting. The provisions of this standard2019-12 are effective for Orion beginningin the current period. One provision applicable to Orion and relevant to recently

filed financial statements relate to hybrid tax regimes. Hybrid tax regimes are those that impose the greater of two taxes – one based on April 1, 2018.income or one based on items other than income. The old guidance specified that if there is a tax based on income that is greater than a franchise tax based on capital, only that excess is subject to ASC 740. The new guidance states that an entity should include the amount of tax based on income in the tax provision and include any incremental amount recorded as a tax not based on income. The adoption of this standard isASU did not expected to have a material impact on Orion’s consolidated financial statements.

Recently Adopted Standards

In November 2015,

NOTE 4 — 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 2015-17, “Income Taxes (Topic 740): Balance Sheet Classificationfixtures are manufactured and are transferred to Cost of Deferred Taxes,”product revenue at the time revenue is recorded. See Note 6 – Inventories. Costs associated with installation sales are expensed as incurred.

Disaggregation of Revenue

Orion’s Product revenue includes revenue from contracts with customers accounted for under the scope of ASC 606 and revenue which is accounted for under other guidance. For fiscal year 2021, 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 simplifyconstruct the presentationlegacy solar facilities which are not under the scope of deferred taxes. ASC 606. All remaining Product revenue, and all Service revenue, are derived from contracts with customers as defined in ASC 606.

The amendments in this update requireprimary 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 deferred tax assets and liabilities be classified as non-currentOrion makes to a select group of contractors who focus on the balance sheet. This ASUfederal 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 18 - 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, 2021 (dollars in thousands):

		Year Ended March 31, 2021												Year Ended March 31, 2020												Year Ended March 31, 2019
		Product				Services				Total				Product				Services				Total				Product				Services				Total
Revenue from contracts with customers:
Lighting revenues, by end user
Federal government		$	696			$	965			$	1,661			$	922			$	379			$	1,301			$	2,579			$	642			$	3,221
Commercial and industrial			83,963				28,211				112,174				110,742				37,110				147,852				49,963				8,851				58,814
Total lighting			84,659				29,176				113,835				111,664				37,489				149,153				52,542				9,493				62,035
Solar energy related revenues			57				—				57				56				—				56				57				—				57
Total revenues from contracts with customers			84,716				29,176				113,892				111,720				37,489				149,209				52,599				9,493				62,092
Revenue accounted for under other guidance			2,948				—				2,948				1,632				—				1,632				3,662				—				3,662
Total revenue		$	87,664			$	29,176			$	116,840			$	113,352			$	37,489			$	150,841			$	56,261			$	9,493			$	65,754

Cash Flow Considerations

Customer payments for material only orders are due shortly after shipment.

Turnkey projects where the end-user is effectivea commercial or industrial company typically span between one week to three months. Customer payment requirements for Orion's annual reporting period,these projects vary by contract. Some contracts provide for customer payments for products and interim periods therein,services as they are delivered, other contracts specify that the customer will pay for the project in its entirety upon completion of April 1, 2017.the installation.

Turnkey projects where the end-user is the federal government typically span a three to six-month period. The adoptioncontracts for these sales often provide for monthly progress payments equal to ninety percent (90%) of this standard hadthe 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, 2021 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, 2021, there were no impactsuch 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 an independent 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 financial statements. Orion adopted his ASU on a prospective basis; prior periods were not retrospectively adjusted.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which changes the measurement principle for inventoryConsolidated Balance Sheets until cash is received from the lowerfinancial institution. The financial institution releases funds to Orion based on the customer’s monthly acknowledgment of cost or marketthe progress Orion has achieved in fulfilling its installation obligation. Orion provides the progress certifications to the lowerfinancial institution one month in arrears.

The total amount received from the sales of cost or net realizable valuethese receivables during the twelve months ended March 31, 2021, 2020, and 2019 was $5.1 million, $4.4 million, and $6.9 million, respectively. Orion’s losses on these sales aggregated to $0.1 million, $0.1 million,

and $0.3 million for entities that measure inventory using first-in, first-out ("FIFO") or average cost. Net realizable value is defined as the estimated selling pricestwelve months ended March 31, 2021, 2020, and 2019, respectively, and are included in Interest expense in the ordinary courseConsolidated Statements of business, less reasonably predictableOperations.

Practical Expedients and Exemptions

Orion expenses sales commissions when incurred because the amortization period is one year or less. These costs of completion, disposalare recorded within Sales and transportation. Orion adopted this standard as of April 1, 2017. The adoption of this standard had an immaterial impact on Orion's consolidated financial statements as the previous measurement and validation of the carrying value of its inventory incorporated market values consistentmarketing expense. There are no other capitalizable costs associated with the net realizable value measurements of the standard.

In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvementsobtaining contracts with customers.

Orion’s performance obligations related 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 matterslighting fixtures typically do not exceed nine months in the statement of cash flows. Orion adopted this ASU as of April 1, 2017.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 adoptingone year or less.

Orion also elected the income tax accounting provisionspractical 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 this standard,any potential significant financing component as permitted by the practical expedients provided in ASC 606.

Contract Balances

A receivable is recognized when Orion realizedhas an increaseenforceable right to payment in both its deferred taxaccordance 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 turnkey contracts. Once Orion has an unconditional right to consideration under a turnkey contract, Orion typically bills the customer accordingly and reclassifies the amount to Accounts receivable, net. Revenue earned but not billed as of March 31, 2021 and March 31, 2020 includes $0.6 million and $39 thousand, respectively, which was not derived from contracts with customers and therefore not classified as a contract asset as defined by the new standards.

Long term accounts receivable as of March 31, 2020, includes $0.6 million of contract assets related to stock-based compensation awards and the related valuation allowance. As Orion carries a full valuation allowance against its deferred tax assets, there was no net impact to its consolidated balance sheets or statements of operations. In accordance with the provisions of this standard, Orion elected to prospectively adopt an accounting policy to recognize forfeitures as they occur in lieu of estimating forfeitures. The cashflow presentation provisionsservice portion of the standard had no impact on Orion’s consolidated financial statements. Finally, due to Orion's net loss, the modificationslong-term financing agreement provided one customer.

Deferred revenue, current as of March 31, 2021, includes $11 thousand of contract liabilities which represented consideration received from customers prior to the calculationpoint that Orion has fulfilled the promises included in a performance obligation and recorded revenue.

Deferred revenue, long-term consists of diluted earnings per sharethe 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 resultcontract with a customer, this value is not a contract liability as defined by the new standards.

The following chart shows the balance of adopting thisOrion’s receivables arising from contracts with customers, contract assets and contract liabilities as of March 31, 2021, and March 31, 2020, after the adoption of the new standards (dollars in thousands):

		March 31, 2021				March 31, 2020
Accounts receivable, net		$	13,572			$	10,427
Contract assets		$	2,367			$	1,082
Contract liabilities		$	11			$	31

There were no significant changes in the contract assets outside of standard did not impact its diluted earnings per share.reclassifications to Accounts receivable, net upon billing. There were no significant changes to contract liabilities.

NOTE 35 — 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 guarantees. 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):

		2021				2020
Accounts receivable, gross		$	13,583			$	10,455
Allowance for doubtful accounts			(11	)			(28	)
Accounts receivable, net		$	13,572			$	10,427

	2018				2017
Accounts receivable, gross	$	8,886			$	9,315
Allowance for doubtful accounts	(150		)		(144		)
Accounts receivable, net	$	8,736			$	9,171

NOTE 46 — 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 with cost determined using the first-in, first-out (FIFO) method. 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, 20182021 and 2017,2020, Orion's inventory balances were as follows (dollars in thousands):

		Cost				Excess and Obsolescence Reserve				Net
As of March 31, 2021
Raw materials and components		$	12,410			$	(967	)		$	11,443
Work in process			758				(356	)			402
Finished goods			8,295				(586	)			7,709
Total		$	21,463			$	(1,909	)		$	19,554
As of March 31, 2020
Raw materials and components		$	9,639			$	(1,244	)		$	8,395
Work in process			699				(305	)			394
Finished goods			6,598				(880	)			5,718
Total		$	16,936			$	(2,429	)		$	14,507

	Cost				Excess and Obsolescence Reserve				Net
As of March 31, 2018
Raw materials and components	$	6,073			$	(1,363	)		$	4,710
Work in process	1,190				(263		)		927
Finished goods	3,934				(1,745		)		2,189
Total	$	11,197			$	(3,371	)		$	7,826
As of March 31, 2017
Raw materials and components	$	8,104			$	(1,807	)		$	6,297
Work in process	1,918				(329		)		1,589
Finished goods	7,044				(1,337		)		5,707
Total	$	17,066			$	(3,473	)		$	13,593

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.

In fiscal 2018, Orion's decreased its obsolescence reserve by $0.1 million. The reserve decrease was due to $1.6 million of disposals during the year of fully reserved inventory items along with other inventory related activities, offset by $1.5 million of increases to the reserve related to aging of fluorescent and LED exterior products.

NOTE 57 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist primarily of prepaid subscription fees, prepaid insurance premiums, prepaid license fees, purchase deposits, advance payments to contractors, unbilled receivables,debt issue costs, and prepaid taxes. Prepaid expenses and other current assets include the following (dollars in thousands):sales tax receivable.

	March 31, 2018				March 31, 2017
Unbilled accounts receivable	$	1,910			$	2,226
Other prepaid expenses	557				651
Total	$	2,467			$	2,877

NOTE 68 — PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Expenditures for additions and improvements are capitalized, while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed as incurred. Properties and equipment sold, or otherwise disposed of, are removed from the property and equipment accounts, with gains or losses on disposal credited or charged to income from operations.

Orion periodically reviews the carrying values of property and equipment for impairment in accordance with ASC 360, Property, Plant and Equipment,, if events or changes in circumstances indicate that the assets may be impaired. The estimated future undiscounted cash flows expected to result from the use of the assets and their eventual disposition are compared to the assets' carrying amount to determine if a write down to market value is required.

During both

As of March 31, 2020, due to the second quarter and fourth quarter of fiscal 2018, as a result of lower than anticipated operating results for Orion’s non-solar business,forecasted change in the macroeconomic conditions due to the COVID-19 pandemic, a triggering event occurred as of September 30, 2017, and March 31, 2018, requiring Orion to evaluate its long-lived assets (excluding solar assets) for impairment. Due to the central nature of its operations, Orion’s tangible and intangible definite-lived assets support its full operations, are utilized by all three of its reportable segments, and do not generate separately identifiable cash flows. As such, these assets together represent a single asset group. Orion performed the Step 1 recoverability test for the asset group by comparing its carrying value to the asset group’s expected future undiscounted cash flows. As of both the second quarter and fourth quarter of fiscal 2018, Orion concluded that the undiscounted cash flows of the non-solarlong-lived asset group exceeded its carrying value. As such the asset group was deemed recoverable and no impairment was recorded.

In fiscal 2018 and fiscal 2017, no fixed asset impairment charges were required.

On June 30, 2016, Orion completed the sale of its Manitowoc manufacturing and distribution facility for gross cash proceeds of $2.6 million, which approximated the assets' net carrying values. In conjunction with the sale, Orion entered into an agreement with the buyer to leaseback approximately 197,000 square feet of the building for not less than three years, subject to mutual options to reduce the amount of leased space.

In conjunction with the anticipated sale of this facility, in fiscal 2016, the Company reviewed the carrying value of the manufacturing and distribution facility assets for impairment performing a probability weighted analysis of expected future cash flows. Based on that analysis, the Company concluded that the assets' carrying values were no longer supported. As such, Orion recorded an impairment charge of $1.6 million in fiscal 2016 to write the assets down to their fair value, which approximated the expected selling price. The impairment charge was recorded to all three of Orion’s reportable segments as follows: Orion U.S. Markets $0.7 million, Orion Engineered Systems $0.8 million, and Orion Distribution Services $0.1 million.

Property and equipment were comprised of the following (dollars in thousands):

		March 31, 2021				March 31, 2020
Land and land improvements		$	433			$	433
Buildings and building improvements			9,477				9,470
Furniture, fixtures and office equipment			7,372				7,270
Leasehold improvements			340				324
Equipment leased to customers			4,997				4,997
Plant equipment			12,451				12,021
Construction in progress			135				15
			35,205				34,530
Less: accumulated depreciation and amortization			(23,836	)			(22,713	)
Net property and equipment		$	11,369			$	11,817

	March 31, 2018				March 31, 2017
Land and land improvements	$	424			$	424
Buildings and building improvements	9,245				9,245
Furniture, fixtures and office equipment	7,096				7,056
Leasehold improvements	324				324
Equipment leased to customers under Power Purchase Agreements	4,997				4,997
Plant equipment	12,106				11,627
Construction in progress	—				61
	34,192				33,734
Less: accumulated depreciation and amortization	(21,298		)		(19,948		)
Net property and equipment	$	12,894			$	13,786

Equipment included above under capital leases was as follows (dollars in thousands):

	March 31, 2018				March 31, 2017
Equipment	$	581			581
Less: accumulated depreciation and amortization	(344		)		(202		)
Net equipment	$	237			$	379

Depreciation is recognized over the estimated useful lives of the respective assets, using the straight-line method. Orion recorded depreciation expense of $1.4$1.2 million, $1.5$1.2 million and $3.0$1.3 million for the years ended March 31, 2018, 20172021, 2020 and 2016,2019, respectively.

Depreciable lives by asset category are as follows:

Land improvements		10-15 years
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

No interest was capitalized for construction in progress during fiscal 20182021 or fiscal 2017.2020.

NOTE 9 — 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 specified in the contract, have been transferred from the lessor to the lessee. The judgement considers matters such as whether the

assets are transferred from the lessor to the lessee at the end of the contract, the term of the agreement in relation to the asset’s remaining economic useful life, and whether the assets are of such a specialized nature that the lessor will not have an alternative use for such assets at the termination of the agreement. Other matters requiring judgement are the lease term when the agreement includes renewal or termination options and the interest rate used when initially determining the ROU asset and lease liability.

ROU assets represent Orion’s right to use an underlying asset for the lease term and lease liabilities represent Orion’s obligation to make lease payments arising from the lease. Under ASC 842, both finance and operating lease ROU assets and lease liabilities for leases with initial terms in excess of 12 months are recognized at the commencement date based on the present value of lease payments over the lease term. When available, Orion uses the implicit interest rate in the lease when completing this calculation. However, as most of Orion’s operating lease agreements generating ROU assets do not provide the implicit rate, Orion’s incremental borrowing rate under its line of credit, adjusted for differences in duration and the relative collateral value in relation to the payment obligation, at the commencement of the lease is generally used in this calculation. The lease term includes options to extend or renew the agreement, or for early termination of the agreement, when it is reasonably certain that Orion will exercise such option. ROU assets are depreciated using the straight-line method over the lease term.

Orion recognizes lease expense for leases with an initial term of 12 months or less, referred to as short term leases, on a straight-line basis over the lease term.

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 approximately 266,000 square foot primary manufacturing and distribution facility in Manitowoc, WI. The lease has a 10-year term, with the option to terminate after six years. 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.

The prior lease agreement for this facility provided the lessor the right to terminate the lease agreement at any time with 12 months’ notice to Orion. As a result, the agreement was previously classified as a short-term lease.

In February 2014, Orion entered into a multi-year lease agreement for use of approximately 10,500 square feet 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. The agreement is classified as an operating lease.

Orion has leased other assets from third parties, principally office and production equipment. The terms of our other leases vary from contract to contract and expire at various dates in the next five years.

The weighted average discount rate for Orion’s lease obligations as of March 31, 2021 is 5.4%. The weighted average remaining lease term as of March 31, 2021 is 4.6 years.

A summary of Orion’s assets leased from third parties follows (dollars in thousands):

		Balance sheet classification		March 31, 2021				March 31, 2020
Assets
Operating lease assets		Other long-term assets		$	2,585			$	2,745
Liabilities
Current liabilities
Operating lease liabilities		Accrued expenses and other			647				691
Non-current liabilities
Operating lease liabilities		Other long-term liabilities			2,642				2,830
Total lease liabilities				$	3,289			$	3,521

Orion had operating lease costs of $0.9 million for the year ended March 31, 2021. 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 2022		$	810
Fiscal 2023			820
Fiscal 2024			746
Fiscal 2025			735
Fiscal 2026			628
Total lease payments		$	3,739
Less: Interest			(450	)
Present value of lease liabilities		$	3,289

Assets Orion Leases to Other Parties

Orion provides long-term financing to one customer who frequently engages Orion in large turnkey projects that span between three and nine months. The customer executes an agreement providing for monthly payments, at a fixed monthly amount, of the contract price, plus interest, over typically a five-year period. The total transaction price in these contracts is allocated between product and services in the same manner as all other turnkey projects. The portion of the transaction associated with the installation is accounted for consistently with all other installation related performance obligations under ASC 606.

While Orion retains ownership of the light fixtures during the financing period, the transaction terms and the underlying economics associated with used lighting fixtures results in Orion essentially ceding ownership of the lighting fixtures to the customer after completion of the agreement. Therefore, the portions of the transaction associated with the sale of the multiple individual light fixtures is accounted for as a sales-type lease under ASC 842.

Revenues, and production and acquisition costs, associated with sales-type leases are included in Product revenue and Costs of product revenues in the Consolidated Statement of Operations. These amounts are recorded for each fixture separately based on the customer’s monthly acknowledgment that specified fixtures have been installed and are operating as specified. The execution of the acknowledgement is considered the commencement date as defined in ASC 842.

The following chart shows the amount of revenue and cost of sales arising from sales-type leases during the year ended March 31, 2021 and 2020 (dollars in thousands):

		March 31, 2021				March 31, 2020
Product revenue		$	2,758			$	1,362
Cost of product revenue			2,512				1,208

The Consolidated Balance Sheet as of March 31, 2021 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 working correctly prior to period end were transferred to the financing institution prior to the respective balance sheet dates. The Consolidated Balance Sheet as of March 31, 2020 includes an immaterial amount related to the net investment in sales-type leases.

Other Agreements where Orion is the Lessor

Orion has leased unused portions of its corporate headquarters to third parties. The length and payment terms of the leases vary from contract to contract and, in some cases, include options for the tenants to extend the lease terms. Annual lease payments are recorded as a reduction in administrative operating expenses and were not material in the years ended March 31, 2021 and 2020. Orion accounts for these transactions as operating leases.

NOTE 710 — OTHER INTANGIBLE ASSETS

The costs of specifically identifiable intangible assets that do not have an indefinite life are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized.

As of January 1, 2016, Orion's USM segment recorded a goodwill impairment charge of $2.4 million and Orion’s OES segment recorded a goodwill impairment charge of $2.0 million. Therefore, as of March 31, 2018 and March 31, 2017, Orion had no goodwill on its Consolidated Balance Sheets.

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
Patents	10-17 years	Straight-line
Licenses	7-13 years	Straight-line
Customer relationships		5-8 years		Accelerated based upon the pattern of economic benefits consumed
Developed technology		8 years		Accelerated based upon the pattern of economic benefits consumed
Non-competition agreements	5 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 are evaluated for impairment at least annually on the first day of Orion’s fiscal fourth quarter, or when indications of potential impairment exist. This annual impairment review may begin with a qualitative test to determine whether it is more likely than not that an indefinite lived intangible asset's carrying value is greater than its fair value. If the qualitative assessment reveals that asset impairment is more likely than not, a quantitative impairment test is performed comparing the fair value of the indefinite lived intangible asset to its carrying value. Alternatively, the qualitative test may be bypassed and the quantitative impairment test may be immediately performed. If the fair value of the indefinite lived intangible asset exceeds its carrying value, the indefinite lived intangible asset is not impaired and no further review is performed. If the carrying value of the indefinite lived intangible asset exceeds its fair value, an impairment loss would be recognized in an amount equal to such excess. Once an impairment loss is recognized, the adjusted carrying value becomes the new accounting basis of the indefinite lived intangible asset.

Orion performed a qualitative assessment in conjunction with its annual impairment test of its indefinite lived intangible assets as of January 1, 2018.2021. This qualitative assessment considered Orion’s operating results for the first nine months of fiscal 20182021 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 20182022 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.

During the second quarter of fiscal 2018, as a result of lower than anticipated operating results in the first half of fiscal 2018, Orion revised its full year fiscal 2018 forecast. As such, a triggering event occurred as of September 30, 2017, requiring Orion to evaluate its long-lived assets for impairment. Orion performed a quantitative impairment review of its indefinite lived intangible assets related to the Harris trade name applying the royalty replacement method to determine the asset’s fair value as of September 30, 2017. Under the royalty replacement method, the fair value of the Harris tradename was determined based on a market participant’s view of the royalty that would be paid to license the right to use the tradename. This quantitative analysis incorporated several assumptions including forecasted future revenues and cash flows, estimated royalty rate, based on similar licensing transactions and market royalty rates, and discount rate, which incorporates assumptions such as weighted-average cost of capital and risk premium. As a result of this impairment test, the carrying value of the Harris trade name exceeded its estimated fair value and an impairment of $0.7 million was recorded to Impairment of intangible assets during the quarter ended September 30, 2017 to reduce the asset’s carrying value to its calculated fair value. This fair value determination was categorized as Level 3 in the fair value hierarchy.

During the fourth quarter of fiscal 2017, Orion achieved lower than anticipated operating results, made a strategic shift in its manufacturing strategy and approach to the fluorescent and LED exterior lighting market, and revised its fiscal 2018 forecast. As a result, a triggering event occurred requiring the Company to reassess its indefinite lived intangible assets for impairment. As such Orion performed a quantitative impairment review of its indefinite lived intangible assets related to the Harris trade name applying the royalty replacement method to determine the asset’s fair value as of March 31, 2017. Under the royalty replacement method, the fair value of the Harris tradename was determined based on a market participant’s view of the royalty that would be paid to license the right to use the tradename. This quantitative analysis incorporated several assumptions including forecasted future revenues and cash flows, estimated royalty rate, based on similar licensing transactions and market royalty rates, and discount rate, which incorporates assumptions such as weighted-average cost of capital and risk premium. As a result of this impairment test, the carrying value of the Harris trade name exceeded its estimated fair value and an impairment of $0.3 million was recorded to Impairment of assets during the fourth quarter of fiscal 2017 to reduce the asset’s carrying value to its calculated fair value. This fair value determination was categorized as Level 3 in the fair value hierarchy (see “Fair Value of Financial Instruments” for the definition of Level 3 inputs).

The components of, and changes in, the carrying amount of other intangible assets were as follows (dollars in thousands):

		March 31, 2021												March 31, 2020
		Gross Carrying Amount				Accumulated Amortization				Net				Gross Carrying Amount				Accumulated Amortization				Net
Patents		$	2,796			$	(1,875	)		$	921			$	2,766			$	(1,700	)		$	1,066
Licenses			58				(58	)			—				58				(58	)			—
Trade name and trademarks			1,011				—				1,011				1,014				—				1,014
Customer relationships			3,600				(3,591	)			9				3,600				(3,545	)			55
Developed technology			900				(889	)			11				900				(819	)			81
Total		$	8,365			$	(6,413	)		$	1,952			$	8,338			$	(6,122	)		$	2,216

	March 31, 2018												March 31, 2017
	Gross Carrying Amount				Accumulated Amortization				Net				Gross Carrying Amount				Accumulated Amortization				Net
Patents	$	2,636			$	(1,370	)		$	1,266			$	2,658			$	(1,211	)		$	1,447
Licenses	58				(58		)		—				58				(58		)		—
Trade name and trademarks	1,005				—				1,005				1,715				—				1,715
Customer relationships	3,600				(3,326		)		274				3,600				(3,054		)		546
Developed technology	900				(582		)		318				900				(426		)		474
Non-competition agreements	100				(95		)		5				100				(75		)		25
Total	$	8,299			$	(5,431	)		$	2,868			$	9,031			$	(4,824	)		$	4,207

As of March 31, 2018,2021, the weighted average useful life of definite life intangible assets was 5.63.75 years. The estimated amortization expense for each of the next five years is shown below (dollars in thousands): 

Fiscal 2022		$	206
Fiscal 2023			115
Fiscal 2024			111
Fiscal 2025			100
Fiscal 2026			90
Thereafter			319
		$	941

Fiscal 2019	$	445
Fiscal 2020	360
Fiscal 2021	285
Fiscal 2022	188
Fiscal 2023	171
Thereafter	414
	$	1,863

Amortization expense is set forth in the following table (dollars in thousands):

		Fiscal Year Ended March 31,
		2021				2020				2019
Amortization included in cost of sales:
Patents		$	175			$	171			$	171
Total		$	175			$	171			$	171
Amortization included in operating expenses:
Customer relationships		$	47			$	86			$	133
Developed technology			68				102				135
Non-competition agreements			—				—				5
Total			115				188				273
Total amortization of intangible assets		$	290			$	359			$	444

	Fiscal Year Ended March 31,
	2018				2017				2016
Amortization included in cost of sales:
Patents	$	159			$	158			$	139
Total	$	159			$	158			$	139
Amortization included in operating expenses:
Customer relationships	$	272			$	542			$	891
Developed technology	156				161				156
Non-competition agreements	20				20				20
Patents	—				—				9
Total	448				723				1,076
Total amortization	$	607			$	881			$	1,215

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 StatementStatements of Operations. SuchIn fiscal years 2021, 2020, and 2019, write-offs recorded in fiscal 2018, 2017were immaterial.

NOTE 11 — ACCRUED EXPENSES AND OTHER

As of March 31, 2021 and 2016 were $0, $0March 31, 2020, Accrued expenses and $0.1 million, respectively.

Included in other income in fiscal 2018 and fiscal 2017 are product royalties received from licensing agreements for our patents.

NOTE 8 — OTHER LONG-TERM ASSETS

Other long-term assets includeincluded the following (dollars in thousands):

		March 31, 2021				March 31, 2020
Compensation and benefits		$	2,851			$	2,594
Sales tax			1,318				513
Accrued project costs			5,010				1,173
Legal and professional fees			497				312
Warranty			705				708
Sales returns reserve			106				98
Credits due to customers			1,009				932
Other accruals			1,730				898
Total		$	13,226			$	7,228

	March 31, 2018				March 31, 2017
Security deposits	41				117
Prepaid Insurance	51				53
Other	$	18			$	5
Total	$	110			$	175

Deferred financing costs related to debt issuances are allocated to interest expense over the life of the debt (1 to 3 years). For the years ended March 31, 2018, 2017 and 2016, the expense was $0.1 million, $0.1 million and $0.1 million respectively.

NOTE 9 — ACCRUED EXPENSES AND OTHER

Accrued expenses and other include the following (dollars in thousands):

	March 31, 2018				March 31, 2017
Compensation and benefits	$	1,786			$	2,431
Sales tax	237				213
Contract costs	985				223
Legal and professional fees (1)	400				2,262
Warranty (2)	402				449
Other accruals	361				410
Total	$	4,171			$	5,988

(1) March 31, 2017 includes a $1.4 million loss contingency reserve.

(2) See table below for additional long-term warranty liability.

Orion generally offers a limited warranty of one to ten10 years on its lighting products including the pass through of standard warranties offered by major original equipment component manufacturers. The manufacturers’ warranties cover lamps, ballasts, LED modules, LED chips, LED drivers, control devices, and other fixture related items, which are significant components in Orion's lighting products.

Changes in Orion’s warranty accrual (both current and long-term) were as follows (dollars in thousands):

		March 31,
		2021				2020
Beginning of year		$	1,069			$	657
Accruals			644				863
Warranty claims (net of vendor reimbursements)			(704	)			(451	)
Ending balance		$	1,009			$	1,069

	March 31,
	2018				2017
Beginning of year	$	759			$	864
Provision to product cost of revenue	(82		)		(102		)
Charges	(4		)		(3		)
End of year	$	673			$	759

NOTE 1012 — NET LOSSINCOME (LOSS) PER COMMON SHARE

Basic net lossincome (loss) per common share is computed by dividing net lossincome (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period and does not consider common stock equivalents.

Diluted net lossincome (loss) per common share reflects the dilution that would occur if warrants and stock options were exercised and restricted shares vested. In the computation of diluted net lossincome (loss) per common share, Orion uses the treasury stock method for outstanding options warrants and restricted shares. DilutedBecause of the net loss for the year ended March 31, 2019 potentially dilutive securities would be anti-dilutive, and therefore diluted net income (loss) per common share is the same as basic net lossincome (loss) per common share for the yearsyear ended March 31, 2018, March 31, 2017 and March 31, 2016 because the effects of potentially dilutive securities would be anti-dilutive. The effect of net loss2019. Net income (loss) per common share is calculated based upon the following shares:

		Fiscal Year Ended March 31,
		2021				2020				2019
Numerator:
Net income (loss) (dollars in thousands)		$	26,134			$	12,462			$	(6,674	)
Denominator:
Weighted-average common shares outstanding			30,634,553				30,104,552				29,429,540
Weighted-average effect of assumed conversion of stock options and restricted stock			669,174				860,225				—
Weighted-average common shares and share equivalents outstanding			31,303,727				30,964,777				29,429,540
Net income (loss) per common share:
Basic		$	0.85			$	0.41			$	(0.23	)
Diluted		$	0.83			$	0.40			$	(0.23	)

	Fiscal Year Ended March 31,
	2018				2017				2016
Numerator:
Net loss (dollars in thousands)	$	(13,128	)		$	(12,288	)		$	(20,126	)
Denominator:
Weighted-average common shares outstanding	28,783,830				28,156,382				27,627,693
Weighted-average common shares and share equivalents outstanding	28,783,830				28,156,382				27,627,693
Net loss per common share:
Basic	$	(0.46	)		$	(0.44	)		$	(0.73	)
Diluted	$	(0.46	)		$	(0.44	)		$	(0.73	)

The following table indicates the number of potentially dilutive securities excluded from the calculation of Diluted net income (loss) per common share because their inclusion would have been anti-dilutive. The number of shares is as of the end of each period:

		March 31,
		2021				2020				2019
Common stock options			—				164,072				467,836
Restricted shares			—				—				1,312,593
Total			—				164,072				1,780,429

	March 31,
	2018			2017			2016
Common stock options	629,667			1,520,953			2,017,046
Restricted shares	1,485,799			1,704,543			1,053,389
Total	2,115,466			3,225,496			3,070,435

NOTE 11 — RELATED PARTY TRANSACTIONS

During fiscal 2018, Orion incurred a de minimis expense for consulting services provided by a member of its Board of Directors. During 2017 and 2016, Orion purchased goods and services from an entity in the amount of $41,000, and $21,000, respectively, for which a director of Orion is a minority owner, serves as president and serves as chairman of the board of directors. In fiscal 2017, Orion purchased services in the amount of $43,000 from an immediate family member of a named executive officer who is now currently employed by Orion.

NOTE 1213 — LONG-TERM DEBT

Long-term debt as of March 31, 20182021 and 20172020 consisted of the following (dollars in thousands):

		March 31,
		2021				2020
Revolving credit facility		$	—			$	10,013
Equipment debt obligations			49				85
Total long-term debt			49				10,098
Less current maturities			(14	)			(35	)
Long-term debt, less current maturities		$	35			$	10,063

	March 31,
	2018				2017
Revolving credit facility	$	3,908			$	6,629
Equipment lease obligations	184				321
Customer equipment finance notes payable	—				7
Other long-term debt	—				14
Total long-term debt	4,092				6,971
Less current maturities	(79		)		(152		)
Long-term debt, less current maturities	$	4,013			$	6,819

Revolving Credit Agreement

On December 29, 2020, Orion has anentered 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 dated as of October 26, 2018, as amended, credit agreement ("by and among Orion and Western Alliance Bank, National Association, as lender (the “Prior Credit Agreement"Agreement”) that. 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 ("(the “Credit Facility”) that matures on December 29, 2025. Borrowings under the Credit Facility")Facility are subject to a borrowing base requirement based on eligible receivables, inventory and inventory.cash. As of March 31, 2018, Orion's2021, the borrowing base was approximately $4.0 million. Thesupports the full availability of the Credit Facility has a maturity date of February 6, 2021, and includes a $2.0 million sublimit for the issuance of letters of credit.Facility. As of March 31, 2018, Orion had2021, no outstanding lettersamounts were borrowed under the Credit Facility.

The Credit Agreement is secured by a first lien security interest in substantially all of credit. Orion’s assets.

Borrowings outstanding as of March 31, 2018, amounted to approximately $3.9 million andunder the Credit Agreement are included in non-current liabilitiespermitted in the accompanying consolidated balance sheet.form of LIBOR 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 estimates that asis required to pay an annual facility fee of March 31, 2018, it was eligible$15,000 and a fee of 25 basis points on the unused portion of the Credit Facility.

The Credit Agreement includes a springing minimum fixed cost coverage ratio of 1.0 to borrow an additional $0.1 million1.0 when excess availability under the Credit Facility based upon current levelsfalls below the greater of eligible inventory and accounts receivable.

Subject in each case to Orion's applicable borrowing base limitations, the Credit Agreement otherwise provides for a $15.0$3.0 million Credit Facility. This limit may increase up to $20.0 million, subject to a borrowing base requirement, if Orion satisfies certain conditions. Orion did not meet the requirements to increase the borrowing limit to $20.0 million as of July 31, 2017, the most recent measurement date.

From and after any increase in the Credit Facility limit from $15.0 million to $20.0 million, the Credit Agreement requires that Orion maintain, asor 15% of the end of each month, acommitted 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 additional customary events of default and other 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 was in compliance with its covenants indefault under the Credit Agreement asoccurs and is continuing, then Bank of March 31, 2018.

Each subsidiary of Orion is a joint and several co-borrower or guarantorAmerica, N.A. may cease making advances under the Credit Agreement and the Credit Agreement is secured by a security interest in substantially all of Orion’s and each subsidiary’s personal property (excluding various assets relating to customer Orion Throughput Agreements ("OTAs") and a mortgage on certain real property.

Borrowingsdeclare any outstanding obligations under the Credit Agreement bear interest atto be immediately due and payable. In addition, if Orion becomes the daily three-month LIBOR plus 3.0% per annum, with a minimum interest charge for each yearsubject of voluntary or portion of a year during the term ofinvoluntary proceedings under any bankruptcy or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable.

Orion did not incur any early termination fees in connection with the termination of the Prior Credit Agreement, but did recognize a loss on debt extinguishment of $0.1 million regardlesson the write-off of usage. unamortized debt issue costs related to the Prior Credit Agreement. The Prior Credit Agreement was scheduled to mature on October 26, 2021.

As of March 31, 2018, the interest rate was 5.31%.2021, 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.

is in compliance with all debt covenants.

Equipment LeaseDebt Obligation

In March 2016 and June 2015,February 2019, Orion entered into leaseadditional debt agreements with a financing company in the principal amount of $19,000$44 thousand and $0.4 million, respectively, to$30 thousand fund certain equipment. The leasesdebts are secured by the related equipment. The leasesdebts bear interest at a rate of 5.94%6.43% and 3.6%8.77% respectively and both debts mature in February 2018 and June 2020. Both leases contain a one dollar buyout option.

Customer Equipment Finance Notes Payable

In December 2014, Orion entered into a secured borrowing agreement with a financing company in the principal amount of $0.4 million to fund completed customer contracts under its OTA finance program that were previously funded under a different

OTA credit agreement. The loan amount is secured by the OTA-related equipment and the expected future monthly payments

under the supporting 25 individual OTA customer contracts. The borrowing agreement bears interest at a rate of 8.36% and matures in April 2018.

Other Long-Term Debt

In September 2010, Orion entered into a note agreement with the Wisconsin Department of Commerce that provided Orion with $0.3 million to fund Orion’s rooftop solar project at its Manitowoc manufacturing facility. This note is included in the table above as other long-term debt. The note is collateralized by the related solar equipment. The note allowed for two years without interest accruing or principal payments due. Beginning in July 2012, the note bears interest at 2% and require monthly payments of $4,600. The note matured in June 2017 and was paid in full upon maturity. The note agreement requires Orion to maintain a certain number of jobs at its Manitowoc facilities during the note’s duration.

January 2024.

Aggregate Maturities

As of March 31, 2018,2021, aggregate maturities of long-term debt were as follows (dollars in thousands):

Fiscal 2022		$	14
Fiscal 2023			14
Fiscal 2024			17
Fiscal 2025			4
		$	49

Fiscal 2019	$	79
Fiscal 2020	83
Fiscal 2021	3,930
	$	4,092

NOTE 1314 — 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,
		2021				2020				2019
Current		$	244			$	84			$	(5	)
Deferred			(19,860	)			75				19
Total		$	(19,616	)		$	159			$	14
		2021				2020				2019
Federal, Current		$	—			$	17			$	(16	)
Federal, Deferred			(16,217	)		$	39			$	19
Total Federal			(16,217	)			56				3
State, Current			244				67				11
State, Deferred			(3,643	)			36				—
Total State			(3,399	)			103				11
Total		$	(19,616	)		$	159			$	14

	Fiscal Year Ended March 31,
	2018				2017				2016
Current	$	4			$	(261	)		$	36
Deferred	(19		)		—				—
Total	$	(15	)		$	(261	)		$	36
	2018				2017				2016
Federal	$	(28	)		$	(283	)		$	15
State	13				22				21
Total	$	(15	)		$	(261	)		$	36

A reconciliation of the statutory federal income tax rate and effective income tax rate is as follows:

		Fiscal Year Ended March 31,
		2021				2020				2019
Statutory federal tax rate			21.0	%			21.0	%			21.0	%
State taxes, net			3.7	%			6.5	%			5.6	%
Federal tax credit			—	%			—	%			(0.3	)%
Change in valuation reserve			(321.4	)%			(25.0	)%			(23.8	)%
Permanent items			(3.4	)%			(1.0	)%			(1.1	)%
Change in tax contingency reserve			(0.5	)%			0.2	%			—	%
Federal refunds			0.0	%			0.0	%			0.3	%
Equity compensation cancellations			0.6	%			0.2	%			(1.0	)%
Other, net			(1.0	)%			(0.6	)%			(0.9	)%
Effective income tax rate			(301.0	)%			1.3	%			(0.2	)%

	Fiscal Year Ended March 31,
	2018			2017			2016
Statutory federal tax rate	30.8	%		34.0	%		34.0	%
State taxes, net	2.2	%		3.5	%		2.8	%
Federal tax credit	(0.3	)%		—	%		—	%
Change in valuation reserve	51.4	%		(37.6	)%		(29.1	)%
Permanent items	(1.4	)%		(0.5	)%		(7.5	)%
Change in tax contingency reserve	(0.1	)%		1.0	%		(0.1	)%
Federal refunds	0.3	%		1.4	%		—	%
U.S. tax reform, corporate rate reduction	(75.2	)%		—	%		—	%
Equity compensation cancellations	(15.7	)%		—	%		—	%
Federal loss, ASU 2016-09	7.7	%		—	%		—	%
Other, net	0.4	%		0.3	%		(0.3	)%
Effective income tax rate	0.1	%		2.1	%		(0.2	)%

The net deferred tax assets and liabilities reported in the accompanying consolidated financial statements include the following components (dollars in thousands):

		March 31,
		2021				2020
Deferred tax assets:
Inventory, accruals and reserves			860				1,046
Federal and state operating loss carry-forwards			18,313				19,540
Tax credit carry-forwards			1,916				1,916
Equity compensation			198				250
Deferred revenue			38				18
Lease liability			853				903
Other			406				121
Total deferred tax assets			22,584				23,794
Valuation allowance			(1,279	)			(22,228	)
Deferred tax assets, net of valuation allowance			21,305				1,566
Deferred tax liabilities:
Lease ROU asset			(670	)			(704	)
Fixed assets			(626	)			(689	)
Intangible assets			(224	)			(248	)
Total deferred tax liabilities			(1,520	)			(1,641	)
Total net deferred tax assets/(liabilities)		$	19,785			$	(75	)

	March 31,
	2018				2017
Inventory, accruals and reserves	$	—			$	4,016
Other	—				54
Deferred revenue	—				(141		)
Valuation allowance	—				(3,929		)
Total net current deferred tax assets and liabilities	$	—			$	—
Inventory, accruals and reserves	1,316				—
Federal and state operating loss carry-forwards	21,333				23,927
Tax credit carry-forwards	1,939				1,881
Equity compensation	402				3,265
Deferred revenue	(81		)		(51		)
Fixed assets	(878		)		(1,360		)
Intangible assets	(363		)		(1,034		)
Other	154				—
Valuation allowance	(23,803		)		(26,628		)
Total net long-term deferred tax assets and liabilities	$	19			$	—
Total net deferred tax assets	$	19			$	—

The Tax Cut and JobsCARES Act ("Act") was enacted December 22, 2017. The Act significantly changes U.Sincludes significant business tax law by,provisions that, among other things, reducingtemporarily eliminate the U.S. federaltaxable income limit for certain NOLs, allow businesses to carry back tax year 2018-2020 NOLs to the five prior tax years, accelerate refunds of corporate tax rate from 35% to 21%, imposing a one-time transition tax on earningsAMT credits, and generally decrease the amount of certain foreign subsidiaries that were previously tax deferred, and creating new taxes on certain foreign sourced earnings.

On December 22, 2017,disallowed business interest expense. Because of Orion’s loss carryforwards, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address accounting for income tax effectsprovisions of the Tax Reform Act. At March 31, 2018, Orion hasCARES Act did not completed its accounting for the tax effects of enactment of the Act; however, as described below, Orion has maderesult in a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax.

Orion remeasured its deferred tax assets based on the rates at which they are expected to reverse in the future, which is generally the 21% federal corporate tax rate. The provisional amount recorded related to the remeasurement of its deferred tax balance decreased deferred tax assets by $9.9 million. Substantially all of this decrease to deferred tax assets was offset by a corresponding decrease to the valuation allowance. There is no impact on the current year income tax expense for the federal corporate tax rate change due to Orion's current year taxable loss.

The Act also requires companies to pay a one-time transition tax on Orion's total post-1986 earnings and profits ("E&P") of its foreign subsidiary that were previously tax deferred from US income taxes. Since Orion's foreign subsidiary has negative E&P, the company estimates there is no transition tax to be reported in income tax expense.

As of March 31, 2018, Orion has federal net operating loss carryforwards of approximately $82.5 million, and state net operating loss carry-forwards of approximately $66.4 million. Upon adoption of ASU 2016-09 in the current fiscal year, the federal and state loss carryforwards associated with historic exercises of NQSOs have been recorded as deferred tax assets. Orion also has federal tax credit carry-forwards of approximately $1.3 million and state tax credits of $0.8 million. Orion's net operating loss and tax credit carry-forwards will begin to expire in varying amounts between 2020 and 2038. material cash or financial statement impact.

For the fiscal year ended March 31, 2018,2021, Orion’s deferred tax assets were primarily the result of U.S. NOL and tax credit carryforwards. Orion has recorded a valuation allowance of $23.8$1.3 million equaling theand $22.2 million against its net deferred tax asset balance as of March 31, 2021 and March 31, 2020, respectively, due to the uncertainty of its realization value in the future. For the year ended March 31, 2021, Orion recorded a net valuation allowance release of $20.9 million on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. For the fiscal year ended March 31, 2018,2020, the valuation allowance against Orion's net federal and net state deferred tax assets decreased $6.8$3.2 million, primarily because of the reduction in the corporate tax rate. Fordue to the fiscal year ended March 31, 2017,2020 loss usage.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the valuation allowance increased approximately $4.6 million.future realization of deferred tax assets. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. As of March 31, 2021, in part because Orion achieved its second full year of pretax income and three years of cumulative pretax income in the U.S. federal tax jurisdiction, management determined there was sufficient positive evidence to conclude that it is more likely than not that deferred taxes assets of $20.9 are realizable. It therefore reduced the valuation allowance accordingly.

As of March 31, 2021, Orion has federal NOL carryforwards of approximately $69.4 million, state NOL carryforwards of approximately $61.8 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 $0.8 million. All of Orion's tax credit carryforwards and $123.6 million of its NOL carryforwards will begin to expire in varying amounts between 2022 and 2040. The remaining $8.4 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, a portion of its federal credit carryforwards, and certain state loss carryforwards will not be realized. In the event thatrecognition of this risk, Orion determines thathas provided a valuation allowance of $1.3 million on the deferred tax assets are ablerelated to be realized, an adjustment to the deferred tax asset would increase income in the period such determination is made.these carryforwards.

Generally, a change of more than 50% in the ownership of Orion's stock, by value, over a three-year period constitutes an ownership change for federal income tax purposes as defined under Section 382 of the Internal Revenue Code. As a result, Orion's ability to use its net operating loss carry-forwards,carryforwards, attributable to the period prior to such ownership change, to offset taxable

income can be subject to limitations in a particular year, which could potentially result in increased future tax liability for Orion. There was no limitation of net operating loss carry-forwardsNOL carryforwards that occurred for fiscal 2018,2021, fiscal 2017,2020, or fiscal 2016.

2019.

Orion records its tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where Orion believes that a tax position is supportable for income tax purposes, the item is included in their income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations and facts of each matter. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities, or the expiration of the statute of limitations.

Orion files income tax returns in the United States federal jurisdiction and in several state jurisdictions. The Company's federal tax returns for tax years beginning April 1, 20142017 or later are open. For states in which Orion files state income tax returns, the statute of limitations is generally open for tax years ended March 31, 20142017 and forward.

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, 2018,2021, the balance of gross unrecognized tax benefits was approximately $0.1$0.3 million, all of which would affect Orion’s effective tax rate if recognized.

Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as other liabilities (non-current) to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax expense. Penalties and interest are included in the unrecognized tax benefits. Orion had the following unrecognized tax benefit activity (dollars in thousands):

		Fiscal Year Ended March 31,
		2021				2020				2019
Unrecognized tax benefits as of beginning of fiscal year		$	259			$	130			$	129
Additions based on tax positions related to the current period positions			123				23				1
Additions/(reductions) for tax positions of prior years			(97	)			106				—
Unrecognized tax benefits as of end of fiscal year		$	285			$	259			$	130

	Fiscal Year Ended March 31,
	2018				2017				2016
Unrecognized tax benefits as of beginning of fiscal year	$	113			$	227			$	212
Additions based on tax positions related to the current period positions	2				2				15
Reduction for tax positions of prior years	$	14			$	(116	)		$	—
Unrecognized tax benefits as of end of fiscal year	$	129			$	113			$	227

NOTE 1415 — COMMITMENTS AND CONTINGENCIES

Operating Leases

Orion leases office space and equipment under operating leases expiring at various dates through 2020. Rent expense under operating leases was $0.9, $0.9 and $0.5 for fiscal 2018, 2017 and 2016, respectively. Total annual commitments under non-cancelable operating leases with terms in excess of one year at March 31, 2018 are as follows (dollars in thousand):

Fiscal 2019	$	647
Fiscal 2020	615
Fiscal 2021	380
	$	1,642

On March 22, 2018, Orion renewed the lease for its manufacturing and distribution facility for an additional eighteen months with an annual rent expense of approximately $0.5 million.

On April 28, 2017, Orion renewed the lease for its Jacksonville, Florida office space for an additional three-year term with annual rent expense of approximately $0.1 million.

On March 31, 2016, Orion entered into a purchase and sale agreement with a third party to sell and leaseback Orion's manufacturing and distribution facility for gross cash proceeds of $2.6 million. The transaction closed on June 30, 2016.

On March 1, 2016, Orion entered into a lease agreement as a lessor for excess office space at its corporate headquarters in Manitowoc, Wisconsin. The initial term of the lease was 24 months and the tenant has the option to extend the term for up to three additional twelve month periods. The tenant exercised its first twelve month extension. The monthly rental payment Orion receives is $21,000 and is included in general and administrative expenses.

On March 31, 2016, Orion entered into a purchase and sale agreement ("Agreement") with third party to sell and leaseback Orion's manufacturing and distribution facility for gross cash proceeds of $2.6 million. The transaction closed on June 30, 2016. Pursuant to the Agreement, a lease was entered into on June 30, 2016, in which Orion is leasing approximately 197,000 square feet of the building for not less than three years, with rent at $2.00 per square foot per annum. Orion's monthly payment under this lease is approximately $38,000. The lease contains options by either party to reduce the amount of leased space after March 1, 2017. On March 22, 2018, both parties agreed to extend the lease until December 31, 2020.

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, 2018,2021, Orion had entered into $1.9$13.1 million of purchase commitments related primarily to fiscal 2019 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 2018, 20172021, Orion made matching contributions of $0.1 million. In fiscal 2020 and 2016,2019, Orion made matching contributions of approximately $9,000, $9,000$0.1 million and $10,000,$9 thousand, 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 ourits future results of operations. In addition to ordinary-course litigation, Orion was or is a party to the proceedings described below.

On March 27, 2014, Orion was named as a defendant in a civil lawsuit filed by Neal R. Verfuerth, a former chief executive officer who left the company in November 2012, in the United States District Court for the Eastern District of Wisconsin (Green Bay Division). The plaintiff alleged, among other things, that Orion breached certain agreements entered into with the plaintiff, including the plaintiff’s employment agreement, and violated certain laws. The complaint sought, among other relief, unspecified pecuniary and compensatory damages, fees and such other relief as the court may deem just and proper.

On January 11, 2018, a three judge panel of the United States Court of Appeals Seventh Circuit unanimously affirmed the dismissal of all of the plaintiff’s claims against Orion. With the conclusion of this case during the fourth quarter of fiscal 2018, Orion released a loss contingency accrual of $1.4 million dollars, the impact of which is included in its general and administrative expenses on the face of the consolidated statement of operations.

On November 10, 2017, a purported shareholder, Stephen Narten, filed a civil lawsuit in the Circuit Court for Manitowoc County against those individuals who served on Orion's Board of Directors during fiscal years 2015, 2016, and 2017 and certain current and former officers during the same period. The plaintiff, who purports to bring the suit derivatively on behalf of Orion, alleges that the director defendants breached their fiduciary duties in connection with granting certain stock-based incentive awards under Orion's 2004 Stock and Incentive Awards Plan and that the directors and current and former officers breached their fiduciary duties by accepting those awards.  On January 22, 2018, Orion moved to dismiss the lawsuit on the grounds that the complaint failed to state a claim upon which relief may be granted.  Subsequent to the end of fiscal 2018, the parties reached a settlement of the claims, filed a stipulation for dismissal of the case and the judge is expected to approve the settlement. The settlement did not, and will not, have a material impact on Orion's results of operations or financial condition.

State Tax Assessment

In June 2016, Orion negotiated a settlement with the Wisconsin Department of Revenue with respect to an assessment regarding the proper classification of its products for tax purposes under Wisconsin law for $0.5 million.

During fiscal year 2018, Orion was notified of a pending sales and use tax audit by the Wisconsin Department of Revenue for the period covering April 1, 2013 through March 31, 2017. Although the final resolution of the Company’s sales and use tax audit is uncertain, based on current information, in the opinion of the Company’s management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated balance sheet, statements of operations, or liquidity.

NOTE 1516 — SHAREHOLDERS’ EQUITY

Share Repurchase Program and Treasury Stock

In October 2011 and 2012, Orion’s Board of Directors approved aseveral share repurchase programprograms authorizing Orion to repurchase in aggregate up to a maximum of $1,000,000 of Orion’s outstanding common stock. In November 2011, 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 $7,500,000$ 7.5 million of Orion's outstanding common stock. As of March 31, 2018,2021, Orion had repurchased 3,022,349 shares of common stock at a cost of $6.8 million under the program.these programs. Orion did not repurchase any shares in fiscal 2018,2021, fiscal 20172020 or fiscal 20162019 and currently does not intend to repurchase any additional common stock under this program in the near-term.

In prior years, Orion issued loans to non-executive employees to purchase shares of its stock. The loan program has been discontinued and new loans are no longer issued. As of March 31, 2017, four thousand dollars of such loans remained outstanding and were reflected on Orion’s balance sheet as a contra-equity account. During the quarter ended June 30, 2017,

Shareholder Rights Plan

On January 3, 2019, Orion entered into agreements withAmendment No. 1 to the counterparties to these loans. In exchange forRights Agreement, which amended the forgivenessRights Agreement dated as of their outstanding loan balance, the employees returned their shares to Orion. As a result of this transaction, 1,230 shares were recorded within treasury stock and the loan balances have been eliminated.

Shareholder Rights Plan

On January 7, 2009 Orion’s Board of Directors adopted a shareholder rights plan and declared a dividend distribution of oneextended its terms by three years to January 7, 2022. Under the amendment, each common share purchase right (Right) for each outstanding share of Orion’s common stock. The issuance date for(a “Right”), if exercisable, will initially represent the distribution of the Rights was February 15, 2009 to shareholders of record on February 1, 2009. Each Right entitles the registered holderright to purchase from Orion, one share of Orion’s common stock, atno par value per share, for a purchase price of $30.00$7.00 per share subject to adjustment (Purchase Price)(the “Purchase Price”).

The Rights will not be exercisable (and will be transferable only with Orion’s common stock) until a “Distribution Date” occurs (or the Rights are earlier redeemed or expire). A Distribution Date generally will occur on the earlier of a public announcement that a person or group of affiliated or associated persons (Acquiring Person)(“Acquiring Person”) has acquired beneficial ownership of 20% or more of Orion’s outstanding common stock (Shares(“Shares Acquisition Date)Date”) or 10 business days after the commencement of, or the announcement of an intention to make, a tender offer or exchange offer that would result in any such person or group of persons acquiring such beneficial ownership.

If a person becomes an Acquiring Person, holders of Rights (except as otherwise provided in the shareholder rights plan)Rights Agreement) will have the right to receive that number of shares of Orion’s common stock having a market value of two times the then-current Purchase Price, and all Rights beneficially owned by an Acquiring Person, or by certain related parties or transferees, will be null and void. If, after a Shares Acquisition Date, Orion is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provision will be made so that each holder of a Right (except as otherwise provided in the shareholder rights plan)Rights Agreement) will thereafter have the right to receive that number of shares of the acquiring company’s common stock which at the time of such transaction will have a market value of two times the then-current Purchase Price.

Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of Orion. At any time prior to a person becoming an Acquiring Person, the Board of Directors of Orion may redeem the Rights in whole, but not in part, at a price of $0.001 per Right. Unless they are extended or earlier redeemed or exchanged, the Rights will expire on January 7, 2019.2022.

Employee Stock Purchase Plan

In August 2010, Orion’s Board of Directors approved a non-compensatory employee stock purchase plan, or ESPP. The ESPP authorizes 2,500,000 shares to be issued from treasury or authorized shares to satisfy employee share purchases under the ESPP. All full-time employees of Orion are eligible to be granted a non-transferable purchase right each calendar quarter to purchase directly from Orion up to $20,000 of Orion’s common stock at a purchase price equal to 100% of the closing sale price of Orion’s common stock on The NASDAQ Capital Market on the last trading day of each quarter. In prior years, Orion issued loans to non-executive employees to purchase shares of its stock. The loan program has been discontinued and new loans are no longer issued. Orion had the following shares issued from treasury during fiscal 20182021 and fiscal 2017:2020:

		As of March 31, 2021
		Shares Issued Under ESPP Plan				Closing Market Price
Quarter Ended March 31, 2021			359					6.90
Quarter Ended December 31, 2020			178					9.87
Quarter Ended September 30, 2020			151					7.57
Quarter Ended June 30, 2020			458					3.46
Total			1,146			$	3.46 - 6.90

		As of March 31, 2020
		Shares Issued Under ESPP Plan				Closing Market Price
Quarter Ended March 31, 2020			512			$		3.70
Quarter Ended December 31, 2019			666			$		3.35
Quarter Ended September 30, 2019			570			$		2.85
Quarter Ended June 30, 2019			613			$		2.97
Total			2,361			$	2.85 - 3.70

	As of March 31, 2018
	Shares Issued Under ESPP Plan			Closing Market Price		Shares Issued Under Loan Program			Dollar Value of Loans Issued				Settlement of Loans
Quarter Ended March 31, 2018	1,780			$0.85		—			$	—			$	—
Quarter Ended December 31, 2017	3,446			$0.88		—			—				—
Quarter Ended September 30, 2017	2,681			$1.12		—			—				—
Quarter Ended June 30, 2017	2,150			$1.28		—			—				4,000
Total	10,057			$0.85 - 1.28		—			$	—			$	4,000
	As of March 31, 2017
	Shares Issued Under ESPP Plan			Closing Market Price		Shares Issued Under Loan Program			Dollar Value of Loans Issued				Settlement of Loans
Quarter Ended March 31, 2017	1,034			$1.98		—			$	—			$	—
Quarter Ended December 31, 2016	840			$2.17		—			—				—
Quarter Ended September 30, 2016	1,511			$1.33		—			—				—
Quarter Ended June 30, 2016	1,771			$1.16		—			—				—
Total	5,156			$1.16 - 2.17		—			$	—			$	—

As

Sale of shares

In March 31, 2017, four thousand dollars2020, 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 $100.0 million of such loans remained outstandingdebt and/or equity securities. The filing of the shelf registration statement may help facilitate Orion’s ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes. The COVID-19 pandemic has had a negative near-term impact on the capital markets and were reflected onmay impact Orion’s balance sheet as a contra-equity account. During fiscal 2018,ability to access this capital.

In March 2021, Orion entered into agreements withan At Market Issuance Sales Agreement to undertake an “at the counterpartiesmarket” (ATM) public equity capital raising program pursuant to these loans. In exchange forwhich 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 forgiveness of their outstanding loan balance,Agent, acting as sales agent or principal. No share sales were effected pursuant to the employees returned their shares to Orion. As a result of these transactions, 1,230 shares were recorded within treasury stock and the loan balances were eliminated.

ATM program through March 31, 2021.

NOTE 1617 — STOCK OPTIONS AND RESTRICTED SHARES AND WARRANTS

At Orion's 2016 Annual MeetingOrion’s 2019 annual meeting of Shareholdersshareholders held on August 3, 2016, Orion's7, 2019, Orion’s shareholders approved the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, as amended and restated (the "Plan"“Amended 2016 Plan”). Approval of the Amended 2016 Plan increased the number of shares of Orion’s common stock available for issuance under the Amended 2016 Plan from 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 exceptions); and added a specific prohibition on the payment of dividends and dividend equivalents on unvested awards. As of March 31, 2021, the number of shares available for grant under the Amended 2016 Plan was 1,578,445.

The Amended 2016 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Amended 2016 Plan may consist of stock options, stock appreciation rights, performance shares, performance units, shares of Orion's common stock, ("Common Stock"), restricted stock, restricted stock units, incentive awards or dividend equivalent units. An aggregate of 1,750,000 shares of Common Stock are reserved for issuance under the Plan.

Prior to shareholder approval of the 2016 Omnibus Incentive Plan, the Company maintained its 2004 Stock and Incentive Awards Plan, as amended, which authorized the grant of cash and equity awards to employees (the “Former“2004 Plan”). No new awards will beare being granted under the Former Plan,2004 Plan; however, all awards granted under the Former2004 Plan that wereare outstanding as of August 3, 2016 will continue to be governed by the Former2004 Plan. Forfeited awards originally issued under the Former2004 Plan are canceled and are not available for subsequent issuance under the 2004 Plan or under the Amended 2016 Omnibus Plan.

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 Amended 2016 Plan and the Former2004 Plan also permit 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 Former2004 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 - Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period.

In fiscal 2018, an aggregate of 730,410 restricted shares were granted valued at a price per share between $0.88 and $1.95, which was the closing market price as of each grant date. In fiscal 2017, an aggregate of 1,132,392 restricted shares were granted valued at a price per share between $1.35 and $2.22, which was the closing market price as of each grant date. 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 2018, Orion granted an aggregate of 24,747 shares from the 2016 Omnibus Incentive Plan to certain non-employee directors who elected to receive stock awards in lieu of cash compensation. The shares were valued ranging from $0.80 to $1.28 per share, the closing market price as of the issuance dates. In fiscal 2017, Orion granted 53,501 shares from the 2004 Stock and Incentive Awards Plan and the 2016 Omnibus Incentive Plan to certain non-employee directors who elected to receive stock awards

in lieu of cash compensation. The shares were valued ranging from $1.38 to $1.85 per share, the closing market price as of the issuance dates. In fiscal 2016, Orion granted 35,290 shares from the 2004 Stock and Incentive Awards Plan to certain non-employee directors who elected to receive stock awards in lieu of cash compensation. The shares were valued ranging from $1.20 to $2.62 per share, the closing market price as of the issuance dates. Additionally, during fiscal 2016, Orion issued 2,500 shares to a consultant as part of a consulting compensation agreement. The shares were valued at $2.00 per share, the closing market price as of the issuance date.

On June 7, 2016, Orion issued and sold 57,065 shares of its common stock to an executive. On August 5, 2016, Orion sold an aggregate of 63,381 shares of its common stock, in equal amounts, to three recently retired members of Orion's board of directors. In each case above, the purchase price for the shares was calculated based on the closing price of Orion's common stock on the NASDAQ Capital Market of the date of the issuance. The shares of common stock were offered and sold pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) and Rule 701.

The following amounts of stock-based compensation expense for restricted shares and options were recorded (dollars in thousands):

		Fiscal Year Ended March 31,
		2021				2020				2019
Cost of product revenue		$	4			$	3			$	2
Cost of service revenue			—				(1	)			3
General and administrative			716				576				764
Sales and marketing			29				38				54
Research and development			4				2				2
		$	753			$	618			$	825

	Fiscal Year Ended March 31,
	2018				2017				2016
Cost of product revenue	$	12			$	30			$	36
General and administrative	929				1,337				1,148
Sales and marketing	155				139				235
Research and development	6				99				43
	$	1,102			$	1,605			$	1,462

The number of shares available for grant under the plans were as follows:

Available at March 31, 2015	1,078,600
Granted stock options	—
Granted shares	(64,960	)
Restricted Shares	(795,805	)
Forfeited restricted shares	206,471
Forfeited stock options	363,380
Available at March 31, 2016	787,686
Shares reserved under new plan	1,750,000
Shares canceled from old plan	(168,289	)
Granted stock options	—
Granted shares	(58,484	)
Restricted shares	(1,132,392	)
Forfeited restricted shares	52,500
Forfeited stock options	67,200
Available at March 31, 2017	1,298,221
Granted shares	(24,747	)
Restricted shares	(730,410	)
Forfeited restricted shares	58,000
Available at March 31, 2018	601,064

The following table summarizes information with respect to outstanding stock options:

	Number of Shares			Weighted Average Exercise Price				Weighted Average Fair Value of Options Granted			Aggregate Intrinsic Value
Outstanding at March 31, 2015	2,426,836			$	3.50			1.32
Granted	—			$	—
Exercised	(46,410	)		$	2.09
Forfeited	(363,380	)		$	4.68
Outstanding at March 31, 2016	2,017,046			$	3.32			—
Granted	—			$	—
Exercised	(80,000	)		$	2.20
Forfeited	(416,093	)		$	3.41
Outstanding at March 31, 2017	1,520,953			$	3.36			—
Granted	—			$	—
Exercised	—			$	—
Forfeited	(891,286	)		$	3.51
Outstanding at March 31, 2018	629,667			$	3.14			—			$	—
Exercisable at March 31, 2018	623,267										$	—

The aggregate intrinsic value represents the total pre-tax intrinsic value, which is calculated as the difference between the exercise price of the underlying stock options and the fair value of Orion’s closing common stock price of $0.85 as of March 31, 2018.

		Number of Shares				Weighted Average Exercise Price
Outstanding at March 31, 2018			629,667			$	3.36
Granted			—			$	—
Exercised			—			$	—
Forfeited			(161,831	)		$	3.61
Outstanding at March 31, 2019			467,836			$	3.14
Granted			—			$	—
Exercised			(22,362	)		$	2.51
Forfeited			(49,174	)		$	4.63
Outstanding at March 31, 2020			396,300			$	2.80
Granted			—			$	—
Exercised			(99,000	)		$	2.34
Forfeited			(100,982	)		$	3.39
Outstanding at March 31, 2021			196,318			$	2.74
Exercisable at March 31, 2021			196,318

The following table summarizes the range of exercise prices on outstanding stock options at March 31, 2018:2021:

		March 31, 2021
		Outstanding and Vested				Weighted Average Remaining Contractual Life (Years)				Weighted Average Exercise Price
$2.00 - 2.03			57,292				1.21			$	2.03
$2.41 - 2.75			92,936				1.53				2.46
$4.19			46,090				0.15				4.19
			196,318				1.11			$	2.74

The following table summarizes information with respect to restricted shares activity:

		Fiscal Year Ended March 31,
		2021				2020				2019
Balance at March 31, 2020			772,720				1,312,593				1,485,799
Shares issued			287,998				279,468				529,000
Shares vested			(450,481	)			(669,238	)			(653,394	)
Shares forfeited			(140,598	)			(150,103	)			(48,812	)
Shares outstanding at March 31, 2021			469,639				772,720				1,312,593
Per share price on grant date		$3.92 - 10.01				$2.69 - 3.03				$0.84 - 1.00

	March 31, 2018
	Outstanding			Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Vested			Weighted Average Exercise Price
$1.62 - 2.20	195,292			4.44		$1.92		195,292			$1.92
$2.41 - 2.75	100,936			4.91		2.48		100,536			2.48
$2.86 - 4.28	267,687			2.17		3.63		261,687			3.63
$4.49 - 4.76	11,000			1.30		4.73		11,000			4.73
$5.35 - 5.44	49,752			1.22		5.40		49,752			5.40
$10.14 - 11.61	5,000			0.13		11.61		5,000			11.61
	629,667			3.21		$3.14		623,267			$3.14

During fiscal 2018,2021, Orion recognized $14,360 of stock-based compensation income related to stock options due to forfeitures in the period.

During fiscal 2018, Orion granted restricted shares as follows (which are included in the above stock plan activity tables):

Balance at March 31, 2017	1,704,543
Shares issued	730,410
Shares vested	(612,601	)
Shares forfeited	(336,553	)
Shares outstanding at March 31, 2018	1,485,799
Per share price on grant date	$0.88-6.80

During fiscal 2018, Orion recognized $1.1$0.8 million of stock-based compensation expense related to restricted shares.

As of March 31, 2018,2021, the weighted average grant-date fair value of restricted shares granted was $1.35.

$4.27.

Unrecognized compensation cost related to non-vested common stock-based compensation as of March 31, 20182021 is expected to be recognized as follows (dollars in thousands):

Fiscal 2022		$	484
Fiscal 2023			361
Fiscal 2024			93
Fiscal 2025			10
Total		$	948
Remaining weighted average expected term		3.1 years

Fiscal 2019	$	754
Fiscal 2020	405
Fiscal 2021	104
Fiscal 2022	12
Fiscal 2023	—
Thereafter	—
	$	1,275
Remaining weighted average expected term	1.9 years

Orion previously issued warrants in connection with various stock offerings and services rendered. The warrants granted the holder the option to purchase common stock at specified prices for a specified period of time. No warrants were issued in fiscal 2018, 2017 or 2016.

NOTE 1718 — SEGMENT DATA

Orion has the following business segments: Orion U.S. Markets Division ("USM"), Orion Engineered Services Division ("OES"(“OES”) and, Orion Distribution Services Division ("ODS"(“ODS”), and Orion U.S. Markets Division (“USM”). The accounting policies are the same for each business segment as they are on a consolidated basis.

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 ESCOs and electrical contractors. During fiscal 2017 and fiscal 2018, a significant portion of the historic sales of this division have migrated to distribution channel sales as a result of the implementation of Orion’s agent distribution strategy. The migrated sales are included in Orion's ODS Division.

Orion Engineered Systems Division ("OES"(“OES”)

The OES segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. OES provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and schools.

other customers.

Orion Distribution Services Division ("ODS"(“ODS”)

The ODS segment focuses on sellingsells lighting products through manufacturer representative agencies and a network of broadline North American distributors. Thisbroadline electrical distributors and contractors.

Orion U.S. Markets Division (“USM”)

The USM segment has expanded in fiscal 2017sells commercial lighting systems and fiscal 2018 as a result of increased sales through distributors as Orion continuesenergy management systems to develop its agent distribution strategy. This expansion includes the migration ofwholesale contractor markets. USM customers from direct sales previously included in the USM division.

include ESCOs and contractors.

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 (dollars in thousands).

		Revenues												Operating Income (Loss)
		For the year ended March 31,												For the year ended March 31,
(dollars in thousands)		2021				2020				2019				2021				2020				2019
Segments:
Engineered Systems		$	84,243			$	122,744			$	30,925			$	7,472			$	16,164			$	(1,237	)
Distribution Services			21,122				15,087				24,173				2,430				(852	)			(1,742	)
U.S. Markets			11,475				13,010				10,656				1,683				2,447				1,132
Corporate and Other			—				—				—				(4,749	)			(4,649	)			(4,310	)
		$	116,840			$	150,841			$	65,754			$	6,836			$	13,110			$	(6,157	)

		Depreciation and Amortization For the year ended March 31,												Capital Expenditures For the year ended March 31,
		2021				2020				2019				2021				2020				2019
Segments:
Engineered Systems		$	913			$	1,013			$	774			$	516			$	302			$	165
Distribution Services			231				187				485				158				81				44
U.S. Markets			128				126				233				107				78				31
Corporate and Other			208				236				291				121				353				215
		$	1,480			$	1,562			$	1,783			$	902			$	814			$	455

		Total Assets
		March 31, 2021				March 31, 2020
Segments:
Engineered Systems		$	29,856			$	22,354
Distribution Services			6,530				5,502
U.S. Markets			6,057				4,859
Corporate and Other			50,378				39,848
		$	92,821			$	72,563

	Revenues												Operating (Loss) Profit
(dollars in thousands)	For the year ended March 31,												For the year ended March 31,
	2018				2017				2016				2018				2017				2016
Segments:
U.S. Markets	$	8,567			$	17,852			$	38,841			$	(3,123	)		$	(1,357	)		$	(4,958	)
Engineered Systems	23,827				29,501				26,325				(3,792		)		(3,647		)		(6,982		)
Distribution Services	27,906				22,858				2,476				(325		)		(927		)		(632		)
Corporate and Other	—				—				—				(5,741		)		(6,596		)		(7,349		)
	$	60,300			$	70,211			$	67,642			$	(12,981	)		$	(12,527	)		$	(19,921	)
	Depreciation and Amortization												Capital Expenditures
	For the year ended March 31,												For the year ended March 31,
	2018				2017				2016				2018				2017				2016
Segments:
U.S. Markets	$	267			$	359			$	1,168			$	73			$	150			$	72
Engineered Systems	988				1,249				1,987				151				224				43
Distribution Services	275				148				71				217				184				10
Corporate and Other	481				576				939				71				102				276
	$	2,011			$	2,332			$	4,165			$	512			$	660			$	401

	Total Assets								Deferred Revenue
	March 31, 2018				March 31, 2017				March 31, 2018				March 31, 2017
Segments:
U.S. Markets	$	3,354			$	6,698			$	153			$	141
Engineered Systems	13,570				18,111				1,247				1,424
Distribution Services	9,315				9,702				39				—
Corporate and Other	19,086				27,540				—				—
	$	45,325			$	62,051			$	1,439			$	1,565

Orion’s revenue outside the United States is insignificant and Orion has no long-lived assets outside the United States.

NOTE 18 -19 — RESTRUCTURING EXPENSE

During the fourth quarter of fiscal 2018, we executed on a cost reduction plan by entering2020, as part of Orion’s response to the impacts of the COVID-19 pandemic, Orion entered into separation agreements with multiple employees, and recognized $2.1$0.4 million of expense in fiscal 2018 in employee separation related costs. Ourexpense. Orion’s restructuring expense for the twelve12 months ended March 31, 20182021, 2020 and 2019 is reflected within ourits consolidated statements of operations as follows (dollars in thousands):

		Year Ended March 31,				Year Ended March 31,				Year Ended March 31,
		2021				2020				2019
Cost of product revenue		$	—			$	82			$	—
Cost of product service			—				74				26
General and administrative			—				28				17
Sales and marketing			—				207				—
Total		$	—			$	391			$	43

	Year Ended March 31,
	2018
Cost of product revenue	$	34
General and administrative	1,822
Sales and marketing	211
Research and development	79
Total	$	2,146

Total restructuring expense by segment was recorded as follows (dollars in thousands):

		Year Ended March 31,				Year Ended March 31,				Year Ended March 31,
		2021				2020				2019
Orion Engineered Systems		$	—			$	139			$	—
Orion Distribution Systems			—				142				12
Corporate and Other			—				110				31
Total		$	—			$	391			$	43

	Year Ended March 31,
	2018
Orion Distribution Systems	$	117
Corporate and Other	2,029
Total	$	2,146

We recorded no restructuring expense to the Orion U.S. Markets or Orion Engineered Systems segments.

Cash payments for employee separation costs in connection with the reorganization of business plans were $1.8 million for fiscal 2018. The remaining restructuring cost accruals as of March 31, 2018 were $0.3 million, of which $0.2 million relates to employee separation costs that are expected to be paid within one year. The remaining accrual of $0.1 million represents post-retirement medical benefits for one former employee which will be paid over several years.

NOTE 1920 — 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

On May 5, 2021, Orion announced a $0.5 million strategic investment in ndustrial, a provider of software and services that optimize industrial facilities across all stages of discrete and process manufacturing supply chains. Orion secured an equity stake in ndustrial through its participation in the date the financial statements were issued and there were no subsequent events requiring disclosure.

ndustrial’s $6 million Series A financing.

NOTE 2021 — QUARTERLY FINANCIAL DATA (UNAUDITED)

Summary quarterly results for the years ended March 31, 20182021 and March 31, 20172020 are as follows:

		Three Months Ended
		Jun 30, 2020				Sep 30, 2020				Dec 31, 2020				March 31, 2021				Total
		(in thousands, except per share amounts)
Total revenue		$	10,811			$	26,281			$	44,251			$	35,497			$	116,840
Gross profit		$	2,635			$	7,263			$	11,006			$	9,220			$	30,124
Net income (loss) (1)		$	(2,219	)		$	1,914			$	4,315			$	22,124			$	26,134
Basic net income (loss) per share (1)		$	(0.07	)		$	0.06			$	0.14			$	0.72			$	0.85
Shares used in basic per share calculation			30,352				30,669				30,736				30,782				30,635
Diluted net loss per share (1)		$	(0.07	)		$	0.06			$	0.14			$	0.71			$	0.83
Shares used in diluted per share calculation			30,352				31,170				31,320				31,295				31,304

		Three Months Ended
		Jun 30, 2019				Sep 30, 2019				Dec 31, 2019				Mar 31, 2020				Total
		(in thousands, except per share amounts)
Total revenue		$	42,378			$	48,322			$	34,249			$	25,892			$	150,841
Gross profit		$	10,283			$	12,791			$	8,274			$	5,775			$	37,123
Net income (loss) (2)		$	3,968			$	6,721			$	2,304			$	(531	)		$	12,462
Basic net loss per share		$	0.13			$	0.22			$	0.08			$	(0.02	)		$	0.41
Shares used in basic per share calculation			29,723				30,189				30,244				30,259				30,105
Diluted net loss per share		$	0.13			$	0.22			$	0.07			$	(0.02	)		$	0.40
Shares used in diluted per share calculation			30,551				30,830				30,824				30,259				30,965

	Three Months Ended
	Mar 31, 2018				Dec 31, 2017				Sep 30, 2017				Jun 30, 2017				Total
	(in thousands, except per share amounts)
Total revenue	$	15,057			$	17,263			$	15,422			$	12,558			$	60,300
Gross profit	$	3,225			$	5,116			$	3,620			$	2,711			$	14,672
Net loss (1)	$	(1,462	)		$	(1,433	)		$	(3,669	)		$	(6,564	)		$	(13,128	)
Basic net loss per share	$	(0.05	)		$	(0.05	)		$	(0.13	)		$	(0.23	)		$	(0.46	)
Shares used in basic per share calculation	28,935				28,910				28,835				28,455				28,784
Diluted net loss per share	$	(0.05	)		$	(0.05	)		$	(0.13	)		$	(0.23	)		$	(0.46	)
Shares used in diluted per share calculation	28,935				28,910				28,835				28,455				28,784

	Three Months Ended
	Mar 31, 2017				Dec 31, 2016				Sep 30, 2016				Jun 30, 2016				Total
	(in thousands, except per share amounts)
Total revenue	$	15,290			$	20,617			$	18,670			$	15,634			$	70,211
Gross profit	$	912			$	6,155			$	6,244			$	4,026			$	17,337
Net loss (2)	$	(7,292	)		$	(1,086	)		$	(970	)		$	(2,940	)		$	(12,288	)
Basic net loss per share	$	(0.26	)		$	(0.04	)		$	(0.03	)		$	(0.11	)		$	(0.44	)
Shares used in basic per share calculation	28,310				28,259				28,172				27,886				28,156
Diluted net loss per share	$	(0.26	)		$	(0.04	)		$	(0.03	)		$	(0.11	)		$	(0.44	)
Shares used in diluted per share calculation	28,310				28,259				28,172				27,886				28,156

(1)	Includes $20.9 million of tax benefit related to the release of the valuation allowance on deferred tax assets during the three months ended March 31, 2021.

(1) (2)

Includes a $2.1$0.4 million restructuring charge a $1.4 million loss contingency reversal, and an intangible impairment of $710.during the three months ended March 31, 2020.

(2)	Includes intangible impairment of $250 and $2,209 related to inventory reserve and other inventory adjustments.

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.

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

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, 2018,2021, 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 weakness 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, 2018.

Notwithstanding the identified material weakness, management,2021.

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 (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, and effected by the 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 GAAP and includes those policies and procedures that:

i.	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

ii.	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

iii.	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

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 based on the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

BDO USA, LLP, independent registered public accounting firm, has issued an attestation report Based on our assessment, management believes that, as of March 31, 2021, our internal control over financial reporting as of March 31, 2018. Their report is in Item 8 under the heading "Reports of Independent Registered Public Accounting Firm" of this Annual Report on Form 10-K.

In connection with the assessment of our internal control over financial reporting as of March 31, 2018, management identified the following material weaknesses that existed as of March 31, 2018:

Information & Communication. We determined that our controls pertaining to information and communication did not operate effectively, resulting in a material weakness pertaining to these COSO components. Specifically, we did not have sufficient communication of the status and evolution of a project to ensure timely and accurate recognition of project

was effective.

costs. In addition, we did not have sufficient communication and resolution of matters identified through management’s review impacting the accounting close as noted in the Control Activities discussion below.

Control Activities - Accounting Close. The operating effectiveness of our controls were inadequate related to management review controls over the accounting close process and forecasts used to support certain fair value estimates. Specifically, we did not have an accurate forecast that impacted our assessment of triggering events and potential impairment. In addition, matters identified through management review controls were not brought to a timely resolution.

A material weakness is a control deficiency or a combination of control deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Because of the material weaknesses described above, management concluded that we did not maintain effective internal control over financial reporting as of March 31, 2018, based on the criteria in Internal Control - Integrated Framework (2013) issued by COSO.

Plans for Remediation of March 31, 2018 Material Weaknesses

Our Board, the Audit & Finance Committee and management have identified additional resources to assist in the remediation effort and are developing and implementing new processes, procedures and internal controls to remediate the material weakness that existed in our internal control over financial reporting as it related to project cost accounting, the accounting close and forecasting processes, and our disclosure controls and procedures, as of March 31, 2018.

We have developed a remediation plan (the “Remediation Plan”) to address the material weakness for the affected areas presented above. The Remediation Plan ensures that each area affected by a material control weakness is put through a comprehensive remediation process. The Remediation Plan entails a thorough analysis which includes the following phases:

Ensure a thorough understanding of the current state, process owners, and procedural or technological gaps causing the deficiency;

Design a remediation action for the forecasting process, to ensure supportable and accurate forecast data are gathered, analyzed and reviewed on a timely basis;

Implement specific remediation actions: train process owners, allow time for process adoption and adequate transaction volume for next steps;

Test and measure the design and effectiveness of the remediation actions; test and provide feedback on the design and operating effectiveness of the controls, and:

Review and acceptance of completion of the remediation effort by executive management and the Audit & Finance Committee.

The following are steps we have taken or are in the process of taking toward the remediation plan:

Designed improved procedures and controls for project cost accounting, including enhanced communication and tracking of project costs .

Developed new and revised procedures and controls throughout the accounting close process.

Implemented controls related to inventory valuation, accounting close, tax, revenue and project cost accounting, but they require further testing to confirm operating effectiveness.

The Remediation Plan is being administered by our Chief Financial Officer and involves key leaders from across the organization.

We will continue to monitor the effectiveness of our internal control over financial reporting in the areas affected by the material weaknesses described above and employ any additional tools and resources deemed necessary to ensure that our financial statements are fairly stated in all material respects.

Remediation Actions and March 31, 2017 Material Weakness Status

As previously disclosed under "Item 9A. Controls and Procedures" in our Annual Report on Form 10-K for our fiscal year ended March 31, 2017, we identified a material weakness that existed as of March 31, 2017 related to the identification and recording of project costs in a timely manner and the timeliness of the completion of select accounting close management review controls. For the year ended March 31, 2017 and subsequent interim periods, we enhanced our closing procedures to ensure that, in all material respects, our financial statements were presented in conformity with GAAP and free of material misstatement as of and for all periods presented.

During fiscal 2018, we took several actions to strengthen our controls and organizational structure in order to remediate the material weakness identified as of March 31, 2017. These actions as well as the revised and newly implemented controls are described in more detail below within “Changes in Internal Control Over Financial Reporting.” We completed the majority of our remediation plans during the quarter ended December 31, 2017. However, select accounting close controls continued to be formalized during the quarter ended December 31, 2017, including controls over our forecasting processes. We tested the design and operating effectiveness of the newly implemented and enhanced controls related to the March 31, 2017 material weakness remediation actions concluding that the controls implemented are designed, but operating effectiveness of such controls have not been confirmed. Therefore, the material weakness identified as of March 31, 2017 continues to be unremediated as of March 31, 2018.

Changes in Internal Control over Financial Reporting

Subsequent to our March 31, 2017 fiscal year end, we took several actions to strengthen existing controls and implement new controls in an effort to remediate the March 31, 2017 material weaknesses described above. Those actions included revising existing controls throughout the accounting close process and implementing new controls as necessary, evaluating and re-structuring the accounting organization, assessing the monthly close process and implementing improved procedures, including enhancements to the execution of account reconciliations. In addition, policies, procedures and control documentation was updated to reflect the improved procedures and controls, as well as training for process and control owners. Finally, project cost accounting improvements were implemented to address project status tracking and communication throughout the organization.

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2018,2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than with respect to the implementation of our Remediation Plans, as described above.

reporting.

ITEM 9B.	OTHER INFORMATION

None.

PART III

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 2018our 2021 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2018.

2021.

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 our Proxy Statement for its 2018our 2021 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2018.

2021.

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 20182021 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2018.

2021.

ITEM 13.        

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to our Proxy Statement for its 2018our 2021 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2018.

2021.

ITEM 14.        

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference to our Proxy Statement for its 2018our 2021 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2018.

2021.

PART IV

PART IV

ITEM 15.         EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

(a)

Financial Statements

Our financial statements are set forth in Item 8 of this Form 10-K.

EXHIBIT INDEX

Number			Exhibit Title
(b) 3.1	Financial Statement Schedule

		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)
2018	Allowance for Doubtful Accounts	$	144			$	22			$	16			$	150
2017	Allowance for Doubtful Accounts	$	505			$	132			$	493			$	144
2016	Allowance for Doubtful Accounts	$	458			$	575			$	528			$	505
2018	Inventory Obsolescence Reserve	$	3,473			$	1,514			$	1,616			$	3,371
2017	Inventory Obsolescence Reserve	$	2,127			$	2,212			$	866			$	3,473
2016	Inventory Obsolescence Reserve	$	1,619			$	509			$	1			$	2,127

EXHIBIT INDEX

Number			Exhibit Title
3.1			Amended and Restated Articles of Incorporation of Orion Energy Systems, Inc., filed as Exhibit 3.3 to the Registrant’s Form S-1 filed August 20, 2007, is hereby incorporated by reference.
3.2			Amended and Restated Bylaws of Orion Energy Systems, Inc., filed as Exhibit 3.23.1 to the Registrant’s Form 10-Q8-K filed November 8, 2013,May 22, 2020, is hereby incorporated by reference.
4.1			Rights Agreement, dated as of January 7, 2009, between Orion Energy Systems, Inc. and Wells Fargo Bank, N.A., which includes as Exhibit A thereto the Form of Right Certificate and as Exhibit B thereto the Summary of Common Share Purchase Rights, filed as Exhibit 4.1 to the Registrant’s Form 8-A filed January 8, 2009, is hereby incorporated by reference.
10.1 4.2			Credit and SecurityAmendment No. 1 to the Rights Agreement, dated as of February 6, 2015 among Orion Energy Systems, Inc.January 3, 2019, between the Company and certain of its subsidiaries, as borrowers and guarantors, andEquiniti Trust Company (as successor to Wells Fargo Bank, National Association,N.A.), as lender,Rights Agent, filed as Exhibit 10.14.1 to Registrant’sthe Registrants Form 10-Q8-K filed on February 9, 2015,January 3, 2019, is hereby incorporated by reference.
10.2 4.3			First AmendmentDescription of Orion Energy Systems, Inc. Capital Stock, filed as Exhibit 4.3 to Creditthe Registrant’s Form 10-K filed on June 5, 2019 is hereby incorporated by reference.
10.1			Loan and Security Agreement dated as of December 27, 2016, by and29, 2020 among Orion Energy Systems, Inc., Bank of America, N.A., as lender, and the subsidiary Borrowersborrowers party thereto, the subsidiary Guarantors party thereto and Wells Fargo Bank, National Association, filed as Exhibit 10.1 to Registrant’s Form 8-K filed on December 29, 2016,January 5, 2021, is hereby incorporated by reference.
10.3 10.2			Second Amendment to Credit and Security Agreement, dated as of November 21, 2017, by and among Orion Energy Systems, Inc., the subsidiary Borrowers party thereto, the subsidiary Guarantors party thereto and Wells Fargo Bank, National Association. +
10.4			Third Amendment to Credit and Security Agreement, dated as of March 30, 2018, by and among Orion Energy Systems, Inc., the subsidiary Borrowers party thereto, the subsidiary Guarantors party thereto and Wells Fargo Bank, National Association, filed as Exhibit 10.1 to Registrant’s Form 8-K filed on April 5, 2018, is hereby incorporated by reference.
10.5			Orion Energy Systems, Inc. 2003 Stock Option Plan, as amended, filed as Exhibit 10.6 to the Registrant’s Form S-1 filed August 20, 2007, is hereby incorporated by reference.*
10.6			Form of Stock Option Agreement under the Orion Energy Systems, Inc. 2003 Stock Option Plan, filed as Exhibit 10.7 to the Registrant’s Form S-1 filed August 20, 2007, is hereby incorporated by reference.*
10.7			Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan, filed as Exhibit 10.9 to the Registrant’s Form S-1 filed August 20, 2007, is hereby incorporated by reference.*
10.7(a) 10.3			Amendment to Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan, filed September 9, 2011 as Appendix A to the Registrant’s definitive proxy statement is hereby incorporated by reference.*
10.8 10.4			Form of Stock Option Agreement under the Orion Energy Systems, Inc. 2004 Equity Incentive Plan, filed as Exhibit 10.10 to the Registrant’s Form S-1 filed August 20, 2007, is hereby incorporated by reference.*
10.9 10.5			Form of Stock Option Agreement as of May 14, 2013 under the Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan, filed as Exhibit 10.7 to the Registrant’s Form 10-K filed on June 13, 2014, is hereby incorporated by reference.*
10.10 10.6			Form of Restricted Stock Award Agreement as of May 14, 2013 under the Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan, filed as Exhibit 10.8 to the Registrant’s Form 10-K filed on June 13, 2014, is hereby incorporated by reference.*
10.11			Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, as amended and restated, filed as Annex A to the Registrant’s Form 8-KDefinitive Proxy Statement on Schedule 14A filed July 8, 2016,on June 21, 2019, is hereby incorporated by reference.*
10.12 10.7			Form of Non-Employee Director Tandem Restricted Stock and Cash Award Agreement under the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, filed as Exhibit 4.5 to the Registrant’s Form S-8 filed August 10, 2016, is hereby incorporated by reference.*
10.13 10.8			Form of Non-Employee Director Restricted Stock Award Agreement under the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, filed as Exhibit 4.6 to the Registrant’s Form S-8 filed August 10, 2016, is hereby incorporated by reference.*
10.14 10.9			Form of Executive Tandem Restricted Stock and Cash Award Agreement under the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, filed as Exhibit 4.7 to the Registrant’s Form S-8 filed August 10, 2016, is hereby incorporated by reference.*

10.15 10.10			Form of Executive Restricted Stock Award Agreement under the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, filed as Exhibit 4.8 to the Registrant’s Form S-8 filed August 10, 2016, is hereby incorporated by reference.*
10.16
10.11			Orion Energy Systems, Inc. Non-Employee Director Compensation Plan, updated and effective as of June 6, 2017,February 7, 2020, filed as Exhibit 10.14 to the Registrant'sRegistrant’s Form 10-K filed on June 13, 2017,5, 2020, is hereby incorporated by reference.*
10.12
10.17			Amended and Restated Executive Employment and Severance Agreement, dated as of June 8, 2017,1, 2020, by and between Orion Energy Systems, Inc. and Michael W. Altschaefl, filed as Exhibit 10.1610.15 to the Registrant'sRegistrant’s Form 10-K filed on June 13, 2017,5, 2020, is hereby incorporated by reference.*
10.18 10.13			Amended and Restated Executive Employment and Severance Agreement, dated as of June 1, 2020, by and between Orion Energy Systems, Inc. and William T. Hull, filed as Exhibit 10.16 to the Registrant’s Form 10-K filed on June 5, 2020, is hereby incorporated by reference.*
10.14			Voluntary Retirement Agreement and Release, dated as of September 21, 2020, between Orion Energy Systems, Inc. and William T. Hull, filed as Exhibit 10.1 to the Registrant’sRegistrant's Form 8-K filed on September 23, 2020, is hereby incorporated by reference.*
10.15			Executive Employment and Severance Agreement, effective as of October 19, 2020, between Orion Energy Systems, Inc. and J. Per Brodin, filed as Exhibit 10.1 to the Registrant's Form 8-K filed on October 5, 2015,15, 2020, is hereby incorporated by reference.*

10.19 10.16			Amended and Restated Executive Employment and Severance Agreement, dated as of August 3, 2016,June 1, 2020, by and between Orion Energy Systems, Inc. and Scott A. Green, filed as Exhibit 10.1 to Registrant’s Form 8-K filed on August 4, 2016, is hereby incorporated by reference.*
10.20			Letter Agreement effective June 13, 2017 between Orion and William T. Hull, filed as Exhibit 10.1910.17 to the Registrant's Form 10-K filed on June 13, 2017,5, 2020, is hereby incorporated by reference. *reference*
10.21 10.17			Executive Employment and Severance Agreement, dated as of January 1, 2014, by and between Orion Energy Systems, Inc. and Marc Meade filed as Exhibit 10.1 to the Registrant’s Form 8-K filed on January 6, 2014, is hereby incorporated by reference.*
10.22			Form of Executive Restricted Stock Award Agreement as of May 26, 2015 under the Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan , filed as Exhibit 10.18 to the Registrant’s Form 10-K for the year ended March 31, 2015, is hereby incorporated by reference.*
10.23			Form of Executive Tandem Restricted Stock and Cash Award Agreement as of May 26, 2015 under the Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan, filed as Exhibit 10.19 to the Registrant’s Form 10-K for the year ended March 31, 2015, is hereby incorporated by reference.*
10.24			Form of Non-Employee Director Restricted Stock Award Agreement as of May 26, 2015 under the Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan, filed as Exhibit 10.20 to the Registrant’s Form 10-K for the year ended March 31, 2015, is hereby incorporated by reference.*
10.25			Form of Non-Employee Director Tandem Restricted Stock and Cash Award Agreement as of May 26, 2015 under the Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan, filed as Exhibit 10.21 to the Registrant’s Form 10-K for the year ended March 31, 2015, is hereby incorporated by reference.*
10.26			Mutual Termination and Severance Agreement and Complete and Permanent Release of All Claims, dated June 8, 2017, by and between Orion Energy Systems, Inc. and John H. Scribante, filed as Exhibit 10.27 to the Registrant's Form 10-K filed June 13, 2017, is hereby incorporated by reference .*
10.27			Mutual Retirement and Severance Agreement, dated as of June 30, 2017, by and between Orion Energy Systems, Inc. and Michael J. Potts, filed as Exhibit 10.1 to the Registrant's Form 8-K filed on June 30, 2017, is hereby incorporated by reference. *
21.1 10.18			At Market Issuance Sales Agreement between Orion Energy Systems, Inc. and B. Riley Securities, Inc., dated March 26, 2021, filed as Exhibit 10.1 to the Registrant's Form 8-K filed on March 26, 2021, is hereby incorporated by reference.
21.1			Subsidiaries of Orion Energy Systems, Inc.+
23.1			Consent of Independent Registered Public Accounting Firm. +
31.1			Certification of Chief Executive Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. +
31.2			Certification of Chief Financial Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended. +
32.1			Certification of Chief Executive Officer and Chief Financial Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +
101			101.INS XBRL Instance Document+
			101.SCH Taxonomy extension schema documentdocument+
			101.CAL Taxonomy extension calculation linkbase documentdocument+
			101.DEF Taxonomy extension definition linkbase document+
			101.LAB Taxonomy extension label linkbase documentdocument+
			101.PRE Taxonomy extension presentation linkbase documentdocument+

Documents incorporated by reference by Orion Energy Systems, Inc. are filed with the Securities and Exchange Commission under File No. 001-33887.

*
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.

SIGNATURES

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on June 13, 2018.

1, 2021.

ORION ENERGY SYSTEMS, INC.
By:		/s/ MICHAEL W. ALTSCHAEFL
		Michael W. Altschaefl
		Chief Executive Officer and Board Chair

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 13, 2018.

1, 2021.

Signature		Title
Signature		Title
/s/ Michael W. Altschaefl		Chief Executive Officer and Board Chair (Principal
Michael W. Altschaefl		Executive Officer)
	��
/s/ William T. Hull J. Per Brodin		Chief Financial Officer, Chief Accounting Officer and
William T. Hull J. Per Brodin		Treasurer (Principal Financial Officer)
/s/ Anthony L. Otten		Lead Independent Director
Anthony L. Otten
/s/ Alan B. Howe		Director
Alan B. Howe
/s/ Michael J. Potts		Director
Michael J. Potts
/s/ Ellen B. Richstone		Director
Ellen B. Richstone
/s/ Mark C. Williamson		Director
Mark C. Williamson
/s/ Kenneth M. Young		Director
Kenneth M. Young

83

90