ORION ENERGY SYSTEMS, INC.
For the period ended Mar 31, 2026. Filed Jun 4, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Jun 4, 2026
OESX$12.51-7.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2025-03-31; filed 2025-06-26.
0000950170-25-090385
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-03-31; filed 2026-06-04.
0001193125-26-257468
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 134 previous paragraphs and 131 current paragraphs.
64 unchanged; 34 reworded; 33 added; 33 removed; 3 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (33)
Current report
Reverse Stock Split
Current report
On August 22, 2025, we effected a 1-for-10 reverse stock split of our common stock in order to remain compliant with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”) for continued listing on the NASDAQ Capital Market (“NASDAQ”).
Current report
Voltrek Earnout Settlement
Current report
On March 17, 2026, we entered into a settlement agreement (the “Settlement Agreement”) with Final Frontier, LLC (“Final Frontier”) and Kathleen M. Connors (“Ms. Connors”), personally and as Trustee of the Kathleen M. Connors 2019 Revocable Trust (“Connors Trust” together with Final Frontier and Ms. Connors, the “Connors Parties”), in order to reach a final and complete resolution and settlement of the dispute between the Connors Parties and us regarding our remaining earnout obligations owed to Final Frontier pursuant to that certain Membership Interest Purchase Agreement, dated as of October 5, 2022, entered into by and among us and the Connors Parties (the “MIPA”), pursuant to which we acquired Voltrek, as well as to reach a final and complete resolution and settlement of related arbitrations and terminate related agreements, as described below.
Current report
Pursuant to the MIPA and a binding term sheet (as amended, the "Term Sheet"), we and the Connors Parties submitted our earn out statement dispute to CPA firm arbitration (the “CPA Firm Arbitration”). The Connors Parties asserted that the remaining earn out payments owed by us totaled approximately $10 million. Our position was that we owed the Connors Parties an additional $1.4 million. The CPA arbitrators determined that we owed an additional $3.4 million of earnout payments. Subsequently, we filed an arbitration demand with the American Arbitration Association in Milwaukee, Wisconsin against the Connors Parties in order to object to the CPA firm’s decision of the earnout statement dispute as manifest error (the “AAA Arbitration”).
Current report
By entering into the Settlement Agreement, we and the Connors Parties agreed to a final and complete resolution and settlement of the CPA Firm Arbitration and the AAA Arbitration, a final and complete resolution and settlement of the earnout statement dispute, termination of the MIPA, termination of all related earnout agreements and termination of any and all claims and counterclaims between or among us and the Connors Parties, without any admission of liability and without incurring of any further payment, cost, liability, obligation, guaranty, expense or inconvenience with respect thereto.
Current report
Under the terms of the Settlement Agreement, we made a one-time cash payment of $3.0 million (the “Settlement Amount”) to Final Frontier on March 18, 2026. Upon receipt of the Settlement Amount, all earn out payment obligations, the MIPA, all earnout agreements, the CPA Firm Arbitration and the AAA Arbitration proceedings were terminated, cancelled and released, and all liens and security interests held by Final Frontier on our assets were automatically terminated and irrevocably released. Additionally, upon payment of the Settlement Amount, we and the Connors Parties exchanged mutual general releases of all claims arising from or related to the earn out disputes, the CPA Firm Arbitration and the AAA Arbitration proceedings, the MIPA and the earnout agreements. The releases did not affect Ms. Connors’ then part-time employment relationship with us or the Connors Parties’ rights as shareholders of our Company. We also agreed to facilitate the Connors Parties’ entry into a Rule 10b5-1 trading plan during our next insider open window period to facilitate the Connors Parties’ sale of their shares of our common stock.
Current report
Significant New Exterior Lighting Project
Current report
We have been awarded a new large-scale LED exterior lighting project with a leading international retail chain, anticipated to generate approximately $14 million to $15 million of revenue. The large-scale project began in our fourth quarter of fiscal 2026, with the majority of the project expected to be completed by the end of July 2026. This new order follows our October 31, 2025 announcement of a three-year renewal of a major LED lighting maintenance contract for this customer, with the renewal having an estimated total revenue potential of between $42 million to $45 million. We will continue to maintain LED lighting systems for more than 2,000 stores operated by this retailer. There is an additional potential for significant expansion of this customer relationship in our fiscal 2027.
Current report
Ongoing Cost Cutting Initiatives
Current report
Over the past two fiscal years, we have been successful in reducing our annual operating expenses by approximately $2.0 million. This cost cutting and overhead reduction initiative has resulted in improved gross margins and profitability.
Current report
Public Stock Offering
Current report
On February 2, 2026, we issued 500,000 shares of our common stock at a price to the public of $14.00 per share pursuant to a firmly underwritten public offering. Net proceeds from the offering of approximately $6.4 million were used to reduce amounts outstanding under our credit agreement, with the remainder used for working capital and general corporate purposes.
Current report
Solar Asset Termination Agreement
Current report
Effective March 19, 2026, we executed a termination agreement with a customer to terminate two power purchase agreements (“PPAs”) that commenced in 2010. The PPAs covered two solar panel arrays on two buildings in New Jersey under which we contracted to sell the solar power generation from the respective solar panel arrays through 2030. Under the terms of the termination agreement, we transferred ownership of the solar arrays to a third party and terminated any future obligations related to those assets in exchange for a cash payment of $1.3 million.
Current report
Credit Facility Extension
Current report
On May 29, 2026, we and Bank of America, N.A. as lender, executed Amendment No. 5 (“Amendment No. 5”) to our Loan and Security Agreement dated December 29, 2020 and amended previously on September 30, 2025 (as amended, the “credit agreement”). The primary purpose of Amendment No. 5 was to extend the maturity date of the Credit Facility from June 30, 2027 to June 30, 2030.
Current report
Tariff Relief
Current report
In February 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers
Current report
Act (“IEEPA”) were unlawful. On April 20, 2026, U.S. Customs and Border Protection launched a portal intended to automate and consolidate the related refund claim process, including associated interest payments. We submitted refund claims related to certain previously paid tariffs. Due to the uncertainly surrounding payment of any potential refund claims, no amounts are reflected in our fiscal 2026 financial statements. As of May 31, 2026, we have received approximately $219 thousand in tariff refunds, including approximately $13 thousand of interest income. The ultimate amount and timing of recovery remains subject to continued administrative review and claim approval.
Current report
Interest Expense. Interest expense in fiscal 2026 decreased by $0.2 million to $0.8 million primarily due to lower outstanding amounts on the line of credit throughout fiscal 2026.
Current report
EV segment revenue decreased 14.5%, or $2.4 million, in fiscal 2026 compared to fiscal 2025 primarily due to project delays. EV segment operating loss decreased $1.7 million, or 72.5%, in fiscal 2026 compared to fiscal 2025 primarily due to a more beneficial sales mix leading to higher margins.
Current report
On February 2, 2026, we issued 500,000 shares of our common stock at a price to the public of $14.00 per share pursuant to a firmly underwritten public offering. Net proceeds from the offering of approximately $6.4 million were used to reduce amounts outstanding under our credit agreement, with the remainder used for working capital and general corporate purposes.
Current report
On September 30, 2025, we and our lender executed Amendment No. 4 to our credit agreement, pursuant to which Bank of America consented to certain subordinated liens we granted in favor of Final Frontier and consented to the Remaining Earnout Amount (as defined herein) evidenced by the Subordinated Loan Agreement (as defined herein), subject to certain limitations, and to permit us to make cash interest and principal payments to Final Frontier as set forth in the Subordinated Loan Agreement. On March 18, 2026, the Subordinated Loan Agreement was terminated and cancelled, and all related liens and security interests held by Final Frontier on our assets were automatically terminated and irrevocably released.
Current report
On May 29, 2026, we and our lender executed Amendment No. 5 to our credit agreement to extend the maturity date of the Credit Facility from June 30, 2027 to June 30, 2030.
Current report
Cash Flows Related to Operating Activities. Cash used in operating activities for fiscal 2026 was $1.1 million and consisted of our net loss of $3.2 million adjusted for non-cash expense items and net cash provided by changes in operating assets of $2.1 million, the largest of which was an increase of $3.5 million in accounts receivable, a $3.1 million increase in revenue earned but not billed, an increase of $2.2 million in accounts payable, and an increase of $1.3 million in accrued expenses and other.
Current report
Cash Flows Related to Financing Activities. Cash used in financing activities in fiscal 2026 was $1.5 million and consisted primarily of payment of long-term debt and paying down the line of credit. These payments were partially offset by proceeds from a public stock issuance along with a draw on the line of credit.
Current report
On September 30, 2025, we and our lender executed Amendment No. 4 to our credit agreement, pursuant to which Bank of America consented to certain subordinated liens we granted in favor of Final Frontier and consented to the Remaining Earnout Amount evidenced by the Subordinated Loan Agreement, subject to certain limitations, and to permit us to make cash interest and principal payments to Final Frontier as set forth in the Subordinated Loan Agreement. On March 18, 2026, the Subordinated Loan Agreement was terminated and cancelled, and all related liens and security interests held by Final Frontier on our assets were automatically terminated and irrevocably released.
Current report
On March 17, 2026, we entered into the Settlement Agreement with Final Frontier and the Connors Parties, in order to reach a final and complete resolution and settlement of the dispute between the Connors Parties and us regarding our remaining earnout obligations owed to Final Frontier pursuant to the MIPA, pursuant to which we acquired Voltrek, as well as to reach a final and complete resolution and settlement of related arbitrations and terminate related agreements, as described below.
Current report
Under the terms of the Settlement Agreement, we made a one-time cash payment of the Settlement Amount to Final Frontier on March 18, 2026. Upon receipt of the Settlement Amount, all earn out payment obligations, the MIPA, all related earnout agreements, including the Subordinated Loan Agreement, the CPA Firm Arbitration and the AAA Arbitration proceedings were terminated, cancelled and released, and all liens and security interests held by Final Frontier on our assets were automatically terminated and irrevocably released. Additionally, upon payment of the Settlement Amount, we and the Connors Parties exchanged mutual general releases of all claims arising from or related to the earn out disputes, the CPA Firm Arbitration and the AAA Arbitration proceedings, the MIPA and the related earnout agreements. The releases did not affect Ms. Connors’ then part-time employment relationship with us or the Connors Parties’ rights as our shareholders. We also agreed to facilitate the Connors Parties’ entry into a Rule 10b5-1 trading plan during our next insider open window period to facilitate the Connors Parties’ sale of their shares of our common stock.
Current report
On May 29, 2026, we and our lender executed Amendment No. 5 to our credit agreement to extend the maturity date of the Credit Facility from June 30, 2027 to June 30, 2030.
Current report
Public Offering
Current report
On February 2, 2026, we issued 500,000 shares of our common stock at a price to the public of $14.00 per share pursuant to a firmly underwritten public offering. Net proceeds from the offering of approximately $6.4 million were used to reduce amounts outstanding under our credit agreement, with the remainder used for working capital and general corporate purposes.
Removed paragraphs (33)
Previous report
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, 2025. See also “Forward-Looking Statements” and Item 1A “Risk Factors”.
Previous report
Replacement of our CEO
Previous report
On April 14, 2025, Michael Jenkins’ employment was terminated by Orion, with our Board appointing Sally A. Washlow as our new Chief Executive Officer, effective as of Mr. Jenkins’ termination date.
Previous report
As a result of the termination, Mr. Jenkins will receive approximately $633 thousand in severance and the acceleration of approximately 322 thousand restricted stock awards. Mr. Jenkins forfeited approximately 646 thousand performance shares along with approximately $170 thousand in tandem cash awards. Additionally, Mr. Jenkins forfeited restricted stock awards not vesting within two years from the termination date, which was a forfeiture of approximately 78 thousand shares.
Previous report
On April 14, 2025, we entered into an Executive Employment and Severance Agreement with Ms. Washlow (the “Employment Agreement”). The Employment Agreement provides Ms. Washlow with the following compensation arrangements: (i) an annual base salary of $382,500, provided that if our other named executive officers’ base salaries are returned to their pre-reduction levels, then Ms. Washlow’s base salary will also be similarly adjusted up to $425,000; (ii) a target annual bonus of 100% (threshold 80% and maximum of 200%) of her base salary upon our relative achievement of executive incentive plan performance targets for each fiscal year; (iii) a special bonus of $100,000 if we achieve a stretch goal of $100 million in revenue for fiscal 2026; (iv) a cash signing bonus of $500,000, approximately $300,000 of was required to be used by Ms. Washlow to purchase shares of our common stock directly from us; (v) a pre-change of control severance multiplier of 1.5x and a post-change of control severance multiplier of 2.0x; (vi) an initial equity grant consisting of a non-qualified stock option exercisable for a total of 500,000 shares of our common stock; and (vii) certain other benefits and perquisites. On May 29, 2025, our board and Ms. Washlow mutually agreed to defer Ms. Washlow’s cash signing bonus and related direct purchase of common stock for up to one year, with the timing of such cash signing bonus and related direct purchase of our common stock to be reviewed quarterly and mutually agreed upon by the compensation committee and Ms. Washlow.
Previous report
Effective on October 5, 2022, we acquired all of the outstanding membership interests of Voltrek, a leading electric vehicle charging company that provides turnkey installation solutions with ongoing support to all commercial verticals. The initial purchase price consisted of $5.0 million cash and $1.0 million of common stock. We also paid $3.0 million in initial earn-out payments based on Voltrek’s financial performance in fiscal 2023. We may owe additional material earn-out payments based on Voltrek’s financial performance in fiscal 2025. We have currently accrued an estimated liability of approximately $3.3 million for such remaining earn-out payments.
Previous report
On June 23, 2025, we entered into the Term Sheet with respect to our remaining earn-out obligations owed to Final Frontier pursuant to our October 5, 2022 acquisition of Voltrek. Pursuant to the Term Sheet, on August 1, 2025, we will pay Final Frontier $875,000 in full and final payment of our fiscal 2024 Voltrek acquisition earn-out obligations. We also agreed with Final Frontier to submit the final determination of our fiscal 2025 and aggregate fiscal 2023 through fiscal 2025 earn-out obligations to binding arbitration if not otherwise mutually agreed by the parties. We agreed to pay to Final Frontier the finally determined remaining earn-out amount as follows: (i) $1.0 million in our common stock issuable 14 trading days after our fiscal 2025 earnings announcement and (ii) the remaining amount pursuant to the anticipated Senior Subordinated Note. We agreed to pay monthly principal payments to Final Frontier on the anticipated Senior Subordinated Note of $25,000 beginning on January 15, 2026, which will increase to $50,000 on July 15, 2026 through maturity. We will also pay interest monthly to Final Frontier at the annual rate of 7% beginning on July 15, 2025. We have the right to pay up to 20% of the remaining outstanding earn-out amount at maturity in shares of our common stock. The anticipated Senior Subordinated Note will be subordinated to our senior credit facilities with Bank of America and will be secured by a second lien on all of our assets. We and Final Frontier agreed to use our respective commercially reasonable best efforts to agree to final documentation further reflecting the terms and conditions set forth in the Term Sheet within 30 days of entering into the Term Sheet.
Previous report
The final earn-out amount determined to be owed by us could be in excess of our current accrued liability for such earn-out amount and could materially adversely affect our future liquidity.
Previous report
Selected Financial Data
Previous report
Acquisition Related Costs. In fiscal 2025, we did not incur any acquisition expenses. In fiscal 2024, we incurred acquisition expenses of $56 thousand relating to the acquisition of Voltrek.
Previous report
Interest Expense. Interest expense in fiscal 2025 increased by $0.3 million to $1.0 million primarily because the term loan that was entered into in the first quarter of fiscal 2025 and a higher interest rate on our credit facility.
Previous report
NM = Not Meaningful
Previous report
Revenue, Cost of Revenue and Gross Margin. Product revenue increased by 10.7%, or $6.1 million, for fiscal 2024 versus fiscal 2023. Service revenue increased by 35.2%, or $7.1 million, for fiscal 2024 versus fiscal 2023. The increase in product and service revenue was primarily due to the execution of a significant government retrofit lighting segment project along with increased EV segment revenues. Cost of product revenue increased by 3.5%, or $1.5 million, in fiscal 2024 versus the comparable period in fiscal 2023. Cost of service revenue increased by 49.2%, or $8.3 million, in fiscal 2024 versus fiscal 2023. The increases were primarily because of increases in revenue described above along with higher cost in our maintenance segment. Gross margin increased to 23.1% of revenue in fiscal 2024 from 22.6% in fiscal 2023, due primarily to improved absorption of fixed costs on increased revenue volume and mix.
Previous report
Operating Expenses
Previous report
General and Administrative. General and administrative expenses decreased 14.1%, or $2.7 million, in fiscal 2024 compared to fiscal 2023. This comparative decrease was primarily due to a reduction in estimate of $0.9 million of earn-out compensation costs recorded in fiscal 2023 related to the Voltrek acquisition, partially offset by a full year of cost at Voltrek.
Previous report
Acquisition Related Costs. In fiscal 2024, we incurred acquisition costs of $56 thousand, primarily relating to the Voltrek acquisition. In fiscal 2023, we incurred acquisition expenses of $0.8 million relating to the acquisition of Voltrek.
Previous report
Sales and Marketing. Our sales and marketing expenses increased 14.0%, or $1.6 million, in fiscal 2024 compared to fiscal 2023. The increase was primarily due to an increase in commission expense on higher sales volume.
Previous report
Interest Expense. Interest expense in fiscal 2024 increased by $0.4 million to $0.8 million primarily because of a full year of borrowings in fiscal 2024 and a higher interest rate on our credit facility.
Previous report
Income Taxes. Income tax expense decreased $18.0 million, or 99.9%, to $41 thousand compared to fiscal 2023. The fiscal 2023 expense included a one-time $17.8 million non-cash charge to increase the valuation allowance on a significant portion of our deferred tax assets. We do not expect to remit significant cash taxes for the next several years.
Previous report
Lighting segment revenue increased in fiscal 2024 compared to fiscal 2023 by 8.0%, or $4.6 million, and operating income decreased $3.8 million, compared to fiscal 2023, due to increased project volume on a government retrofit project. This increase led to a corresponding operating loss decrease in this segment, along with improved project margins.
Previous report
Maintenance segment revenue increased $2.6 million, or 17.8%, in fiscal 2024 compared to fiscal 2023 primarily due to increased volume at a major customer. Operating loss increased $3.3 million, or 148.6%, in fiscal 2024 compared to fiscal 2023 primarily due to increased costs on fixed price contracts.
Previous report
EV segment revenue increased 36.4%, or $4.5 million, in fiscal 2025 compared to fiscal 2024 primarily due to increased sales to municipalities. EV segment operating loss increased $0.8 million, or 50.7%, in fiscal 2025 compared to fiscal 2024 primarily due to increased earn-out amounts, which were partially offset by increased revenue volume in the segment, along with increased gross margins.
Previous report
EV segment revenue increased 96.5%, or $6.1 million, in fiscal 2024 compared to fiscal 2023 primarily due to a full year of Voltrek results being included in segment results. EV segment operating loss decreased $2.6 million, or 62.4%, in fiscal 2024 compared to fiscal 2023 due to increased revenue volume in the segment, partially offset by reduced gross margins.
Previous report
Effective on October 5, 2022, we acquired all of the outstanding membership interests of Voltrek, a leading electric vehicle charging company that provides turnkey installation solutions with ongoing support to all commercial verticals. We may owe additional material earn-out payments based on Voltrek’s financial performance in fiscal 2025. While we have currently accrued an estimated liability of approximately $3.3 million for such remaining earn-out payments.
Previous report
On June 23, 2025, we entered into the Term Sheet with respect to our remaining earn-out obligations owed to Final Frontier pursuant to our October 5, 2022 acquisition of Voltrek. Pursuant to the Term Sheet, on August 1, 2025, we will pay Final Frontier $875,000 in full and final payment of our fiscal 2024 Voltrek acquisition earn-out obligations. We also agreed with Final Frontier to submit the final determination of our fiscal 2025 and aggregate fiscal 2023 through fiscal 2025 earn-out obligations to binding arbitration if not otherwise mutually agreed by the parties. We agreed to pay to Final Frontier the finally determined remaining earn-out amount as follows: (i) $1.0 million in our common stock issuable 14 trading days after our fiscal 2025 earnings announcement and (ii) the remaining amount pursuant to the anticipated Senior Subordinated Note. We agreed to pay monthly principal payments to Final Frontier on the anticipated Senior Subordinated Note of $25,000 beginning on January 15, 2026, which will increase to $50,000 on July 15, 2026 through maturity. We will also pay interest monthly to Final Frontier at the annual rate of 7% beginning on July 15, 2025. We have the right to pay up to 20% of the remaining outstanding earn-out amount at maturity in shares of our common stock. The anticipated Senior Subordinated Note will be subordinated to our senior credit facilities with Bank of America and will be secured by a second lien on all of our assets. We and Final Frontier agreed to use our respective commercially reasonable best efforts to agree to final documentation further reflecting the terms and conditions set forth in the Term Sheet within 30 days of entering into the Term Sheet.
Previous report
The final earn-out amount determined to be owed by us could be in excess of our current accrued liability for such earn-out amount and could materially adversely affect our liquidity.
Previous report
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 sales agent or principal. In March 2025, the ATM was terminated.
Previous report
Cash Flows Related to Operating Activities. Cash (used in) provided by operating activities primarily consisted of net loss adjusted for certain non-cash items, including depreciation, amortization of intangible assets, stock-based compensation, amortization of debt issue costs, provisions for reserves, and the effect of changes in working capital and other activities.
Previous report
Cash used in operating activities for fiscal 2023 was $2.3 million and consisted of our net loss of $34.3 million adjusted for non-cash expense items and net cash used in changes in operating assets of $32.1 million, the largest of which was a $17.8 million decrease in deferred income tax assets as a result of the valuation allowance.
Previous report
Cash provided by financing activities in fiscal 2023 was $10.0 million which consisted of proceeds from our revolving credit facility.
Previous report
Effective on October 5, 2022, we acquired all of the outstanding membership interests of Voltrek, a leading electric vehicle charging company that provides turnkey installation solutions with ongoing support to all commercial verticals. The initial purchase price consisted of $5.0 million cash and $1.0 million of common stock. We also paid $3.0 million in initial earn-out payments based on Voltrek’s financial performance in fiscal 2023. We may owe additional material earn-out payments based on Voltrek’s financial performance in fiscal 2025. We have currently accrued an estimated liability of approximately $3.3 million for such remaining earn-out payments.
Previous report
On June 23, 2025, we entered into the Term Sheet with respect to our remaining earn-out obligations owed to Final Frontier pursuant to our October 5, 2022 acquisition of Voltrek. Pursuant to the Term Sheet, on August 1, 2025, we will pay Final Frontier $875,000 in full and final payment of our fiscal 2024 Voltrek acquisition earn-out obligations. We also agreed with Final Frontier to submit the final determination of our fiscal 2025 and aggregate fiscal 2023 through fiscal 2025 earn-out obligations to binding arbitration if not otherwise mutually agreed by the parties. We agreed to pay to Final Frontier the finally determined remaining earn-out amount as follows: (i) $1.0 million in our common stock issuable 14 trading days after our fiscal 2025 earnings announcement and (ii) the remaining amount pursuant to the anticipated Senior Subordinated Note. We agreed to pay monthly principal payments to Final Frontier on the anticipated Senior Subordinated Note of $25,000 beginning on January 15, 2026, which will increase to $50,000 on July 15, 2026 through maturity. We will also pay interest monthly to Final Frontier at the annual rate of 7% beginning on July 15, 2025. We have the right to pay up to 20% of the remaining outstanding earn-out amount at maturity in shares of our common stock. The anticipated Senior Subordinated Note will be subordinated to our senior credit facilities with Bank of America and will be secured by a second lien on all of our assets. We and Final Frontier agreed to use our respective commercially reasonable best efforts to agree to final documentation further reflecting the terms and conditions set forth in the Term Sheet within 30 days of entering into the Term Sheet.
Previous report
The final earn-out amount determined to be owed by us could be in excess of our current accrued liability for such earn-out amount and could materially adversely affect our future liquidity.
Reworded paragraphs (34)
Previous wording
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current wording
This section of this Form 10-K generally discusses fiscal year 2026 and fiscal year 2025 items and year over year comparisons between fiscal year 2026 and fiscal year 2025. Discussions of the fiscal year 2024 items and the year over year comparisons between fiscal year 2025 and fiscal year 2024 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2025.
Previous wording
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. Effective during the first quarter of fiscal 2024, we began to evaluate and report the business using three segments: lighting segment, maintenance segment and EV segment. Previously, we had four reportable segments: Orion Services Group Segment, Orion Distribution Services Segment, Orion U.S. Markets Division and Orion Electric Vehicle Charging.
Current wording
Reportable segments are components of an entity that have separate financial data that the entity's chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Our CODM is our chief executive officer. We have three segments: lighting segment, maintenance segment and EV segment.
Previous wording
In fiscal 2025, 2024 and 2023, one customer accounted for 24.3%, 25.2% and 16.2% of our total revenue, respectively. In fiscal 2026, we expect that our customer concentration will continue at the approximate range experienced in fiscal 2025 and 2024. We continue to attempt to diversify our customer base by expanding our reach to national accounts, ESCOs, the agent driven distribution channel, lighting maintenance customers and the EV market.
Current wording
In fiscal 2026, 2025 and 2024, one customer accounted for 26.0%, 18.1% and 25.6% of our total revenue, respectively. We continue to attempt to diversify our customer base by expanding our reach to national accounts, ESCOs, the agent driven distribution channel, lighting maintenance customers and the EV market.
Previous wording
Includes stock-based compensation expense recognized under Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, as follows:
Current wording
Includes stock-based compensation expense recognized under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation, or Accounting Standards Codification (ASC) 718, as follows:
Previous wording
Revenue, Cost of Revenue and Gross Margin. Product revenue decreased by 14.1%, or $8.9 million, for fiscal 2025 versus fiscal 2024. Service revenue decreased by 7.0%, or $1.9 million, for fiscal 2025 versus fiscal 2024. The decrease in product revenue was primarily due to the execution of a significant government retrofit lighting segment project that ended in the second quarter of the current fiscal year. The decrease in service revenue was due to multiple customers in our maintenance segment that chose not to renew their contracts for fiscal 2025. Cost of product revenue decreased by 16.1%, or $7.1 million, in fiscal 2025 versus the comparable period in fiscal 2024. Cost of service revenue decreased by 12.1%, or $3.0 million, in fiscal 2025 versus fiscal 2024. The decreases were primarily because of decreases in revenue described above. Gross margin increased to 25.4% of revenue in fiscal 2025 from 23.1% in fiscal 2024, due primarily to a more favorable sales mix along with better overall margins in the maintenance segment.
Current wording
Revenue, Cost of Revenue and Gross Margin. Product revenue increased by 4.9%, or $2.7 million, for fiscal 2026 versus fiscal 2025. Service revenue increased by 15.5%, or $3.9 million, for fiscal 2026 versus fiscal 2025. The increase in product revenue was primarily due to an increase in the maintenance segment along with the contract modification of our solar agreement leading to additional recognized revenue. The increase in service revenue was due to an increase in projects in our lighting segment. Cost of product revenue decreased by 1.1%, or $0.4 million, in fiscal 2026 versus the comparable period in fiscal 2025. Cost of service revenue decreased by 3.8%, or $0.8 million, in fiscal 2026 versus fiscal 2025. The decreases were primarily due to the cost savings initiatives put into place in fiscal 2025. Gross margin increased to 32.6% of revenue in fiscal 2026 from 25.4% in fiscal 2025, due primarily to a more favorable sales mix along with better overall margins in the lighting and EV segments.
Previous wording
General and Administrative. General and administrative expenses increased 7.6%, or $1.3 million, in fiscal 2025 compared to fiscal 2024. This comparative increase was primarily due to increased earn-out compensation costs along with incurred severance expenses, which were partially offset by a reduction in workforce related to restructuring that occurred in the first half of fiscal 2025.
Current wording
General and Administrative. General and administrative expenses increased 3.8%, or $0.7 million, in fiscal 2026 compared to fiscal 2025. This comparative increase was primarily due to earnout compensation costs, sign-on bonus costs and disposal of solar assets costs, which were partially offset by a reduction in workforce related to restructuring that occurred in the first half of fiscal 2025.
Previous wording
Sales and Marketing. Our sales and marketing expenses decreased 10.7%, or $1.4 million, in fiscal 2025 compared to fiscal 2024. The decrease was primarily due to an decrease in commission expense on lower sales volume.
Current wording
Sales and Marketing. Our sales and marketing expenses decreased 12.9%, or $1.5 million, in fiscal 2026 compared to fiscal 2025. The decrease was primarily due to decreases in employment costs throughout fiscal 2026.
Previous wording
Research and Development. Research and development expenses decreased 17.8%, or $0.3 million, in fiscal 2025 compared to fiscal 2024 primarily due to a decrease in testing costs.
Current wording
Research and Development. Research and development expenses decreased 23.1%, or $0.3 million, in fiscal 2026 compared to fiscal 2025 primarily due to a decrease in employment costs.
Previous wording
Lighting segment revenue decreased in fiscal 2025 by 21.9%, or $13.4 million, and operating loss increased $1.4 million, compared to fiscal 2024, due to decreased project volumes in fiscal 2025. This decrease in revenues led to a corresponding operating loss increase in this segment, along with decreased project margins.
Current wording
Lighting segment revenue increased in fiscal 2026 by 17.1%, or $8.2 million, and operating income increased $4.9 million, compared to fiscal 2025, due to increased project volumes in fiscal 2025 along with the recognition of solar revenue due to the contract modification in March of 2026. This increase in revenues led to a corresponding operating income increase in this segment, along with increased project margins.
Previous wording
Maintenance segment revenue decreased $2.0 million, or 11.4%, in fiscal 2025 compared to fiscal 2024 primarily due to some legacy customers not renewing their contracts in fiscal 2025 due to increased project costs to improve segment margins. As a result, operating loss decreased $4.3 million, or 78.5%, in fiscal 2025 compared to fiscal 2024 primarily due to better project margins throughout the segment.
Current wording
Maintenance segment revenue increased $0.9 million, or 5.6%, in fiscal 2026 compared to fiscal 2025 primarily due to increased projects for a large customer. As a result, operating income increased $2.4 million in fiscal 2026 compared to fiscal 2025 primarily due to better project margins throughout the segment.
Previous wording
We had $6.0 million in cash and cash equivalents as of March 31, 2025, compared to $5.2 million at March 31, 2024. Our cash position increased due to the results in our operations, sales of property and equipment, and proceeds from the mortgage loan entered into at the beginning of fiscal 2025. These increases were partially offset by payments made on our revolving credit facility.
Current wording
We had $3.3 million in cash and cash equivalents as of March 31, 2026, compared to $6.0 million at March 31, 2025. Our cash position decreased due to the results in our operations, satisfaction of the final Voltrek earnout obligation and paydown of our Credit Facility. These decreases were partially offset by net proceeds from our February 2026 underwritten public stock offering of approximately $6.4 million.
Previous wording
As of March 31, 2025, our borrowing base supported $15.0 million of availability under our credit facility, with $7.0 million drawn against that availability. As of March 31, 2024, our borrowing base supported $20.1 million of availability under our credit facility, with $10.0 million drawn against that availability.
Current wording
As of March 31, 2026, our borrowing base supported $15.6 million of availability under our credit facility, with $3.0 million drawn against that availability. As of March 31, 2025, our borrowing base supported $15.0 million of availability under our credit facility, with $7.0 million drawn against that availability.
Previous wording
In March 2023, we filed a universal shelf registration statement with the Securities and Exchange Commission. Under our shelf registration statement, we currently have the flexibility to publicly offer and sell from time to time up to $100 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.
Current wording
In March 2023, we filed a universal shelf registration statement with the Securities and Exchange Commission. Under our shelf registration statement, we currently have the flexibility to publicly offer and sell from time to time debt and/or equity securities. The filing of the shelf registration statement may help facilitate our ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes. Based on our current market capitalization, we are subject to the "baby-shelf" rule which limits the amount of securities that can be issued at any given time.
Previous wording
In April 2024, we executed Amendment No.2 to our Loan Security Agreement to add a $3.5 million term loan to the credit facility. The amendment also expanded the pool of eligible receivables to include government receivables in the calculation of the borrowing base. See Note 12 - Long-Term Debt to our accompanying audited consolidated financial statements for more information.
Current wording
In April 2024, we and our lender executed Amendment No.2 to our credit agreement to add a $3.5 million term loan to the credit facility. The amendment also expanded the pool of eligible receivables to include government receivables in the calculation of the borrowing base. See Note 12 - Debt to our accompanying audited consolidated financial statements for more information.
Previous wording
In October 2024, we executed Amendment No.3 to our Loan Security Agreement to extend the maturity date of the Credit Facility from December 29, 2025 to June 30, 2027.
Current wording
In October 2024, we and our lender executed Amendment No.3 to our credit agreement to extend the maturity date of the Credit Facility from December 29, 2025 to June 30, 2027.
Previous wording
Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, cost containment, working capital management, capital expenditures. While we believe that we will likely have adequate available cash and equivalents and credit availability under our Credit Agreement to satisfy our currently anticipated working capital and liquidity requirements, including our negotiated Voltrek acquisition earn-out payment obligations, during the next 12 months and beyond based on our current cash flow forecast, there can be no assurance to that effect, particularly if our Voltrek earn-out amounts are in excess of the liability we have currently accrued. 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.
Current wording
Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, cost containment, working capital management, capital expenditures. While we believe that we will likely have adequate available cash and equivalents and credit availability under our credit agreement to satisfy our currently anticipated working capital and liquidity requirements during the next 12 months and beyond based on our current cash flow forecast, there can be no assurance to that effect. If we experience significant liquidity constraints, we may be required to issue equity or debt securities, reduce our sales efforts, implement additional cost savings initiatives or undertake other efforts to conserve our cash.
Previous wording
Cash used in operating activities for fiscal 2024 was $10.1 million and consisted of our net loss of $11.7 million adjusted for non-cash expense items and net cash used in changes in operating assets of $1.6 million, the largest of which was a $5.0 million increase in accounts payable, an increase of $3.2 million in revenue earned not billed, and a $2.3 million decrease in accrued liabilities.
Current wording
Cash used in operating activities for fiscal 2024 was $10.1 million and consisted of our net loss of $11.7 million adjusted for non-cash expense items and net cash used in changes in operating assets of $1.6 million, the largest of which was a $5.0 million increase in accounts payable, an increase of $3.2 million in revenue earned but not billed, and a $2.3 million decrease in accrued liabilities.
Previous wording
Cash used in investing activities in fiscal 2023 was $6.2 million and consisted primarily of the $5.6 million acquisition of Voltrek and $0.6 million of purchases of property and equipment.
Current wording
Cash Flows Related to Investing Activities. Cash used in investing activities in fiscal 2026 was $0.1 million and consisted primarily of purchases of property and equipment.
Previous wording
Cash Flows Related to Investing Activities. Cash provided by investing activities in fiscal 2025 was $0.1 million and consisted primarily of $0.2 million of sales of property and equipment and $0.1 million of purchases of property and equipment.
Current wording
Cash provided by investing activities in fiscal 2025 was $0.1 million and consisted primarily of $0.2 million of sales of property and equipment and $0.1 million of purchases of property and equipment.
Previous wording
Cash Flows Related to Financing Activities. Cash provided by financing activities in fiscal 2025 was $0.1 million and consisted primarily of proceeds from the term loan that originated in the first quarter of fiscal 2025, which was partially offset by payments on the revolving credit facility.
Current wording
Cash provided by financing activities in fiscal 2025 was $0.1 million and consisted primarily of proceeds from the term loan that originated in the first quarter of fiscal 2025, which was partially offset by payments on the revolving credit facility.
Previous wording
Our net working capital as of March 31, 2023 was $25.9 million, consisting of $50.4 million of current assets and $24.5 million of current liabilities. The change in our working capital in fiscal 2024 from our fiscal 2024 year-end was primarily due to a decrease in cash and cash equivalents and an increase in accounts payable, partially offset by an increase in revenue earned not billed.
Current wording
Our net working capital as of March 31, 2026 was $11.0 million, consisting of $37.7 million of current assets and $26.7 million of current liabilities. Our net working capital as of March 31, 2025 was $8.7 million, consisting of $35.5 million of current assets and $26.8 million of current liabilities. The change was primarily due to an increase in accounts receivable, revenue earned but not billed, and decreases in our revolving line of credit and accrued expenses and other.
Previous wording
Our credit agreement provides for a five-year $25.0 million revolving credit facility (the “Credit Facility”) that matures on June 30, 2027. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of March 31, 2025, the borrowing base supported approximately $15.0 million of availability under the Credit Facility with $7.0 million drawn against that availability. As of March 31, 2024, the borrowing base supported approximately $20.1 million of availability under the Credit Facility with $10.0 million drawn against that availability.
Current wording
Our credit agreement provides for a five-year $25.0 million revolving credit facility (the “Credit Facility”) that now matures on June 30, 2030. Borrowings under the Credit Facility are subject to a borrowing base requirement based on eligible receivables, inventory and cash. As of March 31, 2026, the borrowing base supported approximately $15.6 million of availability under the Credit Facility with $3.0 million drawn against that availability. As of March 31, 2025, the borrowing base supported approximately $15.0 million of availability under the Credit Facility with $7.0 million drawn against that availability.
Previous wording
Effective April 22, 2024, we, along with our lender, executed Amendment No. 2 (“Amendment No. 2”) to the credit agreement. The primary purpose of Amendment No. 2 was to add a $3.525 million mortgage loan facility to the credit agreement secured by our office headquarters property in Manitowoc, Wisconsin. Amendment No. 2 also broadened the definition of receivables to encompass government receivables as being eligible to be included in our borrowing base calculation for the purpose of establishing our monthly borrowing availability under the credit agreement. Quarterly installments of $88,125 are due on the first day of each fiscal quarter beginning October 1, 2024.
Current wording
Effective April 22, 2024, we, along with our lender, executed Amendment No. 2 (“Amendment No. 2”) to the credit agreement. The primary purpose of Amendment No. 2 was to add a $3.525 million mortgage loan facility to the credit agreement secured by our office headquarters property in Manitowoc, Wisconsin. Amendment No. 2 also broadened the definition of receivables to encompass government receivables as being eligible to be included in our borrowing base calculation for the purpose of establishing our monthly borrowing availability under the credit agreement. Quarterly installments of $88,125 are due on the first day of each fiscal quarter.
Previous wording
Our capital expenditures are primarily for general corporate purposes for our corporate headquarters and technology center, production equipment and tooling and for information technology systems. Our capital expenditures totaled $0.1 million in fiscal 2025, $0.8 million in fiscal 2024 and $0.7 million in fiscal 2023. Our capital spending plans predominantly consist of investments related to maintenance fleet vehicles, new product development tooling and equipment and information technology systems, exclusive of any capital spending for potential acquisitions. We expect to finance these capital expenditures primarily through our existing cash, equipment secured loans and leases, to the extent needed, long-term debt financing, or by using our Credit Facility. As discussed in Item 1A. Risk Factors, we will be commencing implementation efforts of a new ERP system in fiscal 2026, with an expected go-live date in the first quarter of fiscal 2027. The expected cost for the project is approximately $1.4 million, which consists of $1.1 million of capital and $0.3 million of expense.
Current wording
Our capital expenditures are primarily for general corporate purposes for our corporate headquarters and technology center, production equipment and tooling and for information technology systems. Our capital expenditures totaled $0.1 million in fiscal 2026, $0.1 million in fiscal 2025 and $0.8 million in fiscal 2024. Our capital spending plans predominantly consist of investments related to maintenance fleet vehicles, new product development tooling and equipment and information technology systems, exclusive of any capital spending for potential acquisitions. We expect to finance these capital expenditures primarily through our existing cash, equipment secured loans and leases, to the extent needed, long-term debt financing, or by using our Credit Facility. As discussed in Item 1A. Risk Factors, we will be commencing implementation efforts of a new ERP system in fiscal 2027, with an expected go-live date at the beginning of the second quarter of fiscal 2027. The expected cost for the project is approximately $2.0 million.
Previous wording
Revenue Recognition. We recognize revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of the goods or services being provided (which we refer to as a performance obligation) is transferred to a customer at an amount that reflects the consideration we expect to receive in exchange for those goods or services. 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.
Current wording
Revenue Recognition. We recognize revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of the goods or services being provided (which we refer to as a performance obligation) is transferred to a customer at an amount that reflects the consideration we expect to receive in exchange for those goods or services.
Previous wording
Revenue from a customer contract which includes both the sale of Orion manufactured or sourced fixtures and the installation of such fixtures (which we refer to as a turnkey project) is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.
Current wording
Revenue from a customer contract which includes both the sale of our manufactured or sourced fixtures and the installation of such fixtures (which we refer to as a turnkey project) is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.
Previous wording
Revenue from the maintenance offering that includes both the sale of Orion manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Consolidated Statement of Operations.
Current wording
Revenue from the maintenance offering that includes both the sale of our manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the consolidated statement of operations.
Previous wording
Inventory. Inventories consist of raw materials and components, such as drivers, metal sheet and coil stock and molded parts; work in process inventories, such as frames and reflectors; and finished goods, including completed fixtures and systems, and accessories. All inventories are stated at the lower of cost or net realizable value with cost determined using the first-in, first-out (FIFO) method. In determining the lower of cost or net realizable value, we consider assumptions such as business and economic conditions, expected demand for our products, changes in technology or customer requirements, recent historical sales activity (including usage in the preceding 9 to 12 months) and selling prices, as well as estimates of future selling prices. When the net realizable value of inventories exceeds the carrying value, Orion records, as a charge to cost of product revenue, the amount required to reduce the carrying value of inventory to net realizable value.
Current wording
Inventories, Net. Inventories consist of raw materials and components, such as drivers, metal sheet and coil stock and molded parts; work in process inventories, such as frames and reflectors; and finished goods, including completed fixtures and systems, and accessories. All inventories are stated at the lower of cost or net realizable value with cost determined using the first-in, first-out (FIFO) method. In determining the lower of cost or net realizable value, we consider assumptions such as business and economic conditions, expected demand for our products, changes in technology or customer requirements, recent historical sales activity (including usage in the preceding 9 to 12 months) and selling prices, as well as estimates of future selling prices. When the net realizable value of inventories exceeds the carrying value, we record, as a charge to cost of product revenue, the amount required to reduce the carrying value of inventory to net realizable value.
Previous wording
We performed a qualitative assessment in conjunction with our annual impairment test of our indefinite lived intangible assets and goodwill as of January 1, 2024. These qualitative assessments considered our operating results for the first nine months of fiscal 2024 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2024 plan. As a result of the conditions that existed as of the assessment date, we determined a quantitative assessment was necessary for our maintenance segment reporting unit. We concluded that the undiscounted cash flows exceeded the carrying value for the indefinite lived intangibles and goodwill, and therefore no impairment charge was recorded. 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 in the lighting and EV segments and a quantitative analysis was not required.
Current wording
We perform a qualitative assessment in conjunction with our annual impairment test of our indefinite lived intangible assets and goodwill as of January 1, 2026. This qualitative assessment considered our operating results for the first nine months of fiscal 2026 in comparison to prior years as well as our anticipated fourth quarter results and fiscal 2026 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was not deemed to be more likely than not and a quantitative analysis was not required.
Previous wording
We performed a qualitative assessment in conjunction with our annual impairment test of our indefinite lived intangible assets and goodwill as of January 1, 2025. These qualitative assessments considered our operating results for the first nine months of fiscal 2025 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2025 plan. As a result of the conditions that existed as of the assessment date, we determined a quantitative assessment was necessary for our maintenance segment reporting unit. We concluded that the undiscounted cash flows exceeded the carrying value for the indefinite lived intangibles and goodwill, and therefore no impairment charge was recorded.
Current wording
We performed a qualitative assessment in conjunction with our annual impairment test of our indefinite lived intangible assets and goodwill as of January 1, 2025. This qualitative assessment considered our operating results for the first nine months of fiscal 2025 in comparison to prior years as well as our anticipated fourth quarter results and fiscal 2025 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was not deemed to be more likely than not and a quantitative analysis was not required.
Previous wording
Stock-Based Compensation. We currently issue time-based and performance-based 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 the awards based on the fair value of the award on the date of grant. Additionally, it is necessary to estimate the achievement of the performance-based awards to ensure the expense remains accurate. Compensation costs for equity incentives are recognized in earnings, on a straight-line basis over the requisite service period.
Current wording
Stock-Based Compensation. We currently issue time-based and performance-based restricted stock awards to our employees, consultants, executive officers and directors. In fiscal 2026, we also issued stock options to certain employees, consultants, and executive officers. We apply the provisions of ASC 718, Compensation - Stock Compensation, to these restricted stock and stock option awards which requires us to expense the estimated fair value of the awards based on the fair value of the award on the date of grant. Additionally, it is necessary to estimate the achievement of the performance-based awards to ensure the expense remains accurate. Compensation costs for equity incentives are recognized in earnings, on a straight-line basis over the requisite service period.
Previous wording
As of March 31, 2025, we had net operating loss carryforwards of approximately $85.4 million for federal tax purposes, $76.1 million for state tax purposes, and $0.7 million for foreign tax purposes.
Current wording
As of March 31, 2026, we had net operating loss carryforwards of approximately $87.2 million for federal tax purposes, $73.4 million for state tax purposes, and $0.6 million for foreign tax purposes.
Previous wording
We also had federal tax credit carryforwards of $1.2 million and state tax credit carryforwards of $0.2 million, which are reserved for as part of our valuation allowance. Of these tax attributes, $36.2 million of the federal and state net operating loss carryforwards are not subject to time restrictions on use but may only be used to offset 80% of future adjusted taxable income. The $126.0 million net operating loss and tax credit carryforwards will begin to expire in varying amounts between 2025 and 2045.
Current wording
We also had federal tax credit carryforwards of $1.1 million and state tax credit carryforwards of $0.1 million, which are reserved for as part of our valuation allowance. Of these tax attributes, $37.8 million of the federal and state net operating loss carryforwards are not subject to time restrictions on use but may only be used to offset 80% of future adjusted taxable income. The $123.4 million net operating loss and tax credit carryforwards will begin to expire in varying amounts between 2026 and 2056.
Previous wording
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, 2025, the balance of gross unrecognized tax benefits was approximately $0.2 million, all of which would reduce our effective tax rate if recognized. We believe that our estimates and judgments discussed herein are reasonable, however, actual results could differ, which could result in gains or losses that could be material.
Current wording
By their nature, tax laws are often subject to interpretation. Further complicating matters is that in those cases where a tax position is open to interpretation, differences of opinion can result in differing conclusions as to the amount of tax benefits to be recognized under Financial Accounting Standards Board ("FASB") ASC 740, Income Taxes. ASC 740 utilizes a two-step approach for evaluating tax positions. Recognition (Step 1) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (Step 2) is only addressed if Step 1 has been satisfied. Under Step 2, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement. Consequently, the level of evidence and documentation necessary to support a position prior to being given recognition and measurement within the financial statements is a matter of judgment that depends on all available evidence. As of March 31, 2026, the balance of gross unrecognized tax benefits was approximately $0.2 million, all of which would reduce our effective tax rate if recognized. We believe that our estimates and judgments discussed herein are reasonable, however, actual results could differ, which could result in gains or losses that could be material.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Results of Operations: Fiscal 2024 versus Fiscal 2023
Previous report — wording carried elsewhere
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):
Previous report — wording carried elsewhere
Research and Development. Research and development expenses decreased 19.3%, or $0.4 million, in fiscal 2024 compared to fiscal 2023 primarily due to a decrease in testing costs.