ORION ENERGY SYSTEMS, INC.

UNAUDITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS

Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion provides light emitting diode lighting systems, wireless Internet of Things enabled control solutions, project engineering, energy project management design, maintenance services and turnkey electric vehicle charging station installation services to commercial and industrial businesses, and federal and local governments, predominantly in North America.

Orion’s corporate offices and leased primary manufacturing operations are located in Manitowoc, Wisconsin. Orion also leases office space in Jacksonville, Florida and Lawrence, Massachusetts.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Orion Energy Systems, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Orion have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement have been included. Interim results are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2027 ("fiscal 2027") or other interim periods.

The Condensed Consolidated Balance Sheet as of March 31, 2026 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete financial statements.

The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in Orion’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026 filed with the SEC on June 4, 2026.

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 management estimates include revenue recognition, net realizable value of inventory, allowance for credit losses, accruals for warranty, loss contingencies, income taxes, impairment analyses, and certain equity transactions. Accordingly, actual results could differ from those estimates.

Goodwill and Other Intangible Assets

Inthe first quarter of fiscal 2027, Orion determined that one of its indefinite-lived trade names no longer had an indefinite life due to changes in revenue earned under the trade name and changes in Orion's strategy for use of the trade name. Orion then performeda quantitative impairment assessment on that indefinite-lived trade name and determined that there was no impairment of that asset. As of June 30, 2026, this trade name was classified as definite-lived and will be amortized over 10 years.

Concentration of Credit Risk and Other Risks and Uncertainties

Orion's cash is primarily deposited withone financial institution. At times, deposits in this institution exceeds the amount of insurance provided on such deposits. Orion has not experienced any losses in such accounts and believes that it is not exposed to any significant financial institution viability risk on these balances.

Orion purchases components necessary for its lighting products, including lamps and LED components, from multiple suppliers. For the three months ended June 30, 2026 and 2025, no suppliers accounted for more than 10% of total cost of revenue.

For the three months ended June 30, 2026, one customer accounted for 38.1% of total revenue. For the three months ended June 30, 2025, one customer accounted for 30.2% of total revenue.

As of June 30, 2026, one customer accounted for 30.9% ofaccounts receivable. As of March 31, 2026, one customer accounted for 33.1% of acco unts receivable.

Recent Accounting Pronouncements

Recently Adopted

In July 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2025-05, Financial Instruments - Credit Losses (Topic 326), which modifies the current credit loss guidance in Topic 326 to expand on how an entity develops and estimate of expected credit losses. The amendments in this update provide (1) all entities with a practical expedient and (2) entities other than public business entities with an accounting policy election when estimating expected credit loses for current accounts receivable and current contract assets arising from transactions accounted for under "Revenue from Contracts with Customers" (Topic 606), ASC 606, as follows: "1. Practical expedient. In developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. 2. Accounting policy election. An entity other than a public business entity that elects the practical expedient is permitted to make an accounting policy election to consider collection activity after the balance sheet date when estimating expected credit losses." Orion adopted this update as of April 1, 2026, and there was no impact from this guidance on Orion's presentation of its consolidated financial statements and accompanying notes.

Issued: Not Yet Adopted

In December 2025, the FASB issued ASU No. 2025-11, which is intended to improve the navigability of the guidance in Accounting Standards Codification (ASC) 270 and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides "interim financial statements and notes in accordance with GAAP." The ASU also addresses the form and content of such financial statements, adds lists to ASC 270 of the interim disclosures required by all other codification topics, and establishes a principle under which an entity must "disclose events since the end of the last annual reporting period that have a material impact on the entity." As the FASB stated in the proposed guidance and reiterates in the ASU, the amendments are not intended to "change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements." The amendments will be effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Orion is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which modifies the disclosure and presentation requirements relating to expenses shown on the statements of operations. The amendments in the update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: "1. Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil and gas-producing activities. 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4. Disclose the total amount of selling expense and, in annual reporting periods, an entity's definition of selling expenses." The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. Orion is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.

NOTE 3 — REVENUE

Orion generates revenues primarily by selling commercial lighting fixtures and components, installing these fixtures in its customers' facilities, and providing maintenance services including repairs and replacements for the lighting and related electrical components deployed in its customer’s facilities. Orion recognizes revenue in accordance with the guidance in ASC 606 when control of the goods or services being provided (which Orion refers to as a performance obligation) is transferred to a customer at an amount that reflects the consideration that management expects to receive in exchange for those goods or services. Prices are generally fixed at the time of order confirmation, either for the contract as a whole or for the hourly rates that will be charged for the type of maintenance services delivered.

If there are multiple performance obligations in a single contract, the contract’s total transaction price is allocated to each individual performance obligation based on their relative standalone selling price. A performance obligation’s standalone selling price is the price at which Orion would sell such promised good or service separately to a customer. Orion uses an observable price to determine the stand-alone selling price for separate performance obligations or an expected cost-plus margin approach when one is not available. When the expected cost-plus margin approach is used to determine the estimated stand-alone selling price it is based on average historical margins for that performance obligation in contracts with similar customers.

Revenue derived from customer contracts which include only performance obligation(s) for the sale of Orion manufactured or sourced lighting fixtures and components is classified as Product revenue in the consolidated statements of operations. The revenue for these transactions is recorded at the point in time when management believes that the customer obtains control of the products, generally either upon shipment or upon delivery to the customer’s facility. This point in time is determined separately for each contract and requires judgment by management of the contract terms and the specific facts and circumstances concerning the transaction.

Revenue from a customer contract, which includes both the sale of Orion manufactured or sourced fixtures and the installation of such fixtures (which Orion refers to as a turnkey project), is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.

The following tables provide detail of Orion’s total revenue for thethree months ended June 30, 2026 and June 30, 2025 (dollars in thousands):

From time to time, Orion sells the receivables from one customer to a financing institution. Orion didnot sell any receivables in the three months ended June 30, 2026. The total amount received from advances of receivables was $0.5 million for the three months ended June 30, 2025. Orion's gains on these sales were $24 thousand for the three months ended June 30, 2025 and are included in Interest expense in the Condensed Consolidated Statements of Operations.

The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of June 30, 2026 and March 31, 2026 (dollars in thousands):

(1)Within the revenue earned but not billed line on the Condensed Consolidated Balance Sheets, $0 million, $0 million, and $0.4 million was accounted for as a sales type lease under ASC 842 for June 30, 2026, March 31, 2026, and March 31, 2025, respectively, and therefore not considered a "contract asset", which is an asset defined by ASC 606.

(2)Fiscal 2025 included the unamortized portion of the funds received from the federal government in 2010 and 2011 as reimbursement for the costs to build the two facilities related to the power purchase agreements. As the transaction is not considered a contract with a customer, this value is not a contract liability as defined by ASC 606.

There wereno significant changes in the contract assets outside of standard increases due to timing of contract completion, offset by the reclassifications to accounts receivable, net upon billing. Deferred revenue, current as of June 30, 2026 and March 31, 2026 includes $0 million and $0.1 million, respectively, of contract liabilities which represent consideration received from a new customer contract on which installation has not yet begun and Orion has not fulfilled the promises included. Of the $0.1 million outstanding as of March 31, 2026, $0.1 million has been recognized as revenue for the three months ended June 30, 2026.

Orion's performance obligations related to lighting fixtures and EV charging stations typically do not exceed nine months in duration. As a result, Orion has elected the practical expedient that provides an exemption to the disclosure requirements regarding information about value assigned to remaining performance obligations on contracts that have original expected durations of one year or less.

NOTE 4 — ACCOUNTS RECEIVABLE

As of June 30, 2026 and March 31, 2026, Orion's accounts receivable and allowance for credit losses balances were as follows (dollars in thousands):

Changes in Orion’s allowance for credit losses were as follows (dollars in thousands):

NOTE 5 — INVENTORIES

As of June 30, 2026 and March 31, 2026, Orion's inventory balances, net of excess and obsolete reserves of $2.2 million and $2.2 million, respectively, were as follows (dollars in thousands):

NOTE 6 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist primarily of prepaid insurance premiums, prepaid subscription fees, prepaid networking services for EV products and ERP system implementation fees. Prepaid expenses totaled $1.9 million and $1.4 million as of June 30, 2026 and March 31, 2026, respectively.

NOTE 7 — PROPERTY AND EQUIPMENT

As of June 30, 2026 and March 31, 2026, property and equipment, net, included the following (dollars in thousands):

NOTE 8 — LEASES

From time to time, Orion leases assets from third parties. Orion also leases certain assets to third parties.

Under ASC 842, both finance and operating lease Right-Of-Use ("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. 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.

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

Orion had operating lease costs of $0.3 million for thethree months ended June 30, 2026. Orion had operating lease costs of $0.3 million for the three ended June 30, 2025.

The estimated maturity of lease liabilities for each of the remaining years is shown below (dollars in thousands):

Assets Orion Leases to Other Parties

Orion provides long-term financing to one customer who 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 Cost of product revenue in the Condensed Consolidated Statements of Operations. These amounts are recorded for each fixture separately based on the customer’s monthly acknowledgment that specified fixtures have been installed and are operating as specified. The execution of the acknowledgment is considered the commencement date as defined in ASC 842.

The following chart shows the amount of revenue and cost of sales arising from sales-type leases during the quarter ended June 30, 2026 and 2025 (dollars in thousands):

NOTE 9 — GOODWILL AND OTHER INTANGIBLE ASSETS

Orion recorded $0.9 million of goodwill related to its purchase of Voltrek LLC ("Voltrek") in the third quarter of fiscal 2023, which has an indefinite life, and is assigned to the EV operating segment.

Orion recorded $0.6 million of goodwill related to its purchase of Stay-Lite Lighting, Inc. ("Stay-Lite") during fiscal year 2022, which has an indefinite life, and is assigned to the maintenance operating segment.

As of June 30, 2026, and March 31, 2026, the components of, and changes in, the carrying amount of other intangible assets, net, were as follows (dollars in thousands):

(1)A trade name that was previously classified as an indefinite-lived asset was reclassified as a definite-lived asset as of June 30, 2026. See Note 2 - Summary of Significant Accounting Policies for additional information.

Amortization expense on intangible assets was $0.1 million for thethree months ended June 30, 2026. Amortization expense on intangible assets was $0.2 million for the three months ended June 30, 2025.

The estimated amortization expense for the remainder of fiscal 2027, the next five fiscal years and beyond is shown below (dollars in thousands):

NOTE 10 — ACCRUED EXPENSES AND OTHER

As of June 30, 2026, and March 31, 2026, accrued expenses and other included the following (dollars in thousands):

Orion generally offers a limited warranty ofone toten years on its lighting products, including the pass-through of standard warranties offered by major original equipment component manufacturers. The manufacturers’ warranties cover lamps, power supplies, LED modules, chips and 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):

NOTE 11 — NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share is computed by dividing net income (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 income (loss) per common share reflects the dilution that would occur if restricted shares were vested. In the computation of diluted net income (loss) per common share, Orion uses the treasury stock method for outstanding options and restricted shares. For periods in which the Company reports a net loss, potentially dilutive securities are excluded from the dilution calculation. Net income (loss) per common share is calculated based upon the following shares:

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

NOTE 12 — DEBT

Debt, including the revolving credit facility, consisted of the following (dollars in thousands):

The carrying value of the Company's debt approximates fair value. The estimated fair value of the Company's debt is categorized within Level 2 of the fair value hierarchy because the valuation is based on observable market inputs.

Revolving Credit Facility

On December 29, 2020, Orion entered into a $25 million Loan and Security Agreement with Bank of America, N.A. (“Bank of America”), as lender (as amended, the “Credit Agreement”). The Credit Agreement provides for a $25.0 million revolving credit facility (the “Credit Facility”) that matures on June 30, 2030. Borrowings under the Credit Facility are subjectto a borrowing base requirement based on eligible receivables, inventory and cash. As of June 30, 2026, the borrowing base of the Credit Facility supported approximately $15.8 million of availability, with $12.8 million of remaining availability net of $3.0 million borrowed.

Borrowings under the Credit Agreement are permitted in the form of Secured Overnight Financing Rate (“SOFR”), or prime rate-based, loans and generally bear interest at floating rates plus an applicable margin determined by reference to Orion’s availability under the Credit Agreement. Among other fees, Orion is required to pay an annual facility fee and a fee on the unused portion of the Credit Facility.

The Credit Agreement includes a springing minimum fixed cost coverage ratio of 1.0 to 1.0 when excess availability under the Credit Facility falls below $4.0 million of the committed facility. Currently, the required springing minimum fixed cost coverage ratio is not required.

The Credit Agreement also contains customary events of default and other covenants, including certain restrictions on Orion's ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, pay any dividend or distribution on Orion's stock, redeem, retire, or purchase shares of Orion's stock, make investments or pledge or transfer assets. If an event of default under the Credit Agreement occurs and is continuing, then the lender may cease making advances under the Credit Agreement and declare any outstanding obligations under the Credit Agreement to be immediately due and payable. In addition, if Orion becomes the subject of voluntary or involuntary proceedings under any bankruptcy or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable.

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

Effective May 29, 2026, Orion, with Bank of America as lender, executed Amendment No. 5 ("Amendment No. 5") to its Credit Agreement. The primary purpose of Amendment No. 5 was to extend the maturity date of the Credit Facility from June 30, 2027 to June 30, 2030. No other significant terms were added, deleted or amended.

As of June 30, 2026, Orion was in compliance with all debt covenants under the Credit Agreement.

NOTE 13 — INCOME TAXES

Orion’s income tax provision was determined by applying an estimated annual effective tax rate, based upon the facts and circumstances known, to book income or loss before income tax, adjusting for discrete items. Orion’s actual effective tax rate is adjusted each interim period, as appropriate, for changes in facts and circumstances. Orion recorded income tax benefit of $5 thousand for the three months ended June 30, 2026 and income tax expense of $13 thousand for the three months ended June 30, 2025.

As of June 30, 2026 and March 31, 2026, Orion had a full valuation allowance against its net deferred tax asset balance. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event that Orion determines that the deferred tax assets are able to be realized, an adjustment to the deferred tax asset would increase income in the period such determination is made.

In the first quarter of fiscal 2027, Orion determined that one of its indefinite-lived trade names no longer had an indefinite life. As such, the corresponding deferred tax liability was reduced in the period. This resulted in a $56 thousand discrete tax benefit for the reduction in valuation allowance on deferred tax assets previously limited by the indefinite-lived deferred tax liability. See Note 2 - Summary of Significant Accounting Policies for additional information.

Uncertain Tax Positions

As of June 30, 2026, Orion’s balance of gross unrecognized tax benefits was approximately$0.3 million, all of which would reduce Orion’s effective tax rate if recognized.

Orion has classified the amounts recorded for uncertain tax benefits in the Condensed Consolidated Balance Sheets as Other long-term liabilities to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax (benefit) expense. Penalties and interest are included in the unrecognized tax benefits.

NOTE 14 — COMMITMENTS AND CONTINGENCIES

Litigation

Orion is subject to various claims and legal proceedings arising in the ordinary course of business. Orion does not believe the final resolution of any of such claims or legal proceedings will have a material adverse effect on Orion’s future results of operations or financial condition.

NOTE 15 — SHAREHOLDERS’ EQUITY

Employee Stock Purchase Plan

In August 2010, Orion’s board of directors approved a non-compensatory employee stock purchase plan, or “ESPP”. In the three months ended June 30, 2026, Orion issued 13 shares under the ESPP plan at a closing market price of $11.69. In the three months ended June 30, 2025, Orion issued 25 shares under the ESPP plan at a closing market price of $6.00.

Sale of Shares

In March 2026, Orion filed a shelf registration statement with the Securities and Exchange Commission. Under the shelf registration statement, Orion currently has the flexibility to publicly offer and sell from time to time up to $100 million of debt and/or equity securities, subject to regulatory limitations. 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.

NOTE 16 — STOCK OPTIONS AND RESTRICTED SHARES

At Orion’s 2023 annual meeting of shareholders, Orion’s shareholders approved the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, as amended and restated (the “Amended 2016 Plan”). The Amended 2016 Plan increased the number of shares of Orion’s common stock available for issuance under the Amended 2016 Plan from 350,000 shares to 600,000 shares (an increase of 250,000 shares); 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.

The Amended 2016 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Amended 2016 Plan may consist of stock options, stock appreciation rights, performance shares, performance units, common stock, restricted stock, restricted stock units, incentive awards or dividend equivalent units.

The Amended 2016 Plan also permits accelerated vesting in the event of certain changes of control of Orion as well as under other special circumstances. Certain non-employee directors have from time to time elected to receive stock awards in lieu of cash compensation pursuant to elections made under Orion’s non-employee director compensation program.

The following amounts of Orion's consolidated stock-based compensation were recorded (dollars in thousands):

The following table summarizes information with respect to performance-vesting restricted stock and time vesting-restricted stock activity:

The following table summarized information with respect to performance-based option and time-based option activity:

As of June 30, 2026, the amount of deferred stock-based compensation expense to be recognized, over a remaining period of 1.0 years, was approximately $0.7 million.

NOTE 17 — SEGMENT DATA

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. Orion's CODM is the chief executive officer. Orion's CODM focuses primarily on each segment's ability to generate sufficient revenues and manage cost of services along with operating expenses. As such, the CODM measures operating performance at the segment level based on operating income or loss, including evaluation of budget to actual variances. Orion evaluates and reports on the business using three segments: lighting segment, maintenance segment and electric vehicle charging segment (“EV segment”).

Lighting Segment

The lighting segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. The lighting segment provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers mostly through direct sales and also sells lighting products though manufacturer representative agencies and to the wholesale contractor markets through energy service companies and contractors.

Maintenance Segment

The maintenance segment provides retailers, distributors and other businesses with maintenance, repair and replacement services for the lighting and related electrical components deployed in their facilities.

EV Segment

The EV segment offers leading electric vehicle charging expertise, sells and installs sourced electric vehicle charging stations with related software subscriptions and renewals and provides EV turnkey installation solutions with ongoing support to all commercial verticals.

Corporate and Other

Corporate and other is comprised of operating expenses not allocated to Orion’s segments and adjustments to reconcile to consolidated results.