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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Orion Energy Systems Inc | NASDAQ:OESX | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.0142 | -1.65% | 0.8458 | 0.84 | 0.9001 | 0.88 | 0.8421 | 0.85 | 8,380 | 22:16:11 |
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Wisconsin
|
|
39-1847269
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification number)
|
2210 Woodland Drive, Manitowoc, Wisconsin
|
|
54220
|
(Address of principal executive offices)
|
|
(Zip code)
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
|
|
|
|
Non-accelerated filer
|
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
ý
|
|
|
Emerging growth company
|
o
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
|
|
|
|
Page(s)
|
ITEM 1.
|
||
|
||
|
||
|
||
|
||
ITEM 2.
|
||
ITEM 3.
|
||
ITEM 4.
|
||
ITEM 1.
|
||
ITEM 1A.
|
||
ITEM 2.
|
||
ITEM 5.
|
||
ITEM 6.
|
||
Exhibit 31.1
|
|
|
Exhibit 31.2
|
|
|
Exhibit 32.1
|
|
|
Exhibit 32.2
|
|
|
EX-101 INSTANCE DOCUMENT
|
|
|
EX-101 SCHEMA DOCUMENT
|
|
|
EX-101 CALCULATION LINKBASE DOCUMENT
|
|
|
EX-101 LABELS LINKBASE DOCUMENT
|
|
|
EX-101 PRESENTATION LINKBASE DOCUMENT
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
8,671
|
|
|
$
|
17,307
|
|
Accounts receivable, net
|
8,141
|
|
|
9,171
|
|
||
Inventories, net
|
9,310
|
|
|
13,593
|
|
||
Deferred contract costs
|
185
|
|
|
935
|
|
||
Prepaid expenses and other current assets
|
1,766
|
|
|
2,877
|
|
||
Total current assets
|
28,073
|
|
|
43,883
|
|
||
Property and equipment, net
|
13,367
|
|
|
13,786
|
|
||
Other intangible assets, net
|
3,203
|
|
|
4,207
|
|
||
Other long-term assets
|
125
|
|
|
175
|
|
||
Total assets
|
$
|
44,768
|
|
|
$
|
62,051
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Accounts payable
|
$
|
7,840
|
|
|
$
|
11,635
|
|
Accrued expenses and other
|
5,453
|
|
|
5,988
|
|
||
Deferred revenue, current
|
849
|
|
|
621
|
|
||
Current maturities of long-term debt
|
86
|
|
|
152
|
|
||
Total current liabilities
|
14,228
|
|
|
18,396
|
|
||
Revolving credit facility
|
3,083
|
|
|
6,629
|
|
||
Long-term debt, less current maturities
|
144
|
|
|
190
|
|
||
Deferred revenue, long-term
|
952
|
|
|
944
|
|
||
Other long-term liabilities
|
541
|
|
|
442
|
|
||
Total liabilities
|
18,948
|
|
|
26,601
|
|
||
Commitments and contingencies
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 at September 30, 2017 and March 31, 2017; no shares issued and outstanding at September 30, 2017 and March 31, 2017
|
—
|
|
|
—
|
|
||
Common stock, no par value: Shares authorized: 200,000,000 at September 30, 2017 and March 31, 2017; shares issued: 38,314,390 at September 30, 2017 and 37,747,227 at March 31, 2017; shares outstanding: 28,880,987 at September 30, 2017 and 28,317,490 at March 31, 2017
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
154,506
|
|
|
153,901
|
|
||
Treasury stock, common shares: 9,433,403 at September 30, 2017 and 9,429,737 at March 31, 2017
|
(36,087
|
)
|
|
(36,081
|
)
|
||
Shareholder notes receivable
|
—
|
|
|
(4
|
)
|
||
Retained deficit
|
(92,599
|
)
|
|
(82,366
|
)
|
||
Total shareholders’ equity
|
25,820
|
|
|
35,450
|
|
||
Total liabilities and shareholders’ equity
|
$
|
44,768
|
|
|
$
|
62,051
|
|
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Product revenue
|
$
|
14,109
|
|
|
$
|
17,675
|
|
|
$
|
25,890
|
|
|
$
|
33,027
|
|
Service revenue
|
1,313
|
|
|
995
|
|
|
2,090
|
|
|
1,277
|
|
||||
Total revenue
|
15,422
|
|
|
18,670
|
|
|
27,980
|
|
|
34,304
|
|
||||
Cost of product revenue
|
10,593
|
|
|
11,752
|
|
|
19,406
|
|
|
23,171
|
|
||||
Cost of service revenue
|
1,208
|
|
|
674
|
|
|
2,243
|
|
|
863
|
|
||||
Total cost of revenue
|
11,801
|
|
|
12,426
|
|
|
21,649
|
|
|
24,034
|
|
||||
Gross profit
|
3,621
|
|
|
6,244
|
|
|
6,331
|
|
|
10,270
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
General and administrative
|
3,157
|
|
|
3,598
|
|
|
8,491
|
|
|
7,499
|
|
||||
Impairment of intangible assets
|
710
|
|
|
—
|
|
|
710
|
|
|
—
|
|
||||
Sales and marketing
|
2,906
|
|
|
3,125
|
|
|
6,260
|
|
|
6,020
|
|
||||
Research and development
|
380
|
|
|
517
|
|
|
904
|
|
|
998
|
|
||||
Total operating expenses
|
7,153
|
|
|
7,240
|
|
|
16,365
|
|
|
14,517
|
|
||||
Loss from operations
|
(3,532
|
)
|
|
(996
|
)
|
|
(10,034
|
)
|
|
(4,247
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Other income
|
—
|
|
|
90
|
|
|
—
|
|
|
190
|
|
||||
Interest expense
|
(139
|
)
|
|
(68
|
)
|
|
(206
|
)
|
|
(138
|
)
|
||||
Interest income
|
3
|
|
|
14
|
|
|
7
|
|
|
24
|
|
||||
Total other (expense) income
|
(136
|
)
|
|
36
|
|
|
(199
|
)
|
|
76
|
|
||||
Loss before income tax
|
(3,668
|
)
|
|
(960
|
)
|
|
(10,233
|
)
|
|
(4,171
|
)
|
||||
Income tax expense (benefit)
|
—
|
|
|
10
|
|
|
—
|
|
|
(261
|
)
|
||||
Net loss
|
$
|
(3,668
|
)
|
|
$
|
(970
|
)
|
|
$
|
(10,233
|
)
|
|
$
|
(3,910
|
)
|
Basic net loss per share attributable to common shareholders
|
$
|
(0.13
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.14
|
)
|
Weighted-average common shares outstanding
|
28,834,868
|
|
|
28,171,899
|
|
|
28,646,188
|
|
|
28,029,526
|
|
||||
Diluted net loss per share
|
$
|
(0.13
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.14
|
)
|
Weighted-average common shares and share equivalents outstanding
|
28,834,868
|
|
|
28,171,899
|
|
|
28,646,188
|
|
|
28,029,526
|
|
|
Six Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
Operating activities
|
|
|
|
||||
Net loss
|
$
|
(10,233
|
)
|
|
$
|
(3,910
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
||||
Depreciation
|
701
|
|
|
755
|
|
||
Amortization
|
324
|
|
|
482
|
|
||
Stock-based compensation
|
618
|
|
|
868
|
|
||
Impairment of intangible assets
|
710
|
|
|
—
|
|
||
Provision for inventory reserves
|
301
|
|
|
443
|
|
||
Provision for bad debts
|
21
|
|
|
67
|
|
||
Other
|
12
|
|
|
112
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, current and long-term
|
1,014
|
|
|
(1,320
|
)
|
||
Inventories
|
3,981
|
|
|
(426
|
)
|
||
Deferred contract costs
|
751
|
|
|
(356
|
)
|
||
Prepaid expenses and other assets
|
1,156
|
|
|
3,813
|
|
||
Accounts payable
|
(3,816
|
)
|
|
667
|
|
||
Accrued expenses and other
|
(438
|
)
|
|
(880
|
)
|
||
Deferred revenue, current and long-term
|
237
|
|
|
319
|
|
||
Net cash (used in) provided by operating activities
|
(4,661
|
)
|
|
634
|
|
||
Investing activities
|
|
|
|
||||
Purchases of property and equipment
|
(283
|
)
|
|
(226
|
)
|
||
Additions to patents and licenses
|
(30
|
)
|
|
(213
|
)
|
||
Proceeds from sales of property, plant and equipment
|
—
|
|
|
2,600
|
|
||
Net cash (used in) provided by investing activities
|
(313
|
)
|
|
2,161
|
|
||
Financing activities
|
|
|
|
||||
Payment of long-term debt and capital leases
|
(111
|
)
|
|
(743
|
)
|
||
Proceeds from revolving credit facility
|
34,176
|
|
|
41,211
|
|
||
Payment of revolving credit facility
|
(37,722
|
)
|
|
(40,071
|
)
|
||
Payments to settle employee tax withholdings on stock-based compensation
|
(8
|
)
|
|
(4
|
)
|
||
Net proceeds from employee equity exercises
|
3
|
|
|
4
|
|
||
Net cash (used in) provided by financing activities
|
(3,662
|
)
|
|
397
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(8,636
|
)
|
|
3,192
|
|
||
Cash and cash equivalents at beginning of period
|
17,307
|
|
|
15,542
|
|
||
Cash and cash equivalents at end of period
|
$
|
8,671
|
|
|
$
|
18,734
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Accounts receivable, gross
|
$
|
8,305
|
|
|
$
|
9,315
|
|
Allowance for doubtful accounts
|
(164
|
)
|
|
(144
|
)
|
||
Accounts receivable, net
|
$
|
8,141
|
|
|
$
|
9,171
|
|
|
Cost
|
|
Reserve
|
|
Net
|
||||||
As of September 30, 2017
|
|
|
|
|
|
||||||
Raw materials and components
|
$
|
6,578
|
|
|
$
|
(1,468
|
)
|
|
$
|
5,110
|
|
Work in process
|
1,334
|
|
|
(351
|
)
|
|
983
|
|
|||
Finished goods
|
4,678
|
|
|
(1,461
|
)
|
|
3,217
|
|
|||
Total
|
$
|
12,590
|
|
|
$
|
(3,280
|
)
|
|
$
|
9,310
|
|
|
|
|
|
|
|
||||||
As of March 31, 2017
|
|
|
|
|
|
||||||
Raw materials and components
|
$
|
8,104
|
|
|
$
|
(1,807
|
)
|
|
$
|
6,297
|
|
Work in process
|
1,918
|
|
|
(329
|
)
|
|
1,589
|
|
|||
Finished goods
|
7,044
|
|
|
(1,337
|
)
|
|
5,707
|
|
|||
Total
|
$
|
17,066
|
|
|
$
|
(3,473
|
)
|
|
$
|
13,593
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Unbilled accounts receivable
|
$
|
1,202
|
|
|
$
|
2,226
|
|
Other prepaid expenses
|
564
|
|
|
651
|
|
||
Total
|
$
|
1,766
|
|
|
$
|
2,877
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Land and land improvements
|
$
|
424
|
|
|
$
|
424
|
|
Buildings and building improvements
|
9,245
|
|
|
9,245
|
|
||
Furniture, fixtures and office equipment
|
7,058
|
|
|
7,056
|
|
||
Leasehold improvements
|
324
|
|
|
324
|
|
||
Equipment leased to customers
|
4,997
|
|
|
4,997
|
|
||
Plant equipment
|
11,795
|
|
|
11,627
|
|
||
Construction in progress
|
132
|
|
|
61
|
|
||
|
33,975
|
|
|
33,734
|
|
||
Less: accumulated depreciation and amortization
|
(20,608
|
)
|
|
(19,948
|
)
|
||
Property and equipment, net
|
$
|
13,367
|
|
|
$
|
13,786
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Equipment
|
$
|
581
|
|
|
$
|
581
|
|
Less: accumulated depreciation and amortization
|
(273
|
)
|
|
(202
|
)
|
||
Equipment, net
|
$
|
308
|
|
|
$
|
379
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
Patents
|
$
|
2,689
|
|
|
$
|
(1,291
|
)
|
|
$
|
1,398
|
|
|
$
|
2,658
|
|
|
$
|
(1,211
|
)
|
|
$
|
1,447
|
|
Licenses
|
58
|
|
|
(58
|
)
|
|
—
|
|
|
58
|
|
|
(58
|
)
|
|
—
|
|
||||||
Trade name and trademarks
|
1,005
|
|
|
—
|
|
|
1,005
|
|
|
1,715
|
|
|
—
|
|
|
1,715
|
|
||||||
Customer relationships
|
3,600
|
|
|
(3,209
|
)
|
|
391
|
|
|
3,600
|
|
|
(3,054
|
)
|
|
546
|
|
||||||
Developed technology
|
900
|
|
|
(506
|
)
|
|
394
|
|
|
900
|
|
|
(426
|
)
|
|
474
|
|
||||||
Non-competition agreements
|
100
|
|
|
(85
|
)
|
|
15
|
|
|
100
|
|
|
(75
|
)
|
|
25
|
|
||||||
Total
|
$
|
8,352
|
|
|
$
|
(5,149
|
)
|
|
$
|
3,203
|
|
|
$
|
9,031
|
|
|
$
|
(4,824
|
)
|
|
$
|
4,207
|
|
Fiscal 2018 (period remaining)
|
$
|
299
|
|
Fiscal 2019
|
448
|
|
|
Fiscal 2020
|
362
|
|
|
Fiscal 2021
|
288
|
|
|
Fiscal 2022
|
190
|
|
|
Fiscal 2023
|
166
|
|
|
Thereafter
|
445
|
|
|
Total
|
$
|
2,198
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Security deposits
|
$
|
66
|
|
|
$
|
117
|
|
Other
|
59
|
|
|
58
|
|
||
Total
|
$
|
125
|
|
|
$
|
175
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Compensation and benefits
|
$
|
1,818
|
|
|
$
|
2,431
|
|
Sales tax
|
281
|
|
|
213
|
|
||
Contract costs
|
398
|
|
|
223
|
|
||
Legal and professional fees
|
1,997
|
|
|
2,262
|
|
||
Warranty
|
446
|
|
|
449
|
|
||
Other accruals
|
513
|
|
|
410
|
|
||
Total
|
$
|
5,453
|
|
|
$
|
5,988
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Warranty
|
$
|
293
|
|
|
$
|
310
|
|
Medical benefits
|
135
|
|
|
—
|
|
||
Unrecognized tax benefits
|
113
|
|
|
113
|
|
||
Other
|
—
|
|
|
19
|
|
||
Total
|
$
|
541
|
|
|
$
|
442
|
|
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Beginning of period
|
$
|
781
|
|
|
$
|
1,038
|
|
|
$
|
759
|
|
|
$
|
864
|
|
Provision to product cost of revenue
|
(40
|
)
|
|
77
|
|
|
(15
|
)
|
|
251
|
|
||||
Charges
|
(2
|
)
|
|
(1
|
)
|
|
(5
|
)
|
|
(1
|
)
|
||||
End of period
|
$
|
739
|
|
|
$
|
1,114
|
|
|
$
|
739
|
|
|
$
|
1,114
|
|
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss (in thousands)
|
$
|
(3,668
|
)
|
|
$
|
(970
|
)
|
|
$
|
(10,233
|
)
|
|
$
|
(3,910
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
28,834,868
|
|
|
28,171,899
|
|
|
28,646,188
|
|
|
28,029,526
|
|
||||
Weighted-average common shares and common share equivalents outstanding
|
28,834,868
|
|
|
28,171,899
|
|
|
28,646,188
|
|
|
28,029,526
|
|
||||
Net loss per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.13
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.14
|
)
|
Diluted
|
$
|
(0.13
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.14
|
)
|
|
September 30, 2017
|
|
September 30, 2016
|
||
Common stock options
|
993,011
|
|
|
1,942,446
|
|
Restricted shares
|
1,536,506
|
|
|
1,723,920
|
|
Total
|
2,529,517
|
|
|
3,666,366
|
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Revolving credit facility
|
$
|
3,083
|
|
|
$
|
6,629
|
|
Equipment lease obligations
|
224
|
|
|
321
|
|
||
Customer equipment finance notes payable
|
6
|
|
|
7
|
|
||
Other long-term debt
|
—
|
|
|
14
|
|
||
Total long-term debt
|
3,313
|
|
|
6,971
|
|
||
Less current maturities
|
(86
|
)
|
|
(152
|
)
|
||
Long-term debt, less current maturities
|
$
|
3,227
|
|
|
$
|
6,819
|
|
|
Shares Issued Under ESPP
Plan |
|
Closing Market
Price |
|
|
Quarter Ended June 30, 2017
|
2,150
|
|
|
$1.28
|
|
Quarter Ended September 30, 2017
|
2,681
|
|
|
$1.12
|
|
Total issued in fiscal 2018
|
4,831
|
|
|
$1.12 - 1.28
|
|
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Cost of product revenue
|
$
|
4
|
|
|
$
|
9
|
|
|
$
|
10
|
|
|
$
|
23
|
|
General and administrative
|
250
|
|
|
485
|
|
|
517
|
|
|
752
|
|
||||
Sales and marketing
|
38
|
|
|
21
|
|
|
79
|
|
|
52
|
|
||||
Research and development
|
6
|
|
|
24
|
|
|
12
|
|
|
41
|
|
||||
Total
|
$
|
298
|
|
|
$
|
539
|
|
|
$
|
618
|
|
|
$
|
868
|
|
|
Restricted Shares
|
Stock Options
|
||
Balance at March 31, 2017
|
1,704,543
|
|
1,520,953
|
|
Awards granted
|
669,272
|
|
—
|
|
Awards vested
|
(559,916
|
)
|
—
|
|
Awards forfeited
|
(277,393
|
)
|
(527,942
|
)
|
Awards outstanding at September 30, 2017
|
1,536,506
|
|
993,011
|
|
Per share price on grant date
|
$0.97 - $1.95
|
|
—
|
|
|
Revenues
|
|
Operating Income (Loss)
|
||||||||||||
|
For the Three Months Ended September 30,
|
|
For the Three Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segments:
|
|
|
|
|
|
|
|
||||||||
Orion U.S. Markets
|
$
|
2,830
|
|
|
$
|
5,192
|
|
|
$
|
(918
|
)
|
|
$
|
263
|
|
Orion Engineered Systems
|
6,133
|
|
|
6,975
|
|
|
(1,185
|
)
|
|
(116
|
)
|
||||
Orion Distribution Services
|
6,459
|
|
|
6,503
|
|
|
(47
|
)
|
|
441
|
|
||||
Corporate and Other
|
—
|
|
|
—
|
|
|
(1,382
|
)
|
|
(1,584
|
)
|
||||
|
$
|
15,422
|
|
|
$
|
18,670
|
|
|
$
|
(3,532
|
)
|
|
$
|
(996
|
)
|
|
Revenues
|
|
Operating Income (Loss)
|
||||||||||||
|
For the Six Months Ended September 30,
|
|
For the Six Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segments:
|
|
|
|
|
|
|
|
||||||||
Orion U.S. Markets
|
$
|
4,220
|
|
|
$
|
11,094
|
|
|
$
|
(2,450
|
)
|
|
$
|
191
|
|
Orion Engineered Systems
|
11,541
|
|
|
13,774
|
|
|
(3,076
|
)
|
|
(796
|
)
|
||||
Orion Distribution Services
|
12,219
|
|
|
9,436
|
|
|
(788
|
)
|
|
(361
|
)
|
||||
Corporate and Other
|
—
|
|
|
—
|
|
|
(3,720
|
)
|
|
(3,281
|
)
|
||||
|
$
|
27,980
|
|
|
$
|
34,304
|
|
|
$
|
(10,034
|
)
|
|
$
|
(4,247
|
)
|
|
Three Months Ended September 30,
|
Six Months Ended September 30,
|
||||
|
2017
|
2017
|
||||
Cost of product revenue
|
$
|
—
|
|
$
|
40
|
|
General and administrative
|
48
|
|
1,815
|
|
||
Sales and marketing
|
86
|
|
183
|
|
||
Total
|
$
|
134
|
|
$
|
2,038
|
|
|
Three Months Ended September 30,
|
Six Months Ended September 30,
|
||||
|
2017
|
2017
|
||||
Orion Distribution Systems
|
$
|
14
|
|
$
|
89
|
|
Corporate and Other
|
120
|
|
1,949
|
|
||
Total
|
$
|
134
|
|
$
|
2,038
|
|
|
March 31, 2017
|
Additions
|
Amounts Used
|
September 30, 2017
|
||||||||
Employee separation costs
|
$
|
—
|
|
$
|
1,897
|
|
$
|
(1,530
|
)
|
$
|
367
|
|
Post-employment medical benefits (1)
|
—
|
|
141
|
|
(1
|
)
|
140
|
|
||||
Total
|
$
|
—
|
|
$
|
2,038
|
|
$
|
(1,531
|
)
|
$
|
507
|
|
(1)
|
The severance agreement with one executive included a long-term post-employment medical benefit which will be paid over a period of approximately
twelve years
. The Company recorded a liability for the net present value of this obligation based on the current cost of premiums for this individual’s medical coverage increased by an estimated health care cost trend of
6.8%
decreasing to
5%
in
nine years
. This benefit is reflected in Orion’s condensed consolidated balance sheet within accrued expenses and other and other long-term liabilities.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Rapidly declining LED component costs and LED product end user customer pricing pressure.
|
•
|
Improving LED product performance and reducing customer return on investment payback periods resulting in increased customer preference for LED lighting products compared to legacy lighting products.
|
•
|
Increasing LED lighting product customer sales compared to decreasing HIF product sales.
|
•
|
A broader and more diverse customer base and market opportunities compared to our historical commercial and industrial facility customers.
|
•
|
Increased importance of highly innovative product designs and features and enhanced product research and development capabilities requiring rapid new product introduction and new methods of product and company differentiation.
|
•
|
Significantly reduced product technology life cycles; significantly shorter product inventory shelf lives and the related increased risk of rapidly occurring product technology obsolescence.
|
•
|
Increased reliance on international component sources.
|
•
|
Less internal product fabrication and production capabilities needed to support LED product assembly.
|
•
|
Different and broader types of components, fabrication and assembly processes needed to support LED product assembly compared to our legacy products.
|
•
|
Expanding customer bases and sales channels.
|
•
|
Significantly longer end user product warranty requirements for LED products compared to our legacy products.
|
•
|
Constant monitoring and management of manufacturing overhead costs to ensure we continue to deliver strong gross margins amid an increasingly competitive market landscape;
|
•
|
Reducing staff positions through a targeted reduction in existing headcount;
|
•
|
Reductions in the total compensation of our executive management and board of directors;
|
•
|
Reductions in operating expenses, including better control of legal spending, elimination of our racing program and removal of various non-critical back office programs and initiatives.
|
|
Three Months Ended September 30,
|
Six Months Ended September 30,
|
||||
|
2017
|
2017
|
||||
Cost of product revenue
|
$
|
—
|
|
$
|
40
|
|
General and administrative
|
48
|
|
1,815
|
|
||
Sales and marketing
|
86
|
|
183
|
|
||
Total
|
$
|
134
|
|
$
|
2,038
|
|
|
Three Months Ended September 30,
|
Six Months Ended September 30,
|
||||
|
2017
|
2017
|
||||
Orion Distribution Systems
|
$
|
14
|
|
$
|
89
|
|
Corporate and Other
|
120
|
|
1,949
|
|
||
Total
|
$
|
134
|
|
$
|
2,038
|
|
•
|
The considerable size of the existing market opportunity for lighting retrofits, including the market opportunities in commercial office, manufacturing, healthcare, government and retail markets;
|
•
|
The continued development of our new higher margin products and product enhancements, including our new LED product offerings;
|
•
|
Our efforts to expand our channels of distribution;
|
•
|
Our cost reduction initiatives which have included significant changes to our manufacturing operations to increase our flexibility and lower our cost structure;
|
•
|
LED adoption continues to grow in all sectors;
|
•
|
Commercial and industrial economic sentiment is strengthening;
|
•
|
Utility incentives continue to be available and are increasing as a percent of project costs in many areas;
|
•
|
Prospects of tax regulatory reform are encouraging;
|
•
|
Capital spending is increasing;
|
•
|
Business profits are increasing; and
|
•
|
Consumer spending remains strong.
|
|
Three Months Ended September 30,
|
|||||||||||||||
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|||||||
|
Amount
|
|
Amount
|
|
%
Change |
|
% of
Revenue |
|
% of
Revenue |
|||||||
Product revenue
|
$
|
14,109
|
|
|
$
|
17,675
|
|
|
(20.2
|
)%
|
|
91.5
|
%
|
|
94.7
|
%
|
Service revenue
|
1,313
|
|
|
995
|
|
|
32.0
|
%
|
|
8.5
|
%
|
|
5.3
|
%
|
||
Total revenue
|
15,422
|
|
|
18,670
|
|
|
(17.4
|
)%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Cost of product revenue
|
10,593
|
|
|
11,752
|
|
|
(9.9
|
)%
|
|
68.7
|
%
|
|
63.0
|
%
|
||
Cost of service revenue
|
1,208
|
|
|
674
|
|
|
79.2
|
%
|
|
7.8
|
%
|
|
3.6
|
%
|
||
Total cost of revenue
|
11,801
|
|
|
12,426
|
|
|
(5.0
|
)%
|
|
76.5
|
%
|
|
66.6
|
%
|
||
Gross profit
|
3,621
|
|
|
6,244
|
|
|
(42.0
|
)%
|
|
23.5
|
%
|
|
33.4
|
%
|
||
General and administrative expenses
|
3,157
|
|
|
3,598
|
|
|
(12.3
|
)%
|
|
20.5
|
%
|
|
19.3
|
%
|
||
Impairment of intangible assets
|
710
|
|
|
—
|
|
|
NM
|
|
|
4.6
|
%
|
|
—
|
%
|
||
Sales and marketing expenses
|
2,906
|
|
|
3,125
|
|
|
(7.0
|
)%
|
|
18.8
|
%
|
|
16.7
|
%
|
||
Research and development expenses
|
380
|
|
|
517
|
|
|
(26.5
|
)%
|
|
2.5
|
%
|
|
2.7
|
%
|
||
Loss from operations
|
(3,532
|
)
|
|
(996
|
)
|
|
(254.6
|
)%
|
|
(22.9
|
)%
|
|
(5.3
|
)%
|
||
Other income
|
—
|
|
|
90
|
|
|
NM
|
|
|
—
|
%
|
|
0.5
|
%
|
||
Interest expense
|
(139
|
)
|
|
(68
|
)
|
|
(104.4
|
)%
|
|
(0.9
|
)%
|
|
(0.4
|
)%
|
||
Interest income
|
3
|
|
|
14
|
|
|
(78.6
|
)%
|
|
—
|
%
|
|
0.1
|
%
|
||
Loss before income tax
|
(3,668
|
)
|
|
(960
|
)
|
|
(282.1
|
)%
|
|
(23.8
|
)%
|
|
(5.1
|
)%
|
||
Income tax expense
|
—
|
|
|
10
|
|
|
NM
|
|
|
—
|
%
|
|
0.1
|
%
|
||
Net loss
|
$
|
(3,668
|
)
|
|
$
|
(970
|
)
|
|
(278.1
|
)%
|
|
(23.8
|
)%
|
|
(5.2
|
)%
|
|
For the Three Months Ended September 30,
|
|||||||||
|
2017
|
|
2016
|
|
%
Change |
|||||
Revenues
|
$
|
2,830
|
|
|
$
|
5,192
|
|
|
(45.5
|
)%
|
Operating (loss) income
|
$
|
(918
|
)
|
|
$
|
263
|
|
|
NM
|
|
Operating margin
|
(32.4
|
)%
|
|
5.1
|
%
|
|
|
|
For the Three Months Ended September 30,
|
|||||||||
|
2017
|
|
2016
|
|
%
Change |
|||||
Revenues
|
$
|
6,459
|
|
|
$
|
6,503
|
|
|
(0.7
|
)%
|
Operating (loss) income
|
(47
|
)
|
|
441
|
|
|
(110.7
|
)%
|
||
Operating margin
|
(0.7
|
)%
|
|
6.8
|
%
|
|
|
|
Six Months Ended September 30,
|
|||||||||||||||
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|||||||
|
Amount
|
|
Amount
|
|
%
Change |
|
% of
Revenue |
|
% of
Revenue |
|||||||
Product revenue
|
$
|
25,890
|
|
|
$
|
33,027
|
|
|
(21.6
|
)%
|
|
92.5
|
%
|
|
96.3
|
%
|
Service revenue
|
2,090
|
|
|
1,277
|
|
|
63.7
|
%
|
|
7.5
|
%
|
|
3.7
|
%
|
||
Total revenue
|
27,980
|
|
|
34,304
|
|
|
(18.4
|
)%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Cost of product revenue
|
19,406
|
|
|
23,171
|
|
|
(16.2
|
)%
|
|
69.4
|
%
|
|
67.6
|
%
|
||
Cost of service revenue
|
2,243
|
|
|
863
|
|
|
159.9
|
%
|
|
8.0
|
%
|
|
2.5
|
%
|
||
Total cost of revenue
|
21,649
|
|
|
24,034
|
|
|
(9.9
|
)%
|
|
77.4
|
%
|
|
70.1
|
%
|
||
Gross profit
|
6,331
|
|
|
10,270
|
|
|
(38.4
|
)%
|
|
22.6
|
%
|
|
29.9
|
%
|
||
General and administrative expenses
|
8,491
|
|
|
7,499
|
|
|
13.2
|
%
|
|
30.3
|
%
|
|
21.9
|
%
|
||
Impairment of intangible assets
|
710
|
|
|
—
|
|
|
NM
|
|
|
2.5
|
%
|
|
—
|
%
|
||
Sales and marketing expenses
|
6,260
|
|
|
6,020
|
|
|
4.0
|
%
|
|
22.4
|
%
|
|
17.5
|
%
|
||
Research and development expenses
|
904
|
|
|
998
|
|
|
(9.4
|
)%
|
|
3.2
|
%
|
|
2.9
|
%
|
||
Loss from operations
|
(10,034
|
)
|
|
(4,247
|
)
|
|
(136.3
|
)%
|
|
(35.9
|
)%
|
|
(12.4
|
)%
|
||
Other income
|
—
|
|
|
190
|
|
|
NM
|
|
|
—
|
%
|
|
0.5
|
%
|
||
Interest expense
|
(206
|
)
|
|
(138
|
)
|
|
(49.3
|
)%
|
|
(0.7
|
)%
|
|
(0.4
|
)%
|
||
Interest income
|
7
|
|
|
24
|
|
|
(70.8
|
)%
|
|
—
|
%
|
|
0.1
|
%
|
||
Loss before income tax
|
(10,233
|
)
|
|
(4,171
|
)
|
|
(145.3
|
)%
|
|
(36.5
|
)%
|
|
(12.2
|
)%
|
||
Income tax (benefit) expense
|
—
|
|
|
(261
|
)
|
|
NM
|
|
|
—
|
%
|
|
(0.8
|
)%
|
||
Net loss
|
$
|
(10,233
|
)
|
|
$
|
(3,910
|
)
|
|
(161.7
|
)%
|
|
(36.5
|
)%
|
|
(11.4
|
)%
|
|
For the Six Months Ended September 30,
|
|||||||||
|
2017
|
|
2016
|
|
%
Change |
|||||
Revenues
|
$
|
4,220
|
|
|
$
|
11,094
|
|
|
(62.0
|
)%
|
Operating (loss) income
|
$
|
(2,450
|
)
|
|
$
|
191
|
|
|
NM
|
|
Operating margin
|
(58.1
|
)%
|
|
1.7
|
%
|
|
|
|
Six Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
Operating activities
|
$
|
(4,661
|
)
|
|
$
|
634
|
|
Investing activities
|
(313
|
)
|
|
2,161
|
|
||
Financing activities
|
(3,662
|
)
|
|
397
|
|
||
Increase (decrease) in cash and cash equivalents
|
$
|
(8,636
|
)
|
|
$
|
3,192
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
i.
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
ii.
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
iii.
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
|
•
|
Information & Communication.
We determined that our controls pertaining to information and communication did not operate effectively, resulting in a material weakness pertaining to these COSO components. Specifically, we did not have sufficient communication of the status and evolution of a project to ensure timely and accurate recognition of project costs. In addition, we did not have sufficient communication and resolution of matters identified through management’s review impacting the accounting close as noted in the Control Activities discussion below.
|
•
|
Control Activities - Accounting Close.
The operating effectiveness of our controls were inadequate to ensure that project costs were identified and recorded to expense in a timely manner. In addition, matters identified through management review controls were not brought to a timely resolution.
|
•
|
Ensure a thorough understanding of the “as is” state, process owners, and procedural or technological gaps causing the deficiency;
|
•
|
Design and evaluate a remediation action for the review and analysis of project costs; validate or improve the related policy and procedures; evaluate skills of the process owners with regard to the policy and adjust as required;
|
•
|
Implement specific remediation actions: train process owners, allow time for process adoption and adequate transaction volume for next steps;
|
•
|
Test and measure the design and effectiveness of the remediation actions; test and provide feedback on the design and operating effectiveness of the controls, and:
|
•
|
Review and acceptance of completion of the remediation effort by executive management and the Audit & Finance Committee.
|
•
|
Developed a regular method for the evaluation of actual project costs incurred against budgeted costs and for the communication of such costs and project status.
|
•
|
Revisited the method in which projects are reviewed and evaluated by the accounting department to ensure the accurate and timely recording of necessary adjustments.
|
•
|
Formalized and strengthened management review controls as they pertain to the accounting close.
|
•
|
Enhance documentation of policies and procedures related to project accounting, account reconciliations, and other key areas within the accounting close.
|
•
|
Provide training to key process owners.
|
•
|
Enhance information technology reporting capabilities, where possible, to ensure consistent, accurate data to support accounting close processes in a timely and efficient manner.
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
32.2
|
|
|
|
101.INS
|
XBRL Instance Document
|
|
|
101.SCH
|
Taxonomy extension schema document
|
|
|
101.CAL
|
Taxonomy extension calculation linkbase document
|
|
|
101.LAB
|
Taxonomy extension label linkbase document
|
|
|
101.PRE
|
Taxonomy extension presentation linkbase document
|
+
|
Filed herewith
|
ORION ENERGY SYSTEMS, INC.
Registrant
|
||
|
|
|
By
|
|
/s/ William T. Hull
|
|
|
William T. Hull
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer and Authorized Signatory)
|
1 Year Orion Energy Systems Chart |
1 Month Orion Energy Systems Chart |
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