# Orion Energy Systems, Inc.: Form 10-Q for the period ended Dec 31, 2024

- Company: [Orion Energy Systems, Inc.](/companies/oesx.md) (CIK 1409375)
- Form: 10-Q
- Filed: 2025-02-11
- Accepted by EDGAR: Feb 11, 2025, 21:30 ET
- Period: 2024-12-31
- Accession: 0000950170-25-017947
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1409375/000095017025017947/oesx-20241231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1409375/000095017025017947/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-10-01 to 2024-12-31 | $19.6m | us-gaap:Revenues |
| Revenue | 9 months, 2024-04-01 to 2024-12-31 | $58.9m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-10-01 to 2024-12-31 | $13.8m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-04-01 to 2024-12-31 | $44.4m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-10-01 to 2024-12-31 | $5.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-04-01 to 2024-12-31 | $14.5m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-10-01 to 2024-12-31 | $287.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-04-01 to 2024-12-31 | $840.0k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-10-01 to 2024-12-31 | −$1.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-04-01 to 2024-12-31 | −$8.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-10-01 to 2024-12-31 | $1.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-04-01 to 2024-12-31 | $44.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-10-01 to 2024-12-31 | −$1.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-04-01 to 2024-12-31 | −$8.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-10-01 to 2024-12-31 | −$0.05 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-04-01 to 2024-12-31 | −$0.27 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-10-01 to 2024-12-31 | −$0.05 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-04-01 to 2024-12-31 | −$0.27 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-10-01 to 2024-12-31 | 32,923,321 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-04-01 to 2024-12-31 | 32,787,107 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-04-01 to 2024-12-31 | $1.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-04-01 to 2024-12-31 | $48.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-12-31 | $7.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-12-31 | $37.1m | us-gaap:AssetsCurrent |
| Total assets | at 2024-12-31 | $52.7m | us-gaap:Assets |
| Current liabilities | at 2024-12-31 | $26.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-12-31 | $38.2m | us-gaap:Liabilities |
| Current portion of debt | at 2024-12-31 | $353.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-12-31 | $14.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,045 characters.

*The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited Condensed Consolidated Financial Statements and related notes included in this Form 10-Q, as well as our audited Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.*

### Cautionary Note Regarding Forward-Looking Statements

Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance are not historical facts and are “forward-looking statements” as that term is defined under the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, “outlook” and similar words. You should read the statements that contain these types of words carefully. Such forward-looking statements are subject to several risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements. There may be events in the future that we are not able to predict accurately or over which we have no control. Potential risks and uncertainties include, but are not limited to, those discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of unanticipated events.

### Overview

We provide state-of-the-art light emitting diode (“LED”) lighting systems, wireless Internet of Things (“IoT”) enabled control solutions, commercial and industrial electric vehicle (“EV”) charging infrastructure solutions, and lighting and electrical maintenance services. We help our customers achieve their sustainability, energy savings and carbon footprint reduction goals through innovative technology and exceptional service. We sell our products and services into many vertical markets within the broader commercial and industrial market segment. Primary verticals include: big box retail, manufacturing, warehousing/logistics, commercial office, federal and municipal government, healthcare and schools. Our services consist of turnkey installation (lighting and EV) and system maintenance. Virtually all of our sales occur within North America or for the US Department of Defense's military bases operating in foreign countries.

Our lighting products consist primarily of LED lighting fixtures, many of which include sourced IoT enabled control systems. Our principal lighting customers include large national account end-users, federal and state government facilities, large regional account end-users, electrical distributors, electrical contractors and energy service companies (“ESCOs”). Currently, most of our lighting products are manufactured at our leased production facility located in Manitowoc, Wisconsin, although as the LED and related IoT market continues to evolve, we are increasingly sourcing products and components from third parties in order to provide versatility in our product development and offerings.

We differentiate ourselves from our competitors by offering very efficient light fixtures (measured in lumens per watt) coupled with our project management services to national account customers to retrofit their multiple locations. Our comprehensive services include initial site surveys and audits, utility incentive and government subsidy management, engineering design, and project management from delivery through to installation and controls integration and commissioning. In addition, we began to offer lighting and electrical maintenance services in fiscal 2021. We believe that providing these services enables us to support a long-term business relationship with our customers and results in an increase in our recurring revenue. We completed the acquisition of Stay-Lite on January 1, 2022, which was intended to further expand our maintenance services capabilities. We subsequently dissolved the Stay-Lite business and merged the net assets into Orion effective October 11, 2024. On October 5, 2022, we acquired Voltrek, which was intended to leverage our project management and maintenance expertise into the rapidly growing EV sector.

Our lighting products consist primarily of LED lighting fixtures, many of which include IoT enabled control systems provided by third parties. We believe the market for LED lighting products continues to grow. Due to their size and flexibility in application, we also believe that LED lighting systems can address opportunities for retrofit applications that cannot be satisfied by other lighting technologies.

We generally do not have long-term contracts with our customers for product or turnkey services that provide us with recurring annual revenue. However, our maintenance services contracts usually consist of multi-year arrangements. We typically generate substantially all of our lighting revenue from sales of lighting systems and related services to governmental, commercial and industrial customers on a project-by-project basis. We also perform work under global services or product purchasing agreements with major customers with sales completed on a purchase order basis. The loss of, or substantial reduction in sales to, any of our significant customers, or our current single largest customer, or the termination or delay of a significant volume of purchase orders by one or more key customers, could have a material adverse effect on our results of operations in any given future period.

We typically sell our lighting systems in replacement of our customers’ existing lighting fixtures. We call this replacement process a "retrofit". We frequently sell our products and services directly to our customers and in many cases we provide design and installation services as well as project management services. We also sell our lighting systems on a wholesale basis, principally to electrical distributors, electrical contractors and ESCOs which then resell to their own customers.

The gross margins of our products can vary significantly depending upon the types of products we sell, with gross margins typically ranging from 10% to 50%. As a result, a change in the total mix of our product sales among higher or lower gross margin products can cause our profitability to fluctuate from period to period.

Our fiscal year ends on March 31. We refer to our current fiscal year which ends on March 31, 2025 as "fiscal 2025". We refer to our most recently completed fiscal year, which ended on March 31, 2024, as “fiscal 2024”, and our prior fiscal year which ended on March 31, 2023 as "fiscal 2023". Our fiscal first quarter of each fiscal year ends on June 30, our fiscal second quarter ends on September 30, our fiscal third quarter ends on December 31, and our fiscal fourth quarter ends on March 31.

Reportable segments are components of an entity that have separate financial data that the entity's chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Orion's CODM is the chief executive officer. Orion evaluates and reports on the business using three segments: Lighting Segment, Maintenance Segment and Electric Vehicle Charging Segment (“EV Segment”).

### Results of Operations - Three Months Ended December 31, 2024 versus Three Months Ended December 31, 2023

The following table sets forth the line items of our Condensed 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 (dollars in thousands, except percentages):

|  | Three Months Ended December 31, 2024 Amount | 2023 Amount | % Change | 2024 % of Revenue | 2023 % of Revenue |
| --- | ---: | ---: | ---: | ---: | ---: |
| Product revenue | $14,308 | $17,007 | (15.9)% | 73.1% | 65.5% |
| Service revenue | 5,276 | 8,964 | (41.1)% | 26.9% | 34.5% |
| Total revenue | 19,584 | 25,971 | (24.6)% | 100.0% | 100.0% |
| Cost of product revenue | 9,347 | 12,302 | (24.0)% | 47.7% | 47.4% |
| Cost of service revenue | 4,483 | 7,302 | (38.6)% | 22.9% | 28.1% |
| Total cost of revenue | 13,830 | 19,604 | (29.5)% | 70.6% | 75.5% |
| Gross profit | 5,754 | 6,367 | (9.6)% | 29.4% | 24.5% |
| General and administrative expenses | 3,857 | 4,910 | (21.4)% | 19.7% | 18.9% |
| Sales and marketing expenses | 2,859 | 3,170 | (9.8)% | 14.6% | 12.2% |
| Research and development expenses | 287 | 349 | (17.8)% | 1.5% | 1.3% |
| Loss from operations | (1,249) | (2,062) | (39.4)% | (6.4)% | (7.9)% |
| Interest expense | (255) | (193) | 32.1% | (1.3)% | (0.7)% |
| Amortization of debt issue costs | (49) | (25) | 96.0% | (0.3)% | (0.1)% |
| Royalty income | 45 | — | NM | 0.5% | 0.0% |
| Other income | — | 25 | (100.0)% | 0.0% | 0.1% |
| Interest income | 1 | — | NM | 0.0% | 0.0% |
| Loss before income tax | (1,507) | (2,255) | (33.2)% | (7.7)% | (8.7)% |
| Income tax expense | 1 | 1 | — | 0.0% | 0.0% |
| Net loss | $(1,508) | $(2,256) | (33.2)% | (7.7)% | (8.7)% |

\* NM - Not Meaningful

*Revenue, Cost of Revenue and Gross Margin.* Product revenue decreased 15.9%, or $2.7 million, for the third quarter of fiscal 2025 versus the third quarter of fiscal 2024. Service revenue decreased 41.1%, or $3.7 million, for the third quarter of fiscal 2025 versus the third quarter of fiscal 2024. The resulting decrease in total revenue was due to decreased revenues in all three segments because of lower volume. Cost of product revenue decreased by 24.0%, or $3.0 million, in the third quarter of fiscal 2025 versus the comparable period in fiscal 2024. Cost of service revenue decreased by 38.6%, or $2.8 million, in the third quarter of fiscal 2025 versus the comparable period in fiscal 2024. Gross margin increased from 24.5% of revenue in the third quarter of fiscal 2024 to 29.4% in the third quarter of fiscal 2025, due primarily to increased margins in the lighting and maintenance segments.

#### Operating Expenses

*General and Administrative.* General and administrative expenses decreased 21.4%, or $1.1 million, in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024. This comparative decrease was primarily due to a decrease in Voltrek acquisition earn out expense to $0.5 million in the third quarter of fiscal 2025 compared to $1.1 million in the third quarter of fiscal 2024, along with decreased wages and benefits as a result of the restructuring that took place in fiscal 2025.

*Sales and Marketing.* Sales and marketing expenses decreased 9.8%, or $0.3 million, in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024. This comparative decrease was primarily due to the lower volume of product sales resulting in lower commission expense.

*Research and Development.* Research and development expenses decreased 17.8%, or $0.1 million, in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024.

### Lighting Segment

Our lighting segment develops and sells lighting products and provides construction and engineering services for our commercial lighting and energy management systems. Our 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 ESCOs and contractors.

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

|  | Three Months Ended December 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $13,214 | $18,545 | (28.7)% |
| Operating income | $429 | $951 | 54.9% |
| Operating margin | 3.2% | 5.1% |  |

Lighting segment revenue in the third quarter of fiscal 2025 decreased by 28.7%, or $5.3 million, compared to the third quarter of fiscal 2024. The decrease in lighting segment revenue was primarily due to United States Department of Defense project in Germany boosting the third quarter fiscal 2024 revenue. The project concluded in the second quarter of fiscal 2025. The decrease in operating income in this segment was a result of decreased production volume which was partially offset by increased volumes from sourced goods.

### Maintenance Segment

Our 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.

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

|  | Three Months Ended December 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $3,925 | $4,608 | (14.8)% |
| Operating income (loss) | $309 | $(1,060) | 129.2% |
| Operating margin | 7.9% | (23.0)% |  |

Maintenance segment revenue in the third quarter of fiscal 2025 decreased by 14.8%, or $0.7 million, compared to the third quarter of fiscal 2024 primarily due to decreased work orders from our major customer. Operating income in this segment increased as a result of an increase in gross margins driven by a more favorable revenue mix.

### Electric Vehicle Charging Segment

Our EV segment offers leading electric vehicle charging expertise and provides EV turnkey installation solutions with ongoing support to all commercial verticals.

The following table summarizes our EV segment operations results (dollars in thousands):

|  | Three Months Ended December 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $2,445 | $2,818 | (13.2)% |
| Operating loss | $(1,166) | $(1,454) | (19.8)% |
| Operating margin | (47.7)% | (51.6)% |  |

24

EV segment revenue in the third quarter of fiscal 2025 decreased by 13.2%, or $0.4 million, compared to the third quarter of fiscal 2024. The decrease in revenue compared to the third quarter of fiscal 2024 was due to a lower revenue volume to municipalities. Operating loss decreased $0.3 million in the third quarter of fiscal 2025 due to increased margins from a more favorable sales mix.

### Results of Operations - Nine Months Ended December 31, 2024 versus Nine Months Ended December 31, 2023

The following table sets forth the line items of our Condensed 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 (dollars in thousands, except percentages):

|  | Nine Months Ended December 31, 2024 Amount | 2023 Amount | % Change | 2024 % of Revenue | 2023 % of Revenue |
| --- | ---: | ---: | ---: | ---: | ---: |
| Product revenue | $39,442 | $46,266 | (14.7)% | 67.0% | 72.1% |
| Service revenue | 19,409 | 17,904 | 8.4% | 33.0% | 27.9% |
| Total revenue | 58,851 | 64,170 | (8.3)% | 100.0% | 100.0% |
| Cost of product revenue | 26,809 | 33,258 | (19.4)% | 45.6% | 51.8% |
| Cost of service revenue | 17,541 | 16,805 | 4.4% | 29.8% | 26.2% |
| Total cost of revenue | 44,350 | 50,063 | (11.4)% | 75.4% | 78.0% |
| Gross profit | 14,501 | 14,107 | 2.8% | 24.6% | 22.0% |
| General and administrative expenses | 12,970 | 15,689 | (17.3)% | 22.0% | 24.4% |
| Acquisition related costs | — | 56 | (100.0)% | 0.0% | 0.2% |
| Sales and marketing expenses | 8,644 | 9,778 | (11.6)% | 14.7% | 15.2% |
| Research and development expenses | 840 | 1,211 | (30.6)% | 1.4% | 1.9% |
| (Loss) income from operations | (7,953) | (12,627) | (37.0)% | (13.5)% | (19.7)% |
| Interest expense | (800) | (561) | 42.6% | (1.4)% | (0.9)% |
| Amortization of debt issue costs | (155) | (74) | 109.5% | (0.3)% | (0.1)% |
| Royalty income | 61 | — | NM | 0.2% | 0.0% |
| Other income | — | 37 | (100.0)% | 0.0% | 0.1% |
| Interest income | 1 | 2 | (50.0)% | 0.0% | 0.0% |
| (Loss) income before income tax | (8,846) | (13,223) | (33.1)% | (15.0)% | (20.6)% |
| Income tax (benefit) expense | 44 | 58 | (24.1)% | 0.1% | 0.1% |
| Net loss | $(8,890) | $(13,281) | (33.1)% | (15.1)% | (20.7)% |
| \* NM - Not Meaningful |  |  |  |  |  |

*Revenue, Cost of Revenue and Gross Margin.* Product revenue decreased 14.7%, or $6.8 million, for the first nine months of fiscal 2025 versus the first nine months of fiscal 2024. Service revenue increased 8.4%, or $1.5 million, for the first nine months of fiscal 2025 versus the first nine months of fiscal 2024. Total revenue decreased due to revenue declines in both the lighting and maintenance segments as a result of decreased volumes, which was partially offset due to a revenue increase in the EV segment, due to increased sales to municipalities. Cost of product revenue decreased by 19.4%, or $6.4 million, in the first nine months of fiscal 2025 versus the comparable period in fiscal 2024. Cost of service revenue increased by 4.4%, or $0.7 million, in the first nine months of fiscal 2025 versus the comparable period in fiscal 2024. Gross margin increased from 22.0% of revenue in the first nine months of fiscal 2024 to 24.6% in the first nine months of fiscal 2025, due primarily to increased margins within the lighting and maintenance segments.

#### Operating Expenses

*General and Administrative.* General and administrative expenses decreased 17.3%, or $2.7 million, in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024. This comparative decrease was primarily due to the decreased accrual of the expected Voltrek acquisition earn-out payment, along with decreased wages and benefits as a result of the restructuring that took place in fiscal 2025.

*Acquisition Related Costs.* There were no acquisition related costs in the first nine months of fiscal 2025 in comparison to the $0.1 million in the first nine months of fiscal 2024.

*Sales and Marketing.* Sales and marketing expenses decreased 11.6%, or $1.1 million, in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024. This comparative decrease was primarily due to the lower volume of product sales resulting in lower commission expense, along with decreased wages and benefits as a result of the restructuring that took place in fiscal 2025 .

*Research and Development.* Research and development expenses decreased 30.6%, or $0.4 million, in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024. This comparative decrease was primarily due to the reduction of employee compensation costs.

*Interest Expense.* Interest expenses increased 42.6%, or $0.2 million, in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024. This comparative increase was primarily due to the interest on outstanding borrowings and a higher incremental borrowing rate.

### Lighting Division

The following table summarizes our lighting division operating results (dollars in thousands):

|  | Nine Months Ended December 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $36,805 | $44,739 | (17.7)% |
| Operating loss | $(2,058) | $(1,777) | 15.8% |
| Operating margin | (5.6)% | (4.0)% |  |

Lighting division revenue in the first nine months of fiscal 2025 decreased by 17.7%, or $7.9 million, compared to the first nine months of fiscal 2024. The decrease in lighting segment revenue was due to variability in the timing of larger lighting projects along with the completion of the United States Department of Defense project in Germany in the second quarter of fiscal 2025. The increase in operating loss in this segment was a result of decreased production volume which was partially offset by increased volumes from sourced goods.

### Maintenance Division

The following table summarizes our maintenance division operating results (dollars in thousands):

|  | Nine Months Ended December 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $11,045 | $11,996 | (7.9)% |
| Operating loss | $(1,019) | $(4,660) | (78.1)% |
| Operating margin | (9.2)% | (38.8)% |  |

Maintenance division revenue in the first nine months of fiscal 2025 decreased by 7.9%, or $1.0 million, compared to the first nine months of fiscal 2024, primarily due to the loss of three large customers who decided not to renew their contracts, due to our decision to substantially increase service pricing, partially offset by increased work orders from our major customer. Operating loss in this segment decreased as a result of an increase in gross margin primarily due to a more favorable revenue mix.

### Electric Vehicle Charging Division

The following table summarizes our EV segment operations results (dollars in thousands):

|  | Nine Months Ended December 31, 2024 | 2023 | % Change |
| --- | ---: | ---: | ---: |
| Revenues | $11,001 | $7,435 | 48.0% |
| Operating loss | $(2,001) | $(4,417) | (54.7)% |
| Operating margin | (18.2)% | (59.4)% |  |

EV segment revenue in the first nine months of fiscal 2025 increased by 48.0%, or $3.6 million, compared to the first nine months of fiscal 2024, primarily due to strong revenue volumes to municipalities in the first two quarters of fiscal 2025. Operating loss in this segment decreased primarily as a result of the Voltrek acquisition earn-out expense decreasing in fiscal 2025 compared to 2024 along with the significant increase in revenue allowing for greater absorption of fixed costs.

### Liquidity and Capital Resources

### Overview

We believe our existing cash and operating cash flow provide us with the financial flexibility needed to meet our capital requirements, including to fund our budgeted capital expenditures and working capital needs for at least one year from the date of this report, as well as our longer-term capital requirements for periods beyond at least one year from the date of this report.

We had approximately $7.5 million in cash and cash equivalents as of December 31, 2024, compared to $5.2 million at March 31, 2024. Our cash position increased as a result of the proceeds of our $3.525 million mortgage loan, which closed in the second quarter of fiscal 2025, along with strong cash receipts in the third quarter, which were partially offset by an operating loss along with $2.5 million repayment of debt during the third quarter of fiscal 2025.

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 and 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 for at least the next 12 months based on our current cash flow forecast, if we experience significant liquidity constraints, we may be required to issue equity or debt securities, reduce our sales efforts, implement additional cost savings initiatives or undertake other efforts to conserve our cash.

### Cash Flows

The following table summarizes our cash flows for the nine months ended December 31, 2024 and 2023 (in thousands):

|  | Nine Months Ended December 31, 2024 | 2023 |
| --- | ---: | ---: |
| Operating activities | $1,298 | $(10,267) |
| Investing activities | 134 | (750) |
| Financing activities | 910 | (8) |
| Increase (decrease) in cash and cash equivalents | $2,342 | $(11,025) |

*Cash Flows Related to Operating Activities.* Cash used in 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.

Cash provided by operating activities for the first nine months of fiscal 2025 was $1.3 million and consisted of our net loss of $8.9 million adjusted for non-cash expense items and net cash provided in changes in operating assets of $10.2 million, the largest of which were accounts receivable, revenue earned but not billed, and inventories totaling $8.5 million. These increases were partially offset by a $4.9 million decrease in accounts payable.

Cash used in operating activities for the first nine months of fiscal 2024 was $10.3 million and consisted of our net loss of $13.3 million adjusted for non-cash expense items and net cash used in changes in operating assets of $3.0 million, the largest of which was a benefit from a $5.5 million accounts payable.

*Cash Flows Related to Investing Activities*. Cash provided by investing activities of $134 thousand in the first nine months of fiscal 2025 consisted primarily of sales of property and equipment.

Cash used in investing activities of $0.8 million in the first nine months of fiscal 2024 consisted primarily of purchases of property and equipment, partially offset by proceeds from the sale of property and equipment.

*Cash Flows Related to Financing Activities.* Cash provided by financing activities of $910 thousand in the first nine months of fiscal 2025 was primarily due to the mortgage term loan discussed in Note 12 above, which was partially offset by payments on our revolving credit facility and long-term debt.

Cash used in financing activities of $8 thousand in the first nine months of fiscal 2024 consisted primarily of payment of long-term debt.

### Working Capital

Our net working capital as of December 31, 2024 was $10.5 million, consisting of $37.1 million in current assets and $26.6 million in current liabilities. Our net working capital as of March 31, 2024 was $16.7 million, consisting of $44.8 million in current assets and $28.1 million in current liabilities.

We generally attempt to maintain at least a three-month supply of on-hand inventory of purchased components and raw materials to meet anticipated demand, as well as to reduce our risk of unexpected raw material or component shortages or supply interruptions. Our accounts receivables, inventory, payables and unbilled revenue may increase to the extent our revenue and order levels increase.

### Indebtedness

### Revolving Credit Agreement

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 December 31, 2024, the borrowing base supported approximately $15.6 million of availability under the Credit Facility, with $7.5 million drawn against that availability. As of December 31, 2023, the borrowing base supported approximately $22.5 million of availability under the Credit Facility, with $10.0 million drawn against that availability.

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

Borrowings under the credit agreement are permitted in the form of SOFR or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to our availability under the Credit Agreement. Among other fees, we are required to pay an annual facility fee of $15,000 and a fee of 25 basis points on the unused portion of the 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 the greater of $3.0 million or 15% 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 our ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, pay any dividend or distribution on our stock, redeem, retire or purchase shares of our 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 we become 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.

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.

Effective October 30, 2024, we and our lender, executed Amendment No. 3 ("Amendment No. 3") to our Credit Agreement. The primary purpose of Amendment No. 3 was to extend the maturity date of the Credit Facility from December 29, 2025 to June 30, 2027.

### Backlog

Backlog represents the amount of revenue that we expect to realize in the future as a result of firm, committed purchase orders. Backlog totaled $14.4 million and $22.0 million as of December 31, 2024 and March 31, 2024, respectively. We generally expect our backlog to be recognized as revenue within one year. Backlog does not include any amounts for contracted maintenance services.

### Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

### Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make certain estimates and judgments that affect our reported assets, liabilities, revenue and expenses, and our related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an ongoing basis, including those related to revenue recognition, inventory valuation, stock-based compensation and income taxes. The estimates of forecasted cash flows are used in the assessment for impairment of long-lived assets and the realizability of deferred tax assets. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. A summary of our critical accounting policies is set forth in the “Critical Accounting Policies and Estimates” section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended March 31, 2024. For the quarter ended December 31, 2024, there were no material changes in our accounting policies.

### Recent Accounting Pronouncements

For a complete discussion of recent accounting pronouncements, refer to Note 2 in the Condensed Consolidated Financial Statements included elsewhere in this report.

## Market risk

As filed, 272 characters.

Our exposure to market risk was discussed in the “Quantitative and Qualitative Disclosures About Market Risk” section contained in our Annual Report on Form 10-K for the year ended March 31, 2024. There have been no material changes to such exposures since March 31, 2024.

## Controls and procedures

As filed, 1,234 characters.

### Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2024, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based on this evaluation, such officers have concluded that our disclosure controls and procedures were effective as of December 31, 2024.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) for the quarter ended December 31, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 701 characters.

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I - Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, which we filed with the SEC on June 12, 2024 and in Part 1 - Item 2 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q.

Filed Feb 11, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-017947. Last ingested by Listed: Oct 24, 2026, 15:09 ET. No prices; not investment advice.