8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

_______________________

Date of Report (Date of earliest event reported): August 4, 2014

              ORION ENERGY SYSTEMS, INC.             

(Exact name of registrant as specified in its charter)

Wisconsin	01-33887	39-1847269
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

  2210 Woodland Drive, Manitowoc, Wisconsin  

(Address of principal executive offices, including zip code)

  (920) 892-9340  

(Registrant’s telephone number, including area code)

  Not Applicable  

(Former name or former address, if changed since last report)

_______________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On August 4, 2014, Orion Energy Systems, Inc. (the “Company”) issued a press release announcing its quarterly financial results for its fiscal 2015 first quarter ended June 30, 2014. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. Also furnished as Exhibit 99.2 is certain supplemental information posted on the Company’s website at www.oesx.com.

Item 9.01(d). Financial Statements and Exhibits.

Exhibit 99.1 Press Release of Orion Energy Systems, Inc. dated August 4, 2014.

Exhibit 99.2 Supplemental Financial Information.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ORION ENERGY SYSTEMS, INC.
Date: August 4, 2014	By: /s/ Scott R. Jensen
	Scott R. Jensen
	Chief Financial Officer

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EX-99.1

EXHIBIT 99.1

Orion Energy Systems Announces Fiscal 2015

First Quarter Results

Company to Hold Conference Call with Accompanying Slide Presentation at 4:30 EDST Today

MANITOWOC, Wis. — August 4, 2014 (BUSINESS WIRE) -- Orion Energy Systems, Inc. (NYSE MKT: OESX), a leading designer and manufacturer of high-performance, energy-efficient lighting platforms, today announced financial results for its fiscal 2015 first quarter ended June 30, 2014.

Operating and Financial Highlights

• Total revenue for the fiscal 2015 first quarter was $13.3 million, compared to $20.9 million in the prior-year period.

• LED lighting sales increased 127.7% year-over-year to $2.6 million in the fiscal 2015 first quarter, accounting for 20.9% of lighting product revenues, an increase from $1.1 million, or 7.6% of lighting product revenues, in the prior year period.

• As of June 30, 2014, the Company had a current backlog of purchase orders amounting to $7.4 million, with $7.0 million in LED and HIF lighting orders, the largest lighting backlog total since September 2011.

• In addition to the hundreds of existing reseller customers, the Company grew its network of key regional resellers to 53 at June 30, 2014 from 30 at March 31, 2014. Orion believes that expansion in this metric will serve as a leading indicator of future sales as there is a certain ramp-up time from signing to when resellers begin to produce a consistent order flow.

• As of June 30, 2014, the Company’s working capital was $29.7 million compared to $33.1 million at March 31, 2014.

Management Comments

John Scribante, Chief Executive Officer of Orion, stated, “We achieved growth in our pipeline of LED sales for the first quarter of fiscal 2015 during a period of redirection, as we are positioning ourselves to become a predominantly solid state LED lighting retrofit product company. The growth in Orion’s order flow was largely driven by national account wins, specifically sales of our LED Troffer Door Retrofit (LDR) product introduced in January 2014. While our top-line was affected in the short-term as a result of a number of these orders being placed in the latter half of the fiscal first quarter, we expect these will translate into revenues in the next two quarterly periods. Each new order from existing and new customers allows us to showcase our superior product offerings as well as our exceptional customer service to the market.”

Financial Review

Fiscal 2015 First Quarter

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• Total revenue was $13.3 million for the fiscal 2015 first quarter, compared to $20.9 million in the prior-year period. The decrease in revenue was a result of delayed customer purchase decisions in the early months of the fiscal 2015 first quarter, coupled with cyclical budget allocation of prospective customers. Also, Orion has seen a decrease of $3.9 million in revenues year-over year attributed directly to their exit of the solar energy business line. Revenue from the non-core solar business is expected to be approximately $1.5 million during fiscal 2015 and will not continue into future years.

• Product revenue from Orion’s LED products increased to $2.55 million, or 20.9% of total lighting product revenues, during fiscal 2015 first quarter, compared to $1.1 million, or 7.6% of total lighting product revenues, in the prior-year period.

• Total lighting revenues that were generated through resellers during the fiscal 2015 first quarter was 71.2%, compared to 62% in prior-year period.

• Total gross margin was 19.6% for the fiscal 2015 first quarter, compared to 27.4% for the prior-year period, largely as a result of the decline in lighting product revenue and the related impact of fixed expenses within its manufacturing facility. As the Company begins to realize economies-of-scale among its lighting product categories, it expects to achieve gross margins of approximately 30%.

• The Company reported a net loss for the fiscal 2015 first quarter of $4.4 million, or $0.20 per diluted share, compared to a net loss of $0.8 million, or $0.04 per diluted share, in the prior-year period.

Balance Sheet Review

• Orion had approximately $16.3 million in cash and cash equivalents and $0.5 million in short-term investments as of June 30, 2014, compared to $17.6 million and $0.5 million, respectively, at March 31, 2014.

• The Company’s working capital as of June 30, 2014, was $29.7 million, consisting of $44.2 million in current assets and $14.5 million in current liabilities, compared to $33.1 million, consisting of $50.3 million in current assets and $17.2 million in current liabilities, at March 31, 2014.

• The Company reported a $1.3 million decrease of net cash from operations during first quarter of 2015, compared to a $2.0 million increase of net cash from operations in the prior-year period.

• Total debt was $5.8 million at June 30, 2014, compared with $6.6 million at March 31, 2014.

Outlook

• The Company continues to expect total revenues for fiscal 2015 to range from $80.0 million to $105.0 million, which is based largely on projected sales acceleration of its LED product line.

• Orion has budgeted a ramp-up in sales over the subsequent quarters of fiscal 2015 from LED products. The Company expects that the timeline of increased sales will largely match with the historical capital allocation budgets of its clients in the second half of calendar 2015, as well as reflect the growing adoption rate from target customers in the office, retail, and industrial sectors.

• The Company continues to evaluate potential acquisition possibilities that could expand its supply chain capabilities, product line, and be complementary to its existing operations.

• The Company-wide re-branding initiative will continue, positioning Orion as a premier LED lighting solutions company.

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Mr. Scribante concluded, “We will continue to leverage our previous customer relationships and partnerships as we lead the adoption of LED lighting retrofit solutions in the office, high bay, and outdoor space. Conveying the performance and efficiency benefits of our LED products to customers to create an ROI driven purchase decision is something we must continue to focus on from a sales perspective. We intend to focus on driving these sales through expansion of our reseller network, signing new national accounts, and investing in a corporate branding initiative that highlights Orion’s position as the leader in retrofitted Solid-State LED solutions. We expect to leverage the ample capacity at our current manufacturing facility, continue to maintain a rational expense structure as we grow, and leverage our strong balance sheet to explore acquisition opportunities. We have been encouraged by the growth in our sales pipeline thus far in fiscal 2015 and feel that Orion is uniquely suited to capture a leading position in the LED retrofit market.”

Supplemental Information

In conjunction with this press release, Orion has posted supplemental information on its website which further discusses the financial performance of the Company for the three months ended June 30, 2014. The supplemental information can be found in the Investor Relations section of Orion’s website at www.oesx.com.

Conference Call

Orion will discuss these results in a conference call today, Monday, August 4, 2014, at 4:30 ET.

The dial-in numbers are:

Domestic callers: (877) 754-5294

International callers: (678) 894-3013

The Company will be utilizing an accompanying slideshow presentation in conjunction with this call, which will be available on the Investor Relations section of Orion’s website at www.oesx.com.

To listen to the live webcast, go to the Investor Relations section of Orion Energy Systems’ website at http://investor.oriones.com/events.cfm for a live webcast link. To ensure a timely connection, it is recommended that users register at least 15 minutes prior to the scheduled webcast.

An audio replay of the earnings conference call will be available shortly after the call and will remain available through August 11, 2014. The replay can be accessed by dialing (855) 859-2056. The replay pass code for callers is

74639105.

About Orion Energy Systems

Orion is leading the transformation of commercial and industrial buildings with state-of-the-art energy efficient lighting systems. Orion manufactures and markets a cutting edge portfolio of products encompassing LED Solid-State Lighting, high intensity fluorescent, and smart controls. Orion's 70+ patents held or pending provide unparalleled optical and thermal performance, which drive financial, environmental, and work-space benefits for a wide variety of retrofit markets.

Safe Harbor Statement

Certain matters discussed in this press release, including under our "Outlook for Fiscal 2015" section, are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements will include words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or words of similar import. Similarly, statements that describe the Company’s financial guidance or future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause results to differ materially from those expected, including, but not limited to, the following: (i) our development of, and participation in, new product and technology offerings or applications, including customer acceptance of our LED product lines; (ii) the rate of customer adoption of LED lighting products and the

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increasing duration of customer sales cycles as customers defer purchasing decisions to evaluate LED product costs and performance; (iii) deterioration of market conditions, including delays to customer capital expenditure budgets; (iv) our ability to compete and execute our growth and profitability strategy in a highly competitive market and our ability to respond successfully to market competition; (v) any material changes to our inventory obsolescence reserves; (vi) our ability to recruit and hire sales talent to increase our in-market sales; (vii) the substantial cost of our various legal proceedings; (viii) our decreasing emphasis on obtaining new solar photovoltaic construction projects, (ix) price fluctuations, shortages or interruptions of component supplies and raw materials used to manufacture our products; (x) loss of one or more key customers or suppliers, including key contacts at such customers; (xi) our ability to effectively manage our product inventory to provide our products to customers on a timely basis; (xii) our ability to effectively manage the credit risk associated with our debt funded OTA contracts; (xiii) a reduction in the price of electricity; (xiv) the cost to comply with, and the effects of, any current and future government regulations, laws and policies; (xv) increased competition from government subsidies and utility incentive programs; (xvi) dependence on customers’ capital budgets for sales of products and services; (xvii) the availability of additional debt financing and/or equity capital; (xviii) potential warranty claims; (xix) potential acquisitions; and (xx) our expectations for the fiscal year ending March 31, 2015. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at http://www.sec.gov or at http://www.oesx.com in the Investor Relations section of the Company’s Web site.

Investor Relations Contacts:

Scott Jensen

Chief Financial Officer

Orion Energy Systems, Inc.

(920) 892-9340

Adam Prior

Senior Vice President

The Equity Group Inc.

(212) 836-9606

aprior@equityny.com

Forrest Hunt

Associate

The Equity Group Inc.

(212) 836-9610

fhunt@equityny.com

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ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

	Three Months Ended June 30,
	2013			2014
Product revenue	$	17,523		$	12,243
Service revenue	3,329			1,070
Total revenue	20,852			13,313
Cost of product revenue	12,884			9,855
Cost of service revenue	2,245			846
Total cost of revenue	15,129			10,701
Gross profit	5,723			2,612
Operating expenses:
General and administrative	2,759			3,648
Acquisition and integration related expenses	—			22
Sales and marketing	3,303			2,878
Research and development	490			416
Total operating expenses	6,552			6,964
Loss from operations	(829		)	(4,352		)
Other income (expense):
Interest expense	(113		)	(90		)
Dividend and interest income	174			94
Total other income	61			4
Loss before income tax	(768		)	(4,348		)
Income tax (benefit) expense	13			11
Net loss	$	(781	)	$	(4,359	)
Basic net loss per share	$	(0.04	)	$	(0.20	)
Weighted-average common shares outstanding	20,173,743			21,669,120
Diluted net loss per share	$	(0.04	)	$	(0.20	)
Weighted-average common shares outstanding	20,173,743			21,669,120

The following amounts of stock-based compensation were recorded (in thousands):

	Three Months Ended June 30,
	2013		2014
Cost of product revenue	$	20	$	12
General and administrative	221		345
Sales and marketing	126		65
Research and development	3		5
Total	$	370	$	427

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ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

		March 31,			June 30,
		2014			2014
Assets
Cash and cash equivalents		$	17,568		$	16,336
Short-term investments		470			471
Accounts receivable, net		15,098			13,651
Inventories, net		11,790			10,858
Deferred contract costs		742			130
Prepaid expenses and other current assets		4,673			2,786
	Total current assets	50,341			44,232
Property and equipment, net		23,135			22,667
Long-term inventory		10,607			10,940
Goodwill		4,409			4,409
Other intangible assets, net		7,551			7,264
Long-term accounts receivable		1,966			1,539
Other long-term assets		931			959
	Total assets	$	98,940		$	92,010
Liabilities and Shareholders’ Equity
Accounts payable		$	8,530		$	6,941
Accrued expenses		4,597			4,013
Deferred revenue, current		614			376
Current maturities of long-term debt		3,450			3,187
	Total current liabilities	17,191			14,517
Long-term debt, less current maturities		3,151			2,595
Deferred revenue, long-term		1,316			1,295
Other long-term liabilities		270			272
	Total liabilities	21,928			18,679
Shareholders’ equity:
Additional paid-in capital		130,766			131,433
Treasury stock		(35,813		)	(35,812		)
Shareholder notes receivable		(50		)	(40		)
Retained deficit		(17,891		)	(22,250		)
	Total shareholders’ equity	77,012			73,331
	Total liabilities and shareholders’ equity	$	98,940		$	92,010

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ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

				Three Months Ended June 30,
				2013			2014
Operating activities
Net loss				$	(781	)	$	(4,359	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating
		activities:
			Depreciation	1,014			762
			Amortization	40			346
			Stock-based compensation expense	370			427
			Loss (gain) on sale of property and equipment	21			(5		)
			Provision for inventory reserves	594			20
			Provision for bad debts	80			44
			Other	33			29
	Changes in operating assets and liabilities:
			Accounts receivable, current and long-term	(4,387		)	1,830
			Inventories, current and long-term	864			612
			Deferred contract costs	(893		)	612
			Prepaid expenses and other assets	439			829
			Accounts payable	2,870			(1,589		)
			Accrued expenses	568			(582		)
			Deferred revenue	1,190			(259		)
	Net cash provided by (used in) operating activities			2,022			(1,283		)
Investing activities
	Purchase of property and equipment			(130		)	(304		)
	Purchase of short-term investments			(1		)	(1		)
	Additions to patents and licenses			(19		)	(48		)
	Proceeds from sales of property, plant and equipment			30			1,001
	Net cash (used in) provided by investing activities			(120		)	648
Financing activities
	Payment of long-term debt			(850		)	(819		)
	Proceeds from repayment of shareholder notes			1			10
	Proceeds from issuance of common stock			35			212
	Net cash used in financing activities			(814		)	(597		)
Net increase (decrease) in cash and cash equivalents				1,088			(1,232		)
Cash and cash equivalents at beginning of period				14,376			17,568
Cash and cash equivalents at end of period				$	15,464		$	16,336

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EX-99.2

EXHIBIT 99.2

Orion Energy Systems, Inc.

Supplemental Information

Fiscal 2015 First Quarter Ended June 30, 2014

August 4, 2014

On August 4, 2014, Orion Energy Systems, Inc. issued a press release announcing financial results for its fiscal 2015 first quarter ended June 30, 2014.  The purpose of the supplemental information included below is to provide further discussion and analysis of our financial results for the first quarter ended June 30, 2014.  Therefore, the accompanying information provided below should be read in conjunction with our press release.

Statement of Operations

Revenue. Product revenue decreased from $17.5 million for the fiscal 2014 first quarter to $12.2 million for the fiscal 2015 first quarter, a decrease of $5.3 million, or 30%. The decrease in product revenue was a result of decreased sales of solar photovoltaic, or PV, systems and delayed customer purchase decisions as a result of the continuing emergence of light emitting diode, or LED, lighting solutions. We began to experience this customer delay during our fourth quarter of fiscal 2014. Within our industrial customer base, LED product costs have been declining while performance, and the related energy reduction is improving. However, while return on investment for our customers using LED technology is improving, these products do not currently meet existing customer payback expectations of two years. We believe customers have been delaying decisions as they continue to monitor and evaluate lighting technology alternatives. We believe that these products will become more economically viable during the back half of calendar 2014. Product sales of our LED fixtures increased from $1.1 million for the fiscal 2014 first quarter to $2.5 million for the fiscal 2015 first quarter, an increase of $1.4 million, or 127%. Service revenue decreased from $3.3 million for the fiscal 2014 first quarter to $1.1 million for the fiscal 2015 first quarter, a decrease of $2.2 million, or 68%. The decrease in service revenue was a result of fewer solar projects under construction and lower national account lighting sales versus the prior year. Total revenue from renewable energy systems was $1.1 million for the fiscal 2015 first quarter compared to $5.0 million for the fiscal 2014 first quarter. The decrease in revenue from renewable energy systems was due to fewer solar projects under construction as compared to a single large solar project under construction during fiscal 2014. We expect this trend of decreasing solar PV system revenue to continue through the remainder of fiscal 2015 as a result of deemphasizing our focus on pursuing new solar PV projects.

Backlog. Total cash order backlog as of June 30, 2014 was $7.4 million, which included $0.4 million of solar PV orders, compared to a backlog of $2.7 million as of March 31, 2014, which included $1.1 million of solar PV orders. We currently expect approximately $7.3 million of our backlog to

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be recognized as revenue during the remainder of fiscal 2015. We typically expect the non-solar portion of our backlog to be recognized as revenue within 90 days from receipt of order. Our solar PV orders are typically longer-term construction type projects and we expect revenue to be recognized over a period of between three and 24 months from receipt of order, depending upon the size and complexity of the project. The roll-forward of cash backlog from March 31, 2014 to June 30, 2014 is as follows (in millions):

Backlog – March 31, 2014	$	2.7
Q1 – Plus: Cash orders and OTA contracts at net present value of future cash flows	17.2
Q1 – Less: Revenue recognized during the quarter	(13.3		)
Q1 – Plus: Portion of revenue recognized from PPAs	0.2
Q1 – Plus: Other miscellaneous and project change orders	0.6
Backlog – June 30, 2014	$	7.4

Cost of Revenue and Gross Margin. Our cost of product revenue decreased from $12.9 million for the fiscal 2014 first quarter to $9.9 million for the fiscal 2015 first quarter, a decrease of $3.0 million, or 23%. Our cost of service revenue decreased from $2.2 million for the fiscal 2014 first quarter to $0.8 million for the fiscal 2015 first quarter, a decrease of $1.4 million, or 62%. Total gross margin was 19.6% for the fiscal 2015 first quarter compared to 27.4% for the fiscal 2014 first quarter. Our gross margin on solar PV revenue was 19.6% during the fiscal 2015 first quarter compared to 22.2% during the fiscal 2014 first quarter. Gross margin from sales of our integrated lighting systems for the fiscal 2015 first quarter was 19.6% compared to 29.1% for the fiscal 2014 first quarter. The decrease in our lighting gross margin percentage was due to the decrease in sales volumes of manufactured lighting products and the related impact of fixed expenses within our manufacturing facility. We expect that our gross margins from sales of lighting products will improve as sales volumes increase of manufactured lighting products increases and our manufacturing facility can reach economies of scale.

General and Administrative Expenses. Our general and administrative expenses increased from $2.8 million for the fiscal 2014 first quarter to $3.6 million for the fiscal 2015 first quarter, an increase of $0.9 million, or 32%. The increase was due to intangible amortization expense of $0.3 million, incremental expenses resulting from the acquisition of Harris in fiscal 2014, increased compensation and benefit expenses, and increased consulting expenses related to initiatives for recruiting and talent development, strategic sourcing and the creation of financial systems tools. These increases were partially offset by decreased legal expenses of $0.2 million during the quarter.

Acquisition and Integration Related Expenses. Our acquisition and integration related expenses for the the fiscal 2015 first quarter were $22,000. We incurred no acquisition related expenses for the fiscal 2014 first quarter.

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Sales and Marketing Expenses. Our sales and marketing expenses decreased from $3.3 million for the fiscal 2014 first quarter to $2.9 million for the fiscal 2015 first quarter, a decrease of $0.4 million, or 13%. The decrease was due to reduced commission expense of $0.2 million due to the decline in revenue, reduced depreciation of $0.2 million as sales IT systems reached the end of their depreciable lives, and reduced travel expenses of $0.2 million due to the sale of our corporate jet. These decreases were partially offset by increased spending in advertising and product promotions to increase LED revenue opportunities and an increase for incremental operating expenses from the acquisition of Harris during fiscal 2014. We have recently been increasing, and intend to continue to increase, our in-market direct sales force during fiscal 2015. Additionally, we intend to invest in a re-branding initiative during fiscal 2015 to educate our customers about our LED product offerings.

Total sales and marketing employee headcount was 84 and 80 at June 30, 2013 and 2014, respectively.

Research and Development Expenses. Our research and development, or R&D, expenses decreased from $0.5 million for the fiscal 2014 first quarter to $0.4 million for the fiscal 2015 first quarter, a decrease of $0.1 million, or 15%. Our R&D expenses decreased during the quarter due to a reduction in compensation expenses, offset by increased spending for samples, testing and certification of new products. We expect our R&D expenses to increase during the remainder of fiscal 2015 due to initiatives to expand our LED fixture product lines.

Interest Expense. Our interest expense decreased from $113,000 for the fiscal 2014 first quarter to $90,000 for the fiscal 2015 first quarter, a decrease of $23,000, or 20%. The decrease in interest expense was due to the reduction in financed contract debt for our Orion Throughput Agreements, or OTAs, compared to the prior year first quarter.

Interest Income. Our interest income decreased from $174,000 for the fiscal 2014 first quarter to $94,000 for the fiscal 2015 first quarter, a decrease of $80,000, or 46%. Our interest income decreased as we increased the utilization of third party finance providers for a majority of our financed projects. In the future, we expect our interest income to decrease as we continue to utilize third party finance providers for our OTA projects.

Income Taxes. Our income tax expense decreased from $13,000 for the fiscal 2014 first quarter to $11,000 for the fiscal 2015 first quarter, a decrease of $2,000, or 15%. Our effective income tax rate for the fiscal 2015 first quarter was 0.3%, compared to 1.7% for the fiscal 2014 first quarter. The change in effective rate was due primarily to the impact of expected minimum state tax liabilities.

Statement of Cash Flows

Cash Flows Related to Operating Activities. Cash used in operating activities primarily consists of net income (loss) adjusted for certain non-cash items, including depreciation and amortization, stock-based compensation expenses, income taxes and the effect of changes in working capital and other activities.

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Cash used in operating activities for the fiscal 2015 first quarter was $1.3 million and consisted of net cash provided by changes in operating assets and liabilities of $1.5 million and cash used from a net loss adjusted for non-cash expense items of $2.7 million. Cash provided by changes in operating assets and liabilities consisted of a decrease in accounts receivable of $1.8 million due to collections of customer payments, a decrease of $0.6 million in inventory on decreased purchases of raw materials, predominantly fluorescent lighting components, a decrease in deferred contract costs of $0.6 million due to the progress completion of solar PV projects under construction, and a decrease in prepaid and other assets of $0.8 million for unbilled revenue related to solar projects where construction progress is billed to the customer at the beginning of the month following the month in which the work was performed and ordinary amortization of prepaid expenses. Cash used from changes in operating assets and liabilities included a $1.6 million decrease in accounts payable due to reduced inventory purchases and the timing of vendor payments, a $0.6 million decrease in accrued expenses due to reduced legal, commission and project installation expenses incurred during the quarter, and a decrease in deferred revenue of $0.3 million due to the timing of project billing for solar projects under construction.

Cash provided from operating activities for the fiscal 2014 first quarter was $2.0 million and consisted of net cash provided by changes in operating assets and liabilities of $0.6 million and a net loss adjusted for non-cash expense items of $1.4 million. Cash provided by changes in operating assets and liabilities consisted of a decrease of $1.5 million in inventory on decreased purchases of lighting components, predominantly fluorescent ballasts and LED components, an increase in accounts payable of $2.9 million due to the timing of vendor payments for solar project materials and construction installation costs, a decrease in prepaid and other assets of $0.4 million for unbilled revenue related to solar projects where construction progress is billed to the customer at the beginning of the month following the month in which the work was performed and an increase in accrued expenses of $0.6 million related to legal expenses and project installation costs. Cash used from changes in operating assets and liabilities included a $4.4 million increase in accounts receivable due to the timing of project billing for a large solar project under construction.

Cash Flows Related to Investing Activities. For the fiscal 2015 first quarter, cash provided from investing activities was $0.6 million which included $1.0 million of proceeds from the sale of our facility in Plymouth, Wisconsin, offset by $0.3 million for capital improvements related to new product tooling, information systems technologies and infrastructure investments to improve our response time to customers and generate business efficiencies, and $47,000 for investment in patents.

For the fiscal 2014 first quarter, cash used in investing activities was $0.1 million for capital improvements related to product development tooling and information technology systems.

Cash Flows Related to Financing Activities. For the fiscal 2015 first quarter, cash flows used in financing activities were $0.6 million which included $0.8 million used for repayment of long-term debt partially offset by $0.2 million received from stock option exercises and stock note repayments.

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For the fiscal 2014 first quarter, cash flows used in financing activities were $0.8 million which included $0.9 million used for repayment of long-term debt partially offset by $36,000 received from stock option exercises and stock note repayments.

Working Capital

Our net working capital as of June 30, 2014 was $29.7 million, consisting of $44.2 million in current assets and $14.5 million in current liabilities. Our net working capital as of March 31, 2014 was $33.1 million, consisting of $50.3 million in current assets and $17.2 million in current liabilities. Our current accounts receivables decreased from our fiscal 2014 year-end by $1.4 million due to increased collections. Our current inventories decreased from our fiscal 2014 year-end by $0.9 million due to decreases in raw materials and accessories for fluorescent lighting product lines. Our deferred contract costs decreased from our fiscal 2014 year-end by $0.6 million due to progress completion of our solar PV projects. Our prepaid expenses and other assets decreased from our fiscal 2014 year-end by $1.9 million due to the sale of our Plymouth building resulting in a $1.0 decrease, a $0.6 million decrease in unbilled revenue related to the timing of billing on solar projects and the ordinary amortization of other prepaid expenses. Our accounts payable decreased from our fiscal 2014 year end by $1.6 million due to decreased inventory purchases and the timing of vendor payments. Our accrued expenses decreased from our fiscal 2014 year end by $0.6 million due to decreases in accrued project installation costs, decreased legal expenses and reduced commission expense.

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 and payables may increase to the extent our revenue and order levels increase.

Capital Spending

Capital expenditures totaled $0.3 million during the fiscal 2015 first quarter due to investments in new product tooling, information systems technologies and infrastructure investments to improve our response time to customers and generate business efficiencies. We expect to incur a total of approximately $0.6 to $0.9 million in capital expenditures during the remainder of fiscal 2015. Our capital spending plans predominantly consist of investments related to new product development tooling, our manufacturing operations to improve efficiencies and reduce costs, for investments in information technology systems, and improvements in telecommunication systems to enhance communications to customers. We expect to finance these capital expenditures primarily through our existing cash, equipment secured loans and leases, to the extent needed, long-term debt financing, or by using our available capacity under our credit facility.

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Additionally, a key part of our strategic growth plans are to pursue potential acquisition opportunities.

Liquidity and Capital Resources

We had approximately $16.3 million in cash and cash equivalents and $0.5 million in short-term investments as of June 30, 2014, compared to $17.6 million and $0.5 million at March 31, 2014. Additionally, as of June 30, 2014 we had $15.0 million of borrowing availability under our revolving credit agreement. We are currently working with JP Morgan on a renewal of our credit agreement which otherwise expires on August 30, 2014.

We were not in compliance with our line of credit covenant requirements related to debt service coverage ratio and funded debt to EBITDA ratio as of June 30, 2014. We are in the process of obtaining a covenant waiver and anticipate receiving such waiver due to our cash balances and no borrowings outstanding under the credit facility.

We believe that our existing cash and cash equivalents, our anticipated cash flows from operating activities and our borrowing capacity under our revolving credit facility will be sufficient to meet our anticipated cash needs for the next 12 months, dependent upon our growth opportunities with our cash and finance customers and future potential acquisitions. Any future potential acquisitions would likely need to be funded by our existing cash resources, our credit facility, seller financing and/or the issuance of additional equity or debt securities.

On January 17, 2014, we filed a universal shelf registration statement with the Securities and Exchange Commission. Under our shelf registration statement, we have the flexibility to publicly

offer and sell from time to time up to $75.0 million of debt and/or equity securities. The filing of the shelf registration statement will help facilitate our ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, or repay existing debt.

Safe Harbor Statement

Certain matters discussed in this supplemental information are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements will include words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or words of similar import. Similarly, statements that describe our financial guidance or future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause results to differ materially from those expected, including, but not limited to, the following: (i) our development of, and participation in, new product and technology offerings or applications, including customer acceptance of our LED product lines; (ii) the rate of customer adoption of LED lighting products and the increasing duration of customer sales cycles as customers defer purchasing decisions to evaluate LED product costs and performance; (iii) deterioration of market conditions, including

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delays to customer capital expenditure budgets; (iv) our ability to compete and execute our growth and profitability strategy in a highly competitive market and our ability to respond successfully to market competition; (v) any material changes to our inventory obsolescence reserves; (vi) our ability to recruit and hire sales talent to increase our in-market sales; (vii) the substantial cost of our various legal proceedings; (viii) our decreasing emphasis on obtaining new solar photovoltaic construction projects, (ix) price fluctuations, shortages or interruptions of component supplies and raw materials used to manufacture our products; (x) loss of one or more key customers or suppliers, including key contacts at such customers; (xi) our ability to effectively manage our product inventory to provide our products to customers on a timely basis; (xii) our ability to effectively manage the credit risk associated with our debt funded OTA contracts; (xiii) a reduction in the price of electricity; (xiv) the cost to comply with, and the effects of, any current and future government regulations, laws and policies; (xv) increased competition from government subsidies and utility incentive programs; (xvi) dependence on customers’ capital budgets for sales of products and services; (xvii) the availability of additional debt financing and/or equity capital; (xviii) potential warranty claims; (xix) potential acquisitions; and (xx) our expectations for the fiscal year ending March 31, 2015. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this supplemental information and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at http://www.sec.gov or at http://www.oesx.com in the Investor Relations section of our Web site.

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