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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    March 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number:
    001-33887
 Orion Energy Systems,
    Inc.
 (Exact name of Registrant as
    specified in its charter)
  Wisconsin

39-1847269(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)1204 Pilgrim Road, Plymouth, WI

53073(Address of principal executive
    offices)

(Zip Code)   (920) 892-9340 (Registrants
    telephone number, including area code)
  Securities registered pursuant to Section 12(b) of the
    act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon stock


The NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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FORWARD-LOOKING
    STATEMENTS
  Form 10-K Form 10-K, Form 10-K. Form 10-K. Form 10-K.
  
    our ability to compete in a highly competitive market and our
    ability to respond successfully to market competition;
    the market acceptance of our products and services;
    price fluctuations, shortages or interruptions of component
    supplies and raw materials used to manufacture our products;
    loss of one or more key customers or suppliers;
    a reduction in the price of electricity;
    the cost to comply with, and the effects of, any current and
    future government regulations, laws and policies;
    increased competition from government subsidiaries and utility
    incentive programs; and
    our ability to effectively manage our anticipated growth.     2




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##### 



ORION
    ENERGY SYSTEMS, INC.
    ANNUAL REPORT ON
    FORM 10-K
    FOR THE YEAR ENDED MARCH 31, 2008
    Table of Contents
   
 PagePART IItem 1.


Business


4Item 1A


Risk Factors


15Item 1B


Unresolved Staff Comments


24Item 2


Properties


24Item 3


Legal Proceedings


24Item 4


Submission of Matters to a Vote of Security
    Holders


25PART IIItem 5


Market for Registrants Common Equity,
    Related Shareholder Matters and Issuer Purchases of Equity
    Securities


25Item 6


Selected Financial Data


28Item 7


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


30Item 7A


Quantitative and Qualitative Disclosures About
    Market Risk


51Item 8


Financial Statements and Supplementary Data


52Item 9


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


83Item 9A


Controls and Procedures


83Item 9B


Other Information


84PART IIIItem 10


Directors, Executive Officers and Corporate
    Governance


84Item 11


Executive Compensation


84Item 12


Security Ownership of Certain Beneficial Owners
    and Management and Related Shareholder Matters


84Item 13


Certain Relationships and Related Transactions,
    and Director Independence


84Item 14


Principal Accountant Fees and Services


84PART IVItem 15


Exhibits and Financial Statement Schedules


85Signatures


90SubsidiairiesConsent of Independent Registered Public Accounting FirmCertification of Chief Executive OfficerCertification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer   3




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ITEM 1.
    BUSINESS  The following business overview is qualified in its entirety
    by the more detailed information included elsewhere or
    incorporated by reference in this Annual Report on
    Form 10-K.
    As used herein, unless otherwise expressly stated or the context
    otherwise requires, all references to Orion,
    we, us, our, the
    Company and similar references are to Orion Energy
    Systems, Inc. and its consolidated subsidiaries.
  Overview
  Coca-Cola
       4




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Cumulative FromDecember 1, 2001Through March 31, 2008(In thousands, unaudited)HIF lighting systems sold(1)


1,133Total units sold (including HIF lighting systems)


1,465Customer kilowatt demand reduction(2)


334Customer kilowatt hours saved(2)(3)


4,563,331Customer electricity costs saved(4)

$
351,376Indirect carbon dioxide emission reductions from customers
    energy savings (tons)(5)


4,449Square footage retrofitted(6)


586,763     (1)
    
    HIF lighting systems includes all HIF units sold
    under the brand name Compact Modular and its
    predecessor, Illuminator.(2)
    
    A substantial majority of our HIF lighting systems, which
    generally operate at approximately 224 watts per six-lamp
    fixture, are installed in replacement of HID fixtures, which
    generally operate at approximately 465 watts per fixture in
    commercial and industrial applications. We calculate that each
    six-lamp HIF lighting system we install in replacement of an HID
    fixture generally reduces electricity consumption by
    approximately 241 watts (the difference between 465 watts and
    224 watts). In retrofit projects where we replace fixtures other
    than HID fixtures, or where we replace fixtures with
    products other than our HIF lighting systems (which other
    products generally consist of products with lamps similar to
    those used in our HIF systems, but with varying frames, ballasts
    or power packs), we generally achieve similar wattage reductions
    (based on an analysis of the operating wattages of each of our
    fixtures compared to the operating wattage of the fixtures they
    typically replace). We calculate the amount of kilowatt demand
    reduction by multiplying (i) 0.241 kilowatts per six-lamp
    equivalent unit we install by (ii) the number of units we
    have installed in the period presented, including products other
    than our HIF lighting systems (or a total of approximately
    1.465 million units).(3)
    
    We calculate the number of kilowatt hours saved on a cumulative
    basis by assuming the reduction of 0.241 kilowatts of
    electricity consumption per six-lamp equivalent unit we install
    and assuming that each such unit has averaged 7,500 annual
    operating hours since its installation.(4)
    
    We calculate our customers electricity costs saved by
    multiplying the cumulative total customer kilowatt hours saved
    indicated in the table by $0.077 per kilowatt hour. The national
    average rate for 2006, which is the most current full year for
    which this information is available, was $.089 per kilowatt hour
    according to the United States Energy Information Administration.(5)
    
    We calculate this figure by multiplying (i) the estimated
    amount of carbon dioxide emissions that result from the
    generation of one kilowatt hour of electricity (determined using
    the Emissions and Generation Resource Integration Database, or
    EGrid, prepared by the United States Environmental Protection
    Agency), by (ii) the number of customer kilowatt hours
    saved as indicated in the table.(6)
    
    Based on 1.465 million total units sold, which contain a
    total of approximately 7.3 million lamps. Each lamp
    illuminates approximately 75 square feet. The majority of
    our installed fixtures contain six lamps and typically
    illuminate approximately 450 square feet.  Our
    Industry
   5




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Todays
    Electricity Market
  Growing Demand for Electricity. $
  Challenges to Capacity Expansion.
      Underinvestment in Electricity Transmission and
    Distribution.
  High Electricity Costs.
 6




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##### Table of Contents



Our
    Market Opportunity
      
    Thirty-four states have, through legislation or regulation,
    ordered utilities to design and fund programs that promote or
    deliver energy efficiency.
    According to the Federal Energy Regulatory Commission (FERC),
    seventeen states have implemented, or are in the process of
    implementing Energy Efficiency Resource Standards (EERS) or have
    an energy efficiency component to the Renewable Portfolio
    Standard (RPS), which generally require utilities to allocate
    funds to energy efficiency programs to meet near-term savings
    targets set by state governments or regulatory authorities.
    These states include California, Texas, Colorado, New Jersey and
    Illinois. In addition, nine other states, including Michigan,
    Florida, New York, Massachusetts and Tennessee, are all
    considering the implementation of some form of EERS.
    In recent years, there has also been an increasing focus on
    decoupling, a regulatory initiative designed to
    break the linkage between utility kWh sales and revenues, in
    order to remove the disincentives for utilities to promote load
    reducing initiatives. Decoupling aims to encourage utilities to
    actively promote energy efficiency by allowing utilities to
    generate revenues and returns on investment from employing
    energy management solutions. To date, nearly half of all states
    have adopted or are adopting forms of decoupling for gas or
    electric utilities.      The
    Role of Lighting
   7




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Our
    Solution
  50/50 Value Proposition.
  Multi-Facility Roll-Out Capability.
  Rapid Payback Period.
  Comprehensive Energy Management System.
  Easy Installation, Implementation and
    Maintenance. plug-and-play
  Base and Peak Load Relief for Utilities.
  Environmental Benefits.
 8




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Our
    Competitive Strengths
  Compelling Value Proposition.
  Large and Growing Customer Base.
  Systematized Sales Process.
  Innovative Technology.
  Strong, Experienced Leadership Team.
  Efficient, Scalable Manufacturing Process.
 9




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Our
    Growth Strategies
  Leverage Existing Customer Base.
  Target Additional Customers.
  Provide Load Relief to Utilities and Grid
    Operators.
  Continue to Improve Operational
    Efficiencies.
  Develop New Sources of Revenue.
  Products
    and Services
     10




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Products
    The Compact Modular.
      InteLite Motion Control and Ambient Light
    Sensors. and/or
  Apollo Light Pipe.
  Wireless Controls.
 11




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Other Products.
    Services
    
    comprehensive site assessment, which includes a review of the
    current lighting requirements and energy usage at the
    customers facility;
    site field verification, where we perform a test implementation
    of our energy management system at a customers facility
    upon request;
    utility incentive and government subsidy management, where we
    assist our customers in identifying, applying for and obtaining
    available utility incentives or government subsidies;
    engineering design, which involves designing a customized system
    to suit our customers facility lighting and energy
    management needs, and providing the customer with a written
    analysis of the potential energy savings and lighting and
    environmental benefits associated with the designed system;
    project management, which involves our working with the
    electrical contractor in overseeing and managing all phases of
    implementation from delivery through installation for a single
    facility or through multi-facility roll-outs tied to a defined
    project schedule;
    installation services, which we provide through our national
    network of qualified third-party installers; and
    recycling in connection with our retrofit installations, where
    we remove, dispose of and recycle our customers legacy
    lighting fixtures.        Our
    Customers
   12




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American Standard International Inc.
    Avery Dennison Corporation
    Big Lots Inc.
    Blyth Inc.Coca-Cola
    Enterprises Inc.

Ecolab, Inc.
    Gap, Inc.
    General Electric Co.
    Kraft Foods Inc.
    Newell Rubbermaid Inc.

OfficeMax, Inc.
    Pepsi Americas Inc.
    Sealed Air Corp.
    Sherwin-Williams Co.

SYSCO Corp.
    Textron, Inc.
    Toyota Motor Corp.
    United Stationers Inc.   Coca-Cola
  Sales and
    Marketing
            Competition
     13




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Intellectual
    Property
    
    Portions of our core HIF lighting technology (including our
    optically efficient reflector and some of our thermally
    efficient fixture I-frame constructions) are patented.
    Our ballast assembly method is patent pending.
    Our light pipe technology and its manufacturing methods are
    patent pending.
    Our wireless lighting control system is patent pending.
    The technology and methodology of our sales-type financing
    program is patent pending.      Manufacturing
    and Distribution
  in-house
    Research
    and Development
   14




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Regulation
      Employees
    ITEM 1A.
    RISK
    FACTORS  You should carefully consider the risk factors set forth
    below and in other reports that we file from time to time with
    the Securities and Exchange Commission and the other information
    in this Annual Report on
    Form 10-K.
    The matters discussed in the risk factors, and additional risks
    and uncertainties not currently known to us or that we currently
    deem immaterial, could have a material adverse effect on our
    business, financial condition, results of operation and future
    growth prospects and could cause the trading price of our common
    stock to decline.
  We
    have a limited operating history, have previously incurred net
    losses, and only recently achieved profitability that we may not
    be able to sustain.
    start-up
 15




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We
    operate in a highly competitive industry and if we are unable to
    compete successfully our revenue and profitability will be
    adversely affected.
      Our
    success is largely dependent upon the skills, experience and
    efforts of our senior management, and the loss of their services
    could have a material adverse effect on our ability to expand
    our business or to maintain profitable operations.
    The
    success of our business depends on the market acceptance of our
    energy management products and services.
   16




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Sales
    of our products and services are dependent upon our
    customers capital budgets.
    Our
    products use components and raw materials that may be subject to
    price fluctuations, shortages or interruptions of
    supply.
    We
    depend on a limited number of key suppliers.
    We
    experienced component quality problems related to certain
    suppliers in the past, and our current suppliers may not deliver
    satisfactory components in the future.
    We
    depend upon a limited number of customers in any given period to
    generate a substantial portion of our revenue.
   17




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Coca-Cola
  Product
    liability claims could adversely affect our business, results of
    operations and financial condition.
    We
    depend on our ability to develop new products and
    services.
    We may
    pursue acquisitions and investments in new product lines,
    businesses or technologies that involve numerous risks, which
    could disrupt our business or adversely affect our financial
    condition and results of operations.
    We are
    currently subject to securities class action litigation, the
    unfavorable outcome of which may have a material adverse effect
    on our financial condition, results of operations and cash
    flows.
   18




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Our
    inability to protect our intellectual property, or our
    involvement in damaging and disruptive intellectual property
    litigation, could adversely affect our business, results of
    operations and financial condition or result in the loss of use
    of the product or service.
           19




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If the
    price of electricity decreases, there may be less demand for our
    products and services.
    We may
    face additional competition if government subsidies and utility
    incentives for renewable energy increase or if such sources of
    energy are mandated.
    If our
    information technology systems fail, or if we experience an
    interruption in their operation, then our business, results of
    operations and financial condition could be materially adversely
    affected.
    
    earthquake, fire, flood and other natural disasters;
    employee or other theft;
    attacks by computer viruses or hackers;
    power outages; and
    computer systems, Internet, telecommunications or data network
    failure.    We own
    and operate an industrial property that we purchased in 2004
    and, if any environmental contamination is discovered, we could
    be responsible for remediation of the property.
   20




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The
    cost of compliance with environmental laws and regulations and
    any related environmental liabilities could adversely affect our
    results of operations or financial condition.
    Our
    retrofitting process frequently involves responsibility for the
    removal and disposal of components containing hazardous
    materials.
    If we
    are unable to manage our anticipated revenue growth effectively,
    our operations, and profitability could be adversely
    affected.
    If we
    are unable to obtain additional capital as needed in the future,
    our ability to grow our revenue could be limited and we may be
    unable to pursue our current and future business
    strategies.
   21




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We
    expect our quarterly revenue and operating results to fluctuate.
    If we fail to meet the expectations of market analysts or
    investors, the market price of our common stock could decline
    substantially, and we could become subject to securities
    litigation.
    Our
    ability to use our net operating loss carryforwards will be
    subject to limitation.
    Our
    common stock has only recently been publicly traded and we
    expect that the price of our common stock will fluctuate
    substantially.
    
    fluctuations in our financial performance;
    economic and stock market conditions generally and specifically
    as they may impact us, participants in our industry or
    comparable companies;
    changes in financial estimates and recommendations by securities
    analysts following our common stock or comparable companies;
    earnings and other announcements by, and changes in market
    evaluations of, us, participants in our industry or comparable
    companies;
    changes in business or regulatory conditions affecting us,
    participants in our industry or comparable companies;
    changes in accounting standards, policies, guidance,
    interpretations or principles;
    announcements or implementation by our competitors or us of
    acquisitions, technological innovations or new products, or
    other strategic actions by our competitors; or
    trading volume of our common stock or the sale of stock by our
    management team, directors or principal shareholders.   22




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If
    securities or industry analysts do not publish research or
    publish inaccurate or unfavorable research about our business,
    our stock price and trading volume could decline.
    Our
    failure to maintain adequate internal control over financial
    reporting in accordance with Section 404 of the
    Sarbanes-Oxley Act of 2002 or to prevent or detect material
    misstatements in our annual or interim consolidated financial
    statements in the future could result in inaccurate financial
    reporting, sanctions or securities litigation, or could
    otherwise harm our business.
      Form 10-K
 23




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The
    market price of our common stock could be adversely affected by
    future sales of our common stock in the public
    market.
  lock-up lock-up
  Anti-takeover
    provisions included in the Wisconsin Business Corporation Law
    and provisions in our amended and restated articles of
    incorporation or bylaws could delay or prevent a change of
    control of our company, which could adversely impact the value
    of our common stock and may prevent or frustrate attempts by our
    shareholders to replace or remove our current board of directors
    or management.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    ITEM 3.
    LEGAL
    PROCEEDINGS   24




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ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Price
    Range of our Common Stock
    Fiscal
    2008
  High

LowThird Quarter (beginning December 19, 2007)

$
22.46


$
16.86Fourth Quarter

$
20.51


$
6.56   Stockholders
    Dividend
    Policy
    Use of
    Proceeds from our Public Offering
  Form S-1 No. 333-145569)
 25




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Securities
    Authorized for Issuance under Equity Compensation
    Plans
    Equity
    Compensation Plan Information
  Number of SecuritiesNumber of Securities to be

Weighted-Average

Remaining Available forIssued Upon Exercise of

Exercise Price of

Future Issuances Under thePlan Category

Outstanding Options

Outstanding Options

Equity Compensation PlansEquity Compensation plans approved by security holders(1)


4,716,022


$
2.30



1,482,058     (1)
    
    Approved before our initial public offering.  Unregistered
    Sales of Securities
       26




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Stock
    Price Performance Graph
    
  December 19,


March 31,2007


2008Orion Energy Systems, Inc.


$
100



$
73Russell 2000 Index


$
100



$
91NASDAQ Clean Edge U.S. Index


$
100



$
73  27




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ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K. Form 10-K, Form 10-K.
  Fiscal Year Ended March 31,2004


2005


2006


2007


2008(In thousands, except per share amounts)Consolidated statements of operations data:Product revenue

$
12,031


$
19,628


$
29,993


$
40,201


$
65,359Service revenue


392



2,155



3,287



7,982



15,328Total revenue


12,423



21,783



33,280



48,183



80,687Cost of product revenue(1)


7,016



12,099



20,225



26,511



42,127Cost of service revenue


360



1,944



2,299



5,976



10,335Total cost of revenue


7,376



14,043



22,524



32,487



52,462Gross profit


5,047



7,740



10,756



15,696



28,225General and administrative expenses(1)


1,927



3,461



4,875



6,162



10,200Sales and marketing expenses(1)


2,381



5,416



5,991



6,459



8,832Research and development expenses(1)


261



213



1,171



1,078



1,832Income (loss) from operations


478



(1,350
)


(1,281
)


1,997



7,361Interest expense


222



570



1,051



1,044



1,390Dividend and interest income






3



5



201



1,189Income (loss) before income tax and cumulative effect of change
    in accounting principle


256



(1,917
)


(2,327
)


1,154



7,160Income tax expense (benefit)


102



(702
)


(762
)


225



2,750Income (loss) before cumulative change in accounting principle


154



(1,215
)


(1,565
)


929



4,410Cumulative effect of change in accounting principle, net






(57
)










Net income (loss)


154



(1,272
)


(1,565
)


929



4,410Accretion of redeemable preferred stock and preferred stock
    dividends(2)


(122
)


(104
)


(3
)


(201
)


(225
)Conversion of preferred stock(3)






(972
)






(83
)


Participation rights of preferred stock in undistributed
    earnings(4)


(6
)










(205
)


(775
)Net income (loss) attributable to common shareholders

$
26


$
(2,348
)

$
(1,568
)

$
440


$
3,410Net income (loss) per share attributable to common shareholders:Basic

$
0.00


$
(0.36
)

$
(0.18
)

$
0.05


$
0.22Diluted

$
0.00


$
(0.36
)

$
(0.18
)

$
0.05


$
0.19Weighted average shares outstanding:Basic


6,197



6,470



8,524



9,080



15,548Diluted


10,218



6,470



8,524



16,433



23,454  28




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As of March 31,2004


2005


2006


2007


2008(In thousands)Consolidated balance sheet data:Cash and cash equivalents

$
107


$
493


$
1,089


$
285


$
78,312Short-term investments


















2,404Total assets


11,147



21,397



24,738



33,583



130,702Long-term debt, less current maturities


4,796



7,921



10,492



10,603



4,473Temporary equity (Series C convertible redeemable preferred
    stock)














4,953



Series A convertible preferred stock


1,007



116



116







Series B convertible preferred stock


779



4,167



5,591



5,959



Shareholder notes receivable


(104
)


(246
)


(398
)


(2,128
)


Shareholders equity

$
3,448


$
5,699


$
6,622


$
9,355


$
113,190     (1)
    
    Includes stock-based compensation expense recognized under
    SFAS 123(R) as follows:  Fiscal Year Ended March 31,2007

2008(In thousands)Cost of product revenue

$
24


$
122General and administrative expenses


154



852Sales and marketing expenses


153



375Research and development expenses


32



42Total stock-based compensation expense

$
363


$
1,391   (2)
    
    For fiscal 2007 and 2008, represents the impact attributable to
    the accretion of accumulated dividends on our Series C
    preferred stock, plus accumulated dividends on our Series A
    preferred stock prior to its conversion into common stock on
    March 31, 2007. The Series C preferred converted
    automatically into common stock on a one-for-one basis upon the
    closing of our IPO and our obligation to pay accumulated
    dividends was extinguished. For fiscal 2005 and 2006, represents
    accumulated dividends on our Series A preferred stock prior
    to its conversion into common stock. See Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Revenue and Expense
    Components  Accretion of Preferred Stock and
    Preferred Stock Dividends.(3)
    
    Represents the estimated fair market value of the premium paid
    to holders of Series A preferred stock upon induced
    conversion. See Managements Discussion and Analysis
    of Financial Condition and Results of Operations 
    Revenue and Expense Components  Conversion of
    Preferred Stock.(4)
    
    Represents undistributed earnings allocated to participating
    preferred shareholders as described under
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Revenue and
    Expense Components  Participation Rights of Preferred
    Stock in Undistributed Earnings. All of our preferred
    stock converted automatically into common stock on a one-for-one
    basis upon the closing of our IPO, thereby ending our
    requirement to allocate any undistributed earnings to our
    preferred shareholders. 29




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ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  You should read the following discussion together with the
    financial statements, including the related notes, and the other
    financial information appearing elsewhere in this Annual Report
    on
    Form 10-K.
    See also Forward-Looking Statements and
    Item 1A. Risk Factors.
  Overview
  high-performance,
    Coca-Cola
    Revenue
    and Expense Components
  Revenue.
   30




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Backlog.
  Cost of Revenue.
 31




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Gross Margin.
  Operating Expenses.
          Accounting for
    Stock Issued to Employees
 32




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Interest Expense.
  Dividend and Interest Income.
  Income Taxes.
      Accretion of Preferred Stock and Preferred Stock
    Dividends.
 33




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Conversion of Preferred Stock.
  Participation Rights of Preferred Stock in Undistributed
    Earnings. No. 03-6, Participating Securities and the Two-Class Method under
    FASB Statement No. 128
 34




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##### Table of Contents



Results
    of Operations
    Fiscal Year Ended March 31,2006


2007





2008% of





% of


%





% of


%Amount


Revenue


Amount


Revenue


Change


Amount


Revenue


Change(Dollars in thousands)Product revenue

$
29,993



90.1
%

$
40,201



83.4
%


34.0
%

$
65,359



81.0
%


62.6
%Service revenue


3,287



9.9
%


7,982



16.6
%


142.8
%


15,328



19.0
%


92.0
%Total revenue


33,280



100.0
%


48,183



100.0
%


44.8
%


80,687



100.0
%


67.5
%Cost of product revenue


20,225



60.8
%


26,511



55.0
%


31.1
%


42,127



52.2
%


58.9
%Cost of service revenue


2,299



6.9
%


5,976



12.4
%


159.9
%


10,335



12.8
%


73.0
%Total cost of revenue


22,524



67.7
%


32,487



67.4
%


44.2
%


52,462



65.0
%


61.5
%Gross profit


10,756



32.3
%


15,696



32.6
%


45.9
%


28,225



35.0
%


79.8
%General and administrative expenses


4,875



14.6
%


6,162



12.8
%


26.4
%


10,200



12.6
%


65.5
%Sales and marketing expenses


5,991



18.0
%


6,459



13.4
%


7.8
%


8,832



10.9
%


36.7
%Research and development expenses


1,171



3.5
%


1,078



2.2
%


(7.9
)%


1,832



2.3
%


69.9
%Income (loss) from operations


(1,281
)


(3.8
)%


1,997



4.1
%


NM



7,361



9.1
%


268.6
%Interest expense


1,051



3.2
%


1,044



2.2
%


(0.7
)%


1,390



1.7
%


33.1
%Dividend and interest income


5



0.0
%


201



0.4
%


NM



1,189



1.5
%


491.5
%Income (loss) before income tax


(2,327
)


(7.0
)%


1,154



2.4
%


NM



7,160



8.9
%


520.5
%Income tax expense (benefit)


(762
)


(2.3
)%


225



0.5
%


NM



2,750



3.4
%


NMNet income (loss)


(1,565
)


(4.7
)%


929



1.9
%


NM



4,410



5.5
%


374.7
%Accretion of redeemable preferred stock and preferred stock
    dividends


(3
)


(0.0
)%


(201
)


(0.4
)%


NM



(225
)


(0.3
)%


11.9
%Conversion of preferred stock






0.0
%


(83
)


(0.2
)%


NM







0.0
%


NMParticipation rights of preferred stock in undistributed earnings






0.0
%


(205
)


(0.4
)%


NM



(775
)


(1.0
)%


182.8
%Net income (loss) attributable to common shareholders

$
(1,568
)


(4.7
)%

$
440



0.9
%


NM


$
3,410



4.2
%


819.1
%     NM =
    
    Not meaningful  Fiscal
    Year Ended March 31, 2008 Compared to Fiscal Year Ended
    March 31, 2007
  Revenue.
  Cost of Revenue.
 35




---



##### Table of Contents



Gross Margin.
  Operating
    Expenses
  General and Administrative.
  Sales and Marketing.
  Research and Development.
  Interest Expense.
  Dividend and Interest Income.
  Income Taxes.
  Accretion of Preferred Stock and Preferred Stock
    Dividends.
 36




---



##### Table of Contents



Fiscal
    Year Ended March 31, 2007 Compared to Fiscal Year Ended
    March 31, 2006
  Revenue.
  Cost of Revenue.
  Gross Margin.
  Operating
    Expenses
  General and Administrative.
  Sales and Marketing.
  Research and Development.
  Interest Expense.
  Dividend and Interest Income.
  Income Taxes.
  Accretion of Preferred Stock and Preferred Stock
    Dividends.
 37




---



##### Table of Contents



Conversion of Preferred Stock.
  Quarterly
    Results of Operations
  Form 10-K.
  For the Three Months EndedJune 30,


Sept. 30,


Dec. 31,


Mar. 31,


June 30,


Sept. 30,


Dec. 31,


Mar. 31,2006


2006


2006


2007


2007


2007


2007


2008(In thousands, unaudited)Product revenue

$
8,688


$
8,756


$
11,256


$
11,501


$
14,505


$
14,247


$
18,934


$
17,673Service revenue


992



1,875



2,307



2,808



2,216



4,158



4,377



4,577Total revenue


9,680



10,631



13,563



14,309



16,721



18,405



23,311



22,250Cost of product revenue


5,459



5,963



7,419



7,671



9,446



9,375



12,224



11,082Cost of service revenue


796



1,415



1,781



1,983



1,672



2,709



2,833



3,121Total cost of revenue


6,255



7,378



9,200



9,654



11,118



12,084



15,057



14,203Gross profit


3,425



3,253



4,363



4,655



5,603



6,321



8,254



8,047General and administrative expenses


1,269



1,336



1,614



1,943



1,571



1,907



3,288



3,434Sales and marketing expenses


1,518



1,608



1,551



1,782



2,111



1,938



2,260



2,523Research and development expenses


211



229



257



381



437



443



454



498Income (loss) from operations


427



80



941



549



1,484



2,033



2,252



1,592Interest expense


253



260



261



270



295



329



648



118Dividend and interest income


1



11



16



173



40



154



286



709Income (loss) before income tax


175



(169
)


696



452



1,229



1,858



1,890



2,183Income tax expense (benefit)


34



(33
)


136



88



481



805



737



727Net income (loss)


141



(136
)


560



364



748



1,053



1,153



1,456Accretion of redeemable preferred stock and preferred stock
    dividends


(1
)


(45
)


(79
)


(76
)


(75
)


(75
)


(75
)


Conversion of preferred stock














(83
)














Participation rights of preferred stock in undistributed earnings


(35
)






(168
)


(71
)


(219
)


(292
)


(264
)


Net income (loss) attributable to common shareholders

$
105


$
(181
)

$
313


$
134


$
454


$
686


$
814


$
1,456   38




---



##### Table of Contents



June 30,


Sept. 30,


Dec. 31,


Mar. 31,


June 30,


Sept. 30,


Dec. 31,


Mar. 31,2006


2006


2006


2007


2007


2007


2007


2008(Unaudited)Product revenue


89.8
%


82.4
%


83.0
%


80.4
%


86.7
%


77.4
%


81.2
%


79.4
%Service revenue


10.2
%


17.6
%


17.0
%


19.6
%


13.3
%


22.6
%


18.8
%


20.6
%Total revenue


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%Cost of product revenue


56.4
%


56.1
%


54.7
%


53.6
%


56.5
%


50.9
%


52.4
%


49.8
%Cost of service revenue


8.2
%


13.3
%


13.1
%


13.8
%


10.0
%


14.8
%


12.2
%


14.0
%Total cost of revenue


64.6
%


69.4
%


67.8
%


67.4
%


66.5
%


65.7
%


64.6
%


63.8
%Gross margin


35.4
%


30.6
%


32.2
%


32.6
%


33.5
%


34.3
%


35.4
%


36.2
%General and administrative expenses


13.1
%


12.6
%


11.9
%


13.6
%


9.4
%


10.4
%


14.1
%


15.4
%Sales and marketing expenses


15.7
%


15.1
%


11.4
%


12.5
%


12.6
%


10.5
%


9.7
%


11.3
%Research and development expenses


2.2
%


2.1
%


1.9
%


2.7
%


2.6
%


2.4
%


1.9
%


2.2
%Income (loss) from operations


4.4
%


0.8
%


6.9
%


3.8
%


8.9
%


11.0
%


9.7
%


7.2
%Interest expense


2.6
%


2.4
%


1.9
%


1.8
%


1.7
%


1.8
%


2.8
%


0.5
%Dividend and interest income


0.0
%


0.0
%


0.1
%


1.2
%


0.2
%


0.9
%


1.2
%


3.2
%Income (loss) before income tax


1.8
%


(1.6
)%


5.1
%


3.2
%


7.4
%


10.1
%


8.1
%


9.8
%Income tax expense (benefit)


0.3
%


(0.3
)%


1.0
%


0.7
%


2.9
%


4.4
%


3.2
%


3.3
%Net income (loss)


1.5
%


(1.3
)%


4.1
%


2.5
%


4.5
%


5.7
%


4.9
%


6.5
%Accretion of redeemable preferred stock and preferred stock
    dividends


(0.0
)%


(0.4
)%


(0.6
)%


(0.5
)%


(0.5
)%


(0.4
)%


(0.3
)%


Conversion of preferred stock














(0.6
)%














Participation rights of preferred stock in undistributed earnings


(0.4
)%






(1.2
)%


(0.5
)%


(1.3
)%


(1.6
)%


(1.1
)%


Net income (loss) attributable to common shareholders


1.1
%


(1.7
)%


2.3
%


0.9
%


2.7
%


3.7
%


3.5
%


6.5
%       Liquidity
    and Capital Resources
  Overview
   39




---



##### Table of Contents



Form 10-K,
    Cash
    Flows
    Fiscal Year Ended March 31,2006


2007


2008(In thousands)Operating activities

$
(3,401
)

$
(6,234
)

$
(1,362
)Investing activities


(162
)


(969
)


(7,437
)Financing activities


4,159



6,399



86,826Increase (decrease) in cash and cash equivalents

$
596


$
(804
)

$
78,027   Cash Flows Related to Operating
    Activities.
  Cash Flows Related to Investing
    Activities.
  Cash Flows Related to Financing
    Activities.
 40




---



##### Table of Contents



Working
    Capital
      Indebtedness
   41




---



##### Table of Contents



Capital
    Spending
   42




---



##### Table of Contents



Contractual
    Obligations
    Payments Due By PeriodLess than








More thanTotal


1 Year


1-3 Years


3-5 Years


5 Years(In thousands)Debt and capital leases, including interest(1)

$
6,761


$
1,143


$
1,882


$
1,424


$
2,312Operating leases


2,790



1,059



1,060



671



Non-cancellable purchase commitments(2)


11,920



11,920











Total

$
21,471


$
14,122


$
2,942


$
2,095


$
2,312     (1)
    
    Debt and capital leases includes fixed contractual interest
    payments by period of $300,000 (less than 1 year); $462,000
    (1-3 years); $322,000 (3-5) years); and $363,000 (more than
    5 years).(2)
    
    Reflects non-cancellable purchase commitments in the amount of
    $3.6 million for certain inventory items entered into in
    order to secure better pricing and ensure materials on hand and
    capital expenditure commitments in the amount of
    $8.3 million for construction of the new technology center
    at our Manitowoc facility and improvements to information
    technology systems.  Off-Balance
    Sheet Arrangements
    Internal
    Control Over Financial Reporting
       43




---



##### Table of Contents



Form 10-K
  Critical
    Accounting Policies and Estimates
    Revenue Recognition.
   44




---



##### Table of Contents



Inventories. first-in,
  Allowance for Doubtful Accounts.
  Marketable Securities. Accounting for Certain Investments in
    Debt and Equity Securities
  Stock-Based Compensation. Accounting for Stock Issued to Employees Accounting for Stock-Based
    Compensation  Transition and Disclosure 
    an Amendment of Financial Accounting Standards Board, or FASB,
    Statement No. 123
    Share-Based Payment
 45




---



##### Table of Contents



Fiscal Year Ended March 31,2006


2007


2008Expected term


6 Years



6.6 Years



4.0 YearsRisk-free interest rate


4.35
%


4.62
%


3.92
%Estimated volatility


50
%


60
%


60
%Estimated forfeiture rate


N/A



6
%


6
%Expected dividend yield


0
%


0
%


0
%                 Valuation of
    Privately-Held Company Equity Securities Issued as
    Compensation
 46




---



##### Table of Contents



47




---



##### Table of Contents



48




---



##### Table of Contents



Common Stock Warrants.
  Accounting for Income Taxes.
     49




---



##### Table of Contents



Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109
  Recent
    Accounting Pronouncements
  Fair Value
    Measurement SFAS 157-2
  Level 1
  Level 2
  Level 3
    The
    Fair Value Option for Financial Assets and Financial
    Liabilities contract-by-contract
  Business Combination
 50




---



##### Table of Contents



Noncontrolling Interests in Consolidated Financial
    Statements  An Amendment to ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities  an Amendment of FASB Statement
    No. 133 Accounting for Derivative Instruments
    and Hedging Activities
  The
    Hierarchy of Generally Accepted Accounting Principles. The Meaning of Presented Fairly in Conformity with Generally
    Accepted Accounting Principles
  Item 7A
    Quantitative
    and Qualitative Disclosure About Market Risk    Inflation.
  Foreign Exchange Risk.
  Interest Rate Risk.
    Commodity Price Risk. 12-month
 51




---



##### 



ITEM 8.
    INDEX
    TO CONSOLIDATED FINANCIAL STATEMENTS   
 PageNumberReport of Independent Registered Public
    Accounting Firm


53Consolidated Balance Sheets


54Consolidated Statements of Operations


55Consolidated Statements of Temporary Equity and
    Shareholders Equity


56Consolidated Statements of Cash Flows


57Notes to Consolidated Financial Statements


58   52




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   Orion Energy Systems, Inc.
        Share-Based Payment
  
    53




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES



CONSOLIDATED
    BALANCE SHEETS  March 31,2007


2008(In thousands, except share and per share amounts)ASSETSCash and cash equivalents

$
285


$
78,312Short-term investments






2,404Accounts receivable, net of allowances of $89 and $79


11,197



17,666Inventories


9,496



16,789Deferred tax assets


345



286Prepaid expenses and other current assets


1,296



1,439Total current assets


22,619



116,896Property and equipment, net


7,588



11,539Patents and licenses, net


243



388Investment


794



794Deferred tax assets


1,907



1,000Other long-term assets


432



85Total assets

$
33,583


$
130,702LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS EQUITYAccounts payable

$
5,607


$
7,521Accrued expenses


2,196



4,242Current maturities of long-term debt


736



843Total current liabilities


8,539



12,606Long-term debt, less current maturities


10,603



4,473Other long-term liabilities


133



433Total liabilities


19,275



17,512Commitments and contingencies (See Note G)Temporary equity:Series C convertible redeemable preferred stock,
    $0.01 par value: 1,818,182 shares issued and
    outstanding at March 31, 2007 and no shares outstanding at
    March 31, 2008


4,953



Shareholders equity:Preferred stock, $0.01 par value: Shares authorized
    including Series C convertible redeemable preferred stock:
    20,000,000 shares authorized at March 31, 2007 and
    30,000,000 shares authorized at March 31, 2008Series B convertible preferred stock, $0.01 par value:
    2,989,830 shares issued and outstanding at March 31,
    2007 and no shares outstanding at March 31, 2008


5,959



Common stock, no par value: Shares authorized: 80,000,000 and
    200,000,000 at March 31, 2007 and March 31, 2008;
    shares issued: 12,107,573 and 27,339,414 at March 31, 2007
    and March 31, 2008; shares outstanding: 12,038,499 and
    26,963,408 at March 31, 2007 and March 31, 2008






Additional paid-in capital


9,438



114,090Treasury stock: 69,074 and 376,006 common shares at
    March 31, 2007 and March 31, 2008


(361
)


(1,739
)Shareholder notes receivable


(2,128
)


Accumulated other comprehensive loss






(6
)Retained earnings (deficit)


(3,553
)


845Total shareholders equity


9,355



113,190Total liabilities, temporary equity and shareholders equity

$
33,583


$
130,702    54




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF OPERATIONS  Fiscal Year Ended March 31,2006


2007


2008(In thousands, except share and per share amounts)Product revenue

$
29,993


$
40,201


$
65,359Service revenue


3,287



7,982



15,328Total revenue


33,280



48,183



80,687Cost of product revenue


20,225



26,511



42,127Cost of service revenue


2,299



5,976



10,335Total cost of revenue


22,524



32,487



52,462Gross profit


10,756



15,696



28,225Operating expenses:General and administrative


4,875



6,162



10,200Sales and marketing


5,991



6,459



8,832Research and development


1,171



1,078



1,832Total operating expenses


12,037



13,699



20,864Income (loss) from operations


(1,281
)


1,997



7,361Other income (expense):Interest expense


(1,051
)


(1,044
)


(1,390
)Dividend and interest income


5



201



1,189Total other income (expense)


(1,046
)


(843
)


(201
)Income (loss) before income tax


(2,327
)


1,154



7,160Income tax expense (benefit)


(762
)


225



2,750Net income (loss)


(1,565
)


929



4,410Accretion of redeemable preferred stock and preferred stock
    dividends


(3
)


(201
)


(225
)Conversion of preferred stock






(83
)


Participation rights of preferred stock in undistributed earnings






(205
)


(775
)Net income (loss) attributable to common shareholders

$
(1,568
)

$
440


$
3,410Basic net income (loss) per share attributable to common
    shareholders

$
(0.18
)

$
0.05


$
0.22Weighted-average common shares outstanding


8,524,012



9,080,461



15,548,189Diluted net income (loss) per share attributable to common
    shareholders

$
(0.18
)

$
0.05


$
0.19Weighted-average common shares and share equivalents outstanding


8,524,012



16,432,647



23,453,803    55




---



##### Table of Contents





ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF TEMPORARY EQUITY AND SHAREHOLDERS
    EQUITY  Temporary Equity


Shareholders EquitySeries C














Common Stock








AccumulatedRedeemable


Preferred Stock





Additional





Shareholder


Other


Retained


TotalPreferred Stock


Series A


Series B





Paid-in


Treasury


Notes


Comprehensive


Earnings


ShareholdersShares


Amount


Shares


Amount


Shares


Amount


Shares


Capital


Stock


Receivable


Loss


(Deficit)


Equity(In thousands, except share amounts)Balance, March 31, 2005





$




20,000


$
116



2,234,400


$
4,167



8,357,744


$
4,643


$
(345
)

$
(58
)

$



$
(2,636
)

$
5,887Issuance of stock and warrants


















613,000



1,424



55,778



153



















1,577Exercise of stock options and warrants for cash and notes


























483,378



445







(375
)










70Stock-based compensation






























558



















558Changes in shareholder notes receivable






































35











35Issuance of common stock and warrants for services


























24,000



60



















60Net loss














































(1,565
)


(1,565
)Balance, March 31, 2006





$




20,000


$
116



2,847,400


$
5,591



8,920,900


$
5,859


$
(345
)

$
(398
)

$



$
(4,201
)

$
6,622Issuance of stock and warrants


1,818,182



4,755











142,430



368



























368Exercise of stock options and warrants for cash and notes


























3,064,809



2,582







(1,753
)










829Conversion to common stock










(20,000
)


(116
)










60,000



199















(83
)


Tax benefit from exercise of stock options






























435



















435Treasury stock purchase


























(7,210
)






(16
)














(16
)Stock-based compensation






























363



















363Changes in shareholder notes receivable






































23











23Accretion of redeemable preferred stock






198







































(198
)


(198
)Net income














































929



929Balance, March 31, 2007


1,818,182


$
4,953






$




2,989,830


$
5,959



12,038,499


$
9,438


$
(361
)

$
(2,128
)

$



$
(3,553
)

$
9,355Accretion of preferred stock






225







































(225
)


(225
)Accrued dividend conversion






(423
)






































423



423Changes in shareholder notes receivable


























(306,932
)






(1,378
)


2,128











750Initial public offering:conversion of preferred stock


(1,818,182
)


(4,755
)










(2,989,830
)


(5,959
)


4,808,012



10,714



















4,755Initial public offering:conversion of debt


























2,360,802



10,762



















10,762Initial public offering, net of issuance costs of $4,246


























6,849,092



78,559



















78,559Issuance of stock and warrants for services


























2,210



29



















29Exercise of stock options and warrants for cash


























1,211,725



2,014



















2,014Tax benefit from exercise of stock options






























1,183



















1,183Stock-based compensation






























1,391



















1,391Adoption of FIN 48














































(210
)


(210
)Net income














































4,410



4,410Unrealized loss on short-term investments










































(6
)






(6
)Comprehensive income


















































4,404Balance, March 31, 2008





$







$







$




26,963,408


$
114,090


$
(1,739
)

$



$
(6
)

$
845


$
113,190    56




---



##### Table of Contents





ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Fiscal Year Ended March 31,2006


2007


2008(In thousands)Operating activitiesNet income (loss)

$
(1,565
)

$
929


$
4,410Adjustments to reconcile net income (loss) to net cash used in
    operating activities:Depreciation and amortization


941



1,063



1,410Stock-based compensation expense


618



363



1,391Deferred income tax benefit (provision)


(922
)


(213
)


966Loss on sale of assets


224



268



2Other


37



21



228Changes in operating assets and liabilities:Accounts receivable


(2,757
)


(5,161
)


(6,469
)Inventories


491



(4,555
)


(7,293
)Prepaid expenses and other assets


(300
)


(524
)


33Accounts payable


(584
)


840



1,914Accrued expenses


416



735



2,046Net cash used in operating activities


(3,401
)


(6,234
)


(1,362
)Investing activitiesPurchase of property and equipment


(871
)


(1,012
)


(5,044
)Purchase of short-term investments










(2,410
)Additions to patents and licenses


(56
)


(81
)


(171
)Proceeds from disposal of equipment


735



263



Net decrease (increase) in amount due from shareholder


30



(139
)


188Net cash used in investing activities


(162
)


(969
)


(7,437
)Financing activitiesProceeds from issuance of long-term debt


134



40



750Proceeds from issuance of convertible debt










10,600Payment of long-term debt


(2,416
)


(1,263
)


(710
)Net activity in revolving line of credit


4,853



1,211



(6,064
)Excess benefit for deferred taxes on stock-based compensation






435



1,183Proceeds from shareholder notes receivable


35



23



750Proceeds from initial public offering, net of issuance costs of
    $4,246










78,559Deferred financing costs


(94
)






(256
)Proceeds from issuance of preferred stock, net of issuance costs
    of $108, $244 and $0


1,454



5,123



Proceeds from issuance of common stock


193



830



2,014Net cash provided by financing activities


4,159



6,399



86,826Net increase (decrease) in cash and cash equivalents


596



(804
)


78,027Cash and cash equivalents at beginning of period


493



1,089



285Cash and cash equivalents at end of period

$
1,089


$
285


$
78,312Supplemental cash flow information:Cash paid for interest

$
1,003


$
927


$
1,182Cash paid for income taxes






17



830Supplemental disclosure of non-cash investing and financing
    activitiesCapital leases entered into for purchase of equipment

$
81


$
40


$
Notes receivable issued to shareholders


375



1,753



Long-term investment acquired through sale of inventory






794



Shares surrendered for payment of shareholder note receivable










(307
)Conversion of debt to common stock










10,762Conversion of redeemable preferred stock and accrued dividends
    to common stock










10,714Preferred stock accretion


3



201



225    57




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  NOTE A 
    DESCRIPTION
    OF BUSINESS  Organization
    Initial
    Public Offering
    NOTE B 
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Principles
    of Consolidation
    Use of
    Estimates
    Cash
    and cash equivalents
    Short-term
    investments
  available-for-sale available-for-sale,
 58




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair
    value of financial instruments
    Accounts
    receivable
  30-60 days.
    2009

$
1182010


25Total gross receivable


143Less: amount representing interest


(8
)Net contracts receivable

$
135   Inventories
  first-in,
   59




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    March 31,


March 31,2007


2008Raw materials and components

$
5,496


$
9,948Work in process


358



680Finished goods


3,642



6,161$
9,496


$
16,789   Prepaid
    Expenses and Other Current Assets
    Property
    and Equipment
    Accounting for the Impairment or
    Disposal of Long-Lived Assets
    March 31,2007


2008Land and land improvements

$
557


$
703Buildings


4,423



4,803Furniture, fixtures and office equipment


1,441



2,256Plant equipment


3,747



4,543Construction in progress


130



2,91810,298



15,223Less: accumulated depreciation and amortization


2,710



3,684Net property and equipment

$
7,588


$
11,539     March 31,2007


2008Equipment

$
1,451


$
1,206Less: accumulated amortization


531



433Net equipment

$
920


$
773  60




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Land improvements


10 - 15 yearsBuildings


10 - 39 yearsFurniture, fixtures and office equipment


3 - 10 yearsPlant equipment


3 - 10 years     Patents
    and Licenses
  15-17 years.
    Investment
      Other
    Long-Term Assets
    Accrued
    Expenses
   61




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      March 31,2007


2008Beginning of year

$
332


$
45Provision to cost of revenue


249



242Charges


(536
)


(218
)End of year

$
45


$
69   Incentive
    Compensation
  23-125% and/or
    Revenue
    Recognition
  Revenue
    Recognition
  
    persuasive evidence of an arrangement exists;
    delivery has occurred and title has passed to the customer;
    the sales price is fixed and determinable and no further
    obligation exists; and
    collectability is reasonably assured   62




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  No. 00-21, Revenue Arrangements With Multiple Deliverables
            March 31,2007


2008Deferred revenue  current liability

$



$
134Deferred revenue  long term liability


133



41Total deferred revenue

$
133


$
175     EITF 01-8, Determining whether an Arrangement Contains a Lease Accounting for Leases Accounting for Transfers and Servicing of Financial Assets
    and Extinguishments of Liabilities  a Replacement of
    FASB Statement No. 125
 63




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Shipping
    and Handling Costs
  EITF 00-10, Accounting for Shipping and Handling Fees and Costs
  Advertising
    Research
    and Development
    Income
    Taxes
  Accounting for Income Taxes
      Stock
    Option Plans
  Share-Based Payment Accounting for Stock
    Issued to Employees Accounting
    for Certain Transactions Involving Stock Compensation, an
    Interpretation of APB 25 Accounting for Stock-Based
    Compensation as amended by SFAS 148 Accounting for
    Stock-Based Compensation  Transition and
    Disclosure
   64




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Year


Fiscal YearEnded March 31, 2007


Ended March 31, 2008Income before income tax

$
363


$
1,391Net income


292



861Net income attributable to common shareholders


292



861Basic net income per common share attributable to common
    shareholders


0.03



0.06Diluted net income per common share attributable to common
    shareholders


0.02



0.04         Fiscal Year Ended March 31,2006


2007


2008Weighted average expected term


6.0 years



6.6 years



4.0 yearsRisk-free interest rate


4.35
%


4.62
%


3.92
%Expected volatility


50
%


60
%


60
%Expected forfeiture rate


N/A



6
%


6
%Expected dividend yield


0
%


0
%


0
%   Valuation of
    Privately-Held-Company Equity Securities Issued as
    Compensation
 65




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Net
    Income (Loss) per Common Share
  The Effect on the Calculation of
    Earnings per Share for the Redemption or Induced Conversion of
    Preferred Stock
  EITF 03-6, Participating Securities and the Two-Class Method under
    FASB Statement No. 128
   66




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Year Ended March 31,2006


2007


2008Numerator:Net income (loss)

$
(1,565
)

$
929


$
4,410Accretion of redeemable preferred stock and preferred stock
    dividends


(3
)


(201
)


(225
)Conversion of preferred stock






(83
)


Participation rights of preferred stock in undistributed earnings






(205
)


(775
)Numerator for basic net income (loss) per common share


(1,568
)


440



3,410Adjustment for convertible note interest, net of income tax
    effect










149Preferred stock dividends and participation rights of preferred
    stock






406



1,000Numerator for diluted net income (loss) per common share

$
(1,568
)

$
846


$
4,559Denominator:Weighted-average common shares outstanding


8,524,012



9,080,461



15,548,189Weighted-average effect of preferred stock, restricted stock,
    convertible notes and assumed conversion of stock options and
    warrants






7,352,186



7,905,614Weighted-average common shares and common share equivalents
    outstanding


8,524,012



16,432,647



23,453,803       March 31,2006


2007


2008Series A preferred


20,000







Series B preferred


2,847,400



2,989,830



Series C redeemable preferred






1,818,182



Common stock subject to non-recourse shareholder notes receivable






2,150,000



Common stock options


6,394,730



4,714,547



4,716,022Common stock warrants


1,098,574



1,109,390



578,788Total


10,360,704



12,781,949



5,294,810  67




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Concentration
    of Credit Risk and Other Risks and Uncertainties
          Segment
    Information
  Disclosures about Segments
    of an Enterprise and Related Information
    Recent
    Accounting Pronouncements
  Fair Value
    Measurement SFAS 157-2
  Level 1
  Level 2
  Level 3
    The
    Fair Value Option for Financial Assets and Financial
    Liabilities contract-by-contract
 68




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Business Combination
  Noncontrolling Interests in Consolidated Financial
    Statements  An Amendment to ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities  an Amendment of FASB Statement
    No. 133 Accounting for Derivative Instruments
    and Hedging Activities
  The
    Hierarchy of Generally Accepted Accounting Principles. The Meaning of Presented Fairly in Conformity with Generally
    Accepted Accounting Principles
  NOTE C 
    RELATED
    PARTY TRANSACTIONS       69




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        NOTE D 
    LONG-TERM
    DEBT    March 31,2007


2008Revolving credit agreement

$
6,064


$
Term note


1,629



1,440First mortgage note payable


1,062



1,045Debenture payable


956



922Lease obligations


850



536Other long-term debt


778



1,373Total long-term debt


11,339



5,316Less current maturities


(736
)


(843
)Long-term debt, less current maturities

$
10,603


$
4,473   Revolving
    Credit Agreement
       70




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Term
    Note
    First
    Mortgage Note Payable
    Debenture
    Payable
    Lease
    Obligations
    Other
    long-term debt
     71




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Aggregate
    Maturities
    Fiscal 2009

$
843Fiscal 2010


805Fiscal 2011


615Fiscal 2012


603Fiscal 2013


499Thereafter


1,951$
5,316   NOTE E 
    CONVERTIBLE
    NOTES      NOTE F 
    INCOME
    TAXES    Fiscal Year Ended March 31,2006


2007


2008Current

$
160


$
438


$
1,784Deferred


(922
)


(213
)


966$
(762
)

$
225


$
2,750   2006


2007


2008Federal

$
(517
)

$
295


$
2,494State


(245
)


(70
)


256$
(762
)

$
225


$
2,750  72




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Year Ended March 31,2006


2007


2008Statutory federal tax rate


(34.0
)%


34.0
%


34.0
%State taxes, net


(5.5
)%


7.9
%


4.2
%Stock-based compensation expense


9.6
%


3.9
%


2.7
%Federal tax credit


(3.2
)%


(13.3
)%


(1.5
)%State tax credit


(5.8
)%


(16.5
)%


(1.0
)%Change in tax contingency reserve


8.9
%


0.0
%


(0.1
)%Other, net


(2.7
)%


3.5
%


(0.2
)%Effective income tax rate


(32.7
)%


19.5
%


38.1
%     March 31,2007


2008Federal and state operating loss carryforwards

$
857


$
79Tax credit carryforwards


702



772Inventory, accruals and reserves


341



330Fixed assets


252



Non qualified stock options


91



325Other


167



249Total deferred tax assets


2,410



1,755Deferred revenue






(195
)Fixed assets






(172
)Other


(158
)


(102
)Total deferred liabilities


(158
)


(469
)Net deferred tax assets

$
2,252


$
1,286      73




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Uncertain
    tax positions
  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109
      Fiscal Year EndedMarch 31, 2008Unrecognized tax benefits upon adoption on April 1, 2007

$
370Decreases relating to settlements with tax authorities


(39
)Additions based on tax positions related to the current period
    positions


61Unrecognized tax benefits as of March 31, 2008

$
392   NOTE G 
    COMMITMENTS
    AND CONTINGENCIES  Operating
    Leases
    Fiscal 2009

$
1,059Fiscal 2010


559Fiscal 2011


501Fiscal 2012


430Fiscal 2013


241  74




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Purchase
    Commitments
    Retirement
    Savings Plan
    Litigation
      NOTE H 
    TEMPORARY EQUITY AND SHAREHOLDERS EQUITY
  Conversion
    of Preferred Stock Upon Completion of Initial Public
    Offering
    Stock
    Split
   75




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Series C
    Redeemable Preferred Stock
    
    senior rank to other classes and series of stock with respect to
    the payment of dividends and proceeds upon liquidation
    entitlement to receive cumulative dividends accruing at a
    non-compounded annual rate of 6% upon the occurrence of certain
    events (accumulated dividends through the IPO were $423,000)
    liquidation preference equal to the purchase price plus any
    accumulated dividends
    conversion into common stock at a one-to-one ratio upon certain
    qualifying exit events resulting in net proceeds to the Company
    of at least $30 million (upon conversion in a qualifying
    event, all rights related to accrued and unpaid dividends would
    be extinguished)
    weighted average dilution protection for any issuance of stock
    or other equity instruments (other than for stock options
    granted under existing stock plans) at a price per share less
    than the Series C purchase price of $2.75
    proportional adjustment of the number of shares of common stock
    into which one share of Series C preferred stock may be
    converted in the event of stock splits, stock dividends
    reclassifications and similar events
    a redemption feature at the option of the holder, including
    accumulated dividends, if certain liquidity events are not
    achieved within five years from issuance
    right to vote with common stock on all matters submitted to a
    vote of shareholders    Series B
    Preferred Stock
    
    a liquidation preference equal to the purchase price of the
    Series B shares
    automatic conversion to common stock at a one-to-one ratio upon
    registration of the common stock under a 1933 Act
    registration
    no dividend preference
    right to vote with common stock on all matters submitted to a
    vote of shareholders   76




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Series A
    Preferred Stock
  Induced Conversions of Convertible Debt
    Treasury
    Stock
    Shareholder
    receivables
    EITF 00-23, Issues related to the Accounting for Stock Compensation under
    APB Opinion No. 25 and FASB Interpretation No. 44
      NOTE I 
    STOCK
    OPTIONS AND WARRANTS   77




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Fiscal Year Ended2007


2008Cost of product revenue

$
24


$
122General and administrative


154



852Sales and marketing


153



375Research and development


32



42$
363


$
1,391       Available at March 31, 2005


2,505,200Granted


(735,000
)Forfeited


278,000Available at March 31, 2006


2,048,200Granted


(1,657,500
)Forfeited


280,000Available at March 31, 2007


670,700Amendment to Plan; concurrent with IPO


1,500,000Granted stock options


(737,432
)Awarded shares in lieu of fees


(2,210
)Forfeited


51,000Available at March 31, 2008


1,482,058  78




---



##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Number of





Fair ValueOptions Granted


Exercise Price


Estimate per Share


Intrinsic ValueApril 2007


50,000


$
2.20


$
4.15


$
98,000July 2007


429,432



4.49



4.49



February 2008


143,000



9.00



9.00



March 2008


115,000



10.14



10.14



     WeightedWeighted


AverageAverage


Fair ValueNumber of


Exercise


of Options


Aggregate IntrinsicShares


Price


Granted


ValueOutstanding at March 31, 2005


6,412,108


$
1.02


$
0.48Granted


735,000



1.87Exercised


(474,378
)


.91Forfeited


(278,000
)


2.09Outstanding at March 31, 2006


6,394,730



1.06


$
1.54Granted


1,657,500



2.26Exercised


(3,057,683
)


.84Forfeited


(280,000
)


2.25Outstanding at March 31, 2007


4,714,547



1.56


$
1.35Granted


737,432



6.09Exercised


(684,957
)


1.27Forfeited


(51,000
)


2.05Outstanding at March 31, 2008


4,716,022



2.30


$
3.03


$
34,201,000Exercisable at March 31, 2008


2,409,190


$
1.24






$
20,005,100     March 31, 2008WeightedAverageRemaining


Weighted





WeightedContractual


Average





AverageLife


Exercise





ExercisePrice

Outstanding


(Years)


Price


Vested


Price$0.69


887,124



3.1


$
0.69



887,124


$
0.690.75 - 0.94


647,420



3.7



0.91



597,420



0.931.23 - 1.50


448,000



5.2



1.48



369,600



1.492.20 - 2.25


1,765,046



8.2



2.21



449,646



2.232.50 - 2.75


281,000



8.2



2.53



105,400



2.534.49 - 5.00


429,432



9.3



4.49







5.01 - 9.00


143,000



9.9



9.00







10.14


115,000



9.9



10.14







4,716,022



6.5


$
2.30



2,409,190


$
1.24  79




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fiscal 2009

$
1,255Fiscal 2010


916Fiscal 2011


841Fiscal 2012


719Fiscal 2013


211Thereafter


294$
4,236Remaining weighted average expected term


6.5 years     March 31,2006


2007


2008Dividend yield


0.00
%


0.00
%


Weighted average risk-free interest rate


4.35
%


4.62
%


Weighted average contractual term


5 years



5 years



Expected volatility


50
%


60
%


     WeightedAverageNumber of


ExerciseShares


PriceOutstanding at March 31, 2005


1,064,314


$
2.02Issued


45,260



2.47Exercised


(9,000
)


1.50Cancelled


(2,000
)


1.50Outstanding at March 31, 2006


1,098,574



2.24Issued


19,580



2.41Exercised


(7,966
)


1.80Cancelled


(798
)


1.50Outstanding at March 31, 2007


1,109,390



2.24Issued






Exercised


(526,766
)


2.17Cancelled


(3,836
)


1.50Outstanding at March 31, 2008


578,788


$
2.31  80




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    March 31,Exercise Price

2008


Expiration$2.25


38,980



Fiscal 2014$2.30


495,048



Fiscal 2010$2.50


37,260



Fiscal 2011$2.60


7,500



Fiscal 2012Total


578,788   NOTE J 
    QUARTERLY
    FINANCIAL DATA (UNAUDITED)    Three Months EndedJune 30,


Sept. 30,


Dec. 31,


Mar. 31,2007


2007


2007


2008


Total(In thousands, except per share amounts)Total revenue

$
16,721


$
18,405


$
23,311


$
22,250


$
80,687Gross profit


5,603



6,321



8,254



8,047



28,225Net income


748



1,053



1,153



1,456



4,410Accretion of redeemable preferred stock and preferred stock
    dividends


(75
)


(75
)


(75
)






(225
)Participation rights of preferred stock in undistributed earnings


(219
)


(292
)


(264
)






(775
)Net income attributable to common shareholders

$
454


$
686


$
814


$
1,456


$
3,410Basic net income per share attributable to common shareholders

$
0.05


$
0.06


$
0.06


$
0.05


$
0.22Shares used in basic per share calculation


9,950



10,712



13,889



26,952



15,548Diluted net income per share attributable to common shareholders

$
0.04


$
0.06


$
0.05


$
0.05


$
0.19Shares used in diluted per share calculation


18,088



19,782



22,858



30,070



23,454   81




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##### Table of Contents



ORION
    ENERGY SYSTEMS, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Three Months EndedJune 30,


Sept. 30,


Dec. 31,


Mar. 31,2006


2006


2006


2007


Total(In thousands, except per share amounts)Total revenue

$
9,680


$
10,631


$
13,563


$
14,309


$
48,183Gross profit


3,425



3,253



4,363



4,655



15,696Net income (loss)


141



(136
)


560



364



929Accretion of redeemable preferred stock and preferred stock
    dividends


(1
)


(45
)


(79
)


(76
)


(201
)Conversion of preferred stock














(83
)


(83
)Participation rights of preferred stock in undistributed earnings


(35
)






(168
)


(71
)


(205
)Net income (loss) attributable to common shareholders

$
105


$
(181
)

$
313


$
134


$
440Basic net income per share attributable to common shareholders

$
0.01


$
(0.02
)

$
0.03


$
0.01


$
0.05Shares used in basic per share calculation


9,003



9,007



9,071



9,248



9,080Diluted net income per share attributable to common shareholders

$
0.01






$
0.03


$
0.01


$
0.05Shares used in diluted per share calculation


15,073







16,876



16,997



16,433     NOTE K 
    SUBSEQUENT
    EVENTS   82




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Managements
    Report on Internal Control Over Financial Reporting
  Form 10-K
  Changes
    in Internal Controls
    Rules 13a-15(f)
 83




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##### Table of Contents



15d-15(f)
  ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED SHAREHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    Fee Category

2007


2008Audit Fees(1)

$
820,306


$
225,139Audit Related Fees(2)






13,330Tax Fees(3)


66,864



121,998All Other Fees(4)


11,035



Total

$
898,205


$
360,457     (1)
    
    Represents the aggregate fees billed for the audit of the
    Companys financial statements ($147,507 in 2008 and
    $95,950 in 2007), services provided in connection with our
    initial public offering ($680,575 in 2007), and services in
    connection with the statutory and regulatory filings or
    engagements for this fiscal year, including 84




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##### Table of Contents



services related to the review of financial statements on a
    quarterly basis prior to our becoming a public company ($77,632
    in 2008 and $43,781 in 2007).(2)
    
    Represents the aggregate fees billed for audit of Company
    benefit plans.(3)
    
    Represents the aggregate fees billed for tax compliance. These
    services also include $28,000 for a change in ownership study
    completed in 2008.(4)
    
    Represents the aggregate fees billed for other permitted
    advisory services. PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  (a)
    Financial
    Statements  Form 10-K.
  (b)
    Financial
    Statement Schedule 85




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##### Table of Contents



SCHEDULE
    II
  VALUATION
    AND QUALIFYING ACCOUNTS
  Balance at


Provisions





Balance atBeginning


Charged to


Write Offs


End ofof Period


Expense


and Other


Period(In thousands)March 31,2006

Allowance for Doubtful Accounts

$
114







76


$
382007

Allowance for Doubtful Accounts


38



51







892008

Allowance for Doubtful Accounts


89



66



76



792006

Inventory Obsolescence Reserve


88



267







3552007

Inventory Obsolescence Reserve


355



94



1



4482008

Inventory Obsolescence Reserve


448



376



294



530  86




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##### Table of Contents



EXHIBIT INDEX
  Number

Exhibit Title2
.1

Form of Series C Senior Convertible Preferred Stock
    Purchase Agreement, including exhibits, by and among Orion
    Energy Systems, Inc. and the signatories thereto, filed as
    Exhibit 2.1 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 2.1.3
.1

Amended and Restated Articles of Incorporation of Orion Energy
    Systems, Inc., filed as Exhibit 3.3 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 3.1.3
.2

Amended and Restated Bylaws of Orion Energy Systems, Inc., filed
    as Exhibit 3.5 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 3.2.4
.1

Amended and Restated Investors Rights Agreement by and
    among Orion Energy Systems, Inc. and the signatories thereto,
    dated August 3, 2007, filed as Exhibit 4.1 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.1.4
.2

Amended and Restated First Offer and Co-Sale Agreement among
    Orion Energy Systems, Inc. and the signatories thereto, dated
    August 3, 2007, filed as Exhibit 4.2 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.2.4
.3

Form of Warrant to purchase Common Stock of Orion Energy
    Systems, Inc. , filed as Exhibit 4.3 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.3.4
.4

Form of Warrant to purchase Common Stock of Orion Energy
    Systems, Inc. , filed as Exhibit 4.4 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.4.4
.5

Credit and Security Agreement by and between Orion Energy
    Systems, Inc., Great Lakes Energy Technologies, LLC and Wells
    Fargo Bank, National Association, acting through its Wells Fargo
    Business Credit Operating Division, dated December 22,
    2005, as amended January 26, 2006, June 30, 2006,
    March 29, 2007 and July 27, 2007 (replaced by
    Exhibits 10.1 and 10.2 to this
    Form 10-K
    on March 18, 2008), filed as Exhibit 4.5 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.5.4
.6

Convertible Subordinated Promissory Note in favor of GE Capital
    Equity Investments, Inc. dated August 3, 2007
    (automatically converted into shares of common stock upon the
    closing of the Registrants initial public offering on
    December 24, 2007), filed as Exhibit 4.6 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.6.4
.7

Convertible Subordinated Promissory Note in favor of Clean
    Technology Fund II, L.P. dated August 3, 2007
    (automatically converted into shares of common stock upon the
    closing of the Registrants initial public offering on
    December 24, 2007), filed as Exhibit 4.7 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.7.4
.8

Convertible Subordinated Promissory Note in favor of Capvest
    Venture Fund, LP, dated August 3, 2007 (automatically
    converted into shares of common stock upon the closing of the
    Registrants initial public offering on December 24,
    2007), filed as Exhibit 4.8 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.8.4
.9

Convertible Subordinated Promissory Note in favor of Technology
    Transformation Venture Fund, LP, dated August 3, 2007
    (automatically converted into shares of common stock upon the
    closing of the Registrants initial public offering on
    December 24, 2007), filed as Exhibit 4.9 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.9.4
.10

Note Purchase Agreement, including exhibits, between Orion
    Energy Systems, Inc. and the signatories thereto dated
    August 3, 2007, filed as Exhibit 4.10 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 4.10. 87




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##### Table of Contents



Number

Exhibit Title10
.1

Credit Agreement, dated March 18, 2008, by and between
    Orion Energy Systems, Inc., Great Lakes Energy Technologies, LLC
    and Wells Fargo Bank, National Association, filed as
    Exhibit 10.1 to the Registrants
    Form 8-K
    filed March 21, 2008 (File
    No. 001-33887),
    is hereby incorporated by reference as Exhibit 10.1.10
.2

Revolving Line of Credit Note, dated March 18, 2008, by and
    between Orion Energy Systems, Inc., Great Lakes Energy
    Technologies, LLC and Wells Fargo Bank, National Association,
    filed as Exhibit 10.2 to the Registrants
    Form 8-K
    filed March 21, 2008 (File
    No. 001-33887),
    is hereby incorporated by reference as Exhibit 10.2.10
.3

Separation Agreement by and between Orion Energy Systems, Inc.
    and Bruce Wadman, effective July 5, 2007, filed as
    Exhibit 10.3 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.3.*10
.4

Separation Agreement by and between Orion Energy Systems, Inc.
    and James Prange, effective July 18, 2007, filed as
    Exhibit 10.4 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.4.*10
.5

Employment Agreement by and between John Scribante and Orion
    Energy Systems, Inc., dated June 2, 2006 (replaced by
    Exhibit 10.20 to this
    Form 10-K
    on March 18, 2008), filed as Exhibit 10.5 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.5.*10
.6

Orion Energy Systems, Inc. 2003 Stock Option Plan, as amended,
    filed as Exhibit 10.6 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.6.*10
.7

Form of Stock Option Agreement under the Orion Energy Systems,
    Inc. 2003 Stock Option Plan, filed as Exhibit 10.7 to the
    Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.7.*10
.8

Amendment to Stock Option Agreement between Bruce Wadman and
    Orion Energy Systems, inc. dated February 19, 2007, filed
    as Exhibit 10.8 to the Registrants
    Form S-1
    filed August 20, 2007
    (File No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.8.*10
.9

Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan,
    filed as Exhibit 10.9 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.9.*10
.10

Form of Stock Option Agreement under the Orion Energy Systems,
    Inc. 2004 Equity Incentive Plan, filed as Exhibit 10.10 to
    the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.10.*10
.11

Form of Stock Option Agreement under the Orion Energy Systems,
    Inc. 2004 Stock and Incentive Awards Plan, filed as
    Exhibit 10.11 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.11.*10
.12

Form of Promissory Note and Collateral Pledge Agreement in favor
    of Orion Energy Systems, Inc. in connection with option
    exercises (all such notes were paid in full in July and August
    2007), filed as Exhibit 10.12 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.12.*10
.15

Summary of Non-Employee Director Compensation, filed as
    Exhibit 10.15 to the Registrants
    Form S-1
    filed November 16, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.15.*10
.16

Executive Employment and Severance Agreement, dated
    February 15, 2008, by and between Orion Energy Systems,
    Inc. and Daniel J. Waibel, filed as Exhibit 10.1 to the
    Registrants
    Form 8-K
    filed February 22, 2008 (File
    No. 001-33887),
    is hereby incorporated by reference as Exhibit 10.16.*10
.17

Executive Employment and Severance Agreement, dated
    February 21, 2008, by and between Orion Energy Systems,
    Inc. and Michael J. Potts, filed as Exhibit 10.2 to the
    Registrants
    Form 8-K
    filed February 22, 2008 (File
    No. 001-33887),
    is hereby incorporated by reference as Exhibit 10.17.*10
.18

Executive Employment and Severance Agreement, dated
    February 20, 2008, by and between Orion Energy Systems,
    Inc. and Eric von Estorff, filed as Exhibit 10.3 to the
    Registrants
    Form 8-K
    filed February 22, 2008 (File
    No. 001-33887),
    is hereby incorporated by reference as Exhibit 10.18.* 88




---



##### Table of Contents



Number

Exhibit Title10
.19

Executive Employment and Severance Agreement, dated
    February 21, 2008, by and between Orion Energy Systems,
    Inc. and Erik Birkerts, filed as Exhibit 10.4 to the
    Registrants
    Form 8-K
    filed February 22, 2008 (File
    No. 001-33887),
    is hereby incorporated by reference as Exhibit 10.19.*10
.20

Executive Employment and Severance Agreement, dated
    March 18, 2008, by and between Orion Energy Systems, Inc.
    and John H. Scribante, filed as Exhibit 10.3 to the
    Registrants
    Form 8-K
    filed March 21, 2008 (File
    No. 001-33887),
    is hereby incorporated by reference as Exhibit 10.20.*10
.21

Executive Employment and Severance Agreement, dated
    April 14, 2008, by and between Orion Energy Systems, Inc.
    and Neal R. Verfuerth, filed as Exhibit 10.1 to the
    Registrants
    Form 8-K
    filed April 18, 2008 (File
    No. 001-33887),
    is hereby incorporated by reference as Exhibit 10.21.*10
.22

Patent and Trademark Security Agreement by and between Orion
    Energy Systems, Inc. and Wells Fargo Bank, National Association,
    Acting Through its Wells Fargo Business Credit Operating
    Division, dated December 22, 2005, filed as
    Exhibit 10.13 to the Registrants
    Form S-1
    filed August 20, 2007
    (File No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.22.10
.23

Patent and Trademark Security Agreement by and between Great
    Lakes Energy Technologies, LLC and Wells Fargo Bank, National
    Association, Acting Through its Wells Fargo Business Credit
    Operating Division, dated December 22, 2005, filed as
    Exhibit 10.14 to the Registrants
    Form S-1
    filed August 20, 2007 (File
    No. 333-145569),
    is hereby incorporated by reference as Exhibit 10.23.21
.1

Subsidiaries of Orion Energy Systems, Inc.**23
.1

Consent of Independent Registered Public Accounting Firm.**31
.1

Certification of Chief Executive Officer of Orion Energy
    Systems, Inc. pursuant to
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    promulgated under the Securities Exchange Act of 1934, as
    amended.**31
.2

Certification of Chief Financial Officer of Orion Energy
    Systems, Inc. pursuant to
    Rule 13a-14(a)
    or
    Rule 15d-14(a)
    promulgated under the Securities Exchange Act of 1934, as
    amended.**32
.1

Certification of Chief Executive Officer of Orion Energy
    Systems, Inc. pursuant to
    Rule 13a-14(b)
    promulgated under the Securities Exchange Act of 1934, as
    amended, and 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**32
.2

Certification of Chief Financial Officer of Orion Energy
    Systems, Inc. pursuant to
    Rule 13a-14(b)
    promulgated under the Securities Exchange Act of 1934, as
    amended, and 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.**     *
    
    Management contract or compensatory plan or arrangement required
    to be filed (and/or incorporated by reference) as an exhibit to
    this Annual Report on
    Form 10-K
    pursuant to Item 15(a)(3) of
    Form 10-K.**
    
    Filed herewith 89




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##### Table of Contents



SIGNATURES
  Form 10-K
    By:
    /s/  Neal
    R. Verfuerth     Form 10-K
  Signature

Title

Date/s/  Neal
    R. VerfuerthNeal
    R. Verfuerth

President and Chief Executive Officer
    and Director 
    (Principal Executive Officer)

June 27, 2008/s/  Daniel
    J. WaibelDaniel
    J. Waibel

Chief Financial Officer 
    (Principal Financial Officer and
    Principal Accounting Officer)

June 27, 2008/s/  Thomas
    A. QuadracciThomas
    A. Quadracci

Chairman of the Board

June 27, 2008/s/  Michael
    J. PottsMichael
    J. Potts

Director

June 27, 2008/s/  Diana
    Propper de CallejonDiana
    Propper de Callejon

Director

June 27, 2008/s/  James
    R. KackleyJames
    R. Kackley

Director

June 27, 2008/s/  Eckhart
    G. GrohmannEckhart
    G. Grohmann

Director

June 27, 2008  90