##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q/A
 (Amendment No. 1)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 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 number)2210 Woodland Drive, Manitowoc, Wisconsin
    
    54220(Address of principal executive offices)
    
    (Zip code)
 Registrants telephone number, including area code: (920) 892-9340
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### Table of Contents



EXPLANATORY NOTE
 As used herein, unless otherwise expressly stated or the context otherwise requires, all
references to Orion, we, us, our, Company and similar references are to Orion Energy
Systems, Inc. and its consolidated subsidiaries.
    
 
 
     2




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##### 



Orion Energy Systems, Inc.
 Quarterly Report On Form 10-Q/A
 For The Quarter Ended September 30, 2010
  
 Table Of Contents
 Page(s)PART I FINANCIAL INFORMATIONITEM 1. Financial Statements (unaudited)
    
    
    4Condensed Consolidated Balance Sheets as of March 31, 2010 and September 30, 2010
    
    
    4Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2009 and 2010
    
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2009 and 2010
    
    
    6Notes to the Condensed Consolidated Financial Statements
    
    
    7ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    31ITEM 4. Controls and Procedures
    
    
    31PART II OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    32ITEM 1A. Risk Factors
    
    
    32ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33ITEM 5. Other Information
    
    
    33ITEM 6. Exhibits
    
    
    34SIGNATURES
    
    
    35Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   3




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1:
    
    Financial Statements
 ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
 
 UNAUDITED




CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and per share amounts)
 March 31,
    
    
    September 30,2010
    
    
    2010(As Restated)
    
    
    (As Restated)AssetsCash and cash equivalents
    
    $
    23,364
    
    
    $
    13,324Short-term investments
    
    
    1,000
    
    
    
    1,007Accounts receivable, net of allowances of $382 and $446
    
    
    15,991
    
    
    
    13,381Inventories, net
    
    
    25,991
    
    
    
    33,706Deferred tax assets
    
    
    1,244
    
    
    
    2,361Prepaid expenses and other current assets
    
    
    4,112
    
    
    
    6,651Total current assets
    
    
    71,702
    
    
    
    70,430Property and equipment, net
    
    
    28,193
    
    
    
    30,313Patents and licenses, net
    
    
    1,590
    
    
    
    1,627Deferred tax assets
    
    
    974
    
    
    
    1,231Long-term accounts receivable
    
    
    2,092
    
    
    
    4,603Other long-term assets
    
    
    27
    
    
    
    1,793Total assets
    
    $
    104,578
    
    
    $
    109,997Liabilities and Shareholders EquityAccounts payable
    
    $
    7,761
    
    
    $
    9,235Accrued expenses and other
    
    
    4,128
    
    
    
    3,771Current maturities of long-term debt
    
    
    562
    
    
    
    1,202Total current liabilities
    
    
    12,451
    
    
    
    14,208Long-term debt, less current maturities
    
    
    3,156
    
    
    
    4,934Deferred revenue, long-term
    
    
    186
    
    
    
    1,149Other long-term liabilities
    
    
    398
    
    
    
    399Total liabilities
    
    
    16,191
    
    
    
    20,690Commitments and contingencies (See Note G)Shareholders equity:Preferred stock, $0.01 par value: Shares authorized: 30,000,000 shares at March 31, 2010 and
September 30, 2010; no shares issued and outstanding at March 31, 2010 and September 30, 2010
    
    
    
    
    
    
    Common stock, no par value: Shares authorized: 200,000,000 at March 31, 2010 and September
30, 2010; shares issued: 29,911,203 and 30,158,399 at March 31, 2010 and September 30, 2010;
shares outstanding: 22,442,380 and 22,714,228 at March 31, 2010 and September 30, 2010
    
    
    
    
    
    
    Additional paid-in capital
    
    
    122,515
    
    
    
    123,378Shareholder notes receivable
    
    
    
    
    
    
    (121
    )Treasury stock: 7,468,823 and 7,444,171 common shares at March 31, 2010 and September 30, 2010
    
    
    (32,011
    )
    
    
    (31,835
    )Accumulated deficit
    
    
    (2,117
    )
    
    
    (2,115
    )Total shareholders equity
    
    
    88,387
    
    
    
    89,307Total liabilities and shareholders equity
    
    $
    104,578
    
    
    $
    109,997
   4




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##### Table of Contents



ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
 
 UNAUDITED



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except share and per share amounts)
 Three Months Ended September 30,
    
    
    Six Months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010(As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)Product revenue
    
    $
    15,219
    
    
    $
    15,086
    
    
    $
    27,143
    
    
    $
    30,844Service revenue
    
    
    856
    
    
    
    767
    
    
    
    2,807
    
    
    
    1,986Total revenue
    
    
    16,075
    
    
    
    15,853
    
    
    
    29,950
    
    
    
    32,830Cost of product revenue
    
    
    10,122
    
    
    
    9,745
    
    
    
    18,870
    
    
    
    20,053Cost of service revenue
    
    
    632
    
    
    
    498
    
    
    
    1,887
    
    
    
    1,415Total cost of revenue
    
    
    10,754
    
    
    
    10,243
    
    
    
    20,757
    
    
    
    21,468Gross profit
    
    
    5,321
    
    
    
    5,610
    
    
    
    9,193
    
    
    
    11,362Operating expenses:General and administrative
    
    
    3,143
    
    
    
    2,988
    
    
    
    6,307
    
    
    
    5,933Sales and marketing
    
    
    2,962
    
    
    
    3,299
    
    
    
    6,113
    
    
    
    6,889Research and development
    
    
    491
    
    
    
    573
    
    
    
    910
    
    
    
    1,183Total operating expenses
    
    
    6,596
    
    
    
    6,860
    
    
    
    13,330
    
    
    
    14,005Loss from operations
    
    
    (1,275
    )
    
    
    (1,250
    )
    
    
    (4,137
    )
    
    
    (2,643
    )Other income (expense):Interest expense
    
    
    (73
    )
    
    
    (55
    )
    
    
    (127
    )
    
    
    (124
    )Dividend and interest income
    
    
    147
    
    
    
    153
    
    
    
    383
    
    
    
    246Total other income (expense)
    
    
    74
    
    
    
    98
    
    
    
    256
    
    
    
    122Loss before income tax
    
    
    (1,201
    )
    
    
    (1,152
    )
    
    
    (3,881
    )
    
    
    (2,521
    )Income tax benefit
    
    
    (269
    )
    
    
    (1,692
    )
    
    
    (869
    )
    
    
    (2,525
    )Net loss
    
    $
    (932
    )
    
    $
    540
    
    
    $
    (3,012
    )
    
    $
    4Basic net income (loss) per share
attributable to common shareholders
    
    $
    (0.04
    )
    
    $
    0.02
    
    
    $
    (0.14
    )
    
    $
    0.00Weighted-average common shares outstanding
    
    
    21,707,477
    
    
    
    22,638,638
    
    
    
    21,648,246
    
    
    
    22,581,188Diluted net income (loss) per share
attributable to common shareholders
    
    $
    (0.04
    )
    
    $
    0.02
    
    
    $
    (0.14
    )
    
    $
    0.00Weighted-average common shares outstanding
    
    
    21,707,477
    
    
    
    22,901,590
    
    
    
    21,648,246
    
    
    
    23,007,067
   5




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##### Table of Contents



ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
 
 UNAUDITED



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 Six Months Ended September 30,2009
    
    
    2010(As Restated)
    
    
    (As Restated)Operating activitiesNet income (loss)
    
    $
    (3,012
    )
    
    $
    4Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    1,325
    
    
    
    1,543Stock-based compensation expense
    
    
    663
    
    
    
    611Deferred income tax benefit
    
    
    (1,556
    )
    
    
    (1,374
    )Change in allowance for notes and accounts receivable
    
    
    353
    
    
    
    64Other
    
    
    (3
    )
    
    
    34Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,969
    )
    
    
    2,546Inventories
    
    
    560
    
    
    
    (7,715
    )Prepaid
expenses and other assets and liabilities
    
    
    (383
    )
    
    
    (5,463
    )Accounts payable
    
    
    (2,338
    )
    
    
    1,474Accrued expenses
    
    
    703
    
    
    
    (357
    )Net cash used in operating activities
    
    
    (5,657
    )
    
    
    (8,633
    )Investing activitiesPurchase of property and equipment
    
    
    (2,235
    )
    
    
    (1,957
    )Purchase of property and equipment held under operating leases
    
    
    
    
    
    
    (1,630
    )Purchase of short-term investments
    
    
    
    
    
    
    (7
    )Sale of short-term investments
    
    
    5,583
    
    
    
    Additions to patents and licenses
    
    
    (131
    )
    
    
    (110
    )Proceeds from sales of property, plant and equipment
    
    
    6
    
    
    
    1Long-term assets
    
    
    
    
    
    
    (330
    )Net cash provided by (used in) investing activities
    
    
    3,223
    
    
    
    (4,033
    )Financing activitiesPayment of long-term debt
    
    
    (433
    )
    
    
    (271
    )Proceeds from long-term debt
    
    
    
    
    
    
    2,689Repurchase of common stock into treasury
    
    
    (400
    )
    
    
    Deferred financing costs
    
    
    
    
    
    
    (61
    )Proceeds from issuance of common stock
    
    
    517
    
    
    
    269Net cash (used in) provided by financing activities
    
    
    (316
    )
    
    
    2,626Net decrease in cash and cash equivalents
    
    
    (2,750
    )
    
    
    (10,040
    )Cash and cash equivalents at beginning of period
    
    
    36,163
    
    
    
    23,364Cash and cash equivalents at end of period
    
    $
    33,413
    
    
    $
    13,324Supplemental cash flow information:Cash paid for interest
    
    $
    149
    
    
    $
    126Cash paid for income taxes
    
    
    30
    
    
    
    28Supplemental disclosure of non-cash investing and financing
activities:Shares issued from treasury for shareholder note receivable
    
    $
    
    
    
    $
    121Shares surrendered into treasury for stock option exercise
    
    $
    
    
    
    $
    51
   6




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##### Table of Contents



ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
 
 UNAUDITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE A  DESCRIPTION OF BUSINESS
 Organization
  NOTE B  RESTATEMENT OF FINANCIAL STATEMENTS
      Consolidated Balance Sheets as of September 30, 2010As Previouslyreported
    
    
    Adjustments
    
    
    As RestatedAssets:Accounts receivable
    
    $
    11,589
    
    
    $
    1,792
    
    
    $
    13,381Deferred tax assets, current
    
    
    521
    
    
    
    1,840
    
    
    
    2,361Prepaid expenses and other current assets
    
    
    5,295
    
    
    
    1,356
    
    
    
    6,651Total current assets
    
    
    65,442
    
    
    
    4,988
    
    
    
    70,430Property, plant and equipment
    
    
    36,333
    
    
    
    (6,020
    )
    
    
    30,313Deferred tax assets, long-term
    
    
    3,383
    
    
    
    (2,152
    )
    
    
    1,231Accounts receivable, long-term
    
    
    
    
    
    
    4,603
    
    
    
    4,603Total assets
    
    
    108,578
    
    
    
    1,419
    
    
    
    109,997Liabilities and Shareholders Equity:Accrued Expenses
    
    
    3,656
    
    
    
    115
    
    
    
    3,771Deferred revenue, long-term
    
    
    1,779
    
    
    
    (630
    )
    
    
    1,149Shareholders equity:Retained deficit
    
    
    (4,049
    )
    
    
    1,934
    
    
    
    (2,115
    )
  7




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##### Table of Contents



Consolidated Statements of OperationsThree months ended September 30, 2010
    
    
    Six months ended September 30, 2010As Previously
    
    
    
    
    
    
    
    
    
    
    As Previouslyreported
    
    
    Adjustments
    
    
    As Restated
    
    
    reported
    
    
    Adjustments
    
    
    As RestatedProduct revenue
    
    $
    12,948
    
    
    $
    2,138
    
    
    $
    15,086
    
    
    $
    26,417
    
    
    $
    4,427
    
    
    $
    30,844Cost of product revenue
    
    
    8,257
    
    
    
    1,488
    
    
    
    9,745
    
    
    
    16,782
    
    
    
    3,271
    
    
    
    20,053Dividend and
interest income
    
    
    6
    
    
    
    147
    
    
    
    153
    
    
    
    16
    
    
    
    230
    
    
    
    246Income tax benefit
    
    
    (1,788
    )
    
    
    96
    
    
    
    (1,692
    )
    
    
    (2,692
    )
    
    
    167
    
    
    
    (2,525
    )Net income (loss)
    
    
    (160
    )
    
    
    700
    
    
    
    540
    
    
    
    (1,215
    )
    
    
    1,219
    
    
    
    4Net income (loss) per
share attributable to
common shareholders 
basic and diluted
    
    $
    (0.01
    )
    
    $
    0.03
    
    
    $
    0.02
    
    
    $
    (0.05
    )
    
    $
    0.05
    
    
    $
    0.00Weighted average
common shares
outstanding  basic
    
    
    22,638,638
    
    
    
    
    
    
    
    22,638,638
    
    
    
    22,581,188
    
    
    
    
    
    
    
    22,581,188Weighted average
common shares
outstanding  diluted
    
    
    22,638,638
    
    
    
    
    
    
    
    22,901,590
    
    
    
    22,581,188
    
    
    
    
    
    
    
    23,007,067
 Consolidated Statements of Cash FlowsSix months ended September 30, 2010As PreviouslyReported
    
    
    Adjustments
    
    
    As RestatedNet (loss) income
    
    $
    (1,215
    )
    
    $
    1,219
    
    
    $
    4Depreciation and Amortization
    
    
    1,994
    
    
    
    (451
    )
    
    
    1,543Deferred income tax benefit
    
    
    (1,337
    )
    
    
    (37
    )
    
    
    (1,374
    )Accounts receivable
    
    
    2,964
    
    
    
    (418
    )
    
    
    2,546Prepaid expenses and other assets and liabilities
    
    
    (1,155
    )
    
    
    (4,308
    )
    
    
    (5,463
    )Accrued expenses
    
    
    (188
    )
    
    
    (169
    )
    
    
    (357
    )Net cash used in operating activities
    
    
    (4,519
    )
    
    
    (4,114
    )
    
    
    (8,633
    )Purchase of property and equipment
    
    
    (1,955
    )
    
    
    (2
    )
    
    
    (1,957
    )Purchase of property and equipment
held under operating leases
    
    
    (5,746
    )
    
    
    4,116
    
    
    
    (1,630
    )Net cash used in investing activities
    
    
    (8,147
    )
    
    
    4,114
    
    
    
    (4,033
    )
  8




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##### Table of Contents



NOTE C  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of consolidation
  Reclassifications
  Basis of presentation
    Use of estimates
  Reclassification
  Cash and cash equivalents
  Short-term investments available for sale
  March 31, 2010Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    
    
    
    
    Cash and Cash
    
    
    Short TermCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value
    
    
    Equivalents
    
    
    InvestmentsMoney market funds
    
    $
    22,297
    
    
    $
    
    
    
    $
    
    
    
    $
    22,297
    
    
    $
    22,297
    
    
    $
    Bank certificates of deposit
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    1,000Total
    
    $
    23,297
    
    
    $
    
    
    
    $
    
    
    
    $
    23,297
    
    
    $
    22,297
    
    
    $
    1,000
 September 30, 2010Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    
    
    
    
    Cash and Cash
    
    
    Short TermCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value
    
    
    Equivalents
    
    
    InvestmentsMoney market funds
    
    $
    484
    
    
    $
    
    
    
    $
    
    
    
    $
    484
    
    
    $
    484
    
    
    $
    Bank certificate of deposit
    
    
    1,007
    
    
    
    
    
    
    
    
    
    
    
    1,007
    
    
    
    
    
    
    
    1,007Total
    
    $
    1,491
    
    
    $
    
    
    
    $
    
    
    
    $
    1,491
    
    
    $
    484
    
    
    $
    1,007
  9




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Fair value of financial instruments
  Accounts receivable
  Inventories
    March 31,
    
    
    September 30,2010
    
    
    2010Raw materials and components
    
    $
    11,107
    
    
    $
    13,318Work in process
    
    
    669
    
    
    
    792Finished goods
    
    
    14,215
    
    
    
    19,596$
    25,991
    
    
    $
    33,706
 Property and Equipment
  March 31,
    
    
    September 30,2010
    
    
    2010(As Restated)
    
    
    (As Restated)Land and land improvements
    
    $
    1,436
    
    
    $
    1,468Buildings
    
    
    14,072
    
    
    
    14,215Furniture, fixtures and office equipment
    
    
    6,615
    
    
    
    7,146Equipment leased to customers under finance agreements
    
    
    
    
    
    
    2,660Plant equipment
    
    
    7,627
    
    
    
    7,855Construction in progress
    
    
    5,774
    
    
    
    5,71135,524
    
    
    
    39,055Less: accumulated depreciation and amortization
    
    
    (7,331
    )
    
    
    (8,742
    )Net property and equipment
    
    $
    28,193
    
    
    $
    30,313
  10




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##### Table of Contents



Patents and Licenses
  Long-Term Finance Receivables
  Other Long-Term Assets
   Fiscal 2013
    
    $
    336Fiscal 2014
    
    
    336Fiscal 2015
    
    
    403Total gross long-term receivable
    
    
    1,075Less: amount representing interest
    
    
    (174
    )Net long-term receivable
    
    $
    901
 Accrued Expenses
    Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Beginning of period
    
    $
    65
    
    
    $
    59
    
    
    $
    55
    
    
    $
    60Provision to product cost of revenue
    
    
    10
    
    
    
    27
    
    
    
    20
    
    
    
    75Charges
    
    
    (33
    )
    
    
    (27
    )
    
    
    (33
    )
    
    
    (76
    )End of period
    
    $
    42
    
    
    $
    59
    
    
    $
    42
    
    
    $
    59
  11




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##### Table of Contents



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
        March 31,
    
    
    September 30,2010
    
    
    2010(As Restated)
    
    
    (As Restated)Deferred revenue  current liability
    
    $
    338
    
    
    $
    432Deferred revenue  long term liability
    
    
    186
    
    
    
    1,149Total deferred revenue
    
    $
    524
    
    
    $
    1,581
  12




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##### Table of Contents



Income Taxes
  Income Taxes
  Stock Option Plans
  Three months Ended September 30,
    
    
    Six months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Weighted average expected term
    
    7.3 years
    
    
    8.3 years
    
    
    6.5 years
    
    
    5.8 yearsRisk-free interest rate
    
    
    2.77
    %
    
    
    2.24
    %
    
    
    2.57
    %
    
    
    2.25
    %Expected volatility
    
    
    60
    %
    
    
    60
    %
    
    
    60
    %
    
    
    60
    %Expected forfeiture rate
    
    
    3
    %
    
    
    10
    %
    
    
    3
    %
    
    
    10
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
 Net Loss per Common Share
  Three months Ended September 30,
    
    
    Six months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010(As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)Net income (loss) (in thousands)
    
    $
    (932
    )
    
    $
    540
    
    
    $
    (3,012
    )
    
    $
    4Net income (loss) per common share:Basic
    
    $
    (0.04
    )
    
    $
    0.02
    
    
    $
    (0.14
    )
    
    $
    0.00Diluted
    
    $
    (0.04
    )
    
    $
    0.02
    
    
    $
    (0.14
    )
    
    $
    0.00Weighted-average common shares
outstanding used in:Basic
    
    
    21,707,477
    
    
    
    22,638,638
    
    
    
    21,648,246
    
    
    
    22,581,188Diluted
    
    
    21,707,477
    
    
    
    22,901,590
    
    
    
    21,648,246
    
    
    
    23,007,067
    13




---



##### Table of Contents



September 30,
    
    
    September 30,2009
    
    
    2010Warrants
    
    
    459,318
    
    
    
    76,240Stock Options
    
    
    3,752,314
    
    
    
    3,638,2524,211,632
    
    
    
    3,714,492
 Concentration of Credit Risk and Other Risks and Uncertainties
     Segment Information
   Recent Accounting Pronouncements
 Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses
 NOTE D  RELATED PARTY TRANSACTIONS
   14




---



##### Table of Contents



NOTE E  LONG-TERM DEBT
  March 31,
    
    
    September 30,2010
    
    
    2010Term note
    
    $
    1,017
    
    
    $
    902Customer equipment finance note payable
    
    
    
    
    
    
    2,429First mortgage note payable
    
    
    926
    
    
    
    890Debenture payable
    
    
    847
    
    
    
    828Lease obligations
    
    
    7
    
    
    
    3Other long-term debt
    
    
    921
    
    
    
    1,084Total long-term debt
    
    
    3,718
    
    
    
    6,136Less: current maturities
    
    
    (562
    )
    
    
    (1,202
    )Long-term debt, less current maturities
    
    $
    3,156
    
    
    $
    4,934
 New Debt Arrangements
   Revolving Credit Agreement
    15




---



##### Table of Contents



NOTE F  INCOME TAXES
   Six Months Ended September 30,2009
    
    
    2010(As Restated)
    
    
    (As Restated)Statutory federal tax rate
    
    
    (34.0
    )%
    
    
    (34.0
    )%State taxes, net
    
    
    2.6
    %
    
    
    (9.9
    )%Stock-based compensation expense
    
    
    5.0
    %
    
    
    (44.6
    )%Federal tax credit
    
    
    (3.5
    )%
    
    
    7.9
    %State tax credit
    
    
    (0.4
    )%
    
    
    2.1
    %Permanent items
    
    
    0.1
    %
    
    
    (11.7
    )%Change in valuation reserve
    
    
    5.1
    %
    
    
    (10.4
    )%Other, net
    
    
    2.7
    %
    
    
    0.4
    %Effective income tax rate
    
    
    (22.4
    )%
    
    
    (100.2
    )%
   Uncertain tax positions
   16




---



##### Table of Contents



Six Months Ended
    
    
    Six Months EndedSeptember 30, 2009
    
    
    September 30, 2010Unrecognized tax benefits as of beginning of period
    
    $
    397
    
    
    $
    398Decreases relating to settlements with tax authorities
    
    
    
    
    
    
    Additions based on tax positions related to the current period positions
    
    
    1
    
    
    
    1Unrecognized tax benefits as of end of period
    
    $
    398
    
    
    $
    399
 NOTE G  COMMITMENTS AND CONTINGENCIES
 Operating Leases and Purchase Commitments
  Litigation
      17




---



##### Table of Contents



NOTE H  SHAREHOLDERS EQUITY
 Employee Stock Purchase Plan
  NOTE I  STOCK OPTIONS AND WARRANTS
    Three Months Ended September 30,
    
    
    Six Months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Cost of product revenue
    
    $
    53
    
    
    $
    38
    
    
    $
    112
    
    
    $
    74General and administrative
    
    
    145
    
    
    
    173
    
    
    
    267
    
    
    
    271Sales and marketing
    
    
    136
    
    
    
    145
    
    
    
    265
    
    
    
    254Research and development
    
    
    9
    
    
    
    7
    
    
    
    19
    
    
    
    12Total
    
    $
    343
    
    
    $
    363
    
    
    $
    663
    
    
    $
    611
   18




---



##### Table of Contents



Options OutstandingWeightedWeighted
    
    
    AverageShares
    
    
    
    
    
    
    Average
    
    
    Remaining
    
    
    AggregateAvailable for
    
    
    Number
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicGrant
    
    
    of Shares
    
    
    Price
    
    
    Term (in years)
    
    
    valueBalance at March 31, 2010
    
    
    569,690
    
    
    
    3,546,249
    
    
    $
    3.66
    
    
    
    6.87Granted stock options
    
    
    (504,077
    )
    
    
    504,077
    
    
    
    3.71Granted shares in lieu of cash compensation
    
    
    (11,976
    )
    
    
    
    
    
    
    Forfeited
    
    
    176,854
    
    
    
    (176,854
    )
    
    
    3.56Exercised
    
    
    
    
    
    
    (235,220
    )
    
    
    1.33Balance at September 30, 2010
    
    
    230,491
    
    
    
    3,638,252
    
    
    $
    3.79
    
    
    
    6.73
    
    
    $
    1,893,707Exercisable at September 30, 2010
    
    
    
    
    
    
    1,684,621
    
    
    $
    3.38
    
    
    
    4.97
    
    
    $
    1,391,009
   Non-vested at March 31, 2010
    
    
    1,789,119Granted
    
    
    504,077Vested
    
    
    (162,711
    )Forfeited
    
    
    (176,854
    )Non-vested at September 30, 2010
    
    
    1,953,631
   WeightedAverageNumber of
    
    
    ExerciseShares
    
    
    PriceBalance at March 31, 2010
    
    
    76,240
    
    
    $
    2.37Issued
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Cancelled
    
    
    
    
    
    
    Balance at September 30, 2010
    
    
    76,240
    
    
    $
    2.37
  Number ofExercise Price
    
    Warrants
    
    
    Expiration$2.25
    
    
    38,980
    
    
    Fiscal 2014$2.50
    
    
    37,260
    
    
    Fiscal 2011Total
    
    
    76,240
  19




---



##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis should be read in conjunction with our unaudited consolidated
financial statements and related notes, included elsewhere in this Quarterly Report on Form 10-Q/A.
The information below has been adjusted to reflect the impact of the restatement of our financial
results which is more fully described in Note B Restatement to the unaudited consolidated
financial statements contained in this Quarterly Report on Form 10-Q/A and under the paragraph
Restatement of Previously Issued Consolidated Financial Statements below and does not reflect any
subsequent information or events occurring after the Original Filing or to modify or update those
disclosures affected by subsequent events.
 Cautionary Note Regarding Forward-Looking Statements
  Restatement of Prior Period Financial Statements
    Background of the Restatement
    
  20




---



##### Table of Contents




 
  Consolidated Balance Sheets as of September 30, 2010As Previouslyreported
    
    
    Adjustments
    
    
    As RestatedAssets:Accounts receivable
    
    $
    11,589
    
    
    $
    1,792
    
    
    $
    13,381Deferred tax assets, current
    
    
    521
    
    
    
    1,840
    
    
    
    2,361Prepaid
expenses and other current assets
    
    
    5,295
    
    
    
    1,356
    
    
    
    6,651Total current assets
    
    
    65,442
    
    
    
    4,988
    
    
    
    70,430Property, plant and equipment
    
    
    36,333
    
    
    
    (6,020
    )
    
    
    30,313Deferred tax assets, long-term
    
    
    3,383
    
    
    
    (2,152
    )
    
    
    1,231Accounts receivable, long-term
    
    
    
    
    
    
    4,603
    
    
    
    4,603Total assets
    
    
    108,578
    
    
    
    1,419
    
    
    
    109,997Liabilities and Shareholders Equity:Accrued Expenses
    
    
    3,656
    
    
    
    115
    
    
    
    3,771Deferred revenue, long-term
    
    
    1,779
    
    
    
    (630
    )
    
    
    1,149Shareholders equity:Retained deficit
    
    
    (4,049
    )
    
    
    1,934
    
    
    
    (2,115
    )
 Consolidated Statements of OperationsThree months ended September 30, 2010
    
    
    Six months ended September 30, 2010As Previously
    
    
    
    
    
    
    
    
    
    
    As Previouslyreported
    
    
    Adjustments
    
    
    As Restated
    
    
    reported
    
    
    Adjustments
    
    
    As RestatedProduct revenue
    
    $
    12,948
    
    
    $
    2,138
    
    
    $
    15,086
    
    
    $
    26,417
    
    
    $
    4,427
    
    
    $
    30,844Cost of product revenue
    
    
    8,257
    
    
    
    1,488
    
    
    
    9,745
    
    
    
    16,782
    
    
    
    3,271
    
    
    
    20,053Dividend and interest
income
    
    
    6
    
    
    
    147
    
    
    
    153
    
    
    
    16
    
    
    
    230
    
    
    
    246Income tax benefit
    
    
    (1,788
    )
    
    
    96
    
    
    
    (1,692
    )
    
    
    (2,692
    )
    
    
    167
    
    
    
    (2,525
    )Net income (loss)
    
    
    (160
    )
    
    
    700
    
    
    
    540
    
    
    
    (1,215
    )
    
    
    1,219
    
    
    
    4Net income (loss) per
share attributable to
common shareholders 
basic and diluted
    
    $
    (0.01
    )
    
    $
    0.03
    
    
    $
    0.02
    
    
    $
    (0.05
    )
    
    $
    0.05
    
    
    $
    0.00Weighted average
common shares
outstanding  basic
    
    
    22,638,638
    
    
    
    
    
    
    
    22,638,638
    
    
    
    22,581,188
    
    
    
    
    
    
    
    22,581,188Weighted average
common shares
outstanding  diluted
    
    
    22,638,638
    
    
    
    
    
    
    
    22,901,590
    
    
    
    22,581,188
    
    
    
    
    
    
    
    23,007,067
  21




---



##### Table of Contents



Consolidated Statements of Cash FlowsSix months ended September 30, 2010As PreviouslyReported
    
    
    Adjustments
    
    
    As RestatedNet (loss) income
    
    $
    (1,215
    )
    
    $
    1,219
    
    
    $
    4Depreciation and Amortization
    
    
    1,994
    
    
    
    (451
    )
    
    
    1,543Deferred income tax benefit
    
    
    (1,337
    )
    
    
    (37
    )
    
    
    (1,374
    )Accounts receivable
    
    
    2,964
    
    
    
    (418
    )
    
    
    2,546Prepaid expenses and other assets and liabilities
    
    
    (1,155
    )
    
    
    (4,308
    )
    
    
    (5,463
    )Accrued expenses
    
    
    (188
    )
    
    
    (169
    )
    
    
    (357
    )Net cash used in operating activities
    
    
    (4,519
    )
    
    
    (4,114
    )
    
    
    (8,633
    )Purchase of property and equipment
    
    
    (1,955
    )
    
    
    (2
    )
    
    
    (1,957
    )Purchase of property and equipment
held under operating leases
    
    
    (5,746
    )
    
    
    4,116
    
    
    
    (1,630
    )Net cash used in investing activities
    
    
    (8,147
    )
    
    
    4,114
    
    
    
    (4,033
    )
 Overview
        22




---



##### Table of Contents



Revenue and Expense Components
 Revenue.
   23




---



##### Table of Contents



Fiscal 2011 remainder
    
    $
    260Fiscal 2012
    
    
    432Fiscal 2013
    
    
    432Fiscal 2014
    
    
    431Beyond
    
    
    1,826Total expected future discounted revenue from PPAs
    
    $
    3,381
    Contracted Revenue.
  24




---



##### Table of Contents



Backlog.
 Cost of Revenue.
 Gross Margin.
 Operating Expenses.
  25




---



##### Table of Contents



Compensation  Stock Compensation
 Interest Expense.
 Dividend and Interest Income.
 Income Taxes.
   26




---



##### Table of Contents



Results of Operations
  Three Months Ended September 30,
    
    
    
    
    
    
    Six Months Ended September 30,2009
    
    
    2010
    
    
    
    
    
    
    2009
    
    
    2010(As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)
    
    
    (As Restated)% of
    
    
    
    
    
    % of
    
    
    %
    
    
    
    
    
    % of
    
    
    
    
    
    % of
    
    
    %Amount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Change
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    ChangeProduct revenue
    
    $
    15,219
    
    
    
    94.7
    %
    
    $
    15,086
    
    
    
    95.2
    %
    
    
    (0.9
    )%
    
    $
    27,143
    
    
    
    90.6
    %
    
    $
    30,844
    
    
    
    94.0
    %
    
    
    13.6
    %Service revenue
    
    
    856
    
    
    
    5.3
    %
    
    
    767
    
    
    
    4.8
    %
    
    
    (10.4
    )%
    
    
    2,807
    
    
    
    9.4
    %
    
    
    1,986
    
    
    
    6.0
    %
    
    
    (29.2
    )%Total revenue
    
    
    16,075
    
    
    
    100.0
    %
    
    
    15,853
    
    
    
    100.0
    %
    
    
    (1.4
    )%
    
    
    29,950
    
    
    
    100.0
    %
    
    
    32,830
    
    
    
    100.0
    %
    
    
    9.6
    %Cost of product revenue
    
    
    10,122
    
    
    
    63.0
    %
    
    
    9,745
    
    
    
    61.5
    %
    
    
    (3.7
    )%
    
    
    18,870
    
    
    
    63.0
    %
    
    
    20,053
    
    
    
    61.1
    %
    
    
    6.3
    %Cost of service revenue
    
    
    632
    
    
    
    3.9
    %
    
    
    498
    
    
    
    3.1
    %
    
    
    (21.2
    )%
    
    
    1,887
    
    
    
    6.3
    %
    
    
    1,415
    
    
    
    4.3
    %
    
    
    (25.0
    )%Total cost of revenue
    
    
    10,754
    
    
    
    66.9
    %
    
    
    10,243
    
    
    
    64.6
    %
    
    
    (4.7
    )%
    
    
    20,757
    
    
    
    69.3
    %
    
    
    21,468
    
    
    
    65.4
    %
    
    
    3.4
    %Gross profit
    
    
    5,321
    
    
    
    33.1
    %
    
    
    5,610
    
    
    
    35.4
    %
    
    
    5.4
    %
    
    
    9,193
    
    
    
    30.7
    %
    
    
    11,362
    
    
    
    34.6
    %
    
    
    23.6
    %General and administrative expenses
    
    
    3,143
    
    
    
    19.6
    %
    
    
    2,988
    
    
    
    18.8
    %
    
    
    (4.9
    )%
    
    
    6,307
    
    
    
    21.1
    %
    
    
    5,933
    
    
    
    18.1
    %
    
    
    (5.9
    )%Sales and marketing expenses
    
    
    2,962
    
    
    
    18.4
    %
    
    
    3,299
    
    
    
    20.8
    %
    
    
    11.4
    %
    
    
    6,113
    
    
    
    20.4
    %
    
    
    6,889
    
    
    
    21.0
    %
    
    
    12.7
    %Research and development expenses
    
    
    491
    
    
    
    3.1
    %
    
    
    573
    
    
    
    3.6
    %
    
    
    16.7
    %
    
    
    910
    
    
    
    3.0
    %
    
    
    1,183
    
    
    
    3.6
    %
    
    
    29.9
    %Loss from operations
    
    
    (1,275
    )
    
    
    (7.9
    )%
    
    
    (1,250
    )
    
    
    (7.9
    )%
    
    
    1.9
    %
    
    
    (4,137
    )
    
    
    (13.8
    )%
    
    
    (2,643
    )
    
    
    (8.1
    )%
    
    
    36.1
    %Interest expense
    
    
    73
    
    
    
    0.5
    %
    
    
    55
    
    
    
    0.3
    %
    
    
    (26.0
    )%
    
    
    127
    
    
    
    0.4
    %
    
    
    124
    
    
    
    0.4
    %
    
    
    (2.4
    )%Dividend and interest income
    
    
    147
    
    
    
    0.9
    %
    
    
    153
    
    
    
    1.0
    %
    
    
    4.1
    %
    
    
    383
    
    
    
    1.3
    %
    
    
    246
    
    
    
    0.8
    %
    
    
    (35.8
    )%Loss before income tax
    
    
    (1,201
    )
    
    
    (7.5
    )%
    
    
    (1,152
    )
    
    
    (7.3
    )%
    
    
    (4.1
    )%
    
    
    (3,881
    )
    
    
    (13.0
    )%
    
    
    (2,521
    )
    
    
    (7.7
    )%
    
    
    35.0
    %Income tax benefit
    
    
    (269
    )
    
    
    (1.7
    )%
    
    
    (1,692
    )
    
    
    (10.7
    )%
    
    
    529.0
    %
    
    
    (869
    )
    
    
    (2.9
    )%
    
    
    (2,525
    )
    
    
    (7.7
    )%
    
    
    190.6
    %Net loss
    
    $
    (932
    )
    
    
    (5.8
    )%
    
    $
    540
    
    
    
    3.4
    %
    
    
    157.9
    %
    
    $
    (3,012
    )
    
    
    (10.1
    )%
    
    $
    4
    
    
    
    0.0
    %
    
    
    100.1
    %
 Contracted Revenue.
 Revenue.
 Cost of Revenue and Gross Margin.
  27




---



##### Table of Contents



Operating Expenses
 General and Administrative.
 Sales and Marketing.
 Research and Development.
 Interest Expense.
 Interest Income.
 Income Taxes.
 Liquidity and Capital Resources
 Overview
  Cash Flows
  Six Months EndedSeptember 30,2009
    
    
    2010(As Restated)
    
    
    (As Restated)Operating activities
    
    $
    (5,657
    )
    
    $
    (8,633
    )Investing activities
    
    
    3,223
    
    
    
    (4,033
    )Financing activities
    
    
    (316
    )
    
    
    2,626Decrease in cash and cash equivalents
    
    $
    (2,750
    )
    
    $
    (10,040
    )
  28




---



##### Table of Contents



Cash Flows Related to Operating Activities.
   Cash Flows Related to Investing Activities.
  Cash Flows Related to Financing Activities.
  Working Capital
   29




---



##### Table of Contents



Indebtedness
 Revolving Credit Agreement
     Capital Spending
   30




---



##### Table of Contents



Contractual Obligations and Commitments
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    YearsBank debt obligations
    
    $
    6,136
    
    
    $
    1,198
    
    
    $
    2,371
    
    
    $
    1,875
    
    
    $
    692Capital lease obligations
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    Cash interest payments on debt
    
    
    1,270
    
    
    
    315
    
    
    
    436
    
    
    
    165
    
    
    
    354Operating lease obligations
    
    
    2,383
    
    
    
    1,003
    
    
    
    1,073
    
    
    
    263
    
    
    
    44Purchase order and cap-ex commitments (1)
    
    
    14,920
    
    
    
    8,198
    
    
    
    6,722
    
    
    
    
    
    
    
    Total
    
    $
    24,713
    
    
    $
    10,718
    
    
    $
    10,602
    
    
    $
    2,303
    
    
    $
    1,090
 
 (1)
    
    Reflects non-cancellable purchase order commitment in the amount of $14.7 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 $0.2 million for improvements to
information technology systems, renewable energy products and manufacturing equipment and
tooling. Off-Balance Sheet Arrangements
  Inflation
  Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
   31




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##### Table of Contents



Evaluation of Disclosure Controls and Procedures
   
 PART II OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
      
 ITEM 1A.
    
    RISK FACTORS
   32




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##### Table of Contents



ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 (b) Use of Proceeds
  
 ITEM 5.
    
    OTHER INFORMATION
 Statistical Data
  Cumulative FromDecember 1, 2001Through September 30, 2010(in thousands, unaudited)HIF lighting systems sold(1)
    
    
    1,873Total units sold (including HIF lighting systems)
    
    
    2,447Customer kilowatt demand reduction(2)
    
    
    574Customer kilowatt hours saved(2)(3)
    
    
    13,206,752Customer electricity costs saved(4)
    
    $
    1,016,920Indirect carbon dioxide emission reductions from customers energy savings (tons)(5)
    
    
    8,778Square footage retrofitted(6)
    
    
    957,317
 
 (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 2.45
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 2009, which is the most current full year for which this information is
available, was $0.0989 per kilowatt hour according to the United States Energy Information
Administration.  33




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##### Table of Contents



(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. The calculation of indirect carbon dioxide emissions reductions
reflects the most recent Environmental Protection Agency eGrid data.(6)
    
    Based on 2.45 million total units sold, which contain a total of approximately 12.25 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. 
 ITEM 6.
    
    EXHIBITS
 (a) Exhibits
 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.
  34




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##### Table of Contents



SIGNATURE
  ORION ENERGY SYSTEMS, INC.
RegistrantBy:
    /s/ Scott R. JensenScott R. JensenChief Financial Officer
(Principal Financial Officer and Authorized Signatory)  35




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##### Table of Contents



Exhibit Index to Form 10-Q for the Period Ended September 30, 2010
 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.
  36