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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2023

OR

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

 

Securities registered pursuant to Section 12(b) of the act:

 

Title of Each Class

 

Trading Symbol (s)

 

Name of Each Exchange on Which Registered

Common stock, no par value

 

OESX

 

The Nasdaq Stock Market LLC

(NASDAQ Capital Market)

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an "emerging growth company". See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

There were 32,502,558 shares of the Registrant’s common stock outstanding on August 4, 2023.

 

 


 

ORION ENERGY SYSTEMS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2023

TABLE OF CONTENTS

 

 

 

Page(s)

PART I FINANCIAL INFORMATION

3

ITEM 1.

Financial Statements (unaudited)

3

 

Condensed Consolidated Balance Sheets as of June 30, 2023 and March 31, 2023

3

 

Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2023 and June 30, 2022

4

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended June 30, 2023 and June 30, 2022

5

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2023 and June 30, 2022

6

 

Notes to the Condensed Consolidated Financial Statements

7

ITEM 2.

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

20

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

27

ITEM 4.

Controls and Procedures

27

PART II OTHER INFORMATION

28

ITEM 1.

Legal Proceedings

28

ITEM 1A.

Risk Factors

28

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

ITEM 5.

Other Information

28

ITEM 6.

Exhibits

29

SIGNATURE

30

 

 

 


 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

 

 

June 30, 2023

 

 

March 31, 2023

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,249

 

 

$

15,992

 

Accounts receivable, net

 

 

14,613

 

 

 

13,728

 

Revenue earned but not billed

 

 

1,231

 

 

 

1,320

 

Inventories, net

 

 

17,689

 

 

 

18,205

 

Prepaid expenses and other current assets

 

 

1,172

 

 

 

1,116

 

Total current assets

 

 

42,954

 

 

 

50,361

 

Property and equipment, net

 

 

10,534

 

 

 

10,470

 

Goodwill

 

 

1,484

 

 

 

1,484

 

Other intangible assets, net

 

 

5,738

 

 

 

6,004

 

Other long-term assets

 

 

3,436

 

 

 

3,260

 

Total assets

 

$

64,146

 

 

$

71,579

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Accounts payable

 

$

11,524

 

 

$

13,405

 

Accrued expenses and other

 

 

10,045

 

 

 

10,552

 

Deferred revenue, current

 

 

732

 

 

 

480

 

Current maturities of long-term debt

 

 

16

 

 

 

17

 

Total current liabilities

 

 

22,317

 

 

 

24,454

 

Revolving credit facility

 

 

10,000

 

 

 

10,000

 

Long-term debt, less current maturities

 

 

 

 

 

3

 

Deferred revenue, long-term

 

 

470

 

 

 

489

 

Other long-term liabilities

 

 

4,558

 

 

 

3,384

 

Total liabilities

 

 

37,345

 

 

 

38,330

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value: Shares authorized: 30,000,000 at
   June 30, 2023 and March 31, 2023;
no shares issued and outstanding at
   June 30, 2023 and March 31, 2023

 

 

 

 

 

 

Common stock, no par value: Shares authorized: 200,000,000 at
June 30, 2023 and March 31, 2023; shares issued:
41,973,543 at
June 30, 2023 and
41,767,092 at March 31, 2023; shares outstanding:
32,502,558 at June 30, 2023 and 32,295,408 at March 31, 2023

 

 

 

 

 

 

Additional paid-in capital

 

 

161,095

 

 

 

160,907

 

Treasury stock, common shares: 9,470,985 at June 30, 2023 and 9,471,684 
at March 31, 2023

 

 

(36,236

)

 

 

(36,237

)

Retained deficit

 

 

(98,058

)

 

 

(91,421

)

Total shareholders’ equity

 

 

26,801

 

 

 

33,249

 

Total liabilities and shareholders’ equity

 

$

64,146

 

 

$

71,579

 

 

The accompanying notes are an integral part of these Condensed Consolidated Statements.

3


 

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended June 30,

 

 

 

2023

 

 

2022

 

Product revenue

 

$

13,671

 

 

$

13,483

 

Service revenue

 

 

3,942

 

 

 

4,423

 

Total revenue

 

 

17,613

 

 

 

17,906

 

Cost of product revenue

 

 

10,059

 

 

 

10,385

 

Cost of service revenue

 

 

4,383

 

 

 

3,967

 

Total cost of revenue

 

 

14,442

 

 

 

14,352

 

Gross profit

 

 

3,171

 

 

 

3,554

 

Operating expenses:

 

 

 

 

 

 

General and administrative

 

 

5,739

 

 

 

3,754

 

Acquisition related costs

 

 

53

 

 

 

14

 

Sales and marketing

 

 

3,296

 

 

 

2,889

 

Research and development

 

 

480

 

 

 

514

 

Total operating expenses

 

 

9,568

 

 

 

7,171

 

Loss from operations

 

 

(6,397

)

 

 

(3,617

)

Other income (expense):

 

 

 

 

 

 

Other income

 

 

 

 

 

(1

)

Interest expense

 

 

(176

)

 

 

(17

)

Amortization of debt issue costs

 

 

(24

)

 

 

(15

)

Interest income

 

 

2

 

 

 

 

Total other expense

 

 

(198

)

 

 

(33

)

Loss before income tax

 

 

(6,595

)

 

 

(3,650

)

Income tax expense

 

 

42

 

 

 

(815

)

Net loss

 

$

(6,637

)

 

$

(2,835

)

Basic net loss per share attributable to
   common shareholders

 

$

(0.21

)

 

$

(0.09

)

Weighted-average common shares outstanding

 

 

32,345,823

 

 

 

31,138,398

 

Diluted net loss per share

 

$

(0.21

)

 

$

(0.09

)

Weighted-average common shares and share
   equivalents outstanding

 

 

32,345,823

 

 

 

31,138,398

 

 

The accompanying notes are an integral part of these Condensed Consolidated Statements.

4


 

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

 

 

 

Shareholders’ Equity

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Additional
Paid-in
Capital

 

 

Treasury
Stock

 

 

Retained
Deficit

 

 

Total
Shareholders’
Equity

 

Balance, March 31, 2023

 

 

32,295,408

 

 

$

160,907

 

 

$

(36,237

)

 

$

(91,421

)

 

$

33,249

 

Shares issued under Employee Stock Purchase
   Plan

 

 

699

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

206,451

 

 

 

188

 

 

 

 

 

 

 

 

 

188

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,637

)

 

 

(6,637

)

Balance, June 30, 2023

 

 

32,502,558

 

 

$

161,095

 

 

$

(36,236

)

 

$

(98,058

)

 

$

26,801

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Additional
Paid-in
Capital

 

 

Treasury
Stock

 

 

Retained
Deficit

 

 

Total
Shareholders’
Equity

 

Balance, March 31, 2022

 

 

31,097,872

 

 

$

158,419

 

 

$

(36,239

)

 

$

(57,080

)

 

$

65,100

 

Exercise of stock options for cash

 

 

26,646

 

 

 

54

 

 

 

 

 

 

 

 

 

54

 

Shares issued under Employee Stock Purchase
   Plan

 

 

443

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

125,744

 

 

 

254

 

 

 

 

 

 

 

 

 

254

 

Employee tax withholdings on stock-based
   compensation

 

 

(634

)

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,835

)

 

 

(2,835

)

Balance, June 30, 2022

 

 

31,250,071

 

 

$

158,727

 

 

$

(36,240

)

 

$

(59,915

)

 

$

62,572

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Statements.

5


 

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Three Months Ended June 30,

 

 

 

2023

 

 

2022

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(6,637

)

 

$

(2,835

)

Adjustments to reconcile net loss to net cash used in
operating activities:

 

 

 

 

 

 

Depreciation

 

 

346

 

 

 

354

 

Amortization of intangible assets

 

 

266

 

 

 

52

 

Stock-based compensation

 

 

188

 

 

 

254

 

Amortization of debt issue costs

 

 

24

 

 

 

15

 

Deferred income tax

 

 

 

 

 

(978

)

Loss (gain) on sale of property and equipment

 

 

28

 

 

 

(1

)

Provision for inventory reserves

 

 

161

 

 

 

100

 

Provision for credit losses

 

 

190

 

 

 

 

Other

 

 

1

 

 

 

(9

)

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

 

Accounts receivable

 

 

(1,075

)

 

 

109

 

Revenue earned but not billed

 

 

89

 

 

 

527

 

Inventories

 

 

355

 

 

 

979

 

Prepaid expenses and other assets

 

 

(257

)

 

 

160

 

Accounts payable

 

 

(1,906

)

 

 

(2,491

)

Accrued expenses and other

 

 

666

 

 

 

(1,273

)

Deferred revenue, current and long-term

 

 

234

 

 

 

32

 

Net cash used in operating activities

 

 

(7,327

)

 

 

(5,005

)

Investing activities

 

 

 

 

 

 

Cash to fund acquisition, net of cash received

 

 

 

 

 

55

 

Purchases of property and equipment

 

 

(508

)

 

 

(139

)

Additions to patents and licenses

 

 

 

 

 

(1

)

Proceeds from sale of property, plant and equipment

 

 

95

 

 

 

 

Net cash used in investing activities

 

 

(413

)

 

 

(85

)

Financing activities

 

 

 

 

 

 

Payment of long-term debt

 

 

(4

)

 

 

(4

)

Proceeds from revolving credit facility

 

 

 

 

 

 

Payments of revolving credit facility

 

 

 

 

 

 

Payments to settle employee tax withholdings on stock-based compensation

 

 

 

 

 

(2

)

Proceeds from employee equity exercises

 

 

1

 

 

 

54

 

Net cash (used in) provided by financing activities

 

 

(3

)

 

 

48

 

Net decrease in cash and cash equivalents

 

 

(7,743

)

 

 

(5,042

)

Cash and cash equivalents at beginning of period

 

 

15,992

 

 

 

14,466

 

Cash and cash equivalents at end of period

 

$

8,249

 

 

$

9,424

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Operating lease assets obtained in exchange for new operating lease liabilities

 

$

363

 

 

$

 

 

The accompanying notes are an integral part of these Condensed Consolidated Statements.

6


 

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS

Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion provides light emitting diode lighting systems, wireless Internet of Things enabled control solutions, project engineering, energy project management design, maintenance services and turnkey electric vehicle charging station installation services to commercial and industrial businesses, and federal and local governments, predominantly in North America.

Orion’s corporate offices and leased primary manufacturing operations are located in Manitowoc, Wisconsin. Orion also leases office space in Jacksonville, Florida, Lawrence, Massachusetts and Pewaukee, Wisconsin.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Orion and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Orion have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement have been included. Interim results are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2024 or other interim periods.

The Condensed Consolidated Balance Sheet as of March 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete financial statements.

The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in Orion’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 filed with the SEC on June 12, 2023.

Allowance for Credit Losses

Orion performs ongoing evaluations of its customers and continuously monitors collections and payments. Orion estimates an allowance for credit losses based upon the historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during that reporting period. Areas that require the use of significant management estimates include revenue recognition, inventory obsolescence, allowance for credit losses, accruals for warranty and loss contingencies, earn-out, income taxes, impairment analyses, and certain equity transactions. Accordingly, actual results could differ from those estimates.

7


 

Concentration of Credit Risk and Other Risks and Uncertainties

Orion's cash is primarily deposited with one financial institution. At times, deposits in this institution exceeds the amount of insurance provided on such deposits. Orion has not experienced any losses in such accounts and believes that it is not exposed to any significant financial institution viability risk on these balances.

Orion purchases components necessary for its lighting products, including lamps and LED components, from multiple suppliers. For the three months ended June 30, 2023 and June 30, 2022, no suppliers accounted for more than 10.0% of total cost of revenue.

For the three months ended June 30, 2023, two customers accounted for 20.6% and 11.0% of total revenue, respectively. For the three months ended June 30, 2022, one customer accounted for 13.8% of total revenue.

As of June 30, 2023, one customer accounted for 11.1% of accounts receivable. As of March 31, 2023, one customers accounted for 10.8% of accounts receivable.

Recent Accounting Pronouncements

 

Recently Adopted Standards

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance. The provisions of ASU 2016-13 and the related amendments are effective for Orion for fiscal years (and interim reporting periods within those years) beginning after December 15, 2022. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Orion adopted ASU 2016-13 effective April 1, 2023. The effect of adoption was immaterial.

NOTE 3 — REVENUE

Orion generates revenue primarily by selling manufactured or sourced commercial lighting fixtures and components, sourced electric vehicle chargers and related products, installing these products in customer’s facilities, and providing maintenance services including repairs and replacements for the lighting and related electrical components. Orion recognizes revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of the goods or services being provided (which we refer to as a performance obligation) is transferred to a customer at an amount that reflects the consideration Orion expects to receive in exchange for those goods or services.

During the third quarter of fiscal 2023, Orion acquired Voltrek LLC ("Voltrek"), which sells and installs sourced electric vehicle charging stations and related software subscriptions and renewals. The results of Voltrek are included in the Orion Electric Vehicle Charging segment ("EV") and compliment Orion’s existing turnkey installation model.

The sale of charging stations and related software subscriptions and renewals is presented in Product revenue. Orion is the principal in the sales of charging stations as it has control of the physical products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis. For certain sales, primarily software subscriptions and renewals, Orion is the sales agent providing access to the content and recognize commission revenue net of amounts due to third parties who fulfill the performance obligation. For these sales, control passes at the point in time upon providing access of the content to the customer.

The sale of installation and services related to the EV charging business is presented in Service revenue. Revenue from the EV segment that includes both the sale of product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Condensed Consolidated Statement of Operations.

8


 

Revenue from the maintenance offering that includes both the sale of Orion manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Condensed Consolidated Statement of Operations.

The following tables provide detail of Orion’s total revenue for the three months ended June 30, 2023 and June 30, 2022 (dollars in thousands):

 

 

 

Three Months Ended June 30, 2023

 

 

 

Product

 

 

Services

 

 

Total

 

Revenue from contracts with customers:

 

 

 

 

 

 

 

 

 

Lighting product and installation

 

$

11,785

 

 

$

831

 

 

$

12,616

 

Maintenance services

 

 

899

 

 

 

2,855

 

 

 

3,754

 

Electric vehicle charging

 

 

982

 

 

 

256

 

 

 

1,238

 

Total revenues from contracts with customers

 

 

13,666

 

 

 

3,942

 

 

 

17,608

 

Revenue accounted for under other guidance

 

 

5

 

 

 

 

 

 

5

 

Total revenue

 

$

13,671

 

 

$

3,942

 

 

$

17,613

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2022

 

 

 

Product

 

 

Services

 

 

Total

 

Revenue from contracts with customers:

 

 

 

 

 

 

 

 

 

Lighting product and installation

 

$

12,404

 

 

$

1,358

 

 

$

13,762

 

Maintenance services

 

 

989

 

 

 

3,065

 

 

 

4,054

 

Solar energy related revenues

 

 

 

 

 

 

 

 

0

 

Total revenues from contracts with customers

 

 

13,393

 

 

 

4,423

 

 

 

17,816

 

Revenue accounted for under other guidance

 

 

90

 

 

 

 

 

 

90

 

Total revenue

 

$

13,483

 

 

$

4,423

 

 

$

17,906

 

From time to time, Orion sells the receivables from one customer to a financing institution. The was no such activity during the three months ended June 30, 2023 or 2022.

The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of June 30, 2023 and March 31, 2023 (dollars in thousands):

 

 

 

June 30,
2023

 

 

March 31,
2023

 

Accounts receivable, net

 

$

14,613

 

 

$

13,728

 

Contract assets

 

$

1,231

 

 

$

1,320

 

Contract liabilities

 

$

657

 

 

$

480

 

 

There were no significant changes in the contract assets outside of standard reclassifications to accounts receivable, net upon billing. Deferred revenue, current as of June 30, 2023 and March 31, 2023, includes $0.7 million and $0.5 million, respectively, of contract liabilities which represent consideration received from a new customer contract on which installation has not yet begun and Orion has not fulfilled the promises included.

NOTE 4 — ACCOUNTS RECEIVABLE, NET

As of June 30, 2023 and March 31, 2023, Orion's accounts receivable and allowance for credit losses balances were as follows (dollars in thousands):

 

 

 

June 30,
2023

 

 

March 31,
2023

 

Accounts receivable, gross

 

$

14,885

 

 

$

13,814

 

Allowance for credit losses

 

 

(272

)

 

 

(86

)

Accounts receivable, net

 

$

14,613

 

 

$

13,728

 

 

9


 

Changes in Orion’s allowance for credit losses were as follows (dollars in thousands):

 

 

For the Three Months Ended
June 30,

 

 

 

2023

 

 

2022

 

Beginning of period

 

$

(86

)

 

$

(8

)

Credit loss expense

 

 

(190

)

 

 

(10

)

Write-off

 

 

4

 

 

 

 

End of period

 

$

(272

)

 

$

(18

)

 

NOTE 5 — INVENTORIES, NET

As of June 30, 2023 and March 31, 2023, Orion's inventory balances were as follows (dollars in thousands):

 

 

 

Cost