STOCK OPTIONS, RESTRICTED SHARES AND WARRANTS

At Orion's 2016 Annual Meeting of Shareholders held on August 3, 2016, Orion's shareholders approved the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan (the "Plan"). The Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Plan may consist of stock options, stock appreciation rights, performance shares, performance units, shares of Orion's common stock ("Common Stock"), restricted stock, restricted stock units, incentive awards or dividend equivalent units. An aggregate of 1,750,000 shares of Common Stock are reserved for issuance under the Plan.

Prior to shareholder approval of the Plan, the Company maintained its 2004 Stock and Incentive Awards Plan, as amended, which authorized the grant of cash and equity awards to employees (the “Former Plan”). No new awards will be granted under the Former Plan, however, all awards granted under the Former Plan that were outstanding as of August 3, 2016 will continue to be governed by the Former Plan. Forfeited awards originally issued under the Former Plan are canceled and are not available for subsequent issuance under the 2016 Omnibus Plan.

Certain non-employee directors have elected to receive stock awards in lieu of cash compensation pursuant to elections made under Orion’s non-employee director compensation program. The Plan and the Former Plan also permit accelerated vesting in the event of certain changes of control of Orion as well as under other special circumstances.

Orion historically granted stock options and restricted stock under the Former Plan. Orion has not issued stock options since fiscal 2014 and instead has issued restricted stock.

Orion accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, net of estimated forfeitures

In fiscal 2017, an aggregate of 1,132,392 restricted shares were granted valued at a price per share between $1.35 and $2.22, which was the closing market price as of each grant date. In fiscal 2016, an aggregate of 795,805 restricted shares were granted valued at a price per share between $1.34 and $2.62, which was the closing market price as of each grant date. In fiscal 2015, an aggregate of 410,496 restricted shares were granted valued at a price per share between $4.16 and $7.23, which was the closing market price as of each grant date.

In fiscal 2017, Orion granted an aggregate of 53,501 shares from the 2004 Stock and Incentive Awards Plan and the 2016 Omnibus Incentive Plan to certain non-employee directors who elected to receive stock awards in lieu of cash compensation. The shares were valued ranging from $1.38 to $1.85 per share, the closing market price as of the issuance dates. In fiscal 2016, Orion granted 35,290 shares from the 2004 Stock and Incentive Awards Plan to certain non-employee directors who elected to receive stock awards in lieu of cash compensation. The shares were valued ranging from $1.20 to $2.62 per share, the closing market price as of the issuance dates. Additionally, during fiscal 2016, Orion issued 2,500 shares to a consultant as part of a consulting compensation agreement. The shares were valued at $2.00 per share, the closing market price as of the issuance date. In fiscal 2015, Orion granted 27,931 shares from the 2004 Stock and Incentive Awards Plan to certain non-employee directors who elected to receive stock awards in lieu of cash compensation. The shares were valued ranging from $4.20 to $5.23 per share, the closing market price as of the issuance dates.

On June 7, 2016, Orion issued and sold 57,065 shares of its common stock to an executive. On August 5, 2016, Orion sold an aggregate of 63,381 shares of its common stock, in equal amounts, to three recently retired members of Orion's board of directors. In each case above, the purchase price for the shares was calculated based on the closing price of Orion's common stock on the NASDAQ Capital Market of the date of the issuance. The shares of common stock were offered and sold pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) and Rule 701.

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



	Fiscal Year Ended March 31,
	2017		2016		2015
Cost of product revenue	$	30	$	36	$	50
General and administrative	1,337		1,148		1,056
Sales and marketing	139		235		360
Research and development	99		43		33
	$	1,605	$	1,462	$	1,499

The number of shares available for grant under the plans were as follows:



Available at March 31, 2014	1,291,996
Granted stock options	—
Granted shares	(27,931	)
Restricted Shares	(410,496	)
Forfeited restricted shares	74,957
Forfeited stock options	150,074
Available at March 31, 2015	1,078,600
Granted stock options	—
Granted shares	(64,960	)
Restricted Shares	(795,805	)
Forfeited restricted shares	206,471
Forfeited stock options	363,380
Available at March 31, 2016	787,686
Shares reserved under new plan	1,750,000
Shares canceled from old plan	(168,289	)
Granted stock options	—
Granted shares	(58,484	)
Restricted shares	(1,132,392	)
Forfeited restricted shares	52,500
Forfeited stock options	67,200
Available at March 31, 2017	1,298,221

The following table summarizes information with respect to outstanding stock options:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Fair Value of Options Granted	Aggregate Intrinsic Value
Outstanding at March 31, 2014	2,716,317		$	3.43	1.32
Granted	—		$	—
Exercised	(139,407	)	$	2.46
Forfeited	(150,074	)	$	3.13
Outstanding at March 31, 2015	2,426,836		$	3.50	—
Granted	—		$	—
Exercised	(46,410	)	$	2.09
Forfeited	(363,380	)	$	4.68
Outstanding at March 31, 2016	2,017,046		$	3.32	—
Granted	—		$	—
Exercised	(80,000	)	$	2.20
Forfeited	(416,093	)	$	3.41
Outstanding at March 31, 2017	1,520,953		$	3.36	—	$	53,760
Exercisable at March 31, 2017	1,405,653					$	49,536

The aggregate intrinsic value represents the total pre-tax intrinsic value, which is calculated as the difference between the exercise price of the underlying stock options and the fair value of Orion’s closing common stock price of $1.98 as of March 31, 2017.

The following table summarizes the range of exercise prices on outstanding stock options at March 31, 2017:



	March 31, 2017
	Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Vested	Weighted Average Exercise Price
$1.62 - 2.20	460,584	5.33	$1.90	406,484	$1.89
$2.41 - 2.75	212,640	5.99	2.45	209,440	2.44
$2.86 - 4.28	650,674	2.97	3.39	592,674	3.43
$4.49 - 4.76	25,000	1.44	4.64	25,000	4.64
$5.35 - 5.44	75,204	2.01	5.39	75,204	5.39
$9.00	27,000	0.87	9.00	27,000	9.00
$10.14 - 11.61	69,851	0.98	10.56	69,851	10.56
	1,520,953	3.90	$3.36	1,405,653	$3.42

During fiscal 2017, Orion granted restricted shares as follows (which are included in the above stock plan activity tables):



Balance at March 31, 2016	1,053,389
Shares issued	1,132,392
Shares vested	(375,738		)
Shares forfeited	(105,500		)
Shares outstanding at March 31, 2017	1,704,543
Per share price on grant date	$1.35-6.80
Compensation expense	$	1,680,362

As of March 31, 2017, the weighted average grant-date fair value of restricted shares granted was $1.43.

Unrecognized compensation cost related to non-vested common stock-based compensation as of March 31, 2017 is as follows (dollars in thousands):



Fiscal 2018	$	1,189
Fiscal 2019	673
Fiscal 2020	186
Fiscal 2021	46
Fiscal 2022	—
Thereafter	—
	$	2,094
Remaining weighted average expected term	2.2 years

Orion previously issued warrants in connection with various stock offerings and services rendered. The warrants granted the holder the option to purchase common stock at specified prices for a specified period of time. No warrants were issued in fiscal 2017, 2016 or 2015. During fiscal 2015, all warrants outstanding for a total of 38,980 shares were exercised at $2.25 per share, and as a result, none remain outstanding.