# Energy Focus, Inc: Form 10-Q for the period ended Mar 31, 2025

- Company: [Energy Focus, Inc](/companies/efoi.md) (CIK 924168)
- Form: 10-Q
- Filed: 2025-05-13
- Accepted by EDGAR: May 13, 2025, 06:05 ET
- Period: 2025-03-31
- Accession: 0001628280-25-024875
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/924168/000162828025024875/efoi-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/924168/000162828025024875/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $616.0k | us-gaap:Revenues |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $422.0k | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2025-01-01 to 2025-03-31 | $194.0k | us-gaap:GrossProfit |
| Research and development | 3 months, 2025-01-01 to 2025-03-31 | $50.0k | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2025-01-01 to 2025-03-31 | $412.0k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$268.0k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2025-01-01 to 2025-03-31 | $0 | us-gaap:InterestExpenseNonoperating |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$268.0k | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 5,266,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$272.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $5.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2025-03-31 | $488.0k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $5.0m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $5.4m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $2.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $2.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $2.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 22,426 characters.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included in Part I, Item 1, “Financial Statements” of this Quarterly Report, as well as Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Annual Report”).

### Overview

Energy Focus, Inc. engages primarily in the design, development, manufacturing, marketing and sale of energy-efficient lighting systems and controls. We develop, market and sell high quality light-emitting diode (“LED”) lighting and controls products in the commercial market and military maritime market (“MMM”). Our mission is to enable our customers to run their facilities with greater energy efficiency, productivity, and human health and wellness through advanced LED retrofit solutions. Our goal is to be a market leader for the most demanding applications where performance, quality, value, environmental impact and health are considered paramount. We specialize in energy efficient LED lighting retrofit product, replacing fluorescent, high-intensity discharge lighting and other types of lamps in institutional buildings for primarily indoor lighting applications with our innovative, high-quality commercial and military-grade tubular LED (“TLED”) products, as well as other LED and lighting control products for commercial and consumer applications. We are also evaluating adjacent technologies, including Gallium Nitride (“GaN”) based power supplies and additional market opportunities for energy solution products that support sustainability in our existing channels.

The LED lighting industry has changed dramatically over the past several years due to increasing competition and price erosion. We have been experiencing these industry forces in both our military and commercial business since 2016, when we once commanded significant price premiums for our flicker-free TLEDs with industry leading warranties. In more recent years, we have focused on redesigning our products for lower costs and consolidated our supply chain for stronger purchasing power in an effort to price our products more competitively while not impacting the performance and quality. Despite these efforts, our legacy products continue to face extreme price competition and a convergence of product functionality in the marketplace, and we have shifted to diversifying our supply chain in an effort to increase value and remain competitive. These trends are not unique to Energy Focus as evidenced by the increasing number of industry peers facing challenges, exiting LED lighting, selling assets and even going out of business.

In addition to continuously pursuing cost reductions, our strategy to combat these trends is to innovate both our technology and product offerings with differentiated products and solutions that offer greater, distinct value. Specific examples of these products we have developed include the RedCap®, our patented emergency backup battery integrated TLED, as well as our robust MMM product offering. The Company has enhanced the performance of our RedCap® product providing a more user- friendly experience. We continue to evaluate our sales strategy and believe our go-to-market strategy that focuses more on direct-sales marketing, selectively expanding our channel partner network to cover territories across the country, and listening to the voice of the customer will lead to better and more impactful product development efforts that we believe will eventually translate into larger addressable markets and greater sales growth for us.

The Company has continued to make significant cost cutting efforts to address operational expenses while maintaining customer satisfaction and delivering goods on-time. Investments into the Company have contributed to the ability of the Company to continue to not only provide quality products and services, but to both expand and rationalize product offerings.

It is our belief that the continued dramatic rightsizing efforts undertaken in 2024 and 2025, along with reorganization of the sales team and ongoing development of innovative, high-value products and an expanded distribution network, will over time result in improved sales and bottom-line performance for the Company.

We have taken steps to strengthen our financial structure through capital increases and cost reduction measures. As a result, we have fully eliminated all external high-interest debt, which we believe has improved our financial position. Our business expansion plans are supported by financial strategies that we expect will provide funding for our planned growth initiatives, although there can be no assurance that such funding will be adequate. During 2024, our MMM business faced ongoing challenges due to delays in government funding and the timing of U.S. Navy awards. Several anticipated projects encountered repeated postponements, further complicated by the long sales cycles typical in this sector. The timeline from bid submission to order placement often exceeds six months, and many MMM products are built-to-order, resulting in extended lead times before revenue recognition. To mitigate this volatility, we continue to actively pursue new opportunities with the U.S. Navy and other government sectors. We have undertaken efforts to reduce costs and improve production efficiencies in MMM product lines which we believe have contributed to our competitiveness, and may have helped us secure new contracts and expand our sales pipeline in the first half of 2025.

We intend to focus on developing our commercial product offerings, including planned new product lines such as Energy Storage Systems (ESS), GaN Power Supplies, and UPS systems for data centers, while continuing to leverage the stability and opportunities within our MMM business. In 2024, we conducted a comprehensive review of our commercial pricing strategy and reassessed key partnerships within the energy related market. These strategic adjustments have improved our market position, offering a more competitive pricing structure and a stronger value proposition for our customers. We believe that these initiatives, if successfully implemented, and if our financial position continues to improve, may contribute to growth across both our MMM and commercial business sectors, although there can be no assurance that such growth will occur.

Meanwhile, we continue to seek additional external funding alternatives and sources to support our growth strategies, plans and initiatives. The strategic investments in 2024 by Sander Electronics, Inc. (“Sander”), a shareholder of the Company, contributed meaningful external capital, as well as presented synergistic opportunities to improve and diversify our supply chain and product offerings.

Despite continuing progress on cost reduction throughout 2024 and 2025, the Company’s results reflect the challenges due to long and unpredictable sales cycles, unexpected delays in MMM and commercial customer retrofit budgets and project starts, and supply chain issues. There has also been continuing aggressive price competition in the lighting industry. We continue to incur losses and we have a substantial accumulated deficit, which continues to raise substantial doubt about our ability to continue as a going concern at March 31, 2025.

### Our Business Strategy

#### Demand-oriented Approach

In order to deepen our relationships with customers, we are in the process of re-establishing our service model, aiming to provide richer and more targeted customer service. We believe that by increasing opportunities for interaction with our customers, we can better understand their needs, thereby enhancing their loyalty to our brand.

To ensure that EFOI’s products, pricing, and customer service lifecycle are better aligned, we are building a comprehensive value model to ensure consistency in the products and services we provide throughout the customer journey. We have begun an in-depth analysis of our current and past top 10 customers over the last five years to identify the core factors that make them loyal customers. By analyzing this data, we hope to reveal the key elements that enhance customer stickiness, providing them with more reasons and value to stay with us. In particular, we are actively focusing on customers with high loyalty to better meet their needs. This is not only an acknowledgment of our products but also a validation of the quality of our service.

#### Supply-oriented Approach

EFOI is committed to adopting three main sustainable economy strategies: “Green Supply Chain”, “Green Product”, and “Green Manufacturing”, aiming to promote sustainability throughout the entire value chain. The Company is working closely with its supply chain partners to optimize recycling mechanisms and strengthen packaging design, integrating sustainable economy principles into the core of supply chain management.

Guided by the vision of “transcending traditional corporate social responsibility and creating shared value”, EFOI’s team is focusing on stakeholders, aiming to achieve a “dual profit engine” effect by combining financial performance and Environmental, Social, and Governance (ESG) practices. This strategy not only aligns with the Company’s responsibility and sustainability goals but is also expected to enhance overall performance and market competitiveness. EFOI's operational team's new strategy focuses on integrating environmental and economic benefits, aiming to create a win-win situation that benefits the company, society, and the environment.

Under the premise of a similar industrial environment and familiar relationships, our professional skills complement those of our supply chain partners. We believe this foundation of cooperation may enable us to pursue common goals of cost reduction, profit sharing, and exploring new business opportunities. This not only strengthens our cooperative relationship but also lays a solid foundation for our joint efforts towards a better future.

#### Financial-oriented Approach

The Company applies strategic financial management in the below perspective.

Control and Monitoring of Assets and Liabilities

- Assets: Regularly evaluate all assets, especially inventory, to ensure they remain in optimal condition in terms of value and performance. Minimize or mitigate the impact of inefficient and aging assets, focusing on assets with high efficiency and return.
- Liabilities: Ensure a robust liability structure, optimize the cost of liabilities, and seek lower interest rates and more favorable repayment terms. Regularly review the liability situation to ensure the company’s level of liabilities remains within a safe range.

Structured Profitability

- Revenue Growth: Develop diversified revenue streams, reduce dependency on single business or market, continuously optimize products and services, and enhance market competitiveness.
- Cost Control: Strictly control operating costs, seek opportunities to reduce costs, and ensure the efficient use of resources to optimize operations.
- Cash Flow Management: Establish a sound accounts receivable and payable management system to ensure timely collection of receivables and reasonable arrangement of payments. Maintain sufficient cash reserves to cope with potential funding shortages.

### Results of operations

The following table sets forth items in our Condensed Consolidated Statements of Operations as a percentage of net sales for the periods indicated:

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| **Net sales** | 100.0% | 100.0% |
| Cost of sales | 68.5 | 85.6 |
| **Gross profit** | 31.5 | 14.4 |
| **Operating expenses:** |  |  |
| Product development | 8.1 | 15.4 |
| Selling, general, and administrative | 66.9 | 70.9 |
| **Total operating expenses** | 75.0 | 86.3 |
| **Loss from operations** | (43.5) | (71.9) |
| **Other expenses (income):** |  |  |
| Interest expense | — | 0.6 |
| Gain on debt extinguishment | — | (22.4) |
| Other expenses | — | 0.1 |
| **Net loss** | (43.5)% | (50.2)% |

27

### Net sales

A further breakdown of our net sales is presented in the following table (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Commercial | $203 | $299 |
| MMM products | 413 | 534 |
| **Total net sales** | $616 | $833 |

Net sales of $0.6 million for the first quarter of 2025 decreased $0.2 million, or 26%, compared to first quarter of 2024 net sales of $0.8 million, driven by a decrease of $0.1 million in MMM sales and $0.1 million in commercial sales. The decrease in net MMM sales in the first quarter of 2025 compared to the same period in 2024 is primarily due to a significant reduction in military demand, driven by the impact of the U.S. election cycle. Net sales of our commercial products decreased by $0.1 million, or 32% in the first quarter of 2025 due to the effects of high inflation, which reduced the proportion of commercial sales, along with market-adjusted pricing.

### Gross Profit

Gross profit margin was $0.2 million, or 32% of net sales, for the first quarter of 2025. This compares with gross margin of $0.1 million, or 14% of net sales, in the first quarter of 2024. The quarter-over-quarter increase in gross margin was primarily driven by a 24% of net sales decrease in fixed costs such as subscription fee and expenses related to rent expense for production.

### Operating expenses

#### Product development

Product development expenses include salaries and related benefits, testing and related costs, travel, supplies, as well as overhead items, such as depreciation and facility costs. Product development costs are expensed as they are incurred.

Product development expenses were $0.1 million for the first quarter of 2025, down 61% from the first quarter of 2024. The $0.1 million decrease primarily resulted from lower payroll-related expenses due to reduction in the headcount and product testing fees. During 2024, the Company terminated several employees, and the result was a significant reduction in payroll-related expenses for the first quarter of 2025.

#### Selling, general and administrative

Selling, general and administrative expenses were $0.4 million for the first quarter of 2025, down 30% as compared to $0.6 million in the first quarter of 2024. The decrease is primarily due to a reduction in consultants fees of $0.2 million.

#### Interest expense

There was no interest expense for the first quarter of 2025, compared to interest expense of $5 thousand for the first quarter of 2024. The decrease is primarily related to early termination of the 2022 Streeterville Note in 2024.

#### Gain on debt extinguishment

We recognized $187 thousand of gain on debt extinguishment for the first quarter of 2024, which was related to the early termination of the 2022 Streeterville Note. There was no such gain recognized for the first quarter of 2025.

#### Other expenses

Other expenses was less than a thousand for the first quarter of 2025, compared to other expenses of $1 thousand for the first quarter of 2024. Other expenses are mainly comprised of bank and collateral management fees.

### Provision for income taxes

Due to the operating losses incurred during the three months ended March 31, 2025 and 2024, and after application of the annual limitation set forth under Section 382 of the Internal Revenue Code of 1986, as amended, it was not necessary to record a provision for U.S. federal income tax or various state income taxes as income tax benefits are fully offset by a valuation allowance recorded.

### Net loss

For the three months ended March 31, 2025, our net loss of $0.3 million decreased 36% over the net loss for the three months ended March 31, 2024 of $0.4 million. The decrease is mainly due to lower fixed costs in the first quarter of 2025.

### Financial condition

At March 31, 2025, we had $0.5 million in cash and no outstanding debt. We have historically incurred substantial losses, and as of March 31, 2025, we had an accumulated deficit of $155.2 million. Additionally, our sales have been concentrated among a few major customers and for the three months ended March 31, 2025, three customers accounted for approximately 70% of net sales.

In 2025 and 2024, we recommitted to building upon the transformation activities started during 2019 that sought to stabilize and regrow our business. These efforts include the following key developments that occurred during 2025 and 2024:

- We reinvested in our MMM sales channel and are pursuing existing and new sales opportunities, though the sales cycles for what are frequently made-to-order products are longer than commercial offerings.
- We aggressively re-evaluated operating expenses and reduced its workforce significantly throughout 2024 into 2025 to manage fixed costs.
- We continued to seek additional external funding alternatives and sources to support our growth strategies, plans and initiatives.

We continue to closely monitor our cost control efforts to streamline our operations by closely managing all spending throughout the Company, while carefully investing in new products and strategies that sought to reenergize sales.

We will seek to remain agile as an organization to respond to potential or continuing weakness in the macroeconomic environment and in the meantime seek to expand sales channels and enter new markets that we believe will provide additional growth opportunities. We plan to achieve profitability through developing and launching new, innovative products, our Redcap® emergency battery backup tubular TLEDs, evaluating new growth opportunities such as GaN-based power supply circuitry and other energy solution products, as well as executing on our multi-channel sales strategy that targets key verticals, such as government, healthcare, education and commercial and industrial, complemented by our marketing outreach campaigns and expanding channel partnerships. In addition, we intend to continue to apply rigorous financial discipline in our organizational structure, decision-making, business processes and policies, strategic sourcing activities and supply chain practices to help accelerate our path towards profitability.

### Liquidity and capital resources

#### Cash

At March 31, 2025, our cash balance was $0.5 million, compared to $0.6 million at December 31, 2024.

The following summarizes cash flows from operating, investing, and financing activities, as reflected in the Condensed Consolidated Statements of Cash Flows included in Part I, Item 1, “Financial Statements,” of this Quarterly Report (in thousands):

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| **Net cash used in operating activities** | $(272) | $(58) |
| **Net cash used in investing activities** | $(5) | $— |
| **Net cash provided by (used in) financing activities** | $200 | $(1,000) |

#### Net cash used in operating activities

Net cash used in operating activities was $0.3 million for the three months ended March 31, 2025. The net loss for the three months ended March 31, 2025 was $0.3 million and was adjusted for non-cash items, including depreciation and amortization, stock-based compensation, provisions for inventory, warranty, accounts receivable reserves and working capital changes. During the three months ended March 31, 2025, we generated $0.2 million in cash through collection of accounts receivable which was offset by $0.2 million in cash due to changes in prepayment for vendors. We used $0.1 million from accounts payable due to timing of inventory receipts and payments.

Net cash used in operating activities was $0.1 million for the three months ended March 31, 2024. The net loss for the three months ended March 31, 2024 was $0.4 million and was adjusted for non-cash items, including depreciation and amortization, stock-based compensation, provisions for inventory, warranty, accounts receivable reserves and working capital changes. During the three months ended March 31, 2024, we generated $1.4 million in cash through collection of accounts receivable and $0.1 million due to changes in prepayment for vendors. We used $0.1 million and $0.8 million from accounts payable and accounts payable to related party, respectively due to timing of inventory receipts and payments.

#### Net cash used in investing activities

Net cash used in investing activities was $5 thousand for the three months ended March 31, 2025, primarily from the acquisition of property and equipment.

For the three months ended March 31, 2024, the Company did not have any activities in connection with investing activities.

#### Net cash provided by (used in) financing activities

Net cash provided by financing activities was $0.2 million for the three months ended March 31, 2025, related to proceeds from the private placement of common stock.

Net cash used in financing activities was $1.0 million for the three months ended March 31, 2024, related to net payments on the 2022 Streeterville Note.

#### Contractual and other obligations

Please refer to Note 9 “Purchase Commitments” included under Part I, Item 1, “Financial Statements,” of this Quarterly Report.

### Critical accounting policies

There have been no material changes to our critical accounting policies as compared to those included in our 2024 Annual Report.

### Certain risks and concentrations

We have certain customers whose net sales individually represented 10% or more of our total net sales, or whose net trade accounts receivable balance individually represented 10% or more of our total net trade accounts receivable; we have certain suppliers, which individually represent 10% or more of our total purchases, or whose trade accounts payable balance individually represented 10% or more of our total trade accounts payable balance. Please refer to Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” included under Part I, Item 1, “Financial Statements,” of this Quarterly Report.

### Recent accounting pronouncements

For information on recent accounting pronouncements, please refer to Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” included under Part I, Item 1, “Financial Statements,” of this Quarterly Report.

## Market risk

As filed, 147 characters.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this item.

## Controls and procedures

As filed, 1,633 characters.

### Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including our Chief Executive Officer who also serves as our principal financial officer as appropriate, to allow for timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Exchange Act, our management must evaluate, with the participation of our Chief Executive Officer, the effectiveness of our disclosure controls and procedures, as of March 31, 2025, the end of the period covered by this Quarterly Report. Management, with the participation of our Chief Executive Officer, did evaluate the effectiveness of our disclosure controls and procedures as of the end of period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures were effective as of March 31, 2025.

### Changes in internal control over financial reporting

During the quarterly period covered by this Quarterly Report, there have not been any changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 4,085 characters.

As a smaller reporting company, we are not required to provide a separate risk factors section in this Quarterly Report. However, we have elected to include the following updated risk factors to provide additional context for investors. These risks supplement those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024. You should carefully consider these risks, together with all other information in this Quarterly Report and our other SEC filings, before making an investment decision.

***We may fail to secure sufficient additional financing, which could prevent us from executing our business plan and continuing as a going concern.***

Our cash balance of $0.5 million as of March 31, 2025, and ongoing operating losses raise substantial doubt about our ability to continue as a going concern. We are actively seeking at least $1 million in capital through equity, debt, or strategic partnerships, but there can be no assurance that we will secure such funding on acceptable terms or at all. Equity financing may significantly dilute existing shareholders, while debt financing could impose restrictive covenants or high interest rates. Failure to obtain adequate financing could result in reduced operations, delayed product development, or insolvency.

***Global trade policies, including tariffs, could increase costs and disrupt our supply chain, adversely affecting our operations and profitability.***

Our operations are subject to risks arising from global trade policies, particularly the imposition of tariffs and other trade barriers by the United States, China, the European Union, and other nations, which have intensified under the current U.S. administration. As of March 31, 2025, approximately 49% of our purchase commitments are with Sander Electronics Co Ltd, a Taiwan-based related party, which could be indirectly affected by international trade tensions, including tariffs. These policies may increase the cost of imported components, extend delivery times due to customs delays, or reduce demand for our products if customers face higher prices. For example, tariffs imposed in early 2025 on electronic components could increase our cost of sales by approximately 10% to 15% annually based on current inventory levels and assuming the relevant products become subject to new or additional tariffs.

The unforeseen results of potential trade disputes and reciprocal tariffs worldwide could further impact our business. Increased trade protectionism, as governments seek to protect or revive domestic industries, may lead to restrictions on imports, such as tariffs, that could significantly affect global trade and, indirectly, the demand for our LED lighting products. Such restrictions could increase the cost of exported goods, prolong delivery times, and elevate risks associated with exporting, potentially leading to a decline in the volume of exported goods and demand for our products. The interconnected nature of global supply chains means that trade policies, even in countries not directly imposing or subject to tariffs, could disrupt our access to critical components.

Tensions over trade remain high, particularly between the U.S., China, and the European Union. The current U.S. administration’s extensive use of tariffs as a policy tool has introduced significant uncertainty regarding future trade relationships with key markets, including China, the European Union, Canada, and Mexico. These tariffs have prompted, and may continue to prompt, retaliatory tariffs from other nations, raising concerns about a prolonged trade war. Protectionist developments, or the perception that they may occur, could materially adversely affect global economic conditions, reduce international trade, and disrupt our supply chain, particularly for components sourced from Asia. Such disruptions could strain our liquidity, increase operating costs, and hinder our ability to compete effectively in the LED lighting market, adversely impacting our business, results of operations, and financial condition.

Filed May 13, 2025.
Source: SEC EDGAR, the filing index for accession 0001628280-25-024875. Last ingested by Listed: Oct 24, 2026, 15:00 ET. No prices; not investment advice.