ENERGY FOCUS INCDE
For the period ended Jun 30, 2024. Filed Aug 13, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 13, 2024
EFOI$4.04+9.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-13.
0001628280-24-022861
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001628280-24-036912
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 84 previous paragraphs and 90 current paragraphs.
54 unchanged; 24 reworded; 11 added; 5 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Net sales of $1.6 million for the second quarter of 2024 increased $0.5 million, or 47%, compared to second quarter of 2023 net sales of $1.1 million, primarily driven by an increase in MMM sales of $0.6 million, or 95%, partially offset by a decrease in commercial sales of $0.1 million, or 20%. The net sales increase in the second quarter was primarily driven by our sales strategy, which led to a decrease in the proportion of commercial sales and a significant increase in the demand and shipments of MMM products for military use, along with market-adjusted pricing.
Current report
Net sales of $2.4 million for the first six months of 2024 increased $0.4 million, or 20%, compared to the same period in 2023, primarily driven by a 42% increase in MMM sales, partially offset by a 14% decrease in commercial sales. The net sales increasefor the first six months of 2024 was primarily driven by our sales strategy, which led to a decrease in the proportion of commercial sales and a significant increase in the demand and shipments of MMM products for military use, along with market-adjusted pricing.
Current report
Gross profit was 8% of net sales, for the second quarter of 2024. This compares with gross profit of 17% of net sales, in the second quarter of 2023. The period-over-period decrease in gross profit was driven mainly by an 8% of net sales decrease in fixed costs such as subscription fee for production, a 4% of net sales decrease in variable costs such as material cost and freight in expense, and a 20% of net sales unfavorable change in the inventory reserves.
Current report
Gross profit was 10% of net sales, for the first six months of 2024 compared to 9% of net sales, for the first six months of 2023. The year-over-year increase in gross profit was driven mainly by a 5% of net sales decrease in fixed costs such as subscription fee and rent expense for production, an 11% of net sales decrease in variable costs such as material cost and freight in expense, and a 16% of net sales unfavorable change in inventory reserves.
Current report
Product development expenses were $268 thousand for the first six months of 2024, a $33 thousand decrease compared to $301 thousand for the first six months of 2023. The decrease is primarily related to payroll expense and decreased headcount, offset by an increase in traveling expense and product testing fee.
Current report
Selling, general and administrative expenses were $1.1 million for the first six months of 2024, compared to $2.2 million for the first six months of 2023. The decrease is primarily due to (i) decreases in payroll and payroll related expenses of $0.5 million due to reduced headcount; (ii) a reduction in accounting and consultants expenses of $0.3 million; and (iii) a reduction of $0.1 million in director fees.
Current report
Other Expense (Income)
Current report
Other income and expenses
Current report
Other income for the second quarter and first six months of 2024 of $4 thousand, compared to other income of $16 thousand for the second quarter and the first months of 2023. Other income are related to the reversal of credit balances recorded from online retail sales.
Current report
For the six months ended June 30, 2024, our net loss of $1.0 million decreased 61% over the net loss for the six months ended June 30, 2023 of $2.5 million. The decrease is primarily due to a decrease in operating expenses in the first six months of 2024 from the first six months of 2023.
Current report
Net cash provided by ( used in) financing activities
Removed paragraphs (5)
Previous report
The EnFocus™ platform offers two immediately available product lines: EnFocus™ DM, which provides a dimmable lighting solution, and EnFocus™ DCT, which provides both a dimmable and color tunable lighting solution. EnFocus™ enables buildings to have dimmable, color tunable and circadian-ready lighting using existing wiring, without requiring laying additional data cables or any wireless communication systems, through a relatively simple upgrade with EnFocus™ switches and LED lamps, a far more secure, affordable and environmentally sustainable solution compared with replacing an entire luminaire and incorporating additional wired or wireless communication.
Previous report
Net sales of $0.8 million for the first quarter of 2024 decreased $0.1 million, or 10%, compared to first quarter of 2023 net sales of $0.9 million, driven by a decrease of $75 thousand in MMM sales and $22 thousand in commercial sales. The decrease in net MMM sales in the first quarter of 2024 compare to the same period in 2023, primarily due to the staff reduction in the MMM sales department and delayed shipments for quality inspections. Net sales of our commercial products decreased by $22 thousand, or 7% in the first quarter of 2024 due to limited product availability impacts from supply chain constraints, our inventory reduction project, increased competition, and continuing fluctuations in the timing, pace, and size of commercial projects.
Previous report
Gross profit margin was $120 thousand, or 14% of net sales, for the first quarter of 2024. This compares with gross margin of $17 thousand, or 2% of net sales, in the first quarter of 2023. The quarter-over-quarter increase for the first quarter of 2024 in gross margin rate was primary driven by (1) a $14 thousand, or 1.3%, of net sales, decrease in fixed costs such as production salaries (2) favorable freight-in variances of $12 thousand, or 1% of net sales, and (3) favorable price and usage variances for material and labor of $117 thousand, or 15% of net sales.
Previous report
Other expenses
Previous report
•We continued development of the second generation of EnFocus™ powerline control switches and circadian lighting system for commercial markets, which as a result of supply chain challenges we now plan to reintroduce in 2024. EnFocus™ powerline control enables buildings to have dimmable, color tunable and circadian-ready lighting using existing wiring, without requiring laying additional cables or any wireless communication systems, through a relatively simple upgrade with EnFocus™ switches and EnFocus™ LED lamps. This upgrade offers a simpler, more secure, affordable and environmentally sustainable solution compared with replacing entire luminaire fixtures and incorporating additional wired or wireless communication.
Reworded paragraphs (24)
Previous wording
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, EnFocus™, our unique dimmable/color-tunable lighting and powerline control platform that we launched in 2020, and the second generation of EnFocus™ powerline control switches and circadian lighting system. We are looking forward to the continued support and growth of our existing EnFocus™ product line which is particularly attractive for its ease of install and ease of use in spaces with transient occupation. The Company have 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.
Current wording
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, EnFocus™, our unique dimmable/color-tunable lighting and powerline control platform that we launched in 2020, and the second generation of EnFocus™ powerline control switches and circadian lighting system. The Company have 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.
Previous wording
Throughout 2023, the Company continued to make significant cost cutting efforts to address operational expenses while maintaining customer satisfaction and delivering goods on-time. Investments into Energy Focus 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.
Current wording
Since year 2023, 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 Energy Focus 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.
Previous wording
Meanwhile, we continue to seek additional external funding alternatives and sources to support our growth strategies, plans and initiatives. The strategic investments in 2023 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.
Current wording
Meanwhile, we continue to seek additional external funding alternatives and sources to support our growth strategies, plans and initiatives. The strategic investments in 2023 and 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.
Previous wording
Product development expenses were $128 thousand for the first quarter of 2024, down 17% from the first quarter of 2023. The $26 thousand decrease primarily resulted from lower payroll-related expenses due to a reduction in headcounts of $17 thousand and lower software contracts cost of $5 thousand. Product development expenses relate to customization of product offerings for key customers.
Current wording
Product development expenses were $140 thousand for the second quarter of 2024, down 5% from the second quarter of 2023. The $7 thousand decrease primarily resulted from lower payroll-related expenses due to reduction in the headcount offset by an increase in traveling expenses and product testing fees. Product development expenses relate to customization of product offerings for key customers.
Previous wording
Selling, general and administrative expenses were $0.6 million for the first quarter of 2024, down 45% as compared to $1.1 million in the first quarter of 2023. The decrease is comprised of a combination of $250 thousand decrease in payroll and payroll-related expenses, $20 thousand decrease in commission expenses, $300 thousand decrease in software contracts, $70 thousand decrease in accounting fee as well as $60 thousand million in director fees.
Current wording
Selling, general and administrative expenses were $0.5 million for the second quarter of 2024, down 52% as compared to $1.1 million in the second quarter of 2023. The decrease is comprised of a combination of a $0.3 million decrease in payroll and payroll-related expenses, a reduction in accounting and consultants fees of $0.2 million, and a reduction of $60 thousand in director fees.
Previous wording
Interest expense was $5 thousand for the first quarter of 2024, compared to interest expense of $123 thousand for the first quarter of 2023. The decrease in interest expense is primarily related to interest attributable to the 2022 Streeterville Note. There is no actual cash interest paid in the first quarter of 2024 and of 2023.
Current wording
Interest expense was $5 thousand for the first six months of 2024, compared to interest expense of $192 thousand for the first six months of 2023. The decrease in interest expense is primarily related to interest attributable to the 2022 Streeterville Note. There was no actual cash interest paid for the six months ended June 30, 2024 compared to $70 thousand in the first six months of 2023.
Previous wording
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 2023.
Current wording
We recognized $187 thousand of gain on debt extinguishment for the first six months of 2024, which was related to the early termination of the 2022 Streeterville Note. There was no such gain recognized for the first six months of 2023.
Previous wording
We recognized other expenses of $1 thousand for the first quarter of 2024, compared to other expenses of $7 thousand for the first quarter of 2023. Other expenses are mainly comprised of bank and collateral management fees.
Current wording
Other expenses were $1 thousand for the second quarter of 2024, compared to other expenses of $14 thousand for the second quarter of 2023. Other expenses were $2 thousand for the six months ended June 30, 2024, compared to other expenses of $21 thousand for the six months ended June 30, 2023. Other expenses are mainly comprised of bank and collateral management fees.
Previous wording
Due to the operating losses incurred during the three months ended March 31, 2024 and 2023, 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.
Current wording
Due to the operating losses incurred during the three and six months ended June 30, 2024 and 2023, 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.
Previous wording
For the three months ended March 31, 2024, our net loss of $0.4 million decreased 69% over the net loss for the three months ended March 31, 2023 of $1.3 million. The decrease is mainly due to lower fixed costs in the first quarter of 2024.
Current wording
For the three months ended June 30, 2024, our net loss of $0.6 million decreased 53% from the net loss for the three months ended June 30, 2023 of $1.2 million. The decrease is primarily due to a decrease in operating expenses in the second quarter of 2024 from the second quarter of 2023.
Previous wording
At March 31, 2024, we had $972 thousand in cash and no outstanding debt. We have historically incurred substantial losses, and as of March 31, 2024, we had an accumulated deficit of $153.7 million. Additionally, our sales have been concentrated among a few major customers and for the three months ended March 31, 2024, two customers accounted for approximately 25% of net sales.
Current wording
At June 30, 2024, we had $1.1 million in cash and no outstanding debt. We have historically incurred substantial losses, and as of June 30, 2024, we had an accumulated deficit of $154.3 million. Additionally, our sales have been concentrated among a few major customers and for the six months ended June 30, 2024, two customers accounted for approximately 40% of net sales.
Previous wording
In 2024 and 2023, 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 2024 and 2023:
Current wording
In 2024 and 2023, we remain committed 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 2024 and 2023:
Previous wording
During 2023 and into 2024, we redoubled our cost control efforts to streamline our operations by closely managing all spending done throughout the Company, while carefully investing in new products and strategies that sought to reenergize sales.
Current wording
During 2023 and into 2024, we closely monitored our cost control efforts to streamline our operations by closely managing all spending done throughout the Company, while carefully investing in new products and strategies that sought to reenergize sales.
Previous wording
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, such as our EnFocus TM powerline control systems, 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. We also plan to continue to develop advanced lighting and lighting control applications built upon the EnFocus TM platform that aim to serve the commercial markets. 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.
Current wording
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. We also plan to continue to develop advanced lighting and lighting control applications built upon the EnFocus TM platform that aim to serve the commercial markets. 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.
Previous wording
At March 31, 2024, our cash balance was approximately $972 thousand, compared to approximately $2.0 million at December 31, 2023.
Current wording
At June 30, 2024, our cash balance was approximately $1.1 million, compared to approximately $2.0 million at December 31, 2023.
Previous wording
The substantial decrease in cash used in operating activity in the first three months of year 2024 was primarily related to:
Current wording
The substantial decrease in cash used in operating activity in the first six months of year 2024 comparing against the same period last year was primarily related to:
Previous wording
•efforts to collect accounts receivable led to increase in cash flow from accounts receivable during the first three months of year 2024 compared to the first three months of year 2023; offset by
Current wording
•efforts to collect accounts receivable led to increase in cash flow from accounts receivable during the first six months of year 2024 compared to the first six months of year 2023; offset by
Previous wording
•higher accounts payable as of December 31, 2023 and efforts to manage inventory levels, reflecting more purchase activities in the fourth quarter of year 2023, led to higher cash outflows in the first quarter of year 2024.
Current wording
•higher accounts payable as of December 31, 2023 and efforts to manage inventory levels, reflecting more purchase activities in the fourth quarter of year 2023, led to higher cash outflows in the six months of year 2024.
Previous wording
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 from 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.
Current wording
Net cash used in operating activities was $0.8 million for the six months ended June 30, 2024. The net loss for the six months ended June 30, 2024 was $1.0 million and was adjusted for non-cash items, including depreciation and amortization, stock-based compensation, provisions for inventory, warranty, and accounts receivable reserves and working capital changes. During the six months ended June 30, 2024, we generated $1.2 million from collection of accounts receivable, $0.4 million from inventory and $0.1 million from accounts payable. We used $1.4 million from accounts payable to related party due to timing of inventory receipts and payments.
Previous wording
Net cash used in operating activities was $1.2 million for the three months ended March 31, 2023. The net loss for the three months ended March 31, 2023 was $1.3 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, 2023, we generated $562 thousand from inventory and $44 thousand due to changes in accrued and other liabilities. We used $496 thousand through the timing of collections of accounts receivable and $27 thousand from accounts payable due to timing of inventory receipts and payments.
Current wording
Net cash used in operating activities was $1.3 million for the six months ended June 30, 2023. The net loss for the six months ended June 30, 2023 was $2.5 million and was adjusted for non-cash items, including depreciation and amortization, stock-based compensation, provisions for inventory, warranty, and accounts receivable reserves and working capital changes. During the six months ended June 30, 2023, we generated $0.3 million from inventory, and $0.5 million from changes in prepaid and other assets, mainly from the receipt of $445 thousand in Employee Retention Tax Credit funds, and $0.9 million from accounts payable due to the timing of inventory receipts and payments. During the six months ended June 30, 2023, we used $0.4 million through the timing of collection of accounts receivable.
Previous wording
For the three months ended March 31, 2024 and 2023, the Company did not have any activities in connection with investing activities.
Current wording
For the six months ended June 30, 2024 and 2023 , the Company did not have any activities in connection with investing activities.
Previous wording
Net cash used in financing activities during the three months ended March 31, 2024 was $1.0 million, related to net payments on the 2022 Streeterville Note.
Current wording
Net cash used in financing activities during the six months ended June 30, 2024 was $0.1 million, primarily related to $0.9 million of net proceeds from the issuance of common stock, offset by $1.0 million related to net payments on the 2022 Streeterville Note.
Previous wording
Net cash provided by financing activities during the three months ended March 31, 2023 was $1.4 million, primarily related to proceeds from the private placement of common stock and warrants of $3.0 million, offset by net payments on the Credit Facilities of $1.1 million and the 2022 Streeterville Note of $0.5 million.
Current wording
Net cash provided by financing activities during the six months ended June 30, 2023 was $2.6 million, primarily related to $4.3 million of net proceeds from the issuance of common stock, offset by net payments on the Credit Facilities of $1.2 million and the 2022 Streeterville Note of $0.5 million.
Previous wording
As of March 31, 2024, we had approximately $557 thousand in outstanding purchase commitments for inventory. Of this amount, approximately $478 thousand is expected to ship in the second quarter of 2023, and $79 thousand expected to ship in the third quarter of 2024 and thereafter. Included in the total of outstanding purchase commitments are orders of 42% to a related party.
Current wording
As of June 30, 2024, we had approximately $1.1 million in outstanding purchase commitments for inventory, $1.1 million of which is expected to ship in the third quarter of 2024 and $35 thousand of which is expected to ship in the fourth quarter of 2024. We have 32% of the outstanding purchase commitments with a related party.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
There was no interest expense for the second quarter of 2024, compared to interest expense of $69 thousand for the second quarter of 2023. The decrease in interest expense is primarily related to early termination of the 2022 Streeterville Note. There was no actual cash interest paid in the second quarter of 2024 compared to $10 thousand in the second quarter of 2023.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Net cash (used in) provided by financing activities