ENERGY FOCUS, INC/DE
For the period ended Mar 31, 2025. Filed May 13, 2025.
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.
Mar 31, 2025 · Filed May 13, 2025
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 2024-09-30; filed 2024-11-12.
0001628280-24-046906
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-13.
0001628280-25-024875
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 89 previous paragraphs and 80 current paragraphs.
51 unchanged; 22 reworded; 7 added; 15 removed; 1 previous and 0 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 (7)
Current report
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.
Current report
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.
Current report
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.
Current report
Other expenses
Current report
For the three months ended March 31, 2024, the Company did not have any activities in connection with investing activities.
Current report
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.
Current report
Please refer to Note 9 “Purchase Commitments” included under Part I, Item 1, “Financial Statements,” of this Quarterly Report.
Removed paragraphs (15)
Previous report
During 2023, our MMM business continued to face challenges resulting from the delayed availability of government funding and the timing of U.S. Navy awards, with several anticipated projects facing repeated and ongoing delays. This sector also maintains very long sales cycles. The timeline between bid to order can often take at least six months, and many MMM products are built-to-order with resultant lead times before orders become revenue. We continue to pursue opportunities from the U.S. Navy and the government sector to minimize such volatility. Previously in our MMM business, significant efforts undertaken to reduce costs in our product offerings have positioned us to be more competitive along with improved production efficiencies. Such efforts allowed us to continue to win bids and proposals that helped grow our MMM sales pipeline in the second half of 2023. While we continue to aggressively seek to increase sales of our commercial products, the MMM business offers us continued sales opportunities, in addition to validating our product quality and strengthening our brand trust in the marketplace. During 2023, we thoroughly reviewed and adjusted our commercial pricing position as well as our strategic relationships and partnerships within the commercial LED market space. We believe our new pricing position will give us a greater advantage than previously held against the competition and offer a more attractive entry point for our end customer base.
Previous report
Net sales of $1.2 million for the third quarter of 2024 decreased $0.1 million, or 11%, compared to third quarter of 2023 net sales of $1.3 million, primarily driven by a decrease in commercial sales of $0.1 million, or 30%, that was partially offset by a 1% increase in MMM sales. The net sales decrease in the third quarter was primarily driven by our sales strategy, which led to a decrease in the proportion of commercial sales.
Previous report
Net sales of $3.6 million for the first nine months of 2024 increased $0.3 million, or 8%, compared to the same period in 2023, primarily driven by a 20% decrease in commercial product sales, that was partially offset by an increase in MMM product sales of 25% for the first nine months of 2024, as compared to the same period of 2023. The net sales increase for the first nine 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.
Previous report
Gross profit was 10% of net sales, for the first nine months of 2024 compared to gross loss of 4% of net sales, for the first nine months of 2023. The year-over-year increase in gross profit was driven mainly by a 6% of net sales decrease in fixed costs such as subscription fee, expenses related to SEC filing and rent expense for production, an 13% of net sales decrease in variable costs such as material cost and freight in expense, and a 11% of net sales unfavorable change in inventory reserves.
Previous report
Product development expenses were $405 thousand for the first nine months of 2024, a $38 thousand decrease compared to $443 thousand for the first nine 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.
Previous report
Selling, general and administrative expenses were $1.6 million for the first nine months of 2024, compared to $2.9 million for the first nine months of 2023. The decrease is primarily due to (i) decreases in payroll and payroll related expenses of $0.6 million due to reduced headcount; (ii) a reduction in accounting and consultants expenses of $0.4 million; and (iii) a reduction of $0.1 million in director fees.
Previous report
Other Expense (Income)
Previous report
Interest expense was $5 thousand for the first nine months of 2024, compared to interest expense of $226 thousand for the first nine months of 2023. The decrease in interest expense is primarily related to interest attributable to the 2022 Streeterville Note. The actual cash interest paid for the nine months ended September 30, 2024 and 2023 was $5 thousand and $77 thousand, respectively.
Previous report
Gain on partial lease termination
Previous report
We recognized $63 thousand of gain on partial lease termination for the three and nine months of 2024, which was related to the early termination of the office lease. There was no such gain recognized in the same periods of 2023.
Previous report
Other income and expenses
Previous report
Other income was $26 thousand for the third quarter of September 30, 2024, compared to no other incomes for the third quarter of 2023. Other income for the nine months ended September 30, 2024 of $30 thousand compared to other income of $16 thousand for the nine months ended September 30, 2023. Other income related to receipts of unclaimed property from vendor for previous payments.
Previous report
For the nine months ended September 30, 2024, our net loss of $1.3 million decreased 63% from $3.4 million net loss for the nine months ended September 30, 2023. The decrease is primarily due to a decrease in operating expenses and increase in gross profit in the first nine months of 2024 from the first nine months of 2023.
Previous report
Net cash provided by financing activities during the nine months ended September 30, 2023 was $4.0 million, primarily related to $6.1 million of net proceeds from the issuance of common stock, offset by net payments on the Credit Facilities of $1.4 million and the 2022 Streeterville Note of $625 thousand.
Previous report
As of September 30, 2024, we had approximately $0.2 million in outstanding purchase commitments for inventory, which is expected to ship in the fourth quarter of 2024 and $28 thousand of which is expected to ship in the fourth quarter of 2024. We have 30% of the outstanding purchase commitments with a related party.
Reworded paragraphs (22)
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, as well as our robust MMM product offering. The Company has enhanced the performance of our RedCap® product by 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, 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.
Previous wording
Since 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.
Current wording
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.
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 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.
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 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
Under the premise of a similar industrial environment and familiar relationships, our professional skills complement those of our supply chain partners. This foundation of cooperation enables us to more easily achieve 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..
Current wording
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.
Previous wording
Gross profit was 16% of net sales, for the third quarter of 2024. This compares with gross loss of 4% of net sales, in the third quarter of 2023. The period-over-period decrease in gross profit was driven mainly by an 7% of net sales decrease in fixed costs such as employee benefit and rent expenses for production, a 78% of net sales increase in variable costs such as material cost and freight in expense, and a 4% of net sales unfavorable change in the inventory reserves.
Current wording
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.
Previous wording
Product development expenses include salaries and related benefit, testing and related cost, travel, supplies, as well as overhead items, such as depreciation and facility costs. Product development costs are expensed as they are incurred.
Current wording
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.
Previous wording
Product development expenses were $137 thousand for the third quarter of 2024, down 4% from the third quarter of 2023. The $5 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.
Current wording
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.
Previous wording
Selling, general and administrative expenses were $0.4 million for the third quarter of 2024, down 37% as compared to $0.7 million in the third quarter of 2023. The decrease is comprised of a combination of a $0.2 million decrease in payroll and payroll-related expenses, a reduction in accounting and consultants fees of $70 thousand.
Current wording
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.
Previous wording
There was no interest expense for the third quarter of 2024, compared to interest expense of $34 thousand for the third 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 third quarter of 2024 compared to $7 thousand in the third quarter of 2023.
Current wording
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.
Previous wording
We recognized $187 thousand of gain on debt extinguishment for the three and nine months of 2024, which was related to the early termination of the 2022 Streeterville Note. There was no such gain recognized in the same periods of 2023.
Current 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 2025.
Previous wording
Other expenses were $7 thousand for the third quarter of 2024, compared to other expenses of $7 thousand for the third quarter of 2023. Other expenses were $9 thousand for the nine months ended September 30, 2024, compared to other expenses of $28 thousand for the nine months ended September 30, 2023. Other expenses are mainly comprised of bank and collateral management fees.
Current wording
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.
Previous wording
Due to the operating losses incurred during the three and nine months ended September 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.
Current wording
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.
Previous wording
For the three months ended September 30, 2024, our net loss of $0.3 million decreased 67% from $0.9 million net loss for the three months ended September 30, 2023. The decrease is primarily due to a decrease in operating expenses and increase in gross profit in the third quarter of 2024 from the third quarter of 2023.
Current wording
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.
Previous wording
At September 30, 2024, we had $0.8 million in cash and no outstanding debt. We have historically incurred substantial losses, and as of September 30, 2024, we had an accumulated deficit of $154.6 million. Additionally, our sales have been concentrated among a few major customers and for the nine months ended September 30, 2024, three customers accounted for approximately 39% of net sales.
Current wording
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.
Previous wording
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:
Current wording
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:
Previous wording
•The Company has aggressively re-evaluated operating expenses, and reduced its workforce significantly throughout 2023 and into 2024 to manage fixed costs.
Current wording
•We aggressively re-evaluated operating expenses and reduced its workforce significantly throughout 2024 into 2025 to manage fixed costs.
Previous wording
We continue to 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.
Current wording
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.
Previous wording
At September 30, 2024, our cash balance was approximately $0.8 million, compared to approximately $2.0 million at December 31, 2023.
Current wording
At March 31, 2025, our cash balance was $0.5 million, compared to $0.6 million at December 31, 2024.
Previous wording
Net cash used in operating activities was $2.4 million for the nine months ended September 30, 2023. The net loss for the nine months ended September 30, 2023 was $3.4 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 nine months ended September 30, 2023, we generated $0.6 million from inventory, $0.5 million from changes in prepaid and other assets, mainly from the receipt of $445 thousand in Employee Retention Tax Credit funds, and $0.4 million from accounts payable due to the timing of inventory receipts and payments. During the nine months ended September 30, 2023, we used $0.4 million through the timing of collection of accounts receivable.
Current wording
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.
Previous wording
Net cash used in operating activities was $1.0 million for the nine months ended September 30, 2024. The net loss for the nine months ended September 30, 2024 was $1.3 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 nine months ended September 30, 2024, we generated cash inflow by reduction of accounts receivable in the amount of $1.1 million through collection, and better inventory management in reduction of inventory amounting $0.4 million and $0.2 million from accounts payable. We paid off approximately $1.2 million in accounts payable to related party.
Current 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 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.
Previous wording
For the nine months ended September 30, 2023 and 2023, net cash used in investing activities was $19 thousand and $27 thousand, respectively, which is primarily from the purchase of tooling.
Current wording
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.
Previous wording
Net cash provided by financing activities during the nine months ended September 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.
Current wording
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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
There have been no other material changes to our contractual and other obligations as compared to those included in our 2023 Annual Report.