ENERGY FOCUS, INC/DE

Previous wording

Energy Focus, Inc. specializes in the design, development, manufacturing, marketing and selling 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”). In addition to our lighting portfolio, we also offer uninterruptible power supply (“UPS”) systems and other power management solutions, which have contributed meaningfully to our revenue in recent quarters and are expected to be a strategic area of continued growth.

Current wording

Energy Focus, Inc. specializes 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”). In addition to our lighting portfolio, we also offer UPS systems and other power management solutions, which have contributed meaningfully to our revenue in recent quarters and are expected to be a strategic area of continued growth.

Previous wording

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 additional adjacent technologies, including Gallium Nitride (“GaN”) based power supplies and other energy solution products that support sustainability in our existing channels.

Current wording

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 products, 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 additional adjacent technologies, including Gallium Nitride (“GaN”) based power supplies and other energy solution products that support sustainability in our existing channels.

Previous wording

The LED lighting industry has changed dramatically over the past several years due to increasing competition and price erosion. 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.

Current wording

The LED lighting industry has changed dramatically over the past several years due to increasing competition and price erosion. 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 without impacting performance or 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.

Previous wording

It is our belief that our strategic initiatives undertaken in 2025 and 2026, including expansion into energy storage solutions, development of advanced Uninterruptible Power Supply (“UPS”) systems for AI data center applications, and targeted growth in the Taiwan and Japan markets, along with continued product innovation, expanded distribution capabilities, and operational efficiency, will over time result in improved sales and bottom-line performance for the Company.

Current wording

It is our belief that our strategic initiatives undertaken in 2025 and 2026, including expansion into energy storage solutions, development of advanced UPS systems for AI data center applications, and targeted growth in the Taiwan and Japan markets, along with continued product innovation, expanded distribution capabilities, and operational efficiency, will over time result in improved sales and bottom-line performance for the Company.

Previous wording

We have taken steps to strengthen our financial structure through capital increases and cost reduction measures, which we believe have improved our financial position and provided a stronger foundation for our growth initiatives. Our business expansion plans, including investments in energy storage solutions, development of advanced UPS systems for AI data center applications, and expansion into the Taiwan and Japan markets, 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. At the same time, our MMM business continues to be affected by delays in government funding, the timing of U.S. Navy awards, and long sales cycles typical of this sector, with the timeline from bid submission to order placement often exceeding six months, and many products being built-to-order, resulting in extended lead times before revenue recognition. To mitigate these factors, we continue to pursue opportunities with the U.S. Navy and other government sectors, while our cost optimization efforts have enhanced our competitiveness and may support our ability to secure new contracts and expand our sales pipeline in 2026 and beyond.

Current wording

We have taken steps to strengthen our financial structure through capital increases and cost reduction measures, which we believe have improved our financial position and provided a stronger foundation for our growth initiatives. Our business expansion plans, including investments in energy storage solutions, development of advanced UPS systems for AI data center applications, and expansion into the Taiwan and Japan markets, 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. At the same time, our MMM business continues to be affected by delays in government funding, the timing of U.S. Navy awards, and long sales cycles typical of this sector, with the timeline from bid submission to order placement often exceeding six months, and many products being built-to-order, resulting in extended lead times before revenue recognition. To mitigate these factors, we continue to pursue new opportunities with the U.S. Navy and other government sectors, while our cost optimization efforts have enhanced our competitiveness and may support our ability to secure new contracts and expand our sales pipeline in 2026 and beyond.

Previous wording

The Company applies strategic financial management in the following perspective.

Current wording

The Company applies strategic financial management from the following perspective.

Previous wording

•Revenue Growth: Develop diversified revenue streams, reduce dependency on single business or market, continuously optimize products and services, and enhance market competitiveness.

Current wording

•Revenue Growth: Develop diversified revenue streams, reduce dependency on a single business or market, continuously optimize products and services, and enhance market competitiveness.

Previous wording

Net sales of $0.9 million for the first quarter of 2026 increased $0.3 million, or 54%, compared to first quarter of 2025 net sales of $0.6 million, driven by a $0.2 million increase in MMM sales and a $0.1 million increase in commercial sales. The increase in net MMM products sales in the first quarter of 2026 was driven by improved demand compared to the prior year period, which was impacted by reduced military procurement activity associated with the U.S. election cycle. The increase in commercial sales was primarily attributable to improved sales volume, partially offset by inflationary pressures and market-adjusted pricing.

Current wording

Net sales of $3.7 million for the second quarter of 2026 increased by $2.6 million, or 228%, compared with net sales of $1.1 million for the second quarter of 2025, driven by a 328% increase in MMM sales and a 192% increase in commercial sales. The increase was primarily driven by higher commercial sales resulting from initial shipments through the ESS business to a new customer in Australia, together with increased MMM product sales due to improved demand compared with the prior-year period.

Previous wording

Gross profit was $0.2 million, representing 23% of net sales, for the first quarter of 2026. This compares with gross profit of $0.2 million, or 32% of net sales, for the first quarter of 2025. The period-over-period change in gross profit was driven mainly by an increase in inventory reserves and lower variable margins, such as tariff impacts.

Current wording

Gross loss was $0.3 million, representing 7% of net sales, for the second quarter of 2026, compared with gross profit of $0.1 million, or 13% of net sales, for the second quarter of 2025. The period-over-period decrease in gross profit was driven mainly by an increase in inventory reserves of $0.5 million during the second quarter of 2026.

Previous wording

Product development expenses were $0.1 million for the first quarter of 2026, representing an increase of $26 thousand, or 52% compared to the first quarter of 2025. The increase primarily resulted from higher product testing expenses.

Current wording

Product development expenses were $0.1 million for the second quarter of 2026, representing an increase of $10 thousand, or 14%, compared with $0.1 million for the second quarter of 2025. The increase primarily resulted from higher product testing expenses and business travel expenses.

Previous wording

Selling, general and administrative expenses were $0.3 million for the first quarter of 2026, down 31% from $0.4 million in the first quarter of 2025. The decrease is primarily due to a reduction in insurance fees of $0.1 million.

Current wording

Selling, general and administrative expenses were $0.5 million for the second quarter of 2026, an increase of 78% from $0.3 million in the second quarter of 2025. The increase was primarily due to a $0.2 million increase in the allowance for credit losses.

Previous wording

Interest income was $1 thousand for the first quarter of 2026, compared to $0 thousand for the first quarter of 2025. The increase was primarily attributable to interest earned in bank deposits.

Current wording

Interest income was $3 thousand for the second quarter of 2026, compared with $1 thousand for the second quarter of 2025. The increase was primarily attributable to interest earned in bank deposits. Interest income was $4 thousand for the first six months of 2026, compared to $1 thousand for the first six months of 2025. The increase was primarily attributable to interest earned in bank deposits.

Previous wording

Due to the operating losses incurred during the three months ended March 31, 2026 and 2025, 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, 2026 and 2025, 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

As of March 31, 2026, we had $1.1 million in cash and no outstanding debt. We have historically incurred substantial losses, and, as of March 31, 2026, we had an accumulated deficit of $156.1 million. Additionally, our sales have been concentrated among a few major customers and, for the three months ended March 31, 2026, four customers accounted for approximately 63% of net sales.

Current wording

As of June 30, 2026, we had $1.1 million in cash and $0.9 million of outstanding short-term debt. We have historically incurred substantial losses, and, as of June 30, 2026, we had an accumulated deficit of $156.9 million. Additionally, our sales have been concentrated among a few major customers, and for the six months ended June 30, 2026, two customers accounted for approximately 65% of net sales.

Previous 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.

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 reinforce sales.

Previous wording

As of March 31, 2026, our cash balance was $1.1 million, compared to $1.1 million as of December 31, 2025. On April 3, 2026, we entered into agreements related to a joint venture investment in Japan under which our total expected investment commitment for a 35% ownership interest is approximately $1.1 million. As of May 12, 2026, we had invested approximately $535 thousand toward this commitment, with the remaining balance of approximately $565 thousand expected to be funded during project development. This commitment may place additional pressure on our liquidity and may increase our dependence on additional financing, capital raising activities, or other funding alternatives to support operations and strategic initiatives.

Current wording

As of June 30, 2026, our cash balance was $1.1 million, compared to $1.1 million as of December 31, 2025. On April 3, 2026, we entered into agreements related to a joint venture investment in Japan under which our total expected investment commitment for a 35% ownership interest is approximately $1.1 million. As of June 30, 2026, we had recorded an advance for investment of approximately $522 thousand related to this proposed transaction. The transaction remains subject to customary closing conditions, and the ownership transfer has not yet been completed. The remaining investment commitment, if funded, may place additional pressure on our liquidity and may increase our dependence on additional financing, capital raising activities, or other funding alternatives to support operations and strategic initiatives.

Previous wording

•As of March 31, 2026, we held total cash of $1.1 million, of which approximately $0.3 million was maintained in a bank account in Taiwan, with the remaining $0.8 million in bank accounts in the United States. These funds support the operations of our wholly owned Taiwanese branch and are denominated in NTD.

Current wording

•As of June 30, 2026, we held total cash of $1.1 million, of which approximately $0.5 million was maintained in a bank account in Taiwan, with the remaining $0.6 million in bank accounts in the United States. These funds support the operations of our wholly owned Taiwanese branch and are denominated in NTD.

Previous wording

Net cash provided by operating activities was $0.1 million for the three months ended March 31, 2026. The net loss for the period was $0.1 million, 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, 2026, major changes included $0.1 million in cash generated from collections of accounts receivable and a $0.9 million change in related party accounts payable due to timing of inventory receipts and payments, which was partially offset by $0.8 million change in inventory.

Current wording

Net cash used in operating activities was $0.8 million for the six months ended June 30, 2026. The net loss for the six months ended June 30, 2026 was $1.0 million, adjusted for non-cash items, including depreciation, provisions for inventory, warranty, accounts receivable reserves and working capital changes. During the six months ended June 30, 2026, major adjustments included a $2.2 million change in accounts receivable caused by specific timing of collecting accounts receivable, which was offset by a $2.8 million change in related party accounts payable due to timing of inventory receipts and payments.

Previous 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, changes included cash generated of $0.2 million from collection of accounts receivable, which was partially offset by $0.2 million changes in prepayment for vendors, and $0.1 million change in accounts payable due to timing inventory receipts and payments.

Current wording

Net cash used in operating activities was $0.5 million for the six months ended June 30, 2025. The net loss for the six months ended June 30, 2025 was $0.5 million and was adjusted for non-cash items, including depreciation, stock-based compensation, provisions for inventory, warranty, accounts receivable reserves and working capital changes. During the six months ended June 30, 2025, major adjustments included a $0.2 million change in accounts receivable caused by specific timing of collecting accounts receivable and a $0.1 million change in accounts payable.

Previous 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.

Current wording

Net cash used in investing activities was $5 thousand for the six months ended June 30, 2025, primarily from the acquisition of property and equipment.

Previous wording

Net cash provided by financing activities was $0.2 million for the three months ended March 31, 2025, primarily reflecting net proceeds from the issuance of common stock.

Current wording

Net cash provided by financing activities was $0.4 million for the six months ended June 30, 2025, primarily reflecting net proceeds from the issuance of common stock.

Previous wording

For the three months ended March 31, 2026, we recognized net foreign currency transaction losses of approximately $8 thousand. We do not currently employ financial instruments to hedge our foreign currency exposure. We continue to monitor our exposure to NTD and JPY and may consider hedging strategies in the future if our foreign currency risk increases materially.

Current wording

For the six months ended June 30, 2026, we recognized net foreign currency transaction losses of approximately $15 thousand. We do not currently employ financial instruments to hedge our foreign currency exposure. We continue to monitor our exposure to NTD, CNY and JPY and may consider hedging strategies in the future if our foreign currency risk increases materially.