efoi-20250331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from _____________ to _____________

Commission file number 001-36583

ENERGY FOCUS, INC.

(Exact name of registrant as specified in its charter)


Delaware						94-3021850
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

32000 Aurora Road, Suite B Solon, OH
(Address of principal executive offices)

44139
(Zip Code)
(Registrant’s telephone number, including area code): (440) 715-1300

None
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	EFOI	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The number of outstanding shares of the registrant’s common stock, $0.0001 par value, as of May 13, 2025 was 5,364,368.

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION
			Page
ITEM 1.	FINANCIAL STATEMENTS
	a.	Condensed Consolidated Balance Sheets as of March 31, 2025 (Unaudited) and December 31, 2024	4
	b.	Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024 (Unaudited)	6

	c.	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2025 and 2024 (Unaudited)	7
	d.	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 (Unaudited)	8
	e.	Notes to the Condensed Consolidated Financial Statements (Unaudited)	10
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		25
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		32
ITEM 4.	CONTROLS AND PROCEDURES		32

PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS		33
ITEM 1A.	RISK FACTORS		33
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		33
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		33
ITEM 4.	MINE SAFETY DISCLOSURES		34
ITEM 5.	OTHER INFORMATION		34
ITEM 6.	EXHIBITS		35
	SIGNATURES		37

PART I - FINANCIAL INFORMATION

Forward-looking statements

Unless the context otherwise requires, all references to “Energy Focus,” “we,” “us,” “our,” “our company,” or “the Company” refer to Energy Focus, Inc., a Delaware corporation, and its consolidated subsidiary for the applicable periods, considered as a single enterprise.

This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Quarterly Report and include statements regarding our intentions, beliefs, or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, capital expenditures, and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made in light of information currently available to us, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.

We believe that important factors that could cause our actual results to differ materially from forward-looking statements include, but are not limited to, the risks and uncertainties outlined under “Risk Factors” under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 and other matters described in this Quarterly Report and our other filings with the Securities and Exchange Commission generally. Some of these factors include:

•our need for and ability to obtain additional financing in the near term, on acceptable terms or at all, to continue our operations;

•our ability to maintain compliance with the continued listing standards of The Nasdaq Stock Market (“Nasdaq”);

•our ability to continue as a going concern for a reasonable period of time;

•our ability to realize synergies with our strategic investor;

•instability in the U.S. and global economies and business interruptions experienced by us, our customers and our suppliers;

•the competitiveness and market acceptance of our light-emitting diode (“LED”) lighting and control technologies and products;

•our ability to compete effectively against companies with lower prices or cost structures, greater resources, or more rapid development capabilities, and new competitors in our target markets;

•our ability to extend our product portfolio into new applications and end markets;

•our ability to increase demand in our targeted markets and to manage sales cycles that are difficult to predict and may span several quarters;

•the timing of large customer orders, significant expenses and fluctuations between demand and capacity as we manage inventory and invest in growth opportunities;

•our ability to successfully scale our network of sales representatives, agents, distributors and other channel partners to compete with the sales reach of larger, established competitors;

•our ability to implement plans to increase sales and control expenses;

•our reliance on a limited number of customers for a significant portion of our revenue, and our ability to maintain or grow such sales levels;

•our ability to add new customers to reduce customer concentration;

•our ability to attract and retain a new chief financial officer;

•our ability to manage the size of our workforce while continuing to attract, develop and retain qualified personnel, and to do so in a timely manner;

•our ability to diversify our reliance on a limited number of third-party suppliers and development partners, our ability to manage third-party product development and obtain critical components and finished products on acceptable terms and of acceptable quality despite ongoing global supply chain challenges, and the impact of our fluctuating demand on the stability of such suppliers;

•our ability to timely, efficiently and cost-effectively transport products from our third-party suppliers by ocean marine and other logistics channels despite global supply chain and logistics disruptions;

•the impact of any type of legal inquiry, claim or dispute;

•the macro-economic conditions, including rising interest rates and recessionary trends, in the United States and in other markets in which we operate or secure products, which could affect our ability to obtain raw materials, component parts, freight, energy, labor, and sourced finished goods in a timely and cost-effective manner;

•our dependence on military maritime customers and on the levels and timing of government funding available to such customers, as well as the funding resources of our other customers in the public sector and commercial markets;

•business interruptions resulting from geopolitical actions such as war and terrorism, natural disasters, including earthquakes, typhoons, floods and fires, or from health epidemics or pandemics or other contagious outbreaks;

•our ability to respond to new lighting and control technologies and market trends;

•our ability to fulfill our warranty obligations with safe and reliable products;

•any delays we may encounter in making new products available or fulfilling customer specifications;

•any flaws or defects in our products or in the manner in which they are used or installed;

•our ability to protect our intellectual property rights and other confidential information, and manage infringement claims by others;

•our compliance with government contracting laws and regulations, through both direct and indirect sale channels, as well as other laws, such as those relating to the environment and health and safety;

•risks inherent in international markets, such as economic and political uncertainty, changing regulatory and tax requirements and currency fluctuations, including tariffs and other potential barriers to international trade;

•the impact of recently imposed or potential future global trade policies, including tariffs, could increase costs and disrupt our supply chain, adversely affecting our operations and profitability; and

•our ability to maintain effective internal controls and otherwise comply with our obligations as a public company.

In light of the foregoing, we caution you not to place undue reliance on our forward-looking statements. Any forward-looking statement that we make in this Quarterly Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments, except as required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

Energy Focus®, Intellitube®, RedCap® and EnFocus™ are our registered trademarks. We may also refer to trademarks of other corporations and organizations in this document.

ITEM 1. FINANCIAL STATEMENTS

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	March 31, 2025		December 31, 2024
	(Unaudited)
ASSETS
Current assets:
Cash	$	488	$	565
Trade accounts receivable, less allowances of $13 and $15, respectively	588		804

Inventories, net	3,233		3,263
Prepayments to vendors	542		356
Prepaid and other current assets	141		157


Total current assets	4,992		5,145

Property and equipment, net	91		90

Operating lease, right-of-use asset	345		377




Total assets	$	5,428	$	5,612

LIABILITIES
Current liabilities:
Accounts payable	$	880	$	970
Accounts payable - related party	957		909
Accrued liabilities	57		90
Accrued legal and professional fees	101		54
Accrued payroll and related benefits	132		148
Accrued sales commissions	12		15

Accrued warranty reserve	85		118

Operating lease liabilities	145		139






Total current liabilities	2,369		2,443

(continued on the next page)

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	March 31, 2025		December 31, 2024
	(Unaudited)


Operating lease liabilities, net of current portion	216		254




Total liabilities	2,585		2,697

STOCKHOLDERS' EQUITY
Preferred stock, par value $0.0001 per share:
Authorized: 5,000,000 shares (3,300,000 designated as Series A Convertible Preferred Stock) at March 31, 2025 and December 31, 2024
Issued and outstanding: 876,447 at March 31, 2025 and December 31, 2024	—		—
Common stock, par value $0.0001 per share:
Authorized: 50,000,000 shares at March 31, 2025 and December 31, 2024
Issued and outstanding: 5,364,368 at March 31, 2025 and 5,260,741 at December 31, 2024	1		1
Additional paid-in capital	158,010		157,814
Accumulated other comprehensive loss	(3)		(3)
Accumulated deficit	(155,165)		(154,897)
Total stockholders' equity	2,843		2,915
Total liabilities and stockholders' equity	$	5,428	$	5,612

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)


	Three months ended March 31,
		2025		2024
Net sales		$	616	$	833
Cost of sales		422		713
Gross profit		194		120

Operating expenses:
Product development		50		128
Selling, general, and administrative		412		591

Total operating expenses		462		719
Loss from operations		(268)		(599)

Other expenses (income):
Interest expense		—		5



Gain on debt extinguishment		—		(187)

Other expenses		—		1


Net loss		$	(268)	$	(418)

Net loss per common share - basic and diluted
Net loss		$	(0.05)	$	(0.09)

Weighted average shares of common stock outstanding:
Basic and diluted		5,266		4,433

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


	Preferred Stock			Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount

Balance at December 31, 2024	876	$	—	5,261	$	1		$	157,814	$	(3)	$	(154,897)	$	2,915

Issuance of common stock	—	—		103	—			200		—		—		200




Stock-based compensation	—	—		—	—			(4)		—		—		(4)

Net loss for the three months ended March 31, 2025	—	—		—	—			—		—		(268)		(268)
Balance at March 31, 2025	876	$	—	5,364	$	1		$	158,010	$	(3)	$	(155,165)	$	2,843


	Preferred Stock			Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount

Balance at December 31, 2023	876	$	—	4,349	$	—		$	156,369	$	(3)	$	(153,315)	$	3,051

Issuance of common stock	—	—		283	—			450		—		—		450
Conversion of advanced capital contribution to common stock	—	—		94	—			141		—		—		141






Stock-based compensation	—	—		—	—			1		—		—		1
Net loss for the three months ended March 31, 2024	—	—		—	—			—		—		(418)		(418)
Balance at March 31, 2024	876	$	—	4,726	$	—		$	156,961	$	(3)	$	(153,733)	$	3,225

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three months ended March 31,
		2025		2024
Cash flows from operating activities:
Net loss		$	(268)	$	(418)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on debt extinguishment		—		(187)
Depreciation		9		8
Stock-based compensation		(4)		1
Provision for credit losses and sales return		(7)		(64)
Provision for slow-moving and obsolete inventories		14		67
Provision for warranties		(33)		(34)
Amortization of loan discounts and origination fees		—		5
Changes in operating assets and liabilities:
Accounts receivable		223		1,440
Inventories		16		(25)
Prepayments to vendors		(213)		102
Prepaid and other assets		16		(43)
Accounts payable		(63)		(61)
Accounts payable - related party		43		(835)
Accrued and other liabilities		(5)		(27)
Operating lease - ROU and liabilities		—		13
Total adjustments		(4)		360
Net cash used in operating activities		(272)		(58)
Cash flows from investing activities:
Acquisitions of property and equipment		(5)		—

Net cash used in investing activities		(5)		—

(continued on next page)

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three months ended March 31,
	2025		2024
Cash flows from financing activities:
Issuance of common stock	200		—








Payments on the 2022 Streeterville Note	—		(1,000)




Net cash provided by (used in) financing activities	200		(1,000)



Net decrease in cash	(77)		(1,058)
Cash beginning of period	565		2,030
Cash end of period	$	488	$	972

Supplemental information:
Cash paid in year for interest	$	—	$	5

Non-cash investing and financing activities:
Debt-to-equity exchange transactions	$	—	$	591

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

(Unaudited)

NOTE 1. NATURE OF OPERATIONS

Energy Focus, Inc. (the “Company”) 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 increased human health and wellness through advanced LED retrofit solutions. Our goal is to be the human wellness lighting and LED technology and market leader for the most demanding applications where performance, quality, value, environmental impact and health are considered paramount. We specialize in LED lighting retrofit by 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 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.

NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The significant accounting policies of our Company, which are summarized below, are consistent with accounting principles generally accepted in the United States (“U.S. GAAP”) and reflect practices appropriate to the business in which we operate. Unless indicated otherwise, the information in the Notes to the Condensed Consolidated Financial Statements relates to our operations.

We have prepared the accompanying financial data for the three months ended March 31, 2025 and 2024 pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The interim results for the period ended March 31, 2025 are not necessarily indicative of the results that may be expected through December 31, 2025. All intercompany accounts and transactions are eliminated upon consolidation. The accompanying financial data and information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Annual Report”). The Condensed Consolidated Balance Sheet as of December 31, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly our Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024, Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024, Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2025 and 2024, and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024.

Going Concern and Nasdaq Continued Listing Requirements Compliance

Due to our financial performance as of March 31, 2025 and December 31, 2024, including net losses of $0.3 million for the three months ended March 31, 2025 and $1.6 million for the twelve months ended December 31, 2024, and total cash used in operating activities of $0.3 million for the three months ended March 31, 2025 and $1.3 million for the twelve months ended December 31, 2024, we determined that substantial doubt about our ability to continue as a going concern continues to exist at March 31, 2025. As a result of restructuring actions and initiatives, we have tailored our operating expenses to be more in line with our expected sales volumes; however, we continue to incur losses and have a substantial accumulated deficit.

Additionally, global supply chain, logistics constraints and the ongoing evolution of international trade policies are impacting our inventory purchasing strategy, as we seek to manage both shortages of available components and longer lead times in obtaining components while pursuing cost-effective measures to enhance profitability. As a result, we will continue to review and pursue selected external funding sources to ensure adequate financial resources to execute across the timelines required to achieve these objectives including, but not limited to, the following:

•obtaining financing from traditional or non-traditional investment capital organizations or individuals;

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

(Unaudited)

•obtaining funding from the sale of our common stock or other equity or debt instruments; and

•obtaining debt financing with lending terms that more closely match our business model and capital needs.

There can be no assurance that we will obtain funding on acceptable terms, in a timely fashion, or at all. Obtaining additional funding contains risks, including:

•additional equity financing may not be available to us on satisfactory terms, particularly in light of the current price of our common stock, and any equity we are able to issue could lead to dilution for current stockholders and have rights, preferences and privileges senior to our common stock;

•loans or other debt instruments may have terms or conditions, such as interest rate, restrictive covenants, conversion features, refinancing demands, and control or revocation provisions, which are not acceptable to management or the Company’s Board of Directors (the “Board of Directors”); and

•the current environment in the capital markets and volatile interest rates, combined with our capital constraints, may prevent us from being able to obtain adequate debt financing.

Considering both quantitative and qualitative information, we continue to believe that the combination of our plans to ensure adequate external funding, timely re-organizational actions, current financial position, liquid resources, obligations due or anticipated within the next year, development and implementation of an excess inventory reduction plan, plans and initiatives in our research and development, product development and sales and marketing, and development of potential channel partnerships, if adequately executed, could provide us with an ability to finance our operations through the next twelve months and may mitigate the substantial doubt about our ability to continue as a going concern.

Nasdaq Capital Market Compliance

As of the date of this Quarterly Report, the Company believes it has maintained compliance with the Minimum Stockholders’ Equity Rule, which requires listed companies to maintain stockholders’ equity of at least $2.5 million for continued listing on the Nasdaq Capital Market. Our Common Stock is listed on the Nasdaq Capital Market, which has as one of its continued listing requirements a minimum bid price of at least $1.00 per share.

However, there can be no assurance that the Company will be able to maintain compliance with the Minimum Stockholders’ Equity Rule, Bid Price Rule, or other Nasdaq listing requirements. If the Company fails to maintain compliance with Nasdaq’s continued listing standards, the Company’s common stock will be subject to delisting from Nasdaq.

Use of estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts in our financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may vary from the estimates. Estimates include, but are not limited to, the expected credit loss provision, inventory obsolescence and warranty claims, the determination of the useful lives of property and equipment, valuation of long-lived assets, allowance for deferred tax assets, sales returns and stock-based compensation. In addition, estimates and assumptions associated with the determination of the fair value of financial instruments and evaluation of long-lived assets for impairment require considerable judgment. Actual results could differ from those estimates and such differences could be material.

Revenue

Net sales include revenues from sales of products and shipping and handling charges, net of estimates for product returns. Revenue is measured at the amount of consideration we expect to receive in exchange for the transferred products. We recognize revenue at the point in time when we transfer the promised products to the customer and the customer obtains control over the products. Distributors’ obligations to us are not contingent upon the resale of our products. We recognize revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight are included in cost of sales. We provide for product returns based on historical return rates. While we incur costs for sales commissions to our sales employees and outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than one year. We do not incur any other incremental costs to obtain contracts with our customers. Our product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Therefore, the product warranties are not a separate performance obligation and are accounted

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

(Unaudited)

for as described below. Sales taxes assessed by governmental authorities and collected by us are accounted for on a net basis and are excluded from net sales.

The following table provides a disaggregation of product net sales for the periods presented (in thousands):


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

Accounts Receivable

Our trade accounts receivable consists of amounts billed to and currently due from customers. Substantially all of our customers are concentrated in the United States. In the normal course of business, we extend unsecured credit to our customers related to the sale of our products. Credit is extended to customers based on an evaluation of the customer’s financial condition and the amounts due are stated at their estimated net realizable value. We maintain allowances for sales returns and credit loss to provide for the estimated number of account receivables that will not be collected. On January 1, 2023, the Company adopted ASC 326. The standard adds to U.S. GAAP an impairment model known as the CECL model, which is based on expected losses rather than incurred losses. This standard only impacts the Company’s trade receivables. The Company decided to use the historical loss rate method of valuing its reserve for trade receivables. The reserve for credit losses is reviewed and assessed for adequacy on a quarterly basis. We take into consideration (1) any circumstances of which we are aware of a customer's inability to meet its financial obligations and (2) our judgments as to prevailing economic conditions in the industry and their impact on our customers. If circumstances change, and the financial condition of our customers is adversely affected and they are unable to meet their financial obligations, we may need to take additional allowances, which would result in an increase in our operating expense. We do not generally require collateral from our customers.

Our standard payment terms with customers are net 30 days from the date of shipment, and we do not generally offer extended payment terms to our customers, but exceptions are made in some cases for major customers or with particular orders. Accordingly, we do not adjust trade accounts receivable for the effects of financing, as we expect the period between the transfer of product to the customer and the receipt of payment from the customer to be in line with our standard payment terms.

Pursuant to ASC 606, Revenue Recognition, contract assets and contract liabilities as of the beginning and ending of the reporting periods must be disclosed. Below is the breakout of the Company’s contract assets for such periods:



	March 31, 2025		December 31, 2024		January 01, 2024
Gross Accounts Receivable	$	601	$	819	$	1,590
Less: Reserve for Credit Losses	(13)		(15)		(20)
Net Accounts Receivable	$	588	$	804	$	1,570

Activity related to our reserve for credit losses for the three months ended March 31, 2025 was as follows (in thousands):


Allowance for credit loss as of December 31, 2024	$	(15)
Reduction of reserve for credit losses as of March 31, 2025	2
Allowance for credit loss as of March 31, 2025	$	(13)

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

(Unaudited)

Activity related to our reserve for credit losses for the three months ended March 31, 2024 was as follows (in thousands):


Allowance for credit loss as of January 1, 2024	$	(20)
Reduction of reserve for credit losses as of March 31, 2024	11
Allowance for credit loss as of March 31, 2024	$	(9)

Geographic information

All of our long-lived fixed assets are located in the United States. For the three months ended March 31, 2025 and 2024, approximately 100% of sales were attributable to customers in the United States. The geographic location of our net sales is derived from the destination to which we ship the product.

Net loss per share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted loss per share gives effect to all dilutive potential shares of common stock outstanding during the period. Dilutive potential shares of common stock consist of incremental shares upon the exercise of stock options, warrants and convertible securities, unless the effect would be anti-dilutive.

The following table presents a reconciliation of basic and diluted loss per share computations (in thousands):


	Three months ended March 31,
	2025		2024
Numerator:
Net loss	$	(268)	$	(418)

Denominator:
Basic and diluted weighted average shares of common stock outstanding	5,266		4,433

As a result of the net loss we incurred for the three months ended March 31, 2025 and 2024, convertible securities representing approximately 25 thousand shares of common stock were excluded from the basic loss per share calculation as their inclusion would have been anti-dilutive.

Product warranties

We warrant our commercial and MMM LED products and controls for periods generally ranging from five to ten years. One product was sold in 2020 with a twenty-year warranty. Warranty settlement costs consist of actual amounts expensed for warranty, which are largely a result of the cost of replacement products or rework services provided to our customers. A liability for the estimated future costs under product warranties is maintained for products under warranty based on the actual claims incurred to date and the estimated nature, frequency, and costs of future claims. These estimates are inherently uncertain and changes to our historical or projected experience may cause material changes to our warranty reserves in the future. We continuously review the assumptions related to the adequacy of our warranty reserve, including product failure rates, and make adjustments to the existing warranty liability when there are changes to these estimates or the underlying replacement product costs, or the warranty period expires.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

(Unaudited)

The following table summarizes warranty activity for the periods presented (in thousands):


	Three months ended March 31,
		2025		2024
Balance at beginning of period		$	118	$	150
Warranty accruals for current period sales		1		1
Adjustments to existing warranty reserves		(34)		(35)

Accrued warranty reserve at end of period		$	85	$	116

Financial Instruments

Fair Value Measurements

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below. We classify the inputs used to measure fair value into the following hierarchy:


Level 1			Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2			Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3			Unobservable inputs for the asset or liability.

The carrying amounts of certain financial instruments including cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short maturities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, we perform a detailed analysis of the assets and liabilities whose fair value is measured on a recurring basis. We review and reassess the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next related to the observability of inputs in a fair value measurement may result in a reclassification between fair value hierarchy levels. There were no reclassifications for all periods presented.

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, as follows:

•For the three months ended March 31, 2025, three customers accounted for 70% of net sales, with sales to our primary distributor for the U.S. Navy accounting for approximately 27% of net sales, a shipbuilder for the U.S. Navy accounting for approximately 24% of net sales, and sales to a commercial customer accounting for approximately 19% of net sales.

•For the three months ended March 31, 2024, two customers accounted for 25% of net sales, with sales to our primary distributor for the U.S. Navy accounting for approximately 14% of net sales, and sales to a commercial customer accounting for approximately 11% of net sales.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

(Unaudited)

•At March 31, 2025, four customers accounted for approximately 88% of gross trade accounts receivables, with receivables from two distributors for the U.S. Navy accounting for approximately 49%, receivables from one shipbuilder for U.S. Navy accounting for approximately 27%, and receivables from one commercial customer accounting for approximately 11% of gross trade accounts receivables.

•At December 31, 2024, three customers collectively accounted for 88% of our net trade accounts receivables. This including approximately 21% from a distributor to the U.S. Navy, approximately 52% from shipbuilder to the U.S. Navy, and approximately 15% from a commercial customer account.

We require substantial amounts of purchased materials from selected vendors. With specific materials, all of our purchases are from a single vendor. The availability and costs of materials may be subject to change due to, among other things, new laws or regulations, suppliers’ allocation to other purchasers, interruptions in production by suppliers, global health issues such as the COVID-19 pandemic, and changes in exchange rates, tariff and worldwide price and demand levels. Our inability to obtain adequate supplies of materials for our products at favorable prices could have a material adverse effect on our business, financial position, or results of operations by decreasing our profit margins and by hindering our ability to deliver products to our customers on a timely basis. Additionally, certain vendors require advance deposits prior to the fulfillment of orders. Deposits paid on unfulfilled orders totaled $0.5 million and $0.4 million at March 31, 2025 and December 31, 2024, respectively.

We have certain vendors who individually represented 10% or more of our total expenditures, or whose net trade accounts payable balance individually represented 10% or more of our total net trade

SEC Form 10-Q filed by Energy Focus Inc.