EFOI 10-K & 10-Q changes, risk factors and insider trading
Energy Focus, Inc. · Nasdaq · Electric Lighting & Wiring Equipment · CIK 924168 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We may fail to secure sufficient additional financing, which could prevent us from executing our business plan and continuing as a going concern.”
New heading “Global trade policies, including tariffs, could increase costs and disrupt our supply chain, adversely affecting our operations and profitability.”
New heading “Foreign currency fluctuations may adversely affect our financial results.”
Removed heading “Our failure to comply with the continued listing requirements of Nasdaq could adversely affect the price of our common stock and its liquidity.”
Largest changes
“Although the substantial majority of our business activity takes place in the U.S., we derive a portion of our revenues and earnings from operations in foreign countries, which is expected to increase with our investment in foreign locations. As a result, we are subject to risks associated with doing business internationally. The risks of doing business in foreign countries include, among other factors: the potential for adverse changes in the local political climate, in diplomatic relations between foreign countries and the U.S. …”see in full comparison
“Tensions over trade remain high, particularly between the U.S., China, and the European Union. The current U.S. administration’s extensive use of tariffs as a policy tool has introduced significant uncertainty regarding future trade relationships with key markets, including China, the European Union, Canada, and Mexico. These tariffs have prompted, and may continue to prompt, retaliatory tariffs from other nations, raising concerns about a prolonged trade war. …”see in full comparison
“Our cash balance of $1.1 million as of December 31, 2025, and ongoing operating losses raise substantial doubt about our ability to continue as a going concern. We are actively seeking additional capital through equity, debt, or strategic partnerships, but there can be no assurance that we will secure such funding on acceptable terms or at all. Equity financing may significantly dilute existing shareholders, while debt financing could impose restrictive covenants or high interest rates. …”see in full comparison
“Our operations are subject to risks arising from global trade policies, particularly the imposition of tariffs and other trade barriers by the United States, China, the European Union, and other nations, which have intensified under the current U.S. administration. As of December 31, 2025, approximately 92% of our purchase commitments are with Sander Electronics Co. Ltd, a Taiwan-based related party, which could be indirectly affected by international trade tensions, including tariffs. …”see in full comparison
“Global trade policies, including tariffs, could increase costs and disrupt our supply chain, adversely affecting our operations and profitability.”see in full comparison
“We may fail to secure sufficient additional financing, which could prevent us from executing our business plan and continuing as a going concern.”see in full comparison
Full comparison: every changed paragraph (34)
For the year ended December 31, 2024,2025, financing activity to sustain ongoing losses included (1) proceeds from the issuance of common stock and warrantsof approximately $0.9 million and (2) payment on the 2022 Streeterville Note $1.0$2.1 million (Please see Note 710 of our financial statements for the year ended December 31, 20242025 included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.).
For the year ended December 31, 2023,2024, financing activity to sustain ongoing losses included (1) selling an aggregateissuance of approximately $6.1 million common stock throughapproximately several$0.9 private placement transactionsmillion and (2) convertingpayments approximatelyon $1.7the million2022 ofStreeterville outstandingNote promissory$1.0 notes into common stock.million.
•additional equity financing may not be available to us on satisfactory termsterms, 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 rates, restrictive covenantscovenants, conversion features, refinancing demands, and control or revocation provisions, which are not acceptable to management or ourthe 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.
We have incurred substantial losses in the past and reported net losses from operations of $1.6$1.0 million and $4.3$1.6 million for the years ended December 31, 20242025 and 2023,2024, respectively. As of December 31, 2024,2025, we had an accumulated deficit of $155.9 million and cash of approximately $1.1 million, compared to an accumulated deficit of $154.9 million and cash of approximately $0.6 million, compared to an accumulated deficit of $153.3 million and cash of approximately $2.0 million as of December 31, 2023.2024.
In order for us to operate our business profitably, we need to grow our sales, maintain cost control discipline while balancing development of our product pipeline and potential long-term revenue growth, continue our efforts to reduce product cost, and drive further operating efficiencies and develop and execute a strategic product pipeline for profitable and compelling MMM and LED lighting and control products. Management plansinitiated to expandexpansion into the Asian market in 2025. There is a risk that our strategy to return to profitability may not be as successful as we envision, or occur as quickly as we expect. We might require additional financing in the near-term and, if our operations do not achieve, or we experience an unanticipated delay in achieving, our intended level and pace of profitability, we will continue to need additional funding, none of which may be available on favorable terms or at all and could require us to sell certain assets or discontinue or curtail our operations.
Historically our customer base has been highly concentrated and a few customers have represented a substantial portion of our net sales. In 2024, two customers collectively accounted for 33% of net sales. Total sales to our primary distributor to the U.S. Navy, combined with sales to shipbuilders for the U.S. Navy represented 33% of net sales in 2024. In 2023, two customers collectively accounted for 48% of net sales. Total sales to our primary distributor to the U.S. Navy, combined with sales to shipbuilders for the U.S. Navy represented 70% of net sales in 2023.
Historically our customer base has been highly concentrated and a limited number of customers have represented a substantial portion of our net sales. We generally do not have long-term contracts with our customers that commit them to purchase any minimum amount of our products or require them to continue to do business with us. As a result, the loss of, or a significant reduction in demand from, any of our significant customers could adversely affect our business, financial condition, results of operations, and prospects. We couldmay lose business from any one of our significant customers for a variety of reasons, many of which are outside of our control, including ongoingchanges long-termin impactscustomer ofprocurement thestrategies COVID-19or pandemic,project timelines, changes in levels of government funding and rebate programs, ourincreased inability to comply with government contracting laws and regulations, changes in customers’ procurement strategies or their lighting retrofit plans,competition, changes in product specifications, additional competitors entering particular markets,and our failureability to keepmeet pacecustomer withrequirements, technologicalincluding advancesdelivery and costquality reductions, and damage to our professional reputation, among others.expectations.
As our customer base and customer demand for our products changes and as we launch new products, we must be able to adjust our production capacity to meet demand. We are continually taking steps to address our manufacturing capacity needs for our products. If we are not able to increase or decrease our production capacity at our targeted rate or if there are unforeseen costs associated with adjusting our capacity levelslevels, or there are unanticipated interruptions in our global supply chain or logistics fromdue to factors outside of our control, such possibilities as long-term effects of the COVID-19 pandemic, geopolitical tensioninstability, aslabor theavailability militaryconstraints, conflictchanges in Ukrainetrade andpolicies, theinflationary Middle East, shifting workforces,pressures, or energyother policies,macroeconomic conditions, we may not be able to achieve our financial targets. In addition, as we introduce new products and further refine existing products, we must balance the production and inventory of prior generation products with the production and inventory of new products, whether manufactured by us or our contract manufacturers, to maintain a product mix that will satisfy customer demand and mitigate the risk of incurring cost write-downs on the previous generation products, related raw materials and tooling.
•macroeconomic, geopolitical and health concerns, including long-term effects of the COVID-19 pandemicconcerns;
We may fail to secure sufficient additional financing, which could prevent us from executing our business plan and continuing as a going concern.
Our cash balance of $1.1 million as of December 31, 2025, and ongoing operating losses raise substantial doubt about our ability to continue as a going concern. We are actively seeking additional capital through equity, debt, or strategic partnerships, but there can be no assurance that we will secure such funding on acceptable terms or at all. Equity financing may significantly dilute existing shareholders, while debt financing could impose restrictive covenants or high interest rates. Failure to obtain adequate financing could result in reduced operations, delayed product development, or insolvency.
Global trade policies, including tariffs, could increase costs and disrupt our supply chain, adversely affecting our operations and profitability.
Our operations are subject to risks arising from global trade policies, particularly the imposition of tariffs and other trade barriers by the United States, China, the European Union, and other nations, which have intensified under the current U.S. administration. As of December 31, 2025, approximately 92% of our purchase commitments are with Sander Electronics Co. Ltd, a Taiwan-based related party, which could be indirectly affected by international trade tensions, including tariffs. These policies may increase the cost of imported components, extend delivery times due to customs delays, or reduce demand for our products if customers face higher prices. For example, certain products have been subject to tariffs imposed in early 2025 on electronic components, which has increased our cost of sales by approximately 4%, or $109 thousand for the year ended December 31, 2025. Based on current inventory levels and supply chain composition, these risks are heightened by our significant concentration of purchases with Taiwan-based related party suppliers (representing 92% of our purchase commitments as of December 31, 2025), which may be indirectly affected by U.S.-China trade tensions and broader Asian trade policies, even if not directly subject to specific tariffs.
The unforeseen results of potential trade disputes and reciprocal tariffs worldwide could further impact our business. Increased trade protectionism, as governments seek to protect or revive domestic industries, may lead to restrictions on imports, such as tariffs, that could significantly affect global trade and, indirectly, the demand for our LED lighting products. Such restrictions could increase the cost of exported goods, prolong delivery times, and elevate risks associated with exporting, potentially leading to a decline in the volume of exported goods and demand for our products. The interconnected nature of global supply chains means that trade policies, even in countries not directly imposing or subject to tariffs, could disrupt our access to critical components.
Tensions over trade remain high, particularly between the U.S., China, and the European Union. The current U.S. administration’s extensive use of tariffs as a policy tool has introduced significant uncertainty regarding future trade relationships with key markets, including China, the European Union, Canada, and Mexico. These tariffs have prompted, and may continue to prompt, retaliatory tariffs from other nations, raising concerns about a prolonged trade war. Protectionist developments, or the perception that they may occur, could materially adversely affect global economic conditions, reduce international trade, and disrupt our supply chain, particularly for components sourced from Asia. Such disruptions could strain our liquidity, increase operating costs, and hinder our ability to compete effectively in the LED lighting market, adversely impacting our business, results of operations, and financial condition.
Foreign currency fluctuations may adversely affect our financial results.
We have operations and business relationships in Taiwan and Japan that expose us to foreign currency risk. As of December 31, 2025, we held approximately $326 thousand in New Taiwan dollar (“NTD”) denominated cash, and $113 thousand in NTD accounts receivable, resulting in a net NTD exposure of approximately $439 thousand. In addition, we held approximately $156 thousand in Japanese Yen (“JPY”) denominated advance for investment in joint venture related to our Japan ESS initiative. Fluctuations in the exchange rate between the U.S. dollar and NTD and JPY directly impact our financial results when these amounts are translated to U.S. dollars for financial reporting purposes. Additionally, economic, political and other risks associated with foreign operations could adversely affect our financial results.
During 2025, we recognized a foreign exchange gain of $20 thousand related to NTD and JPY transactions and balances, including period-end remeasurement of foreign currency denominated monetary items. These fluctuations can be significant relative to our quarterly results and may increase volatility in our reported financial performance. We do not currently hedge our foreign currency exposure, and significant strengthening of the U.S. dollar relative to the NTD or JPY could adversely impact our results of operations and financial condition.
A portion of our cash and operating activities are located in Taiwan, and we are subject to risks associated with foreign currency fluctuations, repatriation restrictions, and local regulations. While there are no current limitations on our ability to access funds held in Taiwan, future government actions, currency controls, or changes in tax law could restrict or delay our ability to repatriate earnings or transfer funds. Additionally, fluctuations in the exchange rate between the New Taiwan dollar and the U.S. dollar may materially affect our reported financial results, and we do not currently hedge this exposure.
Although the substantial majority of our business activity takes place in the U.S., we derive a portion of our revenues and earnings from operations in foreign countries, which is expected to increase with our investment in foreign locations. As a result, we are subject to risks associated with doing business internationally. The risks of doing business in foreign countries include, among other factors: the potential for adverse changes in the local political climate, in diplomatic relations between foreign countries and the U.S. or in government policies, laws or regulations; international conflicts; terrorist activity that may cause social disruption; logistical and communications challenges; costs of complying with a variety of laws and regulations; difficulty in staffing and managing geographically diverse operations; deterioration of foreign economic conditions; inflation and fluctuations in interest rates; foreign currency exchange rate fluctuations; foreign exchange restrictions; differing local business practices and cultural considerations; restrictions on imports and exports or sources of supply, including energy and raw materials; changes in duties, quotas, tariffs, taxes or other protectionist measures; and potential issues related to matters covered by the Foreign Corrupt Practices Act, regulations related to import/export controls, the Office of Foreign Assets Control sanctions program, anti-boycott provisions or similar laws. We believe that our business activities outside of the U.S. involve a higher degree of risk than our domestic activities, and any one or more of these factors could adversely affect our operating results and financial condition. In addition, global and regional economic conditions and the volatility of worldwide capital and credit markets have significantly impacted and may continue to significantly impact our foreign customers and markets. These factors may result in decreased demand in our foreign operations.
Our relationshiprelationships with Sander Electronics, Inc.,Inc (located in the US), an affiliate of a significant shareholder and supplierSander Electronics Co. Ltd (located in Taiwan), a shareholder of the Company controlled by our CEO Chiao Chieh (Jay) Huang, createscreate substantial business and governance risks. As of December 31, 20242025 Sander Electronics represented 54%71% of our accounts payable, and we have ongoing purchasing agreements with them for TLED products and spare parts. This concentration of our supply chain with a related partyparties createscreate risks regarding pricing, payment terms, and supply continuity. While we believe the terms of our transactions with Sander Electronics are commercially reasonable, the overlapping ownership and management between our companies may result in conflicts of interest that could adversely affect our business. Moreover, any deterioration in our relationship with Sander Electronics, or their inability to meet our supply requirements, could materially disrupt our operations. These risks are heightened because we have limited alternative suppliers readily available to replace Sander Electronics' production capacity. Additionally, our significant reliance on a related party supplier may draw increased regulatory scrutiny and impact our ability to demonstrate adequate internal controls over related party transactions. The materiality of this relationship could also affect our ability to obtain favorable terms from alternative suppliers.
OurAs of the date of this Report, our Chief Executive Officer currently serves as our Principal Financial Officer and Principal Accounting Officer due to the vacancy in our Chief Financial Officer position. This dual role may result in:
Our products are largely dependingdependent on the application of our technology. From time to time, third parties holding similar technologies and intellectual property rights, including companies, competitors, patent holding companies, customers and/or non-practicing entities, may assert intellectual property claims against us.
Although we believe that our products do not infringe upon the intellectual property rights of third parties, we cannot be certain that our operations do not or will not infringe upon or otherwise violate intellectual property rights or other rights held by third parties, and there may be third-party intellectual property rights or other rights that are infringed by our products without our awareness. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights or other rights of third parties, some even without merit. If we are forced to defend against any infringement or misappropriation claims, whether they are with or without merit, are settled out of court, or are determined in our favor, we may be required to expend significant time and financial resources on the defense of such claims. Regardless of the merits or eventual outcome, such a claim could adversely impact our brand and business. Any such assertions may require us to enter into royalty arrangement or result in us being unable to use certain intellectual property. Infringement assertions by third parties may involve patent holding companies or other patent owners who have no relevant product revenue, and therefore our own issued and pending patents may provide little or no deterrence to these patent owners in bringing intellectual property right claims against us. Furthermore, any adverse outcome of a dispute may require us to pay damages, potentially including treble damages and attorney’s fees, if we are found to have willfully infringed a party’s intellectual property; case making, licensing or using our solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to redesign our solutions’ enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or works; and to indemnify our partners, customers and other third parties. Any of these events could adversely impact our business, results of operations and financial condition.
Our failure to comply with the continued listing requirements of Nasdaq could adversely affect the price of our common stock and its liquidity.
We have a history of failing to comply with the continued listing requirements of Nasdaq, although we have successfully cured all the pre-existed deficiency, we may not be able to cure any deficiency timely in the future.
On February 21, 2023, we received written notification (the “Bid Price Notification”) from the Staff stating that we had not regained compliance with the Bid Price Rule and our common stock is subject to delisting from Nasdaq. On February 24, 2023, we submitted a request for a hearing before the Nasdaq Hearings Panel (the “Panel”) to appeal the delisting (the “Appeal”). Under Nasdaq rules, the delisting of the Company’s common stock was stayed during the pendency of the Appeal and, during such time, the Company’s common stock continued to be listed on Nasdaq.
On March 28, 2023, the Company received written notification (the “Additional Staff Determination”) from the Staff stating that (i) following the Bid Price Notification, and in accordance with Listing Rule 5810(c)(2)(A), Nasdaq is no longer permitted to consider the stockholders’ equity compliance plan, (ii) the Additional Staff Determination serves as an additional basis for delisting the Company’s common stock from Nasdaq and (iii) the Panel will consider the Additional Staff Determination in rendering a determination regarding the continued listing of the Company’s common stock on Nasdaq.
On April 6, 2023, the Company participated in the Appeal before the Panel. The Company provided an update to the Panel on the Company’s substantial progress made towards the previously submitted Plan during the three months ended March 31, 2023, and requested the Panel grant the Company an exception to (1) re-allow the previously granted exception until May 15, 2023 for the Company to regain compliance with the Minimum Stockholders’ Equity Rule and (2) grant an exception allowing the Company up to 180 days following the Bid Price Notification to regain compliance with the Bid Price Rule by effecting a reverse stock split following stockholder approval at the Company’s 2023 annual meeting of stockholders. On May 1, 2023, the Panel granted the Company’s request (the “Panel Decision”) to continue the Company’s listing on Nasdaq, subject to the following conditions: (1) on or before May 15, 2023, the Company shall file with the SEC its quarterly report for the three months ended March 31, 2023 demonstrating compliance with the Minimum Stockholders’ Equity Rule and (2) on or before July 7, 2023, the Company shall demonstrate compliance with the Bid Price Rule.
On July 27, 2023, the Company received written notification from the Staff stating that the Company has regained compliance with the Bid Price Rule and the Minimum Stockholders’ Equity Rule, as required by the Panel Decision. Pursuant to Nasdaq Listing Rule 5815(d)(4)(B), the Company will be subject to a mandatory panel monitor for a period of one year from July 27, 2023 (the “Monitoring Period”). If, within the Monitoring Period, the Staff finds the Company again out of compliance with the Minimum Stockholders’ Equity Rule, notwithstanding Nasdaq Listing Rule 5810(c)(2), the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, nor will the Company be afforded an applicable cure or compliance period pursuant to Nasdaq Listing Rule 5810(c)(3). Instead, the Staff will issue a delist determination letter and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened hearings panel if the initial Panel is unavailable. The Company will have the opportunity to respond and present to the Panel as provided by Nasdaq Listing Rule 5815(d)(4)(C). The Company’s common stock may be at that time delisted from Nasdaq.
As of the date of this Annual Report, the Company believes it has maintained compliance with the Minimum Stockholders’ Equity Rule for continued listing on the Nasdaq Capital Market. To become compliant with the Bid Price Rule, the Company effected a 1-for-7 reverse stock split to increase the per share trading price of the common stock effective on June 16, 2023 (See Note 9, “Stockholders’ Equity”).
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 in accordance with the Panel’s decision, the Company’s common stock will be subject to delisting from Nasdaq.
Management's Discussion & Analysis (MD&A)
New heading “Gain on disposal of fixed assets”
New heading “Foreign currency exchange risk”
Largest changes
“•The ability to access this cash for general corporate purposes in the United States may be subject to foreign exchange controls, local banking regulations, or unfavorable tax consequences. While there are currently no formal restrictions on the transfer of funds from Taiwan to the United States, repatriation of these funds may result in foreign withholding taxes or other costs, which could impact our overall liquidity. As such, our ability to deploy foreign cash for domestic use may be limited or delayed.”see in full comparison
“While we have made progress in reducing our net loss from $1.6 million in 2024 to $1.0 million in 2025 and improving our cash position from $0.6 million to $1.1 million, we continue to incur operating losses and have a substantial accumulated deficit of $155.9 million. Based on our current capital resources and projected cash requirements for ongoing operations, substantial doubt about our ability to continue as a going concern continues to exist as of December 31, 2025. …”see in full comparison
see in full comparisonOur netNet sales of$4.9$3.6 million in20242025 decreased15%$1.3 million, or 27% compared to2023,2024,mainlyprimarily driven by a decrease of16%43% in MMM sales andaandecreaseincrease of13%11% in commercial sales. The net sales decreasein netof MMMproductproducts sales in2024 as compared to 20232025 wasmainlyprimarily due toa significant reductiondelays in militarydemandcustomertowardprocurementtheandendprojectofexecutiontherelatedyear,to federal budget approval timing. The increase in commercial sales was primarily driven bytheaimpact$0.5ofmilliontheUPSU.S.projectelectiondeliveredcycle.toNetasalesnewof our commercial products decreasedcustomer in2024Taiwan,duerepresentingtoapproximatelythe effects of annual market cycles, high inflation, and our sales strategy, which reduced the proportion36% of commercialsales,salesalonginwith2025.market-adjustedWhilepricing.the project may represent a recurring revenue opportunity, future orders remain subject to customer requirements and timing.
Wesee in full comparisonhaddononot have any off-balance sheet arrangementsduringasthedefinedyearsinendedItemDecember303(a)(4)31,of2024Regulationand 2023.S-K.
Full comparison: every changed paragraph (51)
Energy Focus, Inc. engages primarily in the design, development, manufacturing, marketing and sale of energy-efficient lighting systems and controls. We develop, market and sell high-quality light-emitting diode (“LED”) lighting and controls products in the commercial market and military maritime market (“MMM”). 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.
Energy Focus, Inc. engages primarily in the design, development, manufacturing, marketing and sale of energy-efficient lighting systems and controls. We develop, market and sell high quality light-emitting diode (“LED”) lighting and controls products in the commercial market and military maritime market (“MMM”). Our mission is to enable our customers to run their facilities with greater energy efficiency, productivity, and human health and wellness through advanced LED retrofit solutions. Our goal is to be a market leader for the most demanding applications where performance, quality, value, environmental impact and health are considered paramount. We specialize in energy efficient LED lighting retrofit product, replacing fluorescent, high-intensity discharge lighting and other types of lamps in institutional buildings for primarily indoor lighting applications with our innovative, high-quality commercial and military-grade tubular LED (“TLED”) products, as well as other LED and lighting control products for commercial and consumer applications. We are also evaluating additional adjacent technologies, including Gallium Nitride (“GaN”) based power supplies and additional market opportunities forother energy solution products that support sustainability in our existing channels.
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.growth.
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. DuringSince 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,postponements. furtherIn complicatedaddition, bywe theface challenges from long sales cyclescycles, which is 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 linescosts, which we believe have contributed to our competitiveness, and may have helped us secure new contracts and expand our sales pipeline in the latter halfremainder of 2024.2025 and beyond.
We intendare toactively focus on developingexpanding our commercial product offerings, including plannedour newnewly introduced UPS systems for data centers. We also continue to advance the expansion of product lines such as EnergyESS Storage Systems (ESS),and GaN Powerbased Supplies,power and UPS systems for data centers,supplies, while continuing to leverageleveraging 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 relatedenergy-related market. These strategic adjustments have improved our market position, offering a more competitive pricing structure and a stronger value proposition for our customers. We believe that these initiatives, if successfully implemented, and if our financial position continues to improve, may contribute to growth across both our MMM and commercial business sectors, although there can be no assurance that such growth will occur.
Meanwhile, we continue to seek additional external funding alternatives and sources to support our growth strategies, plans and initiatives. The strategic investments in 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.
While we have made progress in reducing our net loss from $1.6 million in 2024 to $1.0 million in 2025 and improving our cash position from $0.6 million to $1.1 million, we continue to incur operating losses and have a substantial accumulated deficit of $155.9 million. Based on our current capital resources and projected cash requirements for ongoing operations, substantial doubt about our ability to continue as a going concern continues to exist as of December 31, 2025. We are actively pursuing additional sources of capital, including equity financings, debt financings, and strategic partnerships, to fund operations and support future growth. However, there can be no assurance that such financing will be available on acceptable terms, or at all.
The following table sets forth the percentage of net sales represented by certain items reflected onin our Consolidated Statements of Operations as a percentage of net sales for the followingperiods periodsindicated:
A further breakdown of our net sales by product line is aspresented followsin the following table (in thousands):
Our netNet sales of $4.9$3.6 million in 20242025 decreased 15%$1.3 million, or 27% compared to 2023,2024, mainlyprimarily driven by a decrease of 16%43% in MMM sales and aan decreaseincrease of 13%11% in commercial sales. The net sales decrease in netof MMM productproducts sales in 2024 as compared to 20232025 was mainlyprimarily due to a significant reductiondelays in military demandcustomer towardprocurement theand endproject ofexecution therelated year,to federal budget approval timing. The increase in commercial sales was primarily driven by thea impact$0.5 ofmillion theUPS U.S.project electiondelivered cycle.to Neta salesnew of our commercial products decreasedcustomer in 2024Taiwan, duerepresenting toapproximately the effects of annual market cycles, high inflation, and our sales strategy, which reduced the proportion36% of commercial sales,sales alongin with2025. market-adjustedWhile pricing.the project may represent a recurring revenue opportunity, future orders remain subject to customer requirements and timing.
Gross profit (loss)
Gross profit was $0.7 million, representing 19% of net sales in 2025, compared with gross profit of $0.7 million, or 14% of net sales,sales forin 2024,2024. comparedThe withyear-over-year improvement in gross profit of $0.2 million, or 4% of net sales for 2023. The increase in gross margin was driven mainly driven by a 2%sustained reduction in the use of nettemporary salesoutside decreaselabor inand lower fixed costscosts, such as subscription fee,fees expenses related toand rent expense for production, a 16% of net sales decrease in variable costs such as material cost and freight in expense, and an 8% of net sales unfavorable change in inventory reserves.production.
The reduction in warehouse space following the new lease agreement in July 2024 required both significant disposal of highly reserved, excess and obsolete inventory and a focus on selling inventory on hand throughout 2024. As a result of our initiatives of inventory management enhancement, we sold some inventory below cost. This resulted in a net decrease of our gross inventory levels of $0.9 million and a net decrease of excess and obsolete inventory reserves of $2.2 million as compared to 2023.
Product development expenses include salaries and related benefits, product testing and related costs, travel,travel expenses, cost of supplies, as well as overhead items, such as depreciation and facilitiesfacility costs. Product development costs are expensed as they are incurred.
Gross productProduct development expenses were $0.5$0.4 million in 2024,2025, a decrease of 11%,21%, compared to $0.6$0.5 million in 2023.2024. The $0.1 million decrease primarily resulted from lower payroll-related expenses dueresulting tofrom astructure reductionoptimization, inas headcountswell ofas $0.9 million. This was partially offset by a $0.4 million increase in travel expenses and a $0.4 million increase inlower product testing,testing and R&D supplies, and dues. During 2024, the Company terminated several employees, and the result was a significant reduction in payroll-relatedsupplies expenses.
Selling, general, and administrative expenses were $1.3 million, or 36% of net sales in 2025, compared to $2.0 million, or 42% of net sales,sales in 2024, compared to $3.6 million, or 63% of net sales, in 2023.2024. The year-over-year $1.6$0.7 million decrease is comprisedprimarily due to reductions in consultant fees of a$0.3 combination of a $0.9 million decrease from a reduction in headcount for salaries, severance, and commissions, amillion, $0.1 million decreasein fromrent afees, reduction of software costs, a $0.8$0.1 million decreasein from consultant and professionalinsurance fees, and remaining$0.1 frommillion ain decreasedirector of all other general expenses.fees.
There was no interest expense in 2025, compared to interest expense of $5 thousand in 2024. The decrease is primarily related to interest attributable to the 2022 Streeterville Note. There was no actual cash interest paid in 2025 compared to $5 thousand in 2024.
We incurred $5 thousand in interest expenses compared to interest expenses of $380 thousand in 2023. Interest expenses primarily related to the interest on promissory notes in the principal amounts of $2 million (the “2022 Streeterville Note”) the Company sold and issued to Streeterville pursuant to separate note purchase agreements. The decrease is primarily related to early termination of the 2022 Streeterville Note.
We recognized an $187 thousand of gain on debt extinguishment in the first quarter of 2024, which was related to the early termination of the 2022 Streeterville Note. There was no such gain recognized in 2023.2025.
We recognized $2 thousand and $63 thousand of gain on partial lease terminationterminations in 2025 and 2024, which waswere related to the early terminationterminations of the office lease. There was no such gain recognized in 2023.
Gain on disposal of fixed assets
We recognized $3 thousand of gain on sales of fixed assets in 2025, which was related to a one-time resale of a software license package to a related party customer as part of a specific project. There was no such gain recognized in 2024. See Note 14 “Related Party Transactions” included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report for further information.
We recognized other income of $27 thousand and $30 thousand each in 2024 and 2023, respectively. Other income in 2024 and 2023 primarily consisted of tax refunds and miscellaneous adjustments from accounts receivable.
WeOther recognizedincome otherwas expensesless ofthan $10$1 thousand in 2024,2025, compared to other expensesincome of $26$27 thousand in 2023.2024. OtherSuch expensesother inincome 2024is andrelated 2023to primarily consistedreceipts of bankunclaimed andproperty collateralfrom managementvendors fees.for previous payments.
We recognized other expenses of $10 thousand in 2025, compared to other expenses of $12 thousand in 2024. Other expenses are mainly composed of bank and collateral management fees. We recognized a non-cash loss of approximately $8 thousand on the settlement of returning inventory, cancelling prepayments made to the vendor, and settlement of outstanding accounts payables in the second quarter of 2025.
For each of the years ended December 31, 20242025 and 2023,2024, our effective tax rate was 0%. In 2025, our effective tax rate was lower than the statutory rate due to a full valuation allowance as a result of the $1.1 million additional federal net operating loss we recognized for the year. In 2024, our effective tax rate was lower than the statutory rate due to ana increase in thefull valuation allowance as a result of the $3.4 million additional federal net operating loss we recognized for the year. In 2023, our effective tax rate was lower than the statutory rate due to an increase in the valuation allowance as a result of the $6.3 million additional federal net operating loss we recognized for the year.
Please refer to Note 11, “Income Taxes,Taxes” included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report for further information.
For 2025, our net loss of $1.0 million decreased 35% from $1.6 million net loss for 2024. The decrease is primarily due to a decrease in cost of goods sold as well as operating expenses.
Net loss was $1.6 million for 2024. This compares with a net loss of $4.3 million for 2023, mainly driven by reduction of cost of goods sold, product development, selling, general, and administrative expenses as well as interest expenses.
At December 31, 2024,2025, we had $0.6$1.1 million in cash and no outstanding debt. We have historically incurred substantial losses, and as of December 31, 2024,2025, we had an accumulated deficit of $154.9$155.9 million. Additionally, our sales have been concentrated among a few major customerscustomers. and forFor the twelve months ended December 31, 2024,2025, twothree customers collectively accounted for approximately 33%48% of net sales.
In 20242025 and 2023,2024, we recommittedremain committed to building upon the transformation activitiesinitiatives started during 2019 that sought to stabilize and regrow our business. These efforts include the following key developments that occurred during 20242025 and 20232024:
•We aggressively re-evaluated operating expenses and reduced itsour workforce significantly throughout 20232024 and into 20242025 to manage fixed costs.
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 achieveimprove profitability through developing and launching new, innovative products, UPS 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. 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.
•As of December 31, 2025, 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.
•The ability to access this cash for general corporate purposes in the United States may be subject to foreign exchange controls, local banking regulations, or unfavorable tax consequences. While there are currently no formal restrictions on the transfer of funds from Taiwan to the United States, repatriation of these funds may result in foreign withholding taxes or other costs, which could impact our overall liquidity. As such, our ability to deploy foreign cash for domestic use may be limited or delayed.
•Management believes our current cash position and operating cash flows are sufficient to meet near-term working capital needs in both domestic and foreign jurisdictions.
Net cash used in operating activities ofwas $1.3$1.4 million in 2024 resulted primarily fromfor the year ended December 31, 2025. The net loss incurredfor of2025 $1.6was million,$1.0 million and was adjusted for non-cash items, including: depreciation and amortization of $42 thousand,amortization, stock-based compensation, net of $4 thousand, non-favorable provisions from inventoryinventory, of $347 thousand, favorable provisions forwarranty, accounts receivable reserves of $69 thousand, and favorableworking provisionscapital forchanges. warrantiesDuring of2025, $32major thousand.adjustments Weincluded used $128 thousand through a decrease of other accrued liabilities. Wecash generated $1.0from $0.3 million in cash throughfrom collection of accounts receivable, $0.8which millionis frompartially aoffset reduction of inventory, andby $0.3 million from an increasechange in inventory, $0.1 million change in accounts payable and $0.5 million change in related party accounts payable due to the timing of inventory receipts and payments. We paid off approximately $1.2 million in accounts payable to a related party.
Net cash used in operating activities ofwas $2.4$1.3 million in 2023 resulted primarily fromfor the year ended December 31, 2024. The net loss incurredfor of2024 $4.3was million,$1.6 million and was adjusted for non-cash items, including: depreciation and amortization of $258 thousand,amortization, stock-based compensation, net of $44 thousand, non-favorable provisions fromfor inventoryinventory, of $25 thousandwarranty, and from accounts receivable of $6 thousand,reserves and favorableworking provisionscapital changes. During 2024, major adjustments included cash generated from warranty of $33 thousand and gain from paid-off of Credit Facilities of $40 thousand. We used $1.1$1.0 million through the timing offrom collection of accounts receivable, $200and thousand$0.8 formillion prepaymentsfrom toinventory, vendors,which is partially offset by $0.2 million change in accounts payable and $47$1.2 thousandmillion through a decrease of other accrued liabilities. We generated $580 thousandchange in cashrelated for an increase inparty accounts payable due to the timing of inventory receipts and payments, $521 thousand from the change in prepaid and other current assets, and $1.0 million in inventory as we sold off a substantial portion of the stock on hand.payments.
Net cash used in investing activities was $197 thousand and $19 thousand infor the years ended December 31, 2025 and 2024, respectively, primarily from the acquisition of property and equipment and advances for investment in a joint venture, which was partially offset by proceeds from the sale of property and equipment.
Net cash used in investing activities was $69 thousand in 2023, primarily from the acquisition of property and equipment.
Net cash provided by financing activities for the year ended December 31, 20242025 of $0.1$2.1 million, primarilyreflecting resulted from $0.9$2.1 million of net proceeds from the issuance of common stock, offset by net payments of $1.0 million on the 2022 Streeterville Note.stock.
Net cash providedused byin financing activities was $0.1 million for the year ended December 31, 20232024, primarily related to $0.9 million of $4.5 million primarily resulted from thenet proceeds from the issuance of common stock and warrants of $6.1 million and advanced capital contribution of $0.5 million. The increases in cash were partiallystock, offset by $1.0 million related to net payments onof the 2022 Streeterville Note of $0.6 million and Credit Facilities of $1.4 million.Note.
We haddo nonot have any off-balance sheet arrangements duringas thedefined yearsin endedItem December303(a)(4) 31,of 2024Regulation and 2023.S-K.
Please refer to Note 9 “Purchase Commitments” included under Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.
Foreign currency exchange risk
Because we maintain operations and cash balances in Taiwan, we are exposed to fluctuations in the New Taiwan dollar (NTD) exchange rate relative to the U.S. dollar. Changes in exchange rates can affect the reported value of our foreign cash balances, revenues, and expenses, as well as result in transaction gains or losses on intercompany and third-party balances.
As of December 31, 2025, we had a net NTD exposure of approximately $439 thousand, consisting of NTD cash of $326 thousand, and NTD-denominated accounts receivable of $113 thousand. In addition, we held approximately $156 thousand in JPY denominated advances for investment in a joint venture related to our Japan ESS initiative.
For 2025, we recognized a net foreign currency transaction gain of approximately $20 thousand. We do not currently employ financial instruments to hedge our foreign currency exposure. We continue to monitor our NTD and JPY exposure and may consider hedging strategies in the future if our foreign currency risk increases materially.
As of December 31, 2024, we have approximately $0.3 million in outstanding purchase commitments for inventory, of which the majority is expected to ship in the first quarter of 2025. We have 88% of the outstanding purchase commitments with a related party.
As of December 31, 2023, we had approximately $0.5 million in outstanding purchase commitments for inventory, of which the majority is expected to ship in the first quarter of 2024. We had 49% of the outstanding purchase commitments with a related party.
•allowances for doubtfulcredit accounts,losses, returns and discounts,
What changed in the latest 10-Q
Risk Factors
We could not find a separate Risk Factors item in the latest 10-Q. Some companies leave it out of quarterly reports; see the annual 10-K risk factors and the original filing. Open the filing on SEC.gov.
Management's Discussion & Analysis (MD&A)
New heading “Other Expense (Income)”
New heading “Interest expense (income)”
Removed heading “Interest income”
Largest changes
Grosssee in full comparisonprofitloss was$0.2$0.3 million, representing23%7% of net sales, for thefirstsecond quarter of2026.2026,This comparescompared with gross profit of$0.2$0.1 million, or32%13% of net sales, for thefirstsecond quarter of 2025. The period-over-periodchangedecrease in gross profit was driven mainly by an increase in inventory reservesandoflower$0.5variablemillionmargins,duringsuchtheassecondtariffquarterimpacts.of 2026.
“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. …”see in full comparison
“During the second quarter of 2026, the Company recognized approximately $7 thousand of Taiwan corporate income tax related to the 2025 tax year.”see in full comparison
Full comparison: every changed paragraph (49)
Energy Focus, Inc. specializes in the design, development, manufacturing, marketing and sellingsale 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.
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,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.
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 notwithout impacting the performance andor 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.
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.
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.
The Company continues to incur losses and has a substantial accumulated deficit, which raises substantial doubt about its ability to continue as a going concern as of MarchJune 31,30, 2026. Management continues to evaluate and implement strategies to improve liquidity and financial performance.
EFOI is committed to adopting three main sustainable economy strategies: “Green Supply Chain,” “Green Product,” and “Green ManufacturingManufacturing,”, aiming to promote sustainability throughout the entire value chain. The Company is working closely with its supply chain partners to optimize recycling mechanisms and strengthen packaging design, integrating sustainable economy principles into the core of supply chain management.
Guided by the vision of “transcending traditional corporate social responsibility and creating shared value,value”, EFOI’s team is focusing on stakeholders, aiming to achieve a “dual profit engine” effect by combining financial performance and Environmental, Social, and Governance (“ESG”) practices. This strategy not only aligns with the Company’s responsibility and sustainability goals but is also expected to enhance overall performance and market competitiveness. EFOI's operational team's new strategy focuses on integrating environmental and economic benefits, aiming to create a win-win situation that benefits the company, society, and the environment.
The Company applies strategic financial management infrom the following perspective.
•Revenue Growth: Develop diversified revenue streams, reduce dependency on a single business or market, continuously optimize products and services, and enhance market competitiveness.
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.
Net sales of $4.7 million for the first six months of 2026 increased by $2.9 million, or 167%, compared with the same period in 2025, primarily driven by a 178% increase in MMM sales and a 164% 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, as well as increased MMM product sales due to improved demand compared with lower sales volumes in the prior year period.
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.
Gross Profit (Loss)
Gross profitloss was $0.2$0.3 million, representing 23%7% of net sales, for the firstsecond quarter of 2026.2026, This comparescompared with gross profit of $0.2$0.1 million, or 32%13% of net sales, for the firstsecond quarter of 2025. The period-over-period changedecrease in gross profit was driven mainly by an increase in inventory reserves andof lower$0.5 variablemillion margins,during suchthe assecond tariffquarter impacts.of 2026.
Gross loss was $0.0 million, representing 1% of net sales, for the first six months of 2026, compared with gross profit of $0.3 million, or 19% of net sales, for the first six months of 2025. The year-over-year decrease in gross profit was driven mainly by an increase in inventory reserves of $0.5 million during the six months ended June 30, 2026.
Product development expenses were $0.1 million for the firstsecond quarter of 2026, representing an increase of $26$10 thousand, or 52%14%, compared towith $0.1 million for the firstsecond quarter of 2025. The increase primarily resulted from higher product testing expenses and business travel expenses.
Product development expenses were $0.2 million for the first six months of 2026, representing an increase of $36 thousand, or 29%, compared with $0.1 million for the first six months of 2025. The increase primarily resulted from higher business travel expenses.
Selling, general and administrative expenses were $0.3$0.5 million for the firstsecond quarter of 2026, downan 31%increase of 78% from $0.4$0.3 million in the firstsecond quarter of 2025. The decreaseincrease iswas primarily due to a reduction$0.2 million increase in insurancethe feesallowance offor $0.1credit million.losses.
Interest income
InterestSelling, incomegeneral wasand $1administrative thousandexpenses were $0.8 million for the first quartersix months of 2026, compared to $0$0.7 thousandmillion for the first quartersix months of 2025. The increase was primarily attributabledue to interesta earned$0.2 million increase in bankthe deposits.allowance for credit losses.
Other Expense (Income)
Interest expense (income)
Interest expense was $5 thousand for the second quarter of 2026, compared with $0 for the second quarter of 2025. The increase was primarily due to interest expense associated with short-term borrowings. Interest expense was $5 thousand for the first six months of 2026, compared to $0 for the first six months of 2025. The increase was primarily due to interest expense associated with short-term borrowings.
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.
Other expenses
Other expenses were $0 for the second quarter of 2026, compared with $8 thousand for the second quarter of 2025. Other expenses were $0 for the six months ended June 30, 2026, compared with $8 thousand for the six months ended June 30, 2025. In the second quarter of 2025, we recognized a non-cash loss of approximately $8 thousand related to the return of inventory, the cancellation of vendor prepayments, and the settlement of outstanding accounts payable.
Due to the operating losses incurred during the three and six months ended MarchJune 31,30, 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.
During the second quarter of 2026, the Company recognized approximately $7 thousand of Taiwan corporate income tax related to the 2025 tax year.
Net loss for the three months ended MarchJune 31,30, 2026 was $0.1$0.9 million, aan decreaseincrease of $0.2$0.6 million, or 48%280%, compared towith net loss of $0.3$0.2 million for the three months ended MarchJune 31,30, 2025. The decreaseincrease iswas mainlyprimarily due to lowerhigher fixed operating expensescosts, increased inventory reserves, and the recognition of an allowance for credit losses in the firstsecond quarter of 2026.2026 compared to the second quarter of 2025.
Net loss for the six months ended June 30, 2026, was $1.0 million, an increase of $0.5 million, or 104%, compared with net loss of $0.5 million for the six months ended June 30, 2025. The increase was primarily due to higher fixed operating costs, increased inventory reserves, and the recognition of an allowance for credit losses in the first six months of 2026 compared to the first six months of 2025.
As of MarchJune 31,30, 2026, we had $1.1 million in cash and no$0.9 million of outstanding short-term debt. We have historically incurred substantial losses, and, as of MarchJune 31,30, 2026, we had an accumulated deficit of $156.1$156.9 million. Additionally, our sales have been concentrated among a few major customerscustomers, and,and for the threesix months ended MarchJune 31,30, 2026, fourtwo customers accounted for approximately 63%65% of net sales.
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 reenergizereinforce sales.
As of MarchJune 31,30, 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 MayJune 12,30, 2026, we had investedrecorded approximatelyan $535advance thousandfor toward this commitment, with the remaining balanceinvestment of approximately $565$522 thousand expectedrelated to bethis fundedproposed duringtransaction. projectThe development.transaction Thisremains commitmentsubject 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.
•As of MarchJune 31,30, 2026, we held total cash of $1.1 million, of which approximately $0.3$0.5 million was maintained in a bank account in Taiwan, with the remaining $0.8$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.
Net cash provided by (used in) operating activities
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.
Net cash used in operating activities was $0.3$0.8 million for the threesix months ended MarchJune 31,30, 2025.2026. The net loss for the threesix months ended MarchJune 31,30, 20252026 was $0.3$1.0 million and wasmillion, adjusted for non-cash items, including depreciation and amortization, stock-based compensation,depreciation, provisions for inventory, warranty, accounts receivable reserves and working capital changes. During the threesix months ended MarchJune 31,30, 2025,2026, changesmajor adjustments included casha generated$2.2 million change in accounts receivable caused by specific timing of $0.2 million from collection ofcollecting accounts receivable, which was partially offset by $0.2a million changes in prepayment for vendors, and $0.1$2.8 million change in related party accounts payable due to timing of inventory receipts and payments.
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.
For the three months ended March 31, 2026, the Company did not have any activities in connection with investing activities.
Net cash used in investing activities was $5$0.4 thousandmillion for the threesix months ended MarchJune 31,30, 2025,2026, primarily fromdue theto acquisitiona of$0.4 propertymillion andadvance equipment.for investment in a joint venture.
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.
For the three months ended March 31, 2026, the Company did not have any activities in connection with financing activities.
Net cash provided by financing activities was $0.2$1.2 million for the threesix months ended MarchJune 31,30, 2025,2026, primarily reflectingdue netto proceeds of $0.9 million from short-term borrowing and proceeds of $0.3 million from the issuance of common stock.
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.
As of June 30, 2026, we had a net NTD liability exposure of approximately $456 thousand, consisting of NTD cash of $455 thousand and NTD short-term borrowings of $911 thousand. As of June 30, 2026, we had a net Chinese Yuan ("CNY") liability exposure of approximately $1,167 thousand, consisting of CNY accounts receivable of $1,714 thousand and CNY related party accounts payable of $2,881 thousand.
In addition, as of June 30, 2026, the carrying amount of our Japanese Yen ("JPY")-denominated advance for investment in a proposed joint venture related to our Japan ESS initiative was approximately $522 thousand.
As of March 31, 2026, we had a net NTD exposure of approximately $318 thousand, consisting of NTD cash of $320 thousand, partially offset by NTD accounts payable of $2 thousand. In addition, we held approximately $155 thousand in JPY denominated advances for investment in a joint venture related to our Japan ESS initiative.
For the threesix months ended MarchJune 31,30, 2026, we recognized net foreign currency transaction losses of approximately $8$15 thousand. We do not currently employ financial instruments to hedge our foreign currency exposure. We continue to monitor our exposure to NTDNTD, CNY and JPY and may consider hedging strategies in the future if our foreign currency risk increases materially.
EFOI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding EFOI (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 33,398 | $110.2K | 0.0% | Added 224% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 12,705 | $41.9K | 0.0% | New position |