Energy Focus(EFOI) - 2024 Q3 - Quarterly Report

Sales Performance - Net sales for Q3 2024 were $1.2 million, a decrease of$ 0.1 million, or 11%, compared to Q3 2023 net sales of $1.3 million, primarily due to a 30% decrease in commercial sales [142]. - For the first nine months of 2024, net sales increased to$ 3.6 million, up $0.3 million, or 8%, compared to the same period in 2023, driven by a 25% increase in MMM product sales [143]. - Three major customers accounted for approximately 39% of net sales for the nine months ended September 30, 2024 [159]. Profitability and Loss - Gross profit for Q3 2024 was 16% of net sales, compared to a gross loss of 4% in Q3 2023, attributed to a 7% decrease in fixed costs and a 78% increase in variable costs [144]. - Net loss for the three months ended September 30, 2024, was$ 0.3 million, a 67% decrease from the $0.9 million net loss in the same period of 2023 [156]. - Net loss for the nine months ended September 30, 2024, was$ 1.3 million, a 63% decrease from the $3.4 million net loss in the same period of 2023 [157]. Operating Expenses - Operating expenses for Q3 2024 were 49% of net sales, down from 63.8% in Q3 2023, reflecting significant cost-cutting efforts [140]. - Product development expenses for Q3 2024 were$ 137 thousand, a 4% decrease from Q3 2023, primarily due to lower payroll-related expenses [147]. - Selling, general, and administrative expenses for Q3 2024 were $0.4 million, down 37% from$ 0.7 million in Q3 2023, driven by reduced payroll and consulting fees [149]. Cash Flow and Financial Position - Cash balance at September 30, 2024, was approximately $0.8 million, down from$ 2.0 million at December 31, 2023 [164]. - Net cash used in operating activities was $1.0 million for the nine months ended September 30, 2024, compared to$ 2.4 million for the same period in 2023 [166][167]. - Interest expense decreased to $5 thousand for the first nine months of 2024, down from$ 226 thousand in the same period of 2023 [152]. - Gain on debt extinguishment recognized was $187 thousand for the three and nine months of 2024, with no such gain in the same periods of 2023 [152]. - Other income for the nine months ended September 30, 2024, was$ 30 thousand, compared to $16 thousand for the same period in 2023 [154]. - The company had an accumulated deficit of$ 154.6 million as of September 30, 2024 [159]. Strategic Focus and Challenges - The company continues to face challenges from long sales cycles and unexpected delays in MMM and commercial customer projects, impacting revenue generation [131]. - Strategic investments by Sander Electronics, Inc. in 2023 and 2024 have provided meaningful external capital and opportunities to improve the supply chain [130]. - The company is focusing on a demand-oriented approach to enhance customer loyalty and align products and services with customer needs [132]. - The company has implemented a comprehensive value model to analyze customer loyalty and improve service consistency throughout the customer journey [133]. - The company plans to develop and launch new products, including Redcap emergency battery backup tubular TLEDs, to achieve profitability [163].