Energy Focus(EFOI) - 2024 Q4 - Annual Report

Financial Performance - Energy Focus reported net sales of $4.86 million in 2024, a decrease of 15$5.72 million in 2023, primarily due to a 16% decline in MMM product sales and a 13% decline in commercial sales [185]. - The gross profit for 2024 was $0.7 million, or 14$0.2 million, or 4% of net sales in 2023, driven by a decrease in fixed and variable costs [188]. - Net loss for 2024 was $1.6 million, a significant improvement from a net loss of$4.3 million in 2023, primarily due to reduced costs [200]. - Net cash used in operating activities was $1.3 million in 2024, improved from$2.4 million in 2023, reflecting better cash management despite ongoing losses [206][207]. - Cash provided by financing activities was $0.1 million in 2024, significantly lower than$4.5 million in 2023, primarily due to reduced stock issuance proceeds [209][210]. Cost Management - Operating expenses decreased significantly from 73.4% of net sales in 2023 to 52.3% in 2024, with selling, general, and administrative expenses dropping from $3.6 million to$2.0 million [184][192]. - The company has undertaken significant cost-cutting measures in 2023 and 2024 to address operational expenses while maintaining customer satisfaction [172]. - The company aggressively reduced its workforce and operating expenses throughout 2023 and into 2024 to manage fixed costs [204]. Debt and Financial Position - The company achieved a gain of $187,000 on debt extinguishment in 2024, related to the early termination of the 2022 Streeterville Note, compared to no such gain in 2023 [194]. - Energy Focus has eliminated all external high-interest debt, improving its financial position and supporting business expansion plans [174]. - As of December 31, 2024, the company had$0.6 million in cash, down from $2.0 million at the end of 2023, with an accumulated deficit of$154.9 million [201][205]. Revenue Challenges - The military maritime (MMM) business faced challenges in 2024 due to delays in government funding and long sales cycles, impacting revenue recognition [174]. - Two major customers accounted for approximately 33% of net sales for the twelve months ended December 31, 2024, indicating a concentration risk [201]. Growth Strategies - The company is focusing on developing new product lines, including Energy Storage Systems (ESS) and GaN Power Supplies, to enhance its market position [175]. - The company plans to achieve profitability by launching new products, including Redcap® emergency battery backup tubular TLEDs, and exploring GaN-based power supply circuitry [203]. - Energy Focus is actively seeking additional external funding to support its growth strategies and initiatives [176]. - The company continues to seek external funding alternatives to support its growth strategies and initiatives [204]. Tax and Valuation - The effective tax rate for both 2024 and 2023 was 0%, with a full valuation allowance recorded against deferred tax assets due to net operating losses [197][198]. Inventory and Commitments - The company has approximately $0.3 million in outstanding purchase commitments for inventory as of December 31, 2024, with 88$19 thousand in 2024, primarily for property and equipment acquisitions, down from $69 thousand in 2023 [208].