Energy Focus(EFOI) - 2023 Q3 - Quarterly Report

Sales Performance - Net sales for Q3 2023 were $1.3 million, a decrease of$ 0.4 million, or 24%, compared to Q3 2022 net sales of $1.8 million, primarily due to a 61% decrease in commercial sales [167]. - For the first nine months of 2023, net sales totaled$ 3.3 million, a decrease of $2.0 million, or 37%, compared to the same period in 2022, driven by a 63% decrease in commercial product sales [168]. - Two customers accounted for approximately 29% of net sales for the nine months ended September 30, 2023 [183]. Product Sales and Development - MMM product sales increased by$ 0.4 million, or 77%, in Q3 2023, attributed to larger sales orders and improved efficiency following a leadership change in the MMM sales team [167]. - The company plans to launch the second generation of EnFocus™ powerline control switches in 2023, enhancing lighting solutions for commercial markets [184]. - The company is focusing on innovative products like EnFocus™ and RedCap® to drive future growth and profitability [149]. Financial Performance - Gross loss for Q3 2023 was $0.0 million, or (4)% of net sales, an improvement from a gross loss of$ (0.2) million, or (9)% of net sales in Q3 2022 [169]. - Gross profit for the first nine months of 2023 was $0.1 million, or 10% of net sales, compared to a gross loss of$ (0.1) million, or (2)% of net sales in the same period of 2022 [170]. - Net loss for the three months ended September 30, 2023, was $0.9 million, a decrease of 65% from a net loss of$ 2.7 million in the same period of 2022 [181]. Operating Expenses - Total operating expenses for Q3 2023 were 53.2% of net sales, down from 127.2% in Q3 2022, indicating significant cost-cutting efforts [166]. - Selling, general and administrative expenses for the first nine months of 2023 were $2.9 million, a decrease of 51% from$ 5.9 million in the same period of 2022 [175]. - Product development expenses for the third quarter of 2023 were $0.1 million, down 61% from$ 0.3 million in the third quarter of 2022 [172]. - Interest expense for the first nine months of 2023 was $226 thousand, down 67% from$ 679 thousand in the same period of 2022 [177]. Cash Flow and Capital - Cash balance as of September 30, 2023, was approximately $1.7 million, compared to approximately$ 0.1 million at December 31, 2022 [188]. - Net cash used in operating activities for the nine months ended September 30, 2023, was $2.4 million, significantly improved from$ 6.2 million in the same period of 2022 [189]. - The company raised an aggregate gross proceeds of $1.8 million through a security purchase agreement in August 2023 [185]. Challenges and Strategic Focus - The company continues to face challenges from long sales cycles and supply chain issues, impacting both MMM and commercial sales [154]. - Strategic investments in 2023 by Sander Electronics, Inc. have provided meaningful external capital to support growth strategies [153]. - The company is evaluating adjacent technologies, including GaN-based power supplies, to expand its market opportunities [153]. - The company has implemented a demand-oriented approach to enhance customer relationships and loyalty through targeted service models [158]. Reporting Classification - The company is classified as a "smaller reporting company" and is not required to provide detailed market risk information [201].