Energy Focus(EFOI) - 2023 Q4 - Annual Report

Financial Performance - Net sales for 2023 were $5.7 million, a decrease of 4.2% compared to 2022, driven by an 85.6% increase in MMM sales and a 57.5% decrease in commercial sales[194]. - Gross profit for 2023 was$ 0.2 million, or 3.9% of net sales, compared to a gross loss of $(0.3) million, or (5.3)% of net sales in 2022, due to cost reduction efforts[195]. - Net loss for 2023 was$ 4.3 million, an improvement from a net loss of $10.3 million in 2022, primarily due to reduced costs in goods sold and operating expenses[208]. - The net loss for 2023 was$ 4.293 million, a significant improvement from a net loss of $10.279 million in 2022, representing a reduction of 58.3%[248]. - For the year ended December 31, 2023, the net loss was$ 4.293 million, compared to a net loss of $10.279 million for 2022, indicating a significant improvement in financial performance[308]. Cost Management - Gross profit for 2023 was$ 223,000, compared to a gross loss of $318,000 in 2022, indicating an improvement in cost management[247]. - Total operating expenses decreased to$ 4.194 million in 2023 from $8.977 million in 2022, reflecting a reduction of 53.3%[247]. - Selling, general, and administrative expenses decreased to$ 3.6 million, or 63.1% of net sales in 2023, down from $7.1 million, or 119.8% of net sales in 2022[199]. - The company has made significant cost-cutting efforts throughout 2023 while maintaining customer satisfaction and timely delivery of goods[175]. - Research and development expenses were$ 0.6 million for the year ended December 31, 2023, down from $1.5 million in 2022, reflecting a reduction in product development costs[304]. Cash Flow and Liquidity - Cash balance increased to$ 2.0 million at December 31, 2023, compared to $52 thousand at December 31, 2022[213]. - Net cash used in operating activities was$ 2.4 million in 2023, a decrease from $6.7 million in 2022, reflecting improved cash management[214]. - Total cash at the end of 2023 increased to$ 2.03 million from $52, marking a significant recovery in liquidity[257]. - Cash used in operating activities for 2023 was$ 2.4 million, down from $6.7 million in 2022, indicating a 64% reduction in cash outflow[262]. - The company reported net accounts receivable of$ 1.570 million as of December 31, 2023, compared to $445 thousand in 2022[287]. Sales and Market Position - The company has seen growth in quotation opportunities in both MMM and commercial product lines during the fiscal year ended December 31, 2023[178]. - Two major customers accounted for approximately 48% of net sales for the twelve months ended December 31, 2023, indicating sales concentration risk[209]. - Two customers accounted for 48% of net sales in 2023, with sales to the primary distributor for the U.S. Navy representing approximately 35%[320]. - The company continues to face challenges from long and unpredictable sales cycles and aggressive price competition in the lighting industry[181]. - The MMM business faced challenges due to delayed government funding and long sales cycles, but efforts to reduce costs have positioned the company to be more competitive[177]. Strategic Initiatives - The company plans to achieve profitability by increasing sales of innovative products like EnFocus™ and leveraging unique technologies such as RedCap®[179]. - The company is evaluating adjacent technologies, including GaN-based power supplies, to support sustainability in existing channels[179]. - The company is exploring adjacent technologies, including Gallium Nitride (GaN) based power supplies, to enhance its product offerings[260]. - The company plans to reintroduce the second generation of EnFocus™ powerline control switches in 2024, focusing on commercial markets[210]. - The company has focused on diversifying its supply chain to remain competitive amid extreme price competition in the LED lighting industry[174]. Compliance and Regulatory Matters - The company was granted an extension until May 15, 2023, to regain compliance with the Minimum Stockholders' Equity Rule, having reported stockholders' equity of$ 1.5 million as of September 30, 2022[269]. - On July 27, 2023, the company regained compliance with both the Bid Price Rule and the Minimum Stockholders' Equity Rule, subject to a one-year mandatory panel monitor[273]. - The company is subject to delisting from Nasdaq if it fails to maintain compliance with listing standards during the monitoring period[277]. - The company has made substantial progress towards its plan to regain compliance with Nasdaq listing requirements as of March 31, 2023[272]. Debt and Financing - The company raised $1.8 million in gross proceeds through a security purchase agreement in September 2023[210]. - The Company completed a private placement on September 29, 2023, raising approximately$ 1.75 million by issuing 853,658 shares at a price of $2.05 per share[360]. - The June 2023 Private Placement raised approximately$ 1.3 million by issuing 746,875 shares at a price of $1.76 per share[362]. - The Company agreed to restructure the 2022 Streeterville Note, extending its maturity date to December 1, 2024, with scheduled repayments starting January 1, 2024, of approximately$ 117 thousand per month[344]. - Total debt decreased from $4,879,000 in 2022 to$ 1,773,000 in 2023[332]. Inventory Management - Inventories decreased to $4.439 million in 2023 from$ 5.476 million in 2022, a decline of 18.9%[242]. - The company experienced a net decrease of gross inventory levels by $1.0 million and an increase in excess and obsolete inventory reserves by$ 26 thousand compared to 2022[292]. - The Company had a reserve for excess, obsolete, and slow-moving inventories of $2,553,000 as of December 31, 2023[328]. - One offshore supplier accounted for approximately 28.0% of total expenditures for the twelve months ended December 31, 2023[325]. - Deposits paid on unfulfilled orders totaled$ 0.8 million and $0.6 million at December 31, 2023, and 2022, respectively, indicating a slight increase in advance payments[323].