Energy Focus(EFOI) - 2019 Q1 - Quarterly Report

Financial Performance - Net sales for the first quarter of 2019 were $3.2 million, a decrease of 31.8% compared to $4.7 million in the first quarter of 2018, primarily due to a 51.3% decline in military product sales [121]. - Gross profit for the first quarter of 2019 was $0.1 million, or 3.1% of net sales, down from $0.8 million, or 17.5% of net sales in the same period of 2018, reflecting unfavorable manufacturing variances [122]. - Operating expenses for the first quarter of 2019 totaled $2.9 million, representing 91.3% of net sales, compared to 69.2% in the first quarter of 2018 [119]. - The net loss for the first quarter of 2019 was $2.9 million, an increase from a net loss of $2.4 million in the first quarter of 2018, primarily due to lower gross profit [137]. - The company experienced a 10.1% decrease in commercial product sales for the first quarter of 2019 compared to the same period in 2018, attributed to fluctuations in project timing and size [121]. Cash and Debt Position - As of March 31, 2019, the company had $3.9 million in cash and cash equivalents and $3.4 million in total debt, including $1.7 million in subordinated convertible notes [115]. - As of March 31, 2019, the company's cash and cash equivalents were approximately $3.9 million, down from $6.3 million at December 31, 2018 [145]. - Net cash used in operating activities for the three months ended March 31, 2019 was $3.6 million, primarily due to a net loss of $2.9 million [148]. - The company reported net cash provided by financing activities of $1.1 million for the three months ended March 31, 2019, mainly from $1.7 million in proceeds from subordinated convertible notes [152]. - The company has an accumulated deficit of $120.4 million as of March 31, 2019, raising substantial doubt about its ability to continue as a going concern [138]. Restructuring and Future Plans - Restructuring actions taken in 2019 included the elimination of 12 positions and the closure of offices in San Jose, California, and Taipei, Taiwan, incurring additional charges of $0.1 million [115]. - Future plans include developing new technologies and pursuing external funding sources to achieve profitability and expand the customer base [140]. - The company is exploring financing options, including traditional and non-traditional investment capital, as well as potential equity or debt instruments [141]. - The company anticipates that its plans for additional financing and restructuring will mitigate substantial doubt about its ability to continue as a going concern [144]. Inventory and Sales - Approximately $2.5 million in outstanding purchase commitments for inventory were reported as of March 31, 2019, with $1.9 million expected to ship in Q2 2019 [152]. - Sales to the primary distributor for the U.S. Navy accounted for approximately 22% of net sales for the three months ended March 31, 2019 [160]. - Total sales of products for the U.S. Navy comprised approximately 32% of net sales for the same period [160]. Lease and Investment Activities - The company recognized additional operating lease liabilities of approximately $2.9 million upon adopting new lease accounting standards [157]. - Net cash used in investing activities was $4 thousand for the three months ended March 31, 2019, primarily for tooling purchases [150]. - The company had a net loss of $2.4 million for the three months ended March 31, 2018, with net cash used in operating activities of $0.7 million [149].