Energy Focus(EFOI) - 2019 Q2 - Quarterly Report

Financial Performance - Net sales for the first six months of 2019 decreased by 36.3% to $6.3 million compared to $9.8 million in the same period of 2018, primarily due to a 53.9% decrease in military product sales[121] - Gross profit for the second quarter of 2019 was $(0.1) million, or (3.5)% of net sales, compared to $1.3 million, or 25.1% of net sales, in the second quarter of 2018[123] - The company incurred a net loss of $(73.1)% of net sales in the second quarter of 2019, compared to a net loss of (34.8)% in the second quarter of 2018[119] - For the three months ended June 30, 2019, the net loss was $2.3 million, an increase from $1.8 million for the same period in 2018[138] - For the six months ended June 30, 2019, the net loss was $5.1 million, compared to $4.2 million for the same period in 2018[139] Operating Expenses - Operating expenses for the first six months of 2019 totaled 79.0% of net sales, up from 64.3% in the same period of 2018, driven by increased restructuring costs[119] - Selling, general, and administrative expenses for the first six months of 2019 were $3.8 million, down from $5.1 million in the same period of 2018, primarily due to reduced salaries and related benefits[129] - Product development expenses decreased to $0.3 million in the second quarter of 2019 from $0.7 million in the second quarter of 2018, reflecting lower product testing expenses[126] Cash and Debt Position - The company had $2.2 million in cash and cash equivalents as of June 30, 2019, with $3.4 million in total debt[115] - As of June 30, 2019, cash and cash equivalents were approximately $2.2 million, down from $6.3 million at December 31, 2018[147] - The company had a total of $3.4 million in debt, including $1.7 million outstanding on a revolving credit facility and $1.7 million in subordinated convertible notes[140] - For the six months ended June 30, 2019, net cash used in operating activities was $5.1 million, primarily due to the net loss incurred[150] Strategic Actions and Future Outlook - The company continues to evaluate strategic options to achieve profitability and plans to pursue additional external funding sources[116] - The company continues to evaluate strategic options to achieve a profitable business model and maximize shareholder value[143] - Restructuring actions included the elimination of twelve positions and resulted in severance charges of $0.2 million during the first half of 2019[131] - The company faces substantial doubt about its ability to continue as a going concern due to ongoing losses and accumulated deficits[142] Sales Performance - Military product sales for the second quarter of 2019 decreased by 56.8% to $951,000 compared to $2.2 million in the second quarter of 2018[120] - Sales to the primary distributor for the U.S. Navy accounted for approximately 17% of net sales for the six months ended June 30, 2019[164] Lease Liabilities - The company recognized additional operating lease liabilities of approximately $2.9 million upon adopting new lease accounting standards[160] Inventory Commitments - As of June 30, 2019, the company had approximately $0.9 million in outstanding purchase commitments for inventory[154]