efoi-20260630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from _____________ to _____________

Commission file number 001-36583

ENERGY FOCUS, INC.

(Exact name of registrant as specified in its charter)


Delaware						94-3021850
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

32000 Aurora Road, Suite B Solon, OH
(Address of principal executive offices)

44139
(Zip Code)
(Registrant’s telephone number, including area code): (440) 715-1300

None
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	EFOI	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The number of outstanding shares of the registrant’s common stock, $0.0001 par value, as of August 11, 2026 was 6,369,222.

TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION
			Page
ITEM 1.	FINANCIAL STATEMENTS
	a.	Condensed Consolidated Balance Sheets as of June 30, 2026 (Unaudited) and December 31, 2025	4
	b.	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025 (Unaudited)	6

	c.	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2026 and 2025 (Unaudited)	7
	d.	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2026 and 2025 (Unaudited)	8
	e.	Notes to the Condensed Consolidated Financial Statements (Unaudited)	10
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		26
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		34
ITEM 4.	CONTROLS AND PROCEDURES		34

PART II - OTHER INFORMATION

ITEM 6.	EXHIBITS		35
	SIGNATURES		38

PART I - FINANCIAL INFORMATION

Forward-looking statements

Unless the context otherwise requires, all references to “Energy Focus,” “we,” “us,” “our,” “our company,” or “the Company” refer to Energy Focus, Inc., a Delaware corporation, and its consolidated subsidiary for the applicable periods, considered as a single enterprise.

This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Quarterly Report and include statements regarding our intentions, beliefs, or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, capital expenditures, and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made in light of the information currently available to us, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods.

We believe that important factors that could cause our actual results to differ materially from forward-looking statements include, but are not limited to, the risks and uncertainties outlined under “Risk Factors” under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 and other matters described in this Quarterly Report and our other filings with the Securities and Exchange Commission generally. Some of these factors include:

•our need for and ability to obtain additional financing in the near term, on acceptable terms or at all, to continue our operations;

•our ability to maintain compliance with the continued listing standards of The Nasdaq Stock Market (“Nasdaq”);

•our ability to continue as a going concern for a reasonable period of time;

•our ability to realize synergies with our strategic investor;

•instability in the U.S. and global economies and business interruptions experienced by us, our customers and our suppliers;

•the competitiveness and market acceptance of our light-emitting diode (“LED”) lighting and control technologies and products;

•our ability to compete effectively against companies with lower prices or cost structures, greater resources, or more rapid development capabilities, and new competitors in our target markets;

•our ability to extend our product portfolio into new applications and end markets;

•our ability to increase demand in our targeted markets and to manage sales cycles that are difficult to predict and may span several quarters;

•the timing of large customer orders, significant expenses and fluctuations between demand and capacity as we manage inventory and invest in growth opportunities;

•our ability to successfully scale our network of sales representatives, agents, distributors and other channel partners to compete with the sales reach of larger, established competitors;

•our ability to implement plans to increase sales and control expenses;

•our reliance on a limited number of customers for a significant portion of our revenue, and our ability to maintain or grow such sales levels;

•our ability to add new customers to reduce customer concentration;

•our ability to attract and retain a new chief financial officer;

•our ability to manage the size of our workforce while continuing to attract, develop and retain qualified personnel, and to do so in a timely manner;

•our ability to diversify our reliance on a limited number of third-party suppliers and development partners, our ability to manage third-party product development and obtain critical components and finished products on acceptable terms and of acceptable quality despite ongoing global supply chain challenges, and the impact of our fluctuating demand on the stability of such suppliers;

•our ability to timely, efficiently and cost-effectively transport products from our third-party suppliers by ocean marine and other logistics channels despite global supply chain and logistics disruptions;

•the impact of any type of legal inquiry, claim or dispute;

•the macro-economic conditions, including rising interest rates and recessionary trends, in the United States and in other markets in which we operate or secure products, which could affect our ability to obtain raw materials, component parts, freight, energy, labor, and sourced finished goods in a timely and cost-effective manner;

•our dependence on military maritime customers and on the levels and timing of government funding available to such customers, as well as the funding resources of our other customers in the public sector and commercial markets;

•business interruptions resulting from geopolitical actions such as war and terrorism, natural disasters, including earthquakes, typhoons, floods and fires, or from health epidemics or pandemics or other contagious outbreaks;

•our ability to respond to new lighting and control technologies and market trends;

•our ability to fulfill our warranty obligations with safe and reliable products;

•any delays we may encounter in making new products available or fulfilling customer specifications;

•any flaws or defects in our products or in the manner in which they are used or installed;

•our ability to protect our intellectual property rights and other confidential information, and manage infringement claims by others;

•our compliance with government contracting laws and regulations, through both direct and indirect sale channels, as well as other laws, such as those relating to the environment and health and safety;

•risks inherent in international markets, such as economic and political uncertainty, changing regulatory and tax requirements and currency fluctuations, including tariffs and other potential barriers to international trade;

•the impact of recently imposed or potential future global trade policies, including tariffs, could increase costs and disrupt our supply chain, adversely affecting our operations and profitability; and

•our ability to maintain effective internal controls and otherwise comply with our obligations as a public company.

In light of the foregoing, we caution you not to place undue reliance on our forward-looking statements. Any forward-looking statement that we make in this Quarterly Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments, except as required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

Energy Focus®, Intellitube®, and RedCap® are our registered trademarks. We may also refer to trademarks of other corporations and organizations in this document.

ITEM 1. FINANCIAL STATEMENTS

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	June 30, 2026		December 31, 2025
	(Unaudited)
ASSETS
Current assets:
Cash	$	1,096	$	1,064
Trade accounts receivable, less allowances of $184 and $33, respectively	2,563		526

Inventories, net	2,771		2,930
Prepayments to vendors	693		3
Prepaid and other current assets	274		126

Total current assets	7,397		4,649

Property and equipment, net	81		97
Operating lease, right-of-use asset	143		207
Advance for investment in joint venture	522		156
Total assets	$	8,143	$	5,109

LIABILITIES
Current liabilities:
Accounts payable	$	181	$	158
Accounts payable - related party	3,200		386
Accrued liabilities	158		56
Accrued legal and professional fees	72		44
Accrued payroll and related benefits	64		47
Accrued sales commissions	1		1
Accrued warranty reserve	63		91

Operating lease liabilities	151		139
Short-term borrowings	911		—
Total current liabilities	4,801		922

(continued on the next page)

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	June 30, 2026		December 31, 2025
	(Unaudited)


Operating lease liabilities, net of current portion	—		78




Total liabilities	4,801		1,000

STOCKHOLDERS' EQUITY
Preferred stock, par value $0.0001 per share:
Authorized: 5,000,000 shares (3,300,000 designated as Series A Convertible Preferred Stock) as of June 30, 2026 and December 31, 2025
Issued and outstanding: 876,447 as of June 30, 2026 and December 31, 2025	—		—
Common stock, par value $0.0001 per share:
Authorized: 50,000,000 shares as of June 30, 2026 and December 31, 2025
Issued and outstanding: 6,369,222 as of June 30, 2026 and 6,306,433 as of December 31, 2025	1		1
Additional paid-in capital	160,285		160,035
Accumulated other comprehensive loss	(3)		(3)
Accumulated deficit	(156,941)		(155,924)
Total stockholders' equity	3,342		4,109
Total liabilities and stockholders' equity	$	8,143	$	5,109

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Net sales	$	3,749	$	1,143	$	4,698	$	1,759
Cost of sales	4,004		996		4,732		1,418
Gross profit (loss)	(255)		147		(34)		341

Operating expenses:
Product development	84		74		160		124
Selling, general, and administrative	529		297		815		709

Total operating expenses	613		371		975		833
Loss from operations	(868)		(224)		(1,009)		(492)

Other expenses (income):
Interest expense	5		—		5		—
Interest income	(3)		(1)		(4)		(1)




Other expenses	—		8		—		8

Loss from operations before income taxes	(870)		(231)		(1,010)		(499)
Provision for income taxes	7		—		7		—
Net loss	$	(877)	$	(231)	$	(1,017)	$	(499)

Comprehensive loss	$	(877)	$	(231)	$	(1,017)	$	(499)

Net loss per common share - basic and diluted
Net loss	$	(0.14)	$	(0.04)	$	(0.16)	$	(0.09)

Weighted average shares of common stock outstanding:
Basic and diluted	6,327		5,379		6,317		5,323

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


	Preferred Stock			Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount

Balance at December 31, 2025	876	$	—	6,306	$	1		$	160,035	$	(3)	$	(155,924)	$	4,109

Net change in shares related to stock-based compensation	—	—		(3)	—			—		—		—		—
Net loss for the three months ended March 31, 2026	—	—		—	—			—		—		(140)		(140)
Balance at March 31, 2026	876	$	—	6,303	$	1		$	160,035	$	(3)	$	(156,064)	$	3,969
Issuance of common stock	—	—		66	—			250		—		—		250

Net loss for the three months ended June 30, 2026	—	—		—	—			—		—		(877)		(877)
Balance at June 30, 2026	876	$	—	6,369	$	1		$	160,285	$	(3)	$	(156,941)	$	3,342


	Preferred Stock			Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount

Balance at December 31, 2024	876	$	—	5,261	$	1		$	157,814	$	(3)	$	(154,897)	$	2,915
Issuance of common stock	—	—		103	—			200		—		—		200
Stock-based compensation	—	—		—	—			(4)		—		—		(4)
Net loss for the three months ended March 31, 2025	—	—		—	—			—		—		(268)		(268)
Balance at March 31, 2025	876	$	—	5,364	$	1		$	158,010	$	(3)	$	(155,165)	$	2,843
Issuance of common stock	—	—		111	—			200		—		—		200
Net loss for the three months ended June 30, 2025	—	—		—	—			—		—		(231)		(231)
Balance at June 30, 2025	876	$	—	5,475	$	1		$	158,210	$	(3)	$	(155,396)	$	2,812

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Cash flows from operating activities:
Net loss	$	(877)	$	(231)	$	(1,017)	$	(499)
Adjustments to reconcile net loss to net cash used in operating activities:
Foreign exchange loss (gain)	5		(45)		11		(45)
Loss on settlement of vendor obligations	—		8		—		8


Depreciation	8		10		16		19
Stock-based compensation	—		—		—		(4)
Provision for credit losses and sales returns	169		71		152		64
Provision for slow-moving and obsolete inventories	424		44		497		58
Provision for warranties	1		3		(28)		(30)

Changes in operating assets and liabilities:
Accounts receivable	(2,250)		(414)		(2,192)		(191)
Inventories	499		85		(338)		101
Prepayments to vendors	(678)		197		(690)		(16)
Prepaid and other assets	(63)		2		(148)		18
Accounts payable	19		—		23		(63)
Accounts payable - related party	1,891		31		2,819		74
Accrued and other liabilities	35		26		147		21
Right of use assets and lease liabilities	(2)		(2)		(2)		(2)
Total adjustments	58		16		267		12
Net cash used in operating activities	(819)		(215)		(750)		(487)
Cash flows from investing activities:
Acquisitions of property and equipment	—		—		—		(5)
Advance for investment in potential joint venture	(380)		—		(380)		—
Net cash used in investing activities	(380)		—		(380)		(5)

(continued on next page)

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Cash flows from financing activities:
Issuance of common stock	250		200		250		400
Proceeds from short-term borrowings	922		—		922		—
Net cash provided by financing activities	1,172		200		1,172		400

Effect of exchange rate changes on cash	(3)		26		(10)		26

Net increase (decrease) in cash	(30)		11		32		(66)
Cash, beginning of period	1,126		488		1,064		565
Cash, end of period	$	1,096	$	499	$	1,096	$	499

Non-cash investing and financing activities:
Acquisition of property and equipment through accounts payable	—		34		—		39

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

NOTE 1. NATURE OF OPERATIONS

Energy Focus, Inc. (the “Company”) engages primarily in the design, development, manufacturing, marketing and sale of energy-efficient lighting systems and controls. We develop, market and sell high quality light-emitting diode (“LED”) lighting and controls products in the commercial market and military maritime market (“MMM”). Our mission is to enable our customers to run their facilities with greater energy efficiency, productivity, and increased human health and wellness through advanced LED retrofit solutions. Our goal is to be the human wellness lighting and LED technology and market leader for the most demanding applications where performance, quality, value, environmental impact and health are considered paramount. We specialize in LED lighting retrofit by replacing fluorescent, high-intensity discharge lighting and other types of lamps in institutional buildings for primarily indoor lighting applications with our innovative, high-quality commercial and military-grade tubular LED (“TLED”) products, as well as other LED and lighting control products for commercial applications. We are also evaluating adjacent technologies, including Gallium Nitride (“GaN”) based power supplies and additional market opportunities for energy solution products that support sustainability in our existing channels.

NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The significant accounting policies of our Company, which are summarized below, are consistent with accounting principles generally accepted in the United States (“U.S. GAAP”) and reflect practices appropriate to the business in which we operate. Unless indicated otherwise, the information in the Notes to the Condensed Consolidated Financial Statements relates to our operations.

We have prepared the accompanying financial data for the three and six months ended June 30, 2026 and 2025 pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The interim results for the period ended June 30, 2026 are not necessarily indicative of the results that may be expected through December 31, 2026. All intercompany accounts and transactions are eliminated upon consolidation. The accompanying financial data and information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Annual Report”). The Condensed Consolidated Balance Sheet as of December 31, 2025 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly our Condensed Consolidated Financial Statements as of June 30, 2026 and December 31, 2025, and for the three and six months ended June 30, 2026 and 2025.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

Going Concern and Nasdaq Continued Listing Requirements Compliance

Due to our financial performance as of June 30, 2026 and December 31, 2025, including net losses of $1.0 million for the six months ended June 30, 2026 and $1.0 million for the year ended December 31, 2025, and cash used in operating activities of $0.8 million for the six months ended June 30, 2026 and $1.4 million for the year ended December 31, 2025, we determined that substantial doubt about our ability to continue as a going concern continues to exist as of June 30, 2026. As a result of restructuring actions and initiatives, we have tailored our operating expenses to be more in line with our expected sales volumes; however, we continue to incur losses and have a substantial accumulated deficit.

The Company entered into agreements relating to a yet to be formed joint venture investment in Japan, pursuant to which the Company expects to invest approximately $1.1 million in exchange for a 35% ownership interest (see Note 6). As of June 30, 2026, the carrying amount of the Company’s advance related to the joint venture investment was approximately $522 thousand. The remaining funding commitment of approximately $565 thousand is expected to be funded during project development. This additional funding requirement may further heighten the Company’s near-term liquidity needs and underscores the importance of obtaining additional capital and executing its operating plans.

Additionally, global supply chain and logistics constraints and the ongoing evolution of international trade policies are impacting our inventory purchasing strategy, as we seek to manage both shortages of available components and longer lead times in obtaining components while pursuing cost-effectiveness measures to enhance profitability. As a result, we will continue to review and pursue selected external funding sources to ensure adequate financial resources to execute across the timelines required to achieve these objectives including, but not limited to, the following:

•obtaining financing from traditional or non-traditional investment capital organizations or individuals;

•obtaining funding from the sale of our common stock or other equity or debt instruments; and

•obtaining debt financing with lending terms that more closely match our business model and capital needs.

There can be no assurance that we will obtain funding on acceptable terms, in a timely fashion, or at all. Obtaining additional funding contains risks, including:

•additional equity financing may not be available to us on satisfactory terms, particularly in light of the current price of our common stock, and any equity we are able to issue could lead to dilution for current stockholders and have rights, preferences and privileges senior to our common stock;

•loans or other debt instruments may have terms or conditions, such as interest rate, restrictive covenants, conversion features, refinancing demands, and control or revocation provisions, which are not acceptable to management or the Company’s Board of Directors; and

•the current environment in capital markets and volatile interest rates, combined with our capital constraints, may prevent us from being able to obtain adequate debt financing.

Considering both quantitative and qualitative information, we continue to pursue plans to ensure adequate external funding, timely re-organizational actions, management of current financial position and liquid resources, obligations due or anticipated within the next year, development and implementation of an excess inventory reduction plan, plans and initiatives in our research and development, product development and sales and marketing, and development of potential channel partnerships. However, because these plans depend on future events and circumstances that are not entirely within our control, they cannot be considered probable of effectively mitigating the substantial doubt about our ability to continue as a going concern.

Use of estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts in our financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may vary from the estimates. Estimates include, but are not limited to, the establishment of credit losses allowance for accounts receivable, sales returns, inventory obsolescence and warranty claims, the useful lives of property and equipment, valuation allowance for deferred tax assets, and stock-based compensation. In addition, estimates and assumptions associated with the determination of the fair value of financial instruments and evaluation of long-lived assets for impairment require considerable judgment. Actual results could differ from those estimates and such differences could be material.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

Revenue

Net sales include revenues from sales of products and shipping and handling charges, and net of estimates for product returns. Revenue is measured at the amount of consideration we expect to receive in exchange for the transferred products. We recognize revenue at the point in time when we transfer the promised products to the customer and the customer obtains control over the products. Distributors’ obligations to us are not contingent upon the resale of our products. We recognize revenue for shipping and handling charges at the time the goods are shipped to the customer, and the costs of outbound freight are included in cost of sales. We provide for product returns based on historical return rates. While we incur costs for sales commissions to our sales employees and outside agents, we recognize commission costs concurrent with the related revenue, as the amortization period is less than one year. We do not incur any other incremental costs to obtain contracts with our customers. Our product warranties are assurance-type warranties, which promise the customer that the products are as specified in the contract. Therefore, the product warranties are not a separate performance obligation and are accounted for as described below. Sales taxes assessed by governmental authorities and collected by us are accounted for on a net basis and are excluded from net sales.

We also generate revenue from services. Service revenue primarily consists of system configuration and setup services performed in connection with customer orders. These services are typically completed at or near the time of product shipment, are distinct from the related product sales and are accounted for as separate performance obligations, and revenue is recognized at a point in time when the service is rendered.

The following table provides a disaggregation of product and service net sales for the periods presented (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Net sales:
Commercial products	$	2,254	$	773	$	2,572	$	976
MMM products	1,491		348		2,119		761
Setup service	4		22		7		22
Total net sales	$	3,749	$	1,143	$	4,698	$	1,759

Accounts Receivable

Our trade accounts receivable consists of amounts billed to and currently due from customers. In the normal course of business, we extend unsecured credit to our customers related to the sale of our products. Credit is extended to customers based on an evaluation of the customer’s financial condition and the amounts due are stated at their estimated net realizable value. We maintain allowances for sales returns and credit losses to provide for the estimated amount of accounts receivable that will not be collected. The Company has determined that accounts receivable fall within the scope of the Current Expected Credit Losses (“CECL”) analysis in accordance with Accounting Standards Codification (“ASC”) Topic 326. The Company decided to use the historical loss rate method of valuing its reserve for trade receivables. The reserve for credit losses is reviewed and assessed for adequacy on a quarterly basis. We take into consideration (1) any circumstances of which we are aware of a customer's inability to meet its financial obligations and (2) our judgments as to prevailing economic conditions in the industry and their impact on our customers. The Company has elected the practical expedient in Accounting Standards Update (“ASU”) No. 2025‑05 to assume that current economic conditions as of the balance sheet date remain unchanged over the remaining life of current trade accounts receivable when developing reasonable and supportable forecasts of expected credit losses. If circumstances change, and the financial condition of our customers is adversely affected and they are unable to meet their financial obligations, we may need to take additional allowances, which would result in an increase in our operating expenses. We do not generally require collateral from our customers.

Our standard payment terms with customers are net 30 days to 120 days from the date of shipment, and we do not generally offer extended payment terms to our customers, but exceptions are made in some cases for major customers or with particular orders. Accordingly, we do not adjust trade accounts receivable for the effects of financing, as we expect the period between the transfer of product to the customer and the receipt of payment from the customer to be in line with our standard payment terms.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

Pursuant to ASC 606, Revenue Recognition, contract assets and contract liabilities as of the beginning and ending of the reporting periods must be disclosed. Below is the breakout of the Company’s contract assets for such periods (in thousands):



	June 30, 2026		December 31, 2025		January 1, 2025
Gross Accounts Receivable	$	2,747	$	559	$	819
Less: Allowance for Credit Losses	$	(184)	$	(33)	$	(15)
Net Accounts Receivable	$	2,563	$	526	$	804

Activity related to our allowance for credit losses for the three and six months ended June 30, 2026 and 2025 was as follows (in thousands):


Allowance for credit losses as of December 31, 2025	$	(33)
Reduction of reserve for credit losses for the three months ended March 31, 2026	16
Allowance for credit losses as of March 31, 2026	(17)
Increase in reserve for credit losses for the three months ended June 30, 2026	(167)
Allowance for credit losses as of June 30, 2026	$	(184)


Allowance for credit losses as of December 31, 2024	$	(15)
Reduction of reserve for credit losses for the three months ended March 31, 2025	2
Allowance for credit losses as of March 31, 2025	(13)
Increase in reserve for credit losses for the three months ended June 30, 2025	(71)
Allowance for credit losses as of June 30, 2025	$	(84)

Geographic information

All of our long-lived fixed assets are located in the United States. The geographic location of our net sales is based on the destination to which our products are shipped. The following table presents net sales by country for the periods presented:


	Three months ended June 30,				Six months ended June 30,
Net sales by country:	2026		2025		2026		2025
United States	$	1,268	$	579	$	2,217	$	1,195
Australia	2,481		—		2,481		—
Taiwan	—		548		—		548
Other	—		16		—		16
Total net sales	$	3,749	$	1,143	$	4,698	$	1,759

Net loss per share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted loss per share gives effect to all dilutive potential shares of common stock outstanding during the period. Dilutive potential shares of common stock consist of incremental shares upon the exercise of stock options, warrants and convertible securities, unless the effect would be anti-dilutive.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

The following table presents a reconciliation of basic and diluted loss per share computations (in thousands, except per share amounts):


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Numerator:
Net loss	$	(877)	$	(231)	$	(1,017)	$	(499)

Denominator:
Basic and diluted weighted average of common shares outstanding	6,327		5,379		6,317		5,323

As a result of the net loss we incurred for the three and six months ended June 30, 2026 and 2025, convertible preferred stock representing approximately 25 thousand shares of common stock were excluded from the basic loss and diluted loss per share calculation because their inclusion would have been anti-dilutive.

Product warranties

We warrant our products and controls for periods generally ranging from one to ten years, depending on product type and customer application. One product was sold in 2020 with a twenty-year warranty. Warranty settlement costs consist of actual amounts expensed for warranty, which are largely a result of the cost of replacement products or rework services provided to our customers. A liability for the estimated future costs under product warranties is maintained for products under warranty based on the actual claims incurred to date and the estimated nature, frequency, and costs of future claims. These estimates are inherently uncertain, and changes to our historical or projected experience may cause material changes to our warranty reserves in the future. We continuously review the assumptions related to the adequacy of our warranty reserve, including product failure rates, and make adjustments to the existing warranty liability when there are changes to these estimates or the underlying replacement costs, or the warranty period expires.

The following table summarizes warranty activity for the periods presented (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Balance at beginning of period	$	62	$	85	$	91	$	118
Warranty accruals for current period sales	1		3		1		4
Adjustments to existing warranty reserves	—		—		(29)		(34)

Accrued warranty reserve at end of period	$	63	$	88	$	63	$	88

Foreign Currency Transactions

The functional currency of the Company and its Taiwan branch is the U.S. dollar.

Transactions denominated in currencies other than the U.S. dollar are remeasured into U.S. dollars using exchange rates in effect at the time of the transaction. Monetary assets and liabilities denominated in foreign currencies are remeasured at period-end exchange rates. Foreign currency transaction gains and losses are recognized in earnings in the period in which they arise and are included in operating expenses, net, depending on the nature of the underlying transaction.

The Company recognized foreign currency transaction losses of $7 thousand and gains of $45 thousand for the three months ended June 30, 2026 and 2025, respectively, and losses of $15 thousand and gains of $45 thousand for the six months ended June 30, 2026 and 2025, respectively, which are included as a component of selling, general and administrative expenses in the accompanying consolidated statements of operations.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

Financial Instruments

Fair Value Measurements

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below. We classify the inputs used to measure fair value into the following hierarchy:


Level 1			Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2			Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3			Unobservable inputs for the asset or liability.

The carrying amounts of certain financial instruments including cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short maturities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, we perform a detailed analysis of the assets and liabilities whose fair value is measured on a recurring basis. We review and reassess the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next related to the observability of inputs in a fair value measurement may result in a reclassification between fair value hierarchy levels. There were no reclassifications for all periods presented.

Certain risks and concentrations

We have certain customers whose net sales individually represented 10% or more of our total net sales, or whose net trade accounts receivable balance individually represented 10% or more of our total net trade accounts receivable; we have certain suppliers, which individually represent 10% or more of our total purchases, or whose trade accounts payable balance individually represented 10% or more of our total trade accounts payable balance, as follows:

Total net sales were concentrated among a few customers for the three and six months ended June 30, 2026 and 2025 as follows:


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Customer A	11.0	%	12.8	%	12.2	%	17.8	%
Customer B	—	%	—	%	—	%	12.0	%
Customer C	—	%	10.7	%	—	%	13.1	%
Customer D (located in Taiwan)	—	%	50.3	%	—	%	32.7	%
Customer E (located in Australia)	66.2	%	—	%	52.8	%	—	%

As of June 30, 2026 and December 31, 2025, our trade accounts receivables were concentrated among a few customers as follows:


	As of June 30, 2026		As of December 31, 2025
Customer A	14.1	%	15.9	%
Customer D (located in Taiwan)	—	%	21.7	%
Customer E (located in Australia)	63.4	%	—	%
Customer F	—	%	12.0	%
Customer G	—	%	19.5	%

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

We require substantial amounts of purchased materials from selected vendors. We may purchase some specific materials from a single vendor. The availability and costs of materials may be subject to change due to, among other things, new laws or regulations, suppliers’ allocation to other purchasers, interruptions in production by suppliers, and changes in exchange rates, tariff and worldwide price and demand levels. Our inability to obtain adequate supplies of materials for our products at favorable prices could have a material adverse effect on our business, financial position, or results of operations by decreasing our profit margins and by hindering our ability to deliver products to our customers on a timely basis. Additionally, certain vendors require advance deposits prior to the fulfillment of orders. Deposits paid on unfulfilled orders totaled $693 thousand and $3 thousand as of June 30, 2026 and December 31, 2025, respectively.

We have certain vendors who individually represented 10% or more of our total expenditures, or whose net trade accounts payable balance individually represented 10% or more of our total net trade accounts payable.

Total expenditures were concentrated among a few suppliers for the three and six months ended June 30, 2026 and 2025 as follows:


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Supplier A	—	%	—	%	—	%	10.6	%
Supplier B	—	%	30.7	%	—	%	14.8	%
Supplier C, related party*	77.0	%	—	%	68.4	%	—	%
Suppliers D and E, related parties*	6.6	%	15.2	%	12.6	%	16.7	%

* See Note 12 “Related Party Transactions”

As of June 30, 2026 and December 31, 2025, our trade accounts payable were concentrated among a few suppliers as follows:


	As of June 30, 2026		As of December 31, 2025
Supplier C, related party*	85.2	%	—	%
Supplier E, related party*	9.4	%	70.9	%
Supplier F	—	%	10.8	%

* See Note 12 “Related Party Transactions”

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

Recent Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. The standard requires public business entities to disclose additional disaggregated information about certain income statement expense captions, including the nature of expenses such as employee compensation, depreciation, and other significant expense categories. The amendments are effective for fiscal years beginning after December 15, 2026, and may be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures.

Recently adopted accounting standards

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide a practical expedient for estimating expected credit losses for certain current accounts receivable and contract assets arising from revenue transactions. The Company adopted this standard as of January 1, 2026, and the adoption did not have a material impact on its consolidated financial statements and related disclosures.

Other accounting standards that have been issued by FASB that do not require adoption until a future date, other than ASU 2024-03, are not expected to have a material impact on the consolidated financial statements upon adoption. We do not discuss recent standards that are not anticipated to have an impact on or are unrelated to our consolidated financial condition, results of operations, cash flows or disclosures.

NOTE 3. INVENTORIES

Inventories are stated at the lower of standard cost (which approximates actual cost determined using the first-in, first-out cost method) or net realizable value, and consist of the following (in thousands):


	June 30, 2026		December 31, 2025
Raw materials	$	734	$	930
Finished goods	3,125		2,591
Reserves for excess, obsolete, and slow-moving inventories	(1,088)		(591)
Inventories, net	$	2,771	$	2,930

The following is a roll-forward of the reserves for excess, obsolete, and slow-moving inventories (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Beginning balance	$	(664)	$	(361)	$	(591)	$	(347)
Accrual	(640)		(78)		(730)		(139)
Reduction due to inventory sold	216		34		233		81
Reserves for excess, obsolete, and slow-moving inventories	$	(1,088)	$	(405)	$	(1,088)	$	(405)

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets and consist of the following (in thousands):


	June 30, 2026		December 31, 2025
Equipment (useful life 3 to 15 years)	$	496	$	496
Tooling (useful life 2 to 5 years)	210		210
Vehicles (useful life 5 years)	41		41


Leasehold improvements (the shorter of useful life or lease life)	124		124


Property and equipment at cost	871		871
Less: accumulated depreciation	(790)		(774)
Property and equipment, net	$	81	$	97

Depreciation expense was $8 thousand and $10 thousand for the three months ended June 30, 2026 and 2025, respectively. Depreciation expense was $16 thousand and $19 thousand for the six months ended June 30, 2026 and 2025, respectively.

NOTE 5. LEASES

The Company leases certain equipment, manufacturing, warehouse and office space under non-cancellable operating leases with expirations through 2027 under which it is responsible for related maintenance, taxes and insurance. On October 3, 2025, the Company amended the lease to reduce the rentable area, from 29,692 square feet to 25,392 square feet, and rent expenses were decreased in proportion to the reduction in rentable square feet. The Company recorded a reduction to the right of use asset and lease liability of approximately $40 thousand using an incremental borrowing rate of approximately 13.64% and the Company recognized a gain on the lease modification of $2 thousand. The weighted average remaining lease term for operating leases is 1.0 year.

Components of the operating lease costs recognized in net loss were as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Operating lease cost

Lease cost	$	38	$	44	$	76	$	92
Operating lease cost, net	$	38	$	44	$	76	$	92

Supplemental balance sheet information related to the Company’s operating leases as of June 30, 2026 and December 31, 2025 is as follows (in thousands):


	June 30, 2026		December 31, 2025
Operating Leases
Operating lease right-of-use assets	$	143	$	207
Operating lease liabilities	151		217

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

The maturities of lease liabilities under operating leases by years on June 30, 2026 are as follows (in thousands):


	Operating Leases
July 2026 to June 2027	$	160

Total future undiscounted lease payments	160
Less imputed interest	(9)
Total lease obligations	$	151

Supplemental cash flow information related to leases for the three and six months ended June 30, 2026 and 2025, was as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Supplemental Cash Flow Information:
Cash paid, net, for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	38	$	45	$	76	$	90

NOTE 6. ADVANCE FOR INVESTMENT IN JOINT VENTURE

The Company's advance had a carrying amount of approximately $522 thousand as of June 30, 2026 in connection with a proposed joint venture arrangement with Japan’s Meihodo Co., Ltd. and Euka Power Japan Co., Ltd., neither of which is a related party (see Note 9, "May 2026 Private Placement," for additional information).

The amount represents a refundable investment commitment (refundable if the transaction is not completed, subject to the terms of the arrangement) and is recorded as an advance for investment at cost.

As of June 30, 2026, the Company had not obtained ownership interests, voting rights, or the ability to participate in the management or governance of the investee. Accordingly, the advance continues to be recorded as an advance for investment in a joint venture. The transaction remains subject to customary closing conditions, and the ownership transfer has not yet been completed.

The joint venture is intended to support the Company’s Energy Storage Systems (“ESS”) initiatives in the Japan power market. Upon completion of the transaction, the Company will assess its ownership interest and determine the appropriate accounting model, including whether the investment will be accounted for under the equity method.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

NOTE 7. DEBT

Short-term borrowings

Short-term borrowings consisted of the following (in thousands):


Short-term borrowings	June 30, 2026		December 31, 2025
First Commercial Bank	$	911	$	—

On April 27, 2026, the Company's Taiwan branch entered into a short-term borrowing arrangement with First Commercial Bank and received loan proceeds of approximately $0.9 million (New Taiwan Dollars (“NTD”) 29.0 million), which represents the full borrowing capacity available under the facility. The borrowing bears interest at 3.015% per annum and matures on October 27, 2026. The borrowing is unsecured and is not subject to any financial covenants. The proceeds were used for general working capital purposes.

NOTE 8. INCOME TAXES

As a result of the operating loss incurred during each of the three and six months ended June 30, 2026 and 2025, and after the application of the annual limitation set forth under Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”), it was not necessary to record a provision for U.S. Federal income tax. During the second quarter of 2026, the Company recognized approximately $7 thousand of Taiwan corporate income tax related to the 2025 tax year.

As of June 30, 2026 and December 31, 2025, we had a full valuation allowance recorded against our deferred tax assets.

The valuation allowance was recorded due to uncertainties related to our ability to realize the deferred tax assets, primarily consisting of certain net operating loss carry-forwards. The valuation allowance is based on management’s estimates of taxable income by jurisdiction and the periods over which the deferred tax assets will be recoverable.

As of December 31, 2025, we had a net operating loss carry-forward of approximately $141.2 million for federal income tax purposes ($28.3 million for state and local income tax purposes). However, due to changes in our capital structure, approximately $86.8 million of the $141.2 million is available to offset future taxable income after the application of the limitations found under Section 382 of the Internal Revenue Code of 1986, as amended. As a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), net operating loss carry-forwards generated in tax years beginning after December 31, 2017 can only offset 80% of taxable income and can be carried forward indefinitely. The $1.1 million and $3.4 million in federal net operating losses generated in 2025 and 2024, respectively, will be subject to the new limitations under the Tax Act. If not utilized, the carry-forwards generated prior to December 31, 2017 of $7.3 million will begin to expire in 2026 for federal purposes and have begun to expire for state and local purposes. For a full discussion of the estimated restrictions on our utilization of net operating loss carry-forwards, please refer to Note 11, “Income Taxes,” included under Item 8, “Financial Statements and Supplementary Data,” of our 2025 Annual Report.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

NOTE 9. STOCKHOLDERS’ EQUITY

Private Placements

The Company entered into the following securities purchase agreements with certain investors and issued 65,789 and 1,002,692 shares of common stock during the six months ended June 30, 2026 and the year ended December 31, 2025, respectively.

May 2026 Private Placement

On May 29, 2026, the Company entered into a securities purchase agreement with Euka Power Japan Co., Ltd., pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 65,789 shares of the Company’s common stock, par value $0.0001 per share, for a purchase price per share of $3.80 (the “May 2026 Private Placement”).

Aggregate gross proceeds to the Company with respect to the May 2026 Private Placement were approximately $250 thousand. The May 2026 Private Placement closed on June 3, 2026.

November 2025 Private Placement

On November 26, 2025, the Company entered into a securities purchase agreement with each of its Chief Executive Officer and Principal Financial Officer, Mr. Chiao Chieh Jay Huang, and MAN-BO HOTEL CO. LTD, an affiliate entity, which is owned by the spouse of Kin-Fu Chen, the Chairman of the Company’s Board of Directors, respectively, pursuant to which the Company agreed to issue and sell in a private placement 262,009 shares of the Company’s common stock, par value $0.0001 per share to each, and in aggregate, 524,018 shares of Common Stock for a purchase price per share of $2.29 (the “November 2025 Private Placement”). The purchase price was determined by the Board of Directors to be at a premium to the Nasdaq closing price of our common stock on the date of the agreement. The Board of Directors approved the purchase price per share based on its judgment of the Company’s capital needs, market conditions, and limited financing alternatives available at the time. The Board determined this price to be reasonable and in the best interests of the Company and its shareholders. These transactions were approved by independent members of the Board of Directors.

Aggregate gross proceeds to the Company with respect to the November 2025 Private Placement were approximately $1.2 million. The November 2025 Private Placement closed on December 2, 2025.

August 2025 Private Placement

On August 15, 2025, the Company entered into a securities purchase agreement with its Chief Executive Officer, Mr. Chiao Chieh Jay Huang, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 264,550 shares of the Company’s common stock, par value $0.0001 per share, for a purchase price per share of $1.89 (the “August 2025 Private Placement”). The purchase price was determined by the Board of Directors to be at a premium to the Nasdaq closing price of our common stock on the date of the agreement. The Board of Directors approved the purchase price per share based on its judgment of the Company’s capital needs, market conditions, and limited financing alternatives available at the time. The Board determined this price to be reasonable and in the best interests of the Company and its shareholders. These transactions were approved by independent members of the Board of Directors.

Aggregate gross proceeds to the Company with respect to the August 2025 Private Placement were approximately $500 thousand. The August 2025 Private Placement closed on August 19, 2025.

June 2025 Private Placement

On June 19, 2025, the Company entered into a securities purchase agreement with its Chief Executive Officer, Mr. Chiao Chieh Jay Huang, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 110,497 shares of the Company’s common stock, par value $0.0001 per share, for a purchase price per share of $1.81 (the “June 2025 Private Placement”). The purchase price was determined by the Board of Directors to be at a premium to the Nasdaq closing price of our common stock on the date of the agreement. The Board of Directors approved the purchase price per share based on its judgment of the Company’s capital needs, market conditions, and limited financing alternatives available at the time. The Board determined this price to be reasonable and in the best interests of the Company and its shareholders. These transactions were approved by independent members of the Board of Directors.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

Aggregate gross proceeds to the Company with respect to the June 2025 Private Placement were approximately $200 thousand. The June 2025 Private Placement closed on June 23, 2025.

March 2025 Private Placement

On March 27, 2025, the Company entered into a securities purchase agreement with its Chief Executive Officer, Mr. Chiao Chieh Jay Huang, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 103,627 shares of the Company’s common stock, par value $0.0001 per share, for a purchase price per share of $1.93 (the “March 2025 Private Placement”). The purchase price was determined by the Board of Directors to be at a premium to the Nasdaq closing price of our common stock on the date of the agreement. The Board of Directors approved the purchase price per share based on its judgment of the Company’s capital needs, market conditions, and limited financing alternatives available at the time. The Board determined this price to be reasonable and in the best interests of the Company and its shareholders. These transactions were approved by independent members of the Board of Directors.

Aggregate gross proceeds to the Company in respect of the March 2025 Private Placement were approximately $200 thousand. The March 2025 Private Placement was priced higher than the closing price $1.92 of the Common Stock on the Nasdaq on the day of signing of the purchase agreement. The issuance and sale of the shares pursuant to the purchase agreement are not being registered under the Securities Act of 1933, as amended (the “Securities Act”), and were made pursuant to certain exemptions from registration, including Section 4(a)(2) of the Securities Act, in reliance on the representations and covenants of the purchaser under the purchase agreement. The March 2025 Private Placement closed on March 31, 2025.

Preferred Stock

The Series A Preferred Stock was created by the filing of a Certificate of Designation with the Secretary of State of the State of Delaware on March 29, 2019, which designated 2,000,000 shares of the Company’s preferred stock, par value $0.0001 per share, as Series A Preferred Stock (the “Original Series A Certificate of Designation”). On January 15, 2020, with prior stockholder approval, the Company amended the Certificate of Incorporation to increase the number of authorized shares of preferred stock to 5,000,000. The Original Series A Certificate of Designation was also amended on January 15, 2020, to increase the number of shares of preferred stock designated as Series A Preferred Stock to 3,300,000 (the Original Series A Certificate of Designation, as so amended, the “Series A Certificate of Designation”).

Pursuant to the Series A Certificate of Designation, each holder of outstanding shares of Series A Preferred Stock is entitled to vote with holders of outstanding shares of common stock, voting together as a single class, with respect to any and all matters presented to the stockholders of the Company for their action or consideration, except as provided by law. In any such vote, each share of Series A Preferred Stock shall entitle its holder to a number of votes equal to 1.582% of the number of shares of common stock into which such share of Series A Preferred Stock is convertible.

The Series A Preferred Stock (a) has a preference upon liquidation equal to $0.67 per share and then participates on an as-converted basis with the common stock with respect to any additional distributions, (b) shall receive any dividends declared and payable on our common stock on an as-converted basis, and (c) is convertible at the option of the holder into shares of our common stock on a 1-for-35 basis.

As of June 30, 2026 and December 31, 2025, there were 876,447 Series A Preferred Stock issued and outstanding which can be convertible into 25 thousand shares of common stock at the option of the holder.

Warrants

For the three and six months ended June 30, 2026 and the year ended December 31, 2025, no warrants were exercised.

As of June 30, 2026 and December 31, 2025, we had the following outstanding warrants:

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)


	As of June 30, 2026	As of December 31, 2025
	Number of Underlying Shares		Exercise Price	Expiration
June 2022 Warrants	384,615	384,615	$9.10	December 16, 2026
December 2021 Warrants	182,630	182,630	$24.64	June 7, 2027
	567,245	567,245

Stock-based compensation

Stock-based compensation expense is attributable to stock options and restricted stock unit awards. For all stock-based awards, we recognize expense using a straight-line amortization method.

The following table summarizes stock-based compensation expense and the impact it had on operations for the periods presented (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025


Selling, general, and administrative	—		—		—		(4)
Total stock-based compensation	$	—	$	—	$	—	$	(4)

Total unearned stock-based compensation was $1 thousand and $2 thousand as of June 30, 2026 and 2025, respectively. These costs will be charged to expense and amortized on a straight-line basis in future periods. The weighted average period over which the unearned compensation as of June 30, 2026 is expected to be recognized in approximately 0.8 years.

Stock options

For the three and six months ended June 30, 2026 and 2025, the Company did not grant any stock options.

Options outstanding under all plans have a contractual life of ten years, and vesting periods between one and four years. A summary of option activity under all outstanding stock incentive plans for the six months ended June 30, 2026 was presented as follows:


	Number of Options	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)
Balance as of December 31, 2025	1,976	$	9.91
Granted	—	—

Canceled/forfeited	—	—
Expired	—	—
Balance as of June 30, 2026	1,976	$	9.91	2.9

Vested and expected to vest as of June 30, 2026	1,976	$	9.91	2.9

Exercisable at June 30, 2026	1,714	$	11.10	2.8

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)

Restricted stock units

We are able to issue restricted stock units to certain employees and non-employee Directors under the 2020 Stock Incentive Plan (the “2020 Plan”) with vesting periods ranging from one to four years. As of June 30, 2026, the outstanding restricted stock is zero.

Fully Vested Shares

In December 2025, the Board approved and issued 43,000 fully vested shares as bonus compensation to certain employees and the Company recognized $121 thousand as stock-based compensation. For the six months ended June 30, 2026, 10,000 shares previously issued to an employee were forfeited and returned to the Company, and 7,000 fully vested shares were issued to certain employees, resulting in a net decrease of 3,000 common shares outstanding.

NOTE 10. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of June 30, 2026, we had approximately $2.0 million of outstanding purchase commitments for inventory. Approximately $1.6 million is expected to be shipped in the third quarter of 2026, with the remaining $0.4 million expected to be shipped during or after the fourth quarter of 2026. Approximately 98% of the outstanding purchase commitments were with related parties.

NOTE 11. SEGMENT INFORMATION

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (the “CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information presented at a consolidated level on a recurring basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company’s operations are organized into one operating and one reportable segment, which includes both Commercial and MMM product lines that, although discussed separately and may exhibit counter-cyclical trends, are managed and reported together.

The CODM allocates resources and assesses performance of the Company based on net income (loss), as reported on the Consolidated Statement of Operations, which is the segment measure of profit and loss that is based on U.S. GAAP, is the required segment measure.

The CODM reviews these measures (i) to evaluate the Company's operating results and the effectiveness of business strategies, and (ii) internally as benchmarks to compare the Company's performance to its competitors. Additionally, the Company believes these measures are important to evaluate the performance and profitability of our products, individually and in the aggregate.

The CODM does not review segment assets and segment expenses at a level different than what is reported in the Company's Consolidated Balance Sheet and Consolidated Statement of Operations. Additionally, the CODM regularly receives information about the Company's capital expenditures which are reported in the Company's Consolidated Statement of Cash Flows as purchase of property and equipment under investing activities.

NOTE 12. RELATED PARTY TRANSACTIONS

Purchase Transactions

The Company has purchase agreements for Uninterruptible Power Supply (“UPS”) and ESS products with Winner Technology International Limited, a related party due to its relationship with the Company’s Chief Executive Officer, Mr. Chiao Chieh Jay Huang. In addition, the Company has a purchase agreement for TLED products and spare parts and fixed assets with Sander Electronics, Inc. (located in the US), an affiliate of Sander Electronics Co. Ltd (located in Taiwan), which is a shareholder of the Company that is controlled by our Chief Executive Officer.

ENERGY FOCUS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2026

(Unaudited)


Purchase Activities
	Three months ended June 30,								Six months ended June 30,
Name of related party	2026		% of purchases		2025		% of purchases		2026		% of purchases		2025		% of purchases
Winner Technology International Limited	$	2,429	77.0	%	$	—	—	%	$	3,612	68.4	%	$	—	—	%
Sander Electronics, Inc.	—		—	%	131		13.7	%	—		—	%	250		12.6	%
Sander Electronics Co. Ltd	207		6.6	%	15		1.5	%	668		12.6	%	81		4.1	%
	$	2,636	83.6	%	$	146	15.2	%	$	4,280	81.0	%	$	331	16.7	%


Accounts Payable
Name of related party	As of June 30, 2026		% of accounts payable		As of December 31, 2025		% of accounts payable
Winner Technology International Limited	$	2,881	85.2	%	$	—	—	%

Sander Electronics Co. Ltd	319		9.4	%	386		70.9	%
	$	3,200	94.6	%	$	386	70.9	%

Related Party Risk Concentration

The Company’s business operations involve significant related party relationships that create concentration risks. As of June 30, 2026, related parties represented 95% of total accounts payable and 98% of outstanding purchase commitments. This concentration in related party suppliers, while providing certain operational benefits, creates risks regarding pricing, payment terms, supply continuity, and potential conflicts of interest. The Company has limited readily available alternative suppliers to replace the current production capacity provided by related parties. These transactions are subject to review and approval by the Company’s independent directors.

Private Placements

Please refer to Note 9 for further details on Private Placements during the six months ended June 30, 2026 and the year ended December 31, 2025.

NOTE 13. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date these condensed consolidated financial statements were available to be issued. Except as described below, the Company determined that there were no subsequent events or transactions that required recognition or disclosure in these condensed consolidated financial statements.

On July 6, 2026, the Company received a refund of approximately $184 thousand from U.S. Customs and Border Protection ("CBP") related to customs duties previously paid. As the refund was received subsequent to June 30, 2026, it has not been recognized in the accompanying condensed consolidated financial statements. The Company expects to record the refund in the third quarter of 2026 as a reduction of customs duty expense within cost of sales.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included in Part I, Item 1, “Financial Statements” of this Quarterly Report, as well as Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Annual Report”).

Overview

Energy Focus, Inc. specializes in the design, development, manufacturing, marketing and sale of energy-efficient lighting systems and controls. We develop, market and sell high quality light-emitting diode (“LED”) lighting and controls products in the commercial market and military maritime market (“MMM”). In addition to our lighting portfolio, we also offer UPS systems and other power management solutions, which have contributed meaningfully to our revenue in recent quarters and are expected to be a strategic area of continued growth.

Our mission is to enable our customers to run their facilities with greater energy efficiency, productivity, and human health and wellness through advanced LED retrofit solutions. Our goal is to be a market leader for the most demanding applications where performance, quality, value, environmental impact and health are considered paramount. We specialize in energy efficient LED lighting retrofit products, replacing fluorescent, high-intensity discharge lighting and other types of lamps in institutional buildings for primarily indoor lighting applications with our innovative, high-quality commercial and military-grade tubular LED (“TLED”) products, as well as other LED and lighting control products for commercial and consumer applications. We are also evaluating additional adjacent technologies, including Gallium Nitride (“GaN”) based power supplies and other energy solution products that support sustainability in our existing channels.

The LED lighting industry has changed dramatically over the past several years due to increasing competition and price erosion. In more recent years, we have focused on redesigning our products for lower costs and consolidated our supply chain for stronger purchasing power in an effort to price our products more competitively without impacting performance or quality. Despite these efforts, our legacy products continue to face extreme price competition and a convergence of product functionality in the marketplace, and we have shifted to diversifying our supply chain in an effort to increase value and remain competitive. These trends are not unique to Energy Focus as evidenced by the increasing number of industry peers facing challenges, exiting LED lighting, selling assets and even going out of business.

In addition to continuously pursuing cost reductions, our strategy to combat these trends is to innovate both our technology and product offerings with differentiated products and solutions that offer greater, distinct value. Specific examples of these products we have developed include the RedCap®, our patented emergency backup battery integrated TLED, as well as our robust MMM product offering. The Company has enhanced the performance of our RedCap® product by providing a more user-friendly experience. We continue to evaluate our sales strategy and believe our go-to-market strategy that focuses more on direct-sales marketing, selectively expanding our channel partner network to cover territories across the country, and listening to the voice of the customer will lead to better and more impactful product development efforts that we believe will eventually translate into larger addressable markets and greater sales growth.

It is our belief that our strategic initiatives undertaken in 2025 and 2026, including expansion into energy storage solutions, development of advanced UPS systems for AI data center applications, and targeted growth in the Taiwan and Japan markets, along with continued product innovation, expanded distribution capabilities, and operational efficiency, will over time result in improved sales and bottom-line performance for the Company.

We have taken steps to strengthen our financial structure through capital increases and cost reduction measures, which we believe have improved our financial position and provided a stronger foundation for our growth initiatives. Our business expansion plans, including investments in energy storage solutions, development of advanced UPS systems for AI data center applications, and expansion into the Taiwan and Japan markets, are supported by financial strategies that we expect will provide funding for our planned growth initiatives, although there can be no assurance that such funding will be adequate. At the same time, our MMM business continues to be affected by delays in government funding, the timing of U.S. Navy awards, and long sales cycles typical of this sector, with the timeline from bid submission to order placement often exceeding six months, and many products being built-to-order, resulting in extended lead times before revenue recognition. To mitigate these factors, we continue to pursue new opportunities with the U.S. Navy and other government sectors, while our cost optimization efforts have enhanced our competitiveness and may support our ability to secure new contracts and expand our sales pipeline in 2026 and beyond.

We are actively expanding our commercial product offerings, including our newly introduced UPS systems for data centers. We also continue to advance the expansion of product lines such as ESS and GaN based power supplies, while leveraging stability and opportunities within our MMM business. In 2025, we conducted a comprehensive review of our commercial pricing strategy and reassessed key partnerships within the energy-related market. These strategic adjustments have improved our market position, offering a more competitive pricing structure and a stronger value proposition for our customers. We believe that these initiatives, if successfully implemented, and if our financial position continues to improve, may contribute to growth across both our MMM and commercial business sectors, although there can be no assurance that such growth will occur.

Meanwhile, we continue to seek additional external funding alternatives and sources to support our growth strategies, plans and initiatives. Strategic investments by Sander Electronics, Inc. (“Sander”), a shareholder of the Company, have contributed meaningful external capital and created synergistic opportunities to enhance and diversify our supply chain and product offerings, including through relationships with related parties such as Winner Technology International Limited.

The Company continues to incur losses and has a substantial accumulated deficit, which raises substantial doubt about its ability to continue as a going concern as of June 30, 2026. Management continues to evaluate and implement strategies to improve liquidity and financial performance.

Our Business Strategy

Demand-oriented Approach

In order to deepen our relationships with customers, we are in the process of re-establishing our service model, aiming to provide richer and more targeted customer service. We believe that by increasing opportunities for interaction with our customers, we can better understand their needs, thereby enhancing their loyalty to our brand.

To ensure that EFOI’s products, pricing, and customer service lifecycle are better aligned, we are building a comprehensive value model to ensure consistency in the products and services we provide throughout the customer journey. We have begun an in-depth analysis of our current and past top 10 customers over the last five years to identify the core factors that make them loyal customers. By analyzing this data, we hope to reveal the key elements that enhance customer stickiness, providing them with more reasons and value to stay with us. In particular, we are actively focusing on customers with high loyalty to better meet their needs. This is not only an acknowledgment of our products but also a validation of the quality of our service.

Supply-oriented Approach

EFOI is committed to adopting three main sustainable economy strategies: “Green Supply Chain,” “Green Product,” and “Green Manufacturing,” aiming to promote sustainability throughout the entire value chain. The Company is working closely with its supply chain partners to optimize recycling mechanisms and strengthen packaging design, integrating sustainable economy principles into the core of supply chain management.

Guided by the vision of “transcending traditional corporate social responsibility and creating shared value”, EFOI’s team is focusing on stakeholders, aiming to achieve a “dual profit engine” effect by combining financial performance and Environmental, Social, and Governance (“ESG”) practices. This strategy not only aligns with the Company’s responsibility and sustainability goals but is also expected to enhance overall performance and market competitiveness. EFOI's operational team's new strategy focuses on integrating environmental and economic benefits, aiming to create a win-win situation that benefits the company, society, and the environment.

Under the premise of a similar industrial environment and familiar relationships, our professional skills complement those of our supply chain partners. We believe this foundation of cooperation may enable us to pursue common goals of cost reduction, profit sharing, and exploring new business opportunities. This not only strengthens our cooperative relationship but also lays a solid foundation for our joint efforts towards a better future.

Financial-oriented Approach

The Company applies strategic financial management from the following perspective.

Control and Monitoring of Assets and Liabilities

•Assets: Regularly evaluate all assets, especially inventory, to ensure they remain in optimal condition in terms of value and performance. Minimize or mitigate the impact of inefficient and aging assets, focusing on assets with high efficiency and return.

•Liabilities: Ensure a robust liability structure, optimize the cost of liabilities, and seek lower interest rates and more favorable repayment terms. Regularly review the liability situation to ensure the company’s level of liabilities remains within a safe range.

Structured Profitability

•Revenue Growth: Develop diversified revenue streams, reduce dependency on a single business or market, continuously optimize products and services, and enhance market competitiveness.

•Cost Control: Strictly control operating costs, seek opportunities to reduce costs, and ensure the efficient use of resources to optimize operations.

•Cash Flow Management: Establish a sound accounts receivable and payable management system to ensure timely collection of receivables and reasonable arrangement of payments. Maintain sufficient cash reserves to cope with potential funding shortages.

Results of operations

The following table sets forth items in our Condensed Consolidated Statements of Operations as a percentage of net sales for the periods indicated:


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	106.8		87.1		100.7		80.6
Gross profit (loss)	(6.8)		12.9		(0.7)		19.4

Operating expenses:
Product development	2.2		6.5		3.4		7.0
Selling, general, and administrative	14.1		26.0		17.3		40.3

Total operating expenses	16.3		32.5		20.7		47.3
Loss from operations	(23.1)		(19.6)		(21.4)		(27.9)

Other expenses (income):
Interest expense	0.1		—		0.1		—
Interest income	(0.1)		(0.1)		(0.1)		(0.1)


Other expenses	—		0.7		—		0.5

Loss from operations before income taxes	(23.1)		(20.2)		(21.4)		(28.3)
Provision for income taxes	0.2		—		0.1		—
Net loss	(23.3)	%	(20.2)	%	(21.5)	%	(28.3)	%

Comprehensive loss	(23.3)	%	(20.2)	%	(21.5)	%	(28.3)	%

Net sales

A further breakdown of our net sales is presented in the following table (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Commercial products	$	2,254	$	773	$	2,572	$	976
MMM products	1,491		348		2,119		761

Setup service	4		22		7		22
Total net sales	$	3,749	$	1,143	$	4,698	$	1,759

Net sales of $3.7 million for the second quarter of 2026 increased by $2.6 million, or 228%, compared with net sales of $1.1 million for the second quarter of 2025, driven by a 328% increase in MMM sales and a 192% increase in commercial sales. The increase was primarily driven by higher commercial sales resulting from initial shipments through the ESS business to a new customer in Australia, together with increased MMM product sales due to improved demand compared with the prior-year period.

Net sales of $4.7 million for the first six months of 2026 increased by $2.9 million, or 167%, compared with the same period in 2025, primarily driven by a 178% increase in MMM sales and a 164% increase in commercial sales. The increase was primarily driven by higher commercial sales resulting from initial shipments through the ESS business to a new customer in Australia, as well as increased MMM product sales due to improved demand compared with lower sales volumes in the prior year period.

Gross Profit (Loss)

Gross loss was $0.3 million, representing 7% of net sales, for the second quarter of 2026, compared with gross profit of $0.1 million, or 13% of net sales, for the second quarter of 2025. The period-over-period decrease in gross profit was driven mainly by an increase in inventory reserves of $0.5 million during the second quarter of 2026.

Gross loss was $0.0 million, representing 1% of net sales, for the first six months of 2026, compared with gross profit of $0.3 million, or 19% of net sales, for the first six months of 2025. The year-over-year decrease in gross profit was driven mainly by an increase in inventory reserves of $0.5 million during the six months ended June 30, 2026.

Operating expenses

Product development

Product development expenses include salaries and related benefits, testing and related costs, travel expenses, cost of supplies, as well as overhead items, such as depreciation and facility costs. Product development costs are expensed as they are incurred.

Product development expenses were $0.1 million for the second quarter of 2026, representing an increase of $10 thousand, or 14%, compared with $0.1 million for the second quarter of 2025. The increase primarily resulted from higher product testing expenses and business travel expenses.

Product development expenses were $0.2 million for the first six months of 2026, representing an increase of $36 thousand, or 29%, compared with $0.1 million for the first six months of 2025. The increase primarily resulted from higher business travel expenses.

Selling, general and administrative

Selling, general and administrative expenses were $0.5 million for the second quarter of 2026, an increase of 78% from $0.3 million in the second quarter of 2025. The increase was primarily due to a $0.2 million increase in the allowance for credit losses.

Selling, general and administrative expenses were $0.8 million for the first six months of 2026, compared to $0.7 million for the first six months of 2025. The increase was primarily due to a $0.2 million increase in the allowance for credit losses.

Other Expense (Income)

Interest expense (income)

Interest expense was $5 thousand for the second quarter of 2026, compared with $0 for the second quarter of 2025. The increase was primarily due to interest expense associated with short-term borrowings. Interest expense was $5 thousand for the first six months of 2026, compared to $0 for the first six months of 2025. The increase was primarily due to interest expense associated with short-term borrowings.

Interest income was $3 thousand for the second quarter of 2026, compared with $1 thousand for the second quarter of 2025. The increase was primarily attributable to interest earned in bank deposits. Interest income was $4 thousand for the first six months of 2026, compared to $1 thousand for the first six months of 2025. The increase was primarily attributable to interest earned in bank deposits.

Other expenses

Other expenses were $0 for the second quarter of 2026, compared with $8 thousand for the second quarter of 2025. Other expenses were $0 for the six months ended June 30, 2026, compared with $8 thousand for the six months ended June 30, 2025. In the second quarter of 2025, we recognized a non-cash loss of approximately $8 thousand related to the return of inventory, the cancellation of vendor prepayments, and the settlement of outstanding accounts payable.

Provision for income taxes

Due to the operating losses incurred during the three and six months ended June 30, 2026 and 2025, and after application of the annual limitation set forth under Section 382 of the Internal Revenue Code of 1986, as amended, it was not necessary to record a provision for U.S. federal income tax or various state income taxes as income tax benefits are fully offset by a valuation allowance recorded.

During the second quarter of 2026, the Company recognized approximately $7 thousand of Taiwan corporate income tax related to the 2025 tax year.

Net loss

Net loss for the three months ended June 30, 2026 was $0.9 million, an increase of $0.6 million, or 280%, compared with net loss of $0.2 million for the three months ended June 30, 2025. The increase was primarily due to higher fixed operating costs, increased inventory reserves, and the recognition of an allowance for credit losses in the second quarter of 2026 compared to the second quarter of 2025.

Net loss for the six months ended June 30, 2026, was $1.0 million, an increase of $0.5 million, or 104%, compared with net loss of $0.5 million for the six months ended June 30, 2025. The increase was primarily due to higher fixed operating costs, increased inventory reserves, and the recognition of an allowance for credit losses in the first six months of 2026 compared to the first six months of 2025.

Financial condition

As of June 30, 2026, we had $1.1 million in cash and $0.9 million of outstanding short-term debt. We have historically incurred substantial losses, and, as of June 30, 2026, we had an accumulated deficit of $156.9 million. Additionally, our sales have been concentrated among a few major customers, and for the six months ended June 30, 2026, two customers accounted for approximately 65% of net sales.

In 2026 and 2025, we remained committed to building upon the initiatives to stabilize and regrow our business. These efforts include the following key developments that occurred during 2026 and 2025:

•We have reinvested in our MMM sales channel and are pursuing existing and new sales opportunities, though the sales cycles for what are frequently made-to-order products are longer than commercial offerings.

•We have re-evaluated operating expenses and reduced our workforce significantly throughout 2025 and into 2026 to manage fixed costs.

•We continue to seek additional external funding alternatives and sources to support our growth strategies, plans and initiatives.

We continue to closely monitor our cost control efforts to streamline our operations by closely managing all spending throughout the Company, while carefully investing in new products and strategies that sought to reinforce sales.

We will seek to remain agile as an organization to respond to potential or continuing weakness in the macroeconomic environment and in the meantime seek to expand sales channels and enter new markets that we believe will provide additional growth opportunities, including expansion into the Japan market through our joint venture investment initiatives. We plan to achieve profitability through developing and launching new, innovative products, UPS systems, our RedCap® emergency battery backup TLEDs, evaluating new growth opportunities such as GaN-based power supply circuitry and other energy solution products, as well as executing on our multi-channel sales strategy that targets key verticals, such as government, healthcare, education and commercial and industrial, complemented by our marketing outreach campaigns and expanding channel partnerships. In addition, we intend to continue to apply rigorous financial discipline in our organizational structure, decision-making, business processes and policies, strategic sourcing activities and supply chain practices to help accelerate our path towards profitability.

Liquidity and capital resources

Cash

As of June 30, 2026, our cash balance was $1.1 million, compared to $1.1 million as of December 31, 2025. On April 3, 2026, we entered into agreements related to a joint venture investment in Japan under which our total expected investment commitment for a 35% ownership interest is approximately $1.1 million. As of June 30, 2026, we had recorded an advance for investment of approximately $522 thousand related to this proposed transaction. The transaction remains subject to customary closing conditions, and the ownership transfer has not yet been completed. The remaining investment commitment, if funded, may place additional pressure on our liquidity and may increase our dependence on additional financing, capital raising activities, or other funding alternatives to support operations and strategic initiatives.

•As of June 30, 2026, we held total cash of $1.1 million, of which approximately $0.5 million was maintained in a bank account in Taiwan, with the remaining $0.6 million in bank accounts in the United States. These funds support the operations of our wholly owned Taiwanese branch and are denominated in NTD.

•The ability to access this cash for general corporate purposes in the United States may be subject to foreign exchange controls, local banking regulations, or unfavorable tax consequences. While there are currently no formal restrictions on the transfer of funds from Taiwan to the United States, repatriation of these funds may result in foreign withholding taxes or other costs, which could impact our overall liquidity. As such, our ability to deploy foreign cash for domestic use may be limited or delayed.

•Management continues to monitor its cash position, operating cash flows, and funding needs in both domestic and foreign jurisdictions.

The following summarizes cash flows from operating, investing, and financing activities, as reflected in the Condensed Consolidated Statements of Cash Flows included in Part I, Item 1, “Financial Statements,” of this Quarterly Report (in thousands):


	Six months ended June 30,
	2026		2025
Net cash used in operating activities	$	(750)	$	(487)

Net cash used in investing activities	$	(380)	$	(5)

Net cash provided by financing activities	$	1,172	$	400

Net cash used in operating activities

Net cash used in operating activities was $0.8 million for the six months ended June 30, 2026. The net loss for the six months ended June 30, 2026 was $1.0 million, adjusted for non-cash items, including depreciation, provisions for inventory, warranty, accounts receivable reserves and working capital changes. During the six months ended June 30, 2026, major adjustments included a $2.2 million change in accounts receivable caused by specific timing of collecting accounts receivable, which was offset by a $2.8 million change in related party accounts payable due to timing of inventory receipts and payments.

Net cash used in operating activities was $0.5 million for the six months ended June 30, 2025. The net loss for the six months ended June 30, 2025 was $0.5 million and was adjusted for non-cash items, including depreciation, stock-based compensation, provisions for inventory, warranty, accounts receivable reserves and working capital changes. During the six months ended June 30, 2025, major adjustments included a $0.2 million change in accounts receivable caused by specific timing of collecting accounts receivable and a $0.1 million change in accounts payable.

Net cash used in investing activities

Net cash used in investing activities was $0.4 million for the six months ended June 30, 2026, primarily due to a $0.4 million advance for investment in a joint venture.

Net cash used in investing activities was $5 thousand for the six months ended June 30, 2025, primarily from the acquisition of property and equipment.

Net cash provided by financing activities

Net cash provided by financing activities was $1.2 million for the six months ended June 30, 2026, primarily due to proceeds of $0.9 million from short-term borrowing and proceeds of $0.3 million from the issuance of common stock.

Net cash provided by financing activities was $0.4 million for the six months ended June 30, 2025, primarily reflecting net proceeds from the issuance of common stock.

Contractual and other obligations

Please refer to Note 10 “Purchase Commitments” included under Part I, Item 1, “Financial Statements,” of this Quarterly Report.

Foreign Currency Exchange Risk

Because we maintain operations and cash balances in Taiwan, we are exposed to fluctuations in the New Taiwan dollar (NTD) exchange rate relative to the U.S. dollar. Changes in exchange rates can affect the reported value of our foreign cash balances, revenues, and expenses, as well as result in transaction gains or losses on intercompany and third-party balances.

As of June 30, 2026, we had a net NTD liability exposure of approximately $456 thousand, consisting of NTD cash of $455 thousand and NTD short-term borrowings of $911 thousand. As of June 30, 2026, we had a net Chinese Yuan ("CNY") liability exposure of approximately $1,167 thousand, consisting of CNY accounts receivable of $1,714 thousand and CNY related party accounts payable of $2,881 thousand.

In addition, as of June 30, 2026, the carrying amount of our Japanese Yen ("JPY")-denominated advance for investment in a proposed joint venture related to our Japan ESS initiative was approximately $522 thousand.

For the six months ended June 30, 2026, we recognized net foreign currency transaction losses of approximately $15 thousand. We do not currently employ financial instruments to hedge our foreign currency exposure. We continue to monitor our exposure to NTD, CNY and JPY and may consider hedging strategies in the future if our foreign currency risk increases materially.

Critical accounting policies

There have been no material changes to our critical accounting policies as compared to those included in our 2025 Annual Report.

Certain risks and concentrations

Recent accounting pronouncements

For information on recent accounting pronouncements, please refer to Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” included under Part I, Item 1, “Financial Statements,” of this Quarterly Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including our Chief Executive Officer who also serves as our principal financial officer as appropriate, to allow for timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Exchange Act, our management must evaluate, with the participation of our Chief Executive Officer and Principal Financial Officer, the effectiveness of our disclosure controls and procedures, as of June 30, 2026, the end of the period covered by this Quarterly Report. Management, with the participation of our Chief Executive Officer and Principal Financial Officer, did evaluate the effectiveness of our disclosure controls and procedures as of the end of period covered by this Quarterly Report. Based on this evaluation, our management concluded that our disclosure controls and procedures were effective as of June 30, 2026.

Changes in internal control over financial reporting

During the quarterly period covered by this Quarterly Report, there have not been any changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 6. EXHIBITS

EXHIBIT INDEX


Exhibit Number			Description of Documents
3.1			Certificate of Incorporation of Energy Focus, Inc. (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on May 1, 2006).
3.2			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on June 21, 2010 (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.3			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on October 9, 2012 (incorporated by reference to Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.4			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on October 28, 2013 (incorporated by reference to Exhibit 3.4 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.5			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on July 16, 2014 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 16, 2014).
3.6			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on July 24, 2015 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 27, 2015).
3.7			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on January 15, 2020 (incorporated by reference to Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.8			Certificate of Designation of Series A Convertible Preferred Stock of Energy Focus, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on April 1, 2019).
3.9			Amendment to the Certificate of Designation of Series A Convertible Preferred Stock of Energy Focus, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 30, 2019).
3.10			Amendment to the Certificate of Designation of Series A Convertible Preferred Stock of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on January 15, 2020 (incorporated by reference to Exhibit 3.10 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.11			Certificate of Amendment of Certificate of Incorporation, dated June 11, 2020 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 11, 2020).
3.12			Certificate of Amendment of Certificate of Incorporation, dated June 15, 2023 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 22, 2023).
3.13			Bylaws of Energy Focus, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 18, 2020).
3.14			Certificate of Ownership and Merger, Merging Energy Focus, Inc., a Delaware corporation, into Fiberstars, Inc., a Delaware corporation, filed with the Secretary of State of the State of Delaware on May 4, 2007 (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 10, 2007).
4.1			Description of Securities of Energy Focus, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
4.2			Form of Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on December 15, 2021).
4.3			Form of Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on June 6, 2022).
10.1			Form of Securities Purchase Agreement, dated as of May 29, 2026, between the Company and the Purchaser (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on May 29, 2026).
31.1+			Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+			Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1++			Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101			The following financial information from our Quarterly Report for the quarter ended June 30, 2026, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, 2026 and December 31, 2025, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025, (iii) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2026 and 2025, (v) Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2026 and 2025, and (vi) the Notes to Condensed Consolidated Financial Statements.
*104			Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Pursuant to Regulation S-T, this interactive data file is not deemed filed for purposes of Section 11 of the Securities Act, or Section 18 of the Exchange Act, or otherwise subject to the liabilities of these sections.

+ Filed herewith.

++ This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act or the Exchange Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			ENERGY FOCUS, INC.

Date:	August 11, 2026	By:	/s/ Chiao Chieh Jay Huang
			Chiao Chieh Jay Huang
			Chief Executive Officer
			(Principal Executive Officer and Principal Financial Officer)