Energy Focus, Inc. engages primarily in the design, development, manufacturing, marketing and sale of energy-efficient lighting ~~and controls~~ systems and ~~ultraviolet-C light disinfection (“UVCD”) products.~~controls. We develop, market and sell high quality light-emitting diode (“LED”) lighting and controls products ~~and UVCD products~~ in the commercial market and military maritime market (“MMM”)~~, and expanded our offerings into the consumer market beginning in the fourth quarter of 2021.~~. Our mission is to enable our customers to run their facilities ~~offices and homes~~ with greater energy efficiency, productivity, and increased human health and wellness through advanced LED retrofit ~~and UVCD~~ solutions. Our goal is to be the human wellness lighting and LED ~~lighting~~ 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 ~~consumer applications. In late 2020, we announced~~additional market opportunities for energy solution products that support sustainability in our existing channels.

At the ~~launch~~Company’s annual meeting of stockholders held on June 15, 2023, the Company’s stockholders approved a form of the certificate of amendment (the “Certificate of Amendment”) to the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), and authorized the board of directors of the Company to amend the Certificate of Incorporation to effect a reverse stock split of the outstanding shares of the Company’s common stock, par value $0.0001 per share, at a ratio ranging from any whole number of at least 1-for-2 and up to 1-for-10, with the exact ratio within the foregoing range to be determined by the board of directors in its sole discretion.

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 Consolidated Financial Statements relates to our operations.

We have prepared the accompanying financial data for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 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 accompanying financial data and information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (“~~2021~~2022 Annual Report”). The Condensed Consolidated Balance Sheet as of December 31, ~~2021~~2022 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 Balance Sheets as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, Condensed Consolidated Statements of Operations for the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended

June 30, 2023 and ~~2021,~~2022, and Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2023 and 2022.

Due to our financial performance as of June 30, 2023 and December 31, 2022, including net losses of $2.5 million for the six months ended June 30, 2023 and $10.3 million for the twelve months ended December 31, 2022, and ~~2021.~~total cash used in operating activities of $1.3 million for the six months ended June 30, 2023 and $6.7 million for the twelve months ended December 31, 2022, we determined that substantial doubt about our ability to continue as a going concern continues to exist at June 30, 2023. 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.

Additionally, global supply chain and logistics constraints are impacting our inventory purchasing strategy, as we seek to manage both shortages of available components and longer lead times in obtaining components while balancing the development and implementation of an inventory reduction plan. Disruptions in global logistics networks are also impacting our lead times and ability to efficiently and cost-effectively transport products from our third-party suppliers to our facility. 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:

Considering both quantitative and qualitative information, we continue to believe that the combination of our plans to ensure adequate external funding, timely re-organizational actions, current financial position, 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, if adequately executed, could provide us with an ability to finance our operations through the next twelve months and may mitigate the substantial doubt about our ability to continue as a going concern.

Our Common Stock is listed on the Nasdaq Capital Market, which has as one of its continued listing requirements a minimum bid price of at least $1.00 per share. Our Common Stock traded below $1.00 per share starting in the second quarter of 2022. On August 23, 2022, we received a letter from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market notifying us that we were no longer in compliance with the requirement to maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”), because the closing bid price for our common stock was below the minimum $1.00 per share for 30 consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until February 20, 2023, to regain compliance with the Bid Price Rule. During the initial compliance period, our Common Stock continued to trade on the Nasdaq Capital Market, but did not satisfy the Bid Price Rule.

On November 16, 2022, we received a letter from the Staff notifying us that we were no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million if they do

not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations (the “Minimum Stockholders’ Equity Rule”). Our Form 10-Q for the Quarterly Period Ended September 30, 2022 filed on November 10, 2022 reflected that our stockholders’ equity as of September 30, 2022 was $1.5 million. Based on our timely submission of our plan to regain compliance (the “Plan”), Nasdaq granted us an extension through May 15, 2023 to regain compliance with the Minimum Stockholders’ Equity Rule.

On February 21, 2023, we received written notification (the “Bid Price Notification”) from the Staff stating that we had not regained compliance with the Bid Price Rule and our common stock is subject to delisting from Nasdaq. On February 24, 2023, we submitted a request for a hearing before the Nasdaq Hearings Panel (the “Panel”) to appeal the delisting (the “Appeal”). Under Nasdaq rules, the delisting of the Company’s common stock was stayed during the pendency of the Appeal and, during such time, the Company’s common stock continued to be listed on Nasdaq.

On March 28, 2023, the Company received written notification (the “Additional Staff Determination”) from the Staff stating that (i) following the Bid Price Notification, and in accordance with Listing Rule 5810(c)(2)(A), Nasdaq is no longer permitted to consider the stockholders’ equity compliance plan, (ii) the Additional Staff Determination serves as an additional basis for delisting the Company’s common stock from Nasdaq and (iii) the Panel will consider the Additional Staff Determination in rendering a determination regarding the continued listing of the Company’s common stock on Nasdaq.

On April 6, 2023, the Company participated in the Appeal before the Panel. The Company provided an update to the Panel on the Company’s substantial progress made towards the previously submitted Plan during the three months ended March 31, 2023, and requested the Panel grant the Company an exception to (1) re-allow the previously granted exception until May 15, 2023 for the Company to regain compliance with the Minimum Stockholders’ Equity Rule and (2) grant an exception allowing the Company up to 180 days following the Bid Price Notification to regain compliance with the Bid Price Rule by effecting a reverse stock split following stockholder approval at the Company’s 2023 annual meeting of stockholders. On May 1, 2023, the Panel granted the Company’s request (the “Panel Decision”) to continue the Company’s listing on Nasdaq, subject to the following conditions: (1) on or before May 15, 2023, the Company shall file with the SEC its quarterly report for the three months ended March 31, 2023 demonstrating compliance with the Minimum Stockholders’ Equity Rule and (2) on or before July 7, 2023, the Company shall demonstrate compliance with the Bid Price Rule.

On July 27, 2023, the Company received written notification from the Staff stating that the Company has regained compliance with the Bid Price Rule and the Minimum Stockholders’ Equity Rule, as required by the Panel Decision. Pursuant to Nasdaq Listing Rule 5815(d)(4)(B), the Company will be subject to a mandatory panel monitor for a period of one year from July 27, 2023 (the “Monitoring Period”). If, within the Monitoring Period, the Staff finds the Company again out of compliance with the Minimum Stockholders’ Equity Rule, notwithstanding Nasdaq Listing Rule 5810(c)(2), the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, nor will the Company be afforded an applicable cure or compliance period pursuant to Nasdaq Listing Rule 5810(c)(3). Instead, the Staff will issue a delist determination letter and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened hearings panel if the initial Panel is unavailable. The Company will have the opportunity to respond and present to the Panel as provided by Nasdaq Listing Rule 5815(d)(4)(C). The Company’s common stock may be at that time delisted from Nasdaq.

As of the date of this Quarterly Report, the Company believes it has maintained compliance with the Minimum Stockholders’ Equity Rule for continued listing on the Nasdaq Capital Market. To become compliant with the Bid Price Rule, the Company effected a 1-for-7 reverse stock split to increase the per share trading price of the common stock. At the Company’s annual meeting of stockholders held on June 15, 2023, the Company’s stockholders approved a form of the Certificate of Amendment to the Certificate of Incorporation and authorized our board of directors to amend the Certificate of Incorporation to effect a reverse stock split of the outstanding shares of the Company’s common stock at a ratio ranging from any whole number of at least 1-for-2 and up to 1-for-10, with the exact ratio within the foregoing range to be determined by the Board of Directors in its sole discretion.

However, there can be no assurance that the Company will be able to maintain compliance with the Minimum Stockholders’ Equity Rule, Bid Price Rule, or other Nasdaq listing requirements. If the Company fails to maintain compliance with Nasdaq’s continued listing standards in accordance with the Panel’s decision, the Company’s common stock will be subject to delisting from Nasdaq.

Net sales include revenues from sales of products and shipping and handling charges, 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

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

Our trade accounts receivable consists of amounts billed to and currently due from customers. ~~Our~~Substantially all of our customers are concentrated in the United States. 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 utilize a third-party account receivable insurance program with a very high credit worthy insurance company where we have the large majority of the accounts receivable insured with a portion of self-retention. This third party also provides credit-worthiness ratings and metrics that significantly assist us in evaluating the credit worthiness of both existing and new customers. We maintain allowances for sales returns and doubtful accounts receivable to provide for the estimated number of account receivables that will not be collected. The allowance is based on an assessment of forward looking customer ~~creditworthiness~~credit-worthiness and historical payment experience, the age of outstanding receivables, and performance guarantees to the extent applicable. Past due amounts are

written off when our internal collection efforts have been unsuccessful, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. We do not generally require collateral from our customers.

Our standard payment terms with customers are net 30 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.

Through November 2022, we utilized a third-party account receivable insurance program with a very high credit worthy insurance company where we had the large majority of the accounts receivable arising during the policy term insured with a portion of self-retention. This third party also provided credit-worthiness ratings and metrics that significantly assisted us in evaluating the credit-worthiness of both existing and new customers. Although the insurance policy is no longer in place, all invoices issued under the previous coverage period are still covered under the policy.

On January 1, 2023, the Company adopted ASC 326. The standard adds to U.S. GAAP an impairment model known as the CECL model, which is based on expected losses rather than incurred losses. This standard only impacts the Company’s trade receivables. The Company decided to use the roll rate method of valuing its reserve for trade receivables. The reserve is based on a careful review of past delinquencies and forward-looking considerations, such as customer responsiveness. This resulted in a $2.6 thousand adjustment to Retained Earnings as of December 31, 2022 and charges to bad debt expense of $12 thousand in the first quarter of 2023 and $3 thousand in the second quarter of 2023.

All of our long-lived fixed assets are located in the United States. For the three months ended June 30, 2023 and 2022, less than 1% of sales were attributable to customers outside the United States. For the six months ended June 30, ~~2022,~~2023, less than 1% of sales were attributable to customers outside the United States and approximately 1% of sales were attributable to customers outside the United ~~States. For~~States for the ~~three and~~ six months ended June 30, ~~2021, there were approximately 3% and 2%, respectively, of sales attributable to customers outside the United States.~~2022. The geographic location of our net sales is derived from the destination to which we ship the product.

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.

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

As a result of the net loss we incurred for the three months ended June 30, 2023, convertible securities representing approximately 25 thousand shares of common stock were excluded from the basic loss per share calculation as their inclusion would have been anti-dilutive. As a result of the net loss we incurred for the three months ended June 30, 2022, restricted share units, warrants and convertible securities representing approximately 162 thousand, ~~368~~53 thousand and 175 thousand shares of common stock, respectively, were excluded from the basic loss per share calculation because their inclusion would have been anti-dilutive. As a result of the net loss we incurred for the three months ended June 30, 2021, options, restricted share units, warrants and convertible securities representing approximately 57 thousand, 9 thousand, 49 thousand and 17525 thousand shares of common stock, respectively, were excluded from the basic loss per share calculation as their inclusion would have been anti-dilutive.

As a result of the net loss we incurred for the six months ended June 30, ~~2022, restricted share units, warrants and~~2023, convertible securities representing approximately ~~8 thousand, 219 thousand and 175~~25 thousand shares of common stock ~~respectively,~~ were excluded from the basic loss per share calculation because their inclusion would have been anti-dilutive. As a result of the net loss we incurred for the six months ended June 30, ~~2021, options,~~2022, restricted share units, warrants and convertible securities representing approximately 691 thousand, ~~3 thousand, 77~~31 thousand and ~~346~~25 thousand shares of common stock, respectively, were excluded from the basic loss per share calculation because their inclusion would have been anti-dilutive.

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

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:

The carrying amounts of certain financial instruments including cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short maturities. Based on borrowing rates currently available to us for loans with similar terms, the carrying value of borrowings under our revolving credit facilities also approximates fair value.

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.

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 ~~will obtain funding on acceptable terms, in~~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:

For the three months ended June 30, 2023, sales to two U.S. Navy shipbuilders and a ~~timely fashion, or at all. Obtaining additional funding contains risks, including:~~

For the six months ended June 30, 2023, sales to a U.S. Navy shipbuilder and a distributor to the Department of Defense accounted for approximately 23% and 11% of net sales, respectively. When sales to our primary distributor for the U.S. Navy are combined with sales to shipbuilders for the U.S. Navy, total net sales of products for the U.S. Navy comprised approximately 34% of net sales for the same period. For the six months ended June 30, 2022, sales to our primary distributor for the U.S. Navy, a U.S. Navy shipbuilder, and a regional commercial lighting retrofit company accounted for approximately 18%, 12%, and 12% of net sales, respectively. When sales to our primary distributor for the U.S. Navy are combined with sales to shipbuilders for the U.S. Navy, total net sales of products for the U.S. Navy comprised approximately 31% of net sales for the same period.

A distributor for the Department of Defense and a U.S. Navy shipbuilder accounted for approximately 24% and 14% of net trade accounts receivable, respectively, at June 30, 2023. At December 31, 2022, a distributor for the Department of Defense accounted for 25% of our net trade accounts receivable and a shipbuilder for the U.S. Navy accounted for 30% of our net trade accounts receivable.

No one supplier accounted for more than 10% of our total expenditures for the three and six months ended June 30, 2023. Two offshore suppliers accounted for approximately 19% and 10%, respectively, of our total expenditures for the three months ended June 30, 2022. For the six months ended June 30, 2022, one offshore supplier accounted for approximately 19% of our total expenditures.

At June 30, 2023, one offshore supplier accounted for approximately 31% of our trade accounts payable balance. At December 31, 2022, this offshore supplier accounted for approximately 36% of our trade accounts payable balance.

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

The CARES Act, which was enacted on March 27, 2020, provides an Employee Retention Tax Credit (“ERTC”) that is a refundable tax credit against certain employer taxes. The ERTC was subsequently amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, the Consolidated Appropriation Act of 2021, and the American Rescue Plan Act of 2021, all of which amended and extended the ERTC availability and guidelines under the CARES Act. Following these amendments, we and other businesses became retroactively eligible for the ERTC, and as a result of the foregoing legislation, are eligible to claim a refundable tax credit against the employer share of Social Security taxes equal to 70% of the qualified wages paid to employees between January 1, 2021 and September 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021 for a maximum allowable ERTC per employee of $7,000 per calendar quarter in 2021.

For purposes of the amended ERTC, an eligible employer is defined as having experienced a significant (20% or more) decline in gross receipts during each of the first three 2021 calendar quarters when compared with the same quarter in 2019 or the immediately preceding quarter to the corresponding calendar quarter in 2019. The credit is taken against the Company’s share of Social Security Tax when the Company’s payroll provider files, or subsequently amends the applicable quarterly employer tax filings.

Under the amended guidelines, we were eligible to receive the ERTC for the second and third quarters of 2021. As part of the filing of our ~~expense reduction initiatives, we have significantly decreased our warehouse space beginning in~~employer tax filings for the third quarter of ~~2022. In connection with the space reduction, in~~2021, we applied for and received a refund of $431 thousand, and we amended our filing for the second quarter of ~~2022,~~2021, for which we ~~began disposing~~received an additional refund of approximately $445 thousand during the second quarter of 2023. This amount was recorded as a ~~substantial portion~~receivable in the Condensed Consolidated Balance Sheet as of ~~our excess and obsolete commercial finished goods inventory that was more than 90% reserved. As of~~ December 31, 2022.

Depreciation expense was ~~$43~~$8 thousand and ~~$53~~$43 thousand for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. For the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, depreciation expense was ~~$87~~$16 thousand and ~~$100~~$87 thousand, respectively.

~~The Company had one restructured lease with a sub-lease component for~~Components of the New York, New York office that was closed in 2017. The lease expired in June 2021. The restructured lease and sub-lease were deemed to be in-scope and thus subject to the requirements of Topic 842 and were evaluated for impairment in accordance with the asset impairment provisions of Accounting Standards Codification 360, ~~Property, Plant and Equipment~~ (“Topic 360”). The Company concluded its net right-of-use assets were not impaired and the carrying amount approximates expected sublease income in future years as of December 31, 2020. The Company continued to carry certain immaterial operating ~~expenses associated with this lease as restructuring liabilities and continued to accrete those liabilities in accordance with Accounting Standards Codification 420,~~ ~~Exit or Disposal Cost Obligations~~ (“Topic 420”), as has been done since the cease use date in 2017. For additional information regarding treatment of leases please refer to Note 4, “Leases,” included under Item 8, “Financial Statements and Supplementary Data,” of our 2021 Annual Report.

On August 11, 2020, we entered into 2two debt financing arrangements (together, the “Credit Facilities”) that ~~allow~~allowed for expanded borrowing capacity at a lower blended borrowing cost. The first arrangement is an inventory financing facility (the “Inventory Facility”) pursuant to the Loan and Security Agreement (the “Inventory Loan Agreement”) between the Company and Crossroads Financial Group, LLC, a North Carolina limited liability company ~~(the “IF Lender”~~(“Crossroads”). Borrowings under the original Inventory Facility were permitted up to the lower of (i) $3.0 million, which amount was subsequently increased to $3.5 million ~~as described below,~~in April 2021, and (ii) a borrowing base determined from time to time based on the value of the Company’s eligible inventory, valued at 75% of inventory costs or 85% of the inventory net orderly liquidation value, less the availability reserves.

On ~~April 20, 2021,~~January 18, 2023, the Company and ~~the IF Lender~~Crossroads entered into an amendment to the Inventory Loan Agreement (the “Crossroads Amendment”) to ~~increase~~restructure and pay down the Inventory Facility. The Crossroads Amendment provides that the Company make payments to reduce the outstanding obligations under the Inventory Facility of $750 thousand by January 20, 2023 and $250 thousand by February 15, 2023 (which amounts the Company has paid). The Company also agreed to make monthly payments of approximately $40 thousand towards the remaining outstanding obligations under the Inventory Facility, and to reduce the maximum amount that may be available to the Company under the Inventory Facility from ~~$3.0~~$3.5 million to ~~$3.5 million,~~$500 thousand, subject to the borrowing base as set forth in the Inventory Loan Agreement.

Pursuant to the Crossroads Amendment, Crossroads and the Company also agreed to extend the Inventory Facility’s current term through December 31, 2023, while eliminating the minimum borrowing amount and unused line fees and reducing the monthly service fee to a lower, fixed amount. The ~~outstanding indebtedness~~Company also agreed to a slightly increased interest rate, which was more than offset by the reduction in the monthly service fees. Pursuant to the Crossroads Amendment, the interest rate on borrowings under the Inventory Facility ~~accrues at an annual~~is now a per annum rate equal to (i) the ~~greater of (i) 5.75% and (ii) 4.00% plus the three-month~~Three-Month LIBOR rate ~~(2.29% and 0.21%~~plus 5.5% (currently 11.05% per annum) or (ii) at Crossroads’ discretion, an alternative reference rate, SOFR (Secured Overnight Financing Rate), plus 6.00% (currently 11.09% per annum). As of June 30, ~~2022 and December 31, 2021, respectively) and is also subject~~2023, the effective rate was equal to a service fee of 1% per month. The annualized interest rate at June 30, 2022 and December 31, 2021, which includes interest fees, the annual facility fee, bank fees and other miscellaneous lender fees, was 22.1% and 22.4%, respectively. The Inventory Facility’s interest and service fees combined amount is subject to a minimum monthly fee of $18 thousand. There would be no breakage fee for the Company for the Inventory Facility if the Company were to refinance it with an American Bankers Association (“ABA”) equivalent institution. The Inventory Facility is secured by substantially all of the present and future assets of the Company and is also governed by an intercreditor agreement among the Company, the IF Lender and the RF Lender (defined below)12.34%. The Inventory Facility matures on August 11, 2022, subject to early termination upon 90 days’ notice and otherwise in accordance with the terms of the Inventory Loan Agreement. The term is automatically extended in successive one (1) year increments unless terminated by either party in accordance with the Inventory Loan Agreement.

The second ~~arrangement is~~Credit Facility was a receivables financing facility (the “Receivables Facility”) pursuant to the Loan and Security Agreement (the “Receivables Loan Agreement”) between the Company and Factors Southwest L.L.C. (d/b/a FSW Funding), an Arizona limited liability company (the “RF Lender”). Borrowings under the Receivables Facility ~~are~~were permitted up to the lower of (i) $2.5 million and (ii) a borrowing base determined from time to time based on the value of the Company’s eligible accounts receivable, valued at 90% of the face value of such accounts receivable, less availability reserves, if any. ~~Interest on~~

On February 7, 2023, the Company and the RF Lender agreed to terminate the Receivables Facility. All outstanding ~~indebtedness~~amounts under the Receivables Facility ~~accrues at an annual rate equal~~were repaid prior to ~~(i) the highest prime rate announced from time to time by the Wall Street Journal (4.75% at June 30, 2022~~termination, and ~~3.25% at December 31, 2021) plus (ii) 2%. At June 30, 2022 and December 31, 2021, the annualized interest rate, which includes interest~~there were no prepayment fees ~~and the annual facility fee, was 8.4% and 8.0%, respectively. The annualized interest rate on the collateral management fee was 5.9% at both June 30, 2022 and December 31, 2021.~~in connection with termination. The Receivables Facility ~~is also~~was secured by substantially all of the present and future assets of the ~~Borrower~~Company and ~~is also governed by~~was subject to an intercreditor agreement ~~among the Company, the IF Lender and the RF Lender. A $25 thousand, or 1%, facility fee~~with Crossroads, which intercreditor agreement was charged at closing. There would be no breakage fee for the Company for the Receivables Facility if the Company were to refinance it with an ABA equivalent institution. The Receivables Facility matures on August 11, 2022, subject to early termination in accordance with the terms of the Receivables Loan Agreement, provided that the term is automatically extended in successive one (1) year increments unless terminated by either party in accordance with the Receivables Loan Agreement.also terminated.

Borrowings under the Inventory Facility were ~~$1.2~~$0.3 million and $1.4 million at ~~both~~ June 30, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. Borrowings under the Receivables Facility were ~~$0.7 million and $1.0~~approximately $0.1 million at ~~June 30, 2022 and~~ December 31, ~~2021, respectively.~~2022. These ~~Credit Facilities~~facilities are recorded in the Condensed Consolidated Balance Sheets as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 as a current liability under the caption “Credit line borrowings.” Outstanding balances include unamortized net issuance costs totaling ~~$18~~$12 thousand for the Inventory Facility as of June 30, 2023, and ~~$84~~$47 thousand for the Inventory Facility and ~~$4 thousand and $24~~$15 thousand for the Receivables Facility as of ~~June 30, 2022 and~~ December 31, ~~2021, respectively.~~2022.

During the third and fourth quarters of the year ended December 31, 2022, we entered into short-term unsecured promissory notes (the “2022 Promissory Notes”) with Mei Yun (Gina) Huang, Jay Huang, and Tingyu Lin. Ms. Huang is a member of the Board of Directors and Mr. Huang became a member of the Board of Directors in January 2023 in connection with the Sander Private Placement, as described below in Note 9, “Stockholders’ Equity.” The total liability for the 2022 Promissory Notes was $1.5 million at December 31, 2022. All of the 2022 Promissory Notes were exchanged for common stock on January 17, 2023. See Note 9, “Stockholders’ Equity.”

The following summarizes the 2022 Promissory Notes at December 31, 2022:

On April 21, 2022, we entered into a note purchase agreement (the “2022 Streeterville Note Purchase Agreement”) with Streeterville Capital, LLC (“Streeterville”) pursuant to which we sold and issued to Streeterville a promissory note in the principal amount of approximately $2.0 million ~~(the~~(as amended, the “2022 Streeterville Note”). The 2022 Streeterville Note was issued with an original issue discount of $215 thousand and Streeterville paid a purchase price of approximately $1.8 million for the 2022 Streeterville Note, from which the Company paid $15 thousand to Streeterville for Streeterville’s transaction expenses.

The 2022 Streeterville Note ~~has a~~had an original maturity date of April 21, 2024, and accrues interest at 8% per annum, compounded daily, on the outstanding balance. ~~The Company may prepay the amounts outstanding under~~On January 17, 2023, we agreed with Streeterville to restructure and pay down the 2022 Streeterville Note ~~at a premium, which is 5% during the first six months~~ and ~~7.5% thereafter. Prepayments at the reduced rate in the first six months are limited~~extend its maturity date to ~~50% of~~December 1, 2024 (the “2022 Streeterville Note Amendment”). We agreed to make payments to reduce the outstanding ~~balance. Beginning on December 1, 2022, Streeterville may require the Company to redeem up to $225 thousand~~amounts of the 2022 Streeterville Note ~~in any calendar month. The Company~~by $500 thousand by January 20, 2023 (which amount has been paid) and by $250 thousand by July 14, 2023 ($125 thousand of which has already been satisfied pursuant to the ~~right on 5 occasions, but not during more than three consecutive months,~~March 2023 Exchange Agreement (as defined below)). Streeterville agreed to ~~defer all redemptions that Streeterville could otherwise require~~extend the ~~Company to make during any calendar month. Each exercise~~term of ~~this deferral right by the Company will increase the amount outstanding under~~ the 2022 Streeterville Note through December 1, 2024, and beginning January 1, 2024, we would make twelve monthly repayments of approximately $117 thousand each. We would have the right to prepay any of the scheduled repayments at any time or from time to time without additional penalty or fees. Provided we make all payments as scheduled or earlier, the 2022 Streeterville Note will be deemed paid in full and shall automatically be deemed canceled.

On March 31, 2023, the Company entered into an Exchange Agreement (the “March 2023 Exchange Agreement”) with Streeterville, pursuant to which we agreed to (i) partition from the 2022 Streeterville Note a new Promissory Note (the “March 2023 Partitioned Note”) in the original principal amount of $250 thousand (the “March 2023 Exchange Amount”), (ii) cause the outstanding balance of the 2022 Streeterville Note to be reduced by ~~1.5%~~an amount equal to the March 2023 Exchange Amount, and (iii) exchange (the “March 2023 Exchange”) the March 2023 Partitioned Note for 71,715 shares of the Company’s common stock.

The March 2023 Exchange was priced at-the-market under the Nasdaq rules and was effected pursuant to one or more exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). There are no gross proceeds to the Company in respect of the March 2023 Exchange, provided that $125 thousand of the March 2023 Exchange Amount will be applied toward the $250 thousand payment due on or before July 14, 2023 pursuant to the 2022 Streeterville Note Amendment, $125 thousand will be credited to satisfy the December 1, 2024 required payment and a portion of the November 1, 2024 required payment, in each case pursuant to the 2022 Streeterville Note Amendment.

The total liability for the 2022 Streeterville Note, net of discount and financing fees, was ~~$1.8~~$1.3 million and $2.0 million at June 30, ~~2022. Unamortized loan discount~~2023 and ~~debt issuance costs for the~~December 31, 2022, ~~Streeterville Note were $212 thousand at June 30, 2022.~~respectively.

In the event our common stock is delisted from Nasdaq, the amount outstanding under the 2022 Streeterville Note will automatically increase by 15% as of the date of such delisting.

On April 27, 2021, we entered into a note purchase agreement with Streeterville pursuant to which we sold and issued to Streeterville a promissory note in the principal amount of approximately $1.7 million (the “2021 Streeterville Note”). The 2021 Streeterville Note was issued with an original issue discount of $194 thousand and Streeterville paid a purchase price of $1.5 million for the 2021 Streeterville Note, after deduction of $15 thousand of Streeterville’s transaction expenses.

Beginning on November 1, 2021, Streeterville ~~may~~could require the Company to redeem up to $205 thousand of the 2021 Streeterville Note in any calendar month. The Company ~~has~~had the right on 3three occasions to defer all redemptions that Streeterville could otherwise require the Company to make during any calendar month. Each exercise of this deferral right by the Company ~~will increase~~increased the amount outstanding under the 2021 Streeterville Note by 1.5%. The Company exercised this right twice during the fourth quarter of 2021, ~~and~~ once during the second quarter of 2022 and once during the third quarter of 2022.

On March 28, 2023,the Company entered into a securities purchase agreement with Jay Huang, a member of the Board of Directors, pursuant to which the Company agreed to issue and sell, in a private placement (the “March 28, 2023 Private Placement”), 15,500 shares of the Company’s common stock for a purchase price of $3.55 per share.

On March 30, 2023, the Company entered into a securities purchase agreement with Mei Yun (Gina) Huang, a member of the Board of Directors, pursuant to which the Company agreed to issue and sell, in a private placement (collectively with the March 28, 2023 Private Placement, the “March 2023 Private Placements”), 71,428 shares of the Company’s common stock for a purchase price of $3.50 per share.

Aggregate gross proceeds to the Company in respect of the March 2023 Private Placements were $305 thousand. Each of the March 2023 Private Placements was priced at-the-market under the Nasdaq rules.

On February 24, 2023, the Company entered into a securities purchase agreement with Mei Yun (Gina) Huang, a member of the Board of Directors, pursuant to which the Company agreed to issue and sell, in a private placement (the “February 2023 Private Placement”), 114,744 shares of the Company’s common stock, for a purchase price of $3.49 per share.

Gross proceeds to the Company in respect of the February 2023 Private Placement were $400 thousand. The February 2023 Private Placement was priced at fair market value under the Nasdaq rules.

On January 17, 2023, the Company entered into a securities purchase agreement (the “Sander Purchase Agreement”) with certain purchasers associated with Sander Electronics, Inc., pursuant to which the Company agreed to issue and sell in a private placement (the “Sander Private Placement”) an aggregate of 778,017 shares of common stock for a purchase price per share of $3.51. Consideration for the transaction included exchange of approximately $657 thousand in the aggregate of outstanding amounts on previous short-term bridge financings, including the 2022 Promissory Notes issued to Mr. Huang, as described above in Note 7, “Debt”.

Aggregate gross proceeds from the Sander Private Placement were approximately $2.1 million. The Sander Private Placement was priced at-the-market under the Nasdaq rules.

On January 5, 2023, the Company entered into a securities purchase agreement with Mei Yun (Gina) Huang, a member of the Board of Directors, pursuant to which the Company agreed to issue and sell, in a private placement, 36,828 shares of the Company’s common stock, for a purchase price of $2.72 per share. On January 10, 2023, the Company entered into a securities purchase agreement with Ms. Huang, pursuant to which the Company agreed to issue and sell, in a private placement, 46,543 shares of the Company’s common stock for a purchase price of $3.22 per share.

Aggregate gross proceeds to the Company in respect of these private placements to Ms. Huang were $250 thousand. Each of the private placements to Ms. Huang was priced at fair market value under the Nasdaq rules.

On January 17, 2023, the Company and Ms. Huang entered into exchange agreements pursuant to which the Company and Ms. Huang agreed to exchange the approximately $817 thousand aggregate outstanding amounts on previous short-term bridge financings, including the 2022 Promissory Notes issued to Ms. Huang, as described above in Note 7, “Debt”, for an aggregate of 207,371 shares of common stock at a price per share of $3.94. The exchanges were priced at fair market value under the Nasdaq rules.

In June 2022, we completed ~~the June~~a private placement (the “June 2022 Private ~~Placement~~Placement”) with certain institutional investors for the sale of ~~1,313,462~~187,637 shares of our common stock at a purchase price of ~~$1.30~~$9.10 per share. We also sold to the same institutional investors (i) ~~June~~pre-funded warrants (the “June 2022 Pre-Funded ~~Warrants~~Warrants”) to purchase ~~1,378,848~~196,978 shares of common stock at an exercise price of ~~$0.0001~~$0.0007 per share and (ii) warrants (collectively with the June 2022 Pre-Funded Warrants, the “June 2022 Warrants”) to purchase up to an aggregate of ~~2,692,310~~384,615 shares of common stock at an exercise price of ~~$1.30~~$9.10 per share. In connection with the June 2022 Private Placement, we paid the placement agent commissions of $252 thousand, plus $35 thousand in expenses, and we also paid legal, accounting and other fees of $47 thousand. Total offering costs of $334 thousand have been presented as a reduction of additional paid-in capital and have been netted within equity in the Condensed Consolidated Balance Sheet as of ~~June 30,~~December 31, 2022. Net proceeds to us from the June 2022 Private Placement were approximately $3.2 million. We determined the exercise price of the June 2022 Pre-Funded Warrants to be nominal and, as such, have considered the ~~1,378,848~~196,978 shares underlying them to be outstanding effective June 7, 2022, for purposes of calculating net loss per share.

~~As of June 30, 2022, June 2022 Warrants to purchase an aggregate of 4,071,158 shares remained outstanding, with a weighted average exercise price of $0.86 per share.~~ In July 2022, all of the June 2022 Pre-Funded Warrants were exercised. As of June 30, 2023, June 2022 Warrants to purchase an aggregate of 384,615 shares remained outstanding, with a weighted average exercise price of $9.10 per share. The exercise of the remaining June 2022 Warrants outstanding could provide us with cash proceeds of up to $3.5 million in the aggregate.

In December 2021, we completed ~~the December~~a private placement (the “December 2021 Private ~~Placement~~Placement”) with certain institutional investors for the sale of ~~1,193,185~~170,455 shares of our common stock at a purchase price of ~~$3.52~~$24.64 per share. We also sold to the same institutional investors (i) ~~December~~pre-funded warrants (the “December 2021 Pre-Funded ~~Warrants~~Warrants”) to purchase ~~85,228~~12,175 shares of common stock at an exercise price of ~~$0.0001~~$0.0007 per share and (ii) warrants (collectively with the December 2021 Pre-Funded Warrants, the “December 2021 Warrants”) to purchase up to an aggregate of ~~1,278,413~~182,630 shares of common stock at an exercise price of ~~$3.52~~$24.64 per share. In connection with the December 2021 Private Placement, we paid the placement agent ~~commission~~commissions of $360 thousand plus $42 thousand in expenses and we also paid legal, accounting and other fees of $97 thousand. Total offering costs of $499 thousand have been presented as a reduction of additional paid-in capital and have been netted within equity in the Condensed Consolidated Balance Sheet as of December 31, 2021. Net proceeds from the December 2021 Private Placement were approximately $4.0 million. We determined the exercise price of the December 2021 Pre-Funded Warrants to be nominal and, as such, considered the 85,228 shares underlying them to be outstanding effective December 16, 2021, for purposes of calculating net loss per share.

In January 2022, all of the December 2021 Pre-Funded Warrants were exercised. As of June 30, ~~2022,~~2023, December 2021 Warrants to purchase an aggregate of ~~1,278,413~~182,630 shares remained outstanding, with an exercise price of ~~$3.52~~$24.64 per share. The December 2021 Warrants expire on December 16, 2026. The exercise of the remaining December 2021 Warrants outstanding could provide us with cash proceeds of up to $4.5 million in the aggregate.

~~In June 2021,~~On March 29, 2019, we ~~completed a registered direct offering~~issued $1.7 million aggregate principal amount of ~~990,100 shares of our common stock~~subordinated convertible promissory notes (the “Convertible Notes”) to certain ~~institutional~~ investors atin a ~~purchase price~~private placement exempt from registration requirements of ~~$5.05 per share. We paid~~ the placement agent commissions of $400 thousand, plus $51 thousand in expenses, in connection with the June 2021 Equity Offering and we also paid legal and other fees of $18 thousand. Total offering costs of $469 thousand have been presented asSecurities Act. The Convertible Notes had a ~~reduction of additional paid-in capital and have been netted within equity in the Condensed Consolidated Balance Sheet as~~maturity date of December 31, ~~2021. Net proceeds to us from the~~2021 and bore interest at a rate of 5.0% per annum until June ~~2021 Equity Offering were approximately $4.5 million.~~

Pursuant to the terms of the Convertible Notes, on January 16, 2020, following approval by our stockholders of certain amendments to the Certificate of Incorporation, the principal amount of all of the Convertible Notes and the accumulated interest thereon at the date of conversion (totaling $1.8 million) were converted at a conversion price of $0.67 per share into an aggregate of 2,709,018 shares of the Company’s Series A Preferred Stock, which is convertible on a ~~one-for-five~~1-for-35 basis into shares of our common stock. During the year ended December 31, 2020, 111,548 shares of the Series A Preferred Stock were converted into ~~22,310~~3,187 shares of common stock. During the year ended December 31, 2021, 1,721,023 shares of Series A Preferred Stock were converted into ~~344,205~~49,172 shares of common stock. The Series A Preferred Stock that was converted in 2021 was held by a Schedule 13D ownership group (under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and Rule 13d-5 promulgated thereunder) that includes Fusion Park LLC ~~(“Fusion Park”)~~ and 5 Elements Global Fund L.P. (controlled affiliates of James Tu, the Company's former Executive Chairman and Chief Executive Officer), as well as Brilliant Start Enterprise Inc. ~~(“Brilliant Start”)~~ and Jag International Ltd. ~~(controlled~~(both of which are controlled affiliates of ~~Gina~~Mei Yun (Gina) Huang, a member of the Company's ~~board~~Board of ~~directors)~~Directors). ~~Upon conversion of their respective shares of Series A Preferred Stock, Fusion Park and Brilliant Start received 184,851 and 159,354 shares, respectively, of the Company’s common 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

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 ~~one-for-five~~1-for-35 basis. On March 29, 2019, the Company also filed a Certificate of Elimination with respect

to its authorized, but unissued, Series A Participating Preferred Stock, to return such shares to the status of undesignated preferred stock available for designation as Series A Preferred Stock.

The purchase agreement related to the Convertible Notes contains customary representations and warranties and provides for resale registration rights with respect to the shares of our common stock issuable upon conversion of the Series A Preferred Stock.

In January 2020, we completed a registered direct offering for the sale of ~~688,360~~98,337 shares of our common stock to certain institutional investors, at a purchase price of ~~$3.37~~$23.59 per share. We also sold, to the same institutional investors, ~~the~~warrants (the “January 2020 Investor ~~Warrants~~Warrants”) to purchase up to ~~688,360~~98,337 shares of common stock at an exercise price of ~~$3.37~~$23.59 per share in a concurrent private placement for a purchase price of ~~$0.625~~$4.38 per warrant. ~~We paid~~In addition, we issued to the placement agent ~~commissions of $193 thousand, plus $50 thousand in expenses,~~ in connection with ~~the~~such registered direct offering and ~~the~~ concurrent private placement warrants (the “January 2020 Placement Agent Warrants” and ~~we also paid legal, accounting and other fees of $231 thousand related to~~collectively with the ~~offering. Total offering costs of $510 thousand have been presented as a reduction of additional paid-in capital and have been netted within equity in~~January 2020 Investor Warrants, the ~~Condensed Consolidated Balance Sheet as of December 31, 2021. In addition, we issued warrants to the placement agent~~“January 2020 Warrants”) to purchase up to ~~48,185~~6,883 shares of common stock at an exercise price of ~~$4.99~~$34.96 per share. ~~Net proceeds to us from the sale of common stock and January 2020 Warrants were approximately $2.3 million.~~

January 2020 Warrants issued to purchase an aggregate of ~~229,414~~32,773 shares remain outstanding at June 30, ~~2022~~2023 with a weighted average exercise price of ~~$3.67~~$25.66 per share. The exercise of ~~warrants~~January 2020 Warrants could provide us with cash proceeds of up to approximately $0.8 million in the aggregate if all ~~warrants~~January 2020 Warrants are exercised. During the three and six months ended June 30, 2023 and June 30, 2022, no January 2020 Warrants were exercised. ~~During the six months ended June 30, 2021, 156,446 warrants were exercised resulting in total proceeds of $527 thousand.~~

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.

Total unearned stock-based compensation was $0.1 million at June 30, 2023, compared to $0.2 million at June 30, ~~2022, compared to $0.4 million at June 30, 2021.~~2022. 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 at June 30, ~~2022~~2023 is expected to be recognized is approximately ~~2.7~~2.6 years.

As of June 30, ~~2022,~~2023, we had approximately ~~$0.8~~$2.1 million in outstanding purchase commitments for inventory, ~~all~~$0.4 million of which is expected to ship in the third quarter of ~~2022.~~

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, ~~2021~~2022 (“~~2021~~2022 Annual Report”).

Energy Focus, Inc. engages primarily in the design, development, manufacturing, marketing and sale of energy-efficient lighting ~~and controls~~ systems and ~~ultraviolet-C light disinfection (“UVCD”) products.~~controls. We develop, market and sell high quality light-emitting diode (“LED”) lighting and controls products ~~and UVCD products~~ in the commercial market and military maritime market (“MMM”)~~, and expanded our offerings into the consumer market beginning in the fourth quarter of 2021.~~. Our mission is to enable our customers to run their facilities ~~offices, homes and vessels~~ with greater energy efficiency, productivity, and human health and wellness through advanced LED retrofit ~~and UVCD~~ solutions. Our goal is to be ~~the human wellness lighting and LED lighting technology and~~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 byproducts, 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 adjacent technologies, including Gallium Nitride (“GaN”) based power supplies and additional market opportunities for 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. We have been experiencing these industry forces in both our military and commercial business since 2016, where we once commanded significant price premiums for our flicker-free TLEDs with industry leading warranties. In ~~late~~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 while not impacting the performance and 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 2019, the Company began the process of right-sizing the business and undertook cost-cutting measures. During 2021 ~~primarily driven by~~and 2022, we realized initial cost-savings benefits from these relaunch efforts, but continued to face significant operating losses. Despite these cost-cutting efforts, the Company faced a ~~47% decrease~~challenging commercial market with continuing impacts from the global pandemic combined with ongoing delays in MMM projects and funding that continued to depress sales ~~year-over-year, offset slightly by an increase~~through 2021 while the Company invested in ~~sales~~exploring additional lines of our commercial products of 6%. The sales cycles for the MMM is dependent on many factors, including the availability and prioritization of government funding, the timing and fulfillment of U.S. Navy awards, new ship construction, diversion of funds to other government needs, and the timing of vessel maintenance schedules, and our financial results reflect volatility from fluctuationsbusiness with ultraviolet light disinfection technology that ultimately gained little traction in the ~~timing, pace~~market.

At the beginning of 2022, the Board of Directors appointed our lead independent director to serve as interim Chief Executive Officer and ~~size~~replace our previous chief executive officer. During 2022, the Company redoubled its cost-reduction efforts, reduced its warehouse square footage, undertook an inventory reduction project, and dramatically reduced head count. During 2022, we also added three experienced executives to our Board of ~~MMM projects. However,~~Directors with extensive lighting and consumer products industry experience, and in September 2022, we hired a permanent Chief Executive Officer. We reinvested in our MMM sales channel with a strategic hire in ~~the second quarter of~~May 2022 and continue to pursue these ~~opportunities. In our commercial markets, while we are beginning to see an uptick in customer projects and purchase commitments,~~sales opportunities, though the sales cycles ~~can range from several months to over one year and our financial results also reflect volatility from the continued fluctuations in the timing, pace and size of~~for what are frequently made-to-order products are longer than commercial ~~projects due to, among other reasons, the long-term effects on our customers of the coronavirus (“COVID-19”) pandemic.~~

We continue to monitor the impact of the COVID-19 pandemic on our customers, suppliers and logistics providers, and to evaluate governmental actions being taken in response to the pandemic. Global supply chain and logistics constraints are impacting our inventory purchasing strategy as we seek to manage both shortages of available components and longer lead times in obtaining components. Disruptions in global logistics networks are also impacting our lead times and ability to efficiently and cost-effectively transport products from our third-party suppliers to our facility. The significance and duration of the ongoing impact on us is still uncertain. Material adverse effects of the COVID-19 pandemic on market drivers, our customers, suppliers or logistics providers could significantly impact our operating results. We also plan to continue to actively follow, assess and analyze the long-term impact of the COVID-19 pandemic and stand ready to adjust our organizational structure, strategies, plans and processes to respond.

We launched our patented EnFocus™ powerline controls platform during the second quarter of 2020 and, despite the ongoing, significant delay and slowdown in our customers’ lighting projects following the impacts of the COVID-19 pandemic, we continue to receive positive feedback from the market through project specifications that are beginning to convert to larger volume orders. The EnFocus™ platform offers two immediately available product lines: EnFocus™ DM, which provides a dimmable lighting solution, and EnFocus™ DCT, which provides both a dimmable and color tunable lighting solution. EnFocus™ enables buildings to have dimmable, color tunable and circadian-ready lighting using existing wiring, without requiring additional data cables or any wireless communication systems, through a relatively simple upgrade with EnFocus™ switches and LED lamps. Our EnFocus™ powerline controls offer a more secure, affordable and environmentally sustainable solution compared with replacing entire lighting fixtures and incorporating additional wired or wireless communication.

At June 30, 2022, we had $0.9 million in cash and a total of $4.5 million of debt, net of discounts and unamortized debt costs. Total debt, net of discounts and unamortized debt costs, at June 30, 2022 included $1.2 million outstanding underWe launched our inventory financing facility (the “Inventory Facility”), $0.7 million outstanding under our receivables financing facility (the “Receivables Facility” and, together with the Inventory Facility, the “Credit Facilities”), $0.8 million outstanding on the 2021 Streeterville Note (as defined below) and $1.8 million outstanding on the 2022 Streeterville Note (as defined below). At June 30, 2022, we had additional availability of $1.3 million under the Inventory Facility and $0.3 million under the Receivables Facility, for a total of $1.6 million of additional availability. Previously, on April 20, 2021, we entered into an amendment to the Loan and Security Agreement governing the Inventory Facility (the “Inventory Loan Agreement”) to increase the maximum amount that may be available to the Company from $3.0 million previously to $3.5 million, subject to the borrowing base as set forth in the Inventory Loan Agreement.

Net sales of ~~$1.5~~$1.1 million for the second quarter of ~~2022~~2023 decreased ~~$0.6~~$0.4 million, or 29%, compared to second quarter of ~~2021~~2022 net sales of ~~$2.1~~$1.5 million, primarily driven by a decrease in ~~MMM~~commercial sales of $0.5 million, or ~~49%~~55%, ~~and a decrease~~that was partially offset by an increase in MMM sales of $0.1 million, or ~~10%,~~21%. MMM sales increased due to improved sales pipeline as management replaced the head of ~~commercial products sales.~~MMM sales mid-year 2022. The MMM sales cycle is prolonged and started to reverse its negative trend in the middle of the fourth quarter of 2022. Net ~~MMM~~commercial product sales decreased in the second quarter of ~~2022~~2023 compared to the same period in ~~2021, mainly~~2022, primarily due to the lack of availability ~~and prioritization of government project funding and the delayed timing of expected orders. The decrease~~ in high margin, high demand commercial product sales in the second quarter of 2022 reflects (i) volatility of sales to large institutional customers; (ii) fluctuations in the timing and pace of commercial projects, including where lead times extended into the subsequent quarter; and (iii) lingering macroeconomic supply chain impactsproducts as a result of ~~the COVID-19 pandemic.~~supply chain interruptions.

Gross profit was ~~$0.1~~$0.2 million, or ~~7.4%~~17% of net sales, for the second quarter of ~~2022.~~2023. This compares with gross profit of ~~$0.4~~$0.1 million, or ~~18.9%~~7% of net sales, in the second quarter of ~~2021.~~2022. The ~~year-over-year decrease~~period-over-period increase in gross profit was driven mainly by ~~(i)~~a favorable impact from lower ~~sales volume,~~fixed costs of $0.2 million, or 15% of net sales. The $0.1 million favorable impact from product mix was offset by an unfavorable impact of ~~$0.2~~$0.1 million ~~or 16% of~~from lower sales. Additionally, there was an overall net ~~sales; and (ii) an~~ unfavorable ~~product mix~~ impact ~~of approximately $0.3 million, or 20% of net sales. These decreases were offset by a favorable net impact of $0.2 million, or 11% of net sales,~~ from ~~our inventory reduction project, with~~ the change in inventory reserves ~~offset by the inventory scrap write-off. Gross profit for the second quarter of 2022 also included unfavorable freight-in variances~~ of $0.1 million, or 7% of net ~~sales. Gross profit for~~sales, versus the second quarter of ~~2021~~2022 which included ~~favorable price and usage variances for material and labor of $0.4 million, or 19% of net sales.~~a one-time adjustment from a scrap write-off.

Gross profit was $0.2 million, or 10% of net sales, for the first six months of 2023 compared to $0.1 million, or 2% of net sales, for the first six months of ~~2022 compared to $0.9~~2022. The year-over-year increase was driven by (i) a favorable $0.4 million decrease in fixed costs, or ~~20%~~18% of net sales, ~~for the first six months of 2021. The decrease~~which was ~~primarily related to (i)~~offset by an unfavorable impact from lower sales volume ~~which was an unfavorable impact~~ of ~~$0.5~~$0.4 million, or ~~13%~~18% of net sales; and (ii) ~~an unfavorable~~a favorable impact ~~from product mix~~ of ~~$0.6~~$0.1 million, or ~~17% of net sales. These decreases were offset by a favorable net impact of approximately $0.2 million, or 6%~~4% of net sales, from the change in inventory reserves ~~offset by~~which included a one-time adjustment taken during the ~~inventory scrap write-off. The gross profit for the first six months~~second quarter of 2022 ~~included unfavorable freight-in variances of $0.3 million, or 7% of net sales. Gross profit~~ for the first six months of 2021 included favorable price and usage variances for material and labor of $0.6 million, or 12% of net sales, and unfavorable inventory and warranty reserves recorded of $0.1 million, or 2% of net sales.a scrap write-off.

Product development expenses include salaries and related expenses, contractor and consulting fees, product development related legal fees, supplies and materials, as well as overhead, such as depreciation and facility costs. Product development costs are expensed as they are incurred.

Product development expenses were ~~$0.4~~$0.1 million for the second quarter of ~~2022,~~2023, down 5%58% from the second quarter of ~~2021.~~2022. Product development expenses in the second quarter of 2023 primarily relate to ~~the development~~customization of ~~our next generation of EnFocus~~TM ~~and RedCap~~® ~~products.~~

Selling, general and administrative expenses were ~~$2.0~~$1.1 million for the second quarter of ~~2022,~~2023, down ~~13%~~42% as compared to ~~$2.3~~$2.0 million in the second quarter of ~~2021.~~2022. The decrease in expenses from the second quarter of ~~2021~~2022 primarily relates to (i) a reduction of ~~$0.4~~$0.6 million in payroll and payroll related ~~expenses. Other drivers of the change in expense in the second quarter of 2022 versus the second quarter of 2021 were increases~~expenses due to reduced headcount; and (ii) a reduction of $0.1 million in ~~each of consulting fees and~~ trade show and other marketing ~~costs,~~expense. The decrease in expenses were partially offset by a ~~decrease of~~ $0.1 million increase in legal and professional ~~and filing fees.~~expenses.

Interest expense was ~~$0.3 million~~$69 thousand for the second quarter of ~~2022,~~2023, compared to interest expense of ~~$0.2 million~~$260 thousand for the second quarter of ~~2021.~~2022. The ~~increase~~decrease in interest expense is primarily related to interest ~~and amortization~~ attributable to an overall reduction in principal on the Inventory Facility (as defined below) and the 2022 Streeterville ~~Note.~~Note (as defined below), lower facility fees on the Inventory Facility and elimination of the Receivables Facility (as defined below), as well as the amortization of debt costs related to the Inventory Facility. The actual cash interest paid in ~~each of~~ the second quarter of ~~2022 and~~2023 was $10 thousand compared to $105 thousand in the second quarter of ~~2021 was $0.1 million.~~2022.

Interest expense was ~~$0.4 million~~$192 thousand for the first six months of ~~2022,~~2023, compared to interest expense of ~~$0.3 million~~$444 thousand for the first six months of ~~2021.~~2022. The ~~increase~~decrease in interest expense ~~was~~is primarily related to interest ~~and amortization~~ attributable to a promissory note we sold and issued to Streeterville Capital, LLC (“Streeterville”) in the ~~2022~~principal amount of approximately $1.7 million (the “2021 Streeterville ~~Note.~~Note”), as well as the amortization of debt costs related to the Credit Facilities (as defined below). The actual cash interest paid for each of the six months ended June 30, 2023 and 2022 was $70 thousand and ~~the six months ended June 30, 2021 was $0.2 million.~~$183 thousand, respectively.


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)


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


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


PART I - FINANCIAL INFORMATION
			Page
ITEM 1.	FINANCIAL STATEMENTS
	a.	Condensed Consolidated Balance Sheets as of June 30, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022	4
	b.	Condensed Consolidated Statements of Operations for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)	6

	c.	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)	7
	d.	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (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		2930
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		4041
ITEM 4.	CONTROLS AND PROCEDURES		4041

PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS		4142
ITEM 1A.	RISK FACTORS		4142
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		4142
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		4142
ITEM 4.	MINE SAFETY DISCLOSURES		4142
ITEM 5.	OTHER INFORMATION		4142
ITEM 6.	EXHIBITS		4243
	SIGNATURES		4445


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash	Cash	$	938	$	2,682	Cash	$	1,316	$	52
Trade accounts receivable, less allowances of $10 and $14, respectively		1,155		1,240
Trade accounts receivable, less allowances of $79 and $26, respectively						Trade accounts receivable, less allowances of $79 and $26, respectively	841		445
Inventories, net	Inventories, net	7,168		7,866		Inventories, net	5,304		5,476
Short-term deposits	Short-term deposits	501		712		Short-term deposits	630		592
Prepaid and other current assets	Prepaid and other current assets	847		924		Prepaid and other current assets	217		232

Receivable for claimed Employee Retention Tax Credit						Receivable for claimed Employee Retention Tax Credit	—		445
Total current assets	Total current assets	10,609		13,424		Total current assets	8,308		7,242

Property and equipment, net	Property and equipment, net	585		675		Property and equipment, net	60		76

Operating lease, right-of-use asset	Operating lease, right-of-use asset	1,316		292		Operating lease, right-of-use asset	1,034		1,180

Total assets	Total assets	$	12,510	$	14,391	Total assets	$	9,402	$	8,498

LIABILITIES	LIABILITIES					LIABILITIES
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	1,309	$	2,235	Accounts payable	$	2,908	$	2,204
Accrued liabilities	Accrued liabilities	199		265		Accrued liabilities	116		145
Accrued legal and professional fees	Accrued legal and professional fees	53		104		Accrued legal and professional fees	89		—
Accrued payroll and related benefits	Accrued payroll and related benefits	486		718		Accrued payroll and related benefits	268		261
Accrued sales commissions	Accrued sales commissions	55		57		Accrued sales commissions	32		76

Accrued warranty reserve	Accrued warranty reserve	315		295		Accrued warranty reserve	146		183
Deferred revenue		—		268

Operating lease liabilities	Operating lease liabilities	180		325		Operating lease liabilities	210		198

Finance lease liabilities		—		1

Promissory notes payable, net of discounts and loan origination fees						Promissory notes payable, net of discounts and loan origination fees	1,335		2,618
Related party promissory notes payable						Related party promissory notes payable	—		814

Streeterville - 2021 note, net of discount and loan origination fees		809		1,719
Streeterville - 2022 note, net of discount and loan origination fees		1,031		—

Credit line borrowings, net of loan origination fees	Credit line borrowings, net of loan origination fees	1,981		2,169		Credit line borrowings, net of loan origination fees	284		1,447

Total current liabilities	Total current liabilities	6,418		8,156		Total current liabilities	5,388		7,946


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


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


		Three months ended June 30,				Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net sales	Net sales	$	1,480	$	2,074	$	3,541	$	4,711	Net sales	$	1,055	$	1,480	$	1,985	$	3,541
Cost of sales	Cost of sales	1,371		1,681		3,458		3,765		Cost of sales	876		1,371		1,789		3,458
Gross profit	Gross profit	109		393		83		946		Gross profit	179		109		196		83

Operating expenses:	Operating expenses:									Operating expenses:
Product development	Product development	353		370		856		1,023		Product development	147		353		301		856
Selling, general, and administrative	Selling, general, and administrative	1,964		2,268		4,091		4,486		Selling, general, and administrative	1,132		1,964		2,198		4,091
Restructuring recovery		—		(3)		—		(22)

Total operating expenses	Total operating expenses	2,317		2,635		4,947		5,487		Total operating expenses	1,279		2,317		2,499		4,947
Loss from operations	Loss from operations	(2,208)		(2,242)		(4,864)		(4,541)		Loss from operations	(1,100)		(2,208)		(2,303)		(4,864)

Other expenses (income):	Other expenses (income):									Other expenses (income):
Interest expense		260		216		444		343
Gain on forgiveness of Paycheck Protection Program loan		—		—		—		(801)
Interest expense, net										Interest expense, net	69		260		192		444

Other income	Other income	—		—		(30)		—		Other income	(16)		—		(16)		(30)

Other expenses	Other expenses	18		15		29		32		Other expenses	14		18		21		29

Net loss	Net loss	$	(2,486)	$	(2,473)	$	(5,307)	$	(4,115)	Net loss	$	(1,167)	$	(2,486)	$	(2,500)	$	(5,307)

Net loss per common share - basic and diluted	Net loss per common share - basic and diluted									Net loss per common share - basic and diluted
Net loss	Net loss	$	(0.35)	$	(0.59)	$	(0.78)	$	(1.05)	Net loss	$	(0.42)	$	(2.43)	$	(0.98)	$	(5.45)

Weighted average shares of common stock outstanding:	Weighted average shares of common stock outstanding:									Weighted average shares of common stock outstanding:
Basic and diluted		7,166		4,211		6,803		3,913
Basic and diluted *										Basic and diluted *	2,766		1,024		2,539		973
* Shares outstanding for prior periods have been restated for the 1-for-7 reverse stock split effective June 16, 2023.										* Shares outstanding for prior periods have been restated for the 1-for-7 reverse stock split effective June 16, 2023.


	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, 2021	876	$	—	6,368	$	—		$	144,953	$	(3)	$	(138,741)	$	6,209


Issuance of common stock upon the exercise of warrants	—	—		85	—			—		—		—		—




Stock-based compensation	—	—		—	—			44		—		—		44
Net loss for the three months ended March 31, 2022	—	—		—	—			—		—		(2,821)		(2,821)
Balance at March 31, 2022	876	$	—	6,453	$	—		$	144,997	$	(3)	$	(141,562)	$	3,432
Issuance of common stock under employee stock option and stock purchase plans	—	—		45	—			5		—		—		5

Issuance of common stock and warrants	—	—		1,313	1			3,499		—		—		3,500

Offering costs on issuance of common stock and warrants	—	—		—	—			(334)		—		—		(334)





Stock-based compensation	—	—		—	—			54		—		—		54





Net loss for the three months ended June 30, 2022	—	—		—	—			—		—		(2,486)		(2,486)
Balance at June 30, 2022	876	$	—	7,811	$	1		$	148,221	$	(3)	$	(144,048)	$	4,171



	June 30, 2023		December 31, 2022		January 01, 2022
Gross Accounts Receivable	$	920	$	471	$	1,254
Less: Allowance for Doubtful Accounts	$	(79)	$	(26)	$	(14)
Net Accounts Receivable	$	841	$	445	$	1,240


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.


	~~2021~~
~~Balance at December 31, 2020~~	$	11

~~Payments~~	~~(11)~~
~~Balance at June 30, 2021~~	$	—


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Operating lease cost (income)
Sub-lease income	$	(56)	$	(37)	$	(81)	$	(62)
Lease cost	83		141		215		284
Operating lease cost, net	27		104		134		222

Restructured lease cost (income)
Sub-lease income	—		(68)		—		(136)
Lease cost	—		53		—		109
Restructured lease income, net	—		(15)		—		(27)





Total lease cost, net	$	27	$	89	$	134	$	195


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Operating Leases	Operating Leases					Operating Leases
Operating lease right-of-use assets	Operating lease right-of-use assets	$	1,316	$	292	Operating lease right-of-use assets	$	1,034	$	1,180

Operating lease liabilities	Operating lease liabilities	$	1,313	$	351	Operating lease liabilities	$	1,125	$	1,227

Finance Leases	Finance Leases					Finance Leases
Property and equipment	Property and equipment	13		13		Property and equipment	13		13
Allowances for depreciation	Allowances for depreciation	(13)		(12)		Allowances for depreciation	(13)		(13)
Finance lease assets, net	Finance lease assets, net	—		1		Finance lease assets, net	$	—	$	—

Finance lease liabilities		—		1
Total finance lease liabilities		$	—	$	1


At December 31, 2022
	G. Huang		J. Huang		J. Huang		G. Huang		J. Huang		J. Huang		T. Lin		Total
Date entered	September 16, 2022		October 25, 2022		November 4, 2022		November 9, 2022		December 6, 2022		December 21, 2022		December 31, 2022
Term	9 months		9 months		9 months		9 months		9 months		9 months		9 months
Principal amount	$450,000		$50,000		$250,000		$350,000		$200,000		$100,000		$50,000		$1,450,000
Maturity date	June 16, 2023		July 25, 2023		August 4, 2023		August 9, 2023		September 6, 2023		September 21, 2023		September 30, 2023
Interest rate	8	%	8	%	8	%	8	%	8	%	8	%	8	%
Default interest rate	10	%	10	%	10	%	10	%	10	%	10	%	10	%
Outstanding Amount	$460,455		$50,734		$253,123		$353,989		$201,096		$100,219		$50,011		$1,469,627


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Equipment (useful life 3 to 15 years)	Equipment (useful life 3 to 15 years)	$	1,111	$	1,308	Equipment (useful life 3 to 15 years)	$	1,061	$	1,061
Tooling (useful life 2 to 5 years)	Tooling (useful life 2 to 5 years)	414		384		Tooling (useful life 2 to 5 years)	190		190
Vehicles (useful life 5 years)		83		83
Furniture and fixtures (useful life 5 years)		86		86
Computer software (useful life 3 years)		1,144		1,194

Leasehold improvements (the shorter of useful life or lease life)	Leasehold improvements (the shorter of useful life or lease life)	142		169		Leasehold improvements (the shorter of useful life or lease life)	141		141
Finance lease right-of-use asset		13		13
UV - Robots (useful life 5 years)		105		105
Projects in progress		101		135

Property and equipment at cost	Property and equipment at cost	3,199		3,477		Property and equipment at cost	1,392		1,392
Less: accumulated depreciation	Less: accumulated depreciation	(2,614)		(2,802)		Less: accumulated depreciation	(1,332)		(1,316)
Property and equipment, net	Property and equipment, net	$	585	$	675	Property and equipment, net	$	60	$	76


	As of June 30, 2022	As of June 30, 2021
	Number of Underlying Shares		Exercise Price	Expiration
Investor Warrants	187,734	269,180	$3.3700	January 13, 2025
Placement Agent Warrants	41,680	41,680	$4.9940	January 13, 2025
	229,414	310,860


	As of June 30, 2023	As of June 30, 2022
	Number of Underlying Shares		Exercise Price	Expiration
Investor Warrants	26,819	26,819	$23.59	January 13, 2025
Placement Agent Warrants	5,954	5,954	$34.96	January 13, 2025
	32,773	32,773


	Six months ended June 30,
	2022			2021
Fair value of options issued	$	1.13		$	4.24
Exercise price	$	1.43		$	5.48
Expected life of options (in years)	6.1			6.2
Risk-free interest rate	2.0		%	0.8		%
Expected volatility	99.3		%	96.4		%
Dividend yield	0.0		%	0.0		%


	Number of Options	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)
Balance at December 31, 2021	267,109	$	3.46
Granted	65,680	1.43
Exercised	(250)	1.45
Canceled/forfeited	(109,122)	2.74

Balance at June 30, 2022	223,417	$	3.22	7.3

Vested and expected to vest at June 30, 2022	197,739	$	3.26	7.0

Exercisable at June 30, 2022	116,179	$	3.38	5.8


	Restricted Stock Units	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (in years)
Balance at December 31, 2021	2,400	$	7.14
Granted	40,000	1.40
Vested	(40,000)	1.40

Balance at June 30, 2022	2,400	$	7.14	8.2


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 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).
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 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~~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 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~~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 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~~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 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~~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 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~~3.8			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~~3.9			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~~3.10			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~~3.11			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~~3.12			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~~3.13			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).
3.14			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).
~~3.13~~			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~~			~~Form of Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Annual Report on Form 10-K filed on June 6, 2022).~~
10.1			~~Note~~Securities Purchase Agreement, dated as of ~~April 21, 2022 by and~~June 29, 2023, between the Company and ~~Streeterville Capital, LLC~~each purchaser named in the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on ~~April 25, 2022).~~
~~10.2~~			Promissory Note, dated as of April 21, 2022 by and between the Company and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on April 25, 2022).
~~10.3+~~			~~Separation Agreement and Release, dated as of May 20, 2022, between the Company and Tod A. Nestor.~~
~~10.4~~			Securities Purchase Agreement, dated as of June 3, 2022 by and between the Company and Certain Investors (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 6, 2022).
~~10.5~~			Registration Rights Agreement dated as of June 3, 2022 by and between the Company and Certain Investors (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on From 8-K filed on June 6, 2022).
~~10.6~~			Amended and Restated Energy Focus, Inc. 2020 Stock Incentive Plan, dated as of June 22, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on From 8-K filed on June 24, 2022)July 5, 2023).
31.1+			Certification of Principal ~~Exe~~c ~~utive~~Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1++			Certification of Principal Executive Officer and ~~Principal~~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, ~~2022,~~2023, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, (iii) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, (v) Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, and (vi) the Notes to Condensed Consolidated Financial Statements.
*104			Cover Page Interactive Data File (embedded within the Inline XBRL document)


			ENERGY FOCUS, INC.

Date:	August ~~11, 2022~~10, 2023	By:	/s/ ~~Stephen Socolof~~Lesley A. Matt
			~~Stephen Socolof~~Lesley A. Matt
			~~Chairman and Interim~~ Chief Executive Officer
			(Principal Executive Officer and Principal Financial Officer)