What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-24 compared with 2025-03-25 · 85 added, 75 removed, 137 unchanged (54% of the section changed)

4 unchanged sentences

We develop, market and sell high-quality light-emitting diode (“LED”) lighting and controls products in the commercial market and military maritime market (“MMM”).

In addition to our lighting portfolio, we also offer UPS systems and other power management solutions, which have contributed meaningfully to our revenue in recent quarters and are expected to be a strategic area of continued growth.

Our mission is to enable our customers to run their facilities with greater energy efficiency, productivity, and human health and wellness through advanced LED retrofit solutions.

1 unchanged sentence

We specialize in energy efficient LED lighting retrofit product, 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.

We are also evaluating additional adjacent technologies, including GaN based power supplies and other energy solution products that support sustainability in our existing channels.

The LED lighting industry has changed dramatically over the past several years due to increasing competition and price erosion.

5 unchanged sentences

Specific examples of these products we have developed include the RedCap®, our patented emergency backup battery integrated TLED, as well as our robust MMM product offering.

The Company has enhanced the performance of our RedCap® product providing a more user- friendly experience.

We continue to evaluate our sales strategy and believe our go-to-market strategy that focuses more on direct-sales marketing, selectively expanding our channel partner network to cover territories across the country, and listening to the voice of the customer will lead to better and more impactful product development efforts that we believe will eventually translate into larger addressable markets and greater sales growth for us.

The Company has enhanced the performance of our RedCap® product by providing a more user- friendly experience.

Since 2023, the Company has continued to make significant cost cutting efforts to address operational expenses while maintaining customer satisfaction and delivering goods on-time.

4 unchanged sentences

Our business expansion plans are supported by financial strategies that we expect will provide funding for our planned growth initiatives, although there can be no assurance that such funding will be adequate.

During 2024, our MMM business faced ongoing challenges due to delays in government funding and the timing of U.S.

Several anticipated projects encountered repeated postponements, further complicated by the long sales cycles typical in this sector.

Since 2024, our MMM business faced ongoing challenges due to delays in government funding and the timing of U.S.

Several anticipated projects encountered repeated postponements.

In addition, we face challenges from long sales cycles, which is typical in this sector.

The timeline from bid submission to order placement often exceeds six months, and many MMM products are built-to-order, resulting in extended lead times before revenue recognition.

1 unchanged sentence

Navy and other government sectors.

We have undertaken efforts to reduce costs and improve production efficiencies in MMM product lines which we believe have contributed to our competitiveness, and may have helped us secure new contracts and expand our sales pipeline in the latter half of 2024.

We intend to focus on developing our commercial product offerings, including planned new product lines such as Energy Storage Systems (ESS), GaN Power Supplies, and UPS systems for data centers, while continuing to leverage the stability and opportunities within our MMM business.

We have undertaken efforts to reduce costs, which we believe have

contributed to our competitiveness, and may have helped us secure new contracts and expand our sales pipeline in the remainder of 2025 and beyond.

We are actively expanding our commercial product offerings, including our newly introduced UPS systems for data centers.

We also continue to advance the expansion of product lines such as ESS and GaN based power supplies, while leveraging the stability and opportunities within our MMM business.

In 2024, we conducted a comprehensive review of our commercial pricing strategy and reassessed key partnerships within the energy-related market.

2 unchanged sentences

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

The strategic investments in 2023 and 2024 by Sander Electronics, Inc.

The strategic investments in 2024 by Sander Electronics, Inc.

(“Sander”), a shareholder of the Company, contributed meaningful external capital, as well as presented synergistic opportunities to improve and diversify our supply chain and product offerings.

2 unchanged sentences

We continue to incur losses and we have a substantial accumulated deficit, which continues to raise substantial doubt about our ability to continue as a going concern at December 31, 2025.

While we have made progress in reducing our net loss from $1.6 million in 2024 to $1.0 million in 2025 and improving our cash position from $0.6 million to $1.1 million, we continue to incur operating losses and have a substantial accumulated deficit of $155.9 million.

Based on our current capital resources and projected cash requirements for ongoing operations, substantial doubt about our ability to continue as a going concern continues to exist as of December 31, 2025.

We are actively pursuing additional sources of capital, including equity financings, debt financings, and strategic partnerships, to fund operations and support future growth.

However, there can be no assurance that such financing will be available on acceptable terms, or at all.

Our Business Strategy

15 unchanged sentences

Under the premise of a similar industrial environment and familiar relationships, our professional skills complement those of our supply chain partners.

We believe this foundation of cooperation may enable us to pursue common goals of cost reduction, profit sharing, and exploring new business opportunities.

We believe this foundation of cooperation may enable us to pursue common goals of cost reduction,

profit sharing, and exploring new business opportunities.

This not only strengthens our cooperative relationship but also lays a solid foundation for our joint efforts towards a better future.

16 unchanged sentences

Results of operations

The following table sets forth the percentage of net sales represented by certain items reflected on our Consolidated Statements of Operations for the following periods:

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

Net sales 100.0 % 100.0 %

Cost of sales 81.1 85.6

Gross profit (loss) 14.4 3.9

Gross profit 18.9 14.4

Operating expenses:

3 unchanged sentences

Loss from operations (28.8) (37.9)

Other expenses:

Other expenses (income):

Interest income (0.1) —

2 unchanged sentences

Gain on partial lease termination (0.1) (1.3)

Gain on disposal of fixed assets (0.1) —

Other income — (0.6)

Other expenses, net 0.2 0.4

Other expenses 0.4 0.2

Net loss before income taxes (28.8) (32.5)

Benefit from income taxes 0.1 0.1

Provision for income taxes — —

Net loss (28.8) % (32.5) %

A further breakdown of our net sales by product line is as follows (in thousands):

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

Commercial products $ 1,536 $ 1,390

MMM products 1,989 3,470

Setup Service 35 —

Total net sales $ 3,560 $ 4,860

Our net sales of $4.9 million in 2024 decreased 15% compared to 2023, mainly driven by a decrease of 16% in MMM sales and a decrease of 13% in commercial sales.

The decrease in net MMM product sales in 2024 as compared to 2023 was mainly due

to a significant reduction in military demand toward the end of the year, driven by the impact of the U.S.

election cycle.

Net sales of our commercial products decreased in 2024 due to the effects of annual market cycles, high inflation, and our sales strategy, which reduced the proportion of commercial sales, along with market-adjusted pricing.

Gross profit (loss)

Gross profit was $0.7 million, or 14% of net sales, for 2024, compared with gross profit of $0.2 million, or 4% of net sales for 2023.

The increase in gross margin was mainly driven by a 2% of net sales decrease in fixed costs such as subscription fee, expenses related to rent expense for production, a 16% of net sales decrease in variable costs such as material cost and freight in expense, and an 8% of net sales unfavorable change in inventory reserves.

The reduction in warehouse space following the new lease agreement in July 2024 required both significant disposal of highly reserved, excess and obsolete inventory and a focus on selling inventory on hand throughout 2024.

As a result of our initiatives of inventory management enhancement, we sold some inventory below cost.

This resulted in a net decrease of our gross inventory levels of $0.9 million and a net decrease of excess and obsolete inventory reserves of $2.2 million as co mpared to 2023 .

Net sales of $3.6 million in 2025 decreased $1.3 million, or 27% compared to 2024, primarily driven by a decrease of 43% in MMM sales and an increase of 11% in commercial sales.

The net sales decrease of MMM products sales in 2025 was primarily due to delays in military customer procurement and project execution related to federal budget approval timing.

The increase in commercial sales was primarily driven by a $0.5 million UPS project delivered to a new customer in Taiwan, representing approximately 36% of commercial sales in 2025.

While the project may represent a recurring revenue opportunity, future orders remain subject to customer requirements and timing.

Gross profit was $0.7 million, representing 19% of net sales in 2025, compared with gross profit of $0.7 million, or 14% of net sales in 2024.

The year-over-year improvement in gross profit was driven mainly by a sustained reduction in the use of temporary outside labor and lower fixed costs, such as subscription fees and rent expense for production.

Operating expenses

Product development

Product development expenses include salaries and related benefits, product testing and related costs, travel, supplies, as well as overhead items, such as depreciation and facilities costs.

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

Product development costs are expensed as they are incurred.

Gross product development expenses were $0.5 million in 2024, a decrease of 11%, compared to $0.6 million in 2023.

The $0.1 million decrease primarily resulted from lower payroll-related expenses due to a reduction in headcounts of $0.9 million.

This was partially offset by a $0.4 million increase in travel expenses and a $0.4 million increase in product testing, R&D supplies, and dues.

During 2024, the Company terminated several employees, and the result was a significant reduction in payroll-related expenses.

Product development expenses were $0.4 million in 2025, a decrease of 21%, compared to $0.5 million in 2024.

The $0.1 million decrease primarily resulted from lower payroll-related expenses resulting from structure optimization, as well as lower product testing and R&D supplies expenses.

Selling, general, and administrative

Selling, general, and administrative expenses were $1.3 million, or 36% of net sales in 2025, compared to $2.0 million, or 42% of net sales in 2024.

The year-over-year $1.6 million decrease is comprised of a combination of a $0.9 million decrease from a reduction in headcount for salaries, severance, and commissions, a $0.1 million decrease from a reduction of software costs, a $0.8 million decrease from consultant and professional fees, and remaining from a decrease of all other general expenses.

The $0.7 million decrease is primarily due to reductions in consultant fees of $0.3 million, $0.1 million in rent fees, $0.1 million in insurance fees, and $0.1 million in director fees.

Other expenses (income)

Interest expenses (income)

We incurred $5 thousand in interest expenses compared to interest expenses of $380 thousand in 2023.

Interest expenses primarily related to the interest on promissory notes in the principal amounts of $2 million (the “2022 Streeterville Note”) the Company sold and issued to Streeterville pursuant to separate note purchase agreements.

The decrease is primarily related to early termination of the 2022 Streeterville Note.

There was no interest expense in 2025, compared to interest expense of $5 thousand in 2024.

The decrease is primarily related to interest attributable to the 2022 Streeterville Note.

There was no actual cash interest paid in 2025 compared to $5 thousand in 2024.

Gain on debt extinguishment

We recognized $187 thousand of gain on debt extinguishment in 2024, which was related to the early termination of the 2022 Streeterville Note.

We recognized an $187 thousand gain on debt extinguishment in the first quarter of 2024, which was related to the early termination of the 2022 Streeterville Note.

There was no such gain recognized in 2025.

Gain on partial lease termination

We recognized $63 thousand of gain on partial lease termination in 2024, which was related to the early termination of the office lease.

We recognized $2 thousand and $63 thousand of gain on partial lease terminations in 2025 and 2024, which were related to early terminations of the office lease.

Gain on disposal of fixed assets

We recognized $3 thousand of gain on sales of fixed assets in 2025, which was related to a one-time resale of a software license package to a related party customer as part of a specific project.

There was no such gain recognized in 2024.

See Note 14 “Related Party Transactions” included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report for further information.

Other income and expenses

We recognized other income of $27 thousand and $30 thousand each in 2024 and 2023, respectively.

Other income in 2024 and 2023 primarily consisted of tax refunds and miscellaneous adjustments from accounts receivable.

Other income was less than $1 thousand in 2025, compared to other income of $27 thousand in 2024.

Such other income is related to receipts of unclaimed property from vendors for previous payments.

We recognized other expenses of $10 thousand in 2025, compared to other expenses of $12 thousand in 2024.

Other expenses in 2024 and 2023 primarily consisted of bank and collateral management fees.

Other expenses are mainly composed of bank and collateral management fees.

We recognized a non-cash loss of approximately $8 thousand on the settlement of returning inventory, cancelling prepayments made to the vendor, and settlement of outstanding accounts payables in the second quarter of 2025.

Provision for income taxes

For each of the years ended December 31, 2025 and 2024, our effective tax rate was 0%.

In 2024, our effective tax rate was lower than the statutory rate due to an increase in the valuation allowance as a result of the $3.4 million additional federal net operating loss we recognized for the year.

In 2023, our effective tax rate was lower than the statutory rate due to an increase in the valuation allowance as a result of the $6.3 million additional federal net operating loss we recognized for the year.

In 2025, our effective tax rate was lower than the statutory rate due to a full valuation allowance as a result of the $1.1 million additional federal net operating loss we recognized for the year.

In 2024, our effective tax rate was lower than the statutory rate due to a full valuation allowance as a result of the $3.4 million additional federal net operating loss we recognized for the year.

Deferred income tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred income tax assets will not be realized.

In considering the need for a valuation allowance, we assess all evidence, both positive and negative, available to determine whether all or some portion of the deferred tax assets will not be realized.

Such evidence includes, but is not limited to, recent earnings history, projections of future income or loss, reversal patterns of existing taxable and deductible temporary differences, and tax planning strategies.

evidence includes, but is not limited to, recent earnings history, projections of future income or loss, reversal patterns of existing taxable and deductible temporary differences, and tax planning strategies.

We have recorded a full valuation allowance against our deferred tax assets at December 31, 2025 and 2024, respectively.

2 unchanged sentences

Please refer to Note 11, “Income Taxes” included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report for further information.

Net loss was $1.6 million for 2024.

This compares with a net loss of $4.3 million for 2023, mainly driven by reduction of cost of goods sold, product development, selling, general, and administrative expenses as well as interest expenses.

For 2025, our net loss of $1.0 million decreased 35% from $1.6 million net loss for 2024.

The decrease is primarily due to a decrease in cost of goods sold as well as operating expenses.

Financial condition

1 unchanged sentence

We have historically incurred substantial losses, and as of December 31, 2025, we had an accumulated deficit of $155.9 million.

Additionally, our sales have been concentrated among a few major customers and for the twelve months ended December 31, 2024, two customers collectively accounted for approximately 33% of net sales.

In 2024 and 2023, we recommitted to building upon the transformation activities started during 2019 that sought to stabilize and regrow our business.

Additionally, our sales have been concentrated among a few major customers.

For the twelve months ended December 31, 2025, three customers accounted for approximately 48% of net sales.

In 2025 and 2024, we remain committed to building upon the initiatives started during 2019 that sought to stabilize and regrow our business.

These efforts include the following key developments that occurred during 2025 and 2024:

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

• We aggressively re-evaluated operating expenses and reduced its workforce significantly throughout 2023 and into 2024 to manage fixed costs.

• We re-evaluated operating expenses and reduced our workforce significantly throughout 2024 and into 2025 to manage fixed costs.

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

1 unchanged sentence

We will seek to remain agile as an organization to respond to potential or continuing weakness in the macroeconomic environment and in the meantime seek to expand sales channels and enter new markets that we believe will provide additional growth opportunities.

We plan to achieve profitability through developing and launching new, innovative products, our Redcap® emergency battery backup tubular TLEDs, evaluating new growth opportunities such as GaN-based power supply circuitry and other energy solution products, as well as executing on our multi-channel sales strategy that targets key verticals, such as government, healthcare, education and commercial and industrial, complemented by our marketing outreach campaigns and expanding channel partnerships.

We plan to improve profitability through developing and launching new, innovative products, UPS systems, our Redcap® emergency battery backup tubular TLEDs, evaluating new growth opportunities such as GaN-based power supply circuitry and other energy solution products, as well as executing on our multi-channel sales strategy that targets key verticals, such as government, healthcare, education and commercial and industrial, complemented by our marketing outreach campaigns and expanding channel partnerships.

In addition, we intend to continue to apply rigorous financial discipline in our organizational structure, decision-making, business processes and policies, strategic sourcing activities and supply chain practices to help accelerate our path towards profitability.

1 unchanged sentence

At December 31, 2025, our cash balance was $1.1 million, compared to $0.6 million at December 31, 2024.

• As of December 31, 2025, we held total cash of $1.1 million, of which approximately $0.3 million was maintained in a bank account in Taiwan, with the remaining $0.8 million in bank accounts in the United States.

These funds support the operations of our wholly owned Taiwanese branch and are denominated in NTD.

• The ability to access this cash for general corporate purposes in the United States may be subject to foreign exchange controls, local banking regulations, or unfavorable tax consequences.

While there are currently no formal restrictions on the transfer of funds from Taiwan to the United States, repatriation of these funds may result in foreign withholding taxes or other costs, which could impact our overall liquidity.

As such, our ability to deploy foreign cash for domestic use may be limited or delayed.

• Management believes our current cash position and operating cash flows are sufficient to meet near-term working capital needs in both domestic and foreign jurisdictions.

The following is a summary of cash flows from operating, investing, and financing activities, as reflected in the Consolidated Statements of Cash Flows (in thousands):

1 unchanged sentence

Net cash used in investing activities $ (197) $ (19)

Proceeds from the issuance of common stock and warrants $ 851 $ 6,079

Costs related to reverse stock-split — (16)

Payments on the 2022 Streeterville Note (1,000) (625)

Net payments on credit line borrowings - Credit Facilities — (1,402)

Advanced capital contribution — 450

Net cash (used in) provided by financing activities $ (149) $ 4,486

Net cash provided by (used in) financing activities $ 2,100 $ (149)

Net cash used in operating activities

Net cash used in operating activities of $1.3 million in 2024 resulted primarily from the net loss incurred of $1.6 million, adjusted for non-cash items, including:

depreciation and amortization of $42 thousand, stock-based compensation, net of $4 thousand, non-favorable provisions from inventory of $347 thousand, favorable provisions for accounts receivable reserves of $69 thousand, and favorable provisions for warranties of $32 thousand.

We used $128 thousand through a decrease of other accrued liabilities.

We generated $1.0 million in cash through collection of accounts receivable, $0.8 million from a reduction of inventory, and $0.3 million from an increase in accounts payable due to the timing of inventory receipts and payments.

We paid off approximately $1.2 million in accounts payable to a related party.

Net cash used in operating activities of $2.4 million in 2023 resulted primarily from the net loss incurred of $4.3 million, adjusted for non-cash items, including:

depreciation and amortization of $258 thousand, stock-based compensation, net of $44 thousand, non-favorable provisions from inventory of $25 thousand and from accounts receivable of $6 thousand, and favorable provisions from warranty of $33 thousand and gain from paid-off of Credit Facilities of $40 thousand.

We used $1.1 million through the timing of collection of accounts receivable, $200 thousand for prepayments to vendors, and $47 thousand through a decrease of other accrued liabilities.

We generated $580 thousand in cash for an increase in accounts payable due to the timing of inventory receipts and payments, $521 thousand from the change in prepaid and other current assets, and $1.0 million in inventory as we sold off a substantial portion of the stock on hand.

Net cash used in operating activities was $1.4 million for the year ended December 31, 2025.

The net loss for 2025 was $1.0 million and was adjusted for non-cash items, including depreciation and amortization, stock-based compensation, provisions from inventory, warranty, accounts receivable reserves and working capital changes.

During 2025, major adjustments included cash generated from $0.3 million from collection of accounts receivable, which is partially offset by $0.3 million change in inventory, $0.1 million change in accounts payable and $0.5 million change in related party accounts payable due to timing inventory receipts and payments.

Net cash used in operating activities was $1.3 million for the year ended December 31, 2024.

The net loss for 2024 was $1.6 million and was adjusted for non-cash items, including depreciation and amortization, stock-based compensation, provisions for inventory, warranty, and accounts receivable reserves and working capital changes.

During 2024, major adjustments included cash generated from $1.0 million from collection of accounts receivable, and $0.8 million from inventory, which is partially offset by $0.2 million change in accounts payable and $1.2 million change in related party accounts payable due to timing of inventory receipts and payments.

Cash used in investing activities

Net cash used in investing activities was $19 thousand in 2024, primarily from the acquisition of property and equipment.

Net cash used in investing activities was $69 thousand in 2023, primarily from the acquisition of property and equipment.

Net cash used in investing activities was $197 thousand and $19 thousand for the years ended December 31, 2025 and 2024, respectively, primarily from the acquisition of property and equipment and advances for investment in a joint venture, which was partially offset by proceeds from the sale of property and equipment.

Cash provided by financing activities

Net cash provided by financing activities for the year ended December 31, 2024 of $0.1 million, primarily resulted from $0.9 million of net proceeds from the issuance of common stock, offset by net payments of $1.0 million on the 2022 Streeterville Note.

Net cash provided by financing activities for the year ended December 31, 2023 of $4.5 million primarily resulted from the proceeds from the issuance of common stock and warrants of $6.1 million and advanced capital contribution of $0.5 million.

The increases in cash were partially offset by payments on the 2022 Streeterville Note of $0.6 million and Credit Facilities of $1.4 million.

Net cash provided by financing activities for the year ended December 31, 2025 of $2.1 million, reflecting $2.1 million of net proceeds from the issuance of common stock.

Net cash used in financing activities was $0.1 million for the year ended December 31, 2024, primarily related to $0.9 million of net proceeds from the issuance of common stock, offset by $1.0 million related to net payments of the 2022 Streeterville Note.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements during the years ended December 31, 2024 and 2023.

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Contractual and other obligations

As of December 31, 2024, we have approximately $0.3 million in outstanding purchase commitments for inventory, of which the majority is expected to ship in the first quarter of 2025.

We have 88% of the outstanding purchase commitments with a related party.

As of December 31, 2023, we had approximately $0.5 million in outstanding purchase commitments for inventory, of which the majority is expected to ship in the first quarter of 2024.

We had 49% of the outstanding purchase commitments with a related party.

Please refer to Note 9 “Purchase Commitments” included under Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.

Foreign currency exchange risk

Because we maintain operations and cash balances in Taiwan, we are exposed to fluctuations in the New Taiwan dollar (NTD) exchange rate relative to the U.S.

Changes in exchange rates can affect the reported value of our foreign cash balances, revenues, and expenses, as well as result in transaction gains or losses on intercompany and third-party balances.

As of December 31, 2025, we had a net NTD exposure of approximately $439 thousand, consisting of NTD cash of $326 thousand, and NTD-denominated accounts receivable of $113 thousand.

In addition, we held approximately $156 thousand in JPY denominated advances for investment in a joint venture related to our Japan ESS initiative.

For 2025, we recognized a net foreign currency transaction gain of approximately $20 thousand.

We do not currently employ financial instruments to hedge our foreign currency exposure.

We continue to monitor our NTD and JPY exposure and may consider hedging strategies in the future if our foreign currency risk increases materially.

Critical accounting policies and estimates

3 unchanged sentences

• revenue recognition,

• allowances for doubtful accounts, returns and discounts,

• allowances for credit losses, returns and discounts,

• product warranty reserve,

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis