What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-24 compared with 2025-03-25 · 305 added, 302 removed, 535 unchanged (53% of the section changed)

4 unchanged sentences

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2025 and 2024

Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2024 and 2023

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025 and 2024

Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024

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AS OF DECEMBER 31,

(amounts in thousands except share data)

(in thousands, except share and per share amounts)

Current assets:

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Trade accounts receivable, less allowances of $ 33 and $ 15 , respectively

Trade accounts receivable - related party — 202

Inventories, net 2,930 3,263

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Operating lease, right-of-use asset 207 377

Advance for investment in joint venture 156 —

Total assets $ 5,109 $ 5,612

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Operating lease liabilities 139 139

Promissory notes payable, net of discounts and loan origination fees — 1,323

Advanced capital contribution — 450

Total current liabilities 922 2,443

(continued on the following page)

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

(continued on the next page)

ENERGY FOCUS, INC.

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AS OF DECEMBER 31,

(amounts in thousands except share data)

(in thousands, except share and per share amounts)

Operating lease liabilities, net of current portion 78 254

Total liabilities 1,000 2,697

STOCKHOLDERS' EQUITY (DEFICIT)

STOCKHOLDERS' EQUITY

Preferred stock, par value $ 0.0001 per share:

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FOR THE YEARS ENDED DECEMBER 31,

(amounts in thousands except per share data)

(in thousands, except per share amounts)

Net sales $ 3,560 $ 4,860

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Gain on partial lease termination ( 2 ) ( 63 )

Gain on disposal of fixed assets ( 3 ) —

Other income — ( 27 )

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FOR THE YEARS ENDED DECEMBER 31,

(amounts in thousands)

(in thousands)

Net loss $ ( 1,027 ) $ ( 1,582 )

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ENERGY FOCUS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

((amounts in thousands except share data))

(in thousands)

Capital Accumulated

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Shares Amount Shares Amount Total

Balance at December 31, 2022 876 $ — 1,407 $ 1 $ 148,545 $ ( 3 ) $ ( 149,020 ) $ ( 477 )

Balance at January 1,2024 876 $ — 4,349 $ — $ 156,369 $ ( 3 ) $ ( 153,315 ) $ 3,051

Issuance of common stock — — 818 1 1,300 — — 1,301

Stock issued in exchange transactions — — 465 — 1,716 — — 1,716

Par value adjustment due to reverse stock split — — — ( 2 ) 2 — — —

Reduction in equity due to costs from reverse stock split — — — — ( 16 ) — — ( 16 )

Conversion of advanced capital contribution to common stock — — 94 — 141 — — 141

Stock-based compensation — — — — 4 — — 4

Impact of adoption of ASU 2016-13 - CECL — — — — — — ( 2 ) ( 2 )

Net loss — — — — — — ( 1,582 ) ( 1,582 )

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Issuance of common stock — — 1,002 — 2,100 — — 2,100

Conversion of advanced capital contribution to common stock — — 94 — 141 — — 141

Stock-based compensation — — — — 4 — — 4

Shares issued as stock-based compensation — — 43 — 121 — — 121

Net loss — — — — — — ( 1,027 ) ( 1,027 )

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FOR THE YEARS ENDED DECEMBER 31,

(amounts in thousands)

(in thousands)

Cash flows from operating activities:

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Adjustments to reconcile net loss to net cash used in operating activities:

Other income — ( 40 )

Foreign exchange loss 1 —

Loss on settlement of vendor obligations 8 —

Gain on partial lease termination ( 2 ) ( 63 )

Gain on debt extinguishment — ( 187 )

Gain on disposal of fixed assets ( 3 ) —

Depreciation 37 37

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Accounts receivable 266 1,037

Accounts receivable - related party — ( 202 )

Inventories ( 262 ) 829

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Acquisitions of property and equipment ( 54 ) ( 19 )

Proceeds from the sale of property and equipment 13 —

Advance for investment in joint venture ( 156 ) —

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

Cash flows from financing activities:

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

Costs related to reverse stock-split — ( 16 )

Issuance of common stock 2,100 851

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

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

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

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ENERGY FOCUS, INC.

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(amounts in thousands)

Net (decrease) increase in cash ( 1,465 ) 1,978

Effect of exchange rate changes on cash — —

Net increase (decrease) in cash 499 ( 1,465 )

Cash, beginning of year 565 2,030

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

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

Our mission is to enable our customers to run their facilities with greater energy efficiency;

and productivity, and increased human health and wellness through advanced LED retrofit solutions.

Our goal is to be the human wellness lighting and LED technology and market leader for the most demanding applications where performance, quality, value, environmental impact and health are considered paramount.

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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.

Additionally, we have expanded product offerings into both Maritime lighting and Energy Storage Solutions ( “ESS”).

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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 pursuing cost-saving measures to enhance profitability.

Additionally, global supply chain and logistics constraints and the ongoing evolution of international trade policies are impacting our inventory purchasing strategy, as we seek to manage both shortages of available components and longer lead times in obtaining components while pursuing cost-effectiveness measures to enhance profitability.

As a result, we will continue to review and pursue selected external funding sources to ensure adequate financial resources to execute across the timelines required to achieve these objectives including, but not limited to, the following:

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

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

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

Considering both quantitative and qualitative information, we continue to 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

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

Nasdaq Capital Market Compliance

As of the date of this Annual Report, the Company believes it has maintained compliance with the Minimum Stockholders’ Equity Rule, which requires listed companies to maintain stockholders’ equity of at least $ 2.5 million for continued listing on the Nasdaq Capital Market.

To become compliant with the Bid Price Rule, which has a minimum bid price of at least $ 1.00 per share as one of its continued listing requirements, the Company effected a 1-for-7 reverse stock split to increase the per share trading price of the common stock, effective June 16, 2023 (See Note 9, “Stockholders’ Equity”).

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.

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.

If the Company fails to maintain compliance with Nasdaq’s continued listing standards, the Company’s common stock will be subject to delisting from Nasdaq.

Use of estimates

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Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may vary from the estimates.

Estimates include, but are not limited to, the expected credit loss provision, inventory obsolescence and warranty claims, the determination of the useful lives of property and equipment, valuation of long-lived assets, allowance for deferred tax assets, sales returns and stock-based compensation.

Estimates include, but are not limited to, the establishment of credit losses allowance for accounts receivable, sales returns, inventory obsolescence and warranty claims, the useful lives of property and equipment, valuation allowance for net deferred taxes, and stock-based compensation.

In addition, estimates and assumptions associated with the determination of the fair value of financial instruments and evaluation of long-lived assets for impairment require considerable judgment.

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Sales taxes assessed by governmental authorities and collected by us are accounted for on a net basis and are excluded from net sales.

A disaggregation of product net sales is presented in Note 11, “Product and Geographic Information.”

Accounts Receivable and Allowance for Credit Losses

We also generate revenue from services.

Service revenue primarily consists of system configuration and setup services performed in connection with customer orders.

These services are typically completed at or near the time of product shipment, are distinct from the related product sales and are accounted for as separate performance obligations, and revenue is recognized at a point in time when the service is rendered.

A disaggregation of product and service net sales is presented in Note 12, “Product and Geographic Information.”

Accounts Receivable

Our trade accounts receivable consists of amounts billed to and currently due from customers.

Substantially all 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.

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We maintain allowances for sales returns and credit losses to provide for the estimated number of account receivables that will not be collected.

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

The Company has determined that accounts receivable fall within the scope of the Current Expected Credit Losses

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

losses rather than incurred losses.

This standard only impacts the Company’s trade receivables.

(“CECL”) analysis in accordance with ASC 326.

The Company decided to use the historical loss rate method of valuing its reserve for trade receivables.

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December 31, 2025 December 31, 2024 January 1, 2024

Accounts Receivable $ 819 $ 1,590 $ 471

Reserve for Credit Losses

( 15 ) ( 20 ) ( 26 )

Gross Accounts Receivable $ 559 $ 819 $ 1,590

Allowance for Credit Losses ( 33 ) ( 15 ) ( 20 )

Net Accounts Receivable $ 526 804 1,570

Activity related to our reserve for credit losses was as follows (in thousands):

Activity related to our allowance for credit losses for the years ended December 31, 2025 and 2024 was as follows (in thousands):

Allowance for credit losses as of January 1, 2024 $ ( 20 )

Cumulative effect of the implementation of ASC 326 ( 2 )

Reserve for credit losses as of December 31, 2023

Prior year reclassification of sales returns out of allowance for credit losses

Reduction of reserve for credit losses for the year ended December 31, 2024 5

Allowance for credit losses as of December 31, 2024 ( 15 )

Reduction of reserve for credit losses as of December 31, 2024

Increase in reserve for credit losses for the year ended December 31, 2025 ( 18 )

Allowance for credit losses as of December 31, 2025 $ ( 33 )

1 unchanged sentence

All our long-lived fixed assets are located in the United States.

For the years ended December 31, 2024 and 2023, approximately 100 % of sales were attributable to customers in the United States.

For the twelve months ended December 31, 2025 and 2024, approximately 83 % and 100 % of sales were attributable to customers in the United States, respectively, and 17 % and 0 %, were attributable to customers outside the United States, respectively.

The geographic location of our net sales is derived from the destination to which we ship the product.

Cash consists of investments in money market funds and deposits with banks.

At December 31, 2024 and 2023, we had cash of $ 0.6 million and $ 2.0 million, respectively, on deposit with financial institutions located in the United States.

At December 31, 2025 and 2024, we had cash of $ 1.1 million and $ 0.6 million, respectively, on deposit with financial institutions located in the United States and Taiwan.

Our cash balances in U.S.

banks may at times exceed federally insured limits;

however, we place our deposits with high‑quality financial institutions and have not experienced any losses.

Cash held in Taiwan is maintained with local financial institutions and is not insured by U.S.

federal agencies.

We monitor the credit quality of these institutions and have not experienced losses on such deposits.

We state inventories at the lower of standard cost (which approximates actual cost determined using the first-in, first-out method) or net realizable value.

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The assessment is both quantitative and qualitative.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As part of the process of preparing the Consolidated Financial Statements, we are required to estimate our income tax liability in each of the jurisdictions in which we do business.

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These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets.

We then assess the likelihood of the deferred tax assets being recovered from future taxable income and, to the

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

extent we believe it is more likely than not that the deferred tax assets will not be recovered, or is unknown, we establish a valuation allowance.

We then assess the likelihood of the deferred tax assets being recovered from future taxable income and, to the extent we believe it is more likely than not that the deferred tax assets will not be recovered, or is unknown, we establish a valuation allowance.

Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against our deferred tax assets.

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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.

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Expenditures for repairs and maintenance are charged to operations as incurred.

We use the straight-line method of depreciation over the estimated useful lives of the related assets (generally two to 15 years) for financial reporting purposes.

We use the straight-line method of depreciation over the estimated useful lives of the related assets (generally two years to 15 years) for financial reporting purposes.

Accelerated methods of depreciation are used for federal income tax purposes.

When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the Consolidated Statements of Operations.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Long-lived assets

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Events or circumstances that would result in an impairment review primarily include operations reporting losses, a significant change in the use of an asset, or the planned disposal or sale of the asset.

The asset would be considered impaired

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

when the future net undiscounted cash flows generated by the asset are less than its carrying value.

The asset would be considered impaired when the future net undiscounted cash flows generated by the asset are less than its carrying value.

An impairment loss would be recognized based on the amount by which the carrying value of the asset exceeds its fair value, as determined by quoted market prices (if available) or the present value of expected future cash flows.

Refer to Note 5, “Property and Equipment,” for additional information.

Please refer to Note 5, “Property and Equipment,” for additional information.

The Company determines if an arrangement is a lease at its inception.

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Product development expenses include salaries, contractor and consulting fees, supplies and materials, as well as costs related to other overhead items such as depreciation and facilities costs.

Research and development costs are expensed as they are incurred.

We recognized $ 0.5 million and $ 0.6 million research and development costs for the years ended December 31, 2024 and 2023, respectively.

Product development costs are expensed as they are incurred.

We recognized $ 0.4 million and $ 0.5 million product development costs for the years ended December 31, 2025 and 2024, respectively.

Net loss per share

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As a result of the net loss we incurred for the years ended December 31, 2025 and 2024 , convertible preferred stock representing approximately 25 thousand shares of common stock were excluded from the basic loss per share calculation because their inclusion would have been anti-dilutive.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation

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Management applies the Black-Scholes option pricing model to value stock options issued to employees and directors and applies judgment in estimating key assumptions that are important elements of the model in expense recognition.

These elements include the

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

expected life of the option, the expected stock-price volatility, and expected forfeiture rates.

These elements include the expected life of the option, the expected stock-price volatility, and expected forfeiture rates.

Compensation expense is generally amortized on a straight-line basis over the requisite service period, which is generally the vesting period.

See Note 9, “Stockholders’ Equity,” for additional information.

Please refer to Note 10, “Stockholders’ Equity,” for additional information.

Advertising expenses

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They consist of costs for the placement of our advertisements in various media and the costs of demos provided to potential distributors of our products.

Advertising expenses were $ 6 thousand for each of the years ended December 31, 2024 and 2023, respectively.

Advertising expenses were $ 1 thousand and $ 6 thousand for the years ended December 31, 2025 and 2024, respectively.

Product warranties

We warrant our commercial and MMM LED products and controls for periods generally ranging from five to ten years .

We warrant our products and controls for periods generally ranging from one to ten years , depending on the product type and customer application.

One product was sold in 2020 with a twenty-year warranty.

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These estimates are inherently uncertain and changes to our historical or projected experience may cause material changes to our warranty reserves in the future.

We continuously review the assumptions related to the adequacy of our warranty reserve, including product failure rates, and adjust to the existing warranty liability when there are changes to these estimates or the underlying replacement product costs, or the warranty period expires.

We continuously review the assumptions related to the adequacy of our warranty reserve, including product failure rates, and make adjustments to the existing warranty liability when there are changes to these estimates or the underlying replacement product costs, or the warranty period expires.

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

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Balance at the beginning of the year $ 118 $ 150

Accruals for warranties issued 3 10

Adjustments to existing warranties ( 35 ) ( 43 )

Warranty accruals for current period sales 7 3

Adjustments to existing warranty reserves ( 34 ) ( 35 )

Accrued warranty reserve at the end of the year $ 91 $ 118

Recently issued accounting standards

On December 14, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements.

Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation.

They must also further disaggregate income taxes paid.

The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.

The guidance applies to all entities subject to income taxes and is effective for annual periods beginning after December 15, 2024.

The guidance will be applied on a prospective basis with the option to apply the standard retrospectively.

Early adoption is permitted.

The Company plans to

Foreign Currency Transactions

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

Transactions denominated in currencies other than the U.S.

dollar are remeasured into U.S.

dollars using exchange rates in effect at the time of the transaction.

Monetary assets and liabilities denominated in foreign currencies are remeasured at period-end exchange rates.

Foreign currency transaction gains and losses are recognized in earnings in the period in which they arise and are included in operating expenses, net, depending on the nature of the underlying transaction.

The Company recorded foreign currency transaction gains of approximately $ 20 thousand for the year ended December 31, 2025, which are included as a component of selling, general and administrative expenses within the accompanying consolidated statements of operations.

No foreign currency transaction gain or loss was recorded in 2024.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

adopt this standard on January 1, 2025.

We are currently evaluating the impact this ASU will have on our financial statements and disclosures.

Recently issued accounting standards

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

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ASU 2023-06 modifies the disclosure or presentation requirements of a variety of Topics in the Codification.

Certain of the amendments represent clarifications to or technical corrections of the current requirements.

Certain amendments represent clarifications to or technical corrections of the current requirements.

Because of the variety of Topics amended, a broad range of entities may be affected by one or more of those amendments.

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The Company is currently evaluating the potential impact this standard will have on its consolidated financial statements and related disclosures.

Recently adopted accounting standards

On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting-Improvements to Reportable Segment Disclosures , which requires public entities to provide disclosures of significant segment expenses and other segment items.

The guidance requires public entities to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually and also applies to public entities with a single reportable segment.

Entities are permitted to disclose more than one measure of a segment’s profit or loss if such measures are used by the chief operating decision-maker to allocate resources and assess performance, as long as at least one of those measures is determined in a way that is most consistent with the measurement principles used to measure the corresponding amounts in the consolidated financial statements.

The guidance is applied retrospectively to all periods presented in financial statements, unless it is impracticable, and is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses .

The standard requires public business entities to disclose additional disaggregated information about certain income statement expense captions, including the nature of expenses such as employee compensation, depreciation, and other significant expense categories.

The amendments are effective for fiscal years beginning after December 15, 2026, and may be applied either prospectively or retrospectively.

Early adoption is permitted.

The Company adopted ASU 2023-07 in 2024.

Refer to Note 11 for related disclosures.

The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets .

The amendments provide a practical expedient for estimating expected credit losses for certain current accounts receivable and contract assets arising from revenue transactions.

The guidance is effective for fiscal years beginning after December 15, 2025, and early adoption is permitted.

The Company has not early adopted this standard and is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures.

Recently adopted accounting standards

On December 14, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements.

Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation.

They must also further disaggregate income taxes paid.

The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.

The guidance applies to all entities subject to income taxes and is effective for annual periods beginning after December 15, 2024.

The guidance will be applied on a prospective basis with the option to apply the standard retrospectively.

The Company adopted this standard on January 1, 2025 and the adoption does not have significant impact to the Company.

Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

We do not discuss recent standards that are not anticipated to have an impact on or are unrelated to our consolidated financial condition, results of operations, cash flows or disclosures.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Certain risks and concentrations

We have certain customers whose net sales individually represented 10% or more of our total net sales, or whose net trade accounts receivable balance individually represented 10% or more of our total net trade accounts receivable as follows:

• In 2024, two customers collectively accounted for 33 % of net sales, with sales to our primary distributor for the U.S.

Navy accounting for approximately 16 % and sales to a shipbuilder for the U.S.

Navy accounting for approximately 17 %.

In 2023, two customers collectively accounted for 48 % of net sales, with sales to our primary distributor for the U.S.

Navy accounting for approximately 35 % and sales to a shipbuilder for the U.S.

Navy accounting for approximately 13 %.

• At December 31, 2024, three customers collectively accounted for 88 % of our net trade accounts receivables.

This including approximately 21 % from distributor to the U.S.

Navy, approximately 52 % from shipbuilder to the U.S.

Navy, and approximately 15 % from commercial customer accounts.

At December 31, 2023, one distributor to the U.S.

Department of Defense accounted for 74 % of our net trade accounts receivable, when combined with our net trade accounts receivable to shipbuilders for the U.S.

Navy, total net accounts receivable related to U.S.

Navy sales is 78 % of total net accounts receivable.

Total net sales were concentrated among a few customers for the twelve months ended December 31, 2025 and 2024 as follows:

Twelve months ended December 31,

Customer A 21.1 % — %

Customer B (located in Taiwan) 16.2 % — %

Customer C 11.2 % — %

Customer D — % 15.8 %

Customer E — % 17.0 %

At December 31, 2025 and 2024, our trade accounts receivables were concentrated among a few customers as follows:

December 31, 2025

December 31, 2024

Customer A 15.9 % 14.9 %

Customer B (located in Taiwan)

Customer E 19.5 % — %

12.0 % 20.8 %

Customer G — % 51.8 %

We require substantial amounts of purchased materials from selected vendors.

With specific materials, all of our purchases are from a single vendor.

The availability and costs of materials may be subject to change due to, among other things, new laws or regulations, suppliers’ allocation to other purchasers, interruptions in production by suppliers, global health issues such as the

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COVID-19 pandemic, and changes in exchange rates and worldwide price and demand levels.

Our inability to obtain adequate supplies of materials for our products at favorable prices could have a material adverse effect on our business, financial position, or results of operations by decreasing our profit margins and by hindering our ability to deliver products to our customers on a timely basis.

Additionally, certain vendors require advance deposits prior to the fulfillment of orders.

Deposits paid on unfulfilled orders totaled $ 0.4 million and $ 0.8 million at December 31, 2024 and 2023, respectively.

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

• One offshore supplier accounted for approximately 36 % of our total expenditures for the twelve months ended December 31, 2024.

At December 31, 2024, two offshore suppliers collectively accounted for approximately 36 % and 54 % (a related party, See Note 12, “Related Party Transactions”) of our trade accounts payable balance, respectively.

• No offshore supplier accounted for more than 10% of our total expenditures for the twelve months ended December 31, 2023.

At December 31, 2023, two offshore suppliers accounted for approximately 16 % and 57 % (a related party, See Note 12, “Related Party Transactions”) of our trade accounts payable balance, respectively.

Deposits paid on unfulfilled orders totaled $ 3 thousand and $ 356 thousand at December 31, 2025 and 2024, respectively.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total expenditures were concentrated among a few suppliers for the twelve months ended December 31, 2025 and 2024 as follows:

Twelve months ended December 31,

Suppliers C and D, related parties* 28.0 % 36.3 %

* See Note 14 “Related Party Transactions”

At December 31, 2025 and 2024, our trade accounts payable were concentrated among a few suppliers as follows:

December 31, 2025

December 31, 2024

Supplier A — % 31.7 %

Supplier B 10.8 % — %

Suppliers C and D, related parties* 70.9 % 48.4 %

* See Note 14 “Related Party Transactions”

The Company leases certain equipment, manufacturing, warehouse and office space under non-cancellable operating leases with expirations through 2027 under which it is responsible for related maintenance, taxes and insurance.

As of March 25, 2022, the terms of our real estate operating lease have been modified beginning July 1, 2022 and extended through 2027.

Additionally, Effective July 1, 2024, our warehouse and office lease was amended to reduce the rentable square feet from 62,335 square feet to 29,692 square feet and the rent expenses were decreased in proportion to the reduction in rentable square.

Effective July 1, 2024, our warehouse and office lease was amended to reduce the rentable square feet from 62,335 square feet to 29,692 square feet, and the rent expenses were decreased in proportion to the reduction in rentable square feet.

The Company recorded this as a lease modification in accordance with ASC 842 Leases (“ASC 842”) and recorded a reduction to the right of use asset and lease liability of approximately $ 395 thousand using an incremental borrowing rate of approximately 13.64 %.

The Company recognized a gain on the lease modification of $ 63 thousand which was recorded as other income in the Statement of Operations.

The Company recognized a gain on the lease modification of $ 63 thousand during the third quarter of 2024.

On October 3, 2025, the Company further amended the lease to reduce the rentable area, from 29,692 square feet to 25,392 square feet, and rent expenses were decreased in proportion to the reduction in rentable square feet.

The Company recorded a reduction to the right of use asset and lease liability of approximately $ 40 thousand using an incremental borrowing rate of approximately 13.64 % and the Company recognized a gain on the lease modification of $ 2 thousand.

The weighted average remaining lease term for the operating leases is 1.5 years.

2 unchanged sentences

Lease cost $ 175 $ 303

Supplemental Consolidated Balance Sheet information related to the Company’s operating leases is as follows (in thousands):

Supplemental Consolidated Balance Sheet information related to the Company’s operating leases as of December 31, 2025 and 2024 are follows (in thousands):

At December 31,

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Future minimum lease payments required under operating and finance leases for each of the years 2025 through 2027 are as follows (in thousands):

The maturities of lease liabilities under operating leases by years at December 31, 2025 are as follows (in thousands):

Operating Leases

7 unchanged sentences

Operating cash flows from operating leases $ 175 $ 343

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

During 2025, the Company was subject to increased import tariffs on certain products.

Such tariffs are capitalized as part of inventory cost and contributed to higher cost of sales during the year.

The Company continues to monitor the impact of tariffs on its operations and margins.

Inventories consist of the following (in thousands):

At December 31,

2025 2024 (1)

Raw materials $ 930 $ 1,000

Finished goods 2,591 2,610

Reduction due to permanent markdowns ( 2,464 ) —

Reserves for excess, obsolete, and slow-moving inventories ( 591 ) ( 347 )

Inventories, net $ 2,930 $ 3,263

(1) The December 31, 2024 balances have been revised to reflect the permanent markdown in cost of $ 2,464 recorded as of January 1, 2024.

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

At December 31,

2025 2024 (2)

Beginning balance $ ( 347 ) $ ( 89 )

1 unchanged sentence

Reduction due to inventory sold 137 89

Reduction due to permanent markdowns

Reserves for excess, obsolete, and slow-moving inventories $ ( 591 ) $ ( 347 )

(2) The balance as of January 1, 2024 reflects the permanent markdown in cost of $ 2,464 recorded in connection with inventory cost adjustments.

ENERGY FOCUS, INC.

4 unchanged sentences

Equipment (useful life 3 - 15 years)

$ 490 $ 1,061

Tooling (useful life 2 - 5 years)

1 unchanged sentence

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

Construction in progress — 28

Property and equipment at cost 871 826

1 unchanged sentence

Property and equipment, net $ 97 $ 90

Depreciation expense was $ 37 thousand and $ 33 thousand for the years ended December 31, 2024 and 2023, respectively.

In 2024, the Company disposed of fully depreciated equipment and tooling.

Therefore, no gain or loss was recorded during the year ended December 31, 2024.

Depreciation expense was $ 37 thousand for the years ended December 31, 2025 and 2024.

PREPAID AND OTHER CURRENT ASSETS

5 unchanged sentences

Total prepaid and other current assets $ 126 157

Debt consisted of the following (in thousands):

ADVANCE FOR INVESTMENT IN JOINT VENTURE

Other noncurrent assets consisted of the following (in thousands):

At December 31,

Streeterville notes, net — 1,323

Advanced capital contribution — 450

Total $ — $ 1,773

Credit Facilities

On August 11, 2020, we entered into two debt financing arrangements (together, the “Credit Facilities”) that allowed for expanded borrowing capacity at a lower blended borrowing cost.

We paid off and terminated the Credit Facilities during the year ended December 31, 2023.

Inventory Facility with Crossroads

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 (“Crossroads”).

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On January 18, 2023, the Company and Crossroads entered into an amendment to the Inventory Loan Agreement (the “Crossroads Amendment”) to restructure and pay down the Inventory Facility.

The Inventory Facility was paid in full on September 24, 2023, using the interest rate of 11.16 % per annum, and the Company wrote off the difference of $ 40 thousand between the final invoice amount and the carrying value of the debt, which was recorded as interest income in 2023.

Receivables Facility with FSW Funding

The second 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”).

On February 7, 2023, the Company and the RF Lender agreed to terminate the Receivables Facility.

All outstanding amounts under the Receivables Facility had been repaid prior to termination, and there were no prepayment fees in connection with termination.

Promissory Notes-Related Parties

In 2022, we entered into short-term unsecured promissory notes (the “2022 Promissory Notes”) with Mei-Yun (Gina) Huang, Chiao Chieh (Jay) Huang, and Tingyu Lin.

Gina Huang is a member of the Board of Directors and Mr.

Jay Huang is our Chief Executive Officer (“CEO”).

All the 2022 Promissory Notes were exchanged for common stock on January 17, 2023.

See Note 9, “Stockholders’ Equity.”

Advance for investment in joint venture $ 156 $ —

In November 2025, the Company advanced $ 156 thousand in connection with a proposed joint venture arrangement with a third-party counterparty that is not a related party.

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

The joint venture is intended to support the Company’s ESS initiatives in the Japan power market.

The joint venture agreement has not yet been finalized as of December 31, 2025.

Upon completion of the transaction, the advance will be reclassified to an investment balance, if appropriate.

The Company will assess its ownership interest and the appropriate accounting model, including whether the investment will be accounted for under the equity method, upon formation of the joint venture.

Streeterville Notes

2022 Streeterville Note

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 “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 had an original maturity date of April 21, 2024, and accrued interest at 8 % per annum, compounded daily, on the outstanding balance.

On January 17, 2023, we agreed with Streeterville to restructure and pay down the 2022 Streeterville Note and extend its maturity date to December 1, 2024 (the “2022 Streeterville Note Amendment”).

We agreed to make payments to reduce the outstanding amounts of the 2022 Streeterville Note of $ 500 thousand by January 20, 2023 and by $ 250 thousand by July 14, 2023.

Beginning January 1, 2024, we agreed to make twelve monthly repayments of approximately $ 117 thousand each.

We had the right to prepay any of the scheduled repayments at any time or from time to time without additional penalty or fees.

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 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 were no gross proceeds to the Company in respect of the March 2023 Exchange, provided that $ 125 thousand of the March 2023 Exchange Amount was applied toward the $ 250 thousand payment due on or before July 14, 2023 pursuant to the 2022 Streeterville Note Amendment, and $ 125 thousand was credited to satisfy the December 1, 2024 required payment.

The total liability for the 2022 Streeterville Note, net of discount and financing fees, was $ 1.3 million at December 31, 2023.

On April 21, 2022, we entered into a 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 “2022 Streeterville Note”).

The note was subsequently restructured in January 2023 and March 2023, with partial conversion to equity.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

O n January 18, 2024, the Company and Streeterville entered into a payoff letter (the “Letter”) and exchange agreement (“Exchange Agreement”) to pay off the 2022 Streeterville Note early.

The Letter and Exchange Agreement provided that the Company made payments to reduce the outstanding obligations under the 2022 Streeterville Note of $ 1.0 million in cash by January 19, 2024 and exchange 94,440 shares of common stocks by January 23, 2024 for the remaining amount.

On January 23, 2024, the 2022 Streeterville Note was terminated and the Company had no outstanding obligations to Streeterville, upon which the Company recognized a $ 187 thousand other income which is included in gain on debt extinguishment in the Condensed Consolidated Statements of Operations.

On January 18, 2024, the Company and Streeterville entered into an agreement to fully satisfy the remaining obligations under the 2022 Streeterville Note through $ 1.0 million in cash and the issuance of 94,440 shares of common stock.

On January 23, 2024, the 2022 Streeterville Note was terminated, upon which the Company recognized an $ 187 thousand gain on debt extinguishment.

As of December 31, 2025, the Company has no outstanding debt obligations.

Advanced capital contribution

5 unchanged sentences

Purchase Commitments

As of December 31, 2024, we had 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, 2025, we had approximately $ 0.4 million in outstanding purchase commitments for inventory.

Of this amount, $ 0.3 million is expected to ship in the first quarter of 2026 and $ 0.1 million is expected to ship in the second quarter of 2026.

We have 92 % of the outstanding purchase commitments with related parties.

Settlement of Return of Slow-Moving Inventory

On December 30, 2024, in connection with its strategy to reduce a certain quantity of low-turnover inventory, the Company entered into an agreement with the vendor, an unrelated party, to return the inventory purchased between 2021 and 2022 and transfer EnFocus™ registered trademarks (carry amount of $ 0 ).

As a result, the Company will recognize a non-cash gain of approximately $ 5 thousand on the settlement of returning inventory, cancelling prepayments made with the vendor, and settlement of outstanding accounts payable with the vendor.

Please see below for the related accounts as of December 31, 2024 and the gain that will be recognized on the return date, which is expected to be in the early second quarter of year 2025.

At December 31,

Inventories, net

Prepayments to vendors

Accounts payable ( 650 )

EnFocus™ trademark

The transaction was completed in the second quarter of 2025, at which time the inventory return, cancellation of prepayments, and settlement of outstanding accounts payable were finalized.

As a result, the Company recognized a non-cash loss of approximately $ 8 thousand in 2025.

STOCKHOLDERS’ EQUITY

1-for-7 Reverse Stock Split

At the Company’s annual meeting of stockholders held on June 15, 2023, the Company’s stockholders approved 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.

On June 15, 2023, our board of directors determined to set the reverse stock split at 1-for-7 (the “Split Ratio”).

The reverse stock split became effective on June 16, 2023 (the “Effective Time”).

At the Effective Time, every seven shares of common stock issued and outstanding automatically combined into one validly issued, fully paid and non-assessable share of common stock.

No fractional shares were issued as a result of the reverse stock split.

The fractional shares were settled in cash in an amount not material to the Company.

The $ 0.0001 par value per share of common stock and other terms of the common stock were not affected by the reverse stock split.

The number of authorized shares of common stock under the Certificate of Incorporation remained unchanged at 50,000,000 shares.

Private Placements

The Company entered the securities purchase agreements with certain investors and issued 1,002,692 and 912,050 shares of common stock during the years ended December 31, 2025 and 2024, respectively.

November 2025 Private Placement

On November 26, 2025, the Company entered into a securities purchase agreement with each of its Chief Executive Officer and Principal Financial Officer, Mr.

Chiao Chieh (Jay) Huang and MAN-BO HOTEL CO.

LTD, an affiliate entity, which is owned by the spouse of Kin-Fu Chen, the Chairman of the Company’s Board of Directors, respectively, pursuant to which the Company agreed to issue and sell in a private placement 262,009 shares of the Company’s common stock, par value $ 0.0001 per share to each, and in aggregate, 524,018 shares of Common Stock for a purchase price per share of $ 2.29 (the “November 2025 Private Placement”).

The purchase price was determined by the Board of Directors to be at a premium to the Nasdaq closing price of our common stock on the date of the agreement.

The Board of Directors approved the purchase price per share based on its judgment of the Company’s capital needs, market conditions, and limited financing alternatives available at the time.

The Board determined this price to be reasonable and in the best interests of the Company and its shareholders.

These transactions were approved by independent members of the Board of Directors.

Aggregate gross proceeds to the Company with respect to the November 2025 Private Placement were approximately $ 1.2 million.

The November 2025 Private Placement closed on December 2, 2025.

August 2025 Private Placement

On August 15, 2025, the Company entered into a securities purchase agreement with its Chief Executive Officer, Mr.

Chiao Chieh (Jay) Huang, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 264,550 shares of the Company’s common stock, par value $ 0.0001 per share, for a purchase price per share of $ 1.89 (the “August 2025 Private Placement”).

The purchase price was determined by the Board of Directors to be at a premium to the Nasdaq closing

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The reverse stock split was effected solely to increase the per share trading price of the common stock to satisfy the Bid Price Rule for continued listing on Nasdaq.

The common stock began trading on Nasdaq on a split-adjusted basis at the opening of trading on June 19, 2023.

Private Placements

The Company entered the securities purchase agreements with certain investors and issued 912,050 and 2,870,964 shares (including debt-to-equity exchange noted in Note 7, “Debt”) of common stock during the years ended December 31, 2024 and 2023, respectively.

price of our common stock on the date of the agreement.

The Board of Directors approved the purchase price per share based on its judgment of the Company’s capital needs, market conditions, and limited financing alternatives available at the time.

The Board determined this price to be reasonable and in the best interests of the Company and its shareholders.

These transactions were approved by independent members of the Board of Directors.

Aggregate gross proceeds to the Company with respect to the August 2025 Private Placement were approximately $ 500 thousand.

The August 2025 Private Placement closed on August 19, 2025.

June 2025 Private Placement

On June 19, 2025, the Company entered into a securities purchase agreement with its Chief Executive Officer, Mr.

Chiao Chieh (Jay) Huang, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 110,497 shares of the Company’s common stock, par value $ 0.0001 per share, for a purchase price per share of $ 1.81 (the “June 2025 Private Placement”).

The purchase price was determined by the Board of Directors to be at a premium to the Nasdaq closing price of our common stock on the date of the agreement.

The Board of Directors approved the purchase price per share based on its judgment of the Company’s capital needs, market conditions, and limited financing alternatives available at the time.

The Board determined this price to be reasonable and in the best interests of the Company and its shareholders.

These transactions were approved by independent members of the Board of Directors.

Aggregate gross proceeds to the Company with respect to the June 2025 Private Placement were approximately $ 200 thousand.

The June 2025 Private Placement closed on June 23, 2025.

March 2025 Private Placement

On March 27, 2025, the Company entered into a securities purchase agreement with its Chief Executive Officer, Mr.

Chiao Chieh (Jay) Huang, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 103,627 shares of the Company’s common stock, par value $ 0.0001 per share, for a purchase price per share of $ 1.93 (the “March 2025 Private Placement").

The purchase price was determined by the Board of Directors to be at a premium to the Nasdaq closing price of our common stock on the date of the agreement.

The Board of Directors approved the purchase price per share based on its judgment of the Company’s capital needs, market conditions, and limited financing alternatives available at the time.

The Board determined this price to be reasonable and in the best interests of the Company and its shareholders.

These transactions were approved by independent members of the Board of Directors.

Aggregate gross proceeds to the Company with respect to the March 2025 Private Placement were approximately $ 200 thousand.

The Private Placement was priced higher than the closing price $ 1.92 of the Common Stock on the Nasdaq on the day of signing of the purchase agreement.

The issuance and sale of the shares pursuant to the purchase agreement are not being registered under the Securities Act of 1933, as amended (the “Securities Act”), and were made pursuant to certain exemptions from registration, including Section 4(a)(2) of the Securities Act, in reliance on the representations and covenants of the purchaser under the purchase agreement.

The March 2025 Private Placement closed on March 31, 2025.

June 2024 Private Placement

On June 21, 2024, the Company entered into a securities purchase agreement with Sander Electronics Inc., a shareholder of the Company controlled by Mr.

Chiao Chieh (Jay) Huang, CEO of the Company, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 534,591 shares of the Company’s common stock, par value $ 0.0001 per share, for a purchase price per share of $ 1.59 (the “June 2024 Private Placement”).

Consideration for the transaction included an exchange of $ 850 thousand.

Aggregate gross proceeds to the Company in respect of the June 2024 Private Placement were approximately $ 850 thousand.

2 unchanged sentences

On March 28, 2024, the Company entered into a securities purchase agreement with certain purchaser, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 283,019 shares of the Company’s common stock, par value $ 0.0001 per share, for a purchase price per share of $ 1.59 (the “March 2024 Private Placement”).

Consideration for the transaction included exchange of $ 450 thousand in the aggregate of outstanding amounts on previous advanced capital contributions, as described above in Note 6, “Debt”.

Consideration for the transaction included exchange of $ 450 thousand in the aggregate of outstanding amounts on capital contributions received in October 2023.

Aggregate gross proceeds to the Company in respect of the March 2024 Private Placement were approximately $ 450 thousand.

The March 2024 Private Placement was priced at-the-market under the Nasdaq rules.

September 2023 Private Placement

On September 29, 2023, the Company entered into a securities purchase agreement with certain purchasers, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 853,658 shares of the Company’s common stock, par value $ 0.0001 per share, for a purchase price per share of $ 2.05 (the “September 2023 Private Placement”).

Aggregate gross proceeds to the Company in respect of the September 2023 Private Placement were approximately $ 1.75 million.

The September 2023 Private Placement closed on September 29, 2023.

June 2023 Private Placement

On June 29, 2023, the Company entered into a securities purchase agreement with certain purchasers, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 746,875 shares of the Company’s common stock, par value $ 0.0001 per share, for a purchase price per share of $ 1.76 (the “June 2023 Private Placement”).

One of the purchasers was Mr.

Huang, the Company’s CEO.

Aggregate gross proceeds to the Company in respect of the June 2023 Private Placement were approximately $ 1.3 million.

The June 2023 Private Placement closed on June 29, 2023.

March 2023 Private Placements

On March 28, 2023, the Company entered into a securities purchase agreement with Mr.

Chiao Chieh (Jay) Huang, 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

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

February 2023 Private Placement

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.

January 2023 Sander Electronics Private Placement

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.

January 2023 Transactions with Mei Yun (Gina) Huang

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.

Preferred Stock

4 unchanged sentences

In any such vote, each share of Series A Preferred Stock shall entitle its holder to a number of votes equal to 1.582 % of the number of shares of common stock into which such share of Series A Preferred Stock is convertible.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

15 unchanged sentences

For the year ended December 31,

Cost of sales $ — $ 2

Selling, general, and administrative 121 4

Total stock-based compensation $ 121 $ 4

At December 31, 2024 and 2023, we had unearned stock compensation expense of $ 2 thousand and $ 64 thousand, respectively.

These costs will be charged to expense and amortized on a straight-line basis in subsequent periods.

The remaining weighted average period over which the unearned compensation is expected to be amortized was approximately 1.8 years as of December 31, 2024 and 2.8 years as of December 31, 2023.

Stock Options

For the years ended December 31, 2024 and 2023, the Company did not grant any stock options.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model.

Estimates utilized in the calculation include the expected life of the option, risk-free interest rate, and expected volatility, and are further comparatively detailed as follows:

Total unearned stock compensation expense was $ 1 thousand and $ 2 thousand at December 31, 2025 and 2024, respectively.

These costs will be charged to expense and amortized on a straight-line basis in future periods.

The weighted average period over which the unearned compensation at December 31, 2025 is expected to be amortized was approximately 1.3 years.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value of options issued $ — $ 2.49

Exercise price $ — $ 3.04

Expected life of option (in years) 0 6.1

Risk-free interest rate — % 3.5 %

Expected volatility — % 101.8 %

Dividend yield 0.00 % 0.00 %

Options outstanding under all plans at December 31, 2024 have a contractual life of ten years , and vesting periods between one and four years .

A summary of option activity under all plans was as follows:

Stock Options

For the years ended December 31, 2025 and 2024, the Company did not grant any stock options.

Options outstanding under all plans have a contractual life of ten years , and vesting periods between one and four years .

A summary of option activity under all outstanding stock incentive plans for the years ended December 31, 2025 and 2024 is presented as follows:

Options Weighted

Exercise Price

Outstanding at December 31, 2022 47,102 13.78

Granted 11,427 $ 3.04

Share Weighted

Life (in years)

Balance at December 31, 2023 30,575 5.60

Canceled/forfeited —

1 unchanged sentence

Balance at December 31, 2024 30,566 $ 5.58 7.7

Expired ( 9 ) 53.33

Canceled/forfeited ( 28,590 ) 5.28

Balance at December 31, 2025 1,976 $ 9.91 3.2

1 unchanged sentence

Exercisable at December 31, 2025 1,535 $ 12.04 3.1

The “Expected to Vest” options are the unvested options that remain after applying the pre-vesting forfeiture rate assumption to total unvested options.

No options were exercised during 2024 and 2023.

All outstanding equity awards were out of the money as of December 31, 2024.

The options outstanding at December 31, 2024 have been segregated into ranges for additional disclosure as follows:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE

Range of Exercise Prices

Number of Shares Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number of Shares Exercisable Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price

$ 3.04 — $ 4.14 7,142 8.3 $ 3.04 2,976 8.3 $ 3.04

$ 4.15 — $ 5.73 21,428 7.7 5.25 12,062 7.7 5.25

$ 5.74 — $ 13.48 882 6.2 8.34 680 5.9 8.97

$ 13.49 — $ 27.55 661 4.8 16.80 661 4.8 16.80

$ 27.56 — $ 48.79 453 6.1 39.61 356 6.1 39.97

30,566 7.7 $ 5.58 16,735 7.6 $ 6.20

Restricted Stock Units

In 2020, we began issuing restricted stock units to certain employees and non-employee Directors under the 2020 Plan with vesting periods ranging from one to four years .

During the years ended December 31, 2024 and 2023, no restricted stock units were issued, and as of December 31, 2024 and 2023, there were no outstanding restricted stock units.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We are able to issue restricted stock units to certain employees and non-employee Directors under the 2020 Plan with vesting periods ranging from one to four years .

As of December 31, 2025 and 2024, the outstanding restricted stock is zero .

Fully Vested Shares

In December 2025, the Board approved and issued 43,000 fully vested shares as bonus compensation to certain employees and the Company recognized $ 121 thousand as stock-based compensation.

We file income tax returns in the U.S.

5 unchanged sentences

At December 31, 2025 and 2024, respectively, there were no accrued interest and penalties related to uncertain tax positions.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table shows the components of the provision for income taxes (in thousands):

For the year ended December 31,

State $ 2 $ 3

federal $ — $ —

Total current $ — $ —

Total deferred $ — $ —

Provision for income taxes $ — $ —

Certain amounts in the 2024 consolidated statement of operations have been revised to correct an immaterial classification error.

Approximately $ 2 thousand previously reported within provision for income taxes has been reclassified to selling, general, and administrative expenses.

The correction had no impact on previously reported net loss, loss per share, or any balance sheet amounts for the year ended December 31, 2024.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents cash income taxes paid, net of refunds (in thousands):

For the year ended December 31,

federal $ — $ —

Total cash income taxes paid, net of refunds $ 3 $ 5

The following table shows the pre-tax loss (in thousands):

For the year ended December 31,

Pre-tax Loss:

Domestic $ ( 1,027 ) $ ( 1,582 )

Total pre-tax loss $ ( 1,027 ) $ ( 1,582 )

The principal items accounting for the difference between income taxes computed at the U.S.

statutory rate and the (benefit from) provision for income taxes reflected in our Consolidated Statements of Operations are as follows:

statutory rate and the (benefit from) provision for income taxes reflected in our Consolidated Statements of Operations in both dollar (in thousands) and percentage are as follows:

For the year ended December 31,

6 unchanged sentences

State temporary 15 ( 1.4 ) 20 ( 0.6 )

$ — 0.0 % $ — 0.0 %

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are as follows (in thousands):

7 unchanged sentences

Net deferred tax assets $ — $ —

In 2024 and 2023, 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 and $ 6.3 million additional federal net operating loss we recognized for the year.

At December 31, 2024, we had federal and state net operating loss carry-forwards (“NOLs”) of approximately $ 141.1 million for federal income tax purposes ($ 39.1 million for state and local income tax purposes).

However, due to changes in our capital structure, approximately $ 86.8 million of the $ 141.1 million is available after the application of IRC Section 382 limitations.

As a result of the Tax Cuts and Job Act of 2017 (the “Tax Act”), NOLs generated in tax years beginning after December 31, 2017

In 2025 and 2024, our effective tax rate was lower than the statutory rate due to a full valuation allowance as a result of the $ 1.1 million and $ 3.4 million additional federal net operating loss we recognized for the year.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

can only offset 80% of taxable income.

At December 31, 2025, we had federal and state net operating loss carry-forwards (“NOLs”) of approximately $ 141.2 million for federal income tax purposes ($ 28.3 million for state and local income tax purposes).

However, due to changes in our capital structure, approximately $ 86.8 million of the $ 141.2 million is available after the application of IRC Section 382 limitations.

As a result of the Tax Cuts and Job Act of 2017 (the “Tax Act”), NOLs generated in tax years beginning after December 31, 2017 can only offset 80% of taxable income.

These NOLs can no longer be carried back, but they can be carried forward indefinitely.

7 unchanged sentences

We currently operate in a single industry segment, developing and selling our LED lighting products and controls into the MMM and commercial markets.

Operating segments are defined as components of an entity about which discrete financial information is evaluated regularly by the Company’s chief operating decision maker (CODM) in deciding how to allocate resources and assess performance.

The Company operates and manages its business as one business segment.

The Company has a single management team that reports to the Chief Executive Officer, the Company's CODM, who comprehensively manages the entire Company.

The accounting policies of the segment are the same as those described in the summary of significant accounting policies.

When evaluating the Company’s financial performance, the CODM is regularly provided with more detailed expense information than what is included in the Company’s statements of operations and comprehensive loss.

The CODM uses net loss, as reported in the statements of operations and comprehensive loss, in evaluating the performance of the segment.

Decisions regarding resource allocation are made primarily during the annual budget planning process and reallocated as needed throughout the year.

The measure of segment assets is reported on the balance sheets as total assets.

International sales increased to 17 % of total net sales in 2025 (compared to 0 % in 2024), driven primarily by a $ 0.5 million UPS project delivered to a customer in Taiwan (representing 15 % of total sales), as well as additional LED lighting projects delivered in other international markets.

The following table provides a breakdown of product net sales for the years indicated (in thousands):

2 unchanged sentences

MMM products 1,989 3,470

Setup Service 35 —

Total net sales $ 3,560 $ 4,860

5 unchanged sentences

At December 31, 2025 and 2024, approximately 100 % of our long-lived assets, which consist of property and equipment, were located in the United States.

SEGMENT INFORMATION

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance.

The Company’s Chief Executive Officer is the CODM.

The CODM reviews financial information presented at a consolidated level on a recurring basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

The Company’s operations are organized into one operating and one reportable segment, which includes both Commercial and MMM product lines that, although discussed separately and may exhibit counter-cyclical trends, are managed and reported together.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

GAAP, is the required segment measure.

The CODM reviews these measures (i) to evaluate the Company's operating results and the effectiveness of business strategies, and (ii) internally as benchmarks to compare the Company's performance to its competitors.

Additionally, the Company believes these measures are important to evaluate the performance and profitability of our products, individually and in the aggregate.

The CODM does not review segment assets and segment expenses at a level different than what is reported in the Company's Consolidated Balance Sheet and Consolidated Statement of Operations.

Additionally, the CODM regularly receives information about the Company's capital expenditures which are reported in the Company's Consolidated Statement of Cash Flows as purchase of property and equipment under investing activities.

RELATED PARTY TRANSACTIONS

Sales Transactions

In 2025, the Company sold a used software license package to Sander Electronics Co.

Ltd, (located in Taiwan), a shareholder of the Company, as part of a specific project for $ 13 thousand which was approved by the Company's Board of Directors.

The sales price was in excess of book value, resulting in a gain of $ 3 thousand on sales of fixed assets.

There was no such gain recognized in 2024.

Purchase Transactions

The Company has a purchase agreement for TLED products and spare parts with Sander Electronics, Inc., a shareholder of the Company.

Purchases from Sander Electronics, Inc.

for the year ended December 31, 2023 totaled $ 2.1 million, which remained unpaid as of December 31, 2023.

The Company made new purchases for $ 0.6 million from Sander Electronics, Inc.

during 2024 .

As of December 31, 2024 a ccounts payable to Sander Electronics, Inc.

is $ 0.9 million .

The Company has a purchase agreement for TLED products and spare parts and fixed assets with Sander Electronics, Inc (located in the US), an affiliate of a shareholder and Sander Electronics Co.

Ltd (located in Taiwan), a shareholder of the Company.

Purchase Activities

For the year ended December 31,

Name of related party 2025

% of purchases

Sander Electronics, Inc.

$ 498 13.3 % $ — — %

Sander Electronics Co.

Ltd 553 14.7 % 2,572 36.3 %

$ 1,051 28.0 % $ 2,572 36.3 %

Accounts Payable

Name of related party As of

December 31, 2025

% of accounts payable

December 31, 2024

% of accounts payable

Sander Electronics Co.

Ltd $ 386 70.9 % $ 909 48.4 %

Related Party Risk Concentration

The Company’s business operations involve significant related party relationships that create concentration risks.

As of December 31, 2025, related parties represented 71 % of total accounts payable and 92 % of outstanding purchase commitments.

This concentration in related party suppliers, while providing certain operational benefits, creates risks regarding pricing, payment terms, supply continuity, and potential conflicts of interest.

The Company has limited readily available alternative suppliers to replace the current production capacity provided by related parties.

Management believes the terms of related party transactions are commercially reasonable and comparable to arm’s length transactions;

however, the concentration of these relationships could materially impact operations if disrupted.

These transactions are subject to review and approval by the Company’s independent directors.

Private Placements

8 unchanged sentences

For certain types of claims, we maintain insurance coverage for personal injury and property damage, product liability and other liability coverages in amounts and with deductibles that we believe are prudent, but there can be no assurance that these coverages will be applicable or adequate to cover adverse outcomes of claims or legal proceedings against us.

ENERGY FOCUS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUBSEQUENT EVENTS

The Company has evaluated subsequent events occurring after December 31, 2025 through the date these consolidated financial statements were available to be issued.

Based on this evaluation, the Company determined that there were no subsequent events that required recognition or disclosure in these consolidated financial statements.

Table of Contents ENERGY FOCUS, INC.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data