SEC Form 10-K filed by Energy Focus Inc.

3/24/26 8:49:16 AM ET

$EFOI

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


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

For the fiscal year ended December 31, 2025


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

For the transition period from ___________ to ___________

Commission file number 001-36583

ENERGY FOCUS, INC.

(Exact name of registrant as specified in its charter)


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

32000 Aurora Road, Suite B

Solon, Ohio 44139

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: 440.715.1300

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


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

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act of 1933. Yes ¨No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No þ

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

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

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


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	þ	Smaller reporting company	þ
		Emerging growth company	¨

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the Company’s common stock held by non-affiliates of the Company was approximately $7.8 million as of June 30, 2025, the last day of the Company’s most recently completed second fiscal quarter, when the last reported sales price was $2.45 per share.

Number of the registrant’s shares of common stock outstanding as of March 24, 2026: 6,306,433.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission relative to the registrant’s 2025 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report.

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	PART I	Page

ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	10
ITEM 1B.	UNRESOLVED STAFF COMMENTS	24
ITEM 1C.	CYBERSECURITY	24
ITEM 2.	PROPERTIES	25
ITEM 3.	LEGAL PROCEEDINGS	25
ITEM 4.	MINE SAFETY DISCLOSURES	25
	PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES	26
ITEM 6.	[RESERVED]	26
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 8.	FINANCIAL STATEMENTS	35
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	65
ITEM 9A.	CONTROLS AND PROCEDURES	65
ITEM 9B.	OTHER INFORMATION	65
ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	65
	PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	66
ITEM 11.	EXECUTIVE COMPENSATION	66
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	66
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	66
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	66
	PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	66
ITEM 16.	FORM 10-K SUMMARY	68
	SIGNATURES	69

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PART I

Forward-Looking Statements

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

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

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

We believe that important factors that could cause our actual results to differ materially from forward-looking statements include, but are not limited to, the risks and uncertainties outlined under “Risk Factors” under Item 1A of this Annual Report and other matters described in this Annual Report and our other filings with the Securities and Exchange Commission (the “SEC”) generally. Some of these factors include:

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

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

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

•our ability to realize synergies with our strategic investor;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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ITEM 1. BUSINESS

Overview

Energy Focus specializes in designing, developing, manufacturing, and selling energy-efficient lighting systems and controls. We provide high-quality LED lighting solutions for both commercial and military maritime markets (MMM), helping our customers improve energy efficiency, productivity, and wellness through advanced LED retrofit products.

Our core products include robust lighting fixtures and lamps for navy and military applications, Energy Storage Systems (“ESS”), Uninterruptible Power Supply (“UPS”), and tubular LED (“TLED”) lighting products, including battery backup units as well as general commercial and maritime lighting fixtures.

The LED lighting market has faced intense competition and price erosion in recent years. To stay competitive, we’ve reduced costs, streamlined our supply chain, and focused on product innovation. We’ve also restructured our sales strategies, focusing more on direct sales, strategic partnerships, and customer feedback to drive product development.

Despite industry challenges, we continue to innovate, offering differentiated, high-value products that meet the most demanding market needs. In 2025, we enhanced the RedCap® product line, further improving user experience and functionality.

Additionally, we have engaged in preliminary discussions and business development activities with certain contractors that serve U.S. Department of Defense (“DoD”) customers. These efforts are intended to explore potential opportunities and do not constitute awarded contracts or firm commitments.

In 2025, we recommitted to building upon the transformation activities that sought to stabilize and regrow our business. These efforts include the following key developments that occurred during 2025:

•On June 30, 2025, the Board approved the departure of Gina (Mei-Yun) Huang, and on August 8, 2025, appointed Sophia Shee as a new member of the Board. The resignations did not involve any disagreement with the Company. All current Board members, other than our Chief Executive Officer, Mr. Chiao Chieh (Jay) Huang, are independent directors under the corporate governance standards of Nasdaq.

•On March 27, 2025, Energy Focus, Inc. entered into certain securities purchase agreements with certain accredited investors, 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”). Aggregate gross proceeds to the Company with respect to the March 2025 Private Placement were approximately $200 thousand, excluding the offering expenses paid by the Company. The March 2025 Placement closed on March 31, 2025.

•On June 19, 2025, Energy Focus, Inc. entered into certain securities purchase agreements with certain accredited investors, 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”). Aggregate gross proceeds to the Company with respect to the June 2025 Private Placement were approximately $200 thousand, excluding the offering expenses paid by the Company. The June 2025 Private Placement closed on June 23, 2025.

•On August 15, 2025, Energy Focus, Inc. entered into certain securities purchase agreements with certain accredited investors, 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”). Aggregate gross proceeds to the Company with respect to the August 2025 Private Placement were approximately $500 thousand, excluding the offering expenses paid by the Company. The August 2025 Private Placement closed on August 19, 2025.

•On November 26, 2025, Energy Focus, Inc. entered into certain securities purchase agreements with certain accredited investors, pursuant to which the Company agreed to issue and sell in a private placement an aggregate of 524,018 shares of the Company’s common stock, par value $0.0001 per share, for a purchase price per share of $2.29 (the “November 2025 Private Placement”). Aggregate gross proceeds to the Company with respect to the November 2025 Private Placement were approximately $1.2 million, excluding the offering expenses paid by the Company. The November 2025 Private Placement closed on December 2, 2025.

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•In 2025, we carefully researched and analyzed our historical sales data and the current market landscape, focusing on our pricing position and overall sales strategy. We acknowledged the increasing competition in the MMM sales space, both in terms of pricing pressure and the growing number of competitors.

•The Company has aggressively re-evaluated operating expenses throughout the year to manage fixed costs.

During 2025, we have thoroughly reviewed and adjusted our commercial pricing position as well as our strategic relationships and partnerships within the commercial LED market space.

In 2026, we plan to pursue expansion into new markets and industries to diversify our portfolio and drive growth:

•ESS Business Opportunity: We intend to explore energy storage solutions that could complement our existing product lines and support sustainability efforts.

•AI Data Center UPS Development: We aim to enter the AI data center market through development of advanced UPS systems tailored to meet the high-demand energy needs of AI-driven data centers.

•Global Market Expansion: We are evaluating potential opportunities in the Taiwan and Japan markets, where we may leverage our expertise to respond to demand in these regions.

To pursue long-term growth and profitability, we expect to focus on:

•Expanding product offerings in energy storage and AI data center power solutions.

•Strengthening our global presence, particularly in Taiwan and Japan.

•Continuing to innovate in LED lighting and controls.

•Maintaining financial discipline through cost control and operational efficiency.

We believe these strategies, if successfully implemented, may create new revenue streams, potentially strengthen our market position, and could lead to improved financial performance in the coming years, although actual results may differ materially from our expectations.

Our Corporate Structure and History

Fiberstars, Inc. was founded in 1985 in California and reincorporated in Delaware in November 2006. In May 2007, Fiberstars, Inc. merged with Energy Focus, Inc. (the “Company”), a Delaware corporation, with the Company emerging as the surviving entity. In 2023, we established an international branch, which we may refer to as our “Taiwan branch” or “Taipei office,” in Taipei, Taiwan, to enhance our Asia and worldwide business sales force.

Our Industry

We specialize in creating innovative, energy-saving solutions that combine advanced LED lighting, controls, and cutting-edge technology to help our customers operate their facilities more efficiently while promoting productivity and well-being. Our focus is on leading the market in human-centric lighting and high-tech energy solutions by offering top-quality, energy-efficient LED products, including "flicker-free" long-life lamps, retrofit kits, and advanced power technologies. In addition to LED lighting, we’ve expanded into energy-saving high-technology Gallium Nitride (“GaN”) power supplies, ESS, and UPS systems products tailored for AI data centers, positioning us at the forefront of sustainable technology for modern industries.

The demand for energy-efficient solutions like LEDs and advanced power systems is growing rapidly, driven by cost savings, environmental goals, and health benefits. Our new product lines, including GaN power supplies, ESS, and UPS systems, further enhance efficiency and reliability, meeting the rising energy demands of AI-driven data centers and other high-tech applications.

We’re also pioneers in flicker-free lighting—certified by Underwriters Laboratories at less than 1% flicker—reducing health issues like headaches and fatigue. Additionally, our smart lighting innovations, such as connected systems with sensors and circadian rhythm adjustments, are transforming how buildings operate, offering both energy savings and wellness benefits. While the market is competitive, we stand out by developing customer-focused, high-impact products and leveraging a strong sales network to meet evolving needs.

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Our Products

We design and deliver a wide range of energy-efficient solutions for commercial, industrial, and military markets, including:

Commercial products to serve our targeted commercial markets:

•RedCap® emergency backup LED tubes; and

•LED retrofit kits for replacing fluorescent lamps, downlights, and low/high-bay fixtures; and

•Industrial LED dock lights; and

•UPS systems products designed for AI data centers

MMM LED lighting products to serve the U.S. Navy and allied foreign navies:

•Intellitube® and the Invisitube™ retrofit LEDs for the U.S. Navy and allied forces; and

•Military-grade LED fixtures like globe lights, berth lights, and high-bay kits.

New products:

•Energy-saving GaN power supplies for efficient power delivery; and

•ESS products designed for AI data centers

Our products outperform traditional lighting and power solutions, offering financial savings, reduced carbon emissions, and improved occupant health.

The key features of our products are as follows:

•High-efficiency designs with proprietary technology;

•Long-lasting performance, with most LEDs backed by a 10-year warranty;

•Ultra-low flicker for better health and equipment compatibility;

•Compliance with energy efficiency standards and rebate eligibility.

By expanding into GaN power supplies, ESS, and UPS systems, we’re addressing the growing needs of AI data centers and other tech-driven industries, reinforcing our commitment to innovation and sustainability. Our robust research and multi-channel sales strategy ensure we stay ahead in delivering reliable, high-quality solutions.

Sales and Marketing

Our company is dedicated to advancing innovative technologies and high-performance solutions across multiple sectors, including LED lighting, ESS, GaN power supplies, and AI Data Center UPS. We aim to strengthen our market presence in these areas while expanding our business reach in the Asia region.

•LED Lighting and Control Systems

We continue to focus on educating channel partners and end-users about the benefits and unique value propositions of our high-quality LED lighting technologies. Our primary customers include enterprise end-users, contractors, and ESCOs integrating our products into their projects. We also collaborate with lighting agencies that complement our direct sales efforts. Our in-house commercial sales team, along with external sales agencies, ensures broad market coverage, and we plan to extend this network across all U.S. regions.

Our sales strategy emphasizes our brand reputation and product education while simplifying procurement. We target industry verticals where our LED lighting offers significant economic, health, and safety benefits. Our products serve both commercial markets—valuing quality, efficiency, and ROI—and military markets (MMM), which require high durability and reliability.

Since launching our military-grade Intellitube® in 2011 for U.S. Navy ships, military sales have formed a substantial portion of our revenue. We continuously enhance our MMM product designs to reduce costs while maintaining performance standards. Although military sales are affected by fluctuating government funding, our strong presence in this market positions us for future growth. Simultaneously, we are committed to expanding our commercial market share, which holds vast potential.

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Our commercial LED lighting products, introduced in 2010, have gained traction in sectors like healthcare, education, and industrial facilities. Notably, we have been the primary LED supplier for a major northeast Ohio hospital system since 2015, enabling us to expand into additional healthcare networks. We also supply low-flicker LED lighting to schools, colleges, and universities, promoting energy efficiency and healthier learning environments. Furthermore, our high bay and low bay lighting solutions cater to large-scale facilities such as warehouses and retail stores, offering energy and maintenance cost savings.

•ESS

We are expanding into the ESS market, offering reliable energy storage solutions for both commercial and industrial applications. Our ESS products support grid stability, renewable energy integration, and backup power needs. By leveraging our expertise in power electronics, we aim to provide efficient and scalable ESS solutions that cater to diverse energy demands.

•GaN Power Supplies

Our GaN Power Supplies represent the next generation of power conversion technology, delivering higher efficiency and power density compared to traditional silicon-based systems. These power supplies are ideal for applications requiring compact, lightweight, and high-performance solutions, including consumer electronics, industrial equipment, and renewable energy systems.

•AI Data Center UPS Solutions

We are introducing AI-driven UPS systems tailored for data centers, ensuring uninterrupted power supply and optimized energy management. Our AI UPS solutions utilize advanced algorithms to enhance system reliability, predict potential failures, and improve overall energy efficiency, supporting the growing demands of data centers worldwide.

Recognizing the immense market potential in Asia, we are prioritizing business expansion in this region. Our strategy includes establishing local partnerships, enhancing distribution networks, and customizing product offerings to meet regional needs. By strengthening our presence in Asia, we aim to tap into new growth opportunities and diversify our global revenue streams.

We employ a multi-channel sales approach, combining direct sales, external agencies, and selective e-commerce channels to reach a broad customer base. While our focus remains on core commercial and military markets, we continuously evaluate additional sales avenues to maximize market penetration. Our commitment to technological innovation and cost-effective engineering solutions allows us to enhance product features while reducing ownership costs. This strategic advantage supports our goal of expanding distribution channels and solidifying our competitive position.

With our diversified product portfolio and focused expansion strategies, we are well-positioned to drive sustainable growth across LED lighting, ESS, GaN Power Supplies, and AI Data Center UPS markets. Our increased emphasis on the Asia region further strengthens our global market presence, setting the stage for long-term success.

Concentration of Sales

While total MMM sales declined 43% year-over-year, sales to our primary Navy distributor remained approximately flat at $0.8 million, increasing from 16% to 21% as a percentage of total sales as the denominator of total sales decreased. This increased concentration heightens our exposure to the loss of any major customer. We are focused on broadening our customer base and pursuing additional customer opportunities in international markets to mitigate customer concentration risk.

In 2025, three customers accounted for 48% of net sales, with sales to a distributor for the U.S. Navy accounting for approximately 21% and two commercial customers accounting for approximately 27%.

In 2024, two customers accounted for 33% of net sales, with sales to a distributor for the U.S. Navy accounting for approximately 16% and a shipbuilder for the U.S. Navy accounting for approximately 17%.

Competition

Our LED lighting products compete against a variety of lighting products, including conventional light sources such as compact fluorescent lamps and HID lamps, as well as other TLEDs and integrated LED luminaire products. Our ability to compete depends substantially upon the superior performance, incremental benefits and lower total cost of ownership of our products.

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Principal competitors in our markets include large lamp manufacturers and lighting fixture companies based in the United States, as well as TLED and LED replacement fixture manufacturers mostly based in Asia, whose financial resources may substantially exceed ours and whose cost structure as a percentage of sales may be well below ours. These competitors may introduce new or improved products that may reduce or eliminate some of the competitive advantage of our products and may have substantially lower pricing. We anticipate that the competition for our products will also come from new technologies that offer increased energy efficiency, lower initial costs, lower maintenance costs, or advanced features. We compete with LED systems produced by large lighting companies such as Signify Lighting, Osram Sylvania and GE Lighting, as well as smaller manufacturers or distributors such as LED Smart, Energy Source Group, Orion Energy Systems, and Keystone Technologies. Some of these competitors offer products with performance characteristics similar to those of our products.

Manufacturing and Suppliers

We manufacture our lighting products and systems through a combination of in-house production at our Solon, Ohio facility and outsourced finished goods produced to our specifications. Our in-house operations focus on final assembly, testing, and quality control. We collaborate with several vendors to design custom components that meet our specific needs. Our quality assurance program includes rigorous testing at key stages of assembly and for all finished products, whether produced internally or sourced externally. Additionally, we are ISO 9001:2015 certified.

Manufacturing costs are managed through a balance of internal production and outsourcing to trusted suppliers worldwide, primarily in the United States, Malaysia, Taiwan, and previously China. In certain cases, we rely on single-source suppliers for specific components or finished goods. We continuously optimize our global supply chain to meet client expectations in quality and volume while controlling costs and achieving target gross margins. Our approach includes evaluating opportunities for additional outsourcing or increased insourcing when it enhances cost efficiency, quality, or performance.

Our suppliers are primarily based in the United States and Asia. We continue to reduce transportation costs while actively managing shorter lead times for component procurement.

Two suppliers (related parties, See Note 14 “Related Party Transactions” of this Annual Report on Form 10-K, for additional information) accounted for approximately 28% of our total expenditures for the twelve months ended December 31, 2025. At December 31, 2025, two suppliers accounted for approximately 11% and 71% (a related party, See Note 14, “Related Party Transactions” of this Annual Report on Form 10-K, for additional information) of our trade accounts payable balance.

One supplier (a related party, See Note 14 “Related Party Transactions” of this Annual Report on Form 10-K, for additional information) accounted for approximately 36% of our total expenditures for the twelve months ended December 31, 2024. At December 31, 2024, two suppliers accounted for approximately 32% and 48% (a related party, See Note 14, “Related Party Transactions” of this Annual Report on Form 10-K, for additional information) of our trade accounts payable balance, respectively.

Product Development

Product development remains a central focus and a key differentiator in delivering industry-leading LED lighting solutions, GaN Power Supplies, and MMM lighting solutions. Gross product development expenses for the years ended December 31, 2025 and 2024 were $0.4 million and $0.5 million, respectively. We believe that our customer-focused approach to product development ensures that our R&D investments yield impactful and innovative products, driving faster market adoption and strengthening our competitive advantage.

Additionally, we collaborate with certain prime contractors serving the U.S. Department of Defense on product development initiatives that align with anticipated DoD program requirements for 2026 and 2027. These efforts are intended to support qualification, testing, and integration of our products into customer programs.

Intellectual Property

We actively protect our intellectual property through patents, license agreements, trademark registrations, confidential disclosure agreements, and trade secrets, as appropriate. Certain patents are integral to our current product lines. We have multiple pending U.S. and international patent applications filed under the Patent Cooperation Treaty with the World Intellectual Property Organization. Our portfolio includes over 50 issued patents, expiring at various times through May 2040. Patent protection typically lasts 20 years from the earliest effective filing date. However, there is no guarantee that existing patents are invulnerable or that pending applications will be granted. Competitors may develop similar products or access proprietary information despite these protections. The laws of some foreign countries in which we manufacture, sell or may sell

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our products do not protect proprietary rights to products to the same extent as the laws of the United States. Please refer to Note 9, “Commitments and Contingencies,” of this Annual Report on Form 10-K, for additional information.

Insurance

All of our properties and equipment are covered by insurance and we believe that such insurance is adequate. In addition, we maintain general liability, product recall and workers’ compensation insurance in amounts we believe to be consistent with our risk of loss and industry practice.

Regulatory Compliance

In addition, although not legally required to do so, we strive to obtain certification for substantially all our products. In the United States, we seek certification on substantially all of our products from UL Solutions (UL®), Intertek Testing Services (“ETL®”), or DesignLights Consortium (“DLC™”). Where appropriate in jurisdictions outside the United States, we seek to obtain other similar national or regional certifications for our products. Although we believe that our broad knowledge and experience with electrical codes and safety standards have facilitated certification approvals, we cannot ensure that we will be able to obtain any such certifications for our new products or that, if certification standards are amended, we will be able to maintain such certifications for our existing products.

Human Capital

As of December 31, 2025, we had 8 full-time employees and 4 part-time employees, with 7 based in the United States and 5 in Taiwan. We had 5 temporary contractors as of December 31, 2025. None of our employees or contractors are subject to collective bargaining agreements and we consider our relationship with our employees to be good. We encourage and support the growth and development of our employees. Continual learning and career development is advanced through ongoing performance and development conversations with employees and reimbursement is available to employees from time to time for seminars, conferences, formal education, and other training events employees attend in connection with their job duties.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our current and future employees. The principal purposes of our annual bonus plan and equity incentive plan are to attract, retain and motivate employees through the granting of long-term incentive compensation awards.

Business Segments

We currently operate in a single business segment that includes the marketing and sale of commercial and MMM lighting products and controls. Please refer to Note 12, “Product and Geographic Information,” and Note 13, “Segment Information,” included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K, for additional information.

Available Information

Our principal executive offices are located at 32000 Aurora Road, Suite B, Solon, Ohio 44139. Our telephone number is 440.715.1300. Our website address is www.energyfocus.com. We are providing the address to our website solely for the information of investors. The information on our website is not a part of, nor is it incorporated by reference into this Annual Report on Form 10-K. We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports with the Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains these reports at www.sec.gov.

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ITEM 1A. RISK FACTORS

Risks Associated with Our Business

If we are unable to attract or retain qualified personnel, our business and product development efforts could be harmed.

We are highly dependent on our senior management and other key personnel due to our very lean organizational structure. Our future success will depend on our ability to attract, retain, develop and motivate qualified executive, technical, sales, marketing, operating, financial and management personnel, for whom competition is very intense. As we attempt to sustain and re-grow our business, it could be especially difficult to attract, retain and adequately compensate qualified personnel, especially in light of our lean cost structure and the tightening of the labor market, which has led to increased competition for employees. The loss of, or failure to attract, hire, and retain any such persons could delay product development cycles, disrupt our operations, increase our costs, or otherwise harm our business or results of operations. We also do not maintain “key person” insurance policies on any of our officers or our other employees, nor have employment contracts.

We rely on equity and debt financing to operate our business and will require additional financing in the near term, which we may not be able to raise on favorable terms or at all, and our failure to obtain funding when needed may force us to delay, scale back or eliminate our business plan or even discontinue or curtail our operations.

For the year ended December 31, 2025, we reported a net loss of $1.0 million and are dependent upon the availability of financing in order to continue our business.

For the year ended December 31, 2025, financing activity to sustain losses included issuance of common stock of approximately $2.1 million (Please see Note 10 of our financial statements for the year ended December 31, 2025 included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.).

For the year ended December 31, 2024, financing activity to sustain ongoing losses included (1) issuance of common stock approximately $0.9 million and (2) payments on the 2022 Streeterville Note $1.0 million.

We may not generate sufficient cash flows from our operations or be able to borrow sufficient funds to sustain our operations. As such, we will likely need additional external financing during 2026 and will continue to review and pursue external funding sources including, but not limited to, the following:

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

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

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

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

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

•loans or other debt instruments may have terms or conditions, such as interest rates, 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”); and

•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.

If we fail to obtain the required additional financing to sustain our business before we are able to produce levels of revenue to meet our financial needs, we will need to delay, scale back or eliminate our business plan and further reduce our operating costs and headcount, each of which would have a material adverse effect on our business, future prospects, and financial condition. A lack of additional financing could also result in our inability to continue as a going concern and force us to sell certain assets or discontinue or curtail our operations and, as a result, investors in the Company could lose their entire investment.

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Our independent registered public accounting firm’s opinion on our audited financial statements for the fiscal year ended December 31, 2025, included in this Annual Report, contains a modification relating to our ability to continue as a going concern.

Our independent registered public accounting firm’s opinion on our audited financial statements for the year ended December 31, 2025 includes a modification stating that our losses and negative cash flows from operations and uncertainty in generating sufficient cash to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern.

While we continue to pursue funding sources and transactions that could raise capital, there can be no assurances that we will be successful in these efforts or will be able to resolve our liquidity issues or eliminate our operating losses. If we are unable to generate enough cash or obtain sufficient additional funding, we would need to scale back or significantly adjust our business plan, further reduce our operating costs and headcount, or discontinue or curtail our operations. Accordingly, our business, prospects, financial condition and results of operations could be materially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited consolidated financial statements, and it is likely that investors will lose all or a part of their investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. (Please see Note 2 of our financial statements "Going Concern" for the year ended December 31, 2025 included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.)

We have a history of operating losses and will incur losses in the future as we continue our efforts to grow sales and streamline our operations at a profitable level.

We have incurred substantial losses in the past and reported net losses of $1.0 million and $1.6 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $155.9 million and cash of approximately $1.1 million, compared to an accumulated deficit of $154.9 million and cash of approximately $0.6 million as of December 31, 2024.

In order for us to operate our business profitably, we need to grow our sales, maintain cost control discipline while balancing development of our product pipeline and potential long-term revenue growth, continue our efforts to reduce product cost, and drive further operating efficiencies and develop and execute a strategic product pipeline for profitable and compelling MMM and LED lighting and control products. Management initiated expansion into the Asian market in 2025. There is a risk that our strategy to return to profitability may not be as successful as we envision, or occur as quickly as we expect. We might require additional financing in the near-term and, if our operations do not achieve, or we experience an unanticipated delay in achieving, our intended level and pace of profitability, we will continue to need additional funding, none of which may be available on favorable terms or at all and could require us to sell certain assets or discontinue or curtail our operations.

While we are attempting to diversify our customer base, we have historically derived a significant portion of our revenue from a few customers, and the loss of one of these customers, or a reduction in their demand for our products, could adversely affect our business, financial condition, results of operations, and prospects.

Historically our customer base has been highly concentrated and a limited number of customers have represented a substantial portion of our net sales. We generally do not have long-term contracts with our customers that commit them to purchase any minimum amount of our products or require them to continue to do business with us. As a result, the loss of, or a significant reduction in demand from, any of our significant customers could adversely affect our business, financial condition, results of operations, and prospects. We may lose business from any one of our significant customers for a variety of reasons, many of which are outside of our control, including changes in customer procurement strategies or project timelines, changes in government funding and rebate programs, increased competition, changes in product specifications, and our ability to meet customer requirements, including delivery and quality expectations.

We are attempting to expand and diversify our customer base and reduce the dependence on one or a few customers, through the addition of sales representatives and other potential sales channels, but we cannot provide any assurance that our efforts will be successful. We anticipate that a limited number of customers could continue to comprise a substantial portion of our revenue for the foreseeable future. If we continue to do business with our significant customers, our concentration can cause variability in our results because we cannot control the timing or amounts of their purchases. A significant customer could cease to do or drastically reduce its business with us with little or no notice, which could adversely affect our results of operations and cash flows in particular periods.

Historically, we have experienced long sales-cycles, as well as slow ramp-up by new customers to purchase large amounts of LED products from us. Given the fiercely competitive lighting market in which we operate, we are constantly trying to balance

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pricing with the quality-premium our products command both in brand reputation and performance. As a result, adding new customers could generally be a slow process, and increasing new customers’ sales to more significant levels usually takes a long period of time. As we continue to develop more customer-centric new products such as GaN-based power supply circuitry, we hope to both add new customers more quickly and have our customers scale their purchasing levels more quickly. However, there is no guarantee of faster customer acceptance or performance of these new products or any other that has been or is being developed.

If critical components and finished products that we develop with and purchase from a small number of third-party development partners and suppliers become unavailable or increase in price, or if our development partners, suppliers or delivery channels fail to meet our requirements for quality, quantity, and timeliness, our revenue and reputation in the marketplace could be harmed, which would damage our business.

In an effort to reduce research and development and manufacturing costs, we have outsourced the research, development and production of certain parts and components, as well as finished goods in our product lines, to a small number of vendors in various locations throughout the world, primarily in the United States, Malaysia, Taiwan and China. We generally purchase these sole or limited source items with purchase orders, and we have limited guaranteed supply arrangements with such suppliers. While we believe alternative sources for these components and products are available, we select suppliers based on their expected ability to provide quality products at a cost-effective price, to meet our specifications, and to deliver within scheduled time frames. We do not control the time and resources that these suppliers devote to our business, and we cannot be sure that these suppliers will perform their obligations to us. If our ability to manage third-party product development efforts are unsuccessful or our suppliers fail to perform their obligations in a timely manner or at satisfactory quality levels, we may suffer lost or delayed sales, increased costs of goods sold, reductions in revenue or margin, and damage to our reputation in the market, all of which would adversely affect our business. As demand for our products fluctuates, which fluctuations can be hard to predict, we may not need a sustained level of inventory, which may cause financial hardship for our suppliers or they may need to divert production capacity elsewhere. In the past, we have had to purchase quantities of certain components that are critical to our product manufacturing and were in excess of our estimated near-term requirements as a result of supplier delivery constraints and concerns over component availability, and we may need to do so in the future. As a result, we have had, and may need to continue, to devote additional working capital to support a large amount of component and raw material inventory that may not be used over a reasonable period to produce saleable products, and we may be required to increase our excess and obsolete inventory reserves to provide for these excess quantities, particularly if demand for our products does not meet our expectations.

We may be vulnerable to unanticipated product development delays, price increases and payment term changes. Significant increases in the prices of sourced components and products, shipping costs and recent tariff policy changes could cause our product prices to increase, which may reduce demand for our products or make us more susceptible to competition. Furthermore, in the event that we are unable to pass along increases in operating costs to our customers, margins and profitability may be adversely affected. Accordingly, the loss of all or one of these suppliers could have a material adverse effect on our operations until such time as an alternative supplier could be found.

Additionally, consolidation in the lighting industry could result in one or more current suppliers being acquired by a competitor, rendering us unable to continue purchasing key components and products at competitive prices.

We also may be subject to various import duties and tariffs applicable to materials manufactured in foreign countries and may be affected by various other import and export restrictions, as well as other considerations or developments impacting upon international trade, including economic or political instability, tariffs, shipping delays and product quotas. These international trade factors will, under certain circumstances, have an impact on the cost of components, which will have an impact on the cost to us of the manufactured product and the wholesale and retail prices of our products.

We rely on arrangements with independent shipping companies for the delivery of our products from vendors abroad. The failure or inability of these shipping companies to deliver products or the unavailability of shipping or port services, even temporarily, could have a material adverse effect on our business. We may also be adversely affected by an increase in freight surcharges due to global logistics capacity constraints, rising fuel costs and added security costs.

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If we are unable to implement plans to increase sales and control expenses to manage future growth effectively, our profitability goals and liquidity will be adversely affected.

Our ability to achieve our desired growth depends on the adoption of high-quality LED lighting and controls within the general lighting market and our ability to affect and adapt to these rates of adoption. The pace of continued growth in these markets is uncertain, and in order to grow our sales, we may need to:

•manage organizational complexity and ensure effective and timely communication;

•expand the skills and capabilities of our current management, engineering and sales teams;

•add experienced senior level managers;

•attract, retain and adequately compensate qualified employees;

•adequately maintain and adjust the operational and financial controls that support our business;

•expand research and development, sales and marketing, technical support, distribution capabilities, manufacturing planning or administrative functions and capabilities;

•maintain or establish additional manufacturing facilities and equipment, as well as secure sufficient third-party manufacturing resources, to adequately meet customer demand or lower manufacturing costs; and

•manage an increasingly complex supply chain to maintain a sufficient supply of materials and deliver on time to our manufacturing facilities.

These efforts to grow our business, both in terms of size and in diversity of customer bases served, may put a significant strain on our resources. We have implemented comprehensive cost-saving initiatives to reduce our net loss and mitigate doubt about our ability to continue as a going concern. These initiatives have improved efficiency and streamlined our operations, but we continue to operate at a loss and may need additional funding or further cost-cutting to manage liquidity.

Our possible future growth may exceed our current capacity and require rapid expansion in certain functional areas. We may lack sufficient funding to appropriately expand or incur significant expenses as we attempt to scale our resources and make investments in our business that we believe are necessary to achieve short-term and long-term growth goals. Such investments take time to become fully operational, and we may not be able to expand quickly enough to exploit targeted market opportunities. In addition to our own manufacturing capacity, we are increasingly utilizing contract manufacturers and original design manufacturers (“ODMs”) to produce our products for us. There are also inherent execution risks in expanding product lines and production capacity, whether through our facilities or that of a third-party manufacturer, that could increase costs and reduce our operating results, including design and construction cost overruns, poor production process yields and reduced quality control. If we are unable to fund any necessary expansion or manage our growth effectively, we may not be able to adequately meet demand, our expenses could increase without a proportionate increase in revenue, our margins could decrease, and our business and results of operations could be adversely affected.

Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity.

As our customer base and customer demand for our products changes and as we launch new products, we must be able to adjust our production capacity to meet demand. We are continually taking steps to address our manufacturing capacity needs for our products. If we are not able to increase or decrease our production capacity at our targeted rate or if there are unforeseen costs associated with adjusting our capacity levels, or there are unanticipated interruptions in our global supply chain or logistics due to factors outside of our control, such as geopolitical instability, labor availability constraints, changes in trade policies, inflationary pressures, or other macroeconomic conditions, we may not be able to achieve our financial targets. In addition, as we introduce new products and further refine existing products, we must balance the production and inventory of prior generation products with the production and inventory of new products, whether manufactured by us or our contract manufacturers, to maintain a product mix that will satisfy customer demand and mitigate the risk of incurring cost write-downs on the previous generation products, related raw materials and tooling.

If customer demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs to correspond to the demand. This could result in lower margins, write-downs of our inventory and adverse impacts to our business and results of operations. Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower factory utilization, causing higher fixed costs per unit produced. In addition, our efforts to improve quoted delivery lead-time performance may result in corresponding reductions in order backlog. A decline in backlog levels could result in more variability and less predictability in our quarter-to-quarter net sales and operating results.

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If we are not able to compete effectively against companies with lower cost structures or greater resources, or new competitors who enter our target markets, our sales will be adversely affected.

The lighting industry is highly competitive. In the high-performance lighting markets in which we sell our advanced lighting systems, our products compete with lighting products utilizing traditional lighting technology provided by many vendors. Our higher quality and value advanced lighting and control systems also face competition from lower quality, commodity lighting products when customers may be overly purchase-price sensitive. For sales of MMM products, we compete with a small number of qualified military lighting lamp and fixture suppliers. In certain commercial applications, we typically compete with LED systems produced by large lighting companies. Our primary competitors include Signify, Osram Sylvania, LED Smart, Energy Source Group, Orion Energy Systems, and Keystone Technologies. Some of these competitors offer products with performance characteristics similar to those of our products. Many of our competitors are larger, more established companies with greater resources to devote to research and development, manufacturing and marketing, as well as greater brand recognition. In addition, larger competitors who purchase greater unit volumes from component suppliers may be able to negotiate lower costs, thereby enabling them to offer lower pricing to end customers. Moreover, the relatively low barriers to entry into the lighting industry and the limited proprietary nature of many lighting products also permit new competitors to enter the industry easily and with lower costs.

In each of our markets, we also anticipate the possibility that LED component manufacturers, including those that currently supply us with LEDs, may seek to compete with us. Our competitors’ lighting technologies and products may be more readily accepted by customers than our products will be. Moreover, if one or more of our competitors or suppliers were to merge, the change in the competitive landscape could adversely affect our competitive position. Additionally, to the extent that competition in our markets intensifies, we may be required to further reduce our prices in order to remain competitive. If we do not compete effectively, or if we reduce our prices without making commensurate reductions in our costs, our net sales, margins, and profitability and our future prospects for success may be harmed.

We work with independent agents and sales representatives for a portion of our net sales, and the failure to incentivize, retain and manage our relationships with these third parties, or the termination of these relationships, could cause our net sales to decline and harm our business.

In the past, we pursued an agency-driven sales channel strategy in order to expand our market presence throughout the United States. As a result, at that time, we had increased our reliance on independent sales agent channels to market and sell our LED lighting and control products. In addition, these parties provide technical sales support to end-users. The current agreements with our agents are generally non-exclusive on the agents’ product portfolio, meaning they can sell our competitors’ products. Any such agreements we enter into in the future may be on similar terms. Our agents may not be motivated to or successfully pursue the sales opportunities available to them, or they may prefer to sell or be more familiar with the products of our competitors. If our agents do not achieve our sales objectives or these relationships take significant time to develop, our revenue may decline, fail to grow or not increase as rapidly as we intend in order to achieve profitability and grow our business. We improved and continued to maintain our agency relationships that were both mutually beneficial and strategically important. Although we believe that our agency strategy will increase the role of independent agents and sales representatives over time, direct sales using internal sales personnel still account for a substantial portion of our sales, and our agency plans may take longer to contribute significantly to our operating results.

Furthermore, our agency agreements are generally short-term and can be cancelled by either party without significant financial consequence. The termination of or the inability to negotiate extensions of these contracts on acceptable terms could adversely impact sales of our products. Additionally, we cannot be certain that we or end-users will be satisfied by their performance. If these agents significantly change their terms with us, or change their end-user relationships, there could be an impact on our net sales and profits.

If our LED lighting and control technology products fail to gain widespread market acceptance or we are unable to respond effectively as new technologies and market trends emerge, our competitive position and our ability to generate revenue, and profits may be harmed.

To be successful in our respective markets for LED lighting and control technology products, we depend on continued market acceptance of our existing LED lighting and control technology, including in the consumer and commercial markets. Potential customers may be reluctant to adopt LED lighting products as an alternative to traditional lighting technology because of their higher initial costs or perceived risks relating to their novelty, reliability, usefulness, quality and cost-effectiveness when compared to other established lighting sources available in the market. Changes in economic and market conditions may also make traditional lighting technologies more appealing. For example, declining energy prices in certain regions or countries may favor existing lighting technologies that are less energy-efficient, reducing the rate of adoption for LED lighting products in those areas. Notwithstanding continued performance improvements and cost reductions of LED lighting technologies, limited

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customer awareness of the benefits of LED lighting products, lack of widely accepted standards governing LED lighting products and customer unwillingness to adopt LED lighting products could significantly limit the demand for LED lighting products. Even potential customers that are inclined to adopt energy-efficient lighting technology may defer investment as LED lighting products continue to experience rapid technological advances. Any of the foregoing could adversely impact our results of operations and limit our market opportunities.

In addition, we will need to keep pace with rapid changes in LED lighting and control technology, changing customer requirements, new product introductions and cost reductions by competitors and evolving industry standards, any of which could render our existing products obsolete if we fail to respond in a timely manner. The development, introduction, and acceptance of new, re-designed or reduced cost products incorporating advanced technology is a complex process subject to numerous uncertainties, including:

•available funding to sustain adequate development efforts;

•achievement of technology breakthroughs required to make commercially viable devices, and in turn, protecting those breakthroughs through intellectual property;

•the accuracy of our predictions for market requirements;

•our ability to predict, influence, or react to evolving standards;

•acceptance of our new product designs;

•acceptance of new technologies in certain markets;

•the combination of other desired technological advances with lighting products, such as controls;

•the availability of qualified research and development personnel;

•our timely completion of product designs and development;

•our ability to develop repeatable processes to manufacture new products in sufficient quantities, with the desired specifications, and at competitive costs;

•our ability to effectively transfer products and technology from development to manufacturing; and

•market acceptance of our products.

We could experience delays in the introduction of these products. We could also devote substantial resources to the development of new technologies or products that are ultimately not successful.

If effective new sources of light, other than LEDs, are discovered and commercialized, our current products and technologies could become less competitive or obsolete. If others develop innovative proprietary lighting technology that is superior to ours, or if we fail to accurately anticipate technology, pricing and market trends, address market saturation and customer confusion, respond on a timely basis with our own development of new and reliable products and enhancements to existing products, and achieve broad market acceptance of these products and enhancements, our competitive position may be harmed and we may not achieve sufficient growth in our net sales to attain or sustain profitability.

Our operating results may fluctuate due to factors that are difficult to forecast and not within our control.

Our past operating results may not be accurate indicators of future performance, and you should not rely on such results to predict our future performance. Our operating results have fluctuated significantly in the past and could fluctuate in the future. Factors that may contribute to fluctuations include:

•changes in aggregate capital spending, cyclicality and other economic conditions, including inflationary pressures, or domestic and international demand in the industries;

•the timing of large customer orders to which we may have limited visibility and cannot control;

•competition for our products, including the entry of new competitors and significant declines in competitive pricing;

•our ability to effectively manage our working capital;

•our ability to generate increased demand in our current and targeted markets, particularly those in which we have limited experience;

•our ability to satisfy customer demands in a timely and cost-effective manner;

•pricing and availability of labor and materials;

•quality testing and reliability of new products;

•our inability to adjust certain fixed costs and expenses for changes in demand and the timing and significance of expenditures that may be incurred to facilitate our growth;

•macroeconomic, geopolitical and health concerns;

•seasonal fluctuations in demand and our revenue; and

•disruption in component supply from foreign vendors.

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Depressed general economic conditions may adversely affect our operating results and financial condition.

Our business is sensitive to changes in general economic conditions, both inside and outside the United States. Slow growth in the economy or an economic downturn, particularly one affecting construction and building renovation, or that causes end-users to reduce or delay their purchases of lighting products, services, or retrofit activities, would have a material adverse effect on our business, cash flows, financial condition and results of operations. LED lighting retrofit projects, in particular, tend to require a significant capital commitment, which is offset by cost savings achieved over time. As such, a lack of available capital, whether due to economic factors or conditions in the equity or debt markets, could have the effect of reducing demand for our products. A decrease in demand could adversely affect our ability to meet our working capital requirements and growth objectives, or could otherwise adversely affect our business, financial condition, and results of operations.

Customers may be unable to obtain financing to make purchases from us.

Some of our customers require financing in order to purchase our products, and the initial investment is higher than that which is required with traditional lighting products. The potential cost or inability of these customers to access the capital needed to finance purchases of our products and meet their payment obligations to us could adversely impact the appeal of our products relative to those with lower upfront costs and have a negative impact on our financial condition and results of operations. There can be no assurance that third-party finance companies will provide capital to our customers.

A significant portion of our business is dependent upon the existence of government funding, which may not be available into the future and could result in a reduction in sales and harm to our business.

Some of our customers are dependent on governmental funding, including U.S. and foreign allied navies and U.S. military bases. If any of these customers or potential customers abandon, curtail, or delay planned LED lighting retrofit projects as a result of the levels of funding available to them or changes in budget priorities, it would adversely affect our opportunities to generate product sales.

Our products could contain defects, or they may be installed or operated incorrectly, which could reduce sales of those products or result in claims against us.

Despite product testing, defects may be found in our existing or future products. This could result in, among other things, a delay in the recognition or loss of net sales, the write-down or destruction of existing inventory, insurance recoveries that fail to cover the full costs associated with product recalls or other claims, significant warranty, support, and repair costs, diversion of the attention of our engineering personnel from our product development efforts, and damage to our relationships with our customers. The occurrence of these problems could also result in reputational and brand damage or the delay or loss of market acceptance of our lighting products and would likely harm our business. In addition, our customers may specify quality, performance, and reliability standards that we must meet. If our products do not meet these standards, we may be required to replace or rework the products. In some cases, our products may contain undetected defects or flaws that only become evident after shipment. Even if our products meet standard specifications, our customers may attempt to use our products in applications for which they were not designed or in products that were not designed or manufactured properly, resulting in product failures and creating customer satisfaction issues.

Some of our products use line voltages (such as 120- or 240-volts AC), which involve enhanced risk of electrical shock, injury or death in the event of a short circuit or other malfunction. Defects, integration issues or other performance problems in our lighting products could result in personal injury or financial or other damages to end-users or could damage market acceptance of our products. Our customers and end-users could also seek damages from us for their losses. A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend and the adverse publicity generated by such a claim against us or others in our industry could negatively impact our reputation.

We provide warranty periods generally ranging from one to ten years on our LED lighting products. Although we believe our reserves are appropriate, we are making projections about the future reliability of new products and technologies, and we may experience increased variability in warranty claims. Increased warranty claims could result in significant losses due to a rise in warranty expense and costs associated with customer support.

Our industry is characterized by vigorous protection and pursuit of intellectual property rights and positions, which may result in protracted and expensive litigation. We have engaged in litigation in the past and litigation may be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation may also be necessary to defend against claims of infringement or invalidity by others. Additionally, we could be required to defend against individuals and groups who have been purchasing intellectual property assets for the sole purpose of making claims of infringement and attempting to extract settlements from companies like ours. Litigation could delay development or sales

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efforts and an adverse outcome in litigation, or any similar proceedings, could subject us to significant liabilities, require us to license disputed rights from others or require us to cease marketing or using certain products or technologies. We may not be able to obtain any licenses on acceptable terms, if at all, and may attempt to redesign those products that contain allegedly infringing intellectual property, which may not be possible. We also may have to indemnify certain customers if it is determined that we have infringed upon or misappropriated another party’s intellectual property. The costs of addressing any intellectual property litigation claim, including legal fees and expenses and the diversion of management resources, regardless of whether the claim is valid, could be significant and could materially harm our business, financial condition, and results of operations.

From time to time, we have been and may in the future be subject to claims or allegations that we infringe upon or have misappropriated the intellectual property of third parties. Defending against such claims is costly and intellectual property litigation often involves complex questions of fact and law, with unpredictable results. We may be forced to acquire rights to such third-party intellectual property on unfavorable terms (if rights are made available at all), pay damages, modify accused products to be non-infringing, or stop selling the applicable product altogether.

We may be subject to confidential information theft or misuse, which could harm our business and results of operations.

We face attempts by others to gain unauthorized access to our information technology systems on which we maintain proprietary and other confidential information. Our security measures may be breached as the result of industrial or other espionage actions of outside parties, employee error, malfeasance or otherwise, and as a result, an unauthorized party may obtain access to our systems. In addition, these same risks to our information technology systems also apply to the third-party service providers’ information technology systems utilized by the Company. Additionally, outside parties may attempt to access our confidential information through other means, for example by fraudulently inducing our employees to disclose confidential information. We actively seek to prevent, detect and investigate any unauthorized access, which occasionally occurs despite our best efforts. We might be unaware of any such access or unable to determine its magnitude and effects. The theft, corruption or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an incident could adversely affect our competitive position and the value of our investment in research and development could be reduced. Our business could be subject to significant disruption, widespread negative publicity and a loss of customers, and we could suffer legal liabilities and monetary or other losses.

We may fail to secure sufficient additional financing, which could prevent us from executing our business plan and continuing as a going concern.

Our cash balance of $1.1 million as of December 31, 2025, and ongoing operating losses raise substantial doubt about our ability to continue as a going concern. We are actively seeking additional capital through equity, debt, or strategic partnerships, but there can be no assurance that we will secure such funding on acceptable terms or at all. Equity financing may significantly dilute existing shareholders, while debt financing could impose restrictive covenants or high interest rates. Failure to obtain adequate financing could result in reduced operations, delayed product development, or insolvency.

Global trade policies, including tariffs, could increase costs and disrupt our supply chain, adversely affecting our operations and profitability.

Our operations are subject to risks arising from global trade policies, particularly the imposition of tariffs and other trade barriers by the United States, China, the European Union, and other nations, which have intensified under the current U.S. administration. As of December 31, 2025, approximately 92% of our purchase commitments are with Sander Electronics Co. Ltd, a Taiwan-based related party, which could be indirectly affected by international trade tensions, including tariffs. These policies may increase the cost of imported components, extend delivery times due to customs delays, or reduce demand for our products if customers face higher prices. For example, certain products have been subject to tariffs imposed in early 2025 on electronic components, which has increased our cost of sales by approximately 4%, or $109 thousand for the year ended December 31, 2025. Based on current inventory levels and supply chain composition, these risks are heightened by our significant concentration of purchases with Taiwan-based related party suppliers (representing 92% of our purchase commitments as of December 31, 2025), which may be indirectly affected by U.S.-China trade tensions and broader Asian trade policies, even if not directly subject to specific tariffs.

The unforeseen results of potential trade disputes and reciprocal tariffs worldwide could further impact our business. Increased trade protectionism, as governments seek to protect or revive domestic industries, may lead to restrictions on imports, such as tariffs, that could significantly affect global trade and, indirectly, the demand for our LED lighting products. Such restrictions could increase the cost of exported goods, prolong delivery times, and elevate risks associated with exporting, potentially leading to a decline in the volume of exported goods and demand for our products. The interconnected nature of global supply chains means that trade policies, even in countries not directly imposing or subject to tariffs, could disrupt our access to critical components.

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Tensions over trade remain high, particularly between the U.S., China, and the European Union. The current U.S. administration’s extensive use of tariffs as a policy tool has introduced significant uncertainty regarding future trade relationships with key markets, including China, the European Union, Canada, and Mexico. These tariffs have prompted, and may continue to prompt, retaliatory tariffs from other nations, raising concerns about a prolonged trade war. Protectionist developments, or the perception that they may occur, could materially adversely affect global economic conditions, reduce international trade, and disrupt our supply chain, particularly for components sourced from Asia. Such disruptions could strain our liquidity, increase operating costs, and hinder our ability to compete effectively in the LED lighting market, adversely impacting our business, results of operations, and financial condition.

Foreign currency fluctuations may adversely affect our financial results.

We have operations and business relationships in Taiwan and Japan that expose us to foreign currency risk. As of December 31, 2025, we held approximately $326 thousand in New Taiwan dollar (“NTD”) denominated cash, and $113 thousand in NTD accounts receivable, resulting in a net NTD exposure of approximately $439 thousand. In addition, we held approximately $156 thousand in Japanese Yen (“JPY”) denominated advance for investment in joint venture related to our Japan ESS initiative. Fluctuations in the exchange rate between the U.S. dollar and NTD and JPY directly impact our financial results when these amounts are translated to U.S. dollars for financial reporting purposes. Additionally, economic, political and other risks associated with foreign operations could adversely affect our financial results.

During 2025, we recognized a foreign exchange gain of $20 thousand related to NTD and JPY transactions and balances, including period-end remeasurement of foreign currency denominated monetary items. These fluctuations can be significant relative to our quarterly results and may increase volatility in our reported financial performance. We do not currently hedge our foreign currency exposure, and significant strengthening of the U.S. dollar relative to the NTD or JPY could adversely impact our results of operations and financial condition.

A portion of our cash and operating activities are located in Taiwan, and we are subject to risks associated with foreign currency fluctuations, repatriation restrictions, and local regulations. While there are no current limitations on our ability to access funds held in Taiwan, future government actions, currency controls, or changes in tax law could restrict or delay our ability to repatriate earnings or transfer funds. Additionally, fluctuations in the exchange rate between the New Taiwan dollar and the U.S. dollar may materially affect our reported financial results, and we do not currently hedge this exposure.

Although the substantial majority of our business activity takes place in the U.S., we derive a portion of our revenues and earnings from operations in foreign countries, which is expected to increase with our investment in foreign locations. As a result, we are subject to risks associated with doing business internationally. The risks of doing business in foreign countries include, among other factors: the potential for adverse changes in the local political climate, in diplomatic relations between foreign countries and the U.S. or in government policies, laws or regulations; international conflicts; terrorist activity that may cause social disruption; logistical and communications challenges; costs of complying with a variety of laws and regulations; difficulty in staffing and managing geographically diverse operations; deterioration of foreign economic conditions; inflation and fluctuations in interest rates; foreign currency exchange rate fluctuations; foreign exchange restrictions; differing local business practices and cultural considerations; restrictions on imports and exports or sources of supply, including energy and raw materials; changes in duties, quotas, tariffs, taxes or other protectionist measures; and potential issues related to matters covered by the Foreign Corrupt Practices Act, regulations related to import/export controls, the Office of Foreign Assets Control sanctions program, anti-boycott provisions or similar laws. We believe that our business activities outside of the U.S. involve a higher degree of risk than our domestic activities, and any one or more of these factors could adversely affect our operating results and financial condition. In addition, global and regional economic conditions and the volatility of worldwide capital and credit markets have significantly impacted and may continue to significantly impact our foreign customers and markets. These factors may result in decreased demand in our foreign operations.

We have international operations and are subject to risks associated with operating in international markets.

We outsource the production of certain parts and components, as well as finished goods in certain product lines, to a small number of vendors in various locations outside of the United States, including Malaysia, Taiwan and China. Although we do not currently generate significant sales from customers outside the United States, we are targeting foreign allied navies as a potential opportunity to generate additional sales of our MMM products as well as a limited number of foreign geographic markets which we expect to expand over time.

International business operations are subject to inherent risks, including, among others:

•difficulty in enforcing agreements and collecting receivables through foreign legal systems;

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•unexpected changes in regulatory requirements, tariffs, and other trade barriers, restrictions or disruptions;

•potentially adverse tax consequences;

•localized impacts of epidemics, pandemics or other contagious outbreaks, such as the COVID-19 pandemic;

•the burdens of compliance with the U.S. Foreign Corrupt Practices Act, similar anti-bribery laws in other countries, and a wide variety of other laws;

•import and export license requirements and restrictions of the United States and each other country in which we operate;

•exposure to different legal standards and reduced protection for intellectual property rights in some countries;

•currency fluctuations and restrictions; and

•political, social, and economic instability, including war and the threat of war, acts of terrorism, pandemics, boycotts, curtailment of trade, or other business restrictions.

If we do not anticipate and effectively manage these risks, these factors may have a material adverse impact on our business operations.

Our business and operations are significantly dependent on Sander Electronics, which creates material conflicts of interest and business risks.

Our relationships 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 controlled by our CEO Chiao Chieh (Jay) Huang, create substantial business and governance risks. As of December 31, 2025 Sander Electronics represented 71% of our accounts payable, and we have ongoing purchasing agreements with them for TLED products and spare parts. This concentration of our supply chain with related parties create risks regarding pricing, payment terms, and supply continuity. While we believe the terms of our transactions with Sander Electronics are commercially reasonable, the overlapping ownership and management between our companies may result in conflicts of interest that could adversely affect our business. Moreover, any deterioration in our relationship with Sander Electronics, or their inability to meet our supply requirements, could materially disrupt our operations. These risks are heightened because we have limited alternative suppliers readily available to replace Sander Electronics' production capacity. Additionally, our significant reliance on a related party supplier may draw increased regulatory scrutiny and impact our ability to demonstrate adequate internal controls over related party transactions. The materiality of this relationship could also affect our ability to obtain favorable terms from alternative suppliers.

Our Chief Executive Officer currently serves as our Principal Financial Officer, which may impact our internal controls and increase risks related to financial reporting.

As of the date of this Report, our Chief Executive Officer currently serves as our Principal Financial Officer and Principal Accounting Officer due to the vacancy in our Chief Financial Officer position. This dual role may result in:

•Reduced segregation of duties in our internal control framework

•Increased risk of errors or irregularities in financial reporting going undetected

•Limited independent review of financial decisions and reporting processes

•Potential delays in identifying and remediating control deficiencies

•Challenges in maintaining adequate checks and balances in financial operations

•Increased burden on our CEO, potentially affecting overall operational oversight

While we have implemented additional review procedures and controls to mitigate these risks, we cannot assure that these measures will be sufficient. The concentration of these roles could materially impact the effectiveness of our internal controls over financial reporting and disclosure controls and procedures. This could result in material misstatements in our financial statements, missed filing deadlines, or other compliance issues that could adversely affect our business, financial condition, and stock price.

Risks Associated with Legal and Regulatory Matters

We may be subject to legal claims against us or claims by us that could have a significant impact on our resulting financial performance.

At any given time, we may be subject to litigation or claims related to our products, intellectual property, suppliers, customers, employees, shareholders, distributors, sales representatives and sales of our assets, among other things, the disposition of which may have an adverse effect upon our business, financial condition, or results of operations. The outcome of litigation is difficult

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to assess or quantify. Lawsuits can result in the payment of substantial damages by defendants. If we are required to pay substantial damages and expenses as a result of these or other types of lawsuits, our business and results of operations would be adversely affected. Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend and may divert time and money away from our operations. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims could adversely affect our business and the results of our operations.

Our business may suffer if we fail to comply with government contracting laws and regulations.

We derive a significant portion of our revenues from direct and indirect sales to U.S., state, local and foreign governments and their respective agencies. Contracts with government customers are subject to various procurement laws and regulations, business prerequisites to qualify for such contracts, accounting procedures, intellectual property processes, and contract provisions relating to their formation, administration and performance, which may provide for various rights and remedies in favor of the governments that are not typically applicable to or found in commercial contracts. Failure to comply with these laws, regulations, or provisions in our government contracts could result in litigation, the imposition of various civil and criminal penalties, termination of contracts, forfeiture of profits, suspension of payments, or suspension from future government contracting. If our government contracts are terminated, if we are suspended from government work, or if our ability to compete for new contracts is adversely affected, our business could suffer due to, among other factors, lost sales, the costs of any government action or penalties, damages to our reputation and the inability to recover our investment in developing and marketing products for MMM use.

If we are unable to obtain and adequately protect our intellectual property rights or are subject to claims that our products infringe on the intellectual property rights of others, our ability to commercialize our products could be substantially limited.

We consider our technology and processes proprietary. If we are not able to adequately protect or enforce the proprietary aspects of our technology, competitors may utilize our proprietary technology. As a result, our business, financial condition, and results of operations could be adversely affected. We protect our technology through a combination of patent, copyright, trademark and trade secret laws, employee and third-party nondisclosure agreements, and similar means. Despite our efforts, other parties may attempt to disclose, obtain, or use our technologies. Our competitors may also be able to independently develop products that are substantially equivalent or superior to our products or slightly modify our products. In addition, the laws of some foreign countries do not protect our proprietary rights as fully as do the laws of the United States. As a result, we may not be able to protect our proprietary rights adequately in the United States or abroad. Furthermore, there can be no assurance that we will be issued patents for which we have applied or obtain additional patents, or that we will be able to obtain licenses to patents or other intellectual property rights of third parties that we may need to support our business in the future. The inability to obtain certain patents or rights to third-party patents and other intellectual property rights in the future could have a material adverse effect on our business.

We may be subject to intellectual property infringement claims or other allegations by third parties, which may materially and adversely affect our business, results of operations and prospects.

Our products are largely dependent on the application of our technology. From time to time, third parties holding similar technologies and intellectual property rights, including companies, competitors, patent holding companies, customers and/or non-practicing entities, may assert intellectual property claims against us.

Although we believe that our products do not infringe upon the intellectual property rights of third parties, we cannot be certain that our operations do not or will not infringe upon or otherwise violate intellectual property rights or other rights held by third parties, and there may be third-party intellectual property rights or other rights that are infringed by our products without our awareness. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights or other rights of third parties, some even without merit. If we are forced to defend against any infringement or misappropriation claims, whether they are with or without merit, are settled out of court, or are determined in our favor, we may be required to expend significant time and financial resources on the defense of such claims. Regardless of the merits or eventual outcome, such a claim could adversely impact our brand and business. Any such assertions may require us to enter into royalty arrangement or result in us being unable to use certain intellectual property. Infringement assertions by third parties may involve patent holding companies or other patent owners who have no relevant product revenue, and therefore our own issued and pending patents may provide little or no deterrence to these patent owners in bringing intellectual property right claims against us. Furthermore, any adverse outcome of a dispute may require us to pay damages, potentially including treble damages and attorney’s fees, if we are found to have willfully infringed a party’s intellectual property; case making, licensing or using our solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to redesign our solutions’ enter into potentially unfavorable royalty or license agreements in order to obtain the right

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to use necessary technologies or works; and to indemnify our partners, customers and other third parties. Any of these events could adversely impact our business, results of operations and financial condition.

If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property or relevant contents, and we may incur licensing or usage fees or be forced to develop alternatives of our own. As a result, our reputation may be harmed and our business and financial performance may be materially and adversely affected.

The ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

We have significant U.S. net operating loss and tax credit carryforwards (the “Tax Attributes”). Under federal tax laws, we can carry forward and use our Tax Attributes to reduce our future U.S. taxable income and tax liabilities until such Tax Attributes expire in accordance with the Internal Revenue Code of 1986, as amended (the “IRC”). Section 382 and Section 383 of the IRC provide an annual limitation on our ability to utilize our Tax Attributes, as well as certain built-in-losses, against future U.S. taxable income in the event of a change in ownership, as defined under the IRC. Share issuances in connection with our past financing transactions or other future changes in our stock ownership, which may be beyond our control, could result in changes in ownership for purposes of the IRC. Such changes in ownership could further limit our ability to use our Tax Attributes. Accordingly, any such occurrences could adversely affect our financial condition, operating results and cash flows.

The cost of compliance with environmental, health, safety, and other laws and regulations could adversely affect our results of operations or financial condition.

We are subject to a broad range of environmental, health, safety, and other laws and regulations. These laws and regulations impose increasingly stringent environmental, health, and safety protection standards and permit requirements regarding, among other things, air emissions, wastewater storage, treatment, and discharges, the use and handling of hazardous or toxic materials, waste disposal practices, the remediation of environmental contamination, and working conditions for our employees. Some environmental laws, such as the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Clean Water Act, and comparable laws in U.S. states and other jurisdictions world-wide, impose joint and several liability for the cost of environmental remediation, natural resource damages, third-party claims, and other expenses, without regard to the fault or the legality of the original conduct, on those persons who contributed to the release of a hazardous substance into the environment. We may also be affected by future laws or regulations, including those imposed in response to energy, climate change, geopolitical, or similar concerns. These laws may impact the sourcing of raw materials and the manufacture and distribution of our products and place restrictions and other requirements on the products that we can sell in certain geographical locations.

We may be exposed to certain regulatory and financial risks related to climate change.

Growing concerns about climate change may result in the imposition of additional regulations or restrictions to which we may

become subject. A number of governments or governmental bodies have introduced or are contemplating regulatory changes in

response to climate change. The outcome of new legislation or regulation in the U.S. and other jurisdictions in which we operate may result in new or additional requirements, fees or restrictions on certain activities. Compliance with these climate change initiatives may also result in additional costs to us, including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations. Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. We may not be able to recover the cost of compliance with new or more stringent laws and regulations, which could adversely affect our results of operations, cash flow or financial condition.

Our net sales might be adversely impacted if our lighting systems do not meet certain certification and compliance standards.

We are required to comply with certain legal requirements governing the materials in our products. Although we are not aware of any efforts to amend any existing legal requirements or implement new legal requirements in a manner with which we cannot comply, our net sales might be adversely affected if such an amendment or implementation were to occur.

Moreover, although not legally required to do so, we strive to obtain certification for substantially all our products. In the United States, we seek certification on substantially all of our products from UL®, ETL®, or DLC™. Where appropriate in jurisdictions outside the United States, we seek to obtain other similar national or regional certifications for our products. Although we believe that our broad knowledge and experience with electrical codes and safety standards have facilitated certification approvals, we cannot ensure that we will be able to obtain any such certifications for our new products or that, if certification standards are amended, we will be able to maintain such certifications for our existing products. Moreover, although we are not aware of any effort to amend any existing certification standard or implement a new certification standard

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in a manner that would render us unable to maintain certification for our existing products or obtain ratification for new products, our net sales might be adversely affected if such an amendment or implementation were to occur.

We rely heavily on information technology in our operations and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business, which could have a material adverse effect on our business, financial condition, and results of operations.

We rely heavily on our information technology systems, including our enterprise resource planning (“ERP”) and customer relationship management (“CRM”) software, across our operations and corporate functions, including for management of our supply chain, payment of obligations, data warehousing to support analytics, finance systems, accounting systems, and other various processes and procedures, some of which are handled by third parties, as well as lead generation, customer tracking, customer sourcing, etc. We also rely heavily on remote communication tools such as Microsoft Teams and Zoom to accommodate remote work environment and external meetings.

Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of these systems. Our business and results of operations may be adversely affected if we experience system usage problems. The failure of these systems to operate effectively, maintenance problems, system conversions, back-up failures, problems or lack of resources for upgrading or transitioning to new platforms or damage or interruption from circumstances beyond our control, including, without limitation, fire, natural disasters, power outages, systems failure, security breaches, cyber-attacks, viruses or human error could result in, among other things, transaction errors, processing inefficiencies, loss of data, inability to generate timely SEC reports, loss of sales and customers and reduced efficiency in our operations. Additionally, we and our customers could suffer financial and reputational harm if customer or Company proprietary information is compromised by such events. Remediation of such problems could result in significant unplanned capital investments and any damage or interruption could have a material adverse effect on our business, financial condition, and results of operations.

Risks Associated with an Investment in Our Common Stock

As a “thinly-traded” stock with a relatively small public float, the market price of our common stock is highly volatile and may decline regardless of our operating performance.

Our common stock is “thinly-traded” and we have a relatively small public float, which increases volatility in the share price and makes it difficult for investors to buy or sell shares in the public market without materially affecting our share price. Throughout the fiscal year ended December 31, 2025, our market price has ranged from $1.21 to $3.16 and continues to experience significant volatility. Broad market and industry factors also may adversely affect the market price of our common stock, regardless of our actual operating performance. Factors that could cause wide fluctuations in our stock price may include, among other things:

•actual or anticipated variations in our financial condition and operating results;

•general economic conditions and trends;

•addition or loss of significant customers and the timing of significant customer purchases;

•our ability to effectively implement our growth plans, including new products, and the significance and timing of associated expenses;

•unanticipated impairments and other changes that reduce our earnings;

•overall conditions or trends in our industry;

•the entry or exit of new competitors into our target markets;

•any litigation or legal claims;

•the terms and amount of any additional financing that we may obtain, if any;

•unfavorable publicity;

•additions or departures of key personnel;

•geopolitical changes, global health concerns and macroeconomic changes;

•changes in the estimates of our operating results or changes in recommendations by any securities or industry analysts that elect to follow our common stock;

•market expectations following periods of rapid growth;

•the potential impact of increased volatility due to elevated trading on the price of our stock;

•industry-wide news events that may affect market perceptions of the value of our stock; and

•sales of our common stock by us or our stockholders, including sales by our directors and officers.

Because our common stock is thinly-traded, investors seeking to buy or sell a certain quantity of our shares in the public market may be unable to do so within one or more trading days and it may be difficult for stockholders to sell all of their shares in the market at any given time at prevailing prices. Any attempts to buy or sell a significant quantity of our shares could materially

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affect our share price. In addition, because our common stock is thinly-traded and we have a relatively small public float, the market price of our shares may be disproportionately affected by any news, commentary or rumors regarding us or our industry, regardless of the source or veracity, which could also result in increased volatility.

In addition, in the past, following periods of volatility in the market price of a company’s securities, securities litigation has often been instituted against these companies. Volatility in the market price of our shares could also increase the likelihood of regulatory scrutiny. Securities litigation, if instituted against us, or any regulatory inquiries or actions that we face could result in substantial costs, diversion of our management’s attention and resources and unfavorable publicity, regardless of the merits of any claims made against us or the ultimate outcome of any such litigation or action.

We could issue additional shares of common stock or preferred stock without stockholder approval, or new securities with terms or rights superior to those of our existing shareholders, which may adversely affect the market price of our common stock.

We expect to require additional financing to fund future operations, including our research, development, sales and marketing activities. We are authorized to issue 50,000,000 shares of common stock of which 6,306,433 shares were issued and outstanding as of March 24, 2026, and 5,000,000 shares of preferred stock, of which 876,447 were issued and outstanding as of March 24, 2026. Our Board of Directors has the authority, without action or vote of our shareholders, to issue authorized but unissued shares of common and preferred stock subject to Nasdaq’s rules. Additionally, if we raise additional funds by issuing equity securities, the percentage ownership of our current shareholders will be reduced, and, if the equity securities issued are preferred shares, the holders of the new preferred shares may have rights superior to those of our existing shareholders, which could adversely affect rights of our existing shareholders and the market price of our common stock. In addition, in order to raise additional capital or acquire businesses in the future, we may need to issue securities that are convertible or exchangeable for shares of our common or preferred stock. If we raise additional funds by issuing debt securities, the holders of those debt securities would have some rights senior to those of our existing shareholders, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially adverse effect on our business. Any such issuances could be made at a price that reflects a discount to the then-current trading price of our common stock. These issuances could be dilutive to our existing shareholders and cause the market price of our common stock to decline.

The exercise of outstanding warrants to purchase our common stock or the conversion of shares of our Series A Preferred Stock (as defined below) into shares of common stock may dilute the ownership interest of our investors.

In connection with past financing activity, we have issued convertible preferred stock and warrants to purchase our common stock. The exercise of some or all of the outstanding warrants to purchase our common stock or the conversion of some or all of the outstanding Series A Preferred Stock may dilute the ownership interests of our shareholders. Any sales of our common stock issuable upon the exercise of the warrants or conversion of the Series A Preferred Stock could adversely affect prevailing market prices of our common stock. In addition, the anticipated exercise of the warrants or conversion of the Series A Preferred Stock could depress the price of our common stock, which in turn may result in the value of our common stock declining significantly.

We have never paid dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.

We have never declared or paid dividends on our common stock, nor do we anticipate paying any cash dividends for the foreseeable future. We currently intend to retain future earnings, if any, to finance the operations and expansion of our business. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon our earnings, financial condition, operating results, capital requirements, a capital structure strategy and other factors as deemed necessary by our Board of Directors.

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The elimination of monetary liability against our directors under Delaware law and the existence of indemnification rights held by our directors and officers may result in substantial expenditures by the Company and may discourage lawsuits against our directors and officers.

Our Certificate of Incorporation eliminates the personal liability of our directors to the Company and our shareholders for damages for breach of fiduciary duty as a director to the extent permissible under Delaware law. Further, our Bylaws provide that we are obligated to indemnify any of our directors or officers to the fullest extent authorized by Delaware law and, subject to certain conditions, advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition. Those indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against our directors or officers, which we may be unable to recoup. These provisions and resultant costs may also discourage us from bringing a lawsuit against any of our current or former directors or officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit us or our shareholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

Governance

Our Board of Directors assigned specific oversight responsibility for cybersecurity to our Audit Committee, which also oversees our general risk management. The Audit Committee reviews and discusses with management our policies, practices, and risks related to information security and cybersecurity.

Our Chief Executive Officer has primary responsibility for assessing, monitoring, and managing cybersecurity risks. To strengthen our cybersecurity posture, we engage with external consultants for regular risk assessments, penetration testing, and vulnerability analyses, allowing for proactive identification and mitigation of potential threats. We also rigorously verify the cybersecurity practices of our third-party service providers, vendors, and partners, conducting due diligence before establishing relationships and ongoing monitoring to verify compliance with our cybersecurity standards.

Our Principal Financial Officer provides an update to the Audit Committee on any risks related to cybersecurity on a quarterly basis. Our incident response plan includes notifying the Audit Committee, and then the Board of Directors, of any material threats or incidents that arise.

Risk Management and Strategy

We maintain an Enterprise Risk Management (“ERM”) program to identify and respond to the most critical risks to our business, including cybersecurity risks. Risks and vulnerabilities from our increased reliance on information technology systems are assessed at least annually as part of our ERM program. In response to such assessments, controls are embedded into our processes and technology by our Director of Operations & Information Technology to seek to mitigate risks to our systems and processes from cybersecurity incidents. We continuously evaluate if we have adequate controls in place utilizing a risk-based approach that is informed by the National Institute of Standards and Technology Cybersecurity Framework (NIST).

Our information technology department monitors our daily operations, overseeing the security of our computer networks through implemented systems and processes aimed at safeguarding sensitive data. We utilize security technologies and controls designed to help protect our systems against unauthorized access and data loss. This proactive approach ensures the integrity and confidentiality of our data, mitigating potential risks posed by cyber threats.

In assessing cybersecurity risks, we adopt a risk-based approach, particularly concerning third-party vendors integral to our operations. Vendors meeting specific criteria, including ownership and operation of information technology networks critical to our operations, undergo evaluation across various domains such as data security and operations management. Effective communication channels with these vendors are maintained to enable timely notification of any cybersecurity incidents that could impact our company.

Although risks from cybersecurity threats have to date not materially affected, and based on information currently available, we do not believe they are reasonably likely to materially affect, us, our business strategy, results of operations or financial condition, like other companies in our industry, we could, from time to time, experience threats and security incidents related to

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our third-party vendors’ information systems. For more information, please see Item 1A. Risk Factors - Increased Information Technology (“IT”) security threats and more sophisticated computer crime could pose a risk to our systems, networks, and services.

Our Director of Operations & Information Technology regularly evaluates the Company’s cybersecurity risk profile and leads the development of strategies to mitigate risks and address cybersecurity issues that may arise, in consultation with members of our senior management team.

We have formal policies and procedures that address cybersecurity incident response and disaster recovery from interference with our critical applications. Our Cybersecurity Incident Response Plan provides a documented framework for responding to cybersecurity incidents in coordination across multiple departments. In the event of such an incident, our Cybersecurity Incident Response Team (“CIRT”), which is comprised of our Director of Operations & Information Technology, Director of Risk Management and representatives from Risk Management, Legal and Financial Reporting, would respond to such incident in accordance with our Cybersecurity Incident Response Plan. Any cybersecurity incident that meets certain criteria will be communicated by the CIRT to senior management and the Board in a timely manner, and will be evaluated by our Executive Management Team, comprised of certain executives, to assess the impact of the incident on the Company, considering qualitative and quantitative factors. In conducting this assessment and responding to an incident, the CIRT and Executive Management Team may utilize the services of third-party consultants.

Cybersecurity user awareness training is mandatory for all new hires and for existing employees on an annual basis to help protect our employees and the Company against cybersecurity threats. This annual training is customized to address specific cybersecurity challenges and scenarios that we may face within our operating environment. Novel cybersecurity threats to the Company that are identified by our Information Technology team are communicated to all employees by email, as needed, in an effort to promote awareness and protect the Company from cyber-attacks.

ITEM 2. PROPERTIES

Our principal executive offices and our manufacturing facility are located in an approximately 25,392 square foot facility in Solon, Ohio, under a lease agreement expiring on June 30, 2027. We believe this facility is adequate to support our current operations.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may be involved in legal proceedings arising from the normal course of business. See Note 15, “Legal Matters,” to our financial statements for the year ended December 31, 2025 included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock trades on The Nasdaq Capital Market under the symbol “EFOI.”

Shareholders

There were approximately 69 holders of record of our common stock as of March 24, 2026, however, a large number of our stockholders hold their stock in “street name” in brokerage accounts. Therefore, they do not appear on the stockholder list maintained by our transfer agent.

Dividends

We have not declared or paid any cash dividends, and do not anticipate paying cash dividends in the near future.

ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto, included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.

Overview

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

Our mission is to enable our customers to run their facilities with greater energy efficiency, productivity, and human health and wellness through advanced LED retrofit solutions. Our goal is to be a market leader for the most demanding applications where performance, quality, value, environmental impact and health are considered paramount. We specialize in energy efficient LED lighting retrofit 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 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. We have been experiencing these industry forces in both our military and commercial business since 2016, when we once commanded significant price premiums for our flicker-free TLEDs with industry leading warranties. In more recent years, we have focused on redesigning our products for lower costs and consolidated our supply chain for stronger purchasing power in an effort to price our products more competitively while not impacting the performance and quality. Despite these efforts, our legacy products continue to face extreme price competition and a convergence of product functionality in the marketplace, and we have shifted to diversifying our supply chain in an effort to increase value and remain competitive. These trends are not unique to Energy Focus as evidenced by the increasing number of industry peers facing challenges, exiting LED lighting, selling assets and even going out of business.

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

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. Investments into Energy Focus have contributed to the ability of the Company to continue to not only provide quality products and services, but to both expand and rationalize product offerings.

It is our belief that the continued dramatic rightsizing efforts undertaken in 2024 and 2025, along with reorganization of the sales team and ongoing development of innovative, high-value products and an expanded distribution network, will over time result in improved sales and bottom-line performance for the Company.

We have taken steps to strengthen our financial structure through capital increases and cost reduction measures. As a result, we have fully eliminated all external high-interest debt, which we believe has improved our financial position. 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. Since 2024, our MMM business faced ongoing challenges due to delays in government funding and the timing of U.S. Navy awards. 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. To mitigate this volatility, we continue to actively pursue new opportunities with the U.S. Navy and other government sectors. We have undertaken efforts to reduce costs, which we believe have

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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. These strategic adjustments have improved our market position, offering a more competitive pricing structure and a stronger value proposition for our customers. We believe that these initiatives, if successfully implemented, and if our financial position continues to improve, may contribute to growth across both our MMM and commercial business sectors, although there can be no assurance that such growth will occur.

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

Despite continuing progress on cost reduction throughout 2024 and 2025, the Company’s results reflect the challenges due to long and unpredictable sales cycles, unexpected delays in MMM and commercial customer retrofit budgets and project starts, and supply chain issues. There has also been continuing aggressive price competition in the lighting industry. 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

Demand-oriented Approach

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

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

Supply-oriented Approach

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

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

Under the premise of a similar industrial environment and familiar relationships, our professional skills complement those of our supply chain partners. We believe this foundation of cooperation may enable us to pursue common goals of cost reduction,

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profit sharing, and exploring new business opportunities. This not only strengthens our cooperative relationship but also lays a solid foundation for our joint efforts towards a better future.

Financial-oriented Approach

The Company applies strategic financial management in the below perspective.

Control and Monitoring of Assets and Liabilities

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

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

Structured Profitability

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

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

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

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Results of operations

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


	2025		2024
Net sales	100.0	%	100.0	%
Cost of sales	81.1		85.6
Gross profit	18.9		14.4

Operating expenses:
Product development	11.6		10.8
Selling, general, and administrative	36.1		41.5



Total operating expenses	47.7		52.3
Loss from operations	(28.8)		(37.9)

Other expenses (income):



Interest income	(0.1)		—
Interest expense	—		0.1
Gain on debt extinguishment	—		(3.8)
Gain on partial lease termination	(0.1)		(1.3)
Gain on disposal of fixed assets	(0.1)		—
Other income	—		(0.6)
Other expenses	0.4		0.2
Net loss before income taxes	(28.8)		(32.5)
Provision for income taxes	—		—


Net loss	(28.8)	%	(32.5)	%

Net sales

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


	2025		2024
Commercial products	$	1,536	$	1,390
MMM products	1,989		3,470
Setup Service	35		—
Total net sales	$	3,560	$	4,860

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

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.

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Operating expenses

Product development

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

Product development expenses were $0.4 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 $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)

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 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 $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

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 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 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

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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. We had no net deferred liabilities at December 31, 2025 or 2024. We will continue to evaluate the need for a valuation allowance on a quarterly basis.

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

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

At December 31, 2025, we had $1.1 million in cash and no outstanding debt. 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. 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 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.

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

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

Liquidity and capital resources

Cash

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.

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•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):


	2025		2024
Net cash used in operating activities	$	(1,404)	$	(1,297)

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

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

Net cash used in operating activities

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

Contractual and other obligations

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

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Foreign currency exchange risk

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

As of 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

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies, and the reported amounts of net sales and expenses in the financial statements. Material differences may result in the amount and timing of net sales and expenses if different judgments or different estimates were utilized. Critical accounting policies, judgments, and estimates that we believe have the most significant impact on our financial statements are set forth below:

•revenue recognition,

•allowances for credit losses, returns and discounts,

•product warranty reserve,

•valuation of inventories,

•accounting for income taxes,

•share-based compensation, and

•leases.

Recently adopted accounting guidance

For information on recently adopted accounting guidance, please refer to Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” included under Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, 17 CFR § 229.10(f)(1), the Company is not required to provide this information.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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			Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID 1808)			36
Consolidated Balance Sheets as of December 31, 2025 and 2024			38
Consolidated Statements of Operations for the years ended December 31, 2025 and 2024			40
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2025 and 2024			41
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025 and 2024			42
Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024			43
Notes to Consolidated Financial Statements			45

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Energy Focus, Inc.

Solon, Ohio

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Energy Focus, Inc. (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes and Schedule II (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Continuation as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in the notes. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Reserves for Excess, Obsolete and Slow-Moving Inventories

Description of the Matter

As described in Notes 2 and 4 to the consolidated financial statements, the Company assesses the valuation of inventories each reporting period based on the lower of cost or net realizable value. The Company establishes reserves for excess, obsolete and slow-moving inventories after evaluation of historical sales, current economic trends, forecasted sales, product lifecycles and current inventory levels. The assessment is both quantitative and qualitative. As of December 31, 2025, the Company had inventories of $2.9 million, net of reserves for excess, obsolete and slow-moving inventories.

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Auditing management's estimates for excess, obsolete and slow-moving inventories required subjective auditor judgment and evaluation of the reasonableness of significant assumptions used in developing the reserves as detailed above, as well as the inputs and related calculations related to historical sales and on-hand inventories.

How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated the design of internal controls over the Company's reserves for excess, obsolete and slow-moving inventories, including management's assessment of the assumptions and data underlying the reserve calculation.

Our substantive audit procedures included, among others, testing the logic and integrity of calculations within management’s analysis; testing the completeness and accuracy of underlying data used, including inventory quantities, carrying costs and the estimate of net realizable value by product; and evaluating the reasonableness of management’s assumptions related to demand forecasts, estimated reserve percentages and qualitative considerations involving, among others, the implications of new or revised operational strategies. Evaluating the reasonableness of management’s assumptions involved (i) comparing historical sales by product, used as a basis for future demand, to audited sales subledgers on a sample basis, (ii) holding discussions with senior management to determine whether strategic or operational changes in the business were consistent with the projections of future demand that were utilized as the basis for the reserves recorded, and (iii) corroborating management’s qualitative considerations of future demand through review of unfulfilled customer purchase orders as of year-end on a sample basis.

/s/ GBQ Partners, LLC

We have served as the Company's auditor since 2019.

Columbus, Ohio

March 24, 2026

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ENERGY FOCUS, INC.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31,

(in thousands, except share and per share amounts)


	2025		2024
ASSETS
Current assets:
Cash	$	1,064	$	565
Trade accounts receivable, less allowances of $33 and $15, respectively	526		804

Inventories, net	2,930		3,263
Prepayments to vendors	3		356
Prepaid and other current assets	126		157


Total current assets	4,649		5,145

Property and equipment, net	97		90
Operating lease, right-of-use asset	207		377
Advance for investment in joint venture	156		—


Total assets	$	5,109	$	5,612

LIABILITIES
Current liabilities:
Accounts payable	$	158	$	970
Accounts payable - related party	386		909
Accrued liabilities	56		90
Accrued legal and professional fees	44		54
Accrued payroll and related benefits	47		148
Accrued sales commissions	1		15

Accrued warranty reserve	91		118
Operating lease liabilities	139		139
Total current liabilities	922		2,443

(continued on the next page)

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ENERGY FOCUS, INC.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31,

(in thousands, except share and per share amounts)


	2025		2024


Operating lease liabilities, net of current portion	78		254





Total liabilities	1,000		2,697

STOCKHOLDERS' EQUITY
Preferred stock, par value $0.0001 per share:
Authorized: 5,000,000 shares (3,300,000 shares designated as Series A Convertible Preferred Stock) at December 31, 2025 and December 31, 2024
Issued and outstanding: 876,447 shares at December 31, 2025 and December 31, 2024	—		—
Common stock, par value $0.0001 per share:
Authorized: 50,000,000 shares at December 31, 2025 and December 31, 2024
Issued and outstanding: 6,306,433 shares at December 31, 2025 and 5,260,741 shares at December 31, 2024	1		1
Additional paid-in capital	160,035		157,814
Accumulated other comprehensive loss	(3)		(3)
Accumulated deficit	(155,924)		(154,897)
Total stockholders' equity	4,109		2,915
Total liabilities and stockholders' equity	$	5,109	$	5,612

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

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ENERGY FOCUS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,

(in thousands, except per share amounts)


	2025		2024
Net sales	$	3,560	$	4,860
Cost of sales	2,888		4,161
Gross profit	672		699

Operating expenses:
Product development	412		524
Selling, general, and administrative	1,284		2,017



Total operating expenses	1,696		2,541
Loss from operations	(1,024)		(1,842)

Other expenses (income):
Interest income	(2)		—
Interest expense	—		5
Gain on debt extinguishment	—		(187)
Gain on partial lease termination	(2)		(63)
Gain on disposal of fixed assets	(3)		—
Other income	—		(27)
Other expenses	10		12

Loss from operations before income taxes	(1,027)		(1,582)
Provision for income taxes	—		—










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

Net loss per common stock - basic and diluted


Net loss	$	(0.18)	$	(0.32)






Weighted average shares of common stock outstanding:
Basic and diluted	5,553		4,947

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

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ENERGY FOCUS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31,

(in thousands)


	2025		2024
Net loss	$	(1,027)	$	(1,582)

Other comprehensive loss:
Foreign currency translation adjustments	—		—

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

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

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ENERGY FOCUS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

(in thousands)


								Additional Paid-in Capital		Accumulated Other Comprehensive Loss
	Preferred Stock			Common Stock			Accumulated Deficit
	Shares	Amount		Shares	Amount							Total
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
Conversion of advanced capital contribution to common stock	—	—		94	—			141		—		—		141
Stock-based compensation	—	—		—	—			4		—		—		4
Net loss	—	—		—	—			—		—		(1,582)		(1,582)
Balance at December 31, 2024	876	$	—	5,261	$	1		$	157,814	$	(3)	$	(154,897)	$	2,915
Issuance of common stock	—	—		1,002	—			2,100		—		—		2,100

Shares issued as stock-based compensation	—	—		43	—			121		—		—		121
Net loss	—	—		—	—			—		—		(1,027)		(1,027)
Balance at December 31, 2025	876	$	—	6,306	$	1		$	160,035	$	(3)	$	(155,924)	$	4,109

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

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ENERGY FOCUS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,

(in thousands)


	2025		2024
Cash flows from operating activities:
Net loss	$	(1,027)	$	(1,582)
Adjustments to reconcile net loss to net cash used in operating activities:
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
Stock-based compensation	121		4
Provision for credit losses and sales returns	10		(69)
Provision for slow-moving and obsolete inventories	244		347
Provision for warranties	(27)		(32)
Amortization of loan discounts and origination fees	—		5

Change in operating assets and liabilities:
Accounts receivable	266		1,037

Inventories	(262)		829
Prepayments to vendors	(1)		83
Prepaid and other assets	32		3
Accounts payable	(115)		(301)
Accounts payable - related party	(523)		(1,237)
Accrued and other liabilities	(159)		(128)
Right of use assets and lease liabilities	(4)		(43)
Total adjustments	(377)		285
Net cash used in operating activities	(1,404)		(1,297)
Cash flows from investing activities:
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:
Issuance of common stock	2,100		851
Payments on the 2022 Streeterville Note	—		(1,000)

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

(continued on the next page)

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ENERGY FOCUS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31,

(amounts in thousands)


	2025		2024
Effect of exchange rate changes on cash	—		—

Net increase (decrease) in cash	499		(1,465)
Cash, beginning of year	565		2,030
Cash, end of year	$	1,064	$	565







Supplemental information:
Cash paid in year for interest	$	—	$	5


Non-cash investing and financing activities:
Debt-to-equity exchange transactions	$	—	$	591

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


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF OPERATIONS

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

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

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

Going Concern and Nasdaq Continued Listing Requirements Compliance

Due to our financial performance as of December 31, 2025 and 2024, including net losses of $1.0 million and $1.6 million for the twelve months ended December 31, 2025 and 2024, respectively, and total cash used in operating activities of $1.4 million and $1.3 million for the twelve months ended December 31, 2025 and 2024, respectively, we determined that substantial doubt about our ability to continue as a going concern continues to exist at December 31, 2025. As a result of restructuring actions and initiatives, we have tailored our operating expenses to be more in line with our expected sales volumes; however, we continue to incur losses and have a substantial accumulated deficit.

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

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

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

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

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

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

•the current environment in 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


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. 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, the Company’s common stock will be subject to delisting from Nasdaq.

Use of estimates

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

Basis of presentation

The Consolidated Financial Statements include the accounts of the Company. All significant inter-company balances and transactions have been eliminated. We have prepared the accompanying consolidated financial statements in accordance with U.S. GAAP and pursuant to the rules and regulations of the United States Securities & Exchange Commission (“SEC”).

Revenue

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

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

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. In the normal course of business, we extend unsecured credit to our customers related to the sale of our products. Credit is extended to customers based on an evaluation of the customer’s financial condition and the amounts due are stated at their estimated net realizable value. We maintain allowances for sales returns and credit losses to provide for the estimated number of account receivables that will not be collected. The Company has determined that accounts receivable fall within the scope of the Current Expected Credit Losses


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(“CECL”) analysis in accordance with ASC 326. The Company decided to use the historical loss rate method of valuing its reserve for trade receivables. The reserve for credit losses is reviewed and assessed for adequacy on a quarterly basis. We take into consideration (1) any circumstances of which we are aware of a customer's inability to meet its financial obligations and (2) our judgments as to prevailing economic conditions in the industry and their impact on our customers. If circumstances change, and the financial condition of our customers is adversely affected and they are unable to meet their financial obligations, we may need to take additional allowances, which would result in an increase in our operating expenses. We do not generally require collateral from our customers.

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

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



	December 31, 2025		December 31, 2024		January 1, 2024
Gross Accounts Receivable	$	559	$	819	$	1,590
Less: Allowance for Credit Losses	(33)		(15)		(20)
Net Accounts Receivable	$	526	804		1,570

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)
Reduction of reserve for credit losses for the year ended December 31, 2024	5
Allowance for credit losses as of December 31, 2024	(15)
Increase in reserve for credit losses for the year ended December 31, 2025	(18)
Allowance for credit losses as of December 31, 2025	$	(33)

Geographic information

All our long-lived fixed assets are located 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

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

Inventories

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. We establish provisions for excess and obsolete inventories after evaluation of historical sales, current economic trends, forecasted sales, product lifecycles, and current inventory levels. The assessment is both quantitative and qualitative.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income taxes

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. This process involves estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items, such as deferred revenues, for tax and accounting purposes. 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 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. At December 31, 2025 and 2024, we recorded a full valuation allowance against our net deferred tax assets due to uncertainties related to our ability to utilize our deferred tax assets, primarily consisting of certain net operating losses carried forward. The valuation allowance is based upon our estimates of taxable income by jurisdiction and the period over which our deferred tax assets will be recoverable. 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. We continue to evaluate the need for a valuation allowance on a quarterly basis.

Financial Instruments

Fair value measurements

Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value of financial assets and liabilities are measured on a recurring or non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs.

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


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

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

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

Property and equipment

Property and equipment are stated at cost and include expenditures for additions and major improvements. 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 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.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Long-lived assets

Long-lived assets are reviewed for impairment whenever events or circumstances indicate the carrying amount may not be recoverable. 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 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. Please refer to Note 5, “Property and Equipment,” for additional information.

Leases

The Company determines if an arrangement is a lease at its inception. A contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date. The lease term includes renewal options when it is reasonably certain that the option will be exercised and excludes termination options.

Lease expense for these leases is recognized on a straight-line basis over the lease term. We have elected not to recognize ROU assets and lease liabilities that arise from short-term leases for any class of underlying asset. Operating leases are included in Operating lease, right-of-use assets, Operating lease liabilities, and Long-term operating lease liabilities in our Consolidated Balance Sheets.

Product development

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. 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

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

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


	For the years ended December 31,
	2025		2024
Numerator:
Net loss	$	(1,027)	$	(1,582)

Denominator:
Basic and diluted weighted average common shares outstanding	5,553		4,947

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.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation

We recognize compensation expense based on the estimated grant date fair value under the authoritative guidance. 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 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. Please refer to Note 10, “Stockholders’ Equity,” for additional information.

Advertising expenses

Advertising expenses are charged to operations in the period incurred. 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 $1 thousand and $6 thousand for the years ended December 31, 2025 and 2024, respectively.

Product warranties

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. Warranty settlement costs consist of actual amounts expensed for warranty, which are largely a result of the cost of replacement products or rework services provided to our customers. A liability for the estimated future costs under product warranties is maintained for products under warranty based on the actual claims incurred to date and the estimated nature, frequency, and costs of future claims. These estimates are inherently uncertain and changes to our historical or projected experience may cause material changes to our warranty reserves in the future. We continuously review the assumptions related to the adequacy of our warranty reserve, including product failure rates, and make adjustments to the existing warranty liability when there are changes to these estimates or the underlying replacement product costs, or the warranty period expires.

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


	At December 31,
	2025		2024
Balance at the beginning of the year	$	118	$	150
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

Foreign Currency Transactions

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

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

The Company 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.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently issued accounting standards

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. ASU 2023-06 modifies the disclosure or presentation requirements of a variety of Topics in the Codification. 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. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. The amendments in this update should be applied prospectively. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. The Company is currently evaluating the potential impact this standard will have on its consolidated financial statements and related disclosures.

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

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.


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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.

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,
	2025		2024
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:


	As of December 31, 2025		As of December 31, 2024
Customer A	15.9	%	14.9	%
Customer B (located in Taiwan)	21.7	%	—	%
Customer E	19.5	%	—	%
Customer F	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, and changes in exchange rates tariff and worldwide price and demand levels. Our inability to obtain adequate supplies of materials for our products at favorable prices could have a material adverse effect on our business, financial position, or results of operations by decreasing our profit margins and by hindering our ability to deliver products to our customers on a timely basis. Additionally, certain vendors require advance deposits prior to the fulfillment of orders. Deposits paid on unfulfilled orders totaled $3 thousand and $356 thousand at December 31, 2025 and 2024, respectively.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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


	Twelve months ended December 31,
	2025		2024
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:


	As of December 31, 2025		As of 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”

NOTE 3. LEASES

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

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


	For the years ended December 31,
	2025		2024

Lease cost	$	175	$	303

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,
	2025		2024
Operating Leases
Operating lease right-of-use assets	$	207	$	377



Operating lease liabilities	217		393


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	Operating Leases
2026	159
2027	80

Total future undiscounted lease payments	239
Less imputed interest	(22)
Total lease obligations	$	217

Supplemental cash flow information related to leases was as follows (in thousands):


	Years ended December 31,
	2025		2024
Supplemental Cash Flow Information:
Cash paid, net, for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	175	$	343

NOTE 4. INVENTORIES

Inventories are stated at the lower of standard cost (which approximates actual cost determined using the first-in, first-out cost method) or net realizable value. 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
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)
Accrual	(381)		(347)
Reduction due to inventory sold	137		89
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.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. PROPERTY AND EQUIPMENT

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


	At December 31,
	2025		2024
Equipment (useful life 3 - 15 years)	$	496	$	490
Tooling (useful life 2 - 5 years)	210		171
Vehicles (useful life 5 years)	41		41


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



Property and equipment at cost	871		826
Less: accumulated depreciation	(774)		(736)
Property and equipment, net	$	97	$	90

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

NOTE 6. PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consisted of the following (in thousands):


	At December 31,
	2025		2024
Prepaid insurance	$	46	$	36
Prepaid expenses	62		77
Prepaid rent	18		44





Total prepaid and other current assets	$	126	157

NOTE 7. ADVANCE FOR INVESTMENT IN JOINT VENTURE

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


	At December 31,
	2025		2024
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.

NOTE 8. DEBT

Streeterville Notes

2022 Streeterville Note

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.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In October 2023, an unrelated party agreed to subscribe the Company’s common stock in the next round of private placement and transferred funds in the amount of $450 thousand. There was no restriction in use of the funds and the advanced capital contribution bore no interest. The advanced capital contribution was exchanged for common stock on March 28, 2024. See Note 10, “Stockholders’ Equity.”

NOTE 9. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

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 (carrying amount of $0 as of December 31,2024).

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.

NOTE 10. STOCKHOLDERS’ EQUITY

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


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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”).

Aggregate gross proceeds to the Company in respect of the June 2024 Private Placement were approximately $850 thousand. The June 2024 Private Placement closed on June 21, 2024.

March 2024 Private Placement

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 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.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Preferred Stock

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

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

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

As of December 31, 2025 and 2024, there were 876,447 Series A Preferred Stock issued and outstanding which can be convertible into 25 thousand shares of common stock at the option of the holder.

Warrants

During the years ended December 31, 2025 and 2024, no warrants were exercised.

As of December 31, 2025 and 2024, we had the following outstanding warrants:


	As of December 31, 2025	As of December 31, 2024
	Number of Underlying Shares		Exercise Price	Expiration
June 2022 Warrants	384,615	384,615	$9.10	December 16, 2026
December 2021 Warrants	182,630	182,630	$24.64	June 7, 2027
January 2020 Investor Warrants	—	26,819	$23.59	January 13, 2025
January 2020 Placement Agent Warrants	—	5,954	$34.96	January 13, 2025
	567,245	600,018

Stock-based Compensation

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

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


	For the year ended December 31,
	2025		2024


Selling, general, and administrative	121		4
Total stock-based compensation	$	121	$	4

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.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:


	Number of Options	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)
Balance at December 31, 2023	30,575	5.60
Granted	—

Canceled/forfeited	—
Expired	(9)	53.33
Balance at December 31, 2024	30,566	$	5.58	7.7
Granted	—

Canceled/forfeited	(28,590)	5.28
Expired	—
Balance at December 31, 2025	1,976	$	9.91	3.2

Vested and expected to vest at December 31, 2025	1,976	$	9.91	3.2

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

Restricted Stock Units

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.

NOTE 11. INCOME TAXES

We file income tax returns in the U.S. federal jurisdiction, as well as in various state and local jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state, and local, or non-U.S. income tax examinations by tax authorities for years before 2021. Our practice is to recognize interest and penalties related to income tax matters in income tax expense when and if they become applicable. At December 31, 2025 and 2024, respectively, there were no accrued interest and penalties related to uncertain tax positions.


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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,
	2025		2024
Current:
U.S. federal	$	—	$	—
State	—		—
Foreign	—		—
Total current	$	—	$	—
Deferred:
U.S. Federal	—		—
State	—		—
Foreign	—		—
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.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


	For the year ended December 31,
	2025		2024
U.S. federal	$	—	$	—
State	3		5
Foreign	—		—
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,
	2025		2024
Pre-tax Loss:
Domestic	$	(1,027)	$	(1,582)
Foreign	—		—
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 in both dollar (in thousands) and percentage are as follows:


	For the year ended December 31,
	2025				2024
U.S. statutory rate	$	(230)	21.0	%	$	(710)	21.0	%
State taxes (net of federal tax benefit)	(36)		3.3		(152)		4.5
Valuation allowance	(718)		65.5		(622)		18.4
Federal NOLs write off	287		(26.2)		399		(11.8)
Federal temporary	19		(1.7)		409		(12.1)
State NOLs write off	663		(60.5)		656		(19.4)
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):


	At December 31,
	2025		2024
Accrued expenses and other reserves	$	694	$	684
Right-of-use asset	(45)		(82)
Lease liabilities	47		86
Tax credits, deferred R&D, and other	536		579
Net operating loss	20,056		20,739
Valuation allowance	(21,288)		(22,006)
Net deferred tax assets	$	—	$	—

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.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. The $1.1 million and $3.4 million in federal net operating losses generated in 2025 and 2024 will be subject to the new limitations under the Tax Act. If not utilized, the NOLs generated prior to December 31, 2017 of $7.3 million will begin to expire in 2026 for federal purposes and have begun to expire for state and local purposes.

Since we believe it is more likely than not that the benefit from NOLs will not be realized, we have provided a full valuation allowance against our deferred tax assets at December 31, 2025 and 2024, respectively. We had no net deferred tax liabilities at December 31, 2025 and 2024.

NOTE 12. PRODUCT AND GEOGRAPHIC INFORMATION

We focus our efforts on the sale of LED lighting and controls products in the commercial market and MMM. Our products are sold primarily in the United States through a combination of direct sales employees, lighting agents, independent sales representatives and distributors. We currently operate in a single industry segment, developing and selling our LED lighting products and controls into the MMM and commercial markets.

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):


	Year ended December 31,
	2025		2024
Commercial products	$	1,536	$	1,390
MMM products	1,989		3,470
Setup Service	35		—
Total net sales	$	3,560	$	4,860

A geographic summary of net sales is as follows (in thousands):


	For the year ended December 31,
	2025		2024
United States	$	2,967	$	4,848
International	593		12
Total net sales	$	3,560	$	4,860

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.

NOTE 13. 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.


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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.

NOTE 14. 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 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		2024		% 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		As of 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

Please refer to Note 10 for further details on Private Placements in 2025 and 2024.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. LEGAL MATTERS

We may be the subject of threatened or pending legal actions and contingencies in the normal course of conducting our business. We provide for costs related to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount or timing of the resolution of such matters. While it is not possible to predict the future outcome of such matters, we believe that the ultimate resolution of such individual or aggregated matters will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows. 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.

NOTE 16. 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.


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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

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

Pursuant to Rule 13a-15(b) under the Exchange Act, our management must evaluate, with the participation of our Chief Executive Officer and Principal Financial Officer, the effectiveness of our disclosure controls and procedures, as of December 31, 2025, the end of the period covered by this report. Management, with the participation of our current Chief Executive Officer and Principal Financial Officer, did evaluate the effectiveness of our disclosure controls and procedures as of the end of period covered by this report. Based on this evaluation, our management concluded that our disclosure controls and procedures were effective as of December 31, 2025.

Management’s report on internal controls over financial reporting

Management of Energy Focus, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including our Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2025 based upon criteria established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”).

An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error and circumvention or overriding of controls; therefore, it can provide only reasonable assurance with respect to reliable financial reporting. Furthermore, effectiveness of an internal control system in future periods cannot be guaranteed, because the design of any system of internal controls is based in part upon assumptions about the likelihood of future events. There can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, certain controls may become inadequate because of changes in business conditions, or the degree of compliance with policies and procedures may deteriorate. As such, misstatements due to error or fraud may occur and not be detected.

Based upon our evaluation under the COSO Framework as of December 31, 2025, management concluded that its internal control over financial reporting was effective as of December 31, 2025.

Changes in internal control over financial reporting

For the fourth quarter of the fiscal year ended December 31, 2025, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of Independent Registered Public Accounting Firm

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.


Table of Contents			ENERGY FOCUS, INC.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The Company has an insider trading policy governing the purchase, sale and other dispositions of the Company’s securities that applies to all Company personnel, including directors, officers, employees, and other covered persons. The Company also follows procedures for the repurchase of its securities. The Company believes that its insider trading policy and repurchase procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to the Company. A copy of the Company’s insider trading policy is incorporated by reference to Exhibit 19.1 to the Registrant’s Annual Report on Form 10-K filed on March 25, 2025.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

In addition to as set forth in herein, the information required by Items 10, 11, 12, 13 and 14 will appear in the definitive Energy Focus, Inc. Proxy Statement for the Annual Meeting of Shareholders to be held on or about June 12, 2026, which will be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 and is incorporated by reference in this Annual Report pursuant to General Instruction G(3) of Form 10-K (other than the portions thereof not deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934).

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial statements

The financial statements required by this Item 15(a)(1) are set forth in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.

(2) Financial statement schedules

Schedule II—Valuation and Qualifying Accounts is set forth below. All other schedules are omitted either because they are not applicable, or the required information is shown in the financial statements or the notes.

SCHEDULE II

ENERGY FOCUS, INC.

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

(amounts in thousands)


Description	Beginning Balance		Charges to Revenue/ Expense	Deductions	Ending Balance
Year ended December 31, 2025
Allowance for credit losses	$	15	18	—	$	33
Inventory reserves	347		381	137	591
Valuation allowance for deferred tax assets	22,006		—	718	21,288
Year ended December 31, 2024
Allowance for credit losses	$	20	(5)	—	$	15
Inventory reserves	89		347	89	347
Valuation allowance for deferred tax assets	22,627		—	621	22,006

(3) Exhibits


Table of Contents			ENERGY FOCUS, INC.

EXHIBIT INDEX


Exhibit Number			Description of Documents
3.1			Certificate of Incorporation of Energy Focus, Inc. (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed May 1, 2006).
3.2			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on June 21, 2010 (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.3			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on October 9, 2012 (incorporated by reference to Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.4			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on October 28, 2013 (incorporated by reference to Exhibit 3.4 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.5			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on July 16, 2014 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 16, 2014).
3.6			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on July 24, 2015 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 27, 2015).
3.7			Certificate of Amendment to the Certificate of Incorporation of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on January 15, 2020 (incorporated by reference to Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.8			Certificate of Designation of Series A Convertible Preferred Stock of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on March 29, 2019 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on April 1, 2019).
3.9			Amendment to the Certificate of Designation of Series A Convertible Preferred Stock of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on May 30, 2019 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 30, 2019).
3.10			Amendment to the Certificate of Designation of Series A Convertible Preferred Stock of Energy Focus, Inc. filed with the Secretary of State of the State of Delaware on January 15, 2020 (incorporated by reference to Exhibit 3.10 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
3.11			Certificate of Amendment of Certificate of Incorporation, dated June 11, 2020 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 11, 2020).
3.12			Certificate of Amendment of Certificate of Incorporation, dated June 15, 2023 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 22, 2023).
3.13			Bylaws of Energy Focus, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 18, 2020).
3.14			Certificate of Ownership and Merger, Merging Energy Focus, Inc., a Delaware corporation, into Fiberstars, Ind. a Delaware corporation, filed with the Secretary of State of the State of Delaware on May 4, 2007 (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 10, 2007).
4.1			Description of Securities of Energy Focus, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2020).
4.2			Form of Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on December 15, 2021).
4.3			Form of Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on June 6, 2022).









10.1*			Energy Focus, Inc. Executive Bonus Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 19, 2019).
10.2*			Energy Focus, Inc. 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 22, 2020).
10.3*			Energy Focus, Inc. 2020 Stock Incentive Plan - Form of Restricted Stock Unit Award Agreement for Employees (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on September 22, 2020).
10.4*			Energy Focus, Inc. 2020 Stock Incentive Plan - Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on September 22, 2020).
10.5*			Energy Focus, Inc. 2020 Stock Incentive Plan - Form of Nonqualified Stock Option Agreement for Employees (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on September 22, 2020).
10.6*			Energy Focus, Inc. 2020 Stock Incentive Plan - Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on September 22, 2020).
10.7			Note Purchase Agreement, dated as of April 21, 2022 by and between the Company and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 25, 2022).
10.8			Promissory Note, dated as of April 21, 2022 by and between the Company and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on April 25, 2022).


Table of Contents			ENERGY FOCUS, INC.


10.9*			Amended and Restated Energy Focus, Inc. 2020 Stock Incentive Plan, dated as of June 22, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 24, 2022).
10.10*			Chief Executive Officer Offer Letter dated August 6, 2023 between Chiao Chieh (Jay) Huang and Energy Focus, Inc.
10.11			Amendment to Promissory Note, dated January 17, 2023, between the Company and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on January 23, 2023).
10.12			Exchange Agreement, dated as of March 31, 2023, between the Company and Streeterville Capital, LLC. (incorporated by reference to Exhibit 10.11 to the Registrant’s Quarterly Report on Form 10-Q filed on May 11, 2023).

10.13			Payoff Letter and Exchange Agreement, dated as of January 18, 2024, between the Company and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K filed on March 25, 2025).
10.14			Securities purchase agreement, dated as of March 28, 2024 by and between the Company and Certain Investors (incorporated by reference to Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K filed on March 25, 2025).
10.15			Securities Purchase Agreement, dated as of June 21, 2024 by and between the Company and Certain Investors (incorporated by reference to Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K filed on March 25, 2025).
10.16			Second Amendment to Lease Agreement, dated as of January 31, 2024 (incorporated by reference to Exhibit 10. to the Registrant’s Annual Report on Form 10-K filed on March 25, 2025).
10.17			Third Amendment to Lease Agreement, dated as of October 3, 2025.
10.18			Securities Purchase Agreement, dated as of March 27, 2025, between the Company and the Purchaser (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 31, 2025).
10.19			Securities Purchase Agreement, dated as of June 19, 2025, between the Company and the Purchaser (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 23, 2025).
10.20			Securities Purchase Agreement, dated as of August 15, 2025, between the Company and the Purchaser (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 19, 2025).
10.21			Securities Purchase Agreement, dated as of November 26, 2025, between the Company and the Purchaser (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 2, 2025).
19.1			Insider Trading Policy of Energy Focus, Inc (incorporated by reference to Exhibit 19.1 to the Registrant’s Annual Report on Form 10-K filed on March 25, 2025).
23.1			Consent of GBQ Partners, LLC, Independent Registered Public Accounting Firm (filed with this Report).
31.1			Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+			Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1			Compensation Recovery Policy of Energy Focus, Inc. (incorporated by reference to Exhibit 97.1 to the Registrant’s Annual Report on Form 10-K filed on March 22, 2024)
101+**			The following financial information from Energy Focus, Inc. Annual Report on Form 10-K for the year ended December 31, 2025, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, (vi) the Notes to Consolidated Financial Statements.
104**			Cover Page Interactive Data File (embedded within the Inline XBRL document).

*			Management contract or compensatory plan or arrangement.
**			Pursuant to Regulation S-T, this interactive data file is not deemed filed for purposes of Section 11 of the Securities Act, or Section 18 of the Exchange Act, or otherwise subject to the liabilities of these sections.
+			This exhibit will not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act or the Exchange Act.
#			Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).
##			Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the Securities and Exchange Commission upon request.

ITEM 16. FORM 10-K SUMMARY

None.


Table of Contents			ENERGY FOCUS, INC.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

ENERGY FOCUS, INC.

Date: March 24, 2026

By:

/s/ Chiao Chieh (Jay) Huang

Chiao Chieh (Jay) Huang

Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the date indicated:

Date

Signature

Title

March 24, 2026

/s/ Chiao Chieh (Jay) Huang

Chiao Chieh (Jay) Huang

Director and Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

March 24, 2026

/s/ Kin-Fu Chen

Kin-Fu Chen

Chairman of the Board

March 24, 2026

/s/ Wen-Jeng Chang

Wen-Jeng Chang

Director

March 24, 2026

/s/ Wen-Cheng Chen

Wen-Cheng Chen

Director

March 24, 2026

/s/ Chao-Jen Huang

Chao-Jen Huang

Director

March 24, 2026

/s/ Shou-Jang Lee

Shou-Jang Lee

Director

March 24, 2026

/s/ Sophia Ann Shee

Sophia Ann Shee

Director

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