Nature of Operations

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

NATURE OF OPERATIONS

Energy Focus, Inc. engages primarily in the design, development, manufacturing, marketing and sale of energy-efficient lighting systems and controls and ultraviolet-C light disinfection (“UVCD”) products. We develop, market and sell high quality light-emitting diode (“LED”) lighting and controls products and UVCD products in the commercial market and military maritime market (“MMM”), and began to expand our offerings into the consumer market in the fourth quarter of 2021. Our mission is to enable our customers to run their facilities, offices and homes with greater energy efficiency, productivity, and human health and wellness through advanced LED retrofit and UVCD solutions. Our goal is to be the LED and human-centric lighting (“HCL”) 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 and consumer applications. In late 2020, we announced the launch of our UVCD product portfolio. With initial development complete and two products now brought to market, we anticipate the development of additional UVCD products in 2022.

The LED lighting industry continues to be characterized by increasing challenges in differentiating product offerings, competition and price erosion. We have been experiencing these industry forces in both our military business since 2016 and in our commercial segment where we once commanded significant price premiums for our flicker-free TLEDs with primarily 10-year warranties. In more recent years, we have focused on redesigning our products for lower costs and consolidating our supply chain in order to price our products more competitively. Despite these efforts, our legacy products continue to face aggressive pricing competition. 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 continuous cost reductions, our strategy to combat these trends is to move up the value chain, with more innovative and differentiated products and solutions that support a premium. Two specific examples of these products we have recently developed include the RedCap®, our emergency backup battery integrated TLED, and EnFocus™, our new dimmable/tunable lighting and powerline control platform that we launched in 2020. We believe our revamped go-to-market strategy that focuses more on direct-sales and additional sales representatives and listens to the voice of the customer, has informed more impactful product development efforts that could eventually translate into larger addressable markets and greater sales growth for us.

During 2021, we continued to see certain benefits from the relaunch efforts (described below) that began in 2019, in addition to a number of strategic sourcing projects completed during 2020. It is our belief that the continued momentum of the efforts undertaken in 2020 and into 2021, along with the development and launch of new and innovative products, will over time result in improved sales and bottom-line performance for the Company. We launched our EnFocus™ platform during the second quarter of 2020 and continued to receive positive feedback from the market. The EnFocus™ powerline control platform offers two immediately available product lines: EnFocus™ DM, which provides a dimmable lighting solution, and EnFocus™ DCT, which provides both a dimmable and color tunable lighting solution. EnFocus™ enables buildings to have dimmable, color tunable and circadian-ready lighting using existing wiring, without requiring any wireless communications, through a relatively simple upgrade with EnFocus™ switches and replacement LED lamps, a more environmentally sustainable solution compared with replacing each lighting fixture.

In addition, in response to the COVID-19 pandemic and an anticipated increase in sanitation and hygiene demand for buildings, facilities and homes, we started developing advanced UVCD products for both the consumer and the commercial and industrial markets in the first quarter of 2020. In late 2020, we announced the nUVo™ portable disinfection devices for offices and homes. Sales of these products began during the fourth quarter of 2021.

Prior to 2019, the Company experienced significant sales declines, operating losses and increases in its inventory. Beginning in 2019, significant restructuring efforts were undertaken. The Company replaced the entire senior management team, significantly reduced non-critical expenses, minimized the amount of inventory the Company was purchasing, dramatically changed the composition of our board of directors (“Board of Directors”) and the executive team, and recruited new departmental leaders across the Company. The cost savings efforts undertaken included phased actions to reduce costs to minimize cash usage. Initial actions included the elimination of certain positions, restructuring of the sales organization and incentive plan, flattening of the senior management team, additional operational streamlining, management compensation reductions, and outsourcing of certain functions including certain elements of supply chain and marketing.

On June 11, 2020, in accordance with previous stockholder approval, our Board of Directors effected a 1-for-5 (the “Split Ratio”) reverse stock split of the Company’s common stock, par value $0.0001 per share. The reverse stock split became effective immediately upon the filing of the Certificate of Amendment to the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), with the Delaware Secretary of State (the “Effective Time”). At the Effective Time, every five shares of common stock issued and outstanding automatically combined into one validly issued, fully paid and non-assessable share of common stock. No fractional shares were issued as a result of the reverse stock split. The $0.0001 par value per share of common stock and other terms of the common stock were not affected by the reverse stock split. The number of authorized shares of common stock under the Certificate of Incorporation remained unchanged at 50,000,000 shares. Proportional adjustments were made to the conversion and exercise prices of our outstanding warrants and stock options, and to the number of shares issued and issuable under our stock incentive plans in connection with the reverse stock split. The information presented in the financial statements for all prior periods have been retroactively adjusted to reflect the reverse stock split. Preferred shares outstanding were not affected by the reverse stock split and, as such, those shares have not been adjusted.