Energy Focus, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales reached $4.8 million in Q3 2026, a 481.2% year-over-year increase from $0.8 million in Q3 2025, and a 28.1% sequential increase from $3.7 million in Q2 2026.
• Commercial sales surged 2115.8% year-over-year to $4.5 million, driven by a new customer in Taiwan, while military maritime sales decreased by $1.4 million sequentially.
• Gross profit was $1.0 million with a gross margin of 20.5%, compared to 17.8% in Q3 2025 and (6.8)% in Q2 2026.
• A $184 thousand refund from U.S. Customs and Border Protection reduced cost of goods sold, positively impacting gross profit.
• Adjusted gross margin was 37.2% in Q3 2026, up from 27.2% in Q3 2025 and 4.5% in Q2 2026.
• Income from operations was $0.5 million in Q3 2026, reversing a $0.2 million loss in Q3 2025 and a $0.9 million loss in Q2 2026.
• Net income was $0.5 million ($0.08 per share) in Q3 2026, compared to a net loss of $0.2 million ($(0.03) per share) in Q3 2025 and a net loss of $0.9 million ($(0.14) per share) in Q2 2026.
• Adjusted EBITDA was $0.5 million in Q3 2026, compared to $(0.1) million in Q3 2025 and $(0.9) million in Q2 2026.
• Net cash provided by operating activities was $1.5 million for the nine months ended September 30, 2026.
• Cash and cash equivalents were $3.3 million as of September 30, 2026, up from $1.1 million as of December 31, 2025 and $0.9 million as of September 30, 2025.
• Short-term borrowings increased to $911 thousand as of September 30, 2026, from zero at December 31, 2025.
• Accounts payable to related parties increased to $2.5 million as of September 30, 2026, from $386 thousand at December 31, 2025.
• Inventory provisions and write-offs totaled $1.3 million for the nine months ended September 30, 2026.

Business Segments and Product Lines:

• The expansion of the Uninterruptible Power Supply (UPS) business with a new customer in Taiwan drove the majority of commercial sales growth, including related installation and setup services.
• Setup service revenue increased to $254 thousand in Q3 2026 from $4 thousand in Q2 2026.
• Commercial products generated $4.5 million in Q3 2026, compared to $0.2 million in Q3 2025.
• Military Maritime (MMM) products generated $71 thousand in Q3 2026, compared to $621 thousand in Q3 2025.

Risks and Challenges:

• The company faces substantial doubt about its ability to continue as a going concern and a need for additional financing.
• There is dependence on private placements with related parties, resulting in shareholder dilution.
• The business relies on a limited number of customers, including dependence on single large projects.
• Risks include reliance on military maritime customers and ongoing federal budget uncertainties.
• Expansion into new geographic markets where the company lacks an established presence carries risk.
• Early-stage customer relationships offer no assurance of long-term partnerships or material revenue.
• Uncertainty exists regarding whether new product initiatives will achieve market acceptance.
• Global trade policies and tariffs could materially increase costs.
• The company relies on related party suppliers and faces risks from global supply chain disruptions.
• Elevated inventory reserves and the ability to compete against companies with greater resources are noted concerns.

Other Key Points:

• Proceeds of $0.9 million were received from short-term borrowings during the period.
• A $2.1 million change in related party accounts payable occurred due to timing of inventory receipts and payments in the nine months ended September 30, 2026.
• A $1.8 million change in accounts receivable was driven by the specific timing of collecting accounts receivable.
• No equity awards were granted to employees or consultants during the nine months ended September 30, 2026.
• The company received a $184 thousand refund from U.S. Customs and Border Protection related to customs duties previously paid.
• Inventory write-offs in Q3 2026 included $556 thousand related to the disposal of obsolete inventory.