January 18, 2023
Cash-strapped Energy Focus Gets $2M Funding & New Partnership
Company exchanges large swath of 5.4 million shares for much needed funding.
Cash-strapped Energy Focus has announced $2 million of funding in connection with a strategic partnership from Taiwan-based, Sander Electronics, a maker of LED modules and other electronics. Billed as a “newly forged partnership allows EFOI to expand product portfolio to include a wide range of energy solution products” the agreement is attached to a much-needed financial life preserver that allows the company to convert approximately $650,000 in previous bridge financing to equity.
The gross proceeds to Energy Focus are expected to be approximately $2 million, before offering expenses. Energy Focus stated that it intends to use a significant portion of the net proceeds from the offering for restructuring certain outstanding debt obligations, with the remainder earmarked for general corporate purposes.
Exchanging company equity for much needed cash
In recent years, Energy Focus has been hampered by declining revenues and consistent net losses. The most recent quarterly revenues were $1.76 million while net losses grew to $2.66 million for the quarter. The Ohio company logged annual revenues in excess of $60 million in 2015 and has seen sales steadily decline since then.
In 2022 Energy Focus received numerous promissory notes and other financial bridges to help cash flow, and the latest influx may cause a collective feeling of short-term security while the Ohio company focuses on growing sales and turning around the P&L. In September, the company appointed TCP executive Lesley Matt as its new CEO.
Energy Focus entered into definitive securities purchase agreements with certain purchasers associated with Sander Electronics for the issuance and sale of 5,446,252 shares of the Company’s common stock, in a private placement priced at-the-market under the rules of The Nasdaq Stock Market (“Nasdaq”). The closing of the private placement is expected to occur on or about January 20, 2023, subject to the satisfaction of customary closing conditions.
Financial reports indicate that Energy Focus has 9.6 million outstanding shares, so the sale of 5.4 million shares will likely make the Sander Electronics associates the majority owners of the company. Inside.lighting was unable to confirm if the company has any shares in treasury that wouldn’t be part of the outstanding shares report.
Based on the recent history of bridge financing lenders, we presume the “certain purchasers associated with Sander Electronics” are Gina Huang, who has been on the Energy Focus Board of Directors for many years, along with Jay Huang, President of Sander Electronics. Jay Huang will also be joining the Board of Directors.
The new partnership
According to the company announcement, the partnership with Sander Electronics is expected to improve the Energy Focus supply chain for lighting components and controls solutions to become more competitive and reliable in the marketplace. Further, Sander Electronics plans to supply additional energy solution products that will enable Energy Focus to extend beyond the lighting market.
While this imminent transaction brings some short-term financial relief, the company is still trying to turn its performance around while regaining favorable listing on the Nasdaq exchange:
Nasdaq written notice #1
On August 23, 2022, Energy Focus, Inc. received a written notification from the Listing Qualifications staff of The Nasdaq Stock Market that the company is not in compliance with the requirement to maintain a minimum closing bid price of $1.00 per share. In accordance with Nasdaq rules, the company has been provided until February 20, 2023 to regain compliance with the Bid Price Requirement. The EFOI stock price dipped to $0.30 on December 23, but has been climbing up in recent weeks. Intraday trading has the stock trading at $0.75 per share.
Nasdaq written notice #2
On November 16, 2022, Energy Focus, Inc. received a written notification from the Listing Qualifications staff of The Nasdaq Stock Market that the company is not in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq rules require listed companies to maintain stockholders’ equity of at least $2,500,000. The Company’s stockholders’ equity as of September 30, 2022 was $1,526,000.