10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

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

For the quarterly period ended September 30, 2013

OR

☐	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 0-24230

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 Rd., Solon, OH (Address of principal executive offices)
44139 (Zip Code)
(Registrant’s telephone number, including area code): (440) 715-1300
None
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

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 ☑    No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑    No ☐

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

Large accelerated filer 	Accelerated filer 
Non-accelerated filer  (do not check if a smaller reporting company)	Smaller reporting company ☑

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

The number of outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of November 8, 2013 was 51,352,799.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

			Page
Item 1.	Financial Statements
	a.	Condensed Consolidated Balance Sheets as of September 30, 2013 (Unaudited) and December 31, 2012	3
	b.	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (Unaudited)	4
	c.	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2013 and 2012 (Unaudited)	5
	d.	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (Unaudited)	6
	e.	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25
Item 4.	Controls and Procedures		26
PART II - OTHER INFORMATION
Item 1A.	Risk Factors		26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 5.	Other Information		26
Item 6.	Exhibits		27
	Signatures		27
	Exhibit Index		28

2

 

Item 1. Financial Statements

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands except share and per share data)

 

	September 30, 2013			December 31, 2012
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents, includes restricted cash of $0 and $252, respectively	$	952		$	1,181
Trade accounts receivable less allowances of $137 and $265, respectively		3,807			5,319
Retainage receivable		381			634
Inventories, net		2,989			2,581
Costs in excess of billings		162			99
Prepaid and other current assets		1,681			1,012
Total current assets		9,972			10,826
Property and equipment, net		1,466			1,800
Intangible assets, net		106			608
Collateralized assets		1,000			1,000
Other assets		319			119
Total assets	$	12,863		$	14,353
LIABILITIES
Current liabilities:
Accounts payable	$	4,854		$	5,879
Accrued liabilities		1,325			2,265
Deferred revenue		-			751
Billings in excess of costs		1,461			464
Credit line borrowings		836			1,590
Current maturities of long-term debt		58			756
Total current liabilities		8,534			11,705
Other liabilities		56			30
Long-term debt		4,252			1,793
Total liabilities		12,842			13,528
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.0001 per share:
Authorized: 2,000,000 shares in 2013 and 2012
Issued and outstanding: no shares in 2013 and 2012		-			-
Common stock, par value $0.0001 per share:
Authorized: 100,000,000 shares in 2013 and 2012
Issued and outstanding: 49,158,886 at September 30, 2013 and 44,698,650 at December 31, 2012		5			4
Additional paid-in capital		83,946			80,985
Accumulated other comprehensive income		452			460
Accumulated deficit		(84,382	)		(80,624	)
Total shareholders' equity		21			825
Total liabilities and shareholders' equity	$	12,863		$	14,353

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

3

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands except per share amounts)

(unaudited)

 

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Net sales	$	5,988		$	7,904		$	18,702		$	20,878
Cost of sales		4,574			5,945			14,065			16,430
Gross profit		1,414			1,959			4,637			4,448
Operating expenses:
Research and development		57			102			266			87
Sales and marketing		1,550			1,423			4,351			4,084
General and administrative		1,185			1,211			3,524			3,479
Loss on impairment		-			-			325			-
Restructuring		79			-			79			-
Change in estimate of contingent liabilities		-			-			12			-
Total operating expenses		2,871			2,736			8,557			7,650
Loss from operations		(1,457	)		(777	)		(3,920	)		(3,202	)
Other income (expense):
Settlement of acquisition obligations		-			-			892
Other expense		(26	)		(26	)		(265	)		(98	)
Interest income		-			-			-			1
Interest expense		(166	)		(123	)		(459	)		(388	)
Loss before income taxes		(1,649	)		(926	)		(3,752	)		(3,687	)
Provision for income taxes		(2	)		(2	)		(6	)		(8	)
Net loss	$	(1,651	)	$	(928	)	$	(3,758	)	$	(3,695	)
Net loss per share - basic and diluted	$	(0.03	)	$	(0.02	)	$	(0.08	)	$	(0.09	)
Shares used in computing net loss per share - basic and diluted		49,158			44,542			46,712			40,241

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

4

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)

(unaudited)

 

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Net loss	$	(1,651	)	$	(928	)		(3,758	)	$	(3,695	)
Other comprehensive income:
Foreign currency translation adjustments		31			26			(8	)		37
Comprehensive loss	$	(1,620	)	$	(902	)		(3,766	)	$	(3,658	)

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

5

ENERGY FOCUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

	Nine months ended September 30,
	2013			2012
Cash flows from operating activities:
Net loss	$	(3,758	)	$	(3,695	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on impairment		325			-
Depreciation		496			478
Stock-based compensation		149			146
Settlement of acquisition obligations		(892	)		-
Provision for doubtful accounts receivable		(26	)		104
Amortization of intangible assets		177			314
Amortization of discounts on long-term borrowings and acquisition related liabilities		168			180
Amortization of loan origination fees		106			-
Loss on disposal of fixed assets		6			-
Changes in assets and liabilities:
Accounts receivable, inventories, and other assets		319			(1,274	)
Accounts payable and accrued liabilities		(1,579	)		(1,655	)
Deferred revenue and billings in excess of costs		246			(766	)
Total adjustments		(505	)		(2,473	)
Net cash used in operating activities		(4,263	)		(6,168	)
Cash flows from investing activities:
Acquisition of property and equipment		(168	)		(159	)
Net cash used in investing activities		(168	)		(159	)
Cash flows from financing activities:
Proceeds from issuances of common stock, net		15			4,805
Proceeds from other borrowings, net of origination fees		5,224			-
Payments on other borrowings		(290	)		(873	)
Net (repayments) proceeds on credit line borrowings		(754	)		629
Net cash provided by financing activities		4,195			4,561
Effect of exchange rate changes on cash		7			10
Net increase (decrease) in cash and cash equivalents		(229	)		(1,756	)
Cash and cash equivalents at beginning of period		1,181			2,136
Cash and cash equivalents at end of period	$	952		$	380
Classification of cash and cash equivalents:
Cash and cash equivalents	$	952		$	353
Restricted cash held		-			27
Cash and cash equivalents at end of period	$	952		$	380

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

6

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 1. NATURE OF OPERATIONS

Energy Focus, Inc. and its subsidiaries (the “Company”) engage in the design, development, manufacturing, marketing, and installation of energy-efficient lighting systems and solutions where the Company serves two segments:

● solutions segment providing turnkey, high-quality, energy-efficient lighting application alternatives primarily to the existing public-sector building market; and

● products segment providing military, general commercial and industrial lighting and pool lighting offerings, each of which markets and sells energy-efficient lighting systems.

The Company continues to evolve its business strategy to include providing its customers with turnkey, comprehensive energy-efficient lighting solutions, which use, but are not limited to, its patented and proprietary technology. The Company’s products segment includes light-emitting diode (“LED”), fiber optic, high-intensity discharge (“HID”), fluorescent tube and other highly energy-efficient lighting technologies. Typical savings related to current technology of the Company approximates 80% in electricity costs, while providing full-spectrum light closely simulating daylight colors. The Company’s strategy also incorporates continued investment into the research of new and emerging energy sources including LED and solar energy applications.

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

Basis of Presentation

The financial statements include the accounts of the Company and its subsidiaries, Stones River Companies, LLC (“SRC”) doing business as Energy Focus LED Solutions in Nashville, Tennessee, and Crescent Lighting Limited (“CLL”) located in the United Kingdom. All significant inter-company balances and transactions have been eliminated.

We have prepared the accompanying financial data for the three and nine months ended September 30, 2013 and 2012 pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. have been condensed or omitted pursuant to such rules and regulations. The accompanying financial data and information should be read in conjunction with our 2012 Annual Report on Form 10-K.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly our Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012, and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012.

The preparation of condensed consolidated financial statements in accordance with GAAP in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated 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 the company in the future, actual results may be different from the estimates. Estimates include, but are not limited to, the establishment of reserves for accounts receivable, sales returns, inventory obsolescence and warranty claims; the useful lives for property, equipment, and intangible assets; revenues recognized on a percentage-of-completion basis; and stock-based compensation. In addition, estimates and assumptions associated with the evaluation of long-lived assets for impairment requires considerable judgment. Actual results could differ from those estimates and such differences could be material.

7

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

The Company’s independent registered public accounting firm has issued an opinion in connection with the Company’s 2012 Annual Report on Form 10-K raising substantial doubt about the Company’s ability to continue as a going concern. The interim financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The interim financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern.

Update to Significant Accounting Policies

There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Earnings (Loss) per Share

Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares upon exercise of stock options, warrants, and conversion of convertible subordinated promissory notes unless the effect would be anti-dilutive.

A reconciliation of basic and diluted loss per share is provided as follows (in thousands, except per share amounts):

 

	Three months ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Basic and diluted loss per share:
Net loss	$	(1,651	)	$	(928	)	$	(3,758	)	$	(3,695	)
Basic and diluted loss per share:
Weighted average shares outstanding		49,158			44,542			46,712			40,241
Basic and diluted net loss per share	$	(0.03	)	$	(0.02	)	$	(0.08	)	$	(0.09	)

Options and warrants to purchase approximately 14,319,000 and 15,283,000 shares of common stock, were outstanding at September 30, 2013 and 2012, respectively, but were not included in the calculation of diluted net loss per share because their inclusion would have been anti-dilutive.

8

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

Stock-Based Compensation

The Company’s stock-based compensation plan is described in detail in its 2012 Annual Report on Form 10-K. The following table summarizes the Company’s stock-based compensation (in thousands):

 

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Cost of sales	$	1	$	-	$	2	$	-
Research and development		11		7		26		19
Sales and marketing		8		6		23		20
General and administrative		33		29		98		107
Total stock-based compensation	$	53	$	42	$	149	$	146

At September 30, 2013 and 2012, the Company has unamortized stock-based compensation expense of $249 thousand and $241 thousand, respectively. These costs will be charged to expense and amortized using a straight-line amortization method in future periods through the third quarter of 2016. The weighted average period over which this unearned compensation is expected to be recognized is approximately 1.6 years.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. Estimates utilized in the calculation include the expected life of the option, risk-free interest rate, and expected volatility, and are further comparatively detailed as follows:

 

	Nine months ended September 30,
	2013			2012
Fair value of options issued	$	0.17		$	0.15
Exercise price	$	0.25		$	0.27
Expected life of option (years)		7.2			5.6
Risk-free interest rate		1.3	%		0.8	%
Expected volatility		90.2	%		59.0	%
Dividend yield		0	%		0	%

Option activity under the Company’s stock plans during the nine months ended September 30, 2013 was as follows:

 

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractural Term (in Years)
Outstanding as of December 31, 2012		2,184,583		$	2.20
Granted		1,684,500			0.25
Exercised		-			-
Cancelled/forfeited		(651,377	)		0.52
Outstanding as of September 30, 2013		3,217,706		$	1.52		7.3
Exercisable as of September 30, 2013		1,875,274		$	2.35		6.0

Additionally, the Company granted 51,219 restricted stock units during the third quarter ended September 30, 2013. The fair market value on the date of grant was $0.41 per share. The shares vest one year from the grant date.

9

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

Product Warranties

The Company warrants finished goods against defects in material and workmanship under normal use and service for periods generally between one and five years for products and labor. Settlement costs consist of actual amounts expensed for warranty services which are largely a result of third-party service calls and the costs of replacement products. A liability for the estimated future costs under product warranties is maintained for products outstanding under warranty and is included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets. The warranty activity for the respective periods is as follows (in thousands):

 

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Balance at the beginning of the period	$	150		$	125		$	159		$	100
Accruals for warranties issued		7			52			46			110
Settlements made during the period (in cash or in kind)		(17	)		(18	)		(65	)		(51	)
Balance at the end of the period	$	140		$	159		$	140		$	159

NOTE 3. INVENTORIES

Inventories are stated at the lower of standard cost (which approximates actual cost determined using the first-in, first-out cost method) or market and consist of the following, net of reserves (in thousands):

	September 30, 2013		December 31, 2012
Raw materials	$	1,305	$	1,649
Finished goods		1,684		932
Inventories, net	$	2,989	$	2,581

 

NOTE 4. PROPERTY AND EQUIPMENT

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

 

	September 30, 2013			December 31, 2012
Equipment (useful life 3 - 15 years)	$	5,101		$	5,963
Tooling (useful life 2 - 5 years)		2,576			2,600
Furniture and fixtures (useful life 5 years)		132			132
Computer software (useful life 3 years)		541			462
Leasehold improvements (the shorter of useful life or lease life)		633			633
Construction in progress		11			50
Property and equipment at cost		8,994			9,840
Less: accumulated depreciation		(7,528	)		(8,040	)
Property and equipment, net	$	1,466		$	1,800

10

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 5. INTANGIBLE ASSETS

The following table summarizes information related to net carrying value of intangible assets (in thousands):

 

	Amortization Life (in years)		September 30, 2013		December 31, 2012
Definite-lived intangible assets:
Tradenames		10		-		350
Customer relationships		5		106		258
Total definite-lived intangible assets				106		608
Total intangible assets, net			$	106	$	608

Amortization expense for intangible assets subject to amortization was $51 thousand and $104 thousand for the three months ended September 30, 2013 and 2012, respectively. For the nine months ended September 30, 2013 and 2012, amortization expense was $177 thousand and $314 thousand, respectively.

In conjunction with the settlement agreement between the Company and the former owners of SRC, the Company agreed to discontinue the use of the name “Stones River Companies, LLC” and various derivatives including SRC. Therefore, at June 30, 2013, the remaining unamortized balance of Tradenames of $325 thousand was written off. See Note 9, Settlement of Acquisition Obligations.

Customer relationships are amortized over their expected useful lives on an accelerated method that approximates the cash flows associated with those relationships. Based on the carrying value of amortized intangible assets, the Company estimates amortization expense for future years to be as follows (in thousands):

 

Year ending December 31,	Amount
2013 October through December	$	51
2014		55
Total amortization expense	$	106

NOTE 6. CONTRACTS IN PROGRESS

Costs and estimated earnings on contracts in progress as of the periods indicated are summarized in the following table (in thousands):

 

	September 30, 2013			December 31, 2012
Costs incurred on uncompleted contracts	$	11,107		$	7,067
Estimated earnings		1,817			1,330
Total revenues		12,924			8,397
Less: billings to date		14,223			8,762
Total	$	(1,299	)	$	(365	)
Balance sheet classification:
Costs in excess of billings on uncompleted contracts	$	162		$	99
Billings in excess of costs on uncompleted contracts		(1,461	)		(464	)
Total	$	(1,299	)	$	(365	)

11

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 7. DEBT

Credit Facilities

On December 22, 2011, the Company entered into a $4.5 million revolving line of credit (“credit facility”) with Rosenthal & Rosenthal. The total loan amount available to the Company under the line of credit is equal to 85% of its net amount of eligible receivables, plus available inventory (the lesser of 50% of the lower of cost or market value of eligible inventory, or $250 thousand). The credit facility is secured by a lien on the domestic assets of the Company. The interest rate for borrowing on accounts receivable is 8.5%, on inventories 10.0% and on overdrafts 13.0%. Additionally, there is an annual 1% facility fee on the entire amount of the credit facility payable at the beginning of the year. The credit facility is a three year agreement, expiring on December 31, 2014, unless terminated sooner. There are liquidated damages if the credit facility is terminated prior to December 31, 2014, which are based on the maximum credit facility amount then in effect. The damages are: 2% if terminated prior to December 31, 2013, and 1% if terminated prior to December 31, 2014. The Company is required to comply with certain financial covenants, measured quarterly, including, as defined in the agreement: a tangible net worth amount and a working capital amount. The Company was in compliance with the financial covenants at September 30, 2013. Borrowings under the revolving line of credit were $836 thousand at September 30, 2013, and $1.6 million at December 31, 2012, and are recorded in the Company’s Condensed Consolidated Balance Sheets as a current liability under the caption “Credit line borrowings.”

Borrowings

The components of the Company’s debt at September 30, 2013 and December 31, 2012 were as follows (in thousands):

 

	September 30, 2013			December 31, 2012
Unsecured Convertible Notes	$	5,745		$	1,500
Convertible Promissory Note - TLC Investments LLC		-			500
Cognovit Note - Keystone Ruby, LLC		237			277
Letter of Credit Agreement - Mark Plush		-			250
Unsecured Promissory Note - Quercus Trust		70			70
Discounts on long-term borrowings		(1,742	)		(48	)
Subtotal		4,310			2,549
Less: Current maturies of long-term debt		(58	)		(756	)
Long-term debt	$	4,252		$	1,793

The unsecured convertible debt has a five percent annual interest rate, and is convertible into common stock of the Company at the rate of $0.23 per share as follows (in thousands):

April 30, 2013	$	500
July 31, 2013		1,750
September 30, 2013		2,350
October 31, 2013		700
December 31, 2013		150
January 31, 2014		295
	$	5,745

12

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

$500 thousand of the convertible debt matures on December 31, 2015 and the remaining $5.2 million matures on December 31, 2016. During the second quarter, $1 million of the debt was converted into 4.3 million shares of Common Stock of the Company. Additionally, effective October 16, 2013, an additional $500 thousand of the debt was converted into 2.2 million shares of Common Stock of the Company.

As a provision of the settlement agreement between the Company and the former owners of SRC, the Company’s obligation to pay a $500 thousand convertible promissory note was cancelled in its entirety during the second quarter of 2013. See Note 9, Settlement of Acquisition Obligations.

On July 3, 2013, the Letter of Credit Agreement with Mark Plush was paid in full. See Note 13, Related Party Transactions.

For a full description of the Company’s debt financing, reference is made to Note 8, Debt, of the Company’s 2012 Annual Report on Form 10-K.

Future maturities of remaining borrowings are (in thousands):

 

Year ending December 31,	Long-Term Debt
2013 October through December	$	14
2014		59
2015		566
2016		5,317
2017		26
2018 and thereafter		70
Gross long-term borrowings		6,052
Less: discounts on long-term borrowings		(1,742	)
Total commitment, net		4,310
Less: portion classified as current		(58	)
Long-term borrowings, net	$	4,252

NOTE 8. RESTRUCTURING

During the third quarter of 2013, the Company relocated its manufacturing operation from a contract manufacturing facility located in Mexico to its existing facilities in Pleasanton, California and Solon, Ohio. The Condensed Consolidated Statements of Operations includes $79 thousand in “Restructuring” for severance for the Mexican contract employees as required by the production share agreement, as amended, between the Company and the contract manufacturer.

NOTE 9. SETTLEMENT OF ACQUISITION OBLIGATIONS

On June 28, 2013, the Company entered into a Settlement Agreement with SRC, TLC Investments, LLC, Jamie Hall and Robert E. Wilson, terminating the Membership Interest Purchase Agreement and related agreements that the parties had entered into at the end of December 2009 in connection with the Company’s acquisition of SRC. As part of the Settlement Agreement, the Company’s obligation to pay a $500 thousand special fee and a $500 thousand convertible promissory note including interest of $92 thousand were cancelled in their entirety in exchange for a $200 thousand payment and the forgiveness of a net receivable due to the Company of $78 thousand. Additionally, the Company recognized a $66 thousand favorable adjustment related to the change in the estimate of a performance-related contingent obligation for a 2.5% payout based upon the fair value of projected annual billings of SRC. See Note 12, Commitments and Contingencies.

13

 ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

The classification of these items in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2013 is shown below (in thousands):

 

Change in estimate of contingent liabilities:
Forgiveness of net receivable due the Company	$	78
Adjustment to performance-related contingent obligation		(66	)
Net line item expense	$	12
Settlement of acquisition obligations:
Forgiveness of special fee	$	500
Forgiveness of convertible promissory note, including interest		592
Payment by the Company		(200	)
Net line item income	$	892

As a provision of the Settlement Agreement, the Company agreed to discontinue using the name Stones River Companies by July 1, 2014. As a result of this provision, the Company wrote off the remaining $325 thousand of the intangible asset for the Tradename during the second quarter of 2013. See Note 5, Intangible Assets.

NOTE 10. SEGMENTS AND GEOGRAPHIC INFORMATION

The Company has two reportable segments: products segment featuring pool lighting, general commercial and industrial lighting, government products, and research and development services, each of which markets and sells energy-efficient lighting systems; and solutions segment providing turnkey, high-quality, energy-efficient lighting application alternatives. The Company’s products are sold through a combination of direct sales employees, independent sales representatives and distributors in different geographic markets throughout the world. The Company’s solutions sales are designed to enhance total value by positively impacting customers’ profitability, the environment, and the communities it serves. These solutions are sold through the Company’s direct sales employees, as well as our SRC subsidiary, and include not only its proprietary energy-efficient lighting solutions, but also sourced lighting systems, energy audits and service agreements.

14

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

The following summarizes the Company’s reportable segment data for periods indicated (in thousands):

 

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Solutions:
Net sales	$	2,104		$	2,066		$	5,894		$	5,811
Cost of sales		1,888			1,672			5,186			4,912
Gross profit		216			394			708			899
Operating expenses:
Sales and marketing		397			320			934			1,004
General and administrative		115			244			526			558
Loss on impairment		-			-			325			-
Total operating expenses		512			564			1,785			1,562
Segment loss	$	(296	)	$	(170	)	$	(1,077	)	$	(663	)
Products:
Net sales	$	3,884		$	5,838		$	12,808		$	15,067
Cost of sales		2,686			4,273			8,879			11,518
Gross profit		1,198			1,565			3,929			3,549
Operating expenses:
Research and development		57			102			266			87
Sales and marketing		821			957			2,616			2,708
General and administrative		106			119			307			261
Restructuring expense		79			-			79			-
Total operating expenses		1,063			1,178			3,268			3,056
Segment income	$	135		$	387		$	661		$	493
Reconciliation of segment income (loss) to net loss:
Segment (loss) income:
Solutions	$	(296	)	$	(170	)	$	(1,077	)	$	(663	)
Products		135			387			661			493
Total segment (loss) income		(161	)		217			(416	)		(170	)
Operating expenses:
Sales and marketing		332			146			801			372
General and administrative		964			848			2,691			2,660
Change in estimate of contingent liabilities		-			-			12			-
Total operating expenses		1,296			994			3,504			3,032
Other (expense) income		(192	)		(149	)		168			(485	)
Loss before income taxes		(1,649	)		(926	)		(3,752	)		(3,687	)
Provision for income taxes		(2	)		(2	)		(6	)		(8	)
Net loss	$	(1,651	)	$	(928	)	$	(3,758	)	$	(3,695	)

15

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

The following table provides additional business unit gross profitability detail for the Company’s products segment for the periods indicated (in thousands):

 

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Products segment net sales:
Pool and commercial products	$	2,612	$	4,159	$	8,503	$	11,354
Government products/R&D services		1,272		1,679		4,305		3,713
Total products segment net sales		3,884		5,838		12,808		15,067
Products segment cost of sales:
Pool and commercial products		1,668		2,892		5,490		8,077
Government products/R&D services		1,018		1,381		3,389		3,441
Total products segment cost of sales		2,686		4,273		8,879		11,518
Products segment gross profit:
Pool and commercial products		944		1,267		3,013		3,277
Government products/R&D services		254		298		916		272
Total products segment gross profit	$	1,198	$	1,565	$	3,929	$	3,549

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

 

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
United States	$	5,348	$	6,976	$	16,683	$	18,700
International		640		928		2,019		2,178
Net sales	$	5,988	$	7,904	$	18,702	$	20,878

A geographic summary of long-lived assets, which consists of fixed assets and intangible assets, is as follows (in thousands):

 

	September 30, 2013		December 31, 2012
United States	$	1,533	$	2,350
International		39		58
Long-lived assets, net	$	1,572	$	2,408

NOTE 11. INCOME TAXES

At September 30, 2013, the Company has recorded a full valuation allowance against its deferred tax assets in the United States, due to uncertainties related to the Company’s ability to utilize its deferred tax assets, primarily consisting of certain net operating losses carried forward. The valuation allowance is based upon the Company’s estimates of taxable income by jurisdiction and the period over which its deferred tax assets will be recoverable.

16

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

As of December 31, 2012, the Company had a net operating loss carry-forward of approximately $70.7 million for federal, state and local income tax purposes. Due to changes in the Company’s capital structure, the net operating loss carry-forward available to the Company in future years to offset future taxable liabilities may be limited under Section 382 of the Internal Revenue Code (the “Code”). Management is currently reviewing the rules under this section of the Code, but believes that the limitation on the Company’s net operating loss carry-forward may be significant.

NOTE 12. COMMITMENTS AND CONTINGENCIES

In connection with the acquisition of SRC, the Company recorded a performance-related contingent obligation in December 2010 related to a 2.5% payout payable over 42 months commencing January 1, 2010 and based upon the fair value of projected annual billings of the acquired business, and a $500 thousand fee if the market price of the Company’s common stock is not equal to or greater than $2.00 per share for at least twenty trading days between June 30, 2010 and June 30, 2013 (due on June 30, 2013). The Company accrued for each of these contingent liabilities at their respective fair values at the time of the acquisition. For the three and nine months ended September 30, 2013, the Company paid $0 and $206 thousand, respectively, relating to the 2.5% payout. For the three and nine months ended September 30, 2012, the Company paid $51 thousand and $140 thousand, respectively, relating to the payout.

On June 28, 2013, the Company entered into a Settlement Agreement with Stones River Companies, LLC, TLC Investments, LLC, Jamie Hall and Robert E. Wilson, terminating the Membership Interest Purchase Agreement related to the acquisition of SRC. As part of the Settlement Agreement, the Company’s obligation to pay a $500 thousand special fee and a $500 thousand convertible promissory note including interest of $92 thousand were cancelled in their entirety. Additionally, the Company recorded at $66 thousand favorable adjustment related to the 2.5% payout discussed above. See Note 9, Settlement of Acquisition Obligations. At December 31, 2012, the Company had recorded a current liability related to these contingent obligations of $728 thousand under the caption “Accrued liabilities” in its Condensed Consolidated Balance Sheets.

NOTE 13. RELATED PARTY TRANSACTIONS

On August 11, 2011, the Company entered into a Letter of Credit Agreement (“LOC”) with Mark Plush, its former Chief Financial Officer, in the amount of $250 thousand. Effective July 8, 2013, Mr. Plush stepped down from his role and left the Company. For a full description of the terms of the LOC, reference is made to Note 10, Debt, of the Company’s 2012 Annual Report on Form 10-K. On July 3, 2013, the LOC was paid in full.

On December 12, 2012, the Board of Directors of the Company appointed James Tu to serve as its non-executive Chairman, and on April 30, 2013, Mr. Tu became the Executive Chairman assuming the duties of the Company’s Principal Executive Officer. Mr. Tu is also the Founder, Chief Executive Officer and Chief Investment Officer of 5 Elements Global Advisors, an investment advisory and management company managing the holdings of 5 Elements Global Fund LP, and 5 Elements Energy Efficiencies Ltd, a beneficial owner of more than ten percent (10%) of the Company’s Common Stock. 5 Elements Global Advisors focuses on investing in clean energy companies with breakthrough, commercialized technologies and near-term profitability potential. Mr. Tu is also Co-Founder and Managing Partner of Communal International Ltd. “(Communal”), a British Virgin Islands Company dedicated to assisting clean energy solutions companies maximize their technology and product potential and gain access to global marketing, distribution licensing, manufacturing and financing resources. Communal has a fifty percent (50%) ownership interest in 5 Elements Efficiencies (BVI) Ltd.

On February 27, 2012, the Company entered into an Asian Business Development/Collaboration Agreement with Communal International Ltd. The agreement had a 60 month term, under which the Company paid $523 thousand to Communal. Additionally, during the term of the agreement, the Company will pay Communal a five percent (5%) commission on the Company’s net sales which occur within the Territory, as defined by the agreement. The Company has incurred no commissions due under this agreement through September 30, 2013.

17

ENERGY FOCUS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

Effective on January 1, 2013, the Asian Business Development/Collaboration Agreement with Communal was amended to reflect the extension of the terms of the agreement for an additional 12 months, and the addition of certain services and countries in the territory covered by the agreement. In connection with the amended and restated agreement, the Company agreed to pay an additional $425 thousand through December 2013. After December 31, 2013, the Company may terminate the agreement upon 30 days written notice. The Company paid $262 thousand related to this agreement during the first nine months of 2013, and recorded expense of $169 thousand during the first nine months 2013.

NOTE 14. SHAREHOLDERS EQUITY

During the first nine months of 2013, the Company entered into unsecured convertible notes totaling $5.2 million. The notes are convertible into shares of Common Stock of the Company at $.23 per share at various dates beginning on July 31, 2013. See Note 7, Debt. The fair market value of the Company’s Common Stock ranged from $0.21 per share to $0.42 per share during the period the note agreements were consummated. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic Number 420, Debt, $1.8 million was recorded as a discount on these notes under the captions “Long-term debt” and “Additional paid-in capital” in its Condensed Consolidated Balance Sheets at September 30, 2013. The discount will be amortized over the term of the applicable notes through December 31, 2016 unless the notes are converted prior to maturity.

During the second quarter of 2013, an unsecured convertible noted entered into in December 2012 for $1 million was converted into 4.3 million shares of Common Stock of the Company. Additionally, effective October 16, 2013, an additional $500 thousand of the debt was converted into 2.2 million shares of Common Stock of the Company.

NOTE 15. SUBSEQUENT EVENT

On November 13, 2013, the Company announced that it was in negotiations to sell its “Fiberstars” brand pool product lines. The sale is subject to the successful negotiation of terms satisfactory to both parties, completion of the potential buyer’s due diligence review, lender consent, entry into a definitive agreement and other conditions. There is no current binding obligation on either party and, accordingly, Energy Focus makes no assurance that the negotiations will lead to a transaction.

18

ITEM 2. 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 Condensed Consolidated Financial Statements (“financial statements”) and related notes included in Item 1 of this report and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2012.

All references to “Energy Focus,” “we,” “us,” “our,” or “the Company” means Energy Focus, Inc. and its subsidiaries, except where it is made clear that the term means only the parent company.

When used in this discussion, the words “believes,” “expects,” “anticipates,” “intends,” “assumes,” “estimates,” “evaluates,” “opinions,” “forecasts,” “may,” “could,” “future,” “forward,” “plans,” “potential,” “probable,” and similar expressions are intended to identify forward-looking statements. These statements, which include statements as to our expected sales and gross profit margins, expected operating expenses and capital expenditure levels, our sales and marketing expenses, our general and administrative expenses, the adequacy of capital resources and necessity to raise additional funds, our critical accounting policies, expected benefits from our consolidation and statements regarding pending litigation are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those risks discussed below and under the caption “Risk Factors” in our Annual Report on Form 10-K, as well as our ability to negotiate and enter into a definitive agreement to sell the Fiberstars business on terms acceptable to both parties; the receipt of lender consent to the sale; the occurrence of any other event, change or other circumstances that could give rise to the termination of a definitive agreement or the inability to complete the proposed transaction due to, among other things, the failure to satisfy the conditions set forth in a definitive agreement; that the proposed transaction disrupts Energy Focus’ current plans and operations; our ability to manage expenses; our ability to reduce manufacturing overhead and general and administrative expenses as a percentage of sales; our ability to collect on doubtful accounts receivable; our ability to increase cash balances in future quarters; the cost of enforcing or defending intellectual property; unforeseen adverse competitive, economic or other factors that may impact our cash position; and risks associated with raising additional funds. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview

Energy Focus, Inc. and its subsidiaries engage in the design, development, manufacturing, marketing, and installation of energy-efficient lighting systems and solutions where we serve two segments:

● solutions segment providing turnkey, high-quality, energy-efficient lighting application alternatives primarily to the existing public-sector building market; and

● products segment providing military, general commercial and industrial lighting, and pool lighting offerings, each of which markets and sells energy-efficient lighting systems.

We continue to evolve our business strategy to include providing our customers with comprehensive energy-efficient lighting solutions, which use, but are not limited to, our patented and proprietary technology. Our products segment includes LED and other highly energy-efficient lighting technologies. Typical savings related to current technology approximates 50% in electricity costs for fluorescent retrofits and 80% or more for incandescent retrofits, while providing full-spectrum light closely simulating daylight colors. Our strategy also incorporates continued investment into the research of new and emerging energy efficient LED light sources and applications.

19

Results of Operations

The following table sets forth the percentage of net sales represented by certain items reflected on our Consolidated Statements of Operations for the following periods:

 

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		76.4			75.2			75.2			78.7
Gross profit		23.6			24.8			24.8			21.3
Operating expenses:
Research and development		1.0			1.3			1.4			0.4
Sales and marketing		25.9			18.0			23.4			19.5
General and administrative	19.8				15.3			18.8			16.7
Loss on impairment		-			-			1.7			-
Restructuring		1.3			-			0.4			-
Change in estimate of contingent liabilities		-			-			0.1			-
Total operating expenses		48.0			34.6			45.8			36.6
Loss from operations		(24.4	)		(9.8	)		(21.0	)		(15.3	)
Other income (expense):
Settlement of acquisition obligations		-			-			4.8			-
Other expense		(0.4	)		(0.3	)		(1.4	)		(0.5	)
Interest income		-			-			-			0.0
Interest expense		(2.8	)		(1.6	)		(2.5	)		(1.9	)
Loss before income taxes		(27.6	)		(11.7	)		(20.1	)		(17.7	)
Provision for income taxes		(0.0	)		(0.0	)		(0.0	)		(0.0	)
Net loss		(27.6	)%		(11.7	)%		(20.1	)%		(17.7	)%

Our net sales breakdown by business segment is as follows (in thousands):

 

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Solutions:
Net sales - solutions	$	2,104	$	2,066	$	5,894	$	5,811
Products:
Net sales - pool and commercial		2,612		4,159		8,503		11,354
Net sales - government products/R&D services		1,272		1,679		4,305		3,713
Total net sales - product segment		3,884		5,838		12,808		15,067
Total net sales	$	5,988	$	7,904	$	18,702	$	20,878

20

Net sales of $6.0 million for the third quarter of 2013, decreased 24 percent from the prior year’s third quarter. Solutions segment sales increased two percent, while products segment sales decreased 33 percent due to lower pool, commercial and government product sales. Net sales of $18.7 million for the first nine months of 2013, decreased ten percent from the prior year’s nine month period. Solutions segment sales increased one percent, while product segment sales decreased 15 percent, due to lower pool and commercial product sales. Our solutions segment backlog at September 30, 2013 and 2012 was $4.0 million and $2.6 million, respectively.

Revenues from our products segment include, but are not limited to, revenues recognized upon shipping, and service at completion of installation. Revenues from our solutions segment include, but are not limited to, revenues recognized from long-term contracts on a percentage-of-completion basis or the fair value of certain contract deliverables. For a detailed discussion on our revenue recognition policy, see our Annual Report on Form 10-K for the year ended December 31, 2012.

Gross Profit

Total gross profit was $1.4 million, or 23.6 percent of net sales, for the third quarter ended September 30, 2013, compared to $2.0 million, or 24.8 percent of net sales, for the prior year’s quarter. Solutions segment gross profit decreased $178 thousand and was 10.3 percent of net sales for the 2013 quarter compared to 19.1 percent of net sales for the prior year’s quarter. A few lower margin projects, as well as a few large projects where material was shipped to the project site, but no significant installation had occurred, accounted for the decrease. Gross profit is not recognized on materials until installation has been completed. Products segment gross profit decreased $367 thousand, but increased as a percentage of net sales to 30.8 percent from 26.8 percent in the prior year. The decrease in dollars resulted primarily from lower sales of pool and commercial products. Additionally, the gross margin percentage improved as a result of improvements to our supply chains. For the first nine months of 2013, total gross profit was $4.6 million, or 24.8 percent of net sales, compared to $4.4 million, or 21.3 percent of net sales, in the prior year’s comparable period. Solutions segment gross profit decreased $191 thousand on slightly higher net sales, and was 12.0 percent of net sales for the 2013 period compared to 15.5 percent of net sales for the prior year’s period. Products segment gross profit increased $380 thousand, despite 15 percent lower net sales, to 30.7 percent of net sales from 23.6 percent in the prior year. The increase resulted primarily from improvements to our supply chains.

Operating Expenses

Research and Development

Gross research and development expenses were $905 thousand for third quarter of 2013, a 46 percent increase from $621 thousand in the 2012 quarter. The increase in spending is primarily related to two projects to develop LED lighting; one for the commercial market and one for the Navy. For the first nine months of 2013, gross research and development expenses increased six percent from the prior year’s comparable period.

Research and development expenses include salaries, contractor and consulting fees, supplies and materials, as well as overhead costs such as depreciation and facilities costs. Research and development costs are expensed as they are incurred.

Total government reimbursements are the combination of revenues and credits from government contracts.

The gross and net research and development expense along with credits from government contracts is shown in the following table (in thousands):

	Three months ended September 30,						Nine months ended September 30,
Net Research & Development Expense	2013			2012			2013			2012
Total gross research and development expenses	$	905		$	621		$	2,664		$	2,509
Cost recovery through cost of sales		(574	)		(398	)		(1,742	)		(1,792	)
Cost recovery and other credits		(274	)		(121	)		(656	)		(630	)
Research and development, net	$	57		$	102		$	266		$	87

21

Sales and Marketing

Sales and marketing expenses were $1.5 million, or 25.9 percent of net sales, in the third quarter of 2013, compared to $1.4 million, or 18.0 percent of net sales, in last year’s comparable period; an increase of nine percent. For the first nine months of 2013, sales and marketing expenses were $4.4 million, or 23.4 percent of net sales, compared to $4.1 million, or 19.5 percent of net sales; a seven percent increase. The increase in both periods was primarily due to higher consulting costs, and salaries and related personnel expenses, partially offset by lower commission expense.

General and Administrative

General and administrative expenses were $1.2 million, or 19.8 percent of net sales, for the third quarter of 2013 compared to $1.2 million, or 15.3 percent of net sales, for the third quarter of 2012. For the first nine months of 2013, general and administrative expenses were $3.5 million, or 18.8 percent of net sales, compared to $3.5 million, or 16.7 percent of net sales. For third quarter, lower amortization, incentives and bad debt expenses was offset by higher legal fees. Included in the second quarter of 2013 was approximately $250 thousand accrued for salary, payroll taxes and medical benefits per the terms of a separation agreement with the Company’s former Chief Executive Officer. This was partially offset by lower amortization and bad debt expenses.

Loss on impairment

In conjunction with the settlement agreement between the Company and the former owners of SRC, the Company agreed to discontinue the use of the name “Stones River Companies, LLC” and various derivatives thereof including SRC. Therefore, at June 30, 2013, the remaining unamortized balance of Tradenames of $325 thousand was written off. See Note 9, Settlement of Acquisition Obligations.

Restructuring

During the third quarter of 2013, the Company relocated its manufacturing operation from a contract manufacturing facility located in Mexico to its existing facilities in Pleasanton, California and Solon, Ohio. The Condensed Consolidated Statements of Operations includes $79 thousand in “Restructuring” for severance for the Mexican contract employees as required by the production share agreement, as amended, between the Company and the contract manufacturer. See Note 8, Restructuring.

Change in estimate of contingent liabilities

As a provision of the settlement agreement between the Company and the former owners of SRC, the net receive due to the Company of $78 thousand was forgiven. Additionally, the Company recognized a $66 thousand favorable adjustment related to the change in the estimate of a performance-related contingent obligation for a 2.5% payout based upon the fair value of projected annual billings of SRC. The Company recognized a net expense of $12 thousand related to these items in June 2013. See Note 9, Settlement of Acquisition Obligations.

Other Income and Expenses

Settlement of acquisition obligations

As a provision of the settlement agreement between the Company and the former owners of SRC, the Company’s obligation to pay a $500 thousand special fee and a $500 thousand convertible promissory note including interest of $92 thousand were cancelled in their entirety in exchange for a $200 thousand payment. The Company recognized a net gain of $892 thousand related to these items in June 2013. See Note 9, Settlement of Acquisition Obligations.

Other expense

For the three months ended September 30, 2013 and 2012, other expense was $26 thousand. For the nine months ended September 30, 2013 and 2012, other expense was $265 thousand and $98 thousand, respectively. Other expense consists primarily of amortization of loan origination costs, facility and other fees related to the line of credit agreement.

22

Interest expense

For the three months ended September 30, 2013 and 2012, interest expense was $166 thousand and $123 thousand, respectively. For the nine months ended September 30, 2013 and 2013, other expense was $459 thousand and $388 thousand, respectively. Interest expense is primarily related to our debt, which includes the amortization of debt discounts and interest on our line of credit facility.

Net Loss

For the three months ended September 30, 2013 and 2012, the net loss was $1.7 million and $928 thousand, respectively. For the nine months ended September 30, 2013 and 2012, the net loss was $3.8 million and $3.7 million, respectively.

Liquidity and Capital Resources

Cash and Cash Equivalents

At September 30, 2013, the Company’s cash and cash equivalents were $952 thousand, compared to $1.2 million at December 31, 2012; a decrease of $229 thousand. The balance at September 30, 2013 includes no restricted cash, compared to $252 thousand of restricted cash at December 31, 2012. The restricted cash at December 31, 2012 relates to funds received from a grant from/for a branch of the United States government. Total debt, including credit line borrowings, was $5.1 million at September 30, 2013 and $4.1 million as of December 31, 2012.

Cash Used in Operating Activities

For the nine months ended September 30, 2013, net cash used in operating activities was $4.3 million compared to net cash used of $6.2 million in 2012. Cash used in operating activities primarily consists of net losses adjusted for non-cash items, including loss on impairment, depreciation, amortization, and stock-based compensation; and the effect of changes in working capital. The decrease in cash used in operating activities for the 2013 nine month period was primarily due to a decrease in accounts receivable during the 2013 period versus an increase in 2012. Additionally, the 2013 period includes an $892 thousand gain on the settlement of acquisition obligations. See Note 9, Settlement of Acquisition Obligations.

Cash Used in Investing Activities

Net cash used in investing activities was $168 thousand for the nine months ended September 30, 2013, and $159 thousand for the same period in 2012, and consisted of the purchase of property and equipment.

Cash Provided by Financing Activities

Net cash provided by financing activities was $4.2 million for the nine months ended September 30, 2013 and $4.6 million for the 2012 comparable period. The 2013 period includes $5.2 million in net proceeds from unsecured convertible debt. See Note 7, Debt, for further discussion of these transactions. The 2012 period includes $4.8 million in net cash proceeds from stock issuances primarily from the Company entering into Securities Purchase Agreements with ten investors, under which it sold 19.6 million units, each of which consists of one share of the Company’s Common Stock, par value $0.0001 per share, and one-half warrant to purchase one share of Common Stock. The purchase price of each unit was $0.25, based on a formula involving the stock’s 30 day average price prior to February 24, 2012. Each warrant entitles the holder to purchase one share of common stock at an exercise price of $0.54. Each warrant is immediately separable from the unit and immediately exercisable, and expires three years from the date of issuance. The Company used the proceeds of the offering to retire debt and for working capital purposes.

23

Debt

Credit Facilities

On December 22, 2011, the Company entered into a $4.5 million revolving line of credit (“credit facility”) with Rosenthal & Rosenthal. The total loan amount available to the Company under the line of credit is equal to 85% of our net amount of eligible receivables, plus available inventory (the lesser of 50% of the lower of cost or market value of eligible inventory, or $250 thousand). The credit facility is secured by a lien on the domestic assets of the Company. The interest rate for borrowing on accounts receivable is 8.5%, on inventories 10.0% and on overdrafts 13.0%. Additionally, there is an annual 1% facility fee on the entire amount of the credit facility, $4.5 million, payable at the beginning of the year. The credit facility is a three year agreement, expiring on December 31, 2014, unless terminated sooner. There are liquidated damages if the credit facility is terminated prior to December 31, 2014, which are based on the maximum credit facility amount then in effect. The damages are: 2% if terminated prior to December 31, 2013, and 1% if terminated prior to December 31, 2014. The Company is required to comply with certain financial covenants, measured quarterly, including, as defined in the agreement: a tangible net worth amount and a working capital amount. The company was in compliance with the financial covenants at September 30, 2013. Borrowings under the revolving line of credit were $836 thousand at September 30, 2013, and $1.6 million at December 31, 2012, and are recorded in the Condensed Consolidated Balance Sheets as a current liability under the caption “Credit line borrowings.”

Borrowings

Long-term debt, including current maturities, totaled $4.3 million at September 30, 2013 and $2.5 million at December 31, 2012. The change in long-term debt is shown below (in thousands):

 

Balance, December 31, 2012	$	2,549
Unsecured convertible notes entered into		5,245
Discounts on unsecured convertible notes, net		(1,694	)
Conversion of unsecured convertible note		(1,000	)
Forgiveness of convertible promissory note		(500	)
Principal payments on long-term debt		(290	)
Balance, September 30, 2013	$	4,310

Liquidity

Historically, we have incurred losses attributable to operational performance which has negatively impacted cash flows. As of September 30, 2013, we have an accumulated deficit of $84.4 million. Although management continues to address many of the legacy issues that have historically burdened the Company’s financial performance, the Company still faces challenges in order to reach profitability. In order for it to attain profitability and growth, management will need to improve gross margins, successfully execute the marketing and sales plans for its turnkey energy-efficient lighting solutions business, receive additional orders on and fulfill the $23.1 million U.S. Navy supply contract it was awarded in 2011, develop new technologies into sustainable product lines, continue cost reduction efforts throughout the Company, and continue to improve supply chain performance.

During the first quarter of 2013, the Company embarked on a program to raise additional unsecured convertible debt, of which $5.2 million was received during the first nine months of 2013 and $900 thousand during the fourth quarter through November 13, 2013. Management remains optimistic about obtaining the funding necessary to meet on-going tactical and strategic capital requirements; however, there can be no assurances that this objective will be successful. As such, the Company continues to review and pursue selected external funding sources, if necessary, to execute these objectives including, but not limited to, the following:

● obtain financing from traditional and non-traditional investment capital organizations or individuals,

● potential sale or divestiture of one or more operating units, and

● obtain funding from the sale of common stock or other equity or debt instruments.

24

Obtaining financing through the above-mentioned mechanisms contains risks, including:

● loans or other debt instruments may have terms and/or conditions, such as interest rate, restrictive covenants, and control or revocation provisions, which are not acceptable to management or the Board of Directors,

● the current environment in capital markets combined with the Company’s capital constraints may prevent the Company from obtaining additional debt financing,

● financing may not be available for parties interested in pursuing the acquisition of one or more of the operating units of the Company, and

● additional equity financing may not be available in the current capital environment and could lead to further dilution of shareholder value for current shareholders of record.

On November 13, 2013, the Company announced that it was in negotiations to sell its “Fiberstars” brand pool product lines. The sale is subject to the successful negotiation of terms satisfactory to both parties, completion of the potential buyer’s due diligence review, lender consent, entry into a definitive agreement and other conditions. There is no current binding obligation on either party and, accordingly, Energy Focus makes no assurance that the negotiations will lead to a transaction.

Critical Accounting Policies

The preparation of financial statements requires that management 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 which the Company believes have the most significant impact on the financial statements include, but are not limited to, the establishment of reserves for accounts receivable, sales returns, inventory obsolescence and warranty claims; the useful lives for property, equipment, and intangible assets; revenues recognized on a percentage-of-completion basis; stock-based compensation; and accounting for income taxes. In addition, estimates and assumptions associated with the evaluation of long-lived assets for impairment requires considerable judgment. For the detailed discussion of the application of policies critical to our business operations, see our Annual Report on Form 10-K for the year ended December 31, 2012.

Recent Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, under Topic 220, which requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component (the respective line items of net income). This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The adoption of this ASU did not materially impact our disclosures.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which amends ASC 740, Income Taxes. The amendments provide guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 and may be applied on either a prospective or retrospective basis. The provisions are effective for the Company’s Annual Report on Form 10-K for the year ending December 31, 2014. We do not expect the adoption of these provisions to have a significant impact on the Company’s consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2013, we had British pounds sterling-denominated cash valued at $317 thousand held in the United Kingdom, based on the exchange rate at that date. The balances for cash held in the United Kingdom are subject to exchange rate risk. We have a policy of maintaining cash balances in local currency unless an amount of cash is occasionally transferred in order to repay inter-company debts.

25

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet, and management believes that they meet, reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. Any design of disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chairman of the Board of Directors and Chief Financial Officer have concluded that, subject to the limitations noted above, our disclosure controls and procedures were effective to ensure that material information relating to us, including our consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.

(b) Changes in internal control over financial reporting

There were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter. Further, there were no other items identified in connection with our internal evaluations that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1A. RISK FACTORS

Reference is made to the Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012 (the “Annual Report”). There have been no significant changes in those risk factors as set forth in the Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 5. OTHER INFORMATION

None.

26

ITEM 6. EXHIBITS

The information required by this Item is set forth on the Exhibit Index that follows the signature page of this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		ENERGY FOCUS, INC.
Date: November 13, 2013	By:	/s/ James Tu
		James Tu
		Executive Chairman of the Board of Directors
Date: November 13, 2013	By:	/s/ Frank Lamanna
		Frank Lamanna
		Chief Financial Officer

27

EXHIBIT INDEX

Exhibit Number	Description of Documents
3.1	Form of Certificate of Incorporation of the Registrant.
10.1	Energy Focus, Inc. 2013 Employee Stock Purchase Plan (1).
10.2	Amended Form of Notice of Stock Option Grant for 2008 Stock Incentive Plan
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.
*101	The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at September 30, 2013 and December 31, 2012, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2013 and 2012, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September, 30 2013 and 2012, (vi) the Notes to Condensed Consolidated Financial Statements.

*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

(1) Incorporated by reference from Appendix A to the company’s definitive proxy statement on Form DEF14A filed on August 16, 2013.

EX-3

Exhibit 3.1

FORM OF

CERTIFICATE OF INCORPORATION

OF

ENERGY FOCUS, INC.

ARTICLE I

The name of this corporation is Energy Focus, Inc. (the “Corporation”).

ARTICLE II

The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE IV

(A) The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is One Hundred-Fifty-Two Million (152,000,000) shares, each with a par value of $0.0001 per share. One Hundred Fifty Million (150,000,000) shares shall be Common Stock and Two Million (2,000,000) shares shall be Preferred Stock.

(B) The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, by filing a certificate pursuant to the applicable law of the State of Delaware and within the limitations and restrictions stated in this Certificate of Incorporation, to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and the number of shares constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

ARTICLE V

The number of directors of the Corporation shall be fixed from time to time pursuant to the Bylaws.

ARTICLE VI

In the election of directors, each holder of shares of any class or series of capital stock of the Corporation shall be entitled to one vote for each share held. The candidates receiving the highest number of affirmative votes, up to the number of directors to be elected, shall be elected; votes against any candidate and votes withheld shall have no legal effect.

ARTICLE VII

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

1

ARTICLE VIII

(A) Except as otherwise provided in the Bylaws, the Bylaws may be amended or repealed or new Bylaws adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote generally in the election of directors. The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal Bylaws.

(B) Advance notice of stockholder nominations for the election of directors or of business to be brought by the stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws.

ARTICLE IX

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision of the General Corporation Law of Delaware) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws.

ARTICLE X

The Corporation shall have perpetual existence.

ARTICLE XI

(A) To the fullest extent permitted by the General Corporation Law of Delaware, as the same may be amended from time to time, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law of Delaware is hereafter amended to authorize, with the approval of a corporation’s stockholders, further reductions in the liability of a corporation’s directors for breach of fiduciary duty, then a director of the Corporation shall not be liable for any such breach to the fullest extent permitted by the General Corporation Law of Delaware, as so amended.

(B) Any repeal or modification of the foregoing provisions of this Article XI shall not adversely affect any right or protection of a director of the Corporation with respect to any acts or omissions of such director occurring prior to such repeal or modification.

ARTICLE XII

(A) To the fullest extent permitted by applicable law, the Corporation is also authorized to provide indemnification of (and advancement of expenses to) directors, officers, employees and other agents of the Corporation (and any other persons to which Delaware law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law of Delaware, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to a corporation, its stockholders, and others.

(B) Any repeal or modification of any of the foregoing provisions of this Article XII shall not adversely affect any right or protection of any such agent or other person existing at the time of, or increase the liability of any such agent or other person with respect to any acts or omissions of such agent or other person occurring prior to such repeal or modification.

2

ARTICLE XIII

The name and mailing address of the incorporator are as follows:

James Tu

c/o Energy Focus, Inc.

32000 Aurora Rd.

Solon, Ohio 44139

Executed this 24 day of October 2013.

/s/ James Tu

James Tu

Incorporator

3

EX-10

Exhibit 10.2

Energy Focus, Inc.

2008 Stock Incentive Plan

Notice of Stock Option Grant

You have been granted the following Option to purchase Common Stock of Energy Focus, Inc. (the “Company”) under the Company’s 2008 Stock Incentive Plan as amended (the “Plan”):

Name of Optionee:	_____________
Number of Option Shares Granted:	_____________
Type of Option:	□ Incentive Stock Option □ Nonstatutory Stock Option
Exercise Price Per Share:	$ _____
Grant Date:	___________________
Vesting Commencement Date:	________________________
Vesting Schedule:	__________________________
Expiration Date:	__________________________

Energy Focus, Inc.

Notice of Stock Option Grant

-1-

By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the term and conditions of the Plan and the Stock Option Agreement, both of which are attached to and made a part of this document.

OPTIONEE:	Energy Focus, Inc.
__________________________	By: __________________________
Optionee’s Signature
	Title: _________________________
__________________________
Optionee’s Printed Name

Energy Focus, Inc.

Notice of Stock Option Grant

-2-

ENERGY FOCUS, INC.

2008 STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT

Tax Treatment	This Option is intended to be an incentive stock option under Section 422 of the Internal Revenue Code or a nonstatutory option, as provided in the Notice of Stock Option Grant. Even if this Option is designated as an incentive stock option, it shall be deemed to be a nonstatutory option to the extent required by the $100,000 annual limitation under Section 422(d) of the Internal Revenue Code.
Vesting	This Option becomes exercisable in installments, as shown in the Notice of Stock Option Grant. This Option will in no event become exercisable for additional shares after your Service has terminated for any reason.
Term	This Option expires in any event at the close of business at Company headquarters on the day before the 10th anniversary of the Grant Date, as shown on the Notice of Stock Option Grant (fifth anniversary for a more than 10% stockholder as provided under the Plan if this is an incentive stock option). This Option may expire earlier if your Service terminates, as described below.
Regular Termination	If your Service terminates for any reason except death or “Total and Permanent Disability” (as defined in the Plan), then this Option will expire at the close of business at Company headquarters on the date three (3) months after the date your Service terminates (or, if earlier, the Expiration Date). The Company has discretion to determine when your Service terminates for all purposes of the Plan and its determinations are conclusive and binding on all persons.
Death	If you die, then this Option will expire at the close of business at Company headquarters on the date six (6) months after the date your Service terminates (or, if earlier, the Expiration Date). During that period of up to six (6) months, your estate or heirs may exercise the Option.
Disability	If your Service terminates because of your Total and Permanent Disability, then this Option will expire at the close of business at Company headquarters on the date six (6) months after the date your Service terminates (or, if earlier, the Expiration Date).

Energy Focus, Inc.

Notice of Stock Option Grant

-3-

Leaves of Absence	For purposes of this Option, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing and if continued crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to active work. If you go on a leave of absence, then the vesting schedule specified in the Notice of Stock Option Grant may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis, then the vesting schedule specified in the Notice of Stock Option Grant may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.
Restrictions on Exercise	The Company will not permit you to exercise this Option if the issuance of shares at that time would violate any law or regulation. The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of the Company stock pursuant to this Option shall relieve the Company of any liability with respect to the non-issuance or sale of the Company stock as to which such approval shall not have been obtained. However, the Company shall use its best efforts to obtain such approval.
Notice of Exercise	When you wish to exercise this Option you must notify the Company by completing the attached “Notice of Exercise of Stock Option” form and filing it with the Finance Department of the Company. You notice must specify how many shares you wish to purchase. Your notice must also specify how your shares should be registered. The notice will be effective when it is received by the Company. If someone else wants to exercise this Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.

Energy Focus, Inc.

Notice of Stock Option Grant

-4-

Form of Payment	When you submit your notice of exercise, you must include payment of the Option exercise price for the shares you are purchasing. Payment may be made in the following form(s):
	●     Your personal check, a cashier’s check or a money order.
	●     Certificates for shares of Company stock that you own, along with any forms needed to affect a transfer of those shares to the Company. The value of the shares, determined as of the effective date of the Option exercise, will be applied to the Option exercise price. Instead of surrendering shares of Company stock, you may attest to the ownership of those shares on a form provided by the Company and have the same number of shares subtracted from the Option shares issued to you. However, you may not surrender, or attest to the ownership of shares of Company stock in payment of the exercise price if your action would cause the Company to recognize a compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes.
	●     By delivering on a form approved by the Committee of an irrevocable direction to a securities broker approved by the Company to sell all or part of your Option shares and to deliver to the Company from the sale proceeds in an amount sufficient to pay the Option exercise price and any withholding taxes. The balance of the sale proceeds, if any, will be delivered to you. The directions must be given by signing a special “Notice of Exercise” form provided by the Company.
	●     Irrevocable directions to a securities broker or lender approved by the Company to pledge Option shares as security for a loan and to deliver to the Company from the loan proceeds an amount sufficient to pay the Option exercise price and any withholding taxes. The directions must be given by signing a special “Notice of Exercise” form provided by the Company.
	Notwithstanding the foregoing, payment may not be made in any form that is unlawful, as determined by the Company in its sole discretion.
Withholding Taxes and Stock Withholding	You will not be allowed to exercise this Option unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the Option exercise. These arrangements may include withholding shares of Company stock that otherwise would be issued to you when you exercise this Option. The value of these shares, determined as of the effective date of the Option exercise, will be applied to the withholding taxes.

Energy Focus, Inc.

Notice of Stock Option Grant

-5-

Restrictions on Resale

By signing this Agreement, you agree not to sell any Option shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as you are an employee, consultant or director of the Company or a subsidiary of the Company.

Transfer of Option

In general, only you can exercise this Option prior to your death. You cannot transfer or assign this Option, other than as designated by you by will or by the laws of descent and distribution, except as provided below. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may in any event dispose of this Option in your will. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse’s interest in your Option in any other way. However, if this Option is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then the “Committee” (as defined in the Plan) may, in its sole discretion, allow you to transfer this Option as a gift to one or more family members. For purposes of this Agreement, “family member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law or sister-in-law (including adoptive relationships), any individual sharing your household (other than a tenant or employee), a trust in which one or more of these individuals have more than 50% of the beneficial interest, a foundation in which you or one or more of these persons control the management of assets, and any entity in which you or one or more of these persons own more than 50% of the voting interest. In addition, if this Option is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then the Committee may, in its sole discretion, allow you to transfer this option to your spouse or former spouse pursuant to a domestic relations order in settlement of marital property rights. The Committee will allow you to transfer this Option only if both you and the transferee(s) execute the forms prescribed by the Committee, which include the consent of the transferee(s) to be bound by this Agreement.

Energy Focus, Inc.

Notice of Stock Option Grant

-6-

Retention Rights	Neither your Option nor this Agreement gives you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause.
Change in Control	The Options subject to this Agreement shall become exercisable in the event that both of the following events have occurred: (i) a Change in Control occurs with respect to the Company as defined by the Plan; and (ii) The Board has determined to activate the triggering of acceleration upon the occurrence of a Change in Control.
Stockholder Rights	You, or your estate or heirs, have no rights as a stockholder of the Company until you have exercised this Option by giving the required notice to the Company and paying the exercise price. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this Option, except as described in the Plan.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of shares covered by this Option and the exercise price per share may be adjusted pursuant to the Plan.
Applicable Law	This Agreement will be interpreted and enforced under the laws of the State of Delaware without regard to their choice-of-law provisions.
The Plan and Other Agreements	The Company adopted the Plan on May 6, 2008 and amended it on November 19, 2008, February 25, 2010 and May 8, 2012. The Plan as amended is referred to as the “Plan”. The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in the Stock Option Agreement shall have the meanings assigned to them in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded. This Agreement may be amended only by another written agreement, signed by both parties.

BY SIGNING THE COVER SHEET OF THIS AGREEMENT,

YOU AGREE TO ALL OF THE TERMS AND CONDITIONS

DESCRIBED ABOVE AND IN THE PLAN.

Energy Focus, Inc.

Notice of Stock Option Grant

-7-

EXHIBIT A

NOTICE OF EXERCISE

To: Energy Focus, Inc.

Attn: Chief Financial Officer

Subject: Notice of Intention to Exercise Stock Option

This is official notice that the undersigned ("Optionee") intends to exercise Optionee's option to purchase __________ shares of Energy Focus, Inc. Common Stock, under and pursuant to the Company's 2008 Stock Incentive Plan, as amended, and the Stock Option Agreement dated ________________________ as follows:

GrantNumber:	________________________________
Number of Shares:	________________________________
Date of Purchase:	________________________________
Total Purchase Price:	________________________________
Social Security No.:	________________________________

The shares should be issued as follows:

Name:	________________________________
Address:	________________________________________________________________

Energy Focus, Inc.

Notice of Stock Option Grant

-8-

EX-31

EXHIBIT 31.1

CERTIFICATION

I, James Tu, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Energy Focus, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: November 13, 2013

    /s/ James Tu                    

James Tu
Executive Chairman and Chief Executive Officer

EX-31

EXHIBIT 31.2

CERTIFICATION

I, Frank Lamanna, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Energy Focus, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: November 13, 2013

    /s/ Frank Lamanna         

Frank Lamanna
Chief Financial Officer

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Energy Focus, Inc. (the “Company”) for the quarterly period ended September 30, 2013 (the “Report”), I, James Tu, Executive Chairman of the Board of Directors of the Company, and I, Frank Lamanna, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James Tu

James Tu

Executive Chairman and Chief Executive Officer

November 13, 2013

/s/ Frank Lamanna

Frank Lamanna

Chief Financial Officer

November 13, 2013

A signed original of this written statement required by Section 906 has been provided to Energy Focus, Inc. and will be retained by Energy Focus, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Note 11 - Income Taxes

9 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 11. INCOME TAXES

At September 30, 2013, the Company has recorded a full valuation allowance against its deferred tax assets in the United States, due to uncertainties related to the Company’s ability to utilize its deferred tax assets, primarily consisting of certain net operating losses carried forward. The valuation allowance is based upon the Company’s estimates of taxable income by jurisdiction and the period over which its deferred tax assets will be recoverable.

As of December 31, 2012, the Company had a net operating loss carry-forward of approximately $70.7 million for federal, state and local income tax purposes. Due to changes in the Company’s capital structure, the net operating loss carry-forward available to the Company in future years to offset future taxable liabilities may be limited under Section 382 of the Internal Revenue Code (the “Code”). Management is currently reviewing the rules under this section of the Code, but believes that the limitation on the Company’s net operating loss carry-forward may be significant.

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Note 10 - Segments and Geographic Information (Details) - Summary of Reportable Segment Data (USD $) In Thousands, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2013	Jun. 28, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Segment Reporting Information [Line Items]
Net sales	$ 5,988		$ 7,904	$ 18,702	$ 20,878
Cost of sales	4,574		5,945	14,065	16,430
Gross profit	1,414		1,959	4,637	4,448
Operating expenses:
Research and development	57		102	266	87
Sales and marketing	1,550		1,423	4,351	4,084
General and administrative	1,185		1,211	3,524	3,479
Change in estimate of contingent liabilities				12
Restructuring expense	79			79
Loss on impairment		325		325
Total operating expenses	2,871		2,736	8,557	7,650
Other (expense) income	(192)		(149)	168	(485)
Income (loss) before income taxes	(1,649)		(926)	(3,752)	(3,687)
Provision for income taxes	(2)		(2)	(6)	(8)
Net loss	(1,651)		(928)	(3,758)	(3,695)
Solutions Segment [Member]
Segment Reporting Information [Line Items]
Net sales	2,104		2,066	5,894	5,811
Cost of sales	1,888		1,672	5,186	4,912
Gross profit	216		394	708	899
Operating expenses:
Sales and marketing	397		320	934	1,004
General and administrative	115		244	526	558
Loss on impairment	0		0	325	0
Total operating expenses	512		564	1,785	1,562
Income (loss) before income taxes	(296)		(170)	(1,077)	(663)
Products Segment [Member]
Segment Reporting Information [Line Items]
Net sales	3,884		5,838	12,808	15,067
Cost of sales	2,686		4,273	8,879	11,518
Gross profit	1,198		1,565	3,929	3,549
Operating expenses:
Research and development	57		102	266	87
Sales and marketing	821		957	2,616	2,708
General and administrative	106		119	307	261
Restructuring expense	79		0	79	0
Total operating expenses	1,063		1,178	3,268	3,056
Income (loss) before income taxes	135		387	661	493
Segements Total [Member]
Operating expenses:
Income (loss) before income taxes	(161)		217	(416)	(170)
Overhead [Member]
Operating expenses:
Sales and marketing	332		146	801	372
General and administrative	964		848	2,691	2,660
Change in estimate of contingent liabilities	0		0	12	0
Total operating expenses	$ 1,296		$ 994	$ 3,504	$ 3,032

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net sales	$ 5,988	$ 7,904	$ 18,702	$ 20,878
Cost of sales	4,574	5,945	14,065	16,430
Gross profit	1,414	1,959	4,637	4,448
Operating expenses:
Research and development	57	102	266	87
Sales and marketing	1,550	1,423	4,351	4,084
General and administrative	1,185	1,211	3,524	3,479
Loss on impairment			325
Restructuring	79		79
Change in estimate of contingent liabilities			12
Total operating expenses	2,871	2,736	8,557	7,650
Loss from operations	(1,457)	(777)	(3,920)	(3,202)
Other income (expense):
Settlement of acquisition obligations			892
Other expense	(26)	(26)	(265)	(98)
Interest income				1
Interest expense	(166)	(123)	(459)	(388)
Loss before income taxes	(1,649)	(926)	(3,752)	(3,687)
Provision for income taxes	(2)	(2)	(6)	(8)
Net loss	$ (1,651)	$ (928)	$ (3,758)	$ (3,695)
Net loss per share - basic and diluted (in Dollars per share)	$ (0.03)	$ (0.02)	$ (0.08)	$ (0.09)
Shares used in computing net loss per share - basic and diluted (in Shares)	49,158	44,542	46,712	40,241

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Note 4 - Property and Equipment

9 Months Ended

Sep. 30, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

NOTE 4. PROPERTY AND EQUIPMENT

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

	September 30, 2013			December 31, 2012
Equipment (useful life 3 - 15 years)	$	5,101		$	5,963
Tooling (useful life 2 - 5 years)		2,576			2,600
Furniture and fixtures (useful life 5 years)		132			132
Computer software (useful life 3 years)		541			462
Leasehold improvements (the shorter of useful life or lease life)		633			633
Construction in progress		11			50
Property and equipment at cost		8,994			9,840
Less: accumulated depreciation		(7,528	)		(8,040	)
Property and equipment, net	$	1,466		$	1,800

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Note 3 - Inventories (Tables)

9 Months Ended

Sep. 30, 2013

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

	September 30, 2013		December 31, 2012
Raw materials	$	1,305	$	1,649
Finished goods		1,684		932
Inventories, net	$	2,989	$	2,581

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Note 10 - Segments and Geographic Information (Details) - Summary of Geographic Long-Lived Assets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Note 10 - Segments and Geographic Information (Details) - Summary of Geographic Long-Lived Assets [Line Items]
Long-lived assets, net	$ 1,572	$ 2,408
United States [Member]
Note 10 - Segments and Geographic Information (Details) - Summary of Geographic Long-Lived Assets [Line Items]
Long-lived assets, net	1,533	2,350
International [Member]
Note 10 - Segments and Geographic Information (Details) - Summary of Geographic Long-Lived Assets [Line Items]
Long-lived assets, net	$ 39	$ 58

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Note 12 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 12. COMMITMENTS AND CONTINGENCIES

In connection with the acquisition of SRC, the Company recorded a performance-related contingent obligation in December 2010 related to a 2.5% payout payable over 42 months commencing January 1, 2010 and based upon the fair value of projected annual billings of the acquired business, and a $500 thousand fee if the market price of the Company’s common stock is not equal to or greater than $2.00 per share for at least twenty trading days between June 30, 2010 and June 30, 2013 (due on June 30, 2013). The Company accrued for each of these contingent liabilities at their respective fair values at the time of the acquisition. For the three and nine months ended September 30, 2013, the Company paid $0 and $206 thousand, respectively, relating to the 2.5% payout. For the three and nine months ended September 30, 2012, the Company paid $51 thousand and $140 thousand, respectively, relating to the payout.

On June 28, 2013, the Company entered into a Settlement Agreement with Stones River Companies, LLC, TLC Investments, LLC, Jamie Hall and Robert E. Wilson, terminating the Membership Interest Purchase Agreement related to the acquisition of SRC. As part of the Settlement Agreement, the Company’s obligation to pay a $500 thousand special fee and a $500 thousand convertible promissory note including interest of $92 thousand were cancelled in their entirety. Additionally, the Company recorded at $66 thousand favorable adjustment related to the 2.5% payout discussed above. See Note 9, Settlement of Acquisition Obligations. At December 31, 2012, the Company had recorded a current liability related to these contingent obligations of $728 thousand under the caption “Accrued liabilities” in its Condensed Consolidated Balance Sheets.

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Note 7 - Debt (Details) - Future Maturities of Remaining Borrowings (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Future Maturities of Remaining Borrowings [Abstract]
2013 October through December	$ 14
2014	59
2015	566
2016	5,317
2017	26
2018 and thereafter	70
Gross long-term borrowings	6,052
Less: discounts on long-term borrowings	(1,742)	(48)
Total commitment, net	4,310	2,549
Less: portion classified as current	(58)	(756)
Long-term borrowings, net	$ 4,252	$ 1,793

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Note 11 - Income Taxes (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Operating Loss Carryforwards	$ 70.7

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Note 3 - Inventories (Details) - Inventories (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Inventories [Abstract]
Raw materials	$ 1,305	$ 1,649
Finished goods	1,684	932
Inventories, net	$ 2,989	$ 2,581

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Note 6 - Contracts in Progress (Tables)

9 Months Ended

Sep. 30, 2013

Contracts In Progress [Abstract]

Schedule of Contracts in Progress [Table Text Block]

	September 30, 2013			December 31, 2012
Costs incurred on uncompleted contracts	$	11,107		$	7,067
Estimated earnings		1,817			1,330
Total revenues		12,924			8,397
Less: billings to date		14,223			8,762
Total	$	(1,299	)	$	(365	)
Balance sheet classification:
Costs in excess of billings on uncompleted contracts	$	162		$	99
Billings in excess of costs on uncompleted contracts		(1,461	)		(464	)
Total	$	(1,299	)	$	(365	)

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Note 5 - Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	Amortization Life (in years)		September 30, 2013		December 31, 2012
Definite-lived intangible assets:
Tradenames		10		-		350
Customer relationships		5		106		258
Total definite-lived intangible assets				106		608
Total intangible assets, net			$	106	$	608

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Year ending December 31,	Amount
2013 October through December	$	51
2014		55
Total amortization expense	$	106

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Note 7 - Debt (Details) - Summary of Debt Components (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Debt Instruments	$ 6,052
Discounts on long-term borrowings	(1,742)	(48)
Subtotal	4,310	2,549
Less: Current maturies of long-term debt	(58)	(756)
Long-term debt	4,252	1,793
Unsecured Convertible Notes [Member]
Debt Instrument [Line Items]
Debt Instruments	5,745	1,500
Convertible Promissory Note - TLC Investments LLC [Member]
Debt Instrument [Line Items]
Debt Instruments	0	500
Cognovit Note - Keystone Ruby, LLC [Member]
Debt Instrument [Line Items]
Debt Instruments	237	277
Letter of Credit Agreement - Mark Plush [Member]
Debt Instrument [Line Items]
Debt Instruments	0	250
Unsecured Promissory Note - Quercus Trust [Member]
Debt Instrument [Line Items]
Debt Instruments	$ 70	$ 70

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (Details) - Summary of Stock-based Compensation (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	$ 53	$ 42	$ 149	$ 146
Cost of Sales [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	1	0	2	0
Research and Development Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	11	7	26	19
Selling and Marketing Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	8	6	23	20
General and Administrative Expense [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	$ 33	$ 29	$ 98	$ 107

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Note 4 - Property and Equipment (Details) - Property and Equipment (Parentheticals)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	3 years	3 years
Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	15 years	15 years
Tooling [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	2 years	2 years
Tooling [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years	5 years
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years	5 years
Software and Software Development Costs [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	3 years	3 years

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Note 8 - Restructuring (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Restructuring and Related Activities [Abstract]
Restructuring Charges	$ 79	$ 79

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Note 1 - Nature of Operations (Details)	9 Months Ended
	Sep. 30, 2013
Disclosure Text Block [Abstract]
Number of Operating Segments	2

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Note 5 - Intangible Assets (Details) - Estimated Amortization Expense for Future Years (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Estimated Amortization Expense for Future Years [Abstract]
2013 October through December	$ 51
2014	55
Total amortization expense	$ 106	$ 608

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Note 4 - Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	September 30, 2013			December 31, 2012
Equipment (useful life 3 - 15 years)	$	5,101		$	5,963
Tooling (useful life 2 - 5 years)		2,576			2,600
Furniture and fixtures (useful life 5 years)		132			132
Computer software (useful life 3 years)		541			462
Leasehold improvements (the shorter of useful life or lease life)		633			633
Construction in progress		11			50
Property and equipment at cost		8,994			9,840
Less: accumulated depreciation		(7,528	)		(8,040	)
Property and equipment, net	$	1,466		$	1,800

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net loss	$ (3,758)	$ (3,695)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on impairment	325
Depreciation	496	478
Stock-based compensation	149	146
Settlement of acquisition obligations	(892)
Provision for doubtful accounts receivable	(26)	104
Amortization of intangible assets	177	314
Amortization of discounts on long-term borrowings and acquisition related liabilities	168	180
Amortization of loan origination fees	106
Loss on disposal of fixed assets	6
Accounts receivable, inventories, and other assets	319	(1,274)
Accounts payable and accrued liabilities	(1,579)	(1,655)
Deferred revenue and billings in excess of costs	246	(766)
Total adjustments	(505)	(2,473)
Net cash used in operating activities	(4,263)	(6,168)
Cash flows from investing activities:
Acquisition of property and equipment	(168)	(159)
Net cash used in investing activities	(168)	(159)
Cash flows from financing activities:
Proceeds from issuances of common stock, net	15	4,805
Proceeds from other borrowings, net of origination fees	5,224
Payments on other borrowings	(290)	(873)
Net (repayments) proceeds on credit line borrowings	(754)	629
Net cash provided by financing activities	4,195	4,561
Effect of exchange rate changes on cash	7	10
Net increase (decrease) in cash and cash equivalents	(229)	(1,756)
Cash and cash equivalents at beginning of period	1,181	2,136
Cash and cash equivalents	952	353
Restricted cash held	0	27
Cash and cash equivalents at end of period	$ 952	$ 380

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

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

Basis of Presentation

The financial statements include the accounts of the Company and its subsidiaries, Stones River Companies, LLC (“SRC”) doing business as Energy Focus LED Solutions in Nashville, Tennessee, and Crescent Lighting Limited (“CLL”) located in the United Kingdom. All significant inter-company balances and transactions have been eliminated.

We have prepared the accompanying financial data for the three and nine months ended September 30, 2013 and 2012 pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. have been condensed or omitted pursuant to such rules and regulations. The accompanying financial data and information should be read in conjunction with our 2012 Annual Report on Form 10-K.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly our Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012, and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012.

The preparation of condensed consolidated financial statements in accordance with GAAP in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated 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 the company in the future, actual results may be different from the estimates. Estimates include, but are not limited to, the establishment of reserves for accounts receivable, sales returns, inventory obsolescence and warranty claims; the useful lives for property, equipment, and intangible assets; revenues recognized on a percentage-of-completion basis; and stock-based compensation. In addition, estimates and assumptions associated with the evaluation of long-lived assets for impairment requires considerable judgment. Actual results could differ from those estimates and such differences could be material.

The Company’s independent registered public accounting firm has issued an opinion in connection with the Company’s 2012 Annual Report on Form 10-K raising substantial doubt about the Company’s ability to continue as a going concern. The interim financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The interim financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern.

Update to Significant Accounting Policies

There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Earnings (Loss) per Share

Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares upon exercise of stock options, warrants, and conversion of convertible subordinated promissory notes unless the effect would be anti-dilutive.

A reconciliation of basic and diluted loss per share is provided as follows (in thousands, except per share amounts):

	Three months ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Basic and diluted loss per share:
Net loss	$	(1,651	)	$	(928	)	$	(3,758	)	$	(3,695	)
Basic and diluted loss per share:
Weighted average shares outstanding		49,158			44,542			46,712			40,241
Basic and diluted net loss per share	$	(0.03	)	$	(0.02	)	$	(0.08	)	$	(0.09	)

Options and warrants to purchase approximately 14,319,000 and 15,283,000 shares of common stock, were outstanding at September 30, 2013 and 2012, respectively, but were not included in the calculation of diluted net loss per share because their inclusion would have been anti-dilutive.

Stock-Based Compensation

The Company’s stock-based compensation plan is described in detail in its 2012 Annual Report on Form 10-K. The following table summarizes the Company’s stock-based compensation (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Cost of sales	$	1	$	-	$	2	$	-
Research and development		11		7		26		19
Sales and marketing		8		6		23		20
General and administrative		33		29		98		107
Total stock-based compensation	$	53	$	42	$	149	$	146

At September 30, 2013 and 2012, the Company has unamortized stock-based compensation expense of $249 thousand and $241 thousand, respectively. These costs will be charged to expense and amortized using a straight-line amortization method in future periods through the third quarter of 2016. The weighted average period over which this unearned compensation is expected to be recognized is approximately 1.6 years.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. Estimates utilized in the calculation include the expected life of the option, risk-free interest rate, and expected volatility, and are further comparatively detailed as follows:

	Nine months ended September 30,
	2013			2012
Fair value of options issued	$	0.17		$	0.15
Exercise price	$	0.25		$	0.27
Expected life of option (years)		7.2			5.6
Risk-free interest rate		1.3	%		0.8	%
Expected volatility		90.2	%		59.0	%
Dividend yield		0	%		0	%

Option activity under the Company’s stock plans during the nine months ended September 30, 2013 was as follows:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractural Term (in Years)
Outstanding as of December 31, 2012		2,184,583		$	2.20
Granted		1,684,500			0.25
Exercised		-			-
Cancelled/forfeited		(651,377	)		0.52
Outstanding as of September 30, 2013		3,217,706		$	1.52		7.3
Exercisable as of September 30, 2013		1,875,274		$	2.35		6.0

Additionally, the Company granted 51,219 restricted stock units during the third quarter ended September 30, 2013. The fair market value on the date of grant was $0.41 per share. The shares vest one year from the grant date.

Product Warranties

The Company warrants finished goods against defects in material and workmanship under normal use and service for periods generally between one and five years for products and labor. Settlement costs consist of actual amounts expensed for warranty services which are largely a result of third-party service calls and the costs of replacement products. A liability for the estimated future costs under product warranties is maintained for products outstanding under warranty and is included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets. The warranty activity for the respective periods is as follows (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Balance at the beginning of the period	$	150		$	125		$	159		$	100
Accruals for warranties issued		7			52			46			110
Settlements made during the period (in cash or in kind)		(17	)		(18	)		(65	)		(51	)
Balance at the end of the period	$	140		$	159		$	140		$	159

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Note 5 - Intangible Assets

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 5. INTANGIBLE ASSETS

The following table summarizes information related to net carrying value of intangible assets (in thousands):

	Amortization Life (in years)		September 30, 2013		December 31, 2012
Definite-lived intangible assets:
Tradenames		10		-		350
Customer relationships		5		106		258
Total definite-lived intangible assets				106		608
Total intangible assets, net			$	106	$	608

Amortization expense for intangible assets subject to amortization was $51 thousand and $104 thousand for the three months ended September 30, 2013 and 2012, respectively. For the nine months ended September 30, 2013 and 2012, amortization expense was $177 thousand and $314 thousand, respectively.

In conjunction with the settlement agreement between the Company and the former owners of SRC, the Company agreed to discontinue the use of the name “Stones River Companies, LLC” and various derivatives including SRC. Therefore, at June 30, 2013, the remaining unamortized balance of Tradenames of $325 thousand was written off. See Note 9, Settlement of Acquisition Obligations.

Customer relationships are amortized over their expected useful lives on an accelerated method that approximates the cash flows associated with those relationships. Based on the carrying value of amortized intangible assets, the Company estimates amortization expense for future years to be as follows (in thousands):

Year ending December 31,	Amount
2013 October through December	$	51
2014		55
Total amortization expense	$	106

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Note 3 - Inventories

9 Months Ended

Sep. 30, 2013

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

NOTE 3. INVENTORIES

Inventories are stated at the lower of standard cost (which approximates actual cost determined using the first-in, first-out cost method) or market and consist of the following, net of reserves (in thousands):

	September 30, 2013		December 31, 2012
Raw materials	$	1,305	$	1,649
Finished goods		1,684		932
Inventories, net	$	2,989	$	2,581

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Note 5 - Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Jun. 30, 2013 Trade Names [Member]
Note 5 - Intangible Assets (Details) [Line Items]
Amortization of Intangible Assets	$ 51	$ 104	$ 177	$ 314
Intangible Assets, Net (Excluding Goodwill)					$ 325

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Note 7 - Debt (Tables)

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

	September 30, 2013			December 31, 2012
Unsecured Convertible Notes	$	5,745		$	1,500
Convertible Promissory Note - TLC Investments LLC		-			500
Cognovit Note - Keystone Ruby, LLC		237			277
Letter of Credit Agreement - Mark Plush		-			250
Unsecured Promissory Note - Quercus Trust		70			70
Discounts on long-term borrowings		(1,742	)		(48	)
Subtotal		4,310			2,549
Less: Current maturies of long-term debt		(58	)		(756	)
Long-term debt	$	4,252		$	1,793

Schedule of Debt Conversions [Table Text Block]

April 30, 2013	$	500
July 31, 2013		1,750
September 30, 2013		2,350
October 31, 2013		700
December 31, 2013		150
January 31, 2014		295
	$	5,745

Schedule of Maturities of Long-term Debt [Table Text Block]

Year ending December 31,	Long-Term Debt
2013 October through December	$	14
2014		59
2015		566
2016		5,317
2017		26
2018 and thereafter		70
Gross long-term borrowings		6,052
Less: discounts on long-term borrowings		(1,742	)
Total commitment, net		4,310
Less: portion classified as current		(58	)
Long-term borrowings, net	$	4,252

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended			3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Term in Years [Member] Maximum [Member]	Sep. 30, 2013 Restricted Stock Units (RSUs) [Member]	Sep. 30, 2013 Restricted Stock Units (RSUs) [Member] Minimum [Member]
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (Details) [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)	14,319,000	15,283,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)	$ 249	$ 241
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 219 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in Shares)				51,219
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)				$ 0.41
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period				1 year
Standard Product Warranty Description			five years		one

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (Details) - Warranty Activity (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Warranty Activity [Abstract]
Balance at the beginning of the period	$ 150	$ 125	$ 159	$ 100
Accruals for warranties issued	7	52	46	110
Settlements made during the period (in cash or in kind)	(17)	(18)	(65)	(51)
Balance at the end of the period	$ 140	$ 159	$ 140	$ 159

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Note 10 - Segments and Geographic Information (Details) - Summary of Geographic Sales (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Note 10 - Segments and Geographic Information (Details) - Summary of Geographic Sales [Line Items]
Net Sales	$ 5,988	$ 7,904	$ 18,702	$ 20,878
United States [Member]
Note 10 - Segments and Geographic Information (Details) - Summary of Geographic Sales [Line Items]
Net Sales	5,348	6,976	16,683	18,700
International [Member]
Note 10 - Segments and Geographic Information (Details) - Summary of Geographic Sales [Line Items]
Net Sales	$ 640	$ 928	$ 2,019	$ 2,178

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Note 9 - Settlement Of Acquisition Obligations (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended	9 Months Ended	1 Months Ended				3 Months Ended
	Jun. 28, 2013	Jun. 28, 2013	Sep. 30, 2013	Jun. 28, 2013 Special Fee [Member] Stone River Companies, LLC [Member]	Jun. 28, 2013 Stone River Companies, LLC [Member] Principal [Member]	Jun. 28, 2013 Stone River Companies, LLC [Member] Accrued Interest [Member]	Jun. 28, 2013 Stone River Companies, LLC [Member]	Jun. 30, 2013 Stone River Companies, LLC [Member]
Note 9 - Settlement Of Acquisition Obligations (Details) [Line Items]
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability			$ 12	$ 500
Extinguishment of Debt, Amount					500	92		500
Business Combination, Consideration Transferred							200
Due from Related Parties	78	78
Adjustment to Contingent Consideration	66
Asset Impairment Charges		$ 325	$ 325

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Note 7 - Debt (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	9 Months Ended			0 Months Ended	9 Months Ended		3 Months Ended				9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Dec. 22, 2011	Oct. 16, 2013 Subsequent Event [Member] Unsecured Convertible Notes [Member]	Sep. 30, 2013 Termination before First Year, Percentage [Member] Termination Penalty in Percentage [Member]	Sep. 30, 2013 Termination before Second Year, Percentage [Member] Termination Penalty in Percentage [Member]	Jun. 30, 2013 Stone River Companies, LLC [Member]	Jun. 30, 2013 Unsecured Convertible Notes [Member]	Sep. 30, 2013 Unsecured Convertible Notes [Member]	Sep. 30, 2013 Convertible Debt [Member]	Sep. 30, 2013 Percentage of Receivables [Member]	Sep. 30, 2013 Percentage of Inventory, Lower of Cost or Market Value [Member]	Sep. 30, 2013 Inventory, Maximum Value in Thousands [Member]	Sep. 30, 2013 Borrowing on Accounts Receivable [Member]	Sep. 30, 2013 Borrowing on Inventories [Member]	Sep. 30, 2013 Borrowing on Overdrafts [Member]	Sep. 30, 2013 Agreement Term in Years [Member]
Note 7 - Debt (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity (in Dollars)			$ 4,500,000
Line of Credit Facility, Collateral											85%	50%	$250
Line of Credit Facility, Interest Rate Description														8.5%	10.0%	13.0%
Line of Credit Facility, Commitment Fee Percentage	1.00%
Line of Credit Facility, Description					2%	1%											three
Line of Credit Facility, Amount Outstanding (in Dollars)	836,000	1,600,000
Debt Instrument, Interest Rate, Stated Percentage										5.00%
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.23									$ 0.23
Long-term Debt, Maturities, Repayments of Principal in Year Two (in Dollars)	59,000								500,000
Long-term Debt, Maturities, Repayments of Principal in Year Three (in Dollars)	566,000								5,200,000
Debt Conversion, Converted Instrument, Amount (in Dollars)				500,000				1,000,000
Debt Conversion, Converted Instrument, Shares Issued (in Shares)				2.2				4.3
Extinguishment of Debt, Amount (in Dollars)							$ 500,000

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Restricted cash (in Dollars)	$ 0	$ 252
Trade accounts receivable, allowances (in Dollars)	$ 137	$ 265
Common stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in Shares)	100,000,000	100,000,000
Common stock, shares issued (in Shares)	49,158,886	44,698,650
Common stock, shares outstanding (in Shares)	49,158,886	44,698,650

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Note 8 - Restructuring

9 Months Ended

Sep. 30, 2013

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

NOTE 8. RESTRUCTURING

During the third quarter of 2013, the Company relocated its manufacturing operation from a contract manufacturing facility located in Mexico to its existing facilities in Pleasanton, California and Solon, Ohio. The Condensed Consolidated Statements of Operations includes $79 thousand in “Restructuring” for severance for the Mexican contract employees as required by the production share agreement, as amended, between the Company and the contract manufacturer.

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net loss	$ (1,651)	$ (928)	$ (3,758)	$ (3,695)
Foreign currency translation adjustments	31	26	(8)	37
Comprehensive loss	$ (1,620)	$ (902)	$ (3,766)	$ (3,658)

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Note 12 - Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended	3 Months Ended		9 Months Ended			1 Months Ended	45 Months Ended					1 Months Ended		3 Months Ended
	Jun. 28, 2013	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Jun. 28, 2013 Special Fee [Member] Stone River Companies, LLC [Member]	Sep. 30, 2013 Contingent Payment, Project Annual Billings, Percentage [Member]	Sep. 30, 2013 Contingent Payment, Projected Annual Billings, Period in Months [Member]	Sep. 30, 2013 Contingent Payment, Contingent Fees [Member]	Sep. 30, 2013 Not to Exceed Share Price [Member]	Sep. 30, 2013 Number of Days Stock Price Must Trade Above Ceiling to Trigger Additional Fee [Member]	Jun. 28, 2013 Stone River Companies, LLC [Member] Principal [Member]	Jun. 28, 2013 Stone River Companies, LLC [Member] Accrued Interest [Member]	Jun. 30, 2013 Stone River Companies, LLC [Member]
Note 12 - Commitments and Contingencies (Details) [Line Items]
Business Combination, Contingent Consideration Arrangements, Description								2.5%	42	$500	$2.00	twenty
Payments for (Proceeds from) Previous Acquisition		$ 0	$ 51	$ 206	$ 140
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability				12			500
Extinguishment of Debt, Amount													500	92	500
Adjustment to Contingent Consideration	66
Business Combination, Contingent Consideration, Liability						$ 728

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents, includes restricted cash of $0 and $252, respectively	$ 952	$ 1,181
Trade accounts receivable less allowances of $137 and $265, respectively	3,807	5,319
Retainage receivable	381	634
Inventories, net	2,989	2,581
Costs in excess of billings	162	99
Prepaid and other current assets	1,681	1,012
Total current assets	9,972	10,826
Property and equipment, net	1,466	1,800
Intangible assets, net	106	608
Collateralized assets	1,000	1,000
Other assets	319	119
Total assets	12,863	14,353
Current liabilities:
Accounts payable	4,854	5,879
Accrued liabilities	1,325	2,265
Deferred revenue		751
Billings in excess of costs	1,461	464
Credit line borrowings	836	1,590
Current maturities of long-term debt	58	756
Total current liabilities	8,534	11,705
Other liabilities	56	30
Long-term debt	4,252	1,793
Total liabilities	12,842	13,528
Common stock, par value $0.0001 per share:
Issued and outstanding: 49,158,886 at September 30, 2013 and 44,698,650 at December 31, 2012	5	4
Additional paid-in capital	83,946	80,985
Accumulated other comprehensive income	452	460
Accumulated deficit	(84,382)	(80,624)
Total shareholders' equity	21	825
Total liabilities and shareholders' equity	$ 12,863	$ 14,353

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Note 9 - Settlement Of Acquisition Obligations (Details) - Classification in Consolidated Statement of Operations (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Change in estimate of contingent liabilities:
Change in estimate of contingent liabilities	$ 12
Settlement of acquisition obligations:
Settlement of Acquisition Obligations	892
Forgiveness of Net Receivable Due The Company [Member]
Change in estimate of contingent liabilities:
Change in estimate of contingent liabilities	78
Adjustment to Performance-Related Contingent Obligation [Member]
Change in estimate of contingent liabilities:
Change in estimate of contingent liabilities	(66)
Special Fee [Member]
Settlement of acquisition obligations:
Settlement of Acquisition Obligations	500
Convertible Promissory Note - TLC Investments LLC [Member]
Settlement of acquisition obligations:
Settlement of Acquisition Obligations	592
Cash Payment by The Company [Member]
Settlement of acquisition obligations:
Settlement of Acquisition Obligations	$ (200)

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Note 9 - Settlement Of Acquisition Obligations (Tables)

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

Change in estimate of contingent liabilities:
Forgiveness of net receivable due the Company	$	78
Adjustment to performance-related contingent obligation		(66	)
Net line item expense	$	12
Settlement of acquisition obligations:
Forgiveness of special fee	$	500
Forgiveness of convertible promissory note, including interest		592
Payment by the Company		(200	)
Net line item income	$	892

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Basic and diluted loss per share:
Net loss	$	(1,651	)	$	(928	)	$	(3,758	)	$	(3,695	)
Basic and diluted loss per share:
Weighted average shares outstanding		49,158			44,542			46,712			40,241
Basic and diluted net loss per share	$	(0.03	)	$	(0.02	)	$	(0.08	)	$	(0.09	)

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Cost of sales	$	1	$	-	$	2	$	-
Research and development		11		7		26		19
Sales and marketing		8		6		23		20
General and administrative		33		29		98		107
Total stock-based compensation	$	53	$	42	$	149	$	146

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Nine months ended September 30,
	2013			2012
Fair value of options issued	$	0.17		$	0.15
Exercise price	$	0.25		$	0.27
Expected life of option (years)		7.2			5.6
Risk-free interest rate		1.3	%		0.8	%
Expected volatility		90.2	%		59.0	%
Dividend yield		0	%		0	%

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractural Term (in Years)
Outstanding as of December 31, 2012		2,184,583		$	2.20
Granted		1,684,500			0.25
Exercised		-			-
Cancelled/forfeited		(651,377	)		0.52
Outstanding as of September 30, 2013		3,217,706		$	1.52		7.3
Exercisable as of September 30, 2013		1,875,274		$	2.35		6.0

Schedule of Product Warranty Liability [Table Text Block]

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Balance at the beginning of the period	$	150		$	125		$	159		$	100
Accruals for warranties issued		7			52			46			110
Settlements made during the period (in cash or in kind)		(17	)		(18	)		(65	)		(51	)
Balance at the end of the period	$	140		$	159		$	140		$	159

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Note 6 - Contracts in Progress (Details) - Summary of Costs and Estimated Earnings on Contracts in Progress (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Summary of Costs and Estimated Earnings on Contracts in Progress [Abstract]
Costs incurred on uncompleted contracts	$ 11,107	$ 7,067
Estimated earnings	1,817	1,330
Total revenues	12,924	8,397
Less: billings to date	14,223	8,762
Total	(1,299)	(365)
Balance sheet classification:
Costs in excess of billings on uncompleted contracts	162	99
Billings in excess of costs on uncompleted contracts	$ (1,461)	$ (464)

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Note 10 - Segments and Geographic Information (Details) - Additional Business Unit Gross Profitability Detail for Products Segment (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Products segment net sales:
Products segment net sales	$ 5,988	$ 7,904	$ 18,702	$ 20,878
Products segment gross profit:
Products segment gross profit	1,414	1,959	4,637	4,448
Pool and Commercial Products [Member]
Products segment net sales:
Products segment net sales	2,612	4,159	8,503	11,354
Products segment cost of sales:
Products segment cost of sales	1,668	2,892	5,490	8,077
Products segment gross profit:
Products segment gross profit	944	1,267	3,013	3,277
Government Products/ Research and Development Services [Member]
Products segment net sales:
Products segment net sales	1,272	1,679	4,305	3,713
Products segment cost of sales:
Products segment cost of sales	1,018	1,381	3,389	3,441
Products segment gross profit:
Products segment gross profit	254	298	916	272
Products Segment [Member]
Products segment net sales:
Products segment net sales	3,884	5,838	12,808	15,067
Products segment cost of sales:
Products segment cost of sales	2,686	4,273	8,879	11,518
Products segment gross profit:
Products segment gross profit	$ 1,198	$ 1,565	$ 3,929	$ 3,549

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Note 4 - Property and Equipment (Details) - Property and Equipment (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Property and equipment at cost	$ 8,994	$ 9,840
Less: accumulated depreciation	(7,528)	(8,040)
Property and equipment, net	1,466	1,800
Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment at cost	5,101	5,963
Tooling [Member]
Property, Plant and Equipment [Line Items]
Property and equipment at cost	2,576	2,600
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment at cost	132	132
Software and Software Development Costs [Member]
Property, Plant and Equipment [Line Items]
Property and equipment at cost	541	462
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment at cost	633	633
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment at cost	$ 11	$ 50

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (Details) - Estimates Utilized in the Black-Scholes Option Pricing Model (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Estimates Utilized in the Black-Scholes Option Pricing Model [Abstract]
Fair value of options issued (in Dollars per share)	$ 0.17	$ 0.15
Exercise price (in Dollars per share)	$ 0.25	$ 0.27
Expected life of option (years)	7 years 73 days	5 years 219 days
Risk-free interest rate	1.30%	0.80%
Expected volatility	90.20%	59.00%
Dividend yield	0.00%	0.00%

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (Details) - Option Activity (USD $)	9 Months Ended
	Sep. 30, 2013
Option Activity [Abstract]
Outstanding as of December 31, 2012	2,184,583
Outstanding as of December 31, 2012 (in Dollars per share)	$ 2.20
Granted	1,684,500
Granted (in Dollars per share)	$ 0.25
Exercised	0
Exercised (in Dollars per share)	$ 0
Cancelled/forfeited	(651,377)
Cancelled/forfeited (in Dollars per share)	$ 0.52
Outstanding as of September 30, 2013	3,217,706
Outstanding as of September 30, 2013 (in Dollars per share)	$ 1.52
Outstanding as of September 30, 2013	7 years 109 days
Exercisable as of September 30, 2013	1,875,274
Exercisable as of September 30, 2013 (in Dollars per share)	$ 2.35
Exercisable as of September 30, 2013	6 years

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Note 7 - Debt

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 7. DEBT

Credit Facilities

On December 22, 2011, the Company entered into a $4.5 million revolving line of credit (“credit facility”) with Rosenthal & Rosenthal. The total loan amount available to the Company under the line of credit is equal to 85% of its net amount of eligible receivables, plus available inventory (the lesser of 50% of the lower of cost or market value of eligible inventory, or $250 thousand). The credit facility is secured by a lien on the domestic assets of the Company. The interest rate for borrowing on accounts receivable is 8.5%, on inventories 10.0% and on overdrafts 13.0%. Additionally, there is an annual 1% facility fee on the entire amount of the credit facility payable at the beginning of the year. The credit facility is a three year agreement, expiring on December 31, 2014, unless terminated sooner. There are liquidated damages if the credit facility is terminated prior to December 31, 2014, which are based on the maximum credit facility amount then in effect. The damages are: 2% if terminated prior to December 31, 2013, and 1% if terminated prior to December 31, 2014. The Company is required to comply with certain financial covenants, measured quarterly, including, as defined in the agreement: a tangible net worth amount and a working capital amount. The Company was in compliance with the financial covenants at September 30, 2013. Borrowings under the revolving line of credit were $836 thousand at September 30, 2013, and $1.6 million at December 31, 2012, and are recorded in the Company’s Condensed Consolidated Balance Sheets as a current liability under the caption “Credit line borrowings.”

Borrowings

The components of the Company’s debt at September 30, 2013 and December 31, 2012 were as follows (in thousands):

	September 30, 2013			December 31, 2012
Unsecured Convertible Notes	$	5,745		$	1,500
Convertible Promissory Note - TLC Investments LLC		-			500
Cognovit Note - Keystone Ruby, LLC		237			277
Letter of Credit Agreement - Mark Plush		-			250
Unsecured Promissory Note - Quercus Trust		70			70
Discounts on long-term borrowings		(1,742	)		(48	)
Subtotal		4,310			2,549
Less: Current maturies of long-term debt		(58	)		(756	)
Long-term debt	$	4,252		$	1,793

The unsecured convertible debt has a five percent annual interest rate, and is convertible into common stock of the Company at the rate of $0.23 per share as follows (in thousands):

April 30, 2013	$	500
July 31, 2013		1,750
September 30, 2013		2,350
October 31, 2013		700
December 31, 2013		150
January 31, 2014		295
	$	5,745

$500 thousand of the convertible debt matures on December 31, 2015 and the remaining $5.2 million matures on December 31, 2016. During the second quarter, $1 million of the debt was converted into 4.3 million shares of Common Stock of the Company. Additionally, effective October 16, 2013, an additional $500 thousand of the debt was converted into 2.2 million shares of Common Stock of the Company.

As a provision of the settlement agreement between the Company and the former owners of SRC, the Company’s obligation to pay a $500 thousand convertible promissory note was cancelled in its entirety during the second quarter of 2013. See Note 9, Settlement of Acquisition Obligations.

On July 3, 2013, the Letter of Credit Agreement with Mark Plush was paid in full. See Note 13, Related Party Transactions.

For a full description of the Company’s debt financing, reference is made to Note 8, Debt, of the Company’s 2012 Annual Report on Form 10-K.

Future maturities of remaining borrowings are (in thousands):

Year ending December 31,	Long-Term Debt
2013 October through December	$	14
2014		59
2015		566
2016		5,317
2017		26
2018 and thereafter		70
Gross long-term borrowings		6,052
Less: discounts on long-term borrowings		(1,742	)
Total commitment, net		4,310
Less: portion classified as current		(58	)
Long-term borrowings, net	$	4,252

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Note 10 - Segments and Geographic Information (Tables)

9 Months Ended

Sep. 30, 2013

Note 10 - Segments and Geographic Information (Tables) [Line Items]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Solutions:
Net sales	$	2,104		$	2,066		$	5,894		$	5,811
Cost of sales		1,888			1,672			5,186			4,912
Gross profit		216			394			708			899
Operating expenses:
Sales and marketing		397			320			934			1,004
General and administrative		115			244			526			558
Loss on impairment		-			-			325			-
Total operating expenses		512			564			1,785			1,562
Segment loss	$	(296	)	$	(170	)	$	(1,077	)	$	(663	)
Products:
Net sales	$	3,884		$	5,838		$	12,808		$	15,067
Cost of sales		2,686			4,273			8,879			11,518
Gross profit		1,198			1,565			3,929			3,549
Operating expenses:
Research and development		57			102			266			87
Sales and marketing		821			957			2,616			2,708
General and administrative		106			119			307			261
Restructuring expense		79			-			79			-
Total operating expenses		1,063			1,178			3,268			3,056
Segment income	$	135		$	387		$	661		$	493
Reconciliation of segment income (loss) to net loss:
Segment (loss) income:
Solutions	$	(296	)	$	(170	)	$	(1,077	)	$	(663	)
Products		135			387			661			493
Total segment (loss) income		(161	)		217			(416	)		(170	)
Operating expenses:
Sales and marketing		332			146			801			372
General and administrative		964			848			2,691			2,660
Change in estimate of contingent liabilities		-			-			12			-
Total operating expenses		1,296			994			3,504			3,032
Other (expense) income		(192	)		(149	)		168			(485	)
Loss before income taxes		(1,649	)		(926	)		(3,752	)		(3,687	)
Provision for income taxes		(2	)		(2	)		(6	)		(8	)
Net loss	$	(1,651	)	$	(928	)	$	(3,758	)	$	(3,695	)

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
United States	$	5,348	$	6,976	$	16,683	$	18,700
International		640		928		2,019		2,178
Net sales	$	5,988	$	7,904	$	18,702	$	20,878

Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country [Table Text Block]

	September 30, 2013		December 31, 2012
United States	$	1,533	$	2,350
International		39		58
Long-lived assets, net	$	1,572	$	2,408

Products Segment [Member]

Note 10 - Segments and Geographic Information (Tables) [Line Items]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Products segment net sales:
Pool and commercial products	$	2,612	$	4,159	$	8,503	$	11,354
Government products/R&D services		1,272		1,679		4,305		3,713
Total products segment net sales		3,884		5,838		12,808		15,067
Products segment cost of sales:
Pool and commercial products		1,668		2,892		5,490		8,077
Government products/R&D services		1,018		1,381		3,389		3,441
Total products segment cost of sales		2,686		4,273		8,879		11,518
Products segment gross profit:
Pool and commercial products		944		1,267		3,013		3,277
Government products/R&D services		254		298		916		272
Total products segment gross profit	$	1,198	$	1,565	$	3,929	$	3,549

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Note 5 - Intangible Assets (Details) - Summary of Net Carrying Value of Intangible Assets (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Definite-lived intangible assets:
Finite-Lived Intangible Assets	$ 106	$ 608
Total intangible assets, net	106	608
Trade Names [Member]
Definite-lived intangible assets:
Amortization Life (in years)	10 years
Finite-Lived Intangible Assets	0	350
Customer Relationships [Member]
Definite-lived intangible assets:
Amortization Life (in years)	5 years
Finite-Lived Intangible Assets	$ 106	$ 258

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Note 10 - Segments and Geographic Information

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

NOTE 10. SEGMENTS AND GEOGRAPHIC INFORMATION

The Company has two reportable segments: products segment featuring pool lighting, general commercial and industrial lighting, government products, and research and development services, each of which markets and sells energy-efficient lighting systems; and solutions segment providing turnkey, high-quality, energy-efficient lighting application alternatives. The Company’s products are sold through a combination of direct sales employees, independent sales representatives and distributors in different geographic markets throughout the world. The Company’s solutions sales are designed to enhance total value by positively impacting customers’ profitability, the environment, and the communities it serves. These solutions are sold through the Company’s direct sales employees, as well as our SRC subsidiary, and include not only its proprietary energy-efficient lighting solutions, but also sourced lighting systems, energy audits and service agreements.

The following summarizes the Company’s reportable segment data for periods indicated (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Solutions:
Net sales	$	2,104		$	2,066		$	5,894		$	5,811
Cost of sales		1,888			1,672			5,186			4,912
Gross profit		216			394			708			899
Operating expenses:
Sales and marketing		397			320			934			1,004
General and administrative		115			244			526			558
Loss on impairment		-			-			325			-
Total operating expenses		512			564			1,785			1,562
Segment loss	$	(296	)	$	(170	)	$	(1,077	)	$	(663	)
Products:
Net sales	$	3,884		$	5,838		$	12,808		$	15,067
Cost of sales		2,686			4,273			8,879			11,518
Gross profit		1,198			1,565			3,929			3,549
Operating expenses:
Research and development		57			102			266			87
Sales and marketing		821			957			2,616			2,708
General and administrative		106			119			307			261
Restructuring expense		79			-			79			-
Total operating expenses		1,063			1,178			3,268			3,056
Segment income	$	135		$	387		$	661		$	493
Reconciliation of segment income (loss) to net loss:
Segment (loss) income:
Solutions	$	(296	)	$	(170	)	$	(1,077	)	$	(663	)
Products		135			387			661			493
Total segment (loss) income		(161	)		217			(416	)		(170	)
Operating expenses:
Sales and marketing		332			146			801			372
General and administrative		964			848			2,691			2,660
Change in estimate of contingent liabilities		-			-			12			-
Total operating expenses		1,296			994			3,504			3,032
Other (expense) income		(192	)		(149	)		168			(485	)
Loss before income taxes		(1,649	)		(926	)		(3,752	)		(3,687	)
Provision for income taxes		(2	)		(2	)		(6	)		(8	)
Net loss	$	(1,651	)	$	(928	)	$	(3,758	)	$	(3,695	)

The following table provides additional business unit gross profitability detail for the Company’s products segment for the periods indicated (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Products segment net sales:
Pool and commercial products	$	2,612	$	4,159	$	8,503	$	11,354
Government products/R&D services		1,272		1,679		4,305		3,713
Total products segment net sales		3,884		5,838		12,808		15,067
Products segment cost of sales:
Pool and commercial products		1,668		2,892		5,490		8,077
Government products/R&D services		1,018		1,381		3,389		3,441
Total products segment cost of sales		2,686		4,273		8,879		11,518
Products segment gross profit:
Pool and commercial products		944		1,267		3,013		3,277
Government products/R&D services		254		298		916		272
Total products segment gross profit	$	1,198	$	1,565	$	3,929	$	3,549

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

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
United States	$	5,348	$	6,976	$	16,683	$	18,700
International		640		928		2,019		2,178
Net sales	$	5,988	$	7,904	$	18,702	$	20,878

A geographic summary of long-lived assets, which consists of fixed assets and intangible assets, is as follows (in thousands):

	September 30, 2013		December 31, 2012
United States	$	1,533	$	2,350
International		39		58
Long-lived assets, net	$	1,572	$	2,408

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Note 6 - Contracts in Progress

9 Months Ended

Sep. 30, 2013

Contracts In Progress [Abstract]

Contracts In Progress [Text Block]

NOTE 6. CONTRACTS IN PROGRESS

Costs and estimated earnings on contracts in progress as of the periods indicated are summarized in the following table (in thousands):

	September 30, 2013			December 31, 2012
Costs incurred on uncompleted contracts	$	11,107		$	7,067
Estimated earnings		1,817			1,330
Total revenues		12,924			8,397
Less: billings to date		14,223			8,762
Total	$	(1,299	)	$	(365	)
Balance sheet classification:
Costs in excess of billings on uncompleted contracts	$	162		$	99
Billings in excess of costs on uncompleted contracts		(1,461	)		(464	)
Total	$	(1,299	)	$	(365	)

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Note 1 - Nature of Operations

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Nature of Operations [Text Block]

NOTE 1. NATURE OF OPERATIONS

Energy Focus, Inc. and its subsidiaries (the “Company”) engage in the design, development, manufacturing, marketing, and installation of energy-efficient lighting systems and solutions where the Company serves two segments:

● solutions segment providing turnkey, high-quality, energy-efficient lighting application alternatives primarily to the existing public-sector building market; and

● products segment providing military, general commercial and industrial lighting and pool lighting offerings, each of which markets and sells energy-efficient lighting systems.

The Company continues to evolve its business strategy to include providing its customers with turnkey, comprehensive energy-efficient lighting solutions, which use, but are not limited to, its patented and proprietary technology. The Company’s products segment includes light-emitting diode (“LED”), fiber optic, high-intensity discharge (“HID”), fluorescent tube and other highly energy-efficient lighting technologies. Typical savings related to current technology of the Company approximates 80% in electricity costs, while providing full-spectrum light closely simulating daylight colors. The Company’s strategy also incorporates continued investment into the research of new and emerging energy sources including LED and solar energy applications.

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Note 10 - Segments and Geographic Information (Details)	9 Months Ended
	Sep. 30, 2013
Segment Reporting [Abstract]
Number of Reportable Segments	2

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Note 7 - Debt (Details) - Convertible Debt Schedule of Conversion Dates (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013
Debt Conversion [Line Items]
Convertible Debt	$ 5,745
Convertible at April 30, 2013 [Member]
Debt Conversion [Line Items]
Convertible Debt	500
Convertible at July 31, 2013 [Member]
Debt Conversion [Line Items]
Convertible Debt	1,750
Convertible at September 30, 2013 [Member]
Debt Conversion [Line Items]
Convertible Debt	2,350
Convertible at October 31, 2013 [Member]
Debt Conversion [Line Items]
Convertible Debt	700
Convertible at December 31, 2013 [Member]
Debt Conversion [Line Items]
Convertible Debt	150
Convertible at January 31, 2014 [Member]
Debt Conversion [Line Items]
Convertible Debt	$ 295

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Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (Details) - Reconciliation of Basic and Diluted Loss per Share (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Reconciliation of Basic and Diluted Loss per Share [Abstract]
Net loss (in Dollars)	$ (1,651)	$ (928)	$ (3,758)	$ (3,695)
Weighted average shares outstanding	49,158	44,542	46,712	40,241
Basic and diluted net loss per share (in Dollars per share)	$ (0.03)	$ (0.02)	$ (0.08)	$ (0.09)

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Note 13 - Related Party Transactions (Details) (USD $) In Thousands, unless otherwise specified	0 Months Ended	9 Months Ended	1 Months Ended	9 Months Ended		9 Months Ended
	Feb. 27, 2012 Payment [Member] Communal [Member]	Sep. 30, 2013 Payment [Member] Communal [Member]	Jan. 31, 2013 Additional Commited Payment [Member] Communal [Member]	Sep. 30, 2013 5 Elements Efficienties (BVI) Ltd [Member]	Aug. 11, 2011 Chief Financial Officer [Member]	Sep. 30, 2013 Communal [Member]
Note 13 - Related Party Transactions (Details) [Line Items]
Letters of Credit Outstanding, Amount					$ 250
Limited Liability Company (LLC) or Limited Partnership (LP), Managing Member or General Partner, Ownership Interest				50.00%
Related Party Transaction, Amounts of Transaction	523	262	425
Related Party Transaction, Expenses from Transactions with Related Party						$ 169

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Note 13 - Related Party Transactions

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 13. RELATED PARTY TRANSACTIONS

On August 11, 2011, the Company entered into a Letter of Credit Agreement (“LOC”) with Mark Plush, its former Chief Financial Officer, in the amount of $250 thousand. Effective July 8, 2013, Mr. Plush stepped down from his role and left the Company. For a full description of the terms of the LOC, reference is made to Note 10, Debt, of the Company’s 2012 Annual Report on Form 10-K. On July 3, 2013, the LOC was paid in full.

On December 12, 2012, the Board of Directors of the Company appointed James Tu to serve as its non-executive Chairman, and on April 30, 2013, Mr. Tu became the Executive Chairman assuming the duties of the Company’s Principal Executive Officer. Mr. Tu is also the Founder, Chief Executive Officer and Chief Investment Officer of 5 Elements Global Advisors, an investment advisory and management company managing the holdings of 5 Elements Global Fund LP, and 5 Elements Energy Efficiencies Ltd, a beneficial owner of more than ten percent (10%) of the Company’s Common Stock. 5 Elements Global Advisors focuses on investing in clean energy companies with breakthrough, commercialized technologies and near-term profitability potential. Mr. Tu is also Co-Founder and Managing Partner of Communal International Ltd. “(Communal”), a British Virgin Islands Company dedicated to assisting clean energy solutions companies maximize their technology and product potential and gain access to global marketing, distribution licensing, manufacturing and financing resources. Communal has a fifty percent (50%) ownership interest in 5 Elements Efficiencies (BVI) Ltd.

On February 27, 2012, the Company entered into an Asian Business Development/Collaboration Agreement with Communal International Ltd. The agreement had a 60 month term, under which the Company paid $523 thousand to Communal. Additionally, during the term of the agreement, the Company will pay Communal a five percent (5%) commission on the Company’s net sales which occur within the Territory, as defined by the agreement. The Company has incurred no commissions due under this agreement through September 30, 2013.

Effective on January 1, 2013, the Asian Business Development/Collaboration Agreement with Communal was amended to reflect the extension of the terms of the agreement for an additional 12 months, and the addition of certain services and countries in the territory covered by the agreement. In connection with the amended and restated agreement, the Company agreed to pay an additional $425 thousand through December 2013. After December 31, 2013, the Company may terminate the agreement upon 30 days written notice. The Company paid $262 thousand related to this agreement during the first nine months of 2013, and recorded expense of $169 thousand during the first nine months 2013.

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Note 9 - Settlement Of Acquisition Obligations

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

NOTE 9. SETTLEMENT OF ACQUISITION OBLIGATIONS

On June 28, 2013, the Company entered into a Settlement Agreement with SRC, TLC Investments, LLC, Jamie Hall and Robert E. Wilson, terminating the Membership Interest Purchase Agreement and related agreements that the parties had entered into at the end of December 2009 in connection with the Company’s acquisition of SRC. As part of the Settlement Agreement, the Company’s obligation to pay a $500 thousand special fee and a $500 thousand convertible promissory note including interest of $92 thousand were cancelled in their entirety in exchange for a $200 thousand payment and the forgiveness of a net receivable due to the Company of $78 thousand. Additionally, the Company recognized a $66 thousand favorable adjustment related to the change in the estimate of a performance-related contingent obligation for a 2.5% payout based upon the fair value of projected annual billings of SRC. See Note 12, Commitments and Contingencies.

The classification of these items in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2013 is shown below (in thousands):

Change in estimate of contingent liabilities:
Forgiveness of net receivable due the Company	$	78
Adjustment to performance-related contingent obligation		(66	)
Net line item expense	$	12
Settlement of acquisition obligations:
Forgiveness of special fee	$	500
Forgiveness of convertible promissory note, including interest		592
Payment by the Company		(200	)
Net line item income	$	892

As a provision of the Settlement Agreement, the Company agreed to discontinue using the name Stones River Companies by July 1, 2014. As a result of this provision, the Company wrote off the remaining $325 thousand of the intangible asset for the Tradename during the second quarter of 2013. See Note 5, Intangible Assets.

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Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The financial statements include the accounts of the Company and its subsidiaries, Stones River Companies, LLC (“SRC”) doing business as Energy Focus LED Solutions in Nashville, Tennessee, and Crescent Lighting Limited (“CLL”) located in the United Kingdom. All significant inter-company balances and transactions have been eliminated.

We have prepared the accompanying financial data for the three and nine months ended September 30, 2013 and 2012 pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. have been condensed or omitted pursuant to such rules and regulations. The accompanying financial data and information should be read in conjunction with our 2012 Annual Report on Form 10-K.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly our Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012, and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012.

The preparation of condensed consolidated financial statements in accordance with GAAP in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated 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 the company in the future, actual results may be different from the estimates. Estimates include, but are not limited to, the establishment of reserves for accounts receivable, sales returns, inventory obsolescence and warranty claims; the useful lives for property, equipment, and intangible assets; revenues recognized on a percentage-of-completion basis; and stock-based compensation. In addition, estimates and assumptions associated with the evaluation of long-lived assets for impairment requires considerable judgment. Actual results could differ from those estimates and such differences could be material.

The Company’s independent registered public accounting firm has issued an opinion in connection with the Company’s 2012 Annual Report on Form 10-K raising substantial doubt about the Company’s ability to continue as a going concern. The interim financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The interim financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern.

New Accounting Pronouncements, Policy [Policy Text Block]

Update to Significant Accounting Policies

There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Earnings Per Share, Policy [Policy Text Block]

Earnings (Loss) per Share

Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares upon exercise of stock options, warrants, and conversion of convertible subordinated promissory notes unless the effect would be anti-dilutive.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

The Company’s stock-based compensation plan is described in detail in its 2012 Annual Report on Form 10-K.

Standard Product Warranty, Policy [Policy Text Block]

Warranties

The Company warrants finished goods against defects in material and workmanship under normal use and service for periods generally between one and five years for products and labor. Settlement costs consist of actual amounts expensed for warranty services which are largely a result of third-party service calls and the costs of replacement products. A liability for the estimated future costs under product warranties is maintained for products outstanding under warranty and is included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

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Note 14 - Shareholders Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 14. SHAREHOLDERS EQUITY

During the first nine months of 2013, the Company entered into unsecured convertible notes totaling $5.2 million. The notes are convertible into shares of Common Stock of the Company at $.23 per share at various dates beginning on July 31, 2013. See Note 7, Debt. The fair market value of the Company’s Common Stock ranged from $0.21 per share to $0.42 per share during the period the note agreements were consummated. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic Number 420, Debt, $1.8 million was recorded as a discount on these notes under the captions “Long-term debt” and “Additional paid-in capital” in its Condensed Consolidated Balance Sheets at September 30, 2013. The discount will be amortized over the term of the applicable notes through December 31, 2016 unless the notes are converted prior to maturity.

During the second quarter of 2013, an unsecured convertible noted entered into in December 2012 for $1 million was converted into 4.3 million shares of Common Stock of the Company. Additionally, effective October 16, 2013, an additional $500 thousand of the debt was converted into 2.2 million shares of Common Stock of the Company.

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Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 08, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	ENERGY FOCUS, INC/DE
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		51,352,799
Amendment Flag	false
Entity Central Index Key	0000924168
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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Note 15 - Subesquent Event

9 Months Ended

Sep. 30, 2013

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 15. SUBSEQUENT EVENT

On November 13, 2013, the Company announced that it was in negotiations to sell its “Fiberstars” brand pool product lines. The sale is subject to the successful negotiation of terms satisfactory to both parties, completion of the potential buyer’s due diligence review, lender consent, entry into a definitive agreement and other conditions. There is no current binding obligation on either party and, accordingly, Energy Focus makes no assurance that the negotiations will lead to a transaction.

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Note 14 - Shareholders Equity (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified			0 Months Ended	3 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Oct. 16, 2013 Subsequent Event [Member] Unsecured Convertible Notes [Member]	Jun. 30, 2013 Unsecured Convertible Notes [Member]	Sep. 30, 2013 Unsecured Convertible Notes [Member]	Sep. 30, 2013 Minimum [Member]	Sep. 30, 2013 Maximum [Member]
Note 14 - Shareholders Equity (Details) [Line Items]
Debt Instrument, Face Amount					$ 5,200,000
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.23
Share Price (in Dollars per share)						$ 0.21	$ 0.42
Debt Instrument, Unamortized Discount	1,742,000	48,000			1,800,000
Debt Conversion, Converted Instrument, Amount			$ 500,000	$ 1,000,000
Debt Conversion, Converted Instrument, Shares Issued (in Shares)			2.2	4.3