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<SEC-DOCUMENT>0000950123-09-034678.txt : 20090813
<SEC-HEADER>0000950123-09-034678.hdr.sgml : 20090813
<ACCEPTANCE-DATETIME>20090813161701
ACCESSION NUMBER:		0000950123-09-034678
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		9
CONFORMED PERIOD OF REPORT:	20090630
FILED AS OF DATE:		20090813
DATE AS OF CHANGE:		20090813

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ENERGY FOCUS, INC/DE
		CENTRAL INDEX KEY:			0000924168
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRIC LIGHTING & WIRING EQUIPMENT [3640]
		IRS NUMBER:				943021850
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24230
		FILM NUMBER:		091010724

	BUSINESS ADDRESS:	
		STREET 1:		32000 AURORA ROAD
		CITY:			SOLON
		STATE:			OH
		ZIP:			44139
		BUSINESS PHONE:		5104900719

	MAIL ADDRESS:	
		STREET 1:		32000 AURORA ROAD
		CITY:			SOLON
		STATE:			OH
		ZIP:			44139

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FIBERSTARS INC /CA/
		DATE OF NAME CHANGE:	19940527
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>l37333e10vq.htm
<DESCRIPTION>10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>






<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, DC 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>Form&nbsp;10-Q</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
AND EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the quarterly period ended June&nbsp;30, 2009</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the transition period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number 0-24230</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>ENERGY FOCUS, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>

<DIV align="center" style="font-size: 10pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B><BR>
(State or other jurisdiction of incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>94-3021850</B><BR>
(I.R.S. Employer Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>32000 Aurora Rd., Solon, OH</B><BR>
(Address of principal executive offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>44139</B><BR>
(Zip Code)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">(Registrant&#146;s telephone number, including area code): <B>(440)&nbsp;715-1300</B></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days. Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</DIV>

 <DIV align="left" style="font-size: 10pt; margin-top: 6pt">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&nbsp;405 of Regulation&nbsp;S-T during the preceding 12&nbsp;months (or for such shorter period that the registrant was required to submit and post such files).
Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;No&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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 definitions of &#147;large accelerated
filer&#148;, &#147;accelerated filer&#148;, and &#147;smaller reporting company&#148; in Rule&nbsp;12b-2 of the Exchange Act.
</DIV>


<TABLE width="100%" style="font-size: 10pt; margin-top: -6pt"><TR>
<TD>Large accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT></TD>
<TD align="center">Accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;</TD>
<TD align="center"><br>Non-accelerated filer&nbsp;<FONT face="Wingdings">&#254;</FONT><BR>(do not check if a smaller reporting company)</TD>
<TD align="right">Smaller reporting company&nbsp;<FONT face="Wingdings">&#111;</FONT></TD></TR></TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Exchange Act). Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The number of outstanding shares of the registrants&#146; Common Stock, $0.0001 par value, as of July
31, 2009 was 15,078,979.
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>







<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">









<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="5" valign="top" align="center"><BR><B>PART I &#151; FINANCIAL INFORMATION</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#102">Item 1.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Financial Statements:</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">a. Condensed Consolidated Balance Sheets at June&nbsp;30, 2009 (unaudited)&nbsp;and December&nbsp;31, 2008</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">b. Condensed Consolidated Statements of Operations for the Three Months and Six Months
Ended June&nbsp;30, 2009 and 2008 (unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">4</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">c. Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months
and Six Months Ended June&nbsp;30, 2009 and 2008 (unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">5</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">d. Condensed Consolidated Statements of Cash Flows for the Six Months Ended June&nbsp;30, 2009
and 2008, (unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">e. Notes to Condensed Consolidated Financial Statements (unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">7</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#108">Item 2.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">15</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#109">Item 3.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Quantitative and Qualitative Disclosures About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">20</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#110">Item 4.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">20</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" valign="top" align="center"><A href="#111"><B>PART II &#151; OTHER INFORMATION</B><BR></A></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#112">Item 1.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">21</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#113">Item 1A.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">21</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#114">Item 4.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Submission of Matters to a Vote of Security Holders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">21</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><A href="#115">Item 6.</A></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">21</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Signatures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">22</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">Exhibit&nbsp;Index</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">23</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l37333exv10w1.htm">EX-10.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l37333exv10w2.htm">EX-10.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l37333exv10w3.htm">EX-10.3</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l37333exv31w1.htm">EX-31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l37333exv31w2.htm">EX-31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l37333exv32w1.htm">EX-32.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l37333exv32w2.htm">EX-32.2</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. </B><U><B>Financial Statements</B></U>
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
CONDENSED<BR>
CONSOLIDATED BALANCE SHEETS</B><BR>
<B><I>(amounts in thousands, except per share amounts)</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,568</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable trade, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,668</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,414</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,096</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23,652</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,767</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,621</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Credit line borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of long-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,537</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other deferred liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Preferred stock, par value $0.0001 per share:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Authorized: 2,000,000 shares in 2009 and 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issued and outstanding: no shares in 2009 and 2008</DIV></TD>
   <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Common stock, par value $0.0001 per share:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Authorized: 30,000,000 shares in 2009 and 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issued and outstanding: 15,079,000 in 2009 and 14,835,000 in 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,865</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54,718</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49,328</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,789</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23,652</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="104"></A>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
CONDENSED<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS</B><BR>
<B><I>(amounts in thousands, except per share amounts)</I></B><BR>
<B>(unaudited)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Six months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,766</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,687</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales and marketing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,690</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,552</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on impairment of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,471</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,643</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,487</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,048</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,599</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,390</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,008</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,639</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,390</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,088</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss per share &#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.38</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares used in computing net loss per share &#151;
basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,521</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these financial statements.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
CONDENSED<BR>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)</B><BR>
<B><I>(amounts in thousands)</I></B><BR>
<B>(unaudited)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Six months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,639</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,390</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,088</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,187</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,632</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,272</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,922</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
CONDENSED<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS</B><BR>
<B><I>(amounts in thousands)</I></B><BR>
<B>(unaudited)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Six months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,390</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,088</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net loss to net
cash used in operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on impairment of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">621</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Provision for doubtful accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(98</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(266</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(583</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prepaid and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,563</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(465</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,030</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash used in operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,702</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,058</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(298</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash
provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(298</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash proceeds from issuances of common stock, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,335</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash proceeds from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from credit line borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,968</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments of credit line borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,813</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from long-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments of short and long-term bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(288</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(358</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash (used in) provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(331</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,262</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net (decrease)&nbsp;increase in cash and cash equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,955</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,837</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents, beginning of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents, end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,249</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
June&nbsp;30, 2009<BR>
(Unaudited)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1. Nature of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Energy Focus, Inc. and subsidiaries (&#147;the company&#148;) design, develop, manufacture, and market
lighting systems and customer specific energy efficient lighting solutions for a wide-range of use
in both the general commercial market and the pool market. The company&#146;s lighting technology
offers significant energy savings, heat dissipation, and maintenance cost benefits over
conventional lighting for multiple applications. The company&#146;s solutions include fiber optic
(&#147;EFO&#148;), light-emitting diode (&#147;LED&#148;), ceramic metal halide (&#147;CMH&#148;), high-intensity discharge
(&#147;HID&#148;), and other highly energy efficient lighting technologies. The company&#146;s strategy also
incorporates continued investment into researching new and emerging energy sources including, but
not limited to, solar energy for both the public and private sectors. Typical savings of current
technology average 80% in electricity costs, while providing full-spectrum light closely simulating
daylight colours.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Summary of Significant Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The significant accounting policies of the company, which are summarized below, are consistent with
generally accepted accounting principles and reflect practices appropriate to the business in which
it operates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Use of Estimates</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period.
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; and stock-based compensation. Actual results could differ from
those estimates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Reclassifications</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain prior year amounts have been reclassified to be consistent with the current year
presentation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Basis of Presentation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements (&#147;financial statements&#148;) include the accounts of the company
and its subsidiaries, Crescent Lighting Limited (&#147;CLL&#148;) located in the United Kingdom and LBM
Lichtleit-Fasertechnik (&#147;LBM&#148;) located in Germany. All significant inter-company balances and
transactions have been eliminated.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Interim Financial Statements (unaudited)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Although unaudited, the interim financial statements in this report reflect all adjustments,
consisting only of all normal recurring adjustments, which are, in the opinion of management,
necessary for a fair statement of financial position, results of operations and cash flows for the
interim periods covered and of the financial condition of the company at the interim balance sheet
date. The results of operations for the interim periods presented are not necessarily indicative
of the results expected for the entire year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Year-end Balance Sheet</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The year-end balance sheet information was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting principles. These financial
statements should be read in conjunction with the company&#146;s audited financial statements and notes
thereto for the year ended December&nbsp;31, 2008, which are contained in the company&#146;s 2008 Annual
Report on Form 10-K.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
June&nbsp;30, 2009<BR>
(Unaudited)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Foreign Currency Translation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company&#146;s international subsidiaries use their local currencies as their functional currencies.
For those subsidiaries, assets and liabilities are translated at exchange rates in effect at the
balance sheet date and income and expense accounts are translated at average exchange rates during
the year. Resulting translation adjustments are recorded directly to accumulated comprehensive
income as a component of shareholders&#146; equity. Foreign currency transaction gains and losses are
included as a component of other income and expense. Gains and losses from foreign currency
translation are included as a separate component of comprehensive income (expense)&nbsp;within the
consolidated statement of comprehensive income (loss).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Liquidity</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company has continued to incur losses which have been attributable to operational performance,
restructuring, and miscellaneous non-cash charges. This trend has, in turn, led to negative cash
flows and ongoing bank debt compliance violations. The company has managed its liquidity during
this period through a series of previously announced cost reduction initiatives, bank debt
restructuring, and certain asset disposals. However, the ongoing global financial crisis has
continued to have a dramatic effect on the company&#146;s industry and customer base. Further, the
ongoing recession in the United States and Western Europe, combined with the slowdown of economic
growth in the rest of the world, continues to foster a business environment where it is extremely
difficult and costly to obtain either equity or non-equity financing. This environment has also
increased the potential for customer payment defaults. The company&#146;s liquidity position, as well
as its operating performance, has been negatively affected by these economic and industry
conditions and by other financial and business factors, many of which are beyond its control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management acknowledges that the level of negative cash utilization experienced during the six
months ended June&nbsp;30, 2009, if sustained, could result in the insolvency of the company in 2009
without the infusion of additional equity or non-equity financing. Therefore, the company is
aggressively pursuing all of the following sources for working capital funding:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain loans from various financial institutions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain loans from one or more non-traditional investment capital organizations,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sale and/or disposition of one or more operating units, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain funding from the sale of the company&#146;s common stock or other equity instruments.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Obtaining financing through the above mentioned mechanisms contain risks, including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 our Board of Directors,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the current global economic crisis combined with our current financial condition may
prevent us from being able to obtain any debt financing,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>financing may not be available for parties interested in pursuing the acquisition of one
or more of our operating units, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>additional equity financing may not be available to us in the current economic
environment and could lead to further dilution of shareholder value for current
shareholders of record.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company continues to aggressively reduce costs, as evidenced in the $2,296,000 decrease in
operating expenses, net of a non-cash loss on impairment of fixed assets of $165,000, for the six
months ended June&nbsp;30, 2009, as compared to the six months ended June&nbsp;30, 2008. The company&#146;s
cash utilization was $1,187,000 for the three months ended June&nbsp;30, 2009; a 54.2% decrease compared
to the cash utilization for the three months ended June&nbsp;30, 2008 of $2,589,000. Management
continues to execute further cost reductions and organizational realignments in an effort to
sustain the company&#146;s ongoing viability throughout the remainder of 2009.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Earnings (Loss) per Share</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Basic loss per share is computed by dividing net loss available to common shareholders by the
weighted average of common shares outstanding for the period. Diluted loss per share is computed
giving effect to all dilutive potential common shares outstanding during the period. Dilutive
potential common shares consist of incremental shares upon exercise of stock options and warrants,
unless the effect would be anti-dilutive.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
June&nbsp;30, 2009<BR>
(Unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A reconciliation of the numerator and denominator of basic and diluted loss per share is provided
as follows (in thousands, except per share amounts):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Six months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Numerator &#151; basic and diluted loss per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,639</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,390</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,088</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator &#151; basic and diluted loss per
share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,521</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted net loss per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.38</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At June&nbsp;30, 2009, options and warrants to purchase 5,734,000 shares of common stock were
outstanding, but were not included in the calculation of diluted net loss per share because their
inclusion would have been anti-dilutive. Options and warrants to purchase 5,106,000 shares of
common stock were outstanding at June&nbsp;30, 2008, but were not included in the calculation of diluted
net loss per share because their inclusion would have been anti-dilutive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Stock-Based Compensation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company&#146;s stock-based compensation plans are described in detail in its Annual Report on Form
10-K for the year ended December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three and six months ended June&nbsp;30, 2009, the company recorded compensation expense of
$168,000 and $364,000, respectively, compared to $214,000 and $433,000 for the three and six months
ended June&nbsp;30, 2008. Total unearned compensation of $1,152,000 remains at June&nbsp;30, 2009 compared
to $1,363,000 at June&nbsp;30, 2008. These costs will be charged to expense, amortized on a straight
line basis, in future periods through 2013. The remaining weighted average life of the outstanding
options is approximately 1.8&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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 option,
risk-free interest rate, and volatility, and are further comparatively detailed below. During the
six months ended June&nbsp;30, 2009, the company granted 465,000 stock options compared to the 225,000
granted during the six months ended June&nbsp;30, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of each option grant and stock purchase plan grant combined is estimated on the date
of grant using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in the six months ended June&nbsp;30, 2009 and 2008:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Six months ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR>
<TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of options issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life of option</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4.0 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4.0 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.70</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.83</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">84.05</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">66.40</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
June&nbsp;30, 2009<BR>
(Unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;29, 2009, the company&#146;s five senior executive officers agreed to accept voluntary salary
reductions for the remainder of the 2009 calendar year in exchange for the issuance of restricted
shares of common stock as authorized under the company&#146;s 2008 Stock Incentive Plan. Two other key
executives of the company also accepted salary reductions for the balance of the year in exchange
for restricted shares. Each officer and key executive voluntarily accepted a ten percent (&#147;10%&#148;)
salary reduction for the remainder of 2009, except for one officer who voluntarily accepted a forty
percent (&#147;40%&#148;) decrease for the remainder of 2009. The number of restricted shares of common
stock issued to each officer and executive was equal to the dollar value of the individual&#146;s salary
reduction divided by the closing price per share of the company&#146;s common stock on May&nbsp;29, 2009.
The total number of restricted shares of common stock issued to these officers and executives was
209,000. The company reserves the right to extend these salary reductions into the 2010 calendar
year and beyond.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;29, 2009, two members of the company&#146;s Board of Directors also voluntarily relinquished
their directors&#146; fee for the balance of 2009 in exchange for restricted shares of common stock on
the same terms as the shares granted to the officers. The number of restricted shares of common
stock issued to each director was equal to the dollar value of the individual&#146;s relinquished
director&#146;s fee divided by the closing price per share of the company&#146;s common stock on May&nbsp;29,
2009. The total number of restricted shares of common stock issued to these directors was 19,000.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Product Warranties</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company warrants finished goods against defects in material and workmanship under normal use
and service for periods of one to three years. Settlement costs consist of actual amounts expensed
for warranty service, which are largely a result of third party service calls, and costs of
replacement products. A liability for the estimated future costs under product warranties is
maintained for products outstanding under warranty (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Six months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at the beginning of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">212</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accruals for warranties issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlements made during the period
(in cash or in kind)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(192</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(219</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(160</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at the end of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">190</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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 (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,738</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,527</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,795</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
June&nbsp;30, 2009<BR>
(Unaudited)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. Fixed Assets</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Fixed assets are stated at cost and are depreciated using the straight-line method over the
estimated useful lives of the related assets and consist of the following (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equipment (useful life 3 - 15&nbsp;years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tooling (useful life 2 - 5&nbsp;years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture and fixtures (useful life 5&nbsp;years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computer software (useful life 3&nbsp;years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">483</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements (the shorter of useful
life or lease life)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,403</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,179</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,307</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,096</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Long-Term Borrowings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company&#146;s bank line of credit in the United States is based on an agreement with Silicon Valley
Bank (&#147;SVB&#148;) dated October&nbsp;15, 2008, modified effective January&nbsp;31, 2009 and June&nbsp;12, 2009, and
further modified effective July&nbsp;22, 2009, as defined below. At June&nbsp;30, 2009, this agreement
provided for a $2,000,000 revolving line of credit, renewable on a month-to-month basis. The
amount of borrowings available to the company is the lesser of $2,000,000 or 75% of eligible
accounts receivable, as defined by the agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Borrowings under this agreement are collateralized by the company&#146;s assets, including intellectual
property, and bear interest at the SVB Prime Rate plus 1.50%, as of June&nbsp;30, 2009. If the company
terminates the facility prior to maturity, it will be required to pay a 1.00% termination fee. The
company is required to maintain all of its cash and cash equivalents in operating and investment
accounts with SVB and its affiliates. The company is also required to comply with certain covenant
requirements, including a tangible net worth covenant. As of June&nbsp;30, 2009, the company is not in
compliance with this financial covenant as defined by the original credit agreement. The interest
rate at June&nbsp;30, 2009 was 5.50% and 5.00% at December&nbsp;31, 2008. Borrowings under the revolving
line of credit were $1,776,000 at June&nbsp;30, 2009 and December&nbsp;31, 2008. Available borrowings under
this revolving line of credit were $256,000 at June&nbsp;30, 2009 and $263,000 at December&nbsp;31, 2008.
The revolving line of credit borrowings are recorded in the consolidated balance sheets as a
current liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;31, 2009, the company entered into a First Loan Modification and Forbearance
Agreement with SVB which modified the one year credit agreement entered into on October&nbsp;15, 2008.
This modification to the terms of the 2008 credit agreement states that borrowings bear interest at
the SVB Prime Rate plus 1.50%. SVB also agreed to forebear from exercising its rights and remedies
against the company as a result of violating its tangible net worth covenant as of December&nbsp;31,
2008. This forbearance expired on February&nbsp;15, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective June&nbsp;12, 2009, the company entered into a Second Loan Modification and Forbearance
Agreement with SVB which further modified the one year credit agreement entered into on October&nbsp;15,
2008, and modified January&nbsp;31, 2009. This second modification to the terms of the 2008 credit
agreement states that borrowings bear interest at the SVB Prime Rate plus 1.50% through June&nbsp;30,
2009. Beginning July&nbsp;1, 2009 through, and including, September&nbsp;30, 2009, borrowings bear interest
at the SVB Prime Rate plus 2.00%. Beginning October&nbsp;1, 2009 and thereafter, borrowings bear
interest at the SVB Prime Rate plus 3.00%. While the company remained in violation of its tangible
net worth covenant, the company and SVB continued to cooperate to restructure the existing bank
line of credit. In addition, SVB agreed to forebear from exercising its rights and remedies
against the company as a result of violating its tangible net worth covenant as of June&nbsp;30, 2009.
This forbearance expired on June&nbsp;30, 2009.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
June&nbsp;30, 2009<BR>
(Unaudited)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective July&nbsp;22, 2009, the company entered into a Third Loan Modification and Forbearance
Agreement with SVB which modifies the one year credit agreement entered into on October&nbsp;15, 2008,
and modified effective January&nbsp;31, 2009 and June&nbsp;12, 2009. This third modification to the terms of
the 2008 credit agreement revised the amount of borrowings available to the company to be the
lesser of $2,000,000 or the sum of (i)&nbsp;75% of eligible accounts receivable, and (ii)&nbsp;other cash
equivalents on deposit with SVB. While the company remained in violation of its tangible net worth
covenant, the company and SVB continued to cooperate to restructure the existing bank line of
credit. In addition, SVB agreed to forebear from exercising its rights and remedies against the
company as a result of violating its tangible net worth covenant as of July&nbsp;31, 2009. This
forbearance was due to expire on July&nbsp;31, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SVB has informed the company that it does not intend to renew the company&#146;s line of credit when it
expires on October&nbsp;15, 2009. The company is actively engaged in discussions with other potential
financing sources to replace the SVB line of credit and is currently reviewing credit agreement
proposals it has received from selected financial institutions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;27, 2009, the company entered into a Promissory Note (&#147;Note&#148;) with The Quercus Trust (&#147;The
Trust&#148;) in the amount of $70,000. Under the terms of this Note, the company agrees to pay The
Trust the principal sum of the Note and interest accruing at a yearly rate of 1.00% in one lump sum
payment on or before June&nbsp;1, 2109. The company received the funds on June&nbsp;9, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Through the company&#146;s United Kingdom subsidiary, the company maintains a bank overdraft facility of
$415,000 (in British pounds sterling, based on the exchange rate at June&nbsp;30, 2009) under an
agreement with Lloyds Bank Plc. There were no borrowings against this facility as of June&nbsp;30, 2009
or December&nbsp;31, 2008. This facility is renewed annually on January 1. The interest rate on the
facility was 2.75% at June&nbsp;30, 2009, and 7.25% at December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Through the company&#146;s German subsidiary, the company maintained a credit facility under an
agreement with Sparkasse Neumarkt Bank. This credit facility was put in place to finance the
building of offices in Berching, Germany, which were owned and occupied by the company&#146;s German
subsidiary. In June, 2009, the company paid, in its entirety, the balance due on the credit
facility with proceeds received from the sale of the office building in Berching, Germany.
Borrowings against this facility were $299,000 at December&nbsp;31, 2008 (in Euros, based on the
exchange rate at December&nbsp;31, 2008). The interest rate was 5.49% at December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, the company&#146;s German subsidiary has a revolving line of credit with Sparkasse Neumarkt
Bank. As of June&nbsp;30, 2009, there were no borrowings against this line of credit and borrowings of
$128,000 (in Euros, based on the exchange rate at December&nbsp;31, 2008) at December&nbsp;31, 2008. This
revolving facility is renewed annually on January 1. The interest rate on this line of credit was
11.00% at December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Future maturities of remaining borrowings are (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>United States</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>United States</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Credit Line</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Long-Term</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Year ending June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Borrowings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Borrowings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<tr><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,776</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2014</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2015 and thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total commitment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,847</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. Comprehensive Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Comprehensive income (loss)&nbsp;is defined as net income (loss)&nbsp;plus sales, expenses, gains and losses
that, under generally accepted accounting principles, are included in comprehensive income (loss)
but excluded from net income (loss). A separate statement of comprehensive loss has been presented
with this report.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
June&nbsp;30, 2009<BR>
(Unaudited)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Segments and Geographic Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company has two primary product lines: pool lighting and general commercial lighting, each of
which markets and sells lighting systems and customer specific energy efficient lighting solutions.
The company markets its products and solutions for worldwide distribution through a combination of
direct sales employees, independent sales representatives, and various distributors in different
geographic markets throughout the world.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of sales by geographic area is as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Six months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,426</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of sales by product line is as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Six months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pool Lighting</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,347</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial Lighting</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,106</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of long-lived geographic assets (fixed assets) is as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,726</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Germany</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,096</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. Income Taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At June&nbsp;30, 2009, we have recorded a full valuation allowance against the company&#146;s deferred tax
assets in the United States and Germany, due to uncertainties related to its ability to utilize
its deferred tax assets, primarily consisting of certain net operating losses carried forward.
The valuation allowance is based upon the company&#146;s estimates of taxable income by jurisdiction
and the period over which its deferred tax assets will be recoverable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;3, 2006, the company had entered into a consulting agreement with David Ruckert, a
member of its Board of Directors. This agreement was terminated on June&nbsp;30, 2007. No payments were
made during the three months ending June&nbsp;30, 2009 or June&nbsp;30, 2008. Additionally, Mr.&nbsp;Ruckert was
granted options to purchase 32,000 shares of the company&#146;s common stock. Stock expense incurred
under FAS 123(R) related to these options was $7,000 and $15,000 for the three and six months ended
June&nbsp;30, 2009, respectively, and $7,000 and $15,000 for the three and six months ended June&nbsp;30,
2008.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ENERGY FOCUS, INC.<BR>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
June&nbsp;30, 2009<BR>
(Unaudited)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;19, 2007, the company entered into a management agreement with Barry Greenwald, General
Manager of its Pool Lighting Division. Per this agreement, the company was to pay Mr.&nbsp;Greenwald
nonrefundable amounts totaling $309,000 of additional compensation, of which $77,000 was paid on
November&nbsp;1, 2007. Upon Mr.&nbsp;Greenwald&#146;s termination on January&nbsp;21, 2008, the company incurred an
expense of $232,000, of which $77,000 was paid on March&nbsp;14, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On March&nbsp;14, 2008, the company received an additional $9,335,000 in equity financing, net of
expenses. The investment was made by several then current Energy Focus, Inc. shareholders,
including four then current members of the company&#146;s Board of Directors. These investors agreed to
an at-market purchase of approximately 3.1&nbsp;million units for $3.205 per unit, based on the closing
bid price of the company&#146;s common shares on March&nbsp;13, 2008 of $3.08. Each unit comprises one share
of the company&#146;s common stock, par value $0.0001 per share, and one warrant to purchase one share
of the company&#146;s common stock at an exercise price of $3.08 per share. The warrants were
immediately separable from the units and immediately exercisable, and will expire five years after
the date of their issuance. This additional financing was to be used to fund working capital, pay
debt and perform additional research and development. The company received 100% of the funds from
escrow on March&nbsp;17, 2008. Among the investors were Ronald A. Casentini, John M. Davenport, John B.
Stuppin, and Philip E. Wolfson, all of whom were members of its Board of Directors at the time of
the transaction, and who invested approximately $100,000 in the aggregate. Also among the
investors was The Quercus Trust (&#147;The Trust&#148;), whose trustees include David Gelbaum, who became a
member of the company&#146;s Board of Directors in February, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;27, 2009, the company entered into a Promissory Note (&#147;Note&#148;) with The Trust in the amount
of $70,000. Under the terms of this Note, the company agrees to pay The Trust the principal sum of
the Note and interest accruing at a yearly rate of 1.00% in one lump sum payment on or before June
1, 2109. The company received the funds on June&nbsp;9, 2009.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. </B><U><B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with the Condensed Consolidated Financial Statements and related notes
included elsewhere in this report and the section entitled &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&#148; in our Annual Report on Form 10-K for the year ended
December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>When used in this discussion, the words &#147;expects,&#148; &#147;anticipates,&#148; &#147;estimates,&#148; &#147;plan,&#148; 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, expected expenses related to compliance with the Sarbanes-Oxley Act of 2002, the
adequacy of capital resources and necessity to raise additional funds, our critical accounting
policies, expected restructuring costs related to our consolidation in Solon, Ohio, and expected
benefits from our consolidation 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, as well as 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.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>OVERVIEW</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are engaged in the design, development, manufacturing, and marketing of lighting systems and
customer specific energy efficient lighting solutions for a wide-range of use in the general
commercial, industrial, and the pool markets. Our lighting technology offers significant energy
savings, heat dissipation, and maintenance cost benefits over conventional lighting for multiple
applications. Our solutions include fiber optic (&#147;EFO&#148;), light-emitting diode (&#147;LED&#148;), ceramic
metal halide (&#147;CMH&#148;), high-intensity discharge (&#147;HID&#148;), and other highly energy efficient lighting
technologies. Our strategy also incorporates continued investment into researching new and
emerging energy sources including, but not limited to, solar energy for both the public and private
sectors. Typical savings of current technology average 80% in electricity costs, while providing
full-spectrum light closely simulating daylight colours.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We expect to continue our ongoing leadership role in the United States government&#146;s Very High
Efficiency Solar Cell (&#147;VHESC&#148;) Consortium sponsored by the Defense Advanced Research Projects
Agency (&#147;DARPA&#148;), where we expect to be able to commercialize a solar cell technology that will
significantly surpass current solar efficiencies ranging from 6% - 20%. Our proven optics
technology has already shown the ability to achieve approximately 40% efficiency in a laboratory
environment and we believe that this efficiency, or greater, can be achieved on a cost-effective,
commercially-viable scale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;30, 2009, we announced that we had been selected to receive a $1,400,000 contract by the
Naval Research Warfare Center to develop and produce solid state lighting fixtures for use
specifically on Virginia Class attack submarines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash utilization was $1,187,000 for the three months ended June&nbsp;30, 2009; a 54.2% decrease compared
to the three months ended June&nbsp;30, 2008. Cash utilization for the three months ended June&nbsp;30, 2008
was $2,589,000. Cash utilization was $4,955,000 for the six months ended June&nbsp;30, 2009; a 13.9%
decrease compared to the six months ended June&nbsp;30, 2008. Cash utilization for the six months ended
June&nbsp;30, 2008 was $5,753,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net sales
were $3,815,000 for the three months ended June&nbsp;30, 2009; a decrease of 49.9% compared to
the three months ended June&nbsp;30, 2008. The decline primarily resulted from decreased pool lighting
sales, $1,365,000, decreased sales by our European subsidiaries, $1,806,000, and decreased
government sales, $534,000, from second quarter 2008 levels. EFO sales were $1,765,000 for the
three months ended June&nbsp;30, 2009; a decrease of $2,166,000, or 55.1%, from the three months ended
June&nbsp;30, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net sales
were $6,620,000 for the six months ended June&nbsp;30, 2009; a
decrease of 46.8% compared to
the six months ended June&nbsp;30, 2008. The decline primarily resulted from decreased pool lighting
sales, $2,301,000, decreased sales by our European subsidiaries, $2,734,000, and decreased
government sales, $803,000, from first half 2008 levels. EFO sales were $3,308,000 for the six
months ended June&nbsp;30, 2009; a decrease of $2,707,000, or 45.0%, from first half 2008 levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">EFO sales in 2009 and 2008 include sales from EFO fiber optic lighting, EFO LED, EFO Controls, and
EFO Government products.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gross profit was $799,000 for the three months ended June&nbsp;30, 2009; a 67.3% decrease compared to
the three months ended June&nbsp;30, 2008. Gross profit was $1,117,000 for the six months ended June
30, 2009; a 69.7% decrease compared to the six months ended June&nbsp;30, 2008. The gross profit margin
as a percentage of sales decreased to 20.9% and 16.9% for the three and six months ended June&nbsp;30,
2009, respectively, as compared to 32.1% and 29.6% for the three and six months ended June&nbsp;30,
2008, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deteriorating global economic conditions within the housing and construction industries have had an
adverse impact not only on our ability to expand within current markets, but also to penetrate new
markets. For 2009, we continue to combat these global economic pressures by focusing sales
resources in new and existing market channels including food retailers, cold storage, and
government facilities. Furthermore, we will continue to implement strategic sourcing and
operational cost reductions on a global basis. Selected price increases will also be implemented.
Lastly, we are accelerating our transition into a turn-key energy solutions service provider.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net research and development expenses were $253,000 for the three months ended June&nbsp;30, 2009; an
increase of $61,000, or 31.8%, as compared to the three months ended June&nbsp;30, 2008. Gross expenses
for research and development decreased by 20.3% from prior year levels primarily due to lower
project costs in the United States. Net research and development expenses were $483,000 for the
six months ended June&nbsp;30, 2009; a decrease of $10,000, or 2.0%, as compared to the six months ended
June&nbsp;30, 2008. Gross expenses for research and development decreased by 11.1% from prior year
levels primarily due to lower project costs in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our gross research and development expenses are reduced on a proportional performance basis under
DARPA Small Business Innovation Research (&#147;SBIR&#148;) development contracts. In 2007, SBIR contracts
were signed totaling $1,500,000 to be reimbursed over a two-year recovery period. During the first
quarter of 2009, additional SBIR contracts were signed totaling $198,000 to be reimbursed over an
eight month recovery period. At June&nbsp;30, 2009, $127,000 remained as unrecognized reductions of
gross research and development expenses for these contracts. We are currently pursuing additional
contracts through various government agencies, and anticipate being granted additional contracts
during the remainder of 2009. The gross research and development spending along with credits from
government contracts is shown in the table (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Six months ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross expenses for research and
development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">893</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: credits from DARPA contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(137</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(297</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(311</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(400</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales and marketing expenses decreased 39.2% to $1,650,000 for the three months ended June&nbsp;30, 2009
as compared to $2,712,000 for the three months ended June&nbsp;30, 2008. Sales and marketing expenses
decreased 38.0% to $3,530,000 for the six months ended June&nbsp;30, 2009 as compared to $5,690,000 for
the six months ended June&nbsp;30, 2008. These decreases are primarily due to lower salaries and
benefits and advertising expenses on a global basis, as well as management&#146;s efforts to reduce
costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General and administrative expenses increased 1.7% to $1,202,000 for the three months ended June
30, 2009 as compared to $1,182,000 for the three months ended June&nbsp;30, 2008. General and
administrative expenses decreased 4.9% to $2,426,000 for the six months ended June&nbsp;30, 2009 as
compared to $2,552,000 for the six months ended June&nbsp;30, 2008. The decrease is primarily due to
lower professional fees in the United States, as well as management&#146;s efforts to reduce costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the three months ended June&nbsp;30, 2009, we recognized a non-cash expense of $165,000 for the
impairment of certain fixed assets being held for sale. This asset impairment stemmed from the
sale of the office building owned and occupied by our German subsidiary, as well as other
associated fixed assets. There was no impairment of fixed assets in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We recorded a net loss of $2,349,000 for the three months ended June&nbsp;30, 2009, a 43.3% increase
from the net loss of $1,639,000 for the three months ended June&nbsp;30, 2008. We recorded a net loss
of $5,390,000 for the six months ended June&nbsp;30, 2009, a 5.9% increase from the net loss of
$5,088,000 for the six months ended June&nbsp;30, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>LIQUIDITY AND CAPITAL RESOURCES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Cash and Cash Equivalents</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At June&nbsp;30, 2009, our cash and cash equivalents were $5,613,000 as compared to $10,568,000 at
December&nbsp;31, 2008, a net cash decrease of $4,955,000 for the six months ended June&nbsp;30, 2009. This
compares to a net cash increase of $3,837,000 for six months ended June&nbsp;30, 2008 resulting from the
receipt of $9,335,000 of proceeds, net of expenses, from the March&nbsp;14, 2008 equity financing.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cash Used in Operating Activities</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash used in operating activities primarily consists of net loss adjusted by non-cash items,
including depreciation, amortization, stock-based compensation, and the effect of changes in
working capital. Cash decreased during the six months ended June&nbsp;30, 2009, by a net loss of
$5,390,000, compared to a net loss of $5,088,000 for the three months ended June&nbsp;30, 2008. After
adjustments, net cash used in operating activities was $4,702,000 for the six months ended June&nbsp;30,
2009, an increase of 15.9% compared to a net cash usage of $4,058,000 for the six months ended June
30, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cash Provided by (Used in) Investing Activities</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash provided by investing activities was $169,000 for the six months ended June&nbsp;30, 2009;
compared to a net cash usage of $298,000 for the six months ended June&nbsp;30, 2008. This decrease is
primarily due to the proceeds generated from the sale of fixed assets associated with our German
subsidiary partially offset by acquisitions of fixed assets during the period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cash (Used in) Provided by Financing Activities</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net cash used in financing activities was $331,000 for the six months ended June&nbsp;30, 2009. This
cash usage was due to payment on our lines of credit, $2,027,000, and long-term bank borrowings,
$288,000, offset by borrowings on our lines of credit of $1,904,000. For the six months ended June
30, 2008, financing activities contributed $8,262,000. This net contribution was due primarily to
cash proceeds from issuances of common stock and warrants to purchase shares of our common stock
for $9,335,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our bank line of credit in the United States is based on an agreement with Silicon Valley Bank
(&#147;SVB&#148;) dated October&nbsp;15, 2008, modified effective January&nbsp;31, 2009 and further modified effective
June&nbsp;12, 2009. As of June&nbsp;30, 2009, this agreement provides for a $2,000,000 revolving line of
credit, renewable on a month-to-month basis. The amount of borrowings available to the company is
the lesser of $2,000,000 or 75% of eligible accounts receivable, as defined by the agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Borrowings under this agreement are collateralized by our assets, including intellectual property,
and bear interest at the SVB Prime Rate plus 1.50%, as of June&nbsp;30, 2009. If we terminate the
facility prior to maturity, we will be required to pay a 1.00% termination fee. We are required to
maintain all of our cash and cash equivalents in operating and investment accounts with SVB and its
affiliates. We are also required to comply with certain covenant requirements, including a
tangible net worth covenant. As of June&nbsp;30, 2009, we were not in compliance with this financial
covenant as defined by the original credit agreement. The interest rate at June&nbsp;30, 2009 was 5.50%
and 5.00% at December&nbsp;31, 2008. Borrowings under the revolving line of credit were $1,776,000 at
June&nbsp;30, 2009 and December&nbsp;31, 2008. Available borrowings under this revolving line of credit were
$256,000 at June&nbsp;30, 2009 and $263,000 at December&nbsp;31, 2008. The revolving line of credit
borrowings are recorded in the consolidated balance sheets as a current liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;31, 2009, we entered into a First Loan Modification and Forbearance Agreement
with SVB which modified the one year credit agreement entered into on October&nbsp;15, 2008. This
modification to the terms of the 2008 credit agreement states that borrowings bear interest at the
SVB Prime Rate plus 1.50%. SVB also agreed to forebear from exercising its rights and remedies
against the company as a result of violating its tangible net worth covenant as of December&nbsp;31,
2008. This forbearance expired on February&nbsp;15, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective June&nbsp;12, 2009, we entered into a Second Loan Modification and Forbearance Agreement with
SVB which further modified the one year credit agreement entered into on October&nbsp;15, 2008, and
modified January&nbsp;31, 2009. This second modification to the terms of the 2008 credit agreement
states that borrowings bear interest at the SVB Prime Rate plus 1.50% through June&nbsp;30, 2009.
Beginning July&nbsp;1, 2009 through, and including, September&nbsp;30, 2009, borrowings bear interest at the
SVB Prime Rate plus 2.00%. Beginning October&nbsp;1, 2009 and thereafter, borrowings bear interest at
the SVB Prime Rate plus 3.00%. While we remained in violation of our tangible net worth covenant,
we continued to cooperate with SVB to restructure the existing bank line of credit. In addition,
SVB agreed to forebear from exercising its rights and remedies against us as a result of violating
our tangible net worth covenant as of June&nbsp;30, 2009. This forbearance expired on June&nbsp;30, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective July&nbsp;22, 2009, we entered into a Third Loan Modification and Forbearance Agreement with
SVB which modifies the one year credit agreement entered into on October&nbsp;15, 2008, and modified
January&nbsp;31, 2009 and June&nbsp;12, 2009. This third modification to the terms of the 2008 credit
agreement revised the amount of borrowings available to us to be the lesser of $2,000,000 or the
sum of (i)&nbsp;75% of eligible accounts receivable, and (ii)&nbsp;other cash equivalents on deposit with
SVB. While we remained in violation of our tangible net worth covenant, we continued to cooperate
with SVB to restructure the existing bank line of credit. In addition, SVB agreed to forebear from
exercising its rights and remedies against us as a result of violating our tangible net worth
covenant as of July&nbsp;31, 2009. This forbearance was due to expire on July&nbsp;31, 2009.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SVB has informed us that it does not intend to renew our line of credit when it expires on October
15, 2009. We are actively engaged in discussions with other potential financing sources to replace
the SVB line of credit and are currently reviewing credit agreement proposals we have received from
selected financial institutions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On May&nbsp;27, 2009, we entered into a Promissory Note (&#147;Note&#148;) with The Quercus Trust (&#147;The Trust&#148;) in
the amount of $70,000. Under the terms of this Note, we agree to pay The Trust the principal sum
of the Note and interest accruing at a yearly rate of 1.00% in one lump sum payment on or before
June&nbsp;1, 2109. We received the funds on June&nbsp;9, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Through our United Kingdom subsidiary, we maintain a bank overdraft facility of $415,000 (in
British pounds sterling, based on the exchange rate at June&nbsp;30, 2009) under an agreement with
Lloyds Bank Plc. There were no borrowings against this facility as of June&nbsp;30, 2009 or December
31, 2008. This facility is renewed annually on January 1. The interest rate on the facility was
2.75% at June&nbsp;30, 2009, and 7.25% at December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Through our German subsidiary, we maintained a credit facility under an agreement with Sparkasse
Neumarkt Bank. This credit facility was put in place to finance the building of offices in
Berching, Germany, which were owned and occupied by our German subsidiary. In June, 2009, we paid,
in its entirety, the balance due on the credit facility with proceeds received from the sale of the
office building in Berching, Germany. Borrowings against this facility were $299,000 at December
31, 2008 (in Euros, based on the exchange rate at December&nbsp;31, 2008). The interest rate was 5.49%
at December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, our German subsidiary has a revolving line of credit with Sparkasse Neumarkt Bank. As
of June&nbsp;30, 2009, there were no borrowings against this line of credit and borrowings of $128,000
(in Euros, based on the exchange rate at December&nbsp;31, 2008) at December&nbsp;31, 2008. This revolving
facility is renewed annually on January 1. The interest rate on this line of credit was 11.00% at
December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have continued to incur losses which have been attributable to operational performance,
restructuring, and miscellaneous non-cash charges. This trend has, in turn, led to negative cash
flows and ongoing bank debt compliance violations. We have managed our liquidity during this
period through a series of previously announced cost reduction initiatives, bank debt
restructuring, and asset disposals. However, the ongoing global financial crisis has continued to
have a dramatic effect on our industry and customer base. Further, the ongoing recession in the
United States and Western Europe, combined with the slowdown of economic growth in the rest of the
world, continues to foster a business environment where it is extremely difficult and costly to
obtain either equity or non-equity financing. This environment has also increased the potential
for customer payment defaults. Our liquidity position, as well as our operating performance, has
been negatively affected by these economic and industry conditions and by other financial and
business factors, many of which are beyond its control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Management acknowledges that the level of negative cash utilization experienced during the six
months ended June&nbsp;30, 2009, if sustained, could result in the insolvency of the company in 2009
without the infusion of additional equity or non-equity financing. Therefore, we are aggressively
pursuing all of the following sources for working capital funding:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain loans from various financial institutions,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain loans from one or more non-traditional investment capital organizations,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sale and/or disposition of one or more operating units, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain funding from the sale of our common stock or other equity instruments.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Obtaining financing through the above mentioned mechanisms contain risks, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 our Board of Directors,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the current global economic crisis combined with our current financial condition may
prevent us from being able to obtain any debt financing,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>financing may not be available for parties interested in pursuing the acquisition of one
or more of our operating units, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>additional equity financing may not be available to us in the current economic
environment and could lead to further dilution of shareholder value for current
shareholders of record.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We continue to aggressively reduce costs, as evidenced in the $2,296,000 decrease in operating
expenses, net of a non-cash loss on impairment of fixed assets of $165,000, for the six months
ended June&nbsp;30, 2009, as compared to the six months ended June&nbsp;30, 2008. Our cash utilization was
$1,187,000 for the three months ended June&nbsp;30, 2009; a 54.2% decrease compared to the cash
utilization for the three months ended June&nbsp;30, 2008 of $2,589,000. Management is executing
further cost reductions and organizational realignments in an effort to sustain our ongoing
viability throughout the remainder of 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July, 2009, we engaged a leading mergers and acquisitions advisory firm to assist us in
evaluating and valuing our individual operating business units and to support the potential
divestiture of one or more of those business units.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CRITICAL ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of our financial statements requires that we make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of contingencies and the
reported amounts of revenue and expenses in the financial statements. Material differences may
result in the amount and timing of revenue and expenses if different judgments or different
estimates were utilized. Critical accounting policies, judgments and estimates which we believe
have the most significant impact on our financial statements include allowances for doubtful
accounts, returns, warranties, valuation of inventories, and stock based compensation. 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&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>RECENT ACCOUNTING PRONOUNCEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the FASB issued FAS No.&nbsp;157, &#147;Fair Value Measurements&#148; (FAS 157), which defines
fair value, establishes a framework for measuring fair value, and expands disclosures about fair
value measurements. This guidance applies only when other guidance requires or permits assets or
liabilities to be measured at fair value; it does not expand the use of fair value in any new
circumstances. FAS 157 went into effect for fiscal years beginning after November&nbsp;15, 2007
(effective January&nbsp;1, 2008, for our company). In February&nbsp;2008, the FASB issued Staff Position FAS
157-1, which provides that FAS 157 does not apply under FAS 13, &#147;Accounting for Leases,&#148; and other
accounting pronouncements that address fair value measurements for leases. We adopted the
financial assets and liabilities portion of this FASB and it had no effect. In February&nbsp;2008, the
FASB also issued Staff Position FAS 157-2, which delays the effective date of FAS 157 for all
nonfinancial assets and liabilities, except those recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). For items within the scope of Staff
Position FAS 157-2, the effective date will be for fiscal years beginning after November&nbsp;15, 2008
(January&nbsp;1, 2009, for our company). Management is continuing to evaluate the effect that this
guidance may have on our overall financial position or results of operations and does not
anticipate that it will have a significant impact.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2007, the FASB issued FAS No.&nbsp;159, &#147;The Fair Value Option for Financial Assets and
Financial Liabilities&#148; (FAS 159). This guidance provides an option to selectively report financial
assets and liabilities at fair value and establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different measurement attributes
for similar types of assets and liabilities. FAS 159 was in effect for fiscal years beginning
after November&nbsp;15, 2007 (effective January&nbsp;1, 2008, for our company). We have elected to not apply
this fair value option to any of our existing assets or liabilities. However, we may adopt this
guidance for assets or liabilities in the future as permitted under FAS 159.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, the FASB issued FAS No.&nbsp;141(R), &#147;Business Combinations&#148; (FAS 141(R)). The new
pronouncement requires the acquiring entity in a business combination to recognize only the assets
acquired and liabilities assumed in a transaction (e.g., acquisition costs must be expensed when
incurred), establishes the fair value at the date of acquisition as the initial measurement for all
assets acquired and liabilities assumed, and requires expanded disclosures. FAS 141(R) is in
effect for fiscal years beginning after December&nbsp;15, 2008 (January&nbsp;1, 2009, for our company).
Management is continuing to evaluate the effect that this guidance may have on our overall
financial position or results of operations and does not anticipate that it will have a significant
impact.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, the FASB issued FAS No.&nbsp;160, &#147;Non-controlling Interests in Consolidated Financial
Statements, an Amendment of ARB No.&nbsp;51&#148; (FAS 160). The new pronouncement requires all entities to
report non-controlling (minority)&nbsp;interests in subsidiaries as a component of shareholders&#146; equity.
FAS 160 is in effect for fiscal years beginning after December&nbsp;15, 2008 (January&nbsp;1, 2009, for our
company). Management is continuing to evaluate the effect that this guidance may have on our
overall financial position or results of operations and does not anticipate that it will have a
significant impact.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Quantitative and Qualitative Disclosures About Market Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;30, 2009, we had $543,000 in cash held in foreign currencies based on the exchange
rates at June&nbsp;30, 2009. The balances for cash held overseas in foreign currencies are subject to
exchange rate risk. We have a policy of maintaining cash balances in local currencies unless an
amount of cash is occasionally transferred in order to repay inter-company debts.
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Controls and Procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(a)&nbsp;Evaluation of disclosure controls and procedures.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We maintain &#147;disclosure controls and procedures,&#148; as such term is defined in Rule&nbsp;13a-15(e) under
the Securities Exchange Act of 1934 (the &#147;Exchange Act&#148;), 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 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. The design of any 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based on their evaluation as of the end of the period covered by this Quarterly Report on Form
10-Q, our Chief Executive Officer 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>(b)&nbsp;Changes in internal control over financial reporting.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There was no change in our internal control over financial reporting (as defined in Rule&nbsp;13a-15(f)
under the Exchange Act) identified in connection with the evaluation during our last fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II &#151; OTHER INFORMATION</B>
</DIV>

<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. Legal Proceedings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From time to time, we become involved in ordinary routine litigation incidental to our business.
Currently, we are not involved in any material litigation.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1A. Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There are no significant changes in risk factors from our Annual Report on Form 10-K for the year
ended December&nbsp;31, 2008.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Submission of Matters to a Vote of Security Holders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company&#146;s 2009 Annual Meeting of Shareholders was held on June&nbsp;24, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The number of directors of the company was fixed at nine and the following persons were nominated
to serve, and were elected, as directors of the company to serve until the next Annual Meeting of
Shareholders and until their successors are elected and qualify: John M. Davenport, J. James
Finnerty, David Gelbaum, Laurence V. Goddard, Michael A. Kasper, Joseph G. Kaveski, Paul von
Paumgartten, David N. Ruckert, and Philip E. Wolfson. The voting results for each nominee were as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>For</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Withheld</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John M. Davenport</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,354,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. James Finnerty</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,169,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">332,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David Gelbaum</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,336,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,789</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Laurence V. Goddard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,170,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael A. Kasper</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,895,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,606,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joseph G. Kaveski</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,359,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146,649</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Paul von Paumgartten</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,356,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146,094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David N. Ruckert</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,616,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">885,502</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Philip E. Wolfson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,834,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,667,187</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Proposal 2 to ratify the appointment of Plante &#038; Moran, PLLC as the company&#146;s independent
registered public accounting firm for the fiscal year ending December&nbsp;31, 2009 was adopted with
10,395,966 shares voting for, 72,412 shares voting against, and 33,767 shares abstaining.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. Exhibits</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description of Documents</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Loan Modification and Forbearance Agreement to Second Amended and Restated
Loan and Security
Agreement between Registrant and Silicon Valley Bank dated as of January&nbsp;31, 2009.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Loan Modification and Forbearance Agreement to Second Amended and
Restated Loan and Security
Agreement between Registrant and Silicon Valley Bank dated as of June&nbsp;12, 2009.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Loan Modification and Forbearance Agreement to Second Amended and Restated
Loan and Security
Agreement between Registrant and Silicon Valley Bank dated as of July&nbsp;22, 2009.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rule&nbsp;13a-14(a) Certification of Chief Executive Officer.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rule&nbsp;13a-14(a) Certification of Chief Financial Officer.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Chief Executive Officer under Section&nbsp;906 of the Sarbanes-Oxley Act
of 2003 (18 U.S.C. &#167;1350).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Chief Financial Officer under Section&nbsp;906 of the Sarbanes-Oxley Act
of 2003 (18 U.S.C. &#167;1350).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">ENERGY FOCUS, INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:  August 13, 2009&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Joseph G. Kaveski
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Joseph G. Kaveski&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">                            /s/ Nicholas G. Berchtold
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Nicholas G. Berchtold&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Financial Officer<BR>

(Principal Financial and Accounting Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Exhibit&nbsp;Index</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description of Documents</B></TD>
</TR>

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<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Loan Modification and Forbearance Agreement to Second Amended and Restated
Loan and Security
Agreement between Registrant and Silicon Valley Bank dated as of January&nbsp;31, 2009.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Loan Modification and Forbearance Agreement to Second Amended and
Restated Loan and Security
Agreement between Registrant and Silicon Valley Bank dated as of June&nbsp;12, 2009.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Loan Modification and Forbearance Agreement to Second Amended and Restated
Loan and Security
Agreement between Registrant and Silicon Valley Bank dated as of July&nbsp;22, 2009.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rule&nbsp;13a-14(a) Certification of Chief Executive Officer.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rule&nbsp;13a-14(a) Certification of Chief Financial Officer.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Chief Executive Officer under Section&nbsp;906 of the Sarbanes-Oxley Act
of 2003 (18 U.S.C. &#167;1350).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Statement of Chief Financial Officer under Section&nbsp;906 of the Sarbanes-Oxley Act
of 2003 (18 U.S.C. &#167;1350).</TD>
</TR>
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<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>l37333exv10w1.htm
<DESCRIPTION>EX-10.1
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>FIRST LOAN MODIFICATION AND FORBEARANCE AGREEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This First Loan Modification and Forbearance Agreement (this &#147;<B>Loan Modification Agreement</B>&#148;) is
entered into as of the First Loan Modification Effective Date, by and between <B>SILICON VALLEY BANK</B>,
a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at 380 Interlocken Crescent, Suite&nbsp;600,
Broomfield, Colorado 80021 (&#147;<B>Bank</B>&#148;), and <B>ENERGY FOCUS, INC.</B>, a Delaware corporation, formerly known
as Fiberstars, Inc., a Delaware corporation, with offices located at 32000 Aurora Road, Solon, Ohio
44139.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. <U>DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS</U>. Among other indebtedness, and
obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of October&nbsp;27, 2008, evidenced by, among other documents, a certain Second
Amended and Restated Loan and Security Agreement dated as of October&nbsp;27, 2008 between Borrower and
Bank (as may be amended from time to time, the &#147;<B>Loan Agreement</B>&#148;). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. <U>DESCRIPTION OF COLLATERAL</U>. Repayment of the Obligations is secured by the Collateral
as described in the Loan Agreement (together with any other collateral security granted to Bank,
the &#147;<B>Security Documents</B>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hereinafter, the Security Documents, together with all other documents evidencing or securing the
Obligations shall be referred to as the &#147;<B>Existing Loan Documents</B>&#148;.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. <U>ACKNOWLEDGMENT OF DEFAULTS</U>. Borrower acknowledges and agrees that certain Defaults and
Events of Default have occurred under the Loan Agreement by virtue of Borrower&#146;s failure to comply
with the minimum Tangible Net Worth covenant contained in Section&nbsp;6.9(a) of the Loan Agreement for
the compliance period ending on November&nbsp;30, 2008 (the &#147;<B>Prior Default </B>&#148;). Borrower has informed Bank
that it anticipates that it will also fail to comply with the minimum Tangible Net Worth covenant
set forth in Section&nbsp;6.9(a) for the compliance period ending December&nbsp;31, 2008 (the &#147;<B>Anticipated
Default</B>&#148;, and together with the Prior Default, the &#147;<B>Existing Defaults</B>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. <U>DESCRIPTION OF CHANGE IN TERMS</U>.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Modifications to Loan Agreement.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by deleting the following text appearing in Section&nbsp;2.3(a)
thereof in its entirety:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;(a)<U> Interest Rate</U>; <U>Advances</U>. Subject to Section&nbsp;2.3(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to
the aggregate of the Prime Rate plus one percentage point (1.00%), which interest shall be payable
monthly.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and inserting in lieu thereof the following:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;(a)<U> Interest Rate</U>; <U>Advances</U>. Subject to Section&nbsp;2.3(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to
the aggregate of the Prime Rate plus one and one-half percentage point (1.50%), which interest
shall be payable monthly.&#148;</TD>
</TR>


</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by inserting the following definition in Section&nbsp;13.1
thereof, in appropriate alphabetical order:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;&#147;<B>First Loan Modification Effective Date</B>&#148; is the date indicated on the signature page to the First
Loan  Modification and Forbearance Agreement entered into between Bank and Borrower.&#148;</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. <U>FORBEARANCE BY BANK.</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In consideration of, among other things, Borrower&#146;s compliance with each and every term of
this Agreement, Bank hereby agrees to forbear from exercising its rights and remedies against the
Borrower as a result of the Existing Defaults until the earlier to occur of (i)&nbsp;a Default or an
Event of Default under the Loan Agreement (with the sole exception of the Existing Defaults), (ii)
the failure of Borrower to promptly, punctually, or faithfully perform or comply with any term or
condition of this Agreement as and when required, it being expressly acknowledged and agreed that
TIME IS OF THE ESSENCE, or (iii)&nbsp;3:00 pm (Denver, Colorado time) on February&nbsp;15, 2009 (the period
commencing as of the date of the First Loan Modification Effective Date and ending on the earlier
of (i), (ii)&nbsp;or (iii)&nbsp;above shall be referred to as the &#147;<B>Forbearance Period</B>&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Borrower hereby acknowledges and agrees that nothing contained in this section or in any other
section of this Agreement shall be deemed or otherwise construed as a waiver by Bank of the
Existing Defaults or any other Default or Event of Default (whether now existing or hereafter
arising) or of any of its rights and remedies pursuant to the Existing Loan Documents, applicable
law or
otherwise. This Loan Modification Agreement shall only constitute an agreement by Bank to forbear
from enforcing its rights and remedies based upon the Existing Defaults upon the terms and
conditions set forth herein. Upon the expiration of the Forbearance Period, the agreement of Bank
to forbear as set forth in this Loan Modification Agreement shall automatically terminate and Bank
may immediately commence enforcing its rights and remedies pursuant to the Existing Loan Documents,
applicable law or otherwise, in such order and manner as Bank may determine appropriate.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">6. <U>TERMS OF FORBEARANCE.</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>From and after the execution of this Loan Modification Agreement, Borrower agrees that Bank
shall have no further obligation to make any Advances to Borrower, or to issue or provide any other
extensions of credit of any kind to Borrower (as used herein and in the Loan Agreement, any
Advance, Letter of Credit, FX Forward Contract, amount utilized for Cash Management Services, or
any other extension of credit by Bank for Borrower&#146;s benefit shall be referred to as a &#147;Credit
Extension&#148;). Notwithstanding the foregoing, during the Forbearance Period and at the request of
Borrower, Bank may, in its sole and absolute discretion, continue to make any Credit Extensions,
subject in all events to the terms and conditions of this Loan Modification Agreement, the Loan
Agreement (including but not limited to, all limitations imposed by the Borrowing Base and the
Availability Amount) and the other Existing Loan Documents. Borrower covenants and agrees that if,
in the sole and absolute discretion of Bank. Bank shall make any Credit Extensions during the
Forbearance Period, such act shall not constitute (i)&nbsp;a waiver of any of the Existing
Defaults, or of any other Default or Event of Default which may now exist or which, may occur after
the date of this Loan Modification Agreement under any of the Existing Loan Documents, or (ii)&nbsp;an
agreement on the part of Bank to make any further extensions of credit of any kind to Borrower at
a later date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At all times during the Forbearance Period Borrower shall comply with all terms and
conditions contained in the Loan Agreement and other Loan Documents and shall continue to remit
all regularly scheduled payments (including, without limitation, all principal, interest, fees, costs
and</TD>
</TR>



</TABLE>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other amounts) which may become due under the Existing Loan Documents, as and when
such payments are due.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">7. <U>FEES.</U> Borrower shall pay to Bank a forbearance fee equal to Four Thousand Dollars
($4,000.00), which fee shall be due on the date hereof and shall be deemed fully earned as of the
date hereof. Borrower shall also reimburse Bank for all legal fees and expenses incurred in
connection with the Existing Loan Documents and this Loan Modification Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">8. <U>RATIFICATION OF PERFECTION CERTIFICATE</U>. Borrower hereby ratifies, confirms and
reaffirms, all and singular, the terms and disclosures contained in a certain Perfection Certificate
dated as of October&nbsp;27, 2008 executed by Borrower, and acknowledges, confirms and agrees the
disclosures and information Borrower provided to Bank in the Perfection Certificate have not
changed, as of the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">9. <U>AUTHORIZATION TO FILE</U>. Borrower hereby authorizes Bank to file UCC financing statements
without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order
to further perfect or protect Bank&#146;s interest in the Collateral, including a notice that any
disposition of the Collateral, by either the Borrower or any other Person, shall be deemed to
violate the rights of the Bank under the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">10. <U>CONSISTENT CHANGES</U>. The Existing Loan Documents are hereby amended wherever necessary
to reflect the changes described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">11. <U>RATIFICATION OF LOAN DOCUMENTS.</U> Borrower hereby ratifies, confirms, and reaffirms all
terms and conditions of the Loan Agreement, the other Existing Loan Documents and all security or
other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">12. <U>NO DEFENSES OF BORROWER</U>. Borrower hereby acknowledges and agrees that Borrower
has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or
otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby
expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">13. <U>CONTINUING VALIDITY</U>. Borrower understands and agrees that in modifying the existing
Obligations, Bank is relying upon Borrower&#146;s representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force
and effect. Bank&#146;s agreement to modifications to the existing Obligations pursuant to this Loan
Modification Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of
Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will
be released by virtue of this Loan Modification Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">14. <U>RIGHT OF SET-OFF</U>. In consideration of Bank&#146;s agreement to enter into this Loan
Modification Agreement, Borrower herby reaffirms and hereby grants to Bank, a lien, security
interest and right of set off as security for all Obligations to Bank, whether now existing or
hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter
in the possession, custody, safekeeping or control of Bank or any entity under the control of
Silicon Valley Bank (including a Bank subsidiary) or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand or notice, Bank
may set off the same or any part thereof and apply the same to any liability or obligation of
Borrower even though unmatured and regardless of the adequacy of any other collateral securing the
loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY
AND IRREVOCABLY WAIVED.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">15. <U>JURISDICTION/VENUE</U>. Borrower accepts for itself and in connection with its properties,
unconditionally, the exclusive jurisdiction of any state or federal court of competent jurisdiction
in the State of California in any action, suit, or proceeding of any kind against it which arises
out of or by reason of this Loan Modification Agreement. NOTWITHSTANDING THE FOREGOING, THE BANK
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK&#146;S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">16. <U>COUNTERSIGNATURE</U>. This Loan Modification Agreement shall become effective only
when it shall have been executed by Borrower and Bank.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Loan Modification Agreement is executed under the laws of the State of California as of the
First Loan Modification Effective Date.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="35%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
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<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><B>BORROWER:</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>BANK:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><B>ENERGY FOCUS, INC.</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>SILICON VALLEY BANK</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">/s/ Nicholas G. Berchtold</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">/s/ Adam Glick</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NICHOLAS G. BERCHTOLD
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Adam Glick</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CHIEF FINANCIAL OFFICER
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Relationship Manager</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">First Loan Modification Effective date: January&nbsp;31, 2009
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;First Loan Modification and Forbearance Agreement Signature Page&#093;
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="l37333l3733301.gif" alt="(SILICON VALLEY BANK LOGO)">
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SECRETARY&#146;S CORPORATE BORROWING CERTIFICATE</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top"><FONT style="font-variant: SMALL-CAPS"><B>Borrower:</B></FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Energy Focus, Inc.</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-variant: SMALL-CAPS"><B>Date:</B></FONT> October 9<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>, 2008</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><FONT style="font-variant: SMALL-CAPS"><B>Bank:</B></FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Silicon Valley Bank</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I hereby certify as follows, as of the date set forth above:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I am the Secretary of the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Borrower&#146;s exact legal name is set forth above. Borrower is a corporation duly organized,
existing and in good standing under the laws of the State of Delaware.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Attached as <U><B>Exhibit&nbsp;A</B></U> hereto is a true, correct and complete copy of Borrower&#146;s
Certificate of Incorporation (including amendments), as filed with the Secretary of State of the
state in which Borrower is incorporated as set forth in paragraph 2 above. Such Certificate of
Incorporation has not been amended, annulled, rescinded, revoked or supplemented, and remains in
full force and effect as of the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. Attached as <U><B>Exhibit&nbsp;B</B></U> hereto is a true, correct and complete copy of Borrower&#146;s By-laws
(including amendments). Such By-Laws have not been amended, annulled, rescinded, revoked or
supplemented, and remain in full force and effect as of the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The persons named below are now and have been duly qualified and acting, officers of the
Borrower, duly elected to the office as set forth opposite their respective names and the
signatures set forth opposite their respective names and offices are their respective genuine
signatures:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Title</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Signature</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Joseph G Kaveski
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chief Executive Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Joseph G Kaveski</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nicholas G. Berchtold
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">VP of Finance and Chief Financial
Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Nicholas G. Berchtold</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Eric Hilliard
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">VP and Chief Operating Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Eric Hilliard</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">6. The following resolutions were duly and validly adopted by Borrower&#146;s Board of Directors at a
duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized
corporate action). Such resolutions are in full force and effect as of the date hereof and have
not been in any way modified, repealed, rescinded, amended or revoked, and Bank may rely on them
until Bank receives written notice of revocation of same from Borrower.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>BE IT RESOLVED</B>, that <B>any one (1) </B>of the above named officers or employees of Borrower, acting for
and on behalf of Borrower, are authorized and empowered:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Borrow Money</B>. To borrow from time to time from Silicon Valley Bank (&#147;Bank&#148;), on such terms as may
be agreed upon between the officers of Borrower and Bank, such sum or sums of money as in their
judgment should be borrowed.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-1-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Execute Loan Documents</B>. To execute and deliver to Bank the loan documents of Borrower at such rates
of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of Borrower to Bank, and also to execute and deliver to Bank one or more renewals,
extensions, modifications, refinancings, consolidations, or substitutions for one or more of the
loan documents, or any portion of the loan documents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Grant Security</B>. To grant a security interest to Bank in any of Borrower&#146;s assets, which security
interest shall secure all of Borrower&#146;s obligations to Bank.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Negotiate Items</B>. To draw, endorse, and discount with Bank all drafts, trade acceptances, promissory
notes, or other evidences of indebtedness payable to or belonging to Borrower or in which Borrower
may have an interest, and either to receive cash for the same or to cause such proceeds to be
credited to the account of Borrower with Bank, or to cause such other disposition of the proceeds
derived therefrom as they may deem advisable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Letters of Credit</B>. To execute letter of credit applications and other related documents pertaining
to Bank&#146;s issuance of letters of credit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Foreign Exchange Contracts</B>. To execute and deliver foreign exchange contracts, either spot or
forward, from time to time, in such amount as<SUB style="font-size: 85%; vertical-align: text-bottom">,</SUB> in the judgment of the officer or
officers herein authorized.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Issue Warrants. </B>To issue warrants to purchase Borrower&#146;s capital stock, for such class, series and
number, and on such terms, as an officer of Borrower shall deem appropriate. Upon such issuance the
requisite number of shares of Borrower&#146;s capital stock will be automatically reserved for the
exercise of such Warrants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Further Acts. </B>In the case of lines of credit, to designate additional or alternate individuals as
being authorized to request advances thereunder, and in all cases, to do and perform such other
acts and things, to pay any and all fees and costs, and to execute and deliver such other documents
and agreements, including agreements waiving the right to a trial by jury, as they may in their
discretion deem reasonably necessary or proper in order to carry into effect the provisions of
these Resolutions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>BE IT FURTHER RESOLVED</B>, that any and all acts authorized pursuant to these Resolutions and
performed prior to the passage of these resolutions are hereby ratified and approved, that these
Resolutions shall remain in full force and effect and Bank may rely on these Resolutions until
written notice of their revocation shall have been delivered to and received by Bank. Any such
notice shall not affect any of Borrower&#146;s agreements or commitments in effect at the time notice is
given.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-2-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF</B>, I have executed this Certificate on behalf of the Borrower in my capacity as
Secretary as of the 27<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day of October, 2008.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>CERTIFIED TO AND ATTESTED BY:</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Nicholas G. Berchtold
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Nicholas G. Berchtold&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Secretary&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I, the Chief Executive Officer of Borrower, hereby certify as to paragraphs 1 through 6 above, as of
the date set forth above.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Joseph G. Kaveski
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Joseph G. Kaveski&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->-3-<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>l37333exv10w2.htm
<DESCRIPTION>EX-10.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10.2
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SECOND LOAN MODIFICATION AND FORBEARANCE AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Second Loan Modification and Forbearance Agreement (this <B>&#147;Loan
Modification Agreement&#148;) </B>is entered into as of the Second Loan Modification
Effective Date, by and between <B>SILICON VALLEY BANK</B>, a California corporation,
with its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at 380 Interlocken
Crescent, Suite&nbsp;600, Broomfield, Colorado 80021 (&#147;<b>Bank</b>&#148;), and <B>ENERGY FOCUS,
INC., </B>a Delaware corporation, formerly known as Fiberstars, Inc., a Delaware
corporation, with offices located at 32000 Aurora Road, Solon, Ohio 44139.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. <U>DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS</U>. Among
other indebtedness and obligations which may be owing by Borrower to Bank, Borrower
is indebted to Bank pursuant to a loan arrangement dated as of October&nbsp;27, 2008,
evidenced by, among other documents, a certain Second Amended and Restated Loan and
Security Agreement dated as of October&nbsp;27, 2008 between Borrower and Bank, as
amended by a certain First modification and Forbearance Agreement dated as of
January&nbsp;31, 2009 between Borrower and Bank (the <B>&#147;First Amendment&#148;, </B>and as may be
further amended from time to time, the <B>&#147;Loan Agreement&#148;</B>). Capitalized terms used
but not otherwise defined herein shall have the same meaning as in the Loan
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. <U>DESCRIPTION OF COLLATERAL</U>. Repayment of the Obligations is secured by
the Collateral as described in the Loan Agreement and as described in a certain
Intellectual Property Security agreement between borrower and Bank, as ratifies and
reaffirmed by a certain Reaffirmation of Intellectual Property Security Agreement
dated as of October&nbsp;27, 2008 between Borrower and Bank (collectively, the <B>&#147;IP
Agreement&#148;, </B>and together with any other collateral security granted to Bank, the
<B>&#147;Security Documents&#148;</B>).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the <B>&#147;Existing
Loan Documents&#148;</B>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. <U>ACKNOWLEDGMENT OF DEFAULTS</U>. Borrower acknowledges and agrees
that certain Defaults and Events of Default have occurred under the Loan Agreement
by virtue of Borrower&#146;s failure to comply with the minimum Tangible Net Worth
covenant contained in Section&nbsp;6.9(a) of the Loan Agreement for the compliance
periods ended on November&nbsp;30, 2008 and December&nbsp;31, 2008 (the <B>&#147;Prior Defaults&#148;</B>).
Bank is currently forbearing from enforcing its rights and remedies under the Loan
Agreement due to the Prior Defaults. In addition. Borrower failed to comply with
the minimum Tangible Net Worth covenant set forth in Section&nbsp;6.9(a) for the
compliance periods ended January&nbsp;31, 2009, February&nbsp;28, 2009, March&nbsp;31, 2009 and
April&nbsp;30, 2009 (the <B>&#147;Additional Defaults&#148;, </B>and together with the Prior Defaults,
the <B>&#147;Existing Defaults&#148;</B>).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. <U>DESCRIPTION OF CHANGE IN TERMS</U>.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Modifications to Loan Agreement.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by deleting the following text appearing
in Section&nbsp;2.3(a) thereof in its entirety:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;(a) <U>Interest Rate</U>; <U>Advances</U>.
Subject to Section&nbsp;2.3(b), the principal
amount outstanding under the Revolving Line
shall accrue interest at a floating per annum
rate equal to the aggregate of the Prime Rate
plus one and one-half percentage point
(1.50%), which interest shall be payable
monthly.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and inserting in lieu thereof the following:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;(a) <U>Interest Rate</U>; <U>Advances</U>.
Subject to Section&nbsp;2.3(b), the principal
amount outstanding under the Revolving Line
shall</TD>
</TR>




</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accrue interest at a floating per annum rate
equal to (i)&nbsp;from the Second Loan
Modification Effective Date through and
including June&nbsp;30, 2009, the aggregate of the
Prime Rate plus one and one-half percentage
point (1.50%); (ii)&nbsp;beginning July&nbsp;1, 2009
through and including September&nbsp;30, 2009, the
aggregate of the Prime Rate plus two
percentage points (2.00%); and (iii)
beginning October
1, 2009 and thereafter, the aggregate of the
Prime Rate plus three percentage points
(3.00%), which interest shall in any event be
payable monthly.&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by
deleting the following text appearing in Section&nbsp;2.4(e) thereof in
its entirety:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;(e) <U>Collateral Monitoring Fee</U>. A
monthly collateral monitoring fee of Seven
Hundred Fifty Dollars ($750.00), payable in
arrears on the last day of each month;
<U>provided</U>, <U>however</U>, that
during any Streamline Period, the collateral
monitoring fee shall be $0.00 (in each case,
the collateral monitoring fee will be
prorated for any partial month); and&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and inserting in lieu thereof the following:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;(e) <U>Collateral Monitoring Fee</U>. A
monthly collateral monitoring fee of Seven
Hundred Fifty Dollars ($750.00), payable in
arrears on the last day of each month
(prorated for any partial month at the
beginning and upon termination of this
Agreement); and&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by
deleting the following text at the end of Section&nbsp;6.2(a) in its
entirety:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;Notwithstanding the foregoing, during a
Streamline Period, provided no Event of
Default has occurred and is continuing,
Borrower shall be required to provide Bank
with the reports and schedules required
pursuant to clause (a)(i)(A) above on a
monthly basis.&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by
deleting the following text appearing in Section&nbsp;6.8 thereof in
its entirety:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;6.8 Operating Accounts.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(a) Maintain its and its
Subsidiaries&#146;, if any, primary
depository, operating accounts and securities
accounts with Bank and Bank&#146;s affiliates with
all excess funds maintained at or invested
through Bank or an affiliate of Bank, which
accounts shall represent at least eighty-five
percent (85%) of the dollar value of Borrower&#146;s
and such Subsidiaries accounts at all
financial institutions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(b) Provide Bank five (5)&nbsp;days prior-written
notice before establishing any Collateral
Account at or with any bank or financial
institution other than Bank or its Affiliates.
In addition,</TD>
</TR>




</TABLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>for each Collateral Account that
Borrower at any time maintains in the United
States at financial institutions other than
Bank, in an aggregate amount in excess of One
Hundred Thousand Dollars ($100,000) at any time,
Borrower shall cause the applicable bank or
financial institution (other than Bank) at or
with which any such Collateral Account is
maintained lo execute and deliver a Control
Agreement or other appropriate instrument with
respect to such Collateral Account to perfect
Bank&#146;s Lien in such Collateral Account in
accordance with the terms hereunder. The
provisions of the previous sentence shall not
apply to deposit accounts exclusively used for
payroll, payroll taxes and other employee wage
and benefit payments to or for the benefit of
Borrower&#146;s employees and identified to Bank by
Borrower as such.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and inserting in lieu thereof
the following:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;6.8 Operating Accounts.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(a) Maintain all of its and its Subsidiaries
domestic depository, operating accounts and
securities accounts with Bank, with all excess
funds maintained at or invested through Bank.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(b) Provide Bank five (5)&nbsp;days prior-written
notice before establishing any Collateral
Account at or with any bank or financial
institution other than Bank or Bank&#146;s
Affiliates. For each Collateral Account that
Borrower at any time maintains, Borrower shall
cause the applicable bank or financial
institution (other than Bank) at or with which
any Collateral Account is maintained to execute
and deliver a Control Agreement or other
appropriate instrument with respect to such
Collateral Account to perfect Bank&#146;s Lien in
such Collateral Account in accordance with the
terms hereunder which Control Agreement may not
be terminated without the prior written consent
of Bank. The provisions of the previous
sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or
for the benefit of Borrower&#146;s employees and
identified to Bank by Borrower as such.&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by deleting the following text appearing
in Section&nbsp;6.9 thereof in its entirety:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;6.9 Financial Covenants.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Borrower shall maintain at all times, to be
tested as of the last day of each month, on a
non-consolidated basis determined by Bank
from Borrower&#146;s unconsolidated balance sheet:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(a) <U>Tangible Net Worth</U>. From the
monthly period ended September&nbsp;30, 2008
through and including the monthly period
ending December&nbsp;31, 2008, a Tangible Net
Worth of not less than Sixteen Million
Dollars ($16,000,000), in each case
increasing by (i)&nbsp;seventy-five percent (75%)
of issuances of</TD>
</TR>


</TABLE>
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>equity or seventy-five percent (75%) of the
principal amount of Subordinated Debt issued
or incurred by the Borrower after the
Effective Date and (ii)&nbsp;seventy-five percent
(75%) of Borrower&#146;s unconsolidated net
income. Increases in this Tangible Net Worth
covenant based on consideration received from
(a)&nbsp;the issuance of equity securities of
Borrower and Subordinated Debt shall be
effective as of the end of the fiscal month
in which such consideration is received and
(b)&nbsp;quarterly income shall be effective as of
the end of each fiscal quarter, and shall
continue effective thereafter.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notwithstanding the foregoing, not later than
December&nbsp;31, 2008, Bank shall, after
consultation with Borrower in its reasonable
discretion, revise the Tangible Net Worth
covenant described in clause (a)&nbsp;above for
the period beginning January&nbsp;1, 2009 and for
each fiscal month thereafter.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and inserting in lieu thereof
the following:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;6.9 Financial Covenants.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Borrower shall maintain at all times, to be
tested as of the last day of each month, on a
non-consolidated basis determined by Bank
from Borrower&#146;s unconsolidated balance sheet:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(a) <U>Tangible Net Worth</U>. From the
monthly period ended September&nbsp;30, 2008 and
for each monthly period thereafter, a
Tangible Net Worth of not less than Sixteen
Million Dollars ($16,000,000), in each case
increasing by (i)&nbsp;seventy-five percent (75%)
of issuances of equity or seventy-five
percent (75%) of the principal amount of
Subordinated Debt issued or incurred by the
Borrower after the Effective Date and (ii)
seventy-five percent (75%) of Borrower&#146;s
unconsolidated net income. Increases in this
Tangible Net Worth covenant based on
consideration received from (a)&nbsp;the issuance
of equity securities of Borrower and
Subordinated Debt shall be effective as of
the end of the fiscal month in which such
consideration is received and (b)&nbsp;quarterly
income shall be effective as of the end of
each fiscal quarter, and shall continue
effective thereafter.&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">6</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by deleting the following definitions in
Section&nbsp;13.1 thereof, each in its entirety:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;Borrowing Base&#148; </B>is (a)&nbsp;seventy-five percent
(75%) of Eligible Accounts other than
Eligible &#145;Early Buy&#146; Pool and Spa Accounts
<U>plus</U> (b)&nbsp;the lesser of (X)&nbsp;fifty
percent (50%) of Borrower&#146;s cash at Bank or
(Y)&nbsp;One Million Five Hundred Thousand Dollars
($1,500,000), <U>plus</U> (c)&nbsp;the lesser of (X)
seventy-five percent (75%) of Eligible &#145;Early
Buy&#146; Pool and Spa Accounts or (Y)&nbsp;Five
Hundred Thousand Dollars ($500,000), in each
case as determined by Bank from Borrower&#146;s
most recent Borrowing Base Certificate;
<U>provided</U>, <U>however</U>, that Bank
may decrease the foregoing percentages and/or
amounts in its good faith business judgment
based on events, conditions, contingencies,
or risks</TD>
</TR>


</TABLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>which, as determined by Bank, may adversely
affect the value of the Collateral.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;Eligible &#145;Early Buy&#146; Pool and Spa Accounts&#148;</B>
means all of Borrower&#146;s pool and spa accounts
that are otherwise Eligible Accounts that are
(a)&nbsp;pre-approved by Bank in writing and (b)
due and payable ninety-one (91)&nbsp;to one
hundred eighty (180)&nbsp;days from invoice date;
<U>provided</U>, <U>however</U>, that
Eligible &#145;Early Buy&#146; Pool and Spa Accounts do
not include pool and spa accounts that are
not paid within the earlier of (X)&nbsp;thirty
(30)&nbsp;days from the invoice due date or (Y)
one hundred eighty (180)&nbsp;days from the
invoice date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;Liquidity Ratio&#148;</B> is, for any
date of measurement, the ratio of (a)
Borrower&#146;s cash at Bank on such date; <U>to</U> (b)
all outstanding Indebtedness owed by Borrower
to Bank on such date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;Revolving Line&#148; </B>is an Advance or Advances in
an aggregate amount of up to Four Million
Dollars ($4,000,000) outstanding at any time.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;Streamline Period&#148; </B>is any date in which
Borrower&#146;s Liquidity Ratio is greater than
2.50:1.00.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>and inserting in lieu thereof the following:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;&#147;Borrowing Base&#148; </B>is (a)&nbsp;seventy-five
percent (75%) of Eligible Accounts, as
determined by Bank from Borrower&#146;s most
recent Borrowing Base Certificate;
<U>provided</U>, <U>however</U>, that Bank
may decrease the foregoing percentage in its
good faith business judgment based on events,
conditions, contingencies, or risks which, as
determined by Bank, may adversely affect the
value of the Collateral.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;Revolving Line&#148; </B>is an Advance or Advances in
an aggregate amount of up to Two Million
Dollars ($2,000,000) outstanding at any
time.&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">7</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by
inserting the following definition in Section&nbsp;13.1 thereof, in
appropriate alphabetical order:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="10%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&nbsp;</B></TD>
    <TD width="1%"><B>&nbsp;</B></TD>
    <TD><B>&#147;&#147;Second Loan Modification Effective Date&#148; </B>is
the date indicated on the signature page to
the Second Loan Modification and Forbearance
Agreement entered into between Bank and
Borrower.&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">8</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Compliance Certificate appearing as
<U>Exhibit&nbsp;D</U> to the Loan Agreement is hereby replaced with
the Compliance Certificate attached as <U>Exhibit&nbsp;B</U> hereto.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. <U>FORBEARANCE BY BANK</U>.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In consideration of, among other things,
Borrower&#146;s compliance with each and every term of this Agreement, Bank
hereby agrees to forbear from exercising its rights and remedies
against the</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Borrower as a result of the Existing Defaults until the earlier to
occur of (i)&nbsp;a Default or an Event of Default under the Loan
Agreement (with the sole exception of the Existing Defaults), (ii)
the failure of Borrower to promptly, punctually, or faithfully
perform or comply with any term or condition of this Agreement as
and when required, it being expressly acknowledged and agreed that
TIME IS OF THE ESSENCE, or (iii)&nbsp;3:00 pm (Denver, Colorado time) on
June&nbsp;30, 2009 (the period commencing as of the date of the First
Loan Modification Effective Date and ending on the earlier of (i),
(ii)&nbsp;or (iii)&nbsp;above shall be referred to as the <B>&#147;Forbearance
Period&#148;</B>).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Borrower hereby acknowledges and agrees that nothing contained in this section or
in any other section of this Agreement shall be deemed or otherwise construed as
a waiver by Bank of the Existing Defaults or any other Default or
Event of Default (whether now existing or hereafter arising) or of
any of its rights and remedies pursuant to the Existing Loan
Documents, applicable law or otherwise. This Loan Modification
Agreement shall only constitute an agreement by Bank to forbear from
enforcing its rights and remedies based upon the Existing Defaults
upon the terms and conditions set forth herein. Upon the expiration
of the Forbearance Period, the agreement of Bank to forbear as set
forth in this Loan Modification Agreement shall automatically
terminate and Bank may immediately commence enforcing its rights and
remedies pursuant to the Existing Loan Documents, applicable law or
otherwise, in such order and manner as Bank may determine
appropriate.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">6.&nbsp;<U>TERMS OF FORBEARANCE</U>.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>From and after the execution of this Loan Modification
Agreement, Borrower agrees that Bank shall have no further obligation
to make any Advances to Borrower, or to issue or provide any other
extensions of credit of any kind to Borrower (as used herein and in the
Loan Agreement, any Advance, Letter of Credit, FX Forward Contract,
amount utilized for Cash Management Services, or any other extension of
credit by Bank for Borrower&#146;s benefit shall be referred to as a &#147;Credit
Extension&#148;). Notwithstanding the foregoing, during the Forbearance
Period and at the request of Borrower, Bank may, in its sole and
absolute discretion, continue to make any Credit Extensions, subject in
all events to the terms and conditions of this Loan Modification
Agreement, the Loan Agreement (including but not limited to, all
limitations imposed by the Borrowing Base and the Availability Amount)
and the other Existing Loan Documents. Borrower covenants and agrees
that if, in the sole and absolute discretion of Bank, Bank shall make
any Credit Extensions during the Forbearance Period, such act shall not
constitute (i)&nbsp;a waiver of any of the Existing Defaults, or of any
other Default or Event of Default which may now exist or which may
occur after the date of this Loan Modification Agreement under any of
the Existing Loan Documents, or (ii)&nbsp;an agreement on the part of Bank
to make any further extensions of credit of any kind to Borrower at a
later date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At all times during the Forbearance Period Borrower
shall comply with all terms and conditions contained in the Loan
Agreement and other Loan Documents and shall continue to remit all
regularly scheduled payments (including, without limitation, all
principal, interest, fees, costs and other amounts) which may become
due under the Existing Loan Documents, as and when such payments are
due.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">7. <U>FEES</U>. Borrower shall pay to Bank a forbearance fee equal to Four
Thousand Dollars ($4,000.00),
which fee shall be due on the date hereof and shall be deemed fully earned as of
the date hereof. Borrower shall also reimburse Bank for all legal fees and
expenses incurred in connection with the Existing Loan Documents and this Loan
Modification Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">8. <U>RATIFICATION OF IP AGREEMENT</U>. Borrower hereby ratifies, confirms and
reaffirms, all and singular, the terms and conditions of the IP Agreement, and
acknowledges, confirms and agrees that said IP Agreement contains an accurate and
complete listing of all Intellectual Property Collateral as defined in said IP
Agreement, shall remain in full force and effect. Notwithstanding the terms and
conditions of the IP Agreement, the
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Borrower shall not register any Copyrights or Mask Works in the United States
Copyright Office unless it: (i)&nbsp;has given at least fifteen (15)&nbsp;days&#146;
prior-written notice to Bank of its intent to register such Copyrights or Mask
Works and has provided Bank with a copy of the application it intends to file
with the United States Copyright Office (excluding exhibits thereto); (ii)
executes a security agreement or such other documents as Bank may reasonably
request in order to maintain the perfection and priority of Bank&#146;s security
interest in the Copyrights proposed to be registered with the United States
Copyright Office; and (iii)&nbsp;records such security documents with the United
States Copyright Office contemporaneously with filing the Copyright
application(s) with the United States Copyright Office. Borrower shall promptly
provide to Bank a copy of the Copyright application(s) filed with the United
States Copyright Office, together with evidence of the recording of the security
documents necessary for Bank to maintain the perfection and priority of its
security interest in such Copyrights or Mask Works. Borrower shall provide
written notice to Bank of any application filed by Borrower in the United States
Patent Trademark Office for a patent or to register a trademark or service mark
within thirty (30)&nbsp;days of any such filing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">9. <U>RATIFICATION OF PERFECTION CERTIFICATE</U>. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of October&nbsp;27, 2008 executed by Borrower,
and acknowledges, confirms and agrees the disclosures and information Borrower
provided to Bank in the Perfection Certificate have not changed, as of the date
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">10. <U>AUTHORIZATION TO FILE</U>. Borrower hereby authorizes Bank to file UCC
financing statements without notice to Borrower, with all appropriate
jurisdictions, as Bank deems appropriate, in order to further perfect or protect
Bank&#146;s interest in the Collateral, including a notice that any disposition of the
Collateral, by either the Borrower or any other Person, shall be deemed to violate
the rights of the Bank under the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">11. <U>CONSISTENT CHANGES</U>. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">12. <U>RATIFICATION OF LOAN DOCUMENTS</U>. Borrower hereby ratifies, confirms,
and reaffirms all terms and conditions of the Loan Agreement, the other Existing
Loan Documents and all security or other collateral granted to the Bank, and
confirms that the indebtedness secured thereby includes, without limitation, the
Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">13. <U>NO DEFENSES OF BORROWER</U>. Borrower hereby acknowledges and agrees
that Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED and
Borrower hereby RELEASES Bank from any liability thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">14. <U>CONTINUING VALIDITY</U>. Borrower understands and agrees that in
modifying the existing Obligations, Bank is relying upon Borrower&#146;s
representations, warranties, and agreements, as set forth in the Existing Loan
Documents. Except as expressly modified pursuant to this Loan Modification
Agreement, the terms of the Existing Loan Documents remain unchanged and in full
force and effect. Bank&#146;s agreement to modifications to the existing Obligations
pursuant to this Loan Modification Agreement in no way shall obligate Bank to make
any future modifications to the Obligations. Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Obligations. It is the
intention of Bank and Borrower to retain as liable parties all makers of Existing
Loan Documents, unless the party is expressly released by Bank in writing. No
maker will be released by virtue of this Loan Modification Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">15. <U>RIGHT OF SET-OFF</U>. In consideration of Bank&#146;s agreement to enter
into this Loan Modification Agreement, Borrower hereby reaffirms and hereby grants
to Bank, a lien, security interest and right of set off as security for all
Obligations to Bank, whether now existing or hereafter arising upon and against
all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Silicon Valley Bank (including a Bank subsidiary) or in transit to any
of them. At any time after the occurrence and during the continuance of an Event
of Default, without demand or notice, Bank may set off the same or any part
thereof and apply the same to any liability or obligation of Borrower even though
unmatured
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and regardless of the adequacy of any other collateral securing the loan. ANY
AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">16. <U>JURISDICTION/VENUE</U>. Borrower accepts for itself and in
connection with its properties, unconditionally, the exclusive jurisdiction
of any state or federal court of competent jurisdiction in the State of California
in any action, suit, or proceeding of any kind against it which arises out of or
by reason of this Loan Modification Agreement. NOTWITHSTANDING THE FOREGOING, THE
BANK SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS
NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE
ENFORCE THE BANK&#146;S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">17. <U>CONFIDENTIALITY</U>. Bank may use confidential information for the
development of databases, reporting purposes, and market analysis, so long as such
confidential information is aggregated and anonymized prior to distribution unless
otherwise expressly permitted by Borrower. The provisions of the immediately
preceding sentence shall survive the termination of the Loan Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">18. <U>COUNTERSIGNATURE</U>. This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>&#091;The remainder of this page is intentionally left</I>&#093;
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">This Loan Modification Agreement is executed under the laws of the State of
California as of the Second Loan Modification Effective Date.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><B>BORROWER:</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>BANK:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><B>ENERGY FOCUS, INC.</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>SILICON VALLEY BANK</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">/s/ Nicholas G. Berchtold</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nicholas G. Berchtold
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">VP Finance and CFO
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Second Loan Modification Effective Date: June&nbsp;12, 2009
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt">[Second Loan Modification and Forbearance Agreement Signature Page]</DIV>


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<DESCRIPTION>EX-10.3
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10.3
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THIRD LOAN MODIFICATION AND FORBEARANCE AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Third Loan Modification and Forbearance Agreement (this <B>&#147;Loan Modification Agreement&#148;</B>) is
entered into as of the Third Loan Modification Effective Date, by and between <B>SILICON VALLEY BANK</B>,
a California corporation, with its principal place of business 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at 380 Interlocken Crescent, Suite&nbsp;600,
Broomfield, Colorado 80021 (<B>&#147;Bank&#148;</B>) and <B>ENERGY FOCUS, INC., </B>a Delaware corporation, formerly known
as Fiberstars, Inc., a Delaware corporation, with offices located at 32000 Aurora Road, Solon, Ohio
44139.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. <U>DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS</U>. Among other indebtedness
and obligations which may be owing by Borrower to Bank. Borrower is indebted to Bank
pursuant to a loan arrangement dated as of October&nbsp;27, 2008, evidenced by, among other
documents, a certain Second Amended and Restated Loan and Security Agreement dated as of
October&nbsp;27, 2008 between Borrower and Bank (the &#147;<B>Original Loan Agreement&#148;</B>), as amended by a
certain First Modification and Forbearance Agreement dated as of January&nbsp;31, 2009 between
Borrower and Bank (the &#147;<B>First Amendment&#148;</B>), and as further modified by a certain Second Loan
Modification and Forbearance Agreement, dated as of June&nbsp;12, 2009 (the <B>&#147;Second Amendment&#148;</B>,
and together with the First Amendment and the Original Loan Agreement, and as, may be
further amended from time to time, the &#147;<B>Loan Agreement</B>&#148;). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. <U>DESCRIPTION OF COLLATERAL</U>. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and as described in a certain Intellectual
Property Security Agreement between borrower and Bank, as ratified and reaffirmed by a
certain Reaffirmation of Intellectual Property Security Agreement dated as of October&nbsp;27,
2008 between Borrower and Bank (collectively, the <B>&#147;IP Agreement&#148;</B>, and together with any
other collateral security granted to Bank, the <B>&#147;Security Documents&#148;</B>).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hereinafter, the Security Documents, together with all other documents evidencing or securing
the Obligations shall be referred to as the &#147;<B>Existing Loan Documents</B>&#148;.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. <U>ACKNOWLEDGMENT OF DEFAULTS</U>. Borrower acknowledges and agrees that Bank is
currently forbearing from enforcing its rights and remedies pursuant to the First Amendment
and the Second Amendment due to certain Defaults and Events of Default that have occurred
under the Loan Agreement by virtue of Borrower&#146;s failure to comply with the minimum
Tangible Net Worth covenant contained in Section&nbsp;6.9(a) of the Loan Agreement for the
compliance periods ended on November&nbsp;30, 2008 and December&nbsp;31, 2008, January&nbsp;31, 2009,
February&nbsp;28, 2009, March&nbsp;31, 2009, April&nbsp;30, 2009 (the <B>&#147;Prior Defaults&#148;</B>). In addition,
Borrower failed to comply with the minimum Tangible Net Worth covenant set forth in Section
6.9(a) for the compliance period ended May&nbsp;31, 2009 (the <B>&#147;Additional Default&#148;</B>, and together
with the Prior Defaults, the <B>&#147;Existing Defaults&#148;</B>).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. <U>DESCRIPTION OF CHANGE IN TERMS</U>.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Modifications to Loan Agreement.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by inserting the following new Section&nbsp;2.5
immediately following Section&nbsp;2.4 thereof:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%"><B>&#147;2.5 Interest on Pledged CD; Payment of Interest on Pledged CD; Termination of Pledged
CD.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">(a) <U>Interest on Pledged CD</U>. Each Pledged CD shall bear interest at the Pledged
CD Rate. The initial CD Interest Period applicable to the Pledged CDs in connection
with the notice of delivery of Pledged CD will be indicated on the form attached as
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%"><U>Schedule&nbsp;A</U> hereto. Thereafter, each subsequent CD Interest Period will begin automatically
in seven-day increments until the termination of the Pledged CD in accordance with Section&nbsp;2.5(c)
hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">(b) <U>Payment of Interest on the Pledged CD</U>. Accrued but unpaid interest on the Pledged CD
shall be payable upon the termination of the Pledged CD in accordance with Section&nbsp;2.5(c) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">(c) <U>Termination of Pledged CD</U>. The Pledged CD will terminate upon the earlier to occur of
(i)&nbsp;the occurrence of an Event of Default (other than the Existing Defaults) and (ii)&nbsp;the Revolving
Line Maturity Date. Upon termination of the Pledged CD, the entire outstanding principal of and
accrued but unpaid interest on the Pledged CD shall be applied to the Obligations pursuant to the
terms of Section&nbsp;9.4 hereof.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by deleting the following text appearing in Section&nbsp;4.1
thereof in its entirety:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%"><B>&#147;4.1 Grant of Security Interest</B>. Borrower herby grants Bank to secure the payment and performance
in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the
Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds
and products thereof. Borrower represents, warrants, and covenants that the security interest
granted herein is and shall at all times continue to be a first priority perfected security
interest in the Collateral (subject only to Permitted Liens that may have superior priority to
Bank&#146;s Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower
shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant
to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms
of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">and inserting in lieu thereof the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%"><B>&#147;4.1 Grant a Security Interest</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">(a)&nbsp;Borrower hereby grants Bank, to secure the payment and performance in full of all of
the Obligations a continuing security interest in, and pledges and assigns to Bank, the
Collateral, wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower represents and warrants that the security interest
granted herein shall be a first priority perfected security interest in the Collateral. If
Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a
writing signed by Borrower of the general details thereof and grant to Bank in such writing
a security interest therein and in the proceeds thereof, all
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">upon the terms of this Agreement, with such writing to be in form and substance satisfactory to
Bank.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">(b)&nbsp;Borrower hereby assigns, pledges, delivers, and transfers to Bank, and hereby grants to Bank, a
continuing first priority security interest in and against all right, title and interest of the
following, whether now or hereafter existing or acquired by Borrower, and Pledged CD issued from
time to time and general intangibles arising therefrom or relating thereto; and all documents,
instruments and agreements evidencing the same; and all extensions, renewals, modifications and
replacements of the foregoing; and any interest or other amounts payable in connection therewith,
including, without limitation:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">(i)&nbsp;all proceeds of the foregoing (including whatever is receivable or received when any Pledged CD
or proceeds is invested, sold, collected, exchanged, returned, substituted or otherwise disposed
of, whether such disposition is voluntary or involuntary, including rights to payment and return
premiums and insurance proceeds under insurance with respect to any Pledged CD, and all rights to
payment with respect to any cause of action affecting or relating to the Pledged CD); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">(ii)&nbsp;all renewals, replacements and substitutions of items of any Pledged CD.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">If this Agreement is terminated. Bank&#146;s Lien in the Collateral shall continue until the Obligations
(other than inchoate indemnity obligations) are repaid in full in cash. The parties to this
Agreement do not intend that Borrower&#146;s delivery of any Pledged CD to Bank as herein provided will
constitute an advance payment of any Obligations or liquidated damages, nor do the parties intend
that any Pledged CD increase the dollar amount of the Obligations.&#148;
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by deleting the following definitions in Section&nbsp;13.1 thereof,
each in its entirety:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%"><B>&#147;Borrowing Base&#148; </B>is seventy-five percent (75%) of Eligible Accounts, as determined by Bank from
Borrower&#146;s most recent Borrowing Base Certificate; <U>provided</U>, <U>however</U>, that Bank may
decrease the foregoing percentage in its good faith business judgment based on events, conditions,
contingencies, or risks which, as determined by Bank, may adversely affect the value of the
Collateral.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">and inserting in lieu thereof the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%"><B>&#147;Borrowing Base&#148; </B>is (a)&nbsp;seventy-five percent (75%) of Eligible Accounts, as determined by Bank
from Borrower&#146;s most recent Borrowing Base Certificate plus (b)&nbsp;from the Third Loan Modification
Effective date through and including the Revolving Line Maturity Date, up to One Million Three
Hundred Thousand Dollars ($1,300,000), at all times secured in full by the Pledged
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">CD; <U>provided,</U> <U>however</U>, that Bank may decrease the foregoing percentage or
amount in its good faith business judgment based on events, conditions, contingencies, or risks
which, as determined by Bank, may adversely affect the value of the Collateral.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Loan Agreement shall be amended by inserting the following definition in Section&nbsp;13.1
thereof, in appropriate alphabetical order:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">&#147;&#147;<B>CD Interest Determination Date</B>&#148; shall mean the date of delivery of a Pledged CD and the date of
the commencement of each CD Interest Period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">&#147;<B>CD Interest Period</B>&#148;  shall mean the period commencing initially on the date of delivery of a
Pledged CD and thereafter on the date immediately following the end of any such initial period or
subsequent period, and ending on the last Business Day of the period ending approximately seven (7)
days thereafter.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">&#147;<B>Pledged CD</B>&#148; shall mean any and all certificates of deposit issued to Borrower by Bank, in a
minimum principal amount of not less than One Million Three Hundred Thousand Dollars ($1,300,000),
plus any accrued but unpaid interest thereon.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">&#147;<B>Pledged CD Rate</B>&#148; shall mean, for any CD Interest Determination Date, Bank&#146;s prevailing commercial
rate in effect on such date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 13%">&#147;<B>Third Loan Modification Effective Date</B>&#148; is the date indicated on the signature page to the Third
Loan Modification and Forbearance Agreement entered into between Bank and Borrower.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. <U>FORBEARANCE BY BANK</U>.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In consideration of, among other things, Borrower&#146;s compliance with each and every
term of this Loan Modification Agreement, Bank hereby agrees to forbear from exercising
its rights and remedies against the Borrower as a result of the Existing Defaults until the
earlier to occur of (i)&nbsp;a Default or an Event of Default under the Loan Agreement (with the
sole exception of the Existing Defaults), (ii)&nbsp;the failure of Borrower to promptly,
punctually, or faithfully perform or comply with any term or condition of this Agreement as
and when required, it being expressly acknowledged and agreed that TIME IS OF THE ESSENCE,
or (iii)&nbsp;3:00 pm (Denver, Colorado time) on July&nbsp;31, 2009 (the period commencing as of the
date of the Third Loan Modification Effective Date and ending on the earlier of (i), (ii)
or (iii)&nbsp;above shall be referred to as the <B>&#147;Forbearance Period&#148;</B>).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Borrower hereby acknowledges and agrees that nothing contained in this section or in
any other section of the Loan Modification Agreement shall be deemed or otherwise construed
as a waiver by Bank of the Existing Defaults or any other Default or Event of Default
(whether now existing or hereafter arising) or of any of its rights and remedies pursuant
to the Existing Loan Documents, applicable law or otherwise. This Loan Modification Agreement
shall only constitute an agreement by Bank to forbear from enforcing its rights and
remedies based upon the Existing Defaults upon the terms and conditions set forth herein.
Upon the expiration of the Forbearance</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Period, the agreement of Bank to forbear as set forth in this Loan Modification Agreement
shall automatically terminate and Bank may immediately commence enforcing its rights and remedies
pursuant to the Existing Loan Documents, applicable law or otherwise, in such order and manner as
Bank may determine appropriate.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">6. <U>TERMS OF FORBEARANCE.</U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">A.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>From and after the execution of this Loan Modification Agreement, Borrower agrees
that Bank shall have no further obligation to make any Advances to Borrower, or to issue
or provide any other extensions of credit of any kind to Borrower (as used herein and in
the Loan Agreement, any Advance, Letter of Credit, FX Forward Contract, amount utilized
for Cash Management Services, or any other extension of credit by Bank for Borrower&#146;s
benefit shall be referred to as a &#147;Credit Extension&#148;). Notwithstanding the foregoing,
during the Forbearance Period and at the request of Borrower, Bank may, in its sole and
absolute discretion, continue to make any Credit Extensions, subject in all events to the
terms and conditions of this Loan Modification Agreement, the Loan Agreement (including
but not limited to, all limitations imposed by the Borrowing Base and the Availability
Amount) and the other Existing Loan Documents. Borrower covenants and agrees that if, in
the sole and absolute discretion of Bank, Bank shall make any Credit Extensions during
the Forbearance Period, such act shall not constitute (i)&nbsp;a waiver of any of the
Existing Defaults, or of any other Default or Event of Default which may now exist or
which may occur after the date of this Loan Modification Agreement under any of the
Existing Loan Documents, or (ii)&nbsp;an agreement on the part of Bank to make any further
extensions of credit of any kind to Borrower at a later date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">B.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At all times during the Forbearance Period Borrower shall comply with all terms
and conditions contained in the Loan Agreement and other Loan Documents and shall
continue to remit all regularly scheduled payments (including, without limitation, all
principal, interest, fees, costs and other amounts) which may become due under the
Existing Loan Documents, as and when such payments are due.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">7. <U>FEES</U>. Borrower shall pay to Bank a forbearance fee equal to Four Thousand Dollars
($4,000.00), which fee shall be due on the date hereof and shall be deemed fully earned as of
the date hereof. Borrower shall also reimburse Bank for all legal fees and expenses incurred
in connection with the Existing Loan Documents and this Loan Modification Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">8. <U>RATIFICATION OF IP AGREEMENT.</U> Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of the IP
Agreement, and acknowledges, confirms and agrees that said IP Agreement contains
an accurate and complete listing of all Intellectual Property Collateral as
defined in said IP Agreement, which shall remain in full force and effect.
Notwithstanding the terms and conditions of the IP Agreement, the Borrower shall
not register any Copyrights or Mask Works in the United States Copyright Office
unless it: (i)&nbsp;has given at least fifteen (15)&nbsp;days, prior-written notice of Bank
of its intent to register such Copyrights or Mask Works and has provided Bank
with a copy of the application it intends to file with the United States
Copyright Office (excluding exhibits thereto); (ii)&nbsp;executes a security agreement
or such other documents as Bank may reasonably request in order to maintain the
perfection and priority of Bank&#146;s security interest in the Copyrights proposed to
be registered with the United States Copyright Office; and (iii)&nbsp;records such
security documents with the United States Copyright Office contemporaneously with
filing the Copyright application(s) with the United States Copyright Office.
Borrower shall promptly provide to Bank a copy of the Copyright application(s)
filed with the United States Copyright Office, together with evidence of the
recording of the security documents necessary for Bank to maintain the perfection
and priority of its security interest in such Copyrights or Mask Works. Borrower
shall provide written notice to Bank of any application filed by Borrower in the
United States Patent Trademark Office for a patent or to register a trademark or
service mark within thirty (30)&nbsp;days of any such filing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">9. <U>RATIFICATION OF PERFECTION CERTIFICATE</U>. Borrower hereby
ratifies, confirms and reaffirms, all and singular, the terms and disclosures
contained in a certain Perfection Certificate dated as of October&nbsp;27, 2008
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">executed by Borrower, and acknowledges, confirms and agrees the disclosures and information
Borrower provided to Bank in the Perfection Certificate have not changed, as of the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">10. <U>AUTHORIZATION TO FILE</U>. Borrower hereby authorizes Bank to file UCC financing statements
without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to further perfect or protect Bank&#146;s interest in the Collateral, including a notice that any
disposition of the Collateral, by either the Borrower or any other Person, shall be deemed to
violate the rights of the Bank under the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">11. <U>CONSISTENT CHANGES</U>. The Existing Loan Documents are hereby amended wherever necessary
to reflect the changes described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">12. <U>RATIFICATION OF LOAN DOCUMENTS</U>. Borrower hereby ratifies, confirms, and reaffirms all
terms and conditions of the Loan Agreement the other Existing Loan Documents and all security or
other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">13. <U>NO DEFENSES OF BORROWER</U>. Borrower hereby acknowledges and agrees that Borrower has no
offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or
otherwise, and that if
Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank,
whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower
hereby RELEASES Bank from any liability thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">14. <U>CONTINUING VALIDITY</U>. Borrower understands and agrees that in modifying the existing
Obligations,
Bank is relying upon Borrower&#146;s representations, warranties and agreements, as set forth in the
Existing Loan
Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing
Loan Documents remain unchanged and in full force and effect. Bank&#146;s agreement to modifications to
the existing
Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any
future
modifications to the Obligations. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the
Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of
Existing Loan
Documents, unless the party is expressly released by Bank in writing. No maker will be released
by virtue of this
Loan Modification Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">15. <U>RIGHT OF SET-OFF</U>. In consideration of Bank&#146;s agreement to enter into this Loan
Modification
Agreement, Borrower hereby reaffirms and hereby grants to Bank, a lien, security interest and right
of set off as
security for all Obligations to Bank, whether now existing or hereafter arising upon and against
all deposits, credits,
collateral and property, now or hereafter in the possession, custody, safekeeping or control of
Bank or any entity
under the control of Silicon Valley Bank (including a Bank subsidiary) or in transit to any of them.
At any time
after the occurrence and during the continuance of an Event of Default, without demand or notice,
Bank may set off
the same or any part thereof and apply the same to any liability or obligation of Borrower even
though unmatured
and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO
REQUIRE
BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT
TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">16. <U>JURISDICTION/VENUE.</U> Borrower accepts for itself and in connection with its properties,
unconditionally, the exclusive jurisdiction of any state or federal court of competent jurisdiction
in the State of
California in any action, suit, or proceeding of any kind against it which arises out of or by reason of this Loan Modification Agreement.
NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT
TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE
IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK&#146;S RIGHTS
AGAINST THE BORROWER OR ITS PROPERTY.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">17. <U>CONFIDENTIALITY</U>. Bank may use confidential information for the development of
databases, reporting
purposes, and market analysis, so long as such confidential information is aggregated and
anonymized prior to
distribution unless otherwise expressly permitted by Borrower. The provisions of the immediately
preceding
sentence shall survive the termination, of the Loan Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">18. <U>COUNTERSIGNATURE</U>. This Loan Modification Agreement shall become effective only when it
shall
have been executed by Borrower and Bank.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>&#091;The remainder of this page is intentionally left blank&#093;</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Loan Modification Agreement is executed under the laws of the State of California as of the
Third Loan Modification Effective Date.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><B>BORROWER:</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>BANK:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><B>ENERGY FOCUS, INC.</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>SILICON VALLEY BANK</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">/s/ Nicholas Berchtold</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">/s/ Shane Anderson</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nicholas Berchtold
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shane Anderson</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SRM</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Third Loan Modification Effective Date: July&nbsp;22, 2009
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;Third Loan Modification and Forbearance Agreement Signature Page&#093;
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>5
<FILENAME>l37333exv31w1.htm
<DESCRIPTION>EX-31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 31.1</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">CERTIFICATION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Joseph G. Kaveski, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this quarterly report on Form 10-Q of Energy Focus, Inc.;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) for the registrant and we have:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(a)&nbsp;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;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(b)&nbsp;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;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;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
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial
reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant&#146;s internal control over financial
reporting; and
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of registrant&#146;s board of directors (or persons performing the equivalent
functions):
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(a)&nbsp;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&#146;s ability to record, process, summarize and report financial information; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant&#146;s internal controls over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date:
August&nbsp;13, 2009
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                                           /s/Joseph G. Kaveski
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Joseph G. Kaveski&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>6
<FILENAME>l37333exv31w2.htm
<DESCRIPTION>EX-31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 31.2</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">CERTIFICATION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Nicholas G. Berchtold, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this quarterly report on Form 10-Q of Energy Focus, Inc.;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) for the registrant and we have:
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(a)&nbsp;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;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(b)&nbsp;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;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;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
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial
reporting that occurred during the registrant&#146;s most recent fiscal quartssser (the registrant&#146;s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant&#146;s internal control over financial
reporting; and
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of registrant&#146;s board of directors (or persons performing the equivalent
functions):
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(a)&nbsp;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&#146;s ability to record, process, summarize and report financial information; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant&#146;s internal controls over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date:
August&nbsp;13, 2009
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">   /s/ Nicholas G. Berchtold
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Nicholas G. Berchtold&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>7
<FILENAME>l37333exv32w1.htm
<DESCRIPTION>EX-32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STATEMENT OF CHIEF EXECUTIVE OFFICER UNDER 18 U.S.C. &#167;&nbsp;1350</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Joseph G. Kaveski, the Chief Executive Officer of Energy Focus, Inc. (the &#147;company&#148;), certify
for the purposes of
section 1350 of chapter 63 of title 18 of the United States Code that, to the best of my
knowledge,
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(i)&nbsp;The Quarterly Report of the company on Form 10-Q for the period ended June&nbsp;30, 2009 (the
&#147;Report&#148;), fully complies with the requirements of section 13(a) of the Securities Exchange Act of
1934, and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(ii)&nbsp;The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the company.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                     /s/ Joseph G. Kaveski
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Joseph G. Kaveski&nbsp;<br>August 13, 2009</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;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.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
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<SEQUENCE>8
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 32.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STATEMENT OF CHIEF FINANCIAL OFFICER UNDER 18 U.S.C. &#167;&nbsp;1350</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Nicholas G. Berchtold, the Chief Financial Officer of Energy Focus, Inc. (the &#147;company&#148;),
certify for the purposes of section
1350 of chapter 63 of title 18 of the United States Code that, to the best of my knowledge,
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(i)&nbsp;The Quarterly Report of the company on Form 10-Q for the period ended June&nbsp;30, 2009 (the
&#147;Report&#148;), fully complies with the requirements of section 13(a) of the Securities Exchange Act of
1934, and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(ii)&nbsp;The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the company.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                     /s/ Nicholas G. Berchtold
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Nicholas G.
Berchtold&nbsp;<br>August 13, 2009</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;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.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
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