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<SEC-DOCUMENT>0001299933-10-004064.txt : 20101115
<SEC-HEADER>0001299933-10-004064.hdr.sgml : 20101115
<ACCEPTANCE-DATETIME>20101115095525
ACCESSION NUMBER:		0001299933-10-004064
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20101111
ITEM INFORMATION:		Results of Operations and Financial Condition
FILED AS OF DATE:		20101115
DATE AS OF CHANGE:		20101115

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:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24230
		FILM NUMBER:		101189548

	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>8-K
<SEQUENCE>1
<FILENAME>htm_39719.htm
<DESCRIPTION>LIVE FILING
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<TITLE> Energy Focus, Inc. (Form: 8-K) </TITLE>
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		UNITED STATES<BR>
	SECURITIES AND EXCHANGE COMMISSION
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<BR>
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	WASHINGTON, D.C. 20549
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	FORM 8-K
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	CURRENT REPORT
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	Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
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	Date of Report (Date of Earliest Event Reported):
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	&nbsp;
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	November 11, 2010
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	Energy Focus, Inc.
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<BR>__________________________________________<BR>
	(Exact name of registrant as specified in its charter)
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	Delaware
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	0-24230
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	94-3021850
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_____________________<BR>
	(State or other jurisdiction
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_____________<BR>
	(Commission
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	(I.R.S. Employer
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	of incorporation)
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	File Number)
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	Identification No.)
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	32000 Aurora Road, Solon, Ohio
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	&nbsp;
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	44139
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_________________________________<BR>
	(Address of principal executive offices)
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	&nbsp;
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___________<BR>
	(Zip Code)
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	Registrant&#146;s telephone number, including area code:
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	440-715-1300
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	Not Applicable
<BR>______________________________________________<BR>
	Former name or former address, if changed since last report
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<P ALIGN="CENTER">
<FONT SIZE="2">
	&nbsp;
</FONT>
<!-- CoverPageRegistrant END --><P><FONT SIZE="2">
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:</FONT>
</P>
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[&nbsp;&nbsp;]&nbsp;&nbsp;Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<br>
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<B>
	Item 2.02 Results of Operations and Financial Condition.
</B>
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<P ALIGN="LEFT">
<FONT SIZE="2">
On November 11, 2010, Energy Focus, Inc. (the "Company") issued a press release announcing its financial results for the quarter ended September 30, 2010, and hosted an investor call to discuss those results.<br><br>A copy of the press release is furnished with this Report as Exhibits 99.1 and is incorporated in this Report by reference. A copy of the written transcript of the investor conference call is also furnished with this Report as Exhibit 99.2 and is incorporated in this Report by reference.<br><br>The information under this Item in this Report, as well as Exhibits 99.1 and 99.2, is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that Section. The information under this Item in this Report, and those Exhibits, shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933. <br><br><br><br>
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<B>
	SIGNATURES
</B>
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	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 hereunto duly authorized.
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	Energy Focus, Inc.
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<I>
	November 15, 2010
</I>
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	&nbsp;
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<I>
	By:
</I>
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	&nbsp;
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<I>
	Nicholas G. Berchtold
</I>
<BR>
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	&nbsp;
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<I>
	Name: Nicholas G. Berchtold
</I>
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	Title: Chief Financial Officer
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	Exhibit&nbsp;Index
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	Exhibit No.
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	Description
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	99.1
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	&nbsp;
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Press Release dated November 11, 2010 - Energy Focus, Inc. Reports Third Quarter 2010 Results
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	99.2
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	&nbsp;
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Transcript of Investor Conference Call Held on November 11, 2010
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<BODY style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><FONT style="font-size: 14pt"><B>ENERGY FOCUS, INC. REPORTS THIRD QUARTER 2010 RESULTS<BR>
PROVIDES FOURTH QUARTER FORECAST</B></FONT>



<P align="left" style="font-size: 14pt"><FONT style="font-size: 12pt">SOLON, Ohio, November&nbsp;11, 2010 &#151; Energy Focus, Inc. (NASDAQ: EFOI) today announced financial
results for the third quarter ended September&nbsp;30, 2010 and forecast for fourth quarter 2010 sales
and cash projections.
</FONT>

<P align="left" style="font-size: 12pt">Financial and operating highlights for the third quarter of 2010 include the following:


<P>
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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Net sales from continuing operations increased in the third quarter of 2010 to $9.0
million, compared to $3.0&nbsp;million for the third quarter of 2009.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company finished the quarter with a balance sheet showing cash in the amount of $2.7
million and total shareholders&#146; equity of $8.0&nbsp;million.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash generation for the third quarter of 2010 was $0.6&nbsp;million, compared to cash
utilization of $2.3&nbsp;million in the third quarter of 2009. Excluding net proceeds from
financing activities, the company had cash generation of $0.5&nbsp;million in the third quarter
2010 yielding a year to date net cash of $155,000 generated by operations.</TD>
</TR>

</TABLE>


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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$2.8&nbsp;million in lighting solutions contracts secured and $1.4&nbsp;million in new military
contracts.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 12pt">The forecast for Q4 and 2010 include the following:


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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Sales, as previously forecast, in excess of $35&nbsp;million are anticipated for 2010 with net
sales from continuing operations expected to exceed $8.4&nbsp;million in the fourth quarter 2010
versus $3.6&nbsp;million in the fourth quarter 2009.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

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    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company anticipates being net cash flow positive from operations in 2010.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$5.6&nbsp;million, for at least a total of $27.4&nbsp;million, in lighting solutions contracts
secured by the end of the fourth quarter for work expected to be completed in 2010 and 2011.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 12pt">&#147;We continue to be delighted with the performance of our solutions, US products and military
businesses,&#148; said Joe Kaveski, CEO of Energy Focus, Inc. &#147;During the third quarter, Rob Wilson,
Steve Gasperson and their teams helped sustain our first and second quarter&#146;s sales momentum by
securing an additional $2.8&nbsp;million in lighting solutions contracts and delivering over $9.0
million in total sales. Furthermore, Roger Buelow and his government team secured an additional
$1.4&nbsp;million in new military contracts during the quarter. The government team has now secured a
total of $3.0&nbsp;million in new contracts for the year.&#148;


<P align="left" style="font-size: 12pt">Energy Focus management will host a conference call on Thursday, November&nbsp;11, 2010 at 4:30 p.m. EDT
(1:30 p.m. PDT) to review the third quarter 2010 financial results and other corporate events,
followed by a Q & A session. Dialing 1-866-416-5346 (US/Canada) or 1-913-312-0967
(International/Local), participants can access the conference call. The conference ID number is
5330384. Participants are asked to call the assigned number approximately 10 minutes before the
conference call begins.


<P align="left" style="font-size: 12pt">The conference call will also be available over the Internet at http://www.energyfocusinc.com in
the Investor Relations area of the site. A replay of the conference call will be available two
hours after the call for the following 7&nbsp;days by dialing 1-866-416-5346 (US/Canada) or
1-913-312-0967 (international/local) and entering the following pass code: 5330384. Also, a replay
of the conference call will be available over the Internet at http://www.energyfocusinc.com on
November&nbsp;11th, 2010 and will remain available for one year in the Investor Relations area of the
site.


<P align="left" style="font-size: 12pt">About Energy Focus, Inc.


<P align="left" style="font-size: 12pt">Energy Focus, Inc. is a leading provider of energy efficient LED lighting products and turnkey
energy efficient lighting solutions, holding 69 relevant lighting patents. Our solutions provide
energy savings, aesthetics, safety and maintenance cost benefits over conventional lighting. Our
long-standing relationship with the U.S. Government includes numerous research and development
projects for the DOE and DARPA, creating energy efficient LED lighting systems for the U.S. Navy
fleet and the next generation Very High Efficiency Solar Cell. Customers include supermarket
chains, the US government, state and local governmental agencies, retail stores, museums, theme
parks and casinos, hotels, swimming pool builders and many others. Company headquarters are located
in Solon, OH, with additional offices in Nashville, TN, Pleasanton, CA, and the United Kingdom. For
more information, see <U>www.energyfocusinc.com</U>.


<P align="left" style="font-size: 12pt">Forward-looking statements in this release are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. For more information about potential factors that
could affect Energy Focus financial results, please refer to the Company&#146;s SEC reports, including
its Annual Reports on Form 10-K and its quarterly reports on Form 10-Q. These forward-looking
statements speak only as of the date hereof. Energy Focus disclaims any intention or obligation to
update or revise any forward-looking statements.

<DIV align="center">
<TABLE style="font-size: 12pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 12pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 11pt">Media Contact:</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><FONT style="font-size: 11pt">Energy Focus, Inc., Public Relations Office</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-size: 11pt"></FONT></TD>
    <TD align="right"><FONT style="font-size: 11pt">.</FONT></TD>
    <TD><FONT style="font-size: 11pt"></FONT></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><FONT style="font-size: 11pt">(440)&nbsp;715-1295
pr@energyfocusinc.com</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD style="border-top: 1px solid #000000"><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT style="font-size: 11pt">Investor Contact:</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><FONT style="font-size: 11pt">Brian Tanous
CleanTech IR, Inc
(310)-541-6824
btanous@cleantech-ir.com</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD style="border-top: 1px solid #000000"><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt; display: none">1
<!-- PAGEBREAK -->

<DIV align="center">
<TABLE style="font-size: 12pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD colspan="5" align="left"><FONT style="font-size: 11pt">&nbsp;&nbsp;&nbsp;<B>ENERGY FOCUS, INC</B>.<BR></FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11pt"><FONT style="font-size: 10pt"><B>CONDENSED CONSOLIDATED BALANCE SHEETS</B><BR>
<B><I>(amounts in thousands except share and per share data)</I></B></FONT><FONT style="font-size: 12pt"></FONT>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">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="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,062</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,922</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,770</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Prepaid and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">509</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,263</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,091</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">672</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Collateralized assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</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">102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,378</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><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" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">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="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,677</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,854</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,826</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other deferred liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Acquisition-related contingent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,183</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,873</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><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="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><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" style="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Authorized: 2,000,000 shares in 2010 and 2009</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="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issued and outstanding: no shares in 2010 and 2009</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" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><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="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Authorized: 60,000,000 shares at September&nbsp;30, 2010 and</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="font-size: 10pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">30,000,000 at December&nbsp;31, 2009</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="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issued and outstanding: 23,721,000 at September&nbsp;30,
2010 and</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="font-size: 10pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">21,250,000 at December&nbsp;31, 2009</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="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,373</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(67,288</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(60,343</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,378</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD colspan="9" align="left">The accompanying notes are an integral part of these financial statements.<BR></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt; display: none">2
<!-- PAGEBREAK -->


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


<DIV align="center">
<TABLE style="font-size: 9pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 9pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Three months ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine months ended</B></TD>
</TR>
<TR style="font-size: 9pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>September 30,</B></TD>
</TR>
<TR style="font-size: 9pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2010</B></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>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,871</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,508</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,363</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">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="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(61</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Sales and marketing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,549</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Revaluation of equity instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</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">1,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Restructuring expense</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">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,789</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,418</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,578</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,484</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,426</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">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" style="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(153</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(400</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(61</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,562</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,687</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,941</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,408</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</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:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,563</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,687</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,945</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(7,408</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Discontinued operations:</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="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income (loss)&nbsp;from discontinued operations</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">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(600</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">before income taxes</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="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for income 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">&#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 style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Income (loss)&nbsp;from discontinued operations</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">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(600</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,563</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,618</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,945</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(8,008</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss per share &#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.31</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.54</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shares used in computing net 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" style="font-size: 9pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,946</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD colspan="13" align="left">The accompanying notes are an integral part of these financial statements.<BR></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
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<P align="center" style="font-size: 10pt"><FONT style="font-size: 12pt"><B>ENERGY FOCUS, INC</B></FONT>



<P align="center" style="font-size: 12pt"><B>Moderator: Brion Tanous<BR>
November&nbsp;11, 2010<BR>
3:30 pm CT</B>



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    <TD><FONT style="font-size: 10pt">Operator: Good day everyone and welcome to the Third Quarter 2010 Energy Focus Earnings Call.
Today&#146;s conference is being recorded.</FONT></TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">With us from the company we have Brion Tanous with Investor Relations; Joe Kaveski, Chief
Executive Officer; Nick Berchtold, Chief Financial Officer and John Davenport, President.



<P align="left" style="margin-left:4%; font-size: 10pt">At this time, I&#146;d like to turn the conference over to Mr.&nbsp;Brion Tanous. Please go ahead,
sir.


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    <TD>Brion Tanous: Thank you, Jamie. I&#146;d like to welcome everybody to Energy Focus&#146; Third Quarter
Earnings Conference Call.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">On this call the company&#146;s Chief Executive Officer, Joe Kaveski, will give a business update
on the company&#146;s solutions, products, and military businesses as well as provide an outlook
for the fourth quarter and full fiscal year 2010.



<P align="left" style="margin-left:4%; font-size: 10pt">The company&#146;s Chief Financial Officer, Nick Berchtold, will then address the company&#146;s third
quarter financial results.



<P align="left" style="margin-left:4%; font-size: 10pt">We also have President John Davenport on the call with us this afternoon.



<P align="left" style="margin-left:4%; font-size: 10pt">Following prepared remarks, we will open it up for questions for the remainder of this call.
Before we get started I&#146;m going to read a disclaimer about forward-looking statements.



<P align="left" style="margin-left:4%; font-size: 10pt">This conference may contain, in addition to historical information, forward-looking
statements within the meanings and the federal securities laws regarding Energy Focus.
Forward-looking statements include statements about plans, objectives, goals, strategies,
future events and performance, and underlying assumptions and other statements that are
different than historical facts.



<P align="left" style="margin-left:4%; font-size: 10pt">These forward-looking statements are based on current management expectations and are
subject to risks and uncertainties that may result in expectations not being realized and
may cause actual outcomes to differ materially from the expectations reflected in these
forward looking statements.



<P align="left" style="margin-left:4%; font-size: 10pt">Potential risks and uncertainties include change in demand for the company&#146;s product, the
impact of competition and government regulations, and other risks contained in the
statements filed from time to time with the SEC.



<P align="left" style="margin-left:4%; font-size: 10pt">All such forward-looking statements, whether written or oral, made on behalf of the company
are expressly qualified by these cautionary statements. And such forward-looking statements
are subject to risks and uncertainties and we caution you not to place undue reliance on
these.



<P align="left" style="margin-left:4%; font-size: 10pt">With that, I&#146;d like to turn the call over to Mr.&nbsp;Joe Kaveski. Joe?


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    <TD>Joe Kaveski: Thank you Brion. A special thanks to all of our veterans and thanks to our callers
and Internet participants for joining the new Energy Focus 2010 Third Quarter Earnings Call.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">I&#146;m pleased to announce that Energy Focus sales continue to triple that of last year&#146;s
sales. As I stated during the last call, Energy Focus is in a significantly better place and
with a brighter future than where it&#146;s been over the last several years.



<P align="left" style="margin-left:4%; font-size: 10pt">The evidence of this is the company&#146;s continued positive momentum and improving financial
performance. Over the next few minutes I&#146;d like to share with you my thoughts on our third
quarter results and then provide you with some insight into our year-end anticipated
financial performance.



<P align="left" style="margin-left:4%; font-size: 10pt">So to begin, our third quarter results are very encouraging and continue the trend of
producing the best year the company has achieved in over a decade. In our third quarter, we
generated more than $9&nbsp;million in sales, which is three times our net sales from continuing
operations during the third quarter of last year.



<P align="left" style="margin-left:4%; font-size: 10pt">Our solutions business is fully integrated into our operations, performing very well, and
represents about 55% of our total sales.



<P align="left" style="margin-left:4%; font-size: 10pt">In spite of slower international sales, our third quarter overall product and US military
sales are up over 50% compared to our third quarter in 2009 and up over 30% on a
year-over-year comparison basis. This is a direct result of increased sales to the US Navy,
increased commercial product sales, and increased sales to lighting retrofit companies
serving the existing building market.



<P align="left" style="margin-left:4%; font-size: 10pt">I&#146;m also delighted to report that the company had net cash generation from operations of
$500,000 in the third quarter of 2010, yielding a year-to-date net cash from operations of
$155,000. This is a full quarter ahead of our previous guidance and is a dramatic
improvement from our cash utilization of $6.6&nbsp;million during the first nine months of last
year.



<P align="left" style="margin-left:4%; font-size: 10pt">The company&#146;s overall gross profit margins continue to improve as our third quarter 2010
margins increased nearly 10% as compared to the company&#146;s third quarter margins last year.
And on a this-year basis, our third quarter 2010 margin increased 3.1% as compared to our
second quarter results.



<P align="left" style="margin-left:4%; font-size: 10pt">We expect this trend to continue as we lessen our unabsorbed factory costs, increase our
content of EFOI products into our solutions agreements, and leverage our buying expertise to
further reduce our cost of goods sold.



<P align="left" style="margin-left:4%; font-size: 10pt">So that you can see this more clearly, the company has added additional tables into our 10-Q
starting this quarter. These tables provide much more detail on each of our business units.
For example, as you will see in our 10-Q, gross profit margin for our pool and commercial
products group, with 37.9% in the third quarter of 2010 versus 29.7% in the third quarter of
2009. These figures, which exclude unallocated manufacturing overhead in both cases, show a
very significant gain of over 8%.



<P align="left" style="margin-left:4%; font-size: 10pt">In our third quarter, the company secured an additional $2.8&nbsp;million in new lighting
solutions contracts. This brought our solutions contracts to $21.8&nbsp;million as of the end of
the third quarter.



<P align="left" style="margin-left:4%; font-size: 10pt">However, today I&#146;m delighted to announce that we have already received several new contracts
totaling $5.6&nbsp;million for our fourth quarter. We have previously announced $1.5&nbsp;million last
month and we&#146;re now adding another $4.1&nbsp;million, which we&#146;ve received this month. This will
bring our contracts through the end of the year on the solutions side to at least $27.4
million.



<P align="left" style="margin-left:4%; font-size: 10pt">Included in this new $4.1&nbsp;million of work is over $2&nbsp;million to upgrade the lighting in a
large south-eastern university, over $1&nbsp;million to upgrade the lighting at a military base,
and the remaining contracts are to upgrade lighting at a community college and an elementary
school district.



<P align="left" style="margin-left:4%; font-size: 10pt">In all of these projects, our solutions experts have completed audits of the existing
facility, prepared an inventory of their lighting system, created an improved lighting
design, and will now procure the materials and be responsible for the installation of the
new energy efficient lighting refurbishments that pay for themselves out of the savings they
generate from the existing energy budget.



<P align="left" style="margin-left:4%; font-size: 10pt">So from a financial perspective, Energy Focus is making very good progress towards achieving
our 2010 forecast. As I stated in our last earnings call, the acquisition of SRC has
provided Energy Focus a foundation for sales growth, for our existing products and for our
future EFOI lighting products that are being specifically being developed for the existing
building market.



<P align="left" style="margin-left:4%; font-size: 10pt">So to that end, I&#146;d like to provide you with an update on our research and development
efforts. The company announced $1.4&nbsp;million in new military contracts in our third quarter.
We now have secured a total of $3&nbsp;million in new contracts for the year. In addition to
these products that we have developed, qualified, and are currently selling to the US
military, we&#146;re especially pleased that these new contracts compliment our efforts to
develop and commercialize our next generation Intellitube energy efficient lighting system.



<P align="left" style="margin-left:4%; font-size: 10pt">Furthermore, we&#146;ve launched and already secured orders for a new hazardous location globe
light. The light was developed under a US government DARPA contract for the US Navy and is
now being sold in the commercial and industrial sectors. As I mentioned in our last call,
the light targets the heart of a $300&nbsp;million market opportunity and is typically used in
refineries, grain elevators, coal plants, pharmaceutical plants, and oil rigs to name a few.



<P align="left" style="margin-left:4%; font-size: 10pt">By far, our new globe light is the highest performance, lowest cost, longest lasting LED
Class&nbsp;1 Div 2 lamp on the market as it was designed to exceed the US Military&#146;s
specifications.



<P align="left" style="margin-left:4%; font-size: 10pt">Also we are now shipping a 100 lumen per watt LED lamp that is plug-and-play compatible for
a 4 foot linear fluorescent tube lamp. Within the next month, we will be upgrading the
entire lighting systems in two manufacturing facilities with this new lamp.



<P align="left" style="margin-left:4%; font-size: 10pt">So now as we look to the future I&#146;d like to provide you with some specific guidance. We
continue to expect our total year&#146;s sales as previously forecasted will exceed $35&nbsp;million.
Due to seasonality in our businesses, we have forecasted our fourth quarter sales will
exceed $8.4&nbsp;million, which is still 2.3 times more than our fourth quarter 2009 sales
results.



<P align="left" style="margin-left:4%; font-size: 10pt">We are also reaffirming our guidance that we anticipate the company to be overall net cash
flow positive from operations in 2010. And in 2011 the company&#146;s internal target for revenue
continues to be in excess of $45&nbsp;million for the year. We believe the company will continue
to grow organically through the expansion of our solution market coverage and customer base.
We also anticipate increased product sales across all of our business units and we remain
open to acquisition where the acquisition is accretive to Energy Focus. And the company
expects to increase its overall gross profit margins further by injecting an increasing
amount of EFOI product into our solutions contracts and through further reductions in our
cost of goods sold. I anticipate providing you with a more formal revenue and cash flow
guidance for our 2011 fiscal year during our next conference call.



<P align="left" style="margin-left:4%; font-size: 10pt">So in conclusion, clearly macro indicators such as rising energy prices, the environment,
and government mandates, coupled with stimulus money increasingly finding its way into our
projects, will continue to create growing demand for our energy efficient lighting products
and our lighting solutions.



<P align="left" style="margin-left:4%; font-size: 10pt">This company is on the right track to nearly triple its sales this year and poised for
significant growth next year. I remain excited about the current and future success of
Energy Focus and remain confident that the company&#146;s strategy of providing products and
turnkey lighting solutions specifically designed for the US Military and the existing
building market will realize the returns that our shareholders are anticipating.



<P align="left" style="margin-left:4%; font-size: 10pt">So with that, I&#146;d like to turn the call over to Nick Berchtold, our Chief Financial Officer
who will provide you further insight into our financial results. Nick?


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    <TD>Nick Berchtold: Thanks Joe and I would also like to welcome our participants to today&#146;s call. As
Joe mentioned, our company&#146;s third quarter financial results continue to reflect tremendous
top-line revenue result versus 2009 levels and similarly showed continued and very significant
cash flow improvements.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt; text-indent: 4%">Specifically we achieved the following notables during the third quarter, consolidated
revenues from continuing operations of over $9&nbsp;million, which is 199% increase in revenues from
2009 and resulted in a total of $26.4&nbsp;million on a year-to-date basis, Consolidated gross profits
of 20.5%, which represents a 3% increase versus second quarter of 2010 gross profit margin levels,
and as Joe mentioned, $2.8&nbsp;million in new solutions contracts were obtained during the quarter,
which will be primarily completed in 2010, and lastly, cash generation, net of the impacts of
proceeds from financing activities of approximately $500,000 leaving the total cash on hand of $2.7
million and positive cash flow from operations on a year-to-date basis.



<P align="left" style="margin-left:4%; font-size: 10pt">As mentioned during previous calls, I&#146;d like to remind you that the consolidated statements
of operations and consolidated cash flows presented in our form 10-Q have been recast to
include only continuing operations as of September&nbsp;30, 2010. 2009 financial results from the
company&#146;s discontinued operations are separately reported.



<P align="left" style="margin-left:4%; font-size: 10pt">So let me turn to revenues, our third quarter 2010 revenues were $9&nbsp;million and represented
a 199% increase over third quarter 2009 revenues of $3&nbsp;million. Breaking this figure down
further, our solutions subsidiary contributed $4.4&nbsp;million or 49% of the total revenue
figure. Our US products business unit continued to also show strong performance by
generating more than $2.8&nbsp;million or 31% of total revenues. What&#146;s particularly positive
and reassuring is that this represents a 69% increase over 2009 levels and we saw
improvements in all channels of the products business unit. Likewise, our Research and
Development Sales Organization posted strong performance by generating $939,000 in
contract-based revenues during the quarter versus only $16,000 in the comparable quarter of
2009.



<P align="left" style="margin-left:4%; font-size: 10pt">So let me next discuss gross profit from continuing operations. As we mentioned previously,
third quarter 2010 gross profit increased to $1.9&nbsp;million or 20.5% compared to $323,000 or
10.5% for the third quarter of 2009. On a sequential 2010 quarterly basis, our gross profit
margins increased from 17.5% to 20.5% largely resulting from manufacturing and distribution
rationalization benefits we achieved through our US products business unit and further our
gross profit continued to benefit from the reduction of non-solutions-based, unabsorbed
manufacturing overhead. To put this in perspective, the company achieved a 52% reduction in
unabsorbed manufacturing overhead for the third quarter and a 30% reduction in unabsorbed
manufacturing overhead on a year-to-date basis versus the prior year. So we&#146;ve significantly
reduced our unabsorbed manufacturing overhead.



<P align="left" style="margin-left:4%; font-size: 10pt">And now I&#146;d like to turn briefly to operating expenses. Our third quarter 2010 operating
expenses were $3.3&nbsp;million, which represents a 13% increase over the third quarter 2009
operating expense level of 2.9&nbsp;million. However, after removing non-cash expenses of
$321,000 related to equity and acquisition amortization expense, our third quarter 2010
operating expenses were only 2% above prior year levels when including the additional
overhead assumed by our acquisition of Stones River Companies business unit.



<P align="left" style="margin-left:4%; font-size: 10pt">And now I&#146;d like to turn over to earnings per share, our third quarter 2010 net loss from
continuing operations was $.07 per share versus $.17 per share for the third quarter 2009.
Excluding the previously discussed non-cash expenses our third quarter 2010 net loss from
continuing operations was $.05 per share.



<P align="left" style="margin-left:4%; font-size: 10pt">And so now I&#146;d like to turn briefly over to the balance sheet, first our cash and cash
equivalents increased $649,000 from our June&nbsp;30, 2010 levels to reach $2.7&nbsp;million with
proceeds from financing activities contributing only $149,000 during the quarter from the
sale of shares of common stock to a private equity investor.



<P align="left" style="margin-left:4%; font-size: 10pt">And next our account receivable was maintained at $6&nbsp;million on a consolidated basis versus
only $2.9&nbsp;million at December&nbsp;31, 2009. In this regard, the company continued to tightly
manage its working capital and showed continued improvements in its accounts receivable
collections versus prior year and prior quarter.



<P align="left" style="margin-left:4%; font-size: 10pt">Third, our inventory continued to become more efficient in its utilization as we decreased
our total inventory position to $2.8&nbsp;million versus $3.8&nbsp;million at December&nbsp;31, 2009.



<P align="left" style="margin-left:4%; font-size: 10pt">And so in summary I&#146;d like to reiterate that we are very pleased with our continued progress
as reflected in our third quarter results and I look forward to speaking to you again when
Energy Focus reports its total year 2010 results in March.



<P align="left" style="margin-left:4%; font-size: 10pt">And so you again for joining today&#146;s conference call. And now I&#146;ll turn the call back over
to Jamie who will open it up for questions and answers. Thank you.


<P>
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    <TD>Operator: Thank you, sir. If you would like to ask a question at this time, please signal by
pressing the star key followed by the 1 on your touch-tone telephone. If you are using a
speakerphone today, please make sure your mute function has been turned off to ensure that our
equipment can hear your signal. If you find that your question has already been asked and
answered, you may remove yourself from queue by pressing star 2. Again, that is star 1 on your
touch-tone telephone, and we&#146;ll pause for a few moments to give everyone a chance to signal.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">And we&#146;ll take our first question from Robert Smith with Center Performance Investing.


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    <TD>Robert Smith: Hi, good afternoon guys.</TD>
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    <TD>Joe Kaveski: Hi Robert.</TD>
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    <TD>Robert Smith: Congratulations on moving in the right direction, I hope this continues. I did hear
correctly that you&#146;re estimating $45&nbsp;million for the coming year?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: Two-thousand and eleven, that&#146;s correct sir.</TD>
</TR>

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    <TD>Robert Smith: Okay, let&#146;s go for it. What is the opportunity with the fluorescent that you
mentioned, the LED fluorescent?</TD>
</TR>

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    <TD>Joe Kaveski: You&#146;re referring specifically to an LED-based product that leverages Energy Focus&#146;
fundamental IP from a coupling extraction and coating&#146;s perspective and it&#146;s designed to be
plug-and-play replacement with a 4 foot linear fluorescent. And the opportunity is just
absolutely enormous. In Canaccord&#146;s recent report on LED lighting technology, they suggest in
the commercial and industrial space that fluorescent lighting represents almost 75% of all
lighting fixtures. There is over 70&nbsp;billion square foot of lighted square feet in Commercial
and Industrial buildings.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">If you were to just replace the existing fluorescent replacement lamps that are consumed
yearly with our LED Intellitube product,that would represent an annual lighting opportunity
of over $20&nbsp;billion utilizing their statistics.


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    <TD>Robert Smith: Are you first to market or do you have company?</TD>
</TR>

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    <TD>Joe Kaveski: There basically are what I would call Generation 1 products that utilize a strip of
LED to replace fluorescent lamps. We believe Generation 1 products have pretty much maxed out
in their lumen per watt efficiency, are extremely costly and are on the boarder line of
acceptable light output. They&#146;re designed to be a replacement to 4 foot linear fluorescent
lamps.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">Energy Focus currently offers one of those Generation 1 products. In fact, we are now
shipping and selling one with a 100 lumen per watt efficiency, which is absolutely
outstanding. It&#146;s best in class.



<P align="left" style="margin-left:4%; font-size: 10pt">Having said that, what we are most excited about is our Intellitube product, which is under
development right now. Unlike Generation 1 LED lamps which use hundreds of LED,
IntelliTube will use one LED to create the same or better lighting quality of an existing
linear fluorescent lamp at a significantly reduced cost, a maximum amount of energy savings
and with an option of embedded control that will bring forth new functionality that is not
and currently available or difficult to implement in traditional linear fluorescent lamps.
Features that ultimately reduce cost, generate revenue, increase safety and productivity of
building occupants. We are very, very excited about IntelliTube&#146;s potential.


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    <TD>Robert Smith: Is there a timeline to marketing this product?</TD>
</TR>

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    <TD>Joe Kaveski: It is still in development right now. If I were to suggest a timeframe then it will
probably be introduced in late 2011 or early 2012 timeframe.</TD>
</TR>

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    <TD>Robert Smith: So the $45&nbsp;million has no contribution.</TD>
</TR>

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    <TD>Joe Kaveski: That&#146;s correct, not from IntelliTube. However, I&#146;d like to reiterate though that we
are now selling our 100 lumen per watt LED tube replacement for a four foot linear fluorescent
lamp that utilizes multiple LEDs into the market there and we&#146;re very excited about that.</TD>
</TR>

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    <TD>Robert Smith: What is the backlog you&#146;re seeing now?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: Nick, do you want to offer any thoughts on that?</TD>
</TR>

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    <TD>Nick Berchtold: Our backlog currently is approximately greater than $5&nbsp;million for the &#151; through
year-end with obviously more continued contracts on the way but right now it&#146;s in excess of $5
million.</TD>
</TR>

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    <TD>Robert Smith: But that&#146;s much reduced isn&#146;t it or not?</TD>
</TR>

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    <TD>Nick Berchtold: No, you have to understand there are two different metrics that we measure.
There&#146;s pipeline and then there&#146;s backlog. The backlog is a signed contract versus a pipeline
which represents an opportunity or quote log. Our quote log or pipeline continues to be very,
very significant but right now stated backlog with signed contracts in place is $5&nbsp;million
and, again, we expect to sign another $5.6&nbsp;million before year-end. So very significant.</TD>
</TR>

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    <TD>Robert Smith: And lastly, I didn&#146;t understand the line on the operating expenses of R&D being a
negative figure &#151; I mean a positive figure. I&#146;m not clear on that.</TD>
</TR>

</TABLE>


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    <TD>Nick Berchtold: Yes, the reason for that Robert is R&D has different sources of income. It has
top-line revenue and it has cost reimbursements based on the types of contracts that the
company enters into. When you see that it&#146;s a negative number, what that actually means is
that when you take into consideration the cost recovery that the business is generating from
its contracts it is actually making money at the operating expense level.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">And on top of that, there are top-line revenues reduced by cost of goods sold. So it&#146;s
generating revenues and income from multiple sources. And what you&#146;re seeing is that we
received more in cost recovery this quarter than we generated in cost.


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    <TD>Robert Smith: Okay, I&#146;ll step back in the queue. I have further questions but I want to give
others the opportunities. Thanks.</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: Thank you for your questions Robert.</TD>
</TR>

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    <TD>Operator: Again, that is star 1 on your touch-tone telephone if you&#146;d like to ask a question.
We&#146;ll go next to Bill Gibson with Anderson Strudwick.</TD>
</TR>

</TABLE>


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    <TD>Bill Gibson: Hi, on the retrofit projects you&#146;re working on now, are any of those incorporating
EFOI lighting or is it pretty much &#151; just something you&#146;re holding back extra?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: What I had previously stated is that the EFOI product content on the solutions
contract right now is less than 10% although it&#146;s growing. And as Energy Focus begins to
release to the market our Intellitube LED 4&#146; linear fluorescent replacement, EFOI content will
grow dramatically. For example, in the contracts that exist today, linear fluorescent lamps
represent about 80% plus of the product content and we are currently sourcing these lamps and
ballast for other manufacturers.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">But as our IntelliTube comes online, we will lessen our purchases of linear fluorescent
lamps from others, unless customers ask for that, and instead be replacing the linear
fluorescence lamps with our Intellitube LED-based product.


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    <TD>Bill Gibson: I would think this would help you on the acquisition front as well, the Intellitube.
Is that &#151; or is it too early for that to even enter negotiations with someone?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: Well, I love your thought and I would share with you that I believe the previous
owners of SRC certainly shared your opinion. And we believe that it is very significant so...</TD>
</TR>

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    <TD>Bill Gibson: Okay, and just one last question, is there any update on the solar work?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: The update Bill is that we are currently under a phase three contract for the Very
High Efficiency Solar Cell project. It is a two-year contract. The phase three contract is
all about how do you produce it cheaply in mass quantity. But that contract will expire,
excuse me Nick, I think the middle of next year? Yes.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">So, that&#146;s where that one stands and we&#146;ll see where the US government wants to go next with
that particular technology but it&#146;s very exciting. I mean to think that you can have a solar
technology that is more than 40% system conversion efficiency, that&#146;s rather large.


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    <TD>Bill Gibson: Let me put on my wildly optimist hat, is it possible that this reaches
commercialization capability about the time that Intellitube does?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: You know, Bill, I guess anything is possible although in our short-term planning we
haven&#146;t factored that in.</TD>
</TR>

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    <TD>Bill Gibson: Okay, thanks.</TD>
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    <TD>Operator: And we&#146;ll take our next question from Chip Saye with AWH Capital.</TD>
</TR>

</TABLE>


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    <TD>Austin Hopper: Hi, it&#146;s Austin Hopper, AWH Capital. Thanks for taking my question. You have
obviously one very large shareholder, Quercus Trust, they own about 5&nbsp;million shares of stock
and they&#146;ve been a seller. Just any communication with them in terms of their intentions and
continuing to just kind of sell stock. I was hoping you might comment on that, thank you.</TD>
</TR>

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    <TD>Joe Kaveski: Sure, what I can share with you is that we talk to all of our shareholders but we
really can&#146;t speak for any of our shareholders in terms of how they want to basically hold or
sell their stock. What we have and work from is the public information that was filed in the
13D stating that for liquidity reasons of the Quercus Trust they were looking to sell 500,000
shares. And we believe that based upon their Form&nbsp;4 filings that they are nearing that 500,000
amount.</TD>
</TR>

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    <TD>Operator: And again, that is star 1 if you&#146;d like to ask a question. We&#146;ll take a follow-up from
Robert Smith, Center Performance Investing.</TD>
</TR>

</TABLE>


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    <TD>Robert Smith: You know, in offering the projections for 2011, how would you characterize the basis
of the projection? How much would you think would be coming from military as opposed to
commercial? How would you &#151; how do you get to the number?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: Robert, I think that&#146;s one of those items there that we would like to basically
present to all of our shareholders with more detail and clarity during our fourth quarter
call.</TD>
</TR>

</TABLE>


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    <TD>Robert Smith: Okay, that&#146;s fair. All right, so have you touched upon basically all the R&D efforts
that you wish to at the moment or is there something you could say further about the effort?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: I&#146;d like to reiterate what I&#146;ve communicated earlier in previous calls in that you
are now seeing the results of an organization that is becoming highly focused and highly
aligned in its effort. In the early years within Energy Focus I might suggest that perhaps
contracts were taken because it represented a revenue stream on a particular item but not
necessarily one that the company could commercialize.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">Right now we have a very fine filter that we basically apply towards R&D contracts. And if
we cannot see the direct connection between a product that could support the US military and
ultimately be commercialized for the existing building market then that effort is not our
sweet spot anymore. And so we are very highly focused right now on the Intellitube product
line, that&#146;s a game changer.


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    <TD>Robert Smith: So that will provide you with what kind of a tool in the marketplace? In other
words, you&#146;re getting these contracts for low single-digit numbers, will you have the
opportunity to take on much bigger work? On a contract basis I mean?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: The answer to that is we believe yes it will. IntelliTube represents the lowest
cost, highest performance, most energy savings afforded, longest lasting, plug-and-play LED
lamp replacement for a 4 foot linear fluorescent lamp.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:4%; font-size: 10pt">And again, in our solutions contracts, a large percentage of the material we are acquiring
from other manufacturers such as Phillips, GE, and alike, are traditional fluorescent lamps
and ballasts. In the future, IntelliTube holds the potential to displace a large percentage
of our fluorescent lamp and purchases. And the margin that is now going to other
manufacturers will be additive to ours. And this is a very significant item for growth and
margin improvement as we move forward.


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    <TD>Robert Smith: So the IP for this is in-house now?</TD>
</TR>

</TABLE>


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    <TD>Joe Kaveski: Yes, the IP is in-house.</TD>
</TR>

</TABLE>


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    <TD>Robert Smith: So you&#146;re playing against many of the bigger entities so to speak, I&#146;m sure everyone
is working really diligently to get to where maybe you feel you are a step ahead so this
timeframe of about a year or two come to the marketplace, do you &#151; is it as best I could say
it, I mean do you have the luxury of being there before someone else is there?</TD>
</TR>

</TABLE>


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    <TD width="1%">&nbsp;</TD>
    <TD>Joe Kaveski: Yes, we believe so. I can&#146;t say it enough times. I&#146;m bullish on our technology.
It&#146;s a game changer.</TD>
</TR>

</TABLE>


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    <TD>Robert Smith: And where is it being generated Joe? I mean is it Joe Davenport&#146;s work with his crew
or...</TD>
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    <TD>Joe Kaveski: Right now it is a collaborative effort within the organization from our research
and development team as well as our product management team.</TD>
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    <TD>Robert Smith: Okay, I certainly wish you well.</TD>
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    <TD>Joe Kaveski: Thank you Robert, appreciate your call.</TD>
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    <TD>Operator: And that does conclude our question-and-answer session. At this time, I&#146;d like to turn
the call back to you Mr.&nbsp;Kaveski for additional and closing remarks.</TD>
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    <TD>Joe Kaveski: Well, thank you again, and a very special thank you to the veterans that have
joined us today in our great country, and thanks to our participants on the call, and
especially our associates that are working so hard to deliver the results that we&#146;re all
looking for.</TD>
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<P align="left" style="margin-left:4%; font-size: 10pt">We had a great quarter and we are extremely optimistic about the future of Energy Focus and
its position in helping existing building owners and the US Military, lower the cost of
owning and operating their buildings.



<P align="left" style="margin-left:4%; font-size: 10pt">So with that, we look forward to visiting with you again during our fourth quarter year-end
earnings call in March. Have a great evening.


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    <TD>Operator: And again, that does conclude today&#146;s conference. Thank you for your participation.</TD>
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