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Nature of Operations | 12 Months Ended
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Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Nature of Operations | NATURE OF OPERATIONS Energy Focus, Inc. and its subsidiary engage in the design, development, manufacturing, marketing, and sale of energy-efficient lighting systems. We operate in a single industry segment, developing and selling our energy-efficient light-emitting diode (“LED”) lighting products into the general commercial, industrial and military maritime markets. Our goal is to become a trusted leader in the LED lighting retrofit market by replacing fluorescent lamps in institutional buildings and high-intensity discharge (“HID”) lighting in low-bay and high-bay applications with our innovative, high-quality commercial and military tubular LED (“TLED”) products. The LED lighting industry has changed dramatically over the past several years due to increasing commoditization and price erosion. We experienced this in our Navy business in late 2016 and early 2017 and in our commercial segment, where we once enjoyed significant price premiums for our flicker-free TLEDs with 10-year warranties, we now have a number of competitors offering similar capabilities at much lower prices. During the year, we reduced the costs of eight legacy product families in order to price our products more competitively. Despite these efforts, the pricing of our legacy products remains at the high end of the competitive range and we expect aggressive price erosion and commoditization to continue to be a headwind until our more innovative and differentiated new products ramp in volume. These trends are not unique to Energy Focus as evidenced by the increasing number of industry peers facing challenges, exiting LED lighting, selling assets and even going out of business. In addition to continuous, scheduled cost reductions, our strategy to combat these trends it to move up the value chain, with more differentiated products and solutions, such as our smart lighting roadmap, that offer greater value to our customers. In light of these factors, over this period we have evaluated the continued value of equipment and inventory and implemented restructuring and product development initiatives to reduce costs and streamline operations while continuing to pursue our new product pipeline and revenue growth. During 2016, the slowdown in demand from U.S. Navy resulted in a year-over-year decrease in military maritime sales of $33.9 million from 2015 to 2016. As a result, we re-evaluated the economics of manufacturing components versus purchasing them for the manufacture of our military Intellitube® product and recorded an impairment loss at year-end for the related equipment and software, and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), we evaluated our 2016 year-end inventory quantities for excess levels and potential obsolescence and charged $3.3 million to cost of sales from continuing operations for excess and obsolete inventories. The restructuring initiative implemented in the first quarter of 2017 included a new management team, an organizational consolidation of management functions and a hybrid sales model, combining our existing historical direct sales model with sales agencies to expand our market presence throughout the U.S. We closed our New York, New York, Arlington, Virginia and Rochester, Minnesota offices, reduced full-time equivalent headcount by 51 percent and significantly decreased operating expenses from 2016 levels (a net reduction of $8.4 million, which includes $1.8 million in offsetting restructuring and impairment charges). As of December 31, 2018, we expanded our sales coverage to the entire U.S. through six geographic regions and now have 50 sales agencies, each of which has, on average, 10 agents representing Energy Focus products. During 2017, we also implemented a strategic sales initiative to sell certain excess inventory that had previously been written-down, as required by U.S. GAAP. This initiative resulted in a net reduction of our excess inventory reserves of $1.4 million in 2017. During 2018, we recorded restructuring charges totaling approximately $0.1 million, related to the revision of our initial estimates of the costs and offsetting sublease income and accretion expense for the remaining lease obligation for our former New York, New York and Arlington, Virginia offices. As a result of our continued cost control initiatives in 2018, we achieved an additional net decrease in operating expenses of $3.6 million, which includes the $0.1 million recorded in facility restructuring charges. Please refer to Note 3, “Restructuring,” for more information on our restructuring charges. Despite progress in reducing overall costs and the costs of our products, expanding and diversifying our new product portfolio and growing sales of our new products and legacy luminaire product line, among other areas, our 2018 results reflect continued challenges due to long and unpredictable sales cycles, delays in customer retrofit budgets and project starts, continuing aggressive price competition and a lower priced legacy product portfolio that was not available until the end of 2018 and impacted the development timeline for our next generation smart lighting products. The substantial doubt about our ability to continue as a going concern continued to exist as of December 31, 2018. Over the past several months, we have evaluated and pursed, and we expect that we will continue to assess the Company’s strategic options, as we seek additional external funding sources and to achieve a profitable business model and maximize value for our stockholders. Our ongoing plans to achieve profitability include continuing to develop new technologies into sustainable product lines that allow us to effectively compete to expand our customer base, execute our marketing and sales plans, and continue to improve our supply chain and organizational structure.

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- Definition The entire disclosure for the nature of an entity's business, major products or services, principal markets including location, and the relative importance of its operations in each business and the basis for the determination, including but not limited to, assets, revenues, or earnings. For an entity that has not commenced principal operations, disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activities are being directed toward. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=99393423&loc=d3e5967-108592 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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