EFOI

• Regained compliance with NASDAQ continued listing requirements as of July 27, 2023, due to balance sheet improvements and reverse stock split.
• Sales lagged long-term expectations but showed slight improvement from prior quarter; timing of orders and inventory delayed some revenues into H2 2023.
• Randy Gianas joined the sales force, bringing operations, product experience, and sales-related roles.
• RedCap emergency backup LED tube product stock began arriving in late Q2; Power Line Controlled EnFocus switches supply issues worked through.
• Focus on product expansion in lighting, control, and energy solution products; new product announcements to come.
• Q2 2023 net sales $1.1M, gross profit $179K, operating expenses $1.3M, net loss $1.2M.

• No specific guidance provided, but expects gross margin to improve with more RedCap and new products.
• Anticipates commercial revenue growth as healthier stocking levels are achieved.
• Product development costs expected to increase as top line revenue grows, but aligned with revenue growth.

For the second quarter of 2023, net sales were $1.1 million, a 29% decrease from $1.5 million in Q2 2022. Military products had net sales of $613,000 in Q2 2023, a $107,000 increase from Q2 2022. Commercial products were approximately $442,000, 42% of total net sales, down $533,000 from Q2 2022 but up $121,000 sequentially. Gross profit in Q2 2023 was $179,000 compared to $109,000 in Q2 2022. Gross margin was 17% in Q2 2023 vs 7% in Q2 2022. Adjusted gross profit was 7% in Q2 2023 compared to a gross loss of 5% in Q2 2022.

• Supply chain volatility impacting sales through legacy inventory.
• Prior noncompliance with NASDAQ continued listing requirements, though regained compliance as of July 2023.

Q: Do you expect gross margin to improve from 17% in 2Q 2023 as more RedCap inventory comes in?

A: Although we don't provide guidance, I believe as we get fresh supply of RedCap and new products, gross margin will improve.

Q: How should we look at sales ramp and inventory going forward with RedCap and EnFocus switches?

A: RedCap is a lead product pulling through other inventory; EnFocus switches' availability will drive demand for related products as stocking improves.

Q: How much visibility do you have in securing MMM orders to reach 2022 revenue levels in next 2-6 quarters?

A: We have inventory pipelines and booked orders through Q2 2024; a new military sales leader rebuilt the pipeline, with better pipeline quarter-over-quarter.

Q: Should we expect sequential increases in commercial revenues going forward?

A: Absolutely, with healthier stocking levels and new stock, we anticipate growing commercial revenues.

Q: When should we expect product development costs to turn back on as sales increase?

A: As we drive top line revenue, we expect a small increase in product development costs, aligned with revenue growth.