Q4 2020 Energy Focus Inc Earnings Call

Ross dead dead dead dead.

Thank you operator and good morning. Everyone join me on the call. Today is James to Executive chairman and chief executive officer and Todd Mister president and Chief Financial Officer. Before we begin today's call like to remind everyone that will make up for the new statement. These statements are based upon information that represents the company's current expectations or beliefs the results realize May differ materially from those stated for discussion of these risks, they could affect our results. Please refer to an option under the headings risk factors as well as forward-looking statements in our most recent 10-K, the company undertakes no obligation to publicly update or revise any forward-looking statements where there as a result of doing information future events, or otherwise except as required by law. Also, please note that during this call and in the accompanying press releases any certain Financial metrics are presented on both gaap and non-gaap adjusted basis reconciliation of adjusted results took the Gap results are available in the tables attached to the earnings release, which is posted on our corporate website at energy-focused, and the investor relations section to site on their own to the call or James James floor is yours.

Thank you, Brett. Good morning everyone and thank you for joining our full year and fourth quarter 2020 earnings conference call.

2020 was a year filled with both extreme challenges and solid progress as energy Focus the global pandemic swept across the country and arguably still down heavily on the economic activities today more than a year after the initial break up despite of the impression that the softness of lighting retrofit activities impacted our Commercial Lighting sales our financial results for the full year, which Tower will go into further details later illustrate the considerable progress We Have Made In Puerto Rican lighting top-line growth because it's really improving our margins and strengthening of our balance sheet.

And prudently managing inventory and working capital to position our company for strong growth as economic life resumes towards normality and our new home disinfection products generate multiple sales in the coming quarters, the top-line the strength of our product Innovation that result in improved competitiveness in the military and Maritime space was a significant driver of the more than 32% net sales growth. We were able to achieve in 2020 which affect the weakness we experience in our Commercial Business ever since March of last year.

As we continue to strengthen our military engineering organization and expand our business development efforts. We are confident that we will continue to achieve high-level performance and for the office in this segment going forward in addition within the federal government outside of the Navy ecosystem our Military and Commercial buy American Products off successfully added to the GSA schedule in December 2020. We have started to receive orders from the GSA Channel over the past few months and wage are aggressively building our our sales and marketing infrastructure for this particular Market that covers more than 3,300 61,000 buildings throughout federal government agencies on the commercial side as we mentioned over the past few people earnings calls.

We wouldn't.

a dramatic slowdown of lighting retrofit activities in 2020

many non-essential building Improvement upgrades and retrofits were put on cold as the global pandemic for most organizations to significantly limit building occupancy and building excess and caused widespread suspicion or postponements of capital Improvement projects.

Adele facility utilization and capital spending freezes continue to linger going into the first quarter of 2020 as I've since become more widely available and returned to office space has started pick up pace. We are cautiously optimistic that commercial sales pipeline activities will start to accelerate going into the second month more know probably so into the second half of the Year. Meanwhile, we continue to make exciting progress in expanding our Channel partnership Network by adding more proven and committed lighting agent to represent our products in various Geographic territories, as well as by engaging with new National Distribution partners that will take a product the New Vertical markets.

Without improved cost structure of our LED product on top of the enfocus dimmable and quality control platform that has received strong industry Wise Choice including initial orders from a state government that manages Seventeen million square feet of building space. We are looking forward to improving our Commercial Lighting sales rep called over quarter of the Year. 2021 progress has the COVID-19 demek bro and president challenges to our Commercial Business also broader potential new opportunities for energy focus by creating unprecedented need for space this infection.

In 2020, we devoted significant amount of engineering resources and R&D dollars to develop a whole new portfolio of u v c r and served disinfection products with a combination of our expertise and experience with lighting technology and additional new proprietary as well as patent office Technologies. We have divided up. We have created a line of unique and Powerful UVC product that can inactivate 99.9% or more of birth of pathogen.

Including virus and influenza the Earth is sufficient proof of product portfolio currently include above spelled a b u v a modular travel system that provides both flicker free T-Mobile and color of the light as well as disinfection capabilities off all the powers still and you video an error disinfection device for large work and living spaces and Google traveler our portable rechargeable UV disinfection device or in car and travel application.

Over the past few months we have Incorporated.

Into these products additional Technologies and features that make them much more effective powerful and unique in the marketplace than when we first introduced them in the fourth quarter of 2028, and we are now scheduled to make the first deliveries for these products to customers later in the second quarter to early third-quarter.

Meanwhile, the feedback we received from our Channel partners and potential customers over the past four to five months since the products were introduced has only gotten more positive and enthusiastic. I will never been so excited about the prospects for these products. Even our believe that needs of disinfection are here to stay regardless of how the impact form COVID-19 evolved in the coming months and years and our Innovation focus and quality positioning. We're aiming to build a living wage in fiction brand portfolio in this new emerging market.

And we expect to introduce additional products throughout 2021 p.m. To better serve the disinfection needs of various facility and consumer applications off to compliment our are disinfection products. We've also developed an industry-leading autonomous QVC service disinfection robot call spell you.

While we will be selling the robots later this year to customers with larger facility for prints such as hospitals hotels and Retail chains or universities and government agencies. I would need to focus is to develop our disinfection as a service or the aaf solution.

Call kru which provides robotics infection Services by the hour in the Target territory. We are starting to pile of this service in the Cleveland area this month and are planning to officially launch our services in the second quarter first in Cleveland, then other major metropolitan area as we Master our service operation for replication.

Like our arrogance infection product. The only indication of the interest is very encouraging for move and move crew. Even before we formally launched the product and service jobs doubly we were selected by one of the top 10 universities in the country to be the service disinfection technology for NCAA National fencing championships, which are being held there are this week 25 NCAA division 1 colleges and their athletic directors I expected to be present.

Although these products and solutions are early stages and I expect you to meaningfully contribute to our financial results until the second half of two thousand twenty one. They create potentially enormous long-term growth opportunity outside of the Commercial and Military lighting space and our intrapreneurial culture and Innovative DNA enable us to talk verbally in such a market where multiple technological domains of expertise have to inspect converge and synergize to provide the best Perfection results.

Essentially with both positioning of any organizational agility and Engineering Ingenuity. We have taken the past 12 months to enter a whole new market that could further and completely transform the group profile of energy focus in the coming quarters and years.

Clearly as I mentioned before challenges remain today in the broader macro environment and in particular proper lighting retrofit industry as a remote working.

drastically reduces facility capital budget and project activity

with the opening of the economy in the coming months expected and our growth growing list of Highly differentiated products from military lighting commercial. I am in focus control platform or you get this infection probably to penetrate their respective Target markets We believe We believe that image Focus has never been as well positioned today to deliver long-term sustainable growth and profitability.

With that I will turn the call to top to review our financial performance for the year and the quarter.

Thank you James. First I'd like to summarize our 2020 full year results net sales for the full year 2020 or sixteen point eight million dollars of 32.5% compared with twelve point seven million dollars in 2019. The year-over-year increase in that sales was primarily driven by an increase in military sales, which is partially offset by declining commercial sales as a result of fluctuations in the timing case and size of commercial projects including principally the impact from the COVID-19 pandemic the fraud or delay lighting retrofit projects across the board in the commercial sector is James mentioned earlier from the segment mixed perspective military sales were eleven point four million reps 67. 9% of total net sales compared to 4.8 million or 38% of total net sales for 2019.

Sales to commercial customers were five point four million in 2020 representing 32.1% of total net sales for the year down from 7.9 million dollars or 68% of total net sales in 2019. The year-over-year decrease and commercial sales is mainly due to overall softness in the commercial Market that began with the onset of the COVID-19 pack.

Gross profit for 2020 with 5.2 million dollars compared with two million dollars in 2019 an increase of 162.7% year-over-year that was driven by an increase in military sales dollars in mix as well as improved efficiency in our plan operations.

As a percentage of Revenue gross profit margin was 30.8% in 2020 compared to 15.5% in 2019 and nearly two-fold increase with this increase was primarily due to a more favorable product mix in the margin impact from increased military sales, which more than offset unexpected additional manufacturing cost to supply them to supply change challenges supply chain challenges related primarily to Military and Maritime products. Just the gross. Margin a non-gaap measure is 27.1 per month for full year 2020 compared to 15.9% in the prior year.

Operating expenses in 2020 were nine point three million or 54.9% of sales compared to eight point nine million or 70.3% of sales and 2019 or a 3.7% increase you every year however, which was leveraged by the 32.5% increase in net sales. The increase in spending was driven by higher product development and testing costs related to the development and launch of our enfocus products and development of our be products and higher sg&a do to increase salaries and benefits or headcount to support our growth initiatives.

Loss from operations for 2020 with 4.1 million compared to a loss from operations of 7 million and 2019 a year-over-year Improvement of 3.1 million months our core operating business continues to improve as we remain focused on leveraging our operations as we grow and through continued diligent cost management through strategic sourcing efforts and down payments below the operating line interest expense including interest on borrowings and non-cash amortization of facility fees was $481,000.20 compared with three hundred thousand in 2019. This increase was the result of an increase in borrowings under our new short-term credit facilities that provided increased borrowing capacity.

Also below the operating line, we had non-recurring expenses of $276,000 for the extinguishing. The extinguishment of former revolving line of credit is 6 or earlier pay off of the bridge financing and a loss of one point 1 million for the market for the market value change in our warrant liabilities.

Importantly in December certain of the terms of our outstanding warrants were modified such as the warrants now qualify for Equity accounting treatment going forward at the time of the month club. The liability related to the remaining warrants was fair value with the offsetting adjustment recorded in income. The warrant liability was then reclassified into equity in the warrants are no longer subject to read document that each balance sheet date consequently. This reclassification is added the benefit of eliminating the volatility risk to our net income that can result in periodic month of ones that are classified as a liability.

Net loss for 2020 inclusive of the non-operating expense has an impact of the war.

Evaluation was six million dollars or a dollar eighty three loss per basic and diluted share based on three point two million fully diluted shares compared with the loss of seven point four million or $2.90 99 cent lost for basic and diluted share in 2019, which is based on a 2.5 million fully diluted shares.

Adjusted ebitda a non-gaap measure which excludes depreciation and amortization interest expense stock-based and other incentive, was a loss of 3.5 million for $20 compared with a loss of 5.9 million and 2019.

Now I would like to turn to a brief review of fourth-quarter results not sales for the fourth quarter of 2024 3.7 million of 6.1% compared with 3.5% in the fourth quarter of 2019. The year-over-year increase in that sales was primarily driven by an increase in military sales, which was partially offset by the climbing commercial sales rep was all the fluctuations in the tiny space and size of commercial projects including the impacts of of the COVID-19 pandemic.

When compared to 2 to 6 million in the third quarter of 2020 and that sales were down 37.2% on a sequential basis due in large part to decrease sales and our military discipline resulting primarily from the timing of one particular military order that shifted a significant portion of sales from the second quarter of 2022 the third quarter resulting in an Xbox concentration of military sales and a third quarter as we have previously mentioned.

Sales to our top 10 customers for the total company for the fourth quarter of 2020 increased 6.1% in sales to our top twenty customers increase 4.8% compared to the fourth quarter of last year reflecting further penetration and its top tier of our existing customer base.

From an ex perspective military sales were two point six million for the fourth quarter of 2020 representing 69.2% of net sales compared to one point five million or 42.5% of total net sales for the fourth quarter of 2019.

Year-over-year increase in military sales is primarily due to increased sales to one of our top 10 customers compared to last year with one particular military customer representing most of the increase also fourth quarter net sales to our top ten military customers increased 66.9% and that fails to our top twenty military customers increased to 67.3% compared to the fourth quarter of 2019.

Sales to commercial customers were 1.1 million in the fourth quarter of 2020 representing 30.8% of total net sales for the quarter down from two million dollars or 57.5% of total net sales in the fourth quarter of 2019. The year-over-year decrease in commercial sales was mainly due to overall softness in the commercial Market that began at the onset of COVID-19 pandemic. Sequentially that sells the commercial customers decreased 20.7% down from one point five million in the third quarter of 2026 increase was primarily driven by the pandemic.

fourth quarter twenty

20 net sales to our top 10 commercial customers decreased 53.6% year-over-year in fourth quarter net sales to our top 20 commercial customers decreased 51.8% off as a percentage of Revenue gross profit was 38.3% in the fourth quarter of 2020 compared to 27.1% in the fourth quarter of 2019 a year a year increase of 1120 basis points. This increase was primarily due to a more favorable product mix in the margin impact from increased military sales in a more favorable Reserve movements in twenty-twenty on a sequential basis gross profit margin increased 1520 basis points from 23.1% in the third quarter of 2020.

Adjusting gross profit margins for excess and Obsolete and Transit and net realizable value inventory Reserve resulted in the non-gaap adjusted gross margins of 27.5% for the fourth quarter of 2020 more in line with recent historical Trends compared to 28.5% in the fourth quarter of 2019 and 24.66% in third quarter of 2020.

Operating expenses in the fourth quarter of 2020 with 2.3 million or 61.4% of sales compared to two point 1 million or 60.2% of sales in the fourth quarter of 2019 an increase of $173,000 or 8% cents 8.1% year-over-year. The increase was largely driven by higher product development costs for us to the development of our you've ecd products loss from operations for the fourth quarter of 2020 was $866,000 compared to a loss from operations of 1.5 million and the fourth quarter of 2019 a year-over-year Improvement of three approximately $300,000. Sequentially this compared to a loss from operations of 1 million and the birth of twenty-twenty and Improvement of $146,000 below. The operating line interest expense was $137,000 in the fourth quarter $137,000.

And the fourth quarter of 2020 compared with $181,000 in the fourth quarter of 2019. This decrease was the result of a lower Blended interest rate on borrowings. Despite the fact that balance also below the operating line in the fourth quarter. We had non-recurring expenses of $117,000 for the extinguishment of debt off at one point two million dollars gain related to the valuation of the warrants. As I mentioned earlier. These warrants were reclassified equity and will be subject will not be subject to remeasurement subsequent periods that income in the fourth quarter of 2020 was a positive $65,000 or $0.01 per basic and diluted shares based on four point three million a full with it shares compared with the loss of one point three million dollars or 53% on a loss for basic and diluted share basis based on 3.3 million of fully diluted birth.

And the fourth quarter of 2009.

Now I'd like to turn to the balance sheet of December 31st 2020. We had cash of 1.8 million dollars compared to $350,000 at the end of 2019. The increase in cash was primarily due to the insurance of new capital through the sale of equity in the first quarter as well as increased bonds total. As of December 31st, 2020 was 3.1 million, which was comprised of two point three million in short-term credit line Barnes and Barnes of $795,000 under the paycheck Protection Program as part of the coronavirus paid relief and economic security or cares Act.

We applied for loan forgiveness in October of 2020 and it was subsequently granted in February of 2021 which included the entire principal balance and interest in accordance with gaap. The Forgiveness income will be recorded as other income and the Consolidated statements of operations during 20-21. We estimate there will be a positive impact to other income of approximately $800,000 in the first quarter.

For Enterprise Value purposes Arnett was one point three million at the end of 2020 which compares to that of three point million three point 1 million at the end of 2019 with 1.8 million dollar reduction year-over-year as of December 31st, 2020. We had total availability of three point five million dollars, which was comprised of one point five million dollars of cash and one point seven million dollars of excess borrowing availability under our credit facilities primarily as a result of additional capacity gained through our new credit facilities that ppap in the equity offering this compares to 1.9 million in total availability at the end of fiscal 2019.

Now I would like to discuss the full-year cash flow results cash used in operations was two point five million for 2020. The net loss was six million dollars inclusive wage non-cash items such as depreciation stock-based compensation and one point 1 million loss from the change in fair value of the warrants. We generated cash from working capital of 2.3 million and twenty $20 compared to being a use of $412,000 of cash in 2019. 1.1 million was generated from inventories and 1.5 million was generated from accounts payable both driven by timing of inventory and it's $400,000 was generated from accounts receivable driven by timing of collections.

Cash used in investing was $223,000 or approximately 1% of net sales historically our Capital spending requirements are not significant Metcalf provided by the financing activities with 4.1 million dollars driven primarily by the equity we issued in January as well as the PPP loan.

as I mentioned

And during prior earnings call earnings calls for the time being would like to provide brief updates about the impact of the COVID-19 pandemic on our business as in the past. We continue to operate under are customized COVID-19 contingency plan at the company with employees that can alternatively work from our plant and office or from their homes.

James and I've already discussed the historical impact of the COVID-19 pandemic on our Commercial Business while they are small signs that the commercial business might be starting to rebound a bit is still too young to become overly optimistic of a rapid or immediate recovery during the fourth quarter of 2020 and through today. The impact of the pandemic has significantly impacted many businesses, including our home and resulted in supply chain impacts such as increased wait times for products to arrive as well as increase inbound and outbound Freight and shipping costs. Some of which could be passed along to customers plus continued Staffing challenges and other operational hurdles. We have had to overcome

Fortunately, we continue to not see a significant impact of the COVID-19 pandemic on our military and Maritime business unit. However, thankfully the development and launch for the long haul your products is a good countervailing influence to the pandemics impact on our Commercial Business is consistent with our human health center of approach to lighting fits, very strategically off our long-term goals, and we believe it's a long-term business model that will address a lasting focus on sanitation in the workplace consumer space and social Gathering spaces following the COVID-19 Panthers event. Do you receive the portfolio addresses all pathogens including the coronavirus and influenza, hence? We are entering this segment strategically in with a long-term deal with that package would like to open up the call to questions.

Thank you. If you would like to ask a question, please, press star one on your telephone keypad. A confirmation tone will indicate your alignments in the question queue. You may press star to if you would like to remove question from the queue and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star. He's our first question is from may dial with HC Wainwright. Please proceed.

Thank you. Good morning. James Corden. Hey, how are you? Good morning, just with respect to this, you know this infection at the service solutions. How many rooms do we have right now? And can you talk a little bit about the business model in terms of you know, you said you might be charging on an hourly basis. I know it's very early, but in terms of just your thoughts on how this could scale up potentially if you know this picks up for you.

Yeah, sure. Yeah, you are right that it's a little bit early. We just launching the Pilot service. We now have five robots that we are basically, you know walking on and providing services and training our operating technicians in the Cleveland area. So it'll be too early to to you know, allow the specifics but we're excited about it. We are charging $150 per hour on the services are receipt depends on you know, how long how much is the subscription how many times do you are using a monthly basis and we have a you know so-called, you know type of wage, you know, a methodology towards the usage to encourage, you know recurring uses we will be sharing more details in the next earnings call log.

about the exact mechanism

So we just want you know to make an announcement that we are in the middle of the piloting services. And as I mentioned you will be launched officially in the second quarter. So we'll have more details to share.

Okay, I don't want to add anything. I just sat on the pricing front when we determine that level of pricing we did extensive benchmarking and other analysis to make sure that we felt we had a a very good value and it 150 is the highest price of customer would pay if they bomb unit. They get a lower price per hour.

I'm just and then you know, it looks like going into 2021. We have a lot of drivers for the commercial truck in terms of products and you know renewed sort of sales force reorganization Etc. If the commercial business picks up for you, you know in twenty Twenty-One wage. What kind of impact on the margins should we expect you know from this?

I'll take a step in obviously talking at Fellers. We always talk it over 30% gross margins in some products at 5. So this will end and fixture product lines. The margins could be lower and also depends on you know, the the could be one-time transaction that will have lower wage. But overall we are looking to achieve 30% plus margins in in our commercial business line. We definitely should have that Faith In Focus line and the and most likely or the CD products and I think that's consistent with what we have talked been talking about targeting over 30% off on the on the commercial.

Todd doing anything to add on that I'll just say that, you know, given our current volumes as we increase volume at that rate will be more consistent quarter-to-quarter because of the next will not impact it as much but we do we do have a strategy of targeting the kind of margins both from a dollar basis, which is our primary driver off as well as considering percentage margins and how we price these so we we do intend to stick in those ranges that we mention before and change just reminded everybody else.

Okay, thank you for that and with respect to the info cuz it looks like this is you know, a bigger part of the commercial efforts 20-21 has did in fact contribute anything in the fourth quarter or you know, you weren't really in a position to Market as you know sell this because of government related reasons in that order.

Yes.

Well, the the end is really insignificant yet at this point. And the reason is that as you are aware of the enfocus system are protected the commercial facility and you know all the budget basically not only new retro fit the budget but also the existing projects were being delayed. So we haven't seen uh, you know in Focus being actually so into the market in new projects yet. What we are seeing is a lot of interest in taking in folks into new projects. Once the project started to happen again we mentioned about when that we had with, you know, a a state government facilities that will start installing in focus in a second half of the year of this year, you know, and that was one of the sort of not rare but not so often situations wage.

The budget company to move forward without any impact without any short-term impact. So our hope is that you know of the, you know economy started to walk back to more normal Pace. We can start seeing in Focus being specified into the into the new projects. We are also am obviously going to be you know, as you mentioned we're extending our sales organization. So they are going to be additional channels where we could sail in focus to the non-traditional problem oriented oriented opportunities, and we will we will talk more about that when that transpires. The the other thing I want to add is that obviously in focus is your name is is a major investment for us in engineering for the commercial space. We we we envision that in Focus being the Dead.

You know the basically the control Hub, you know going forward for to provide web-based learning controls and we're adding functionality to it and off we will also have other residential type of applications based on in Focus later this year. So, you know, we're looking to expand this product portfolio page further throughout the year James. Can I have one item to that were also in Focus will be part of the above product that James off earlier r u v c d proper. So with that as those begin to see the market we will also see growth in the enfocus platform.

Yeah, that's what I have for my other questions about my thank you so much.

Thank you.

As a reminder to star one on your telephone keypad, if you would like to ask a question. Our next question is from Bill Hardy with private investor. Please proceed with yes. Good morning in Greek. Just fine. Just fine. My question is in regard to InFocus Thursday the August conference call. You mentioned that you were going to provide a programmable capability for the in Focus station home from an individual station and from a system-wide station. Could you comment on where we stand on that? Because I think it's a very significant thing to add to that product line.

Yeah bill.

Uh you're talking about I presume you're talking about more additional control capabilities.

For in Focus. Yeah, so so yeah, so you are aware of the current generation. The first generation of in Focus product has the ability to wage, you know, it is freaking free T-mobile funicle, right all control from the switch in the Next Generation. We're adding Acadian lighting which is autonomous is security and lighting package as well as the occupancy sensing. So we obviously expanding the capabilities of the enfocus switch and and obviously that's it off the bat Publications almost Limitless, you know, once you have once you establish the connection between the switch which the control center and the Lambs the rest is wrong adding the the capabilities to the switch and it's I think the appeal for enfocus is only going to get better stronger because of the increasing Sai Prasad.

Pretty concerns for Wireless Communications. And so yeah, so so, you know, we are moving towards that direction for sure.

So that that means that rather than manually operating this which you'll be able to program it. So it'll go on and off at particular times, right? Yes. Yeah, you you basically have the ability to return to autonomous control cuz based on the Circadian rhythm researchers know throughout the day there will be these different levels and color temperatures that were optimized, you know human, you know comfort and productivity and performance. We in the Next Generation, we are building that capability into the into the switch. So if you can obviously override the life or the color temperature any time mainly only but if you choose to do autonomous you have the ability to actually, you know have that security and lighting throughout the day twenty-four

For our. Which is I think it's going to be a great application for residential uses which is what we have scheduled to launch a second half of the year, right? Thank you. One more question in regard to the UVC products suck you had indicated in the third quarter conference call that you were going to

Provide about a hundred of the stand-up booklet small stand-alone units to various customer and I'm just wondering what the feedback was from that and and and did that happen. Yeah, as I mentioned in the in the office call, we have made additional improvements on the products and we are even more exciting now with the product so long the products are now being going through production engineering and you know, we are we're scheduled to start selling them in the June time frame will be providing these samples, you know before that, you know, and so we'll we'll see how you know, the responses are but you know, yep.

past few months we have taken our

Prototype products that's probably the hunger you're talking about. We we have provided, you know, demo those products too many customer and that's why we said that the feedback has been really good the, you know, the delete capabilities for the products, which I won't go into details here. But you know in the summer it used to be able to intercept the virus in real time and disinfect them effectively, which is what most purifiers do not provide them. And so and we have technologies that are building that can you know, generate pretty strong air flow while still keeping the units safe home human use. Those are the improvements that we made over the past few months and and you know, we believe that there's a certain amount of demand again. It's a new market so we don't know how big dog

Steven is we and anecdotal evidence has shown based on our discussions and demos with our customers and and you know and their customers and think they might would be substantial, but we still early detailed. Well, thank you very much, and I would like to thank you for taking you to call from from a private investor off. Thank you feel thanks for the support. Right right and interest. Yep. Thank you.

And our next question is from Ethan star private investor. Please proceed. Yes, good morning. You mentioned you mentioned to believe the new National wage Asian partners that will take products to new verticals, and I'm hoping you could please expand on that.

Yeah, we are not ready to talk about it yet. I think you know once that's that's ready to go. We will be announcing that yeah. All right, that's fortunately we we can talk about it right now yet. That's fine. I understand and I'm wondering to what extent are you aiming at new construction versus retrofit retrofit seem to get a lot more discussion during the conference call.

Oh, yeah, absolutely. The company has traditionally been a retrofit Focus company because our land-based Solutions we but you you made a very good point. I heard the question that the new construction actually hasn't been affected by the the retrofit just because the new construction budget usually has been approved ready to go and I think the new stimulus plan is going to continue to increase the demand for new construction lighting Products for the retrofit. Is that totally different story. Where do you you you don't have to you know upgrade your lighting when people are not even there and you don't know when they're going to come back so and that's why we have been confronting over the past year or so, but we are, you know planning to lunch hour hold fix a line. That is also land-based. We're very excited about that will go into new construction market and the reason we are very excited about wage.

is twofold one is that it would be based on, you know our best solution which is which

To make those fixtures, uh, you know, very sustainable compared with the you know, integrated pictures that you have to you know, really, uh, you know, throw out those mechanical Parts if the lights don't work anymore or it becomes very, you know, technologically, you know lack lagging. So, uh, so if I'm the system is it did a decent Point that's the that's the most simple lighting fixture in the market and the second thing is is that it's it's basically coupling transfers without existing lens to provide a different line of products that now The Architects and designers could specify instead of specifying Blends and drove home. They could just specify that whole fixture line and it's it doesn't take a lot of time for us to launch this product line. It would be launching the second quarter. So so that would take us to the new age

Construction Market, obviously that takes time to develop the whole segment. It's a new second line for us on the other hand. One of the most important things when when dead slow over the past six months for the commercial side is for us is to expand our agency Network. Now, we have a more than 20 agency lighting agencies across the country and Ed and be the agencies have a substantial amount of business in in you know new construction. So we're hoping that this new product line to address their means there as well.

Okay, great. And I'm wondering you mentioned these lighting agencies, I believe and I'm wondering I'm not really aware of those but wondered what what extent do you focus your marketing efforts in architectural firms?

Already though. As I said this point before we launched the floor for a picture line, very little we have been focusing mostly on retrofit. And as I mentioned, we have the feature line, we will be, you know, turning our marketing Focus to the you know, I mean essentially, you know, driving into a whole new mom there with the existing agency, and that's the beauty of it. We don't have to create another channel for it. Okay, great. Thank you very much. I wish you good luck going forward and I look forward to the next call and a few months. Thank you.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Thank you very much for your participation today in our only vehicle, and we look forward to talking to you again in the next quarterly earnings call. Have a great day. Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.