Welcome to the Energy Focus Fourth Quarter And Full Year 2014 Earnings Call. Today’s conference is being recorded. And at this time, I would like to turn the conference over to Marcia Miller. Please go ahead.

Thank you, Greg. Good morning, everyone and thank you for joining us for Energy Focus Fourth Quarter and 2014 Year Earnings Conference Call. Today James Tu, our Executive Chairman, Eric Hillard, our President and Chief Operating Officer and I will report on our results for the fourth quarter and 2014 year. The new releases with our earnings result and our annual report filed on Form 10K has been posted to our website under the investor section. As a reminder today's discussion will include forward-looking statements including predictions, expectations, estimates or other information that might be considered forward-looking. These forward-looking statements are subject to numerous risks and uncertainties. We encourage you to review our most recent filings with the Securities and Exchange Commission, including our 10-K and 10-Qs for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. We are not obligating ourselves to publicly release any revisions to these forward-looking statements in light of new information or future events. Now, I’d like to turn the call over to James.

Thanks, Marcia. Good morning everyone and thank you again for your participation in our earnings call. In this call I will talk briefly about our progress during fourth quarter and full year 2014 and Marcia Miller will discuss about our financial in more detail. We will then open up for questions. As you have read in our earnings press release fourth quarter 2014 represented another exciting sequential quarterly growth over third quarter of 2014. We obtained the upper end of our estimated quarterly sales goal at $9.5 million and multiply our product sales which are always focused on, 252% over the same quarter in 2013 many due to strong navy sales. During the quarter we further improved our gross margin from 32% last quarter and 23.2% in the fourth quarter of 2013 to 34%, excluding the onetime severance settlement and employment incentive charges, quarterly operating loss was reduced to 70,000. We also generated $1.3 million of operating cash flow during the quarter. In the meantime we extended our R&D efforts further and filed additional patent for our commercial IntelliTube product. And we’re awaiting UL and DLC certification to launch the product formerly within the next few weeks, we believe that in therapy we will represent a true ground breaking and differentiated solution to replace florescent light with lowest fluorescent light with lowest talk of ownership and leading quality and safety features, not just in the U.S. but also worldwide. We also are in the process of developing products that are complementary to our core two product portfolio for our commercial customers and we will announce them in the coming weeks and months when they are launched. These commercial product development efforts aim to position Energy Focus as an indisputable either in the tubular LED market. Also during the quarter we…

Thank you, James. As James indicated we’re finished with our sales growth and growth margin improvements for both the fourth quarter and the year. I trust you all have had the time to read our earnings release and I would like to give you a quick rundown of our financial results. For the fourth quarter of 2014, Energy Focus had net sales of $9.5 million compared to $6.6 million, the prior year's fourth quarter representing an increase of 43% year-over-year and an increase of 34% from the third quarter. To remind everyone we report two segments of our business. The product segment and the solution segment. The product segment includes our military and general and commercial and industrial LED lightening offerings as well as research and development service contract revenue. R&D remains a key focus for us and our engineering team is dedicated to developing a leading edge LED lighting product. However since the second half of 2013 we have curtailed our efforts by bidding on research contract and grants that don’t fit our strategy of focusing on the tubular LED lighting retrofit market and revenue from these contracts has declined significantly in 2014 to a negligible amount as these contracts are near completion. Revenues from the product segment totaled 9.3 million of the total 9.5 million for the quarter and grew 252% from the prior year's quarter. Excluding R&D for the project revenue I just spoke of. Project segment revenue were almost 300% from the prior year's quarter through the strong sales of our military IntelliTube products for the U.S. Navy. In regard to our solution segment during the second half of 2014 we began shifting our focus away from providing turnkey solution so we could focus our resources solely on our LED lighting retrofit product placement. Our solution…

[Operator Instructions]. First from Roth we have Craig Irwin.

James, you’re very clear about the growth in the Navy and key part of your continued growth in 2015. Can you may be discuss how things are tracking in your national accounts and commercial businesses, whether or not we’re going to see those businesses to start contributing a more material portion of the overall revenue of the company or if the Navy is likely to lead the growth charge in 2015.

So as I mentioned that we have been building our infrastructure for the commercial sales and we do expect the commercial sales volumes to start picking up as we move throughout 2015 almost on a quarterly basis. So it is our expectation that we can start showing the numbers in more meaningful ways throughout the year. Maybe sales are still going to be a very important part of our 2015 results but as I said the pipelines that we have been building in the commercial market and I think what differentiated us from a year ago in our commercial market personally that we have a more clear and more defined strategy that we believe is working and will be working. So I would just say that it takes a while to generate actual sales of our individual account and we anticipate a country result in the coming months.

So the next question I wanted to ask is about seasonality, just so that everybody that follows your company has the progression of revenue and margin is collaborated correctly. Can you discuss what are not there typical seasonality that we can expect anything first quarter result if this is likely have a similar impact on Energy Focus to others in the lighting market or do you see less of an impact given your significant waiting from your successful sales to the Navy.

Yes aside from the Navy sales that might be stronger in the third quarter due to the budget year in the defense department. We don’t particularly anticipate very strong seasonality in any of our business. There you can argue that in the retail business fourth quarter is probably the weakest just because nobody does much in the industry but still a very small part of our sales at this point. So all-in-all we don’t expect to have much seasonality, now we focus very much on product sales and our sales will continue to diversify into different vertical as we progress through 2015. You can argue that in 2014 Navy was the notable sales growth driving force. In 2015 you will see more verticals that are contributing to our sales and towards the end of the year we believe that the Navy sales will become more muted not 70% - 80% of overall sales. But still it will be a very important part of our sales.

And our next question comes from Allan Snider with Oppenheimer.

I had a question about the fact that you have turned this company around and you never in my opinion have hyped anything. You don’t put frivolous press releases and I respect that very much. But I did want to ask you with relationship to Cushman & Wakefield. Now it's publically known that you’re considered as a preferred provider to Cushman & Wakefield and they didn’t sell -- or built as the world's largest manager of commercial real estate and in my opinion that is a huge, huge plus for your organization. So I was wondering if there is anything that you can care to elaborate on with relation to Cushman or any similar commercial opportunities that are now following for you guys?

Well the Cushman & Wakefield deal was a significant win for us. While we have experienced however is that because Cushman & Wakefield does not own the building, they only manage -- their clients. So the decision making is spread into the individual owner which is very hard to penetrate when we did not have IntelliTube which is a plug and play product. So we do expect that -- so unfortunately in 2014 we did not make much progress when it comes to actual sales from the channel, we do expect in 2015 we will maximize our leverage that particular relationship and penetrate some part of the building market. I do want to emphasize that this is a vast market and the penetration rate for LED lighting is still minimal and there are a lot of what we call low hanging fruits particularly in the industry that pay attention to not just energy saving but also the health impact and sustainability impact. So that’s why we focus very much on the schools where the kids will benefit from better lighting, the fluorescent lighting impact them in a very far more humble way in LED lighting, our product provides a dramatic health impact on the kids and there are many studies that have shown that we can improve their extending performances as well. Same thing for healthcare industry and the retail industry, those are the industry that we’re more focused on right now. We will continue to expand on to other verticals but again it's such a vast market. We’re talking about tubular tubes out there to be replaced in the U.S. alone. We have barely scratched the surface of this market. So we just have to be careful about where we focus our resources and we did a couple of million dollars sales last year in commercial--

I was just curious as to what had transpired with Cushman and then you made it very clear and I do understand. And bottom-line I just want to congratulate you. I think you’ve done a wonderful job and the cliché is that the train is possibly leaving the station and I'm looking forward to further conference calls.

[Operator Instructions]. We will move to Joseph Gimet [ph], Private Investor.

I’ve one question on quarter four, on the September you announced that you received maybe a $7.7 million order and the order most of which is expected to be delivered throughout the remaining of 2014 represents the largest order in the company's history and I was just wondering if indeed it was completed at that time and also what the percentage of your sales were accountable to that particular contract?

I will try to answer your question as transparent as I can, the order that we received in 2014 there were numerous orders but there is specific order that you’re referring to has a delivery on it that expand beyond 2014 and into 2015. So we did deliver parts of that order and then we will continue to deliver that order. The mix of that I can't speak dynamically to on the call obviously. And as a percentage of that particular order as it made up our sales volume, again that’s hard to disseminate right now in the room but. As James had said to your question Joe, military is in 2014 a significant part of our revenues. Thanks.

Joe, if you look at press releases that we have now potentially December accumulated orders from Navy was about $29 million.

Did you see additional orders?

Yes so there will be more, coming like the three quarters based on those order and potentially more order.

One another question, the 500 D-tubes and the IntelliTubes and whatever, are those manufactured in the United States or Mexico, or are they done overseas? Or is it a mixture of partials both here and there?

So we do sell two versions of products, one version is just purely commercial product. Those were mainly in Asia and another class of the tube are what we call [indiscernible] tube, they are assembled in the United States. There are some clients, government, military especially that required by American products. So we do make those products in our production facility here in Cleveland as well.

And next we will move to David Hartman, Private Investor.

You indirectly answered my question already, you mentioned that the severance cost were based on the UK operations and we haven't heard about them for a while, I was wondering if you would elaborate on that a little bit and also your Communal deal with Asian distribution, we haven't heard about that for a while and I realize that because of the IntelliTube launch wait and I just want to see if that was still no track. Thank you.

Sure. So the first part of the question about UK operation, we did set out -- well first of all it's a very small part of our business at this point, it's less than 5% of our sales and it was a negative business that focused on specified market which is not the market we focused but we did have a pretty extensive restructuring during the fourth quarter to make sure that operation can be cash flow breakeven or more or better and with that that’s where the charges are found. And we are also in the middle of setting of that operation to sell our IntelliTube product. In UK and part of Europe and Middle-East. So that is being prepared at this point. And we hope we have more development report once we launch the IntelliTube product in the second quarter in UK, again it's a very small operation at this point and we’re treading very carefully how we expand that operation there. We do have a very capable leader there at this point, a new leader there so we will report progress as we make them. The second part of your question about Communal. Yes, once IntelliTube is launched we do expect that Communal will be helping us in some part of the Asian market and that is being worked down right now.

The other question is obviously I know this may not affect you at all but the port strike, I didn’t know if that was influencing. I mean do you have enough inventory to cover future orders tier, I mean is that something that may hold us back?

The port strike obviously affected everybody mostly retail, probably [indiscernible]. Fortunately our planning logistic crew has done a wonderful job it has not affected us, hasn’t affected our client as well and we’re fortunate about that and we’re going to continue to be able to support our client as we move forward. Thank you.

[Operator Instructions]. Next we have Robert Smith with the Center For Performance Investing.

James, can you share with us what your two chief concerns are going forward? Thanks.

Two chief concerns, I’ve a lot of concerns. There are always challenges for us to expand this fast I mean there are just not many companies actual that sell actual products and deliver actual products and process actual products like we’re in the race, we’re growing. So we’re very fortunate, we have a very strong production and operational team here and we have great either tier that we will be building over the past 12 months. So I think the chief concern is always how do we expand the sales as fast as we like to. As I’ve always said this market is fast, it's waiting for us to untap. It is limited by our ability to grow and being able to execute being able to hire the right talent in time we have a lot of hires ongoing and to make sure that the [indiscernible] and being into our culture is very important. That is the most important thing as we grow the company to maintain the integrity of our culture that focus on accountability and execution and having a very sound environment. So if you ask me that’s my chief concern having a bigger and bigger team that they will say in one integrity. The second concern I think is the ability to expand outside of the United States that is something that we have not done much and we will be doing and we have been working on this for several months, overseas, what's the strategy and that will be also consuming a lot of our energy especially towards the end of 2015. I do believe that our biggest challenge I guess the investors point of view in 2015 will be the delivery of our commercial sales and we do believe that we have a very solid team and strategy together and we will see a very exciting growth in 2015 and again in our tradition that we don’t want to over promise anything. We do expect strong growth in 2015 and I believe that’s what investors will be looking for us continue to deliver profitability and growth in the commercial market and I think as quarter's progress we will see more clear signs of those execution results.

James can you give us more color on the R&D effort, you’re spending about 3% of revenue and R&D and pace of technology is such that I'm wondering about your position in LED lighting.

Sure. I will love to spend 6% of our sales on R&D and I think we will continue to invest more and more heavily into new product development as you’ve seen from our history in the safety miles as we instigated the restructuring and whole transformation. We were in the survival mode and we need to make sure that operation can be sustained and we have again I will never say that we passed the crisis mode yet and but we are going to start investing more and more heavily into new product development as we launch IntelliTube, that’s the first generation IntelliTube 2.0 is already being worked on. So we want to make sure whatever we do bringing us closer to the leadership position we aspire in the business [indiscernible] market and we have a strong product portfolio right now. We will continue to strengthen the portfolio for our customers and again the customers are the businesses, the government, the non-profit and we think very focused on developing product that day we will buy today and you will see that continue to happen and the effort will continue to expand.

[Operator Instructions]. Next we have Alvin Burns [ph], Private Investor.

It's good to hear that you guys are expanding and doing well. My question is on the to meet this increase in demand how about the dose facility, are you looking forward to having any extra shifts and/or do you suppose to see any need to expand your facilities to meet the demand?

Yes we have expanded pretty rapidly our production capacity. As I’ve mentioned you know we the shipments, the total shipments of our tubes grew 360% in 2014 that’s a lot of tubes to be shipped so that has been shipped. So we will continue to expand, I think we have gone through the most steep curve in our own production facility and we have very good teams there. So I'm very comfortable continue to expand that capacity. As for imported products we have several Asian OEMs that we will be working with and they all have pretty substantial capacities. And if you look at the two shipments in the market today we’re one of the top leaders as I indicated. So, we are able to secure production facilities, capacities because of our [indiscernible] will continue to drive the cost down and be qualified OEM that’s definitely on the top of our mind and we’re very happy that we have very strong OEM partners at this point to scale up dramatically.

Also one last question, I know you had escrows, you’re deemphasizing escrow stuff, how about construction? What do you see about the construction in the U.S. and abroad is it looking up? That will be a place where your products will be going. Thanks.

Yes we’re still focused greatly today on the retrofit markets. Again the retrofit market is more than 90% of the market there and it's still penetration rate is still extremely low in the single digit, low single digit. So we want to be able to focus on that market and the new construction market is a very different market and the lead time is even longer. We don’t get into project sales at this point. We’re focused only on product sales. So we will not be in the new construction market anytime soon and that doesn’t mean we will never get into that markets, we just are not in that market right now. We have enough room to grow rapidly even for few years so -- but we’re looking at other products that our customers want in the retrofit side.

And next we will take Bill Hardy, Private Investor.

One question, in January you announced a $25 million I guess what I would call a shelf registration in which you could access capital markets I guess mainly through offering shares and here this morning you said that you had enough capital with your 7.5 million to fund inventories and anything else that you foresaw in 2015. I guess the question is what were you thinking about when you went for the 25 million and is that just kind of something you want to keep in your back pocket?

Yes, Bill, that 25 million shelf registration left three year. So we have put it out there because mainly for two reasons, so what I meant was that we’re not in the urgent immediate need, so this can grow obviously. But we did have for two reasons, one is that the companies that we’re competing with are mostly very established company, you’re talking about Philips. Osram, GE, so -- and our customers are business customers so they are concerned about our survivability and our sustainability. So we have to have a very strong balance sheet to compete with the big company. We believe that we have very strong portfolio and strategy and team to win against this incumbent but we need a very strong balance sheet to make sure that there is no doubt. We can be a partner for these businesses. The second reason is that as you know they have really marketed the fast changing industries and there might be opportunities for to buy technologies or distribution that we can buy at the very good price. And it might come up anytime. I'm not seeing anything at this point exciting but as we always said internally within the sulk years, one month here is equivalent to a year in other industry. So you never know what's coming on the horizon in six months down the road. So we want to be ready to have that opportunity to response to these opportunities. So these are the two reasons why we filed the shelf.

Okay, next question is on guidance. Are you looking to give us any guidance for the first quarter of '15 or is that something that’s just going to be better than the fourth quarter?

While we definitely are still looking for a continuous strong growth but -- because we’re still a very small company we are trying to give investors full year guidance and even that full year guidance is a very risky one just because one year is a long time for Energy Focus. So all we can say is that we expect continuing growth and looking down on specific range is simply not practical given that we’re dealing with a lot of opportunities that might come in the last minute or it might split out in the next quarter, in the next minute. There are contracts that could take a year to execute. So I think investors should be looking at the company executing quarter by quarter and looking at our progress quarter by quarter predicting a specific number for particular is probably not but that’s the way to look at Energy Focus for the long haul. And we did tell everyone that we’re still comfortable with the 50% annual sales growth target and if you look at our sales -- for the fourth quarter we doing through the onetime charges. We’re very close to breakeven of that sales at 9.5. So if you extrapolate that expenses line and grow at a lower rate and the top line then it's not hard to imagine that we will be profitable once we surpass a certain amount of sales on a quarterly basis.

And with no further questions that does conclude the question and answer session. I will turn things back to Mr. James Tu for any additional or closing remarks.

Thanks everyone again for your participation. We very much look forward to talking to you again in our first quarter 2015 earnings call. Thank you and have a great day.

Once again ladies and gentlemen that does conclude today's conference. Thank you for your participation.