Good day and welcome to the Energy Focus Second Quarter Earnings Release Conference Call. As a reminder, today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Brion Tanous. Please go ahead, sir.

Thank you, operator. I’d like to welcome everybody to Energy Focus’ Fiscal Year 2012 Second Quarter Earnings Conference Call. On this call, the Company’s Chief Executive Officer, Joe Kaveski will give a business update on the Company’s solutions, products and government businesses as well as provide an outlook for the third quarter of fiscal year 2012. The Company’s Chief Financial Officer, Mark Plush will provide greater details surrounding the Company’s second quarter financial results. We also have John Davenport and Eric Hilliard on the call with us this afternoon. Following prepared remarks, we’ll open it up for questions for the remainder of this call. Before we get started, I am going to read a disclaimer about forward-looking statements. This conference may contain in addition to historical information, forward-looking statements within the meanings in 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. 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. Potential risks and uncertainties include change in demand for the Company’s products, the impact of competition and government regulation and other risks contained in the statements filed from time to time with the SEC. All such forward-looking statements whether written or oral, made on behalf of the Company are expressed to 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. With that, I’d like to turn the call over to Mr. Joe Kaveski. Joe?

Thank you, Brion and good afternoon, ladies and gentlemen, and thank you for joining our second quarter 2012 earnings call. Today, I’d like to offer some brief comments on the Company’s second quarter financial results, progress that we’ve made in some of our business units, and an accelerant that is likely to increase our LED products and SRC Solution sales. I would then like to offer you some guidance towards our anticipated third quarter and year-end results. So to begin, I am very pleased to report that our second quarter sales were $7.7 million and fell within our guidance of $7 million to $8 million. This represents a 45% sequential increase in overall net sales from our first quarter and was driven by strong growth in our LED product sales. In our overall gross profit margins for the second quarter improved over 7 percentage points from our first quarter and are up over 3 percentage points over our second quarter last year. Furthermore, our operating expenses for our second quarter were slightly less than our first quarter. Additionally our year-to-date operating expenses are down over 23% when compared to the same 6 month period last year. Those increased sales in gross margins coupled with our expense reductions, all contributed to the narrowing of our EBITDA loss which was $470,000 for our second quarter. This represents a $1.1 million improvement for the first 6 months of this year when compared to the same period last year. So as we look to the performance of our business units, our R&D team made good progress on 2 fronts during our second quarter. First, they secured another contract for the military. This contract worth approximately $900,000 is to develop a next generation lighting fixture for the U.S. - for a future U.S. Navy vessel.…

Thank you, Joe. Good afternoon, everyone. Net sales of $7.7 million for the second quarter of 2012 decreased $521,000 compared with the prior year’s second quarter sales of $8.2 million. The decline in sales was due primarily to $1.2 million of lower sales from our SRC Solutions business, which was partially offset by a $718,000 increase in product sales as a result of higher sales of LED products. We did not record material sales during the second quarter for U.S. Navy products as the current release date calls for shipping products during the third quarter. Gross margins were 22.2% of net sales versus last year’s second quarter gross margins of 18.9% of net sales, a 3.3 percentage point increase or $156,000 increase. The increase in gross margins was due primarily to higher gross margins at our Solutions business, towards 20.3% of net sales of this year compared to 11.9% last year. Additionally, there was favorable mix as product sales represented approximately 72% of total sales and that segment has a higher gross margins than the Solutions segment. Operating expenses for the second quarter of 2012 were $2.4 million, compared with the prior year’s $2.5 million, a 4% decrease due to lower sales in marketing expenses. Second quarter’s loss before taxes was $897,000 compared to a loss before taxes of $1.2 million in the prior year’s second quarter. This reflects an improvement of $272,000 even though sales decreased $521,000. The improvement was due to higher gross margins, and slightly lower operating expenses. It should be noted that sequentially compared to the first quarter of 2012, net sales increased $2.4 million or 45%. Gross margins as a percentage of net sales were 22.2% compared to the first quarter’s gross margins of 14.8%, 7.4 percentage point improvement. Further the loss before taxes narrowed…

[Operator Instructions] We’ll go first to Robert Smith with the Center for Performance Investing.

Do you think you could share some growth margin targets for third and fourth quarter?

Robert, we do not forecast. We do not give specific guidance to our gross margin targets. What I can tell you is longer term what we are looking for, for running this business our gross margins in the upper 20% to lower 30% range, but again we are not giving specific targets for the third and fourth quarters. We just don’t give that guidance.

Okay, so when you say longer term targets reachable and what kind of timeframe?

Clearly in the next 12 months.

Okay. I heard the kind of caveat about so-called I guess the world facing fiscal cliff and government - lack of government budget and continuing resolutions and all of this, so how much of the third quarter revenue range is really firmed out, in other words is $9.5 million kind of truly a bottom?

That’s the guidance that we’ve given, Robert.

Okay. But so would you say that's not dependent upon the idiosyncrasies of the government situation at the moment in spending?

Well Robert, your guess is as good as ours, but I mean you’ve got effectively a potential administrative change which would occur in the fourth quarter. You’ve got the potential fiscal cliff that hopefully will be avoided in the first quarter of next year. So your guess is as good as ours, but I think we just all have to recognize that and continue to strive to grow our businesses.

But I mean the third quarter range, I mean the bottom end of that range is that - can that be influenced?

We feel pretty good about the range that we’ve given on the third quarter.

Okay. And how about your cash position going forward, about the ability to fund the business?

Yes Robert, we have a credit facility where we are basically providing collateral with our receivables. So we borrow what we need and we don’t want to pay any more interest than what we have to pay. So our cash position is really at any given point in time is really more of a function of what we need to run the business for the next week.

Okay. So there are no fears in that respect near-term?

No, we think that our current financing is sufficient.

Okay, can you give some color about the present state of the R&D efforts?

Beyond what I’ve already given? As I mentioned, we are delighted by the progress that the R&D group has made, and the development of our 4-foot version of IntelliTube, I mean that is truly the Holy Grail. We’ve actually expedited the development of that. We are utilizing what we believe are the absolute state of the art pushing the bubble there. So we’re on track to basically bring that product to market in the near-term.

And by taking it to market - how do you create a sizable market?

I think the sizable market exists already out there right now, I mean the fact is that in the U.S. alone there is over 70 billion square feet of non-residential lighted space and out of that 70 billion square feet, the predominant technology is the 4-foot linear fluorescent.

So how are you going to tap into it, I guess is the better question?

We believe that the government sector will be one of the first to tap into it because of their value equation. So the evidence that we think we’re on track here is the fact that last quarter we announced a $1.8 million order for basically a large LED product sale.

So with a large market opportunity like that, I mean how much is possible of government business that is presently there, I mean what is the size of the government market that could...

Sure, well let me just tie it to back to the program that I just announced. I talked about the fact that the President had issued basically a memorandum to government agencies and executive offices that basically said, "You need to move forward with basically doing $2 billion minimum in performance-based contracting in these Federal facilities and get them under contract by the end of 2013." So it basically - there are 3 scopes of work under this Enable program. One of them is water conservation, one of them is rudimentary controls and the third one is lighting. So if at minimum 1/3 of that $2 billion was lighting that’s a big number.

So if all the government facilities would change their 4-foot fluorescent lighting today, what kind of a market size is that? Do you have any idea?

I can tell you, I don’t have a calculator in front of me but out of the 70 billion square feet of non-res lighted space, the government basically said that 30% of it is government buildings.

[Operator Instructions] We’ll go next to Ted Brown [ph].

I am confused about how many shares of stock will now be outstanding after this new registration. And I am reckoning somewhere around 55 million shares. Also I am a little curious about some of the details of the recent financing and the fact that you’re now just embarking on registering I guess 29 million. Was any of the stock, do you think is going to find its way quickly into the market. Let’s not have another David Gelbaum situation. Could you get me some assurances about what the character of these holders is?

Yes, Ted you have a number of questions, so let me try to address the questions. Right now we have 44,541,696 shares outstanding. There are roughly 9 million worth of warrants which could be exercised but that’s at $0.54 a share and they would have to take action. So the shares that are outstanding today are roughly 44.5 million shares. So that’s what we have and that’s what we’re calculating our earnings per share numbers based on. In terms of the shareholders, the recent shareholders, we have been told by them that they are patient, they are long-term shareholders and they are in this for the long run. And that’s what they have stated to us. So we believe them and we believe that they will be patient with us. Did I address your questions? Was there another question that I may have missed?

Yes, well that’s fine, but do you anticipate any more sales of common shares because you could make $10 jillion[ph] but if you have 25 jillion new shares, it’s not going to amount to much.

No, I mean today the S-1 registered these shares for this latest equity offering and assets.

Okay. So you really not anticipate any other expansion of government stocks or equipment [ph].

No plans at this time but again recognizing there is 9 million warrants out there that they could exercise that $0.54 a share. But that was part of that equity deal, but we have no other plans for issuing any other shares at this point in time.

[Operator Instructions] And we’ll go next to Peter Field with Merryfield Investment Management.

You’ve answered my questions, so thank you for that. The comment is after watching you guys for many years as you know, it sounds to me like all your hard work and dedication and commitment is finally beginning to pay off, so congratulations and keep up the good work.

Well thank you Peter, we appreciate that very much.

And we’ll take our next question from Bill Harvey [ph].

I think that the improvement in res was fairly decent and I think your forecast of $9.5 million this coming quarter is very significant. So I have a good feeling about that. The thing I’d like to ask you about is of course IntelliTube, the 4-foot version. It is much as the 2-foot version has already been proven. It seems almost [indiscernible] that the 4-foot wouldn’t be that difficult. So are there problems in getting that out or is it just that you want to make sure that it’s right.

Bill, we know it’s right, but the reality is, is it wasn’t until this year that the LED chip suppliers had a chip available on the market that put out sufficient amount of light and do it very energy efficiently. And so that’s really what’s been holding us back and in a 4-foot version you need twice the light of 2-foot version so there we go.

Yes, based upon normal engineering that’s a fact. Do you think that along about the end of this the fourth quarter or beginning of 2013, we’re going to be there?

That’s what we’re pressing hard for right now, correct.

And that does conclude our question and answer session. I’d now like to turn the call back over to Brion Tanous for any additional or closing remarks.

Actually it’s Joe Kaveski, and thank you Kevin, and I guess I would just like to offer a few closing remarks and that is first of all, I’d like to thank our shareholders that participated in voting their proxy at our Annual Meeting that concluded in July. And I’d also like to share - actually I am delighted to share with you that the Company will be participating in the Rodman & Renshaw Conference September 10 at 1:35 P.M. excuse me, when the conference will actually be held at the Waldorf Astoria in New York City. So hopefully you’ll be able to join us. And so with that, I would just like to thank everyone again for making time and participating in our call. Thank Energy Focus’ employees for their dedication and continuing hard work and wish everyone a great evening and I look forward to our next call. So thank you again and have a good evening.

And ladies and gentlemen, once again that does conclude today’s call. We do appreciate everyone’s participation.