Good day and welcome to the Energy Focus’ Fourth Quarter 2012 Earnings release conference call. As a reminder, today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Brian Tanous. Please go ahead, sir.

Thank you, operator. I’d like to welcome everybody to Energy Focus’ fourth quarter and fiscal 2012 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 first quarter of fiscal 2013. The company’s chief financial officer, Mark Plush, will provide greater detail surrounding the company’s fourth quarter and full year 2012 financial results. We also have John Davenport and Eric Hilliard on the call with us this afternoon. Following prepared remarks, we will open it up for questions for the remainder of this call. Before we get started, I’m going to read a disclaimer about forward looking statements. This conference may contain, in addition to historical information, forward looking statements within the meaning of 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 regulations, 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 expressly 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, Brian, and good afternoon everyone, and thank you for participating in Energy Focus’ fourth quarter 2012 conference call. Today I’d like to offer you a few brief comments on our fourth quarter and year-end financial performance and discuss some noteworthy events that have recently occurred. I’d like to offer you a view of our overall opportunity within the LED industry, and why Energy Focus is well-positioned to capitalize on this opportunity. And, I’d like to provide you with guidance relative to our anticipated first quarter and 2013 performance. So to begin, the company achieved a 48% increase in sales compared to the fourth quarter of last year, and an overall 16% sales increase over the prior year. There were many positive milestones that were achieved in our fourth quarter, and they include sales in our pool and commercial segment which are primarily now LED products, increased 30% compared to the fourth quarter of last year and increased 26% on a year over year basis. Furthermore, our product segment reported a $1.3 million in segment income improvement, making this the first time since 2008 that this segment was profitable. This was the result of increasing demand for our LED products, including a new multiple LED tube lamp that we began selling in our fourth quarter. This super energy efficient LED lamp is truly best in class, as it can achieve 118 lumens per watt. Also, the National Shipbuilders Research Program, which is an organization representing the U.S. Navy and all of the major navy ship builders selected Energy Focus to exclusively design the Navy’s future de facto general illumination LED fixture, based upon none less than BFOI’s military IntelliTube product. This fixture will be used in the construction of future navy ships, so it’s now fair to say that…

Thank you, Joe. Good afternoon everyone. Net sales of $9 million for the fourth quarter of 2012 increased $2.9 million, or 48%, compared with the prior year’s fourth quarter sales of $6.1 million. The increase in sales was due primarily to $3.2 million higher sales from our SRC solutions business. This was partially offset by a $1.1 million decrease in our government products R&D services, mainly due to lower revenues from the U.S. Navy contract. Gross margins were 20% of net sales versus last year’s fourth quarter gross margins of 20.6% of net sales, a slight decrease from the prior year. However, gross margin dollars increased $540,000 as a result of higher sales. Operating expenses for the fourth quarter of 2012 were $3.6 million, compared to the prior year’s $1.6 million, a $2.1 million increase. Approximately $1 million of the increase were noncash items: $672,000 due to the write-off of impaired goodwill, and $309,000 due to a lower favorable adjustment on a contingent liability. Additionally, there was approximately a $900,000 impact as a result of last year’s favorable credit to operating expenses relating to the U.S. Navy contract. When adjusting for these items, operating expenses increased approximately $200,000. The fourth quarter loss before taxes was $2 million compared to a loss before taxes of $625,000 in the prior year’s fourth quarter. This reflects an increase in gross margins of $539,000 on higher sales, which was offset by $2.1 million in higher operating expenses, $1 million of which were noncash. For the year ending December 31, 2012, net sales were $29.8 million compared to $25.8 million for last year, a $4.1 million increase, or 16%. The increase in sales was primarily the result of $3 million of higher sales or a 26% increase from our pool and commercial products, primarily driven…

[Operator Instructions] We’ll go first to Ted Brown [ph], a private investor.

A couple of things, I’d like you to think about and tell us what you think. First of all, awhile back, at the last conference call, I think, I mentioned the fact that Nexus was really in serious trouble, and there must be some products of Nexus that you might be able to negotiate with. Now, in the meantime, they’ve found themselves a whole lot of additional capital, and they announced the day before yesterday that they’re all ready to come forth with a wonderful plug-in replacement that is very similar to what you think that you have or that you’re working on. And I wonder if they have some really severe kind of competition for us now.

Well we read the same press releases that you did, and basically what we saw was a press release that they were just introducing a new tube that would put out roughly 1,700 lumens at 15 watts, which is 112 lumens/watt. Good for them, but we’ve been selling one that can achieve up 118 lumens/watt since our fourth quarter. So I don’t know how to respond further than that. The other thing that I would mention to you is that the market is just so huge at this particular point in time that I don’t believe that they’ll compromise any of Energy Focus’ sales. And in terms of their technology that they introduced, basically it was a multiple LED tube lamp, similar to the one that we’ve been selling. But the higher levels of differentiation and excitement really begin when we bring commercial IntelliTube to the market in the latter half of our second quarter. So I guess that’s my only thoughts on that.

Okay, well that’s good, gentlemen. Look, you’ve been very smart in developing, what is it, the 4-foot tube? And it was promised in the last quarter of the last year. And you didn’t mention when it’s coming. And some people think that, that’s very important.

And I totally agree. It is very important. It’s the game-changer. And in our last earnings call, what we did say was that we expected to introduce it either in the last half of 2012 or by the middle of 2013. And we are absolutely committed to doing just that. And I would have liked to have introduced it a little sooner, but the reality is we were highly dependent upon the LED chip manufacturers themselves. And we now have LED chips that are high-brightness white LEDs that achieve the amount of light output that we need and at the efficiency level that we need, as well. So we’re moving full steam ahead.

Incidentally, Peter Field and I went to see GTA Technologies in New Hampshire here, along with another friend of yours, Joe Guilmette [ph]. And we got quite a good feeling about what they could do. I wonder if they’re one of the fellows that have your equipment. Do you know?

I am not familiar with GTA Technologies. I’m actually just trying to Google them as we literally speak right now, and look at their product.

All right, well, we can fix you up.

Okay. We’d welcome that.

But yes , check with them. Now, another thing. I’ll get out of here after I ask about this. You’ve had terrible investor relations. Now, I know Brian Tanous has been on and off with you, but there are a few of us, like us who go to your annual meetings and drive all the way to Cleveland and all that kind of stuff, and when we call we get kind of concerned, because we’ve lost a lot of money on paper. And we just got nervous about this, and we never get a call back. So we would like to have better investor relations from the few of us still living. Okay?

Understood.

What do you think about that?

I understand what my customer is telling me. It sounds like an area for improvement that you have my commitment that we will take action upon.

Okay, thanks a lot.

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

First of all, congratulations on the improvements you’ve made, and the accomplishments you’ve done. Could you give me a little more color on the projected growth in sales for this next year and when we’re going to reach that magical EBITDA breakeven point?

Peter, as I mentioned in my preamble, we do expect to see double digit growth in sales in 2013. And we do expect to provide you let’s call it more insight into guidance during our next call. The reality is right now that with what’s going on with the government sequester, we’ve just got to get at least a few days under our belts before we could really comment any further on that. But with or without the sequester, we feel very good about double-digit growth.

Well, I assumed that would be the case, and shall I also assume that that’s why, in your press release, you show an expectation of $5.5 million to $6 million in sales for the first quarter of 2013, which would seem to be quite conservative, and in fact is equal to what the Q1 was in the prior 2 years? But that’s probably just due to lack of being able to see what’s coming on the other end of getting the sequester back up and running and so on and so forth.

Peter, that’s a very fair conclusion.

Okay, well, hopefully when we get together for your annual meeting, we’ll have perfect clarity and we’ll all know what the future brings.

I’m looking forward to it. Thank you, Peter. Appreciate your call.

[Operator Instructions] And that will conclude our question and answer session. I’d now like to turn the call back over to Joe Kaveski for any additional or closing remarks.

Well, thank you, operator, and I would like to thank everyone again for participating in our call today, especially those that our employees and our investors and internet participants. In conclusion, I think that as I mentioned, and for the reasons I mentioned, that there’s going to be significant adoption to LED within the lighting industry, especially within the public sector, within the next 12 to 24 months. And Energy Focus, there’s no doubt that we’re well-positioned to capitalize on this transformation. In summary, we already serve those most viable markets for the LED transformation. We already sell the best-performing LED products today, and we’re about the launch the game-changing technology that we call IntelliTube for the commercial markets that, in the end, is what it’s all about. It’s going to create superior value for our customers and our shareholders. So with that, I’d like to thank you again and we look forward to visiting with you on our first quarter 2013 earnings call. Good night, everyone.

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