ENERGY FOCUS, INC/DE

Current report

As a smaller reporting company, we are not required to provide a separate risk factors section in this Quarterly Report. However, we have elected to include the following updated risk factors to provide additional context for investors. These risks supplement those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024. You should carefully consider these risks, together with all other information in this Quarterly Report and our other SEC filings, before making an investment decision.

Current report

We may fail to secure sufficient additional financing, which could prevent us from executing our business plan and continuing as a going concern.

Current report

Our cash balance of $0.5 million as of March 31, 2025, and ongoing operating losses raise substantial doubt about our ability to continue as a going concern. We are actively seeking at least $1 million in capital through equity, debt, or strategic partnerships, but there can be no assurance that we will secure such funding on acceptable terms or at all. Equity financing may significantly dilute existing shareholders, while debt financing could impose restrictive covenants or high interest rates. Failure to obtain adequate financing could result in reduced operations, delayed product development, or insolvency.

Current report

Global trade policies, including tariffs, could increase costs and disrupt our supply chain, adversely affecting our operations and profitability.

Current report

Our operations are subject to risks arising from global trade policies, particularly the imposition of tariffs and other trade barriers by the United States, China, the European Union, and other nations, which have intensified under the current U.S. administration. As of March 31, 2025, approximately 49% of our purchase commitments are with Sander Electronics Co Ltd, a Taiwan-based related party, which could be indirectly affected by international trade tensions, including tariffs. These policies may increase the cost of imported components, extend delivery times due to customs delays, or reduce demand for our products if customers face higher prices. For example, tariffs imposed in early 2025 on electronic components could increase our cost of sales by approximately 10% to 15% annually based on current inventory levels and assuming the relevant products become subject to new or additional tariffs.

Current report

The unforeseen results of potential trade disputes and reciprocal tariffs worldwide could further impact our business. Increased trade protectionism, as governments seek to protect or revive domestic industries, may lead to restrictions on imports, such as tariffs, that could significantly affect global trade and, indirectly, the demand for our LED lighting products. Such restrictions could increase the cost of exported goods, prolong delivery times, and elevate risks associated with exporting, potentially leading to a decline in the volume of exported goods and demand for our products. The interconnected nature of global supply chains means that trade policies, even in countries not directly imposing or subject to tariffs, could disrupt our access to critical components.

Current report

Tensions over trade remain high, particularly between the U.S., China, and the European Union. The current U.S. administration’s extensive use of tariffs as a policy tool has introduced significant uncertainty regarding future trade relationships with key markets, including China, the European Union, Canada, and Mexico. These tariffs have prompted, and may continue to prompt, retaliatory tariffs from other nations, raising concerns about a prolonged trade war. Protectionist developments, or the perception that they may occur, could materially adversely affect global economic conditions, reduce international trade, and disrupt our supply chain, particularly for components sourced from Asia. Such disruptions could strain our liquidity, increase operating costs, and hinder our ability to compete effectively in the LED lighting market, adversely impacting our business, results of operations, and financial condition.

Previous report

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this item.