ENERGY FOCUS, INC/DE

Previous wording

Our cash balance of $0.5 million as of June 30, 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 wording

Our cash balance of $0.9 million as of September 30, 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.

Previous wording

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 June 30, 2025, approximately 91% 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 supply chain composition, assuming the relevant products become subject to new or additional tariffs. These risks are heightened by our significant concentration of purchases with Taiwan-based related party suppliers (representing 91% of our purchase commitments as of June 30, 2025), which may be indirectly affected by U.S.-China trade tensions and broader Asian trade policies, even if not directly subject to specific tariffs.

Current wording

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 September 30, 2025, approximately 9% 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 supply chain composition, assuming the relevant products become subject to new or additional tariffs. These risks are heightened by our significant concentration of purchases with Taiwan-based related party suppliers (representing 9% of our purchase commitments as of September 30, 2025), which may be indirectly affected by U.S.-China trade tensions and broader Asian trade policies, even if not directly subject to specific tariffs.

Previous wording

We have operations and business relationships in Taiwan that expose us to foreign currency risk. As of June 30, 2025, we held approximately $85 thousand in NTD denominated cash, $604 thousand in NTD accounts receivable, and $116 thousand in NTD accounts payable, resulting in a net NTD exposure of approximately $573 thousand. Fluctuations in the exchange rate between the U.S. dollar and NTD directly impact our financial results when these amounts are translated to U.S. dollars for financial reporting purposes. Additionally, economic, political and other risks associated with foreign operations could adversely affect our financial results.

Current wording

We have operations and business relationships in Taiwan that expose us to foreign currency risk. As of September 30, 2025, we held approximately $499 thousand in NTD denominated cash, $130 thousand in NTD accounts receivable, and $102 thousand in NTD accounts payable, resulting in a net NTD exposure of approximately $527 thousand. Fluctuations in the exchange rate between the U.S. dollar and NTD directly impact our financial results when these amounts are translated to U.S. dollars for financial reporting purposes. Additionally, economic, political and other risks associated with foreign operations could adversely affect our financial results.

Previous wording

During the three months ended June 30, 2025, we recognized an foreign exchange gain of $45 thousand related to NTD transactions and balances. These fluctuations can be significant relative to our quarterly results and may increase volatility in our reported financial performance. We do not currently hedge our foreign currency exposure, and significant strengthening of the U.S. dollar relative to the NTD could adversely impact our results of operations and financial condition.

Current wording

During the nine months ended September 30, 2025, we recognized a foreign exchange gain of $43 thousand related to NTD transactions and balances. These fluctuations can be significant relative to our quarterly results and may increase volatility in our reported financial performance. We do not currently hedge our foreign currency exposure, and significant strengthening of the U.S. dollar relative to the NTD could adversely impact our results of operations and financial condition.