Energy Focus (EFOI) risk factors, FY2025 10-K

Other

1. 01If we are unable to attract or retain qualified personnel, our business and product development efforts could be harmed
2. 02For the year ended December 31, 2025, we reported a net loss of $1.0 million and are dependent upon the availability of financing in order to continue our business81% rewritten
3. 03For the year ended December 31, 2024, financing activity to sustain ongoing losses included (1) issuance of common stock approximately $0.9 million and (2) payments on the 2022 Streeterville Note $1.0 millionNew
4. 04Our independent registered public accounting firm’s opinion on our audited financial statements for the fiscal year ended December 31, 2025, included in this Annual Report, contains a modification relating to our ability to continue as a going concern89% rewritten
5. 05We have a history of operating losses and will incur losses in the future as we continue our efforts to grow sales and streamline our operations at a profitable level23% rewritten
6. 06Additionally, consolidation in the lighting industry could result in one or more current suppliers being acquired by a competitor, rendering us unable to continue purchasing key components and products at competitive prices
7. 07If we are unable to implement plans to increase sales and control expenses to manage future growth effectively, our profitability goals and liquidity will be adversely affected
8. 08Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity
9. 09If we are not able to compete effectively against companies with lower cost structures or greater resources, or new competitors who enter our target markets, our sales will be adversely affected
10. 10We work with independent agents and sales representatives for a portion of our net sales, and the failure to incentivize, retain and manage our relationships with these third parties, or the termination of these relationships, could cause our net sales to decline and harm our business
11. 11If our LED lighting and control technology products fail to gain widespread market acceptance or we are unable to respond effectively as new technologies and market trends emerge, our competitive position and our ability to generate revenue, and profits may be harmed
12. 12We could experience delays in the introduction of these products. We could also devote substantial resources to the development of new technologies or products that are ultimately not successful
13. 13Our operating results may fluctuate due to factors that are difficult to forecast and not within our control
14. 14Depressed general economic conditions may adversely affect our operating results and financial condition
15. 15Customers may be unable to obtain financing to make purchases from us
16. 16A significant portion of our business is dependent upon the existence of government funding, which may not be available into the future and could result in a reduction in sales and harm to our business
17. 17Our products could contain defects, or they may be installed or operated incorrectly, which could reduce sales of those products or result in claims against us
18. 18We may be subject to confidential information theft or misuse, which could harm our business and results of operation s
19. 19We may fail to secure sufficient additional financing, which could prevent us from executing our business plan and continuing as a going concernNew
20. 20Global trade policies, including tariffs, could increase costs and disrupt our supply chain, adversely affecting our operations and profitabilityNew
21. 21Foreign currency fluctuations may adversely affect our financial resultsNew
22. 22We have international operations and are subject to risks associated with operating in international markets
23. 23Our business and operations are significantly dependent on Sander Electronics, which creates material conflicts of interest and business risks35% rewritten
24. 24Our Chief Executive Officer currently serves as our Principal Financial Officer, which may impact our internal controls and increase risks related to financial reporting
25. 25We may be subject to legal claims against us or claims by us that could have a significant impact on our resulting financial performance
26. 26Our business may suffer if we fail to comply with government contracting laws and regulations
27. 27If we are unable to obtain and adequately protect our intellectual property rights or are subject to claims that our products infringe on the intellectual property rights of others, our ability to commercialize our products could be substantially limited
28. 28We may be subject to intellectual property infringement claims or other allegations by third parties, which may materially and adversely affect our business, results of operations and prospects27% rewritten
29. 29to use necessary technologies or works; and to indemnify our partners, customers and other third parties. Any of these events could adversely impact our business, results of operations and financial conditionNew
30. 30The ability to use our net operating loss carryforwards and certain other tax attributes may be limited
31. 31The cost of compliance with environmental, health, safety, and other laws and regulations could adversely affect our results of operations or financial condition
32. 32become subject. A number of governments or governmental bodies have introduced or are contemplating regulatory changes in
33. 33Our net sales might be adversely impacted if our lighting systems do not meet certain certification and compliance standards
34. 34We rely heavily on information technology in our operations and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business, which could have a material adverse effect on our business, financial condition, and results of operations
35. 35As a “thinly-traded” stock with a relatively small public float, the market price of our common stock is highly volatile and may decline regardless of our operating performance
36. 36We could issue additional shares of common stock or preferred stock without stockholder approval, or new securities with terms or rights superior to those of our existing shareholders, which may adversely affect the market price of our common stock
37. 37The exercise of outstanding warrants to purchase our common stock or the conversion of shares of our Series A Preferred Stock (as defined below) into shares of common stock may dilute the ownership interest of our investors
38. 38We have never paid dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future
39. 39The elimination of monetary liability against our directors under Delaware law and the existence of indemnification rights held by our directors and officers may result in substantial expenditures by the Company and may discourage lawsuits against our directors and officers