What zSpace, Inc. told the SEC could break it.

zSpace relies on dilutive financing — a Senior Secured Convertible Note convertible at 97% of the lowest 10-day VWAP whose floor price was cut from $1.98 to $0.60 (with default acceleration features), plus a Tumim equity line (ELOC) — exposing shareholders to substantial dilution and financing dependence.

“The conversion price of the Senior Secured Convertible Note was subject to a floor price of $ 1.98 . On October 15, 2025, the Company entered into an amendment to the Senior Secured Convertible Note pursuant to which the floor price was amended to $ 0.60 .”

zSpace's K-12 end-market depends on federal/state education funding, whose disruption has lengthened sales cycles and prompted customers to delay confirmed orders; its dollar-based net retention fell from 92% to 71% and hardware revenue declined, reflecting this funding sensitivity.

“uncertainty in the Company's K-12 end-user markets where funding sources have been disruptive, causing longer than usual sales cycles, and in some cases prompting customers to delay receipt of confirmed order bookings.”

zSpace's China-based hardware supply chain and international sales expose it to tariff/trade-policy uncertainty (which it says cut hardware revenue 35% and elongated sales cycles in 2025) and to OFAC sanctions, US export controls and FCPA/UK Bribery Act compliance.

“The decrease in hardware revenue was primarily attributable to tariff and trade policy uncertainty, as well as uncertainty in federal funding sources for education available to our K-12 segment customers, and the resulting impact on laptop shipments, during the year ended December 31, 2025.”

zSpace owns no manufacturing and relies on outsourced partners — a single specific China-based manufacturer assembles its proprietary stylus (with specialized tracking tech), and two PC OEMs build its laptops — so if any of these partners ends the relationship and can't be replaced, its business could be materially harmed.

“We rely on a specific third-party manufacturing partner located in China to assemble our proprietary stylus. This partner is responsible for component procurement, final assembly, and quality assurance testing based on our proprietary designs.”