Vivesto AB (OMA) Risk Analysis
Risk Overview Q1, 2018
Source: the company's latest filing for the period ended Apr 30, 2018, filed Sep 14, 2018
Risk Change Over Time
No filing history is available.
- Accounting & Financial Operations - Risk 1Our independent registered public accounting firm has advised us that it has identified a material weakness in our internal control over financial reporting relating to revenue recognition from profit sharing agreements and inadequate financial statement preparation and review procedures.
In connection with the audit of our financial statements as of and for the fiscal year ended April 30, 2018 our independent registered public accounting firm reported to our audit committee that it had identified a material weakness in our internal control over financial reporting related to internal controls designed to ensure that profit-sharing revenue is properly recognized were not carried out effectively. Although management corrected the misstatement for the year ended April 30, 2018, we concur with our independent registered public accounting firm that a material weakness exists in our internal control over financial reporting as of April 30, 2018. Also, in connection with the audit of our financial statements as of and for the fiscal year ended April 30, 2017 our independent registered public accounting firm reported to our audit committee that it had identified a material weakness in our internal control over financial reporting related to inadequate financial statement preparation and review procedures. During the year ended April 30, 2018, we have performed the remedial activities described below to address the material weakness identified by our independent registered public accounting firm. However due to lack of resources there has not yet been a sufficient time period to allow management to assess whether these actions have been implemented successfully, and determine that the newly-designed controls will operate as designed, both routinely and effectively. Accordingly, we cannot yet conclude that the material weakness previously identified has been fully remediated. Under standards established by the Public Company Accounting Oversight Board (United States), a material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Specifically, our independent registered public accounting firm determined that we did not have adequate procedures and controls to ensure that accurate financial statements could be prepared and reviewed on a timely basis, including: - sufficient resources and processes in place, including controls in the finance and accounting department, to adequately perform a timely financial statement close process resulting in errors in period-end accruals related to capitalized research and development expenses. - adequate internal review processes in place over critical accounting areas including timely operation whereby management identifies and resolves significant or complex accounting matters. - sufficient resources and processes in place, including controls in the sales/finance and accounting department, to ensure that profit-sharing revenue is properly recognized were not carried out effectively. To remediate the material weaknesses in our internal control over financial reporting described above, we are implementing new control procedures to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS. The changes to the control environment include, but are not limited to, the following: - For future assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, we intend to retain third-party specialists and utilize additional internal resources to update internal control procedures, including having all changes in writing regarding 20-F confirmed by two senior managers before filing the financial statements with the SEC. Such resources will be retained by management at the direction of the audit committee. - For future assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, we intend to prepare an accounting and internal control memorandum to address the matter as necessary, as well as further educate our management regarding internal control and accounting through related accounting literature, which will be reviewed by the Chief Financial Officer and presented to the audit committee. These remediation initiatives are intended to enhance our ability to provide accurate and timely internal control by establishing a formal process and specific control activities. Management believes that these measures, which are currently being implemented, will remediate the identified weakness. Other than as noted above, other changes may be implemented in the future to enhance and improve our internal control over financial reporting measures to prevent this weakness from recurring. We concurred with the findings from our independent registered public accounting firm. We have been working to remediate the material weaknesses. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period and management has concluded, through testing, that these controls are operating effectively. We will be required to disclose changes made in our internal control over financial reporting and procedures on a semi-annual basis and our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an "emerging growth company" under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. We could be an "emerging growth company" for up to five years. An independent assessment of the effectiveness of our internal control over financial reporting could detect problems that our management's assessment might not. Additional undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur additional expenses of remediation, and adversely affect our reputation, financial condition and operating results.
- Corporate Activity and Growth - Risk 2Incentive program.
Oasmia's Extraordinary General Meeting in November 2016 passed a resolution on an incentive plan, under which options will be issued to the Company's senior management and Board members. These incentive plans were replaced by the incentive plans approved by an Extraordinary General Meeting in June 2017; see "ITEM 6 B. Compensation." The purpose of the Company's incentive s plan is to encourage employees and Board members to dedicate their best efforts to the interests of the Company in order to be able to share in and help promote positive value growth in the Company's share price in the period covered by the plan, and to enable Oasmia to retain and recruit competent and committed employees. There is a risk that these goals will not be achieved, however, which could result in the participants in incentive plans performing their work less efficiently than expected. There is also a risk that Oasmia and the participants in the incentive plans may interpret the terms and conditions of the plans in different ways, or that other disputes concerning the incentive plan could arise, which could add to the expense and reduce or completely counteract the effectiveness of the plan. Further, share-based incentive plan is always associated with an element of tax risk, since the Company's assessment of applicable tax legislation may prove to be incorrect, which could lead to a higher tax burden in the future and in Oasmia being subject to tax-related penalties. In addition, other unforeseen costs related to incentive programs may arise.
Risk Highlights Q1, 2018
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 67
- Share Price & Shareholder Rights - Risk 1Our concentration of ownership could be disadvantageous to shareholders.
Alceco International S.A. ("Alceco") owned approximately 10.8 percent of our shares as of July 31, 2018. Per Arwidsson, through Arwidsro Investment AB and in his own name, owned approximately 16.9 percent of our shares as of July 31, 2018. Alceco and Per Arwidsson can thus exercise significant influence over all matters requiring shareholder approval, and may be able to prevent a change in control or preclude Oasmia from taking other measures that may benefit other shareholders. Moreover, the sale of a substantial number of our shares by Alceco and/or Mr. Arwidsson within a short period of time could cause our share price to decrease, making it more difficult for us to raise funds through future offerings of our shares or acquire other businesses using our shares as currency. Additionally, Alceco and Mr. Arwidsson may have interests that conflict with ours and/or our unaffiliated shareholders. See "- There are relationships among our directors and our largest shareholders that could pose a conflict of interest."
- Share Price & Shareholder Rights - Risk 2There are relationships among our directors and our largest shareholders that could pose a conflict of interest.
There are relationships among some of the members of our board of directors with each other that could pose a conflict of interest. Two of our directors, our Executive Chairman Julian Aleksov and Bo Cederstrand are co-owners of Alceco, a holding company based in Luxembourg that conducts no business and exists only for financial management. Alceco owns 19,417,801 of the Ordinary Shares as of July 31, 2018 and is our second largest shareholder. In addition to being partners in Alceco, Messrs. Aleksov and Cederstrand also have a familial relationship. Mr. Aleksov is the father of two of Mr. Cederstrand's grandchildren. Alceco has also extended a credit facility of SEK 40 million to the Company, which as of the date of this annual report has not been drawn upon. These directors may have actual or apparent conflicts of interest with respect to matters involving or affecting us and Alceco. Examples of possible conflicts include: - issues or disputes could arise under the commercial agreements that exist between us and Alceco;- under the terms of Alceco's loan agreements, one or more Alceco creditors could become shareholders and could exercise their voting rights in a manner that could conflict with your interests; and - given the close relationship between Messrs. Cederstrand and Aleksov, Mr. Cederstrand could be conflicted as to any board decision on the compensation and employment status of Mr. Aleksov. See also "Related Party Transactions." Apart from the conflicts of interest policy contained in our Code of Ethics and Business Conduct, we and Alceco and Arwidsro Investment AB have not established any formal procedures for us, Alceco and Arwidsro Investment AB to resolve potential or actual conflicts of interest between us. There can be no assurance that any of the foregoing conflicts will be resolved in a manner that does not adversely affect our business, financial condition or results of operations. U.S. investors may have difficulty enforcing civil liabilities against us, our directors or members of senior management and the experts named in this annual report. With one exception are all our directors and officers named in this annual report are non-residents of the U.S., and all or a substantial portion of the assets of such persons are located outside the U.S. As a result, it may not be possible to serve process on such persons or our company in the U.S. or to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the U.S. There is doubt as to whether Swedish courts would enforce certain civil liabilities under U.S. securities laws in original actions or judgments of U.S. courts based upon these civil liability provisions. In addition, awards of punitive damages in actions brought in the U.S. or elsewhere may be unenforceable in Sweden. An award for monetary damages under the U.S. securities laws would be considered punitive if it does not seek to compensate the claimant for loss or damage suffered and is intended to punish the defendant. The enforceability of any judgment in Sweden will depend on the particular facts of the case as well as the laws and treaties in effect at the time. The U.S. and Sweden do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters.
- Share Price & Shareholder Rights - Risk 3The multiple listing of the Ordinary Shares and the ADSs may adversely affect the liquidity and value of the ADSs.
The Ordinary Shares will continue to be listed on NASDAQ Stockholm, and the ADSs trade on the NASDAQ Capital Market. We cannot predict the effect of this multiple listing on the value of the Ordinary Shares and the ADSs. However, it is possible the multiple listing of the Ordinary Shares and ADSs may dilute the liquidity of these securities in one or all two markets and may adversely affect the development of an active trading market for the ADSs in the U.S. The price of the ADSs could also be adversely affected by trading in the Ordinary Shares on NASDAQ Stockholm. Although currently we have no plans to do so, we may decide to delist the Ordinary Shares from either exchange in the future. We cannot predict the effect such delisting of the Ordinary Shares would have on the market price of the ADSs on Nasdaq.
- Share Price & Shareholder Rights - Risk 4If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding the ADSs or the Ordinary Shares, the price of these securities and their trading volume could decline.
The trading market for the ADSs and the Ordinary Shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If we do not obtain adequate securities or industry analyst coverage, the trading price for the ADSs and the Ordinary Shares may be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our products, our intellectual property or the ADSs or our ordinary share performance, or if our target studies and operating results fail to meet the expectations of analysts, the prices of the ADSs and the Ordinary Shares may decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the prices of the ADSs and the Ordinary Shares, as well as their respective trading volume to decline.
- Share Price & Shareholder Rights - Risk 5Substantial future sales of the Ordinary Shares or the ADSs in the public market, or the perception that these sales could occur, could cause the price of the ADSs to decline.
Additional sales of the Ordinary Shares in the public market, or the perception that such sales could occur, could cause the market price of the Ordinary Shares to decline. As of the date of this annual report, we had 179,309,596 Ordinary Shares issued and outstanding, including those underlying presently issued and outstanding ADS but excluding all such Ordinary Shares underlying the ADSs issuable upon exercise of the Warrants and excluding any exercise by the underwriters of the option to purchase Ordinary Shares. All ADSs are freely transferable without restriction or additional registration under the Securities Act. The Ordinary Shares held by our directors, officers, and large institutional shareholders are available for sale since the expiration of the lock-up period has occurred. The remaining Ordinary Shares are also available for sale since they are not subject to contractual and legal restrictions on resale. To the extent shares are sold into the market, the market price of the ADSs could decline.
- Share Price & Shareholder Rights - Risk 6Speculative nature of Warrants.
The Warrants do not confer any rights of ownership of ADSs on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire ADSs at a fixed price for a limited period of time. Specifically, holders of the Warrants may exercise their right to acquire ADSs and pay an initial exercise price of $4.06, subject to adjustment, during the ten (10) years from the date of issuance, after which date any unexercised Warrants will expire and have no further value. There can be no assurance that the market price of the ADSs will ever equal or exceed the exercise price of the Warrants, and consequently, whether it will ever be profitable for holders of the Warrants to exercise them.
- Share Price & Shareholder Rights - Risk 7You may not have the same voting rights as the holders of the Ordinary Shares and may not receive voting materials in time to be able to exercise your right to vote.
Holders of ADSs are not shareholders of our company and therefore do not have direct voting rights or the right to attend shareholders' meetings. ADS holders do have the right to instruct the depositary how to vote the Ordinary Shares underlying their ADSs, but the depositary will only send voting materials to ADS holders if we ask it to. Therefore, you may not receive voting materials or you may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers or other securities intermediaries, will not have the opportunity to exercise a right to vote. The Warrants confer no equity ownership in our company, nor do they provide voting rights.
- Share Price & Shareholder Rights - Risk 8You may not receive distributions on the Ordinary Shares represented by the ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.
The depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on the Ordinary Shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of the Ordinary Shares your ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution of the ADSs, Ordinary Shares, rights or anything else to holders of the ADSs. This means that you may not receive the distributions we make on the Ordinary Shares or any value from them if it is unlawful or impractical to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.
- Share Price & Shareholder Rights - Risk 9As a foreign private issuer, we are exempt from a number of U.S. securities laws and rules promulgated thereunder and are permitted to file less information with the SEC than U.S. companies must. This will limit the information available to holders of the ADSs.
We currently qualify as a "foreign private issuer," as defined in the SEC's rules and regulations and, consequently, we are not subject to all of the disclosure requirements applicable to companies organized within the U.S. For example, we are exempt from certain rules under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our officers and directors are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies. We are also not subject to Regulation FD under the Exchange Act, which would prohibit us from selectively disclosing material nonpublic information to certain persons without concurrently making a widespread public disclosure of such information. Accordingly, there may be less publicly available information concerning our company than there is for U.S. public companies. As a foreign private issuer, we will file an annual report on Form 20-F within four months of the close of each fiscal year ended April 30 and reports on Form 6-K relating to certain material events promptly after we publicly announce these events. However, because of the above exemptions for foreign private issuers, our shareholders will not be afforded the same protections or information generally available to investors holding shares in public companies organized in the U.S.
- Share Price & Shareholder Rights - Risk 10We are an "emerging growth company," as defined in the JOBS Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, the ADS and Ordinary Shares may be less attractive to investors.
We are an "emerging growth company," as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict whether, or ascertain if, investors will or do find the ADSs or the Ordinary Shares less attractive because we will rely on these exemptions. If some investors find the ADSs or the Ordinary Shares less attractive as a result, there may be a less active trading market for the ADSs or the Ordinary Shares and the price of the ADSs may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year: (a) following the fifth anniversary of the completion of the initial public offering, 2020, (b) in which we have total annual gross revenue of at least USD$1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of the Ordinary Shares that is held by non-affiliates exceeds USD$700 million as of the prior October 31; and (2) the date on which we have issued more than USD$1.0 billion in non-convertible debt during the prior three-year period.
- Share Price & Shareholder Rights - Risk 11The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.
We are incorporated under Swedish law. The rights of holders of Ordinary Shares and, therefore, certain of the rights of holders of ADSs, are governed by Swedish law, including the provisions of the Swedish Companies Act, and by our Articles of Association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations.
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