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Hyperdynamics (HDYNQ) Risk Analysis

Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning. Hyperdynamics disclosed 40 risk factors in its most recent earnings report. Hyperdynamics reported the most risks in the “Finance & Corporate” category.

Risk Overview Q2, 2017

Source: the company's latest filing for the period ended Jun 30, 2017, filed Nov 15, 2017

Risk Distribution
40Risks
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Risk Change Over Time

Hyperdynamics disclosed risks per quarterNo. of Risks323436384042Q2Q4Q12017Q2Showing: Q2, 2017
Risks removedRisks addedRisks changedHyperdynamics Risk Factors
Risk Changed (5)
  • Share Price & Shareholder Rights - Risk 1
    We have obtained shareholder approval for a 1-for-2 to 1-for-6 reverse stock split, and in the event that our board of directors decides to effectuate such reverse split, it could adversely affect the liquidity of our common stock and market capitalization.

    We may effectuate a between 1-for-2 and 1-for-6 reverse split of our common stock.  On June 30, 2017, our board of directors approved a reverse stock split in that range and directed the Company to solicit the requisite votes of the stockholders of the Company for their approval of such reverse stock split by written consents in lieu of a special meeting. On August 10, 2017, we obtained shareholder approval for a reverse stock split in that range, with the exact reverse split ratio to be determined within that range by the board of directors in its sole discretion, and with such reverse stock split to be effective at such date and time, if at all, as determined by the board of directors in its sole discretion. A reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in our overall market capitalization. If the per share market price does not increase proportionately as a result of the reverse stock split, then the value of our Company as measured by our market capitalization will be reduced, perhaps significantly. This would also significantly reduce the number of shares of our common stock that are outstanding, and the liquidity of our common stock could be adversely affected and you may find it more difficult to purchase or sell shares of our common stock.

  • Share Price & Shareholder Rights - Risk 2
    You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.

    In the future, we may issue our authorized but previously unissued equity securities, which would result in the dilution of the ownership interests of our present stockholders and the purchasers of our common stock offered hereby. The Company is authorized to issue an aggregate of 87,000,000 shares of common stock and 20,000,000 shares of "blank check" preferred stock. We may issue additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the common stock. We will need to raise additional capital in the near future to meet our working capital needs, and there can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with these capital raising efforts, including at a price (or exercise prices) below the price you paid for your stock.

  • Share Price & Shareholder Rights - Risk 3
    If the stock purchase agreement with CLNG closes, you will experience immediate and substantial dilution of your ownership interest, and our stock price could be negatively impacted.

    If the stock purchase agreement with CLNG closes (of which there is no assurance), we will issue to them 40,000,000 shares of common stock, and current shareholders will experience immediate and substantial dilution.  If this purchase is completed, CLNG or its affiliate will own approximately 53% of our then outstanding common stock, and existing stockholders will hold only approximately 47%.  The issuance of these shares, or other factors relating to the transaction, could cause our stock price to decline, perhaps significantly.

  • Share Price & Shareholder Rights - Risk 4
    If the stock purchase agreement with CLNG closes, CLNG or its affiliate will own a majority of our outstanding voting stock and will have effective control of the Company and could preclude other stockholders from influencing significant corporate decisions.

    If the stock purchase agreement with CLNG is completed, CLNG or its affiliate will own approximately 53% of our outstanding common stock and will have the ability to elect all of our directors as well as to exercise a controlling influence over other matters requiring stockholder approval, including approval of significant corporate transactions and dilutive share issuances, and may have significant control over our management and policies. If the transaction closes, CLNG has informed us that it or its affiliate intends to appoint representatives who will form a majority of our board of directors, but no specific agreement has yet been entered into in this respect, nor have such director candidates been definitively identified.  Such majority of directors would be able to effectively control the Company, by directing its business and controlling its finances, future issuances of stock and other securities, and otherwise.  A new board of directors could decide to change, expand or contract the business plan of the Company in its discretion. While the stock purchase agreement provides that Ray Leonard will remain President, Chief Executive Officer and a director of the Company, and Jason Davis will remain Chief Financial Officer, they may be removed as officers by the board (subject, in the case of Mr. Leonard, to the provisions of his employment agreement), and Mr. Leonard can be removed by, or not re-elected by, the stockholders in accordance with our certificate of incorporation and bylaws and Delaware law.

  • Share Price & Shareholder Rights - Risk 5
    Future sales of our common stock or securities convertible or exchangeable for our common stock, or the perception that such sales might occur, may cause our stock price to decline and may dilute your voting power and your ownership interest in us.

    If our existing stockholders or warrant or option holders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the price of our common stock could decline. The perception in the market that these sales may occur could also cause the price of our common stock to decline. Upon the effectiveness of the registration statement we have filed to register for resale certain shares of common stock by our stockholders or we could elect to file with respect to any other outstanding shares of common stock, any sales of those shares or any perception in the market that such sales may occur could cause the trading price of our common stock to decline. As of the date of effectiveness of such registration statement, such shares registered for resale will be freely tradable without restriction under the Securities Act of 1933.

  • Share Price & Shareholder Rights - Risk 6
    The ability of our board of directors to issue additional stock may prevent or make more difficult certain transactions, including a sale or merger of the Company.

    Our board of directors is authorized to issue up to 87,000,000 shares of common stock and 20,000,000 shares of preferred stock with powers, rights and preferences designated by it. (A total of 595 shares of Series A Preferred Stock are currently outstanding.) Shares of voting or convertible preferred stock could be issued, or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking to effect a takeover or otherwise gain control of the Company. The ability of the board of directors to issue such additional shares of preferred stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of the Company by tender offer or other means. Such issuances could therefore deprive stockholders of benefits that could result from such an attempt, such as the realization of a premium over the market price for their shares in a tender offer or the temporary increase in market price that such an attempt could cause. Moreover, the issuance of such additional shares of preferred stock to persons friendly to the board of directors could make it more difficult to remove incumbent managers and directors from office even if such change were to be favorable to stockholders generally.

  • Share Price & Shareholder Rights - Risk 7
    There currently is a limited market for our common stock and there can be no assurance that an active public market will ever develop. Failure to develop or maintain an active trading market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your shares.

    There is currently only a limited public market for shares of our common stock, and an active trading market may never develop. Our common stock is quoted on the OTC Markets. The OTC Markets is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our common stock to be listed on a national securities exchange, which is often a more widely-traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our common stock on a more widely-traded and liquid market include the following: our stockholders' equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our common stock may not be sufficiently widely held; we may not be able to secure market makers for our common stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our common stock listed. Should we fail to satisfy the initial listing standards of the national exchanges, or our common stock is otherwise rejected for listing, and remains listed on the OTC Markets or is suspended from the OTC Markets, the trading price of our common stock could suffer and the trading market for our common stock may be less liquid and our common stock price may be subject to increased volatility. We have not applied, and currently do not intend to apply, for the listing of our common stock on any national securities exchange.  We do not currently meet the listing criteria of any such exchange, and no assurance can be given that we will at any time in the future.

  • Share Price & Shareholder Rights - Risk 8
    Our common stock is currently subject to the "penny stock" rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

    Rule 15g-9 under the Exchange Act establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person's account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

  • Share Price & Shareholder Rights - Risk 9
    Our stock may be traded infrequently and in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.

    Until our common stock is listed on a national securities exchange such as the New York Stock Exchange or The Nasdaq Stock Market, we expect our common stock to remain eligible for quotation on the OTC Markets, or on another over-the-counter quotation system. In those venues, however, the shares of our common stock may trade infrequently and in low volumes, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. An investor may find it difficult to obtain accurate quotations as to the market value of our common stock or to sell his or her shares at or near bid prices or at all. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. This would also make it more difficult for us to raise capital.

  • Share Price & Shareholder Rights - Risk 10
    We have entered into an agreement to raise $6,000,000 through the sale of 40,000,000 shares of our common stock, but there can be no assurance that this financing will be completed.

    On November 2, 2017, we executed an agreement to issue and sell 40 million shares of our common stock at a price of $0.15 per share (for a total purchase price of $6,000,000) to CLNG or its affiliate.  The closing of the sale is subject to substantial conditions, including (i) the completion of satisfactory due diligence by each party of the other, (ii) waiver by holders of our Series A Convertible Preferred Stock of their right of first refusal, (iii) negotiation of reductions in our outstanding current liabilities satisfactory to CLNG, and (iv) satisfaction of other customary closing conditions.  If this purchase is completed, CLNG will own approximately 53% of our outstanding common stock.  There can be no assurance that our due diligence of CLNG will be acceptable to us, that CLNG's due diligence of us will be acceptable to CLNG, that all holders of our Series A Convertible Preferred Stock will waive their right of first refusal, that we will successfully negotiate reductions in our outstanding current liabilities satisfactory to CLNG, or, even if these conditions are satisfied, that the stock purchase agreement will close. The net proceeds of this stock sale, if it occurs, may not be sufficient to pay all of our outstanding liabilities and will not be sufficient to cover current operating expenses or, if the two-year appraisal period in Guinea for which we have applied is granted, to be able to fund operations for the appraisal program.  See the following Risk Factor for additional information.

  • Share Price & Shareholder Rights - Risk 11
    We are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.

    We qualify as a "smaller reporting company" (meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company, and we have a public float of less than $75 million as of the last business day of our most recently completed second fiscal quarter), which allows us to take advantage of a number of exemptions from SEC disclosure requirements in our periodic reports and proxy statements, including, among other things, simplified executive compensation disclosures, only being required to provide two (rather than three) years of audited financial statements, and not being required to comply with the requirements of Section 404 of the Sarbanes-Oxley Act that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. Decreased disclosures in our SEC filings due to our status as a "smaller reporting company" may make it harder for investors to analyze our results of operations and financial prospects and may cause some investors to find our common stock less attractive because we rely on these exemptions, there may be a less active trading market for our common stock, and our stock price may be more volatile.

  • Accounting & Financial Operations - Risk 12
    Any failure to maintain effective internal control over our financial reporting could materially adversely affect us.

    Section 404 of the Sarbanes-Oxley Act of 2002 requires us to include in our annual reports on Form 10-K an assessment by management of the effectiveness of our internal control over financial reporting. In addition, at such time, if any, as we are no longer a "smaller reporting company," our independent registered public accounting firm will have to attest to and report on management's assessment of the effectiveness of such internal control over financial reporting. Based upon the last evaluation conducted as of June 30, 2017, our management concluded that our internal control over financial reporting was not effective as of such date to provide reasonable assurance to the Company's management and Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Our management identified a material weakness in our internal control over financial reporting that occurred during our fiscal quarter ended March 31, 2017 and continued through June 30, 2017 and thereafter through the date of this filing, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. During the fiscal year 2017, the Company has experienced turnover in its accounting group and as of June 30, 2017, it lacked a sufficient number of competent accounting personnel.   This material weakness in our internal controls over financial reporting had a material adverse impact on our quarterly and annual financial close process and reporting. The Company is in the process of remediating this weakness by adding additional competent accounting personnel. If we fail to maintain effective internal control over financial reporting, we may be unable to prevent or detect fraud or provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. This could result in a loss of investor confidence in the reliability of our financial statements, which in turn could negatively affect the price of our common stock. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and (if required in future) our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404(b). Our compliance with Section 404(b) may require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group. We may need to retain the services of additional accounting and financial staff or consultants with appropriate public company experience and technical accounting knowledge to satisfy the ongoing requirements of Section 404(b). We intend to review the effectiveness of our internal controls and procedures and make any changes management determines appropriate, including to achieve compliance with Section 404(b) by the date on which we are required to so comply. ***

  • Accounting & Financial Operations - Risk 13
    We do not anticipate paying dividends on our common stock.  Any return on your investment will likely be limited to the value of our common stock.

    Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares of common stock. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

  • Debt & Financing - Risk 14
    You could lose all of your investment.

    An investment in our securities is speculative and involves a high degree of risk. Potential investors should be aware that the value of an investment in the Company may go down as well as up. In addition, there can be no certainty that the market value of an investment in the Company will fully reflect its underlying value. You could lose your entire investment.

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Risk Highlights Q2, 2017

Main Risk Category
Finance & Corporate
With 22 Risks
Number of Disclosed Risks
40
+6
From last report
S&P 500 Average: 32
Recent Changes
17Risks added
10Risks removed
5Risks changed
Since Jun 2017
Number of Risk Changed
5
+3
From last report
S&P 500 Average: 1

Risk Word Cloud

geopolitical instability where we operate subjects us to political, economic and other uncertainties.operate subjects us to politicalthe absence of cash inflows into our company raises substantial doubts about our ability to continue as a going concern as reflected in the opinion of the auditors of our financial statements. if we are not successful in carrying out our fund-raising plans, we will not be able to continue operations.our company raises substantial doubtswe may incur a variety of costs to engage in business transactions, and the anticipated benefits of those transactions may never be realized.variety of costs to engagethe absence of cash inflows into our company raises substantial doubts about our ability to continue as a going concern as reflected in the opinion of the auditors of our financial statements. if we are not successful in carrying out our fund-raising plans, we will not be able to continue operations.auditors of our financial statementswe are highly dependent on our management team and consultants, and any failure to retain the services of such parties could adversely affect our ability to effectively manage our operations or successfully execute our business plan.successfully execute our business planefforts to attract commercial partners may not be successful and may not be on terms advantageous to us.efforts to attract commercial partnerswe are exposed to the failure or non-performance of commercial counterparties.non-performance of commercial counterpartieswe may not be able to obtain the additional capital necessary to achieve our business plan.to achieve our business planoperator's responsibilities pose high risk in terms of organizing operations safely, in an environmentally responsible way and within the terms prescribed by the applicable legislation.terms of organizing operations safelyan extended period of depressed oil and gas prices could adversely affect our financial condition, liquidity, ability to obtain financing and future operating results. oil and gas prices are volatile, and we have no ability to control the price of oil and gas. a continued substantial or extended decline in prices could adversely affect our financial condition, liquidity, ability to obtain financing and future operating results.extended period of depressed oil

Risk Factors Full Breakdown - Total Risks 40

Share Price & Shareholder Rights13 | 32.5%
  • Share Price & Shareholder Rights - Risk 1Added
    We have obtained shareholder approval for a 1-for-2 to 1-for-6 reverse stock split, and in the event that our board of directors decides to effectuate such reverse split, it could adversely affect the liquidity of our common stock and market capitalization.

    We may effectuate a between 1-for-2 and 1-for-6 reverse split of our common stock.  On June 30, 2017, our board of directors approved a reverse stock split in that range and directed the Company to solicit the requisite votes of the stockholders of the Company for their approval of such reverse stock split by written consents in lieu of a special meeting. On August 10, 2017, we obtained shareholder approval for a reverse stock split in that range, with the exact reverse split ratio to be determined within that range by the board of directors in its sole discretion, and with such reverse stock split to be effective at such date and time, if at all, as determined by the board of directors in its sole discretion. A reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in our overall market capitalization. If the per share market price does not increase proportionately as a result of the reverse stock split, then the value of our Company as measured by our market capitalization will be reduced, perhaps significantly. This would also significantly reduce the number of shares of our common stock that are outstanding, and the liquidity of our common stock could be adversely affected and you may find it more difficult to purchase or sell shares of our common stock.

  • Share Price & Shareholder Rights - Risk 2Added
    You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.

    In the future, we may issue our authorized but previously unissued equity securities, which would result in the dilution of the ownership interests of our present stockholders and the purchasers of our common stock offered hereby. The Company is authorized to issue an aggregate of 87,000,000 shares of common stock and 20,000,000 shares of "blank check" preferred stock. We may issue additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the common stock. We will need to raise additional capital in the near future to meet our working capital needs, and there can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with these capital raising efforts, including at a price (or exercise prices) below the price you paid for your stock.

  • Share Price & Shareholder Rights - Risk 3Added
    If the stock purchase agreement with CLNG closes, you will experience immediate and substantial dilution of your ownership interest, and our stock price could be negatively impacted.

    If the stock purchase agreement with CLNG closes (of which there is no assurance), we will issue to them 40,000,000 shares of common stock, and current shareholders will experience immediate and substantial dilution.  If this purchase is completed, CLNG or its affiliate will own approximately 53% of our then outstanding common stock, and existing stockholders will hold only approximately 47%.  The issuance of these shares, or other factors relating to the transaction, could cause our stock price to decline, perhaps significantly.

  • Share Price & Shareholder Rights - Risk 4Added
    If the stock purchase agreement with CLNG closes, CLNG or its affiliate will own a majority of our outstanding voting stock and will have effective control of the Company and could preclude other stockholders from influencing significant corporate decisions.

    If the stock purchase agreement with CLNG is completed, CLNG or its affiliate will own approximately 53% of our outstanding common stock and will have the ability to elect all of our directors as well as to exercise a controlling influence over other matters requiring stockholder approval, including approval of significant corporate transactions and dilutive share issuances, and may have significant control over our management and policies. If the transaction closes, CLNG has informed us that it or its affiliate intends to appoint representatives who will form a majority of our board of directors, but no specific agreement has yet been entered into in this respect, nor have such director candidates been definitively identified.  Such majority of directors would be able to effectively control the Company, by directing its business and controlling its finances, future issuances of stock and other securities, and otherwise.  A new board of directors could decide to change, expand or contract the business plan of the Company in its discretion. While the stock purchase agreement provides that Ray Leonard will remain President, Chief Executive Officer and a director of the Company, and Jason Davis will remain Chief Financial Officer, they may be removed as officers by the board (subject, in the case of Mr. Leonard, to the provisions of his employment agreement), and Mr. Leonard can be removed by, or not re-elected by, the stockholders in accordance with our certificate of incorporation and bylaws and Delaware law.

  • Share Price & Shareholder Rights - Risk 5Added
    Future sales of our common stock or securities convertible or exchangeable for our common stock, or the perception that such sales might occur, may cause our stock price to decline and may dilute your voting power and your ownership interest in us.

    If our existing stockholders or warrant or option holders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the price of our common stock could decline. The perception in the market that these sales may occur could also cause the price of our common stock to decline. Upon the effectiveness of the registration statement we have filed to register for resale certain shares of common stock by our stockholders or we could elect to file with respect to any other outstanding shares of common stock, any sales of those shares or any perception in the market that such sales may occur could cause the trading price of our common stock to decline. As of the date of effectiveness of such registration statement, such shares registered for resale will be freely tradable without restriction under the Securities Act of 1933.

  • Share Price & Shareholder Rights - Risk 6Added
    The ability of our board of directors to issue additional stock may prevent or make more difficult certain transactions, including a sale or merger of the Company.

    Our board of directors is authorized to issue up to 87,000,000 shares of common stock and 20,000,000 shares of preferred stock with powers, rights and preferences designated by it. (A total of 595 shares of Series A Preferred Stock are currently outstanding.) Shares of voting or convertible preferred stock could be issued, or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking to effect a takeover or otherwise gain control of the Company. The ability of the board of directors to issue such additional shares of preferred stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of the Company by tender offer or other means. Such issuances could therefore deprive stockholders of benefits that could result from such an attempt, such as the realization of a premium over the market price for their shares in a tender offer or the temporary increase in market price that such an attempt could cause. Moreover, the issuance of such additional shares of preferred stock to persons friendly to the board of directors could make it more difficult to remove incumbent managers and directors from office even if such change were to be favorable to stockholders generally.

  • Share Price & Shareholder Rights - Risk 7Added
    There currently is a limited market for our common stock and there can be no assurance that an active public market will ever develop. Failure to develop or maintain an active trading market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your shares.

    There is currently only a limited public market for shares of our common stock, and an active trading market may never develop. Our common stock is quoted on the OTC Markets. The OTC Markets is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our common stock to be listed on a national securities exchange, which is often a more widely-traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our common stock on a more widely-traded and liquid market include the following: our stockholders' equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our common stock may not be sufficiently widely held; we may not be able to secure market makers for our common stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our common stock listed. Should we fail to satisfy the initial listing standards of the national exchanges, or our common stock is otherwise rejected for listing, and remains listed on the OTC Markets or is suspended from the OTC Markets, the trading price of our common stock could suffer and the trading market for our common stock may be less liquid and our common stock price may be subject to increased volatility. We have not applied, and currently do not intend to apply, for the listing of our common stock on any national securities exchange.  We do not currently meet the listing criteria of any such exchange, and no assurance can be given that we will at any time in the future.

  • Share Price & Shareholder Rights - Risk 8Added
    Our common stock is currently subject to the "penny stock" rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

    Rule 15g-9 under the Exchange Act establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person's account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

  • Share Price & Shareholder Rights - Risk 9Added
    Our stock may be traded infrequently and in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.

    Until our common stock is listed on a national securities exchange such as the New York Stock Exchange or The Nasdaq Stock Market, we expect our common stock to remain eligible for quotation on the OTC Markets, or on another over-the-counter quotation system. In those venues, however, the shares of our common stock may trade infrequently and in low volumes, meaning that the number of persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. An investor may find it difficult to obtain accurate quotations as to the market value of our common stock or to sell his or her shares at or near bid prices or at all. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. This would also make it more difficult for us to raise capital.

  • Share Price & Shareholder Rights - Risk 10Added
    We have entered into an agreement to raise $6,000,000 through the sale of 40,000,000 shares of our common stock, but there can be no assurance that this financing will be completed.

    On November 2, 2017, we executed an agreement to issue and sell 40 million shares of our common stock at a price of $0.15 per share (for a total purchase price of $6,000,000) to CLNG or its affiliate.  The closing of the sale is subject to substantial conditions, including (i) the completion of satisfactory due diligence by each party of the other, (ii) waiver by holders of our Series A Convertible Preferred Stock of their right of first refusal, (iii) negotiation of reductions in our outstanding current liabilities satisfactory to CLNG, and (iv) satisfaction of other customary closing conditions.  If this purchase is completed, CLNG will own approximately 53% of our outstanding common stock.  There can be no assurance that our due diligence of CLNG will be acceptable to us, that CLNG's due diligence of us will be acceptable to CLNG, that all holders of our Series A Convertible Preferred Stock will waive their right of first refusal, that we will successfully negotiate reductions in our outstanding current liabilities satisfactory to CLNG, or, even if these conditions are satisfied, that the stock purchase agreement will close. The net proceeds of this stock sale, if it occurs, may not be sufficient to pay all of our outstanding liabilities and will not be sufficient to cover current operating expenses or, if the two-year appraisal period in Guinea for which we have applied is granted, to be able to fund operations for the appraisal program.  See the following Risk Factor for additional information.

  • Share Price & Shareholder Rights - Risk 11Added
    We are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.

    We qualify as a "smaller reporting company" (meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company, and we have a public float of less than $75 million as of the last business day of our most recently completed second fiscal quarter), which allows us to take advantage of a number of exemptions from SEC disclosure requirements in our periodic reports and proxy statements, including, among other things, simplified executive compensation disclosures, only being required to provide two (rather than three) years of audited financial statements, and not being required to comply with the requirements of Section 404 of the Sarbanes-Oxley Act that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. Decreased disclosures in our SEC filings due to our status as a "smaller reporting company" may make it harder for investors to analyze our results of operations and financial prospects and may cause some investors to find our common stock less attractive because we rely on these exemptions, there may be a less active trading market for our common stock, and our stock price may be more volatile.

  • Share Price & Shareholder Rights - Risk 12Changed
    Certain provisions of Delaware law and our charter documents may impede or discourage a takeover, which could adversely impact the market price of our shares.

    As a Delaware corporation, we are governed by anti-takeover provisions of Section 203 of the Delaware General Corporation Law (the "DGCL") that prohibit certain publicly-traded Delaware corporations from engaging in a business combination with anyone who owns at least 15% of its common stock for a period of three years after the date of the transaction in which the person acquired the 15% ownership, unless the certificate of incorporation or by-laws of the corporation contain a provision expressly electing not to be governed by this anti-takeover statute, the merger or combination is approved in a prescribed manner, or the corporation does not have a class of voting stock that is listed on a national securities exchange or held by more than 2,000 stockholders of record. We are currently not subject to these restrictions; however, our certificate of incorporation and by-laws do not contain a provision electing not to be governed by this statute, and once our common stock is listed on a national securities exchange or held by more than 2,000 stockholders of record, we will become subject to these restrictions, which may discourage a potential acquirer from making a tender offer for our common stock, which, under certain circumstances, could reduce the market price of our common stock. Certain other provisions of Delaware law and of our certificate of incorporation and bylaws impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders, or could discourage a potential acquirer from making a tender offer for our common stock. In addition, these provisions may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our Board of Directors. These provisions include: Ÿ no cumulative voting in the election of directors; Ÿ the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director; Ÿ a requirement that special meetings of stockholders be called only by the chairperson of the board of directors, the chief executive officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of directors, Ÿ an advance notice requirement for stockholder proposals and nominations; Ÿ the authority of our board of directors to issue preferred stock with such terms as our board of directors may determine; and Ÿ elimination of personal liability for breaches of fiduciary duty as a director, to the extent permitted under the Delaware law. These restrictions, under certain circumstances, could reduce the market price of our common stock.

  • Share Price & Shareholder Rights - Risk 13
    The price of our common stock historically has been volatile.  This volatility may affect the price at which you could sell your common stock, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock.

    The closing price for our common stock has varied between a high of $2.80 on January 4, 2017 and a low of $0.37 on July 26, 2016 for the fiscal year ended June 30, 2017.  Since June 30, 2017, the closing price for our common stock has varied between a high of $2.05 and a low of $0.06.  On November 14, 2017, the closing price of our common stock was $0.14. This volatility may affect the price at which an investor could sell the common stock, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock.  Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors, including the other factors discussed in "- Risks Relating to Our Business and the Industry in Which We Operate"; variations in our quarterly operating results from our expectations or those of securities analysts or investors; downward revisions in securities analysts' estimates; and announcement by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky. The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment. They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result. It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process. Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”. Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report. According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing. You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector. Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements. A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below. 1. Financial & Corporate Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results. Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing. Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments. Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances. 2. Legal & Regulatory Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company. Regulation – risks related to compliance, GDPR, and new legislation. Environmental / Social – risks related to environmental regulation and to data privacy. Taxation & Government Incentives – risks related to taxation and changes in government incentives. 3. Production Costs – risks related to costs of production including commodity prices, future contracts, inventory. Supply Chain – risks related to the company’s suppliers. Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls. Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation. 4. Technology & Innovation Innovation / R&D – risks related to innovation and new product development. Technology – risks related to the company’s reliance on technology. Cyber Security – risks related to securing the company’s digital assets and from cyber attacks. Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying. 5. Ability to Sell Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers. Competition – risks related to the company’s competition including substitutes. Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration. Brand & Reputation – risks related to the company’s brand and reputation. 6. Macro & Political Economy & Political Environment – risks related to changes in economic and political conditions. Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19. International Operations – risks related to the global nature of the company. Capital Markets – risks related to exchange rates and trade, cryptocurrency.