Puradyn Filter Technologies (PFTI) Risk Analysis
Risk Overview Q4, 2019
Source: the company's latest filing for the period ended Dec 31, 2019, filed Apr 15, 2020
Risk Change Over Time
No filing history is available.
- Accounting & Financial Operations - Risk 1Our net sales decreased in 2019 from 2018 and are not sufficient to fund our operating expenses.
Net sales for 2019 decreased by 64% from 2018 and our current operations remain insufficient to fund our operating expenses and pay our obligations as they become due. We used cash in operations of approximately $945,916 and $187,222 in 2019 and 2018, respectively. Our gross profit margins decreased from 41% in 2018 to 14% during 2019.The decrease in our gross profit margins in 2019 is attributable to reduced sales which is attributable to reduced facility utilization due to decreased sales and an increase in the reserve for slow moving inventory of $30,368. We are unable to predict when, if ever, our gross margins will return to 2018 levels. This significant decline in our gross profit margins further exacerbates our ability to continue as a going concern.
Risk Highlights Q4, 2019
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 13
- Share Price & Shareholder Rights - Risk 1Provisions of our certificate of incorporation and bylaws may delay or prevent a take-over which may not be in the best interests of our stockholders.
Provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our shareholders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of the Delaware General Corporation Law also may be deemed to have certain anti-takeover effects. Further, our certificate of incorporation authorizes the issuance of up to 500,000 shares of preferred stock with such rights and preferences as may be determined from time to time by our board of directors in their sole discretion. Although, to date, we have never issued preferred stock, our board of directors may, without stockholder approval, issue series of preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock.
- Share Price & Shareholder Rights - Risk 2The exercise of outstanding warrants and options will be dilutive to our existing stockholders.
At December 31, 2019, we had 69,016,468 shares of our common stock issued and outstanding and the following securities, which are exercisable into shares of our common stock, were outstanding: 350,000 shares of our common stock issuable upon the exercise of warrants with exercise price $0.050 per share; and 11,152,500 shares of our common stock issuable upon the exercise of options with exercise prices ranging from $0.017 per share to $0.046 per share. The issuance of these shares will be dilutive to our existing stockholders.
- Share Price & Shareholder Rights - Risk 3Because our stock currently trades below $5.00 per share, and is quoted on the otcqb marketplace, our stock is considered a "penny stock" which can adversely affect its liquidity.
As the trading price of our common stock is less than $5.00 per share, our common stock is considered a "penny stock," and trading in our common stock is subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker/dealer must make an individualized written suitability determination for the purchaser and receive the purchaser's written consent prior to the transaction. Securities and Exchange Commission regulations also require additional disclosure in connection with any trades involving a "penny stock," including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of our common stock in the secondary market because few brokers or dealers are likely to undertake these compliance activities. Purchasers of our common stock may find it difficult to resell the shares in the secondary market.
- Share Price & Shareholder Rights - Risk 4There may not be sufficient liquidity in the market for our securities in order for investors to sell their securities. The market price of our common stock may be volatile.
While our common stock is quoted on the OTCQB Tier of the OTC Markets, our common stock is thinly traded and should be considered an illiquid investment. The market price of our common stock will likely be highly volatile, as is the stock market in general, and the market for over the counter quoted stocks in particular. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as conditions or trends in the industry in which we operate or sales of our common stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.
- Share Price & Shareholder Rights - Risk 5Finra sales practice requirements may also limit a stockholders ability to buy and sell our stock.
In addition to the penny stock rules promulgated by the SEC, which are discussed earlier in this section, the rules of the Financial Industry Regulatory Authority, Inc. (FINRA) require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must have reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability to buy and sell our stock and have an adverse effect on the market value for our shares.
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