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Solesence (SLSN) Risk Analysis
Risk Overview Q3, 2019
Risk Change Over Time
No filing history is available.
- Share Price & Shareholder Rights - Risk 1A Majority of our Common Stock is Controlled by a Single Stockholder
Together with his affiliates Grace Brothers, Ltd. and Grace Investments, Ltd., Bradford T. Whitmore beneficially owned 53% of our common stock as of May 13, 2019. Therefore, Mr. Whitmore has the legal power, regardless of the votes of our other stockholders, to elect all the members of the Company's board of directors. Consequently, our board of directors and management may be strongly influenced by our controlling stockholder, and the interests of our current controlling stockholder may conflict with the interests of other stockholders. Pursuant to the General Corporation Law of the State of Delaware and our Bylaws, our controlling stockholder is empowered to elect the majority of our board of directors, exercise overall control over our management, determine our policies, sell or, in any other manner, transfer shares representing control over the Company held by him and determine the result of any deliberation of our stockholders, including transactions with related parties, corporate reorganizations, sale of all or substantially all the assets, or delisting our shares from the OTCQB marketplace, as well as to determine the distribution and payment of any future dividends. Our controlling stockholder may have an interest in acquisitions, disposal of assets and partnerships, may seek funding or may take other decisions that could conflict with the interests of other stockholders and which may not result in any improvement in our operating results.
- Debt & Financing - Risk 2Our Ability to Continue as a Going Concern is in Doubt Absent Obtaining Adequate New Financing
Cash from operations, cash on hand, cash from our May 13, 2019 and November 13, 2019 financing, in addition to unused borrowing capacity, should be adequate to fund our operating plans through 2019. Our largest customer, consisting of 64% of revenue for the nine-months ended September 30, 2019, had a revenue decrease of 20% from the same time last year. This decline has limited our flexibility and required us to make cash management a top priority. The growth in our Solésence business increased 56% for the nine-months ended September 30, 2019 compared to the same time last year. We continue to view Solésence as a critical strategic undertaking and may require additional investment in working capital. Our current plan is to continue to invest in Solésence-related operating expenses and capital equipment. Given the decline related to our largest customer, as well as our growth strategy for Solésence, we may need to seek additional funding to address working capital demands within the next twelve months. We believe that we will be able to secure additional financing, but we do not have any additional financing commitments in place as of today. However, we may not be able to secure additional financing in a timely manner under commercially reasonable terms, or at all. If we are unable to secure additional financing, we would need to reevaluate the Company's strategy, including our Solésence growth strategy, and lower investment and expenses accordingly. This could impede growth in 2020 and beyond. These circumstances raise significant doubt as to the Company's ability to operate as a going concern for the next 12 months, and inability to fund our ongoing cash obligations may result in our ceasing to operate, which would result in liquidation of our assets. In a liquidation of the Company, if we are unable to continue as a going concern, the value realized on our assets would likely be less than our outstanding obligations and, consequently, our stockholders would lose their entire investment.
Risk Highlights Q3, 2019
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 27
- Share Price & Shareholder Rights - Risk 1The disclosure requirements under the "conflict minerals" provisions of the Dodd-Frank Act could increase our costs and limit the supply of certain metals used in our products and affect our reputation with customers and shareholders.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, or the Dodd-Frank Act, the SEC adopted disclosure requirements, which became effective in 2014, for public companies using certain minerals and metals in their products. These minerals and metals are generally referred to as "conflict minerals" regardless of their country of origin. Commercial sales of our products containing these materials began during 2015. Under these rules, we are required to perform due diligence and disclose our efforts to prevent the sourcing of such conflict minerals from the Democratic Republic of Congo or adjoining countries. As a result of these regulations, we have incurred and expect to continue to incur costs to comply with the disclosure requirements, including costs related to determining the source of any of the conflict minerals used in our products. These new requirements could also adversely affect the sourcing, availability and pricing of such minerals, and the pool of suppliers who provide "conflict free" metals may be limited. As a result, we or our suppliers may not be able to obtain materials necessary for production of our products in sufficient quantities or at competitive prices. In addition, we may not be able to sufficiently verify the origins of all metals used in our products and confirm that they are "conflict free," which may adversely affect our reputation.
- Share Price & Shareholder Rights - Risk 2Additional sales, or the availability for sale, of substantial amounts of our common stock could adversely affect the value of our common stock.
No prediction can be made as to the effect, if any, that future sales of our common stock, or the availability of our common stock for future sales, will have on the market price of our common stock. Sales of substantial amounts of our common stock in the public market and the availability of shares for future sale could adversely affect the prevailing market price of our common stock. This in turn could impair our future ability to raise capital through an offering of our equity securities.
- Share Price & Shareholder Rights - Risk 3There may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.
To the extent of our authorized but unissued shares pursuant to our certificate of incorporation, as amended, we are not restricted from issuing additional shares of common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The market price of our common stock could decline as a result of future sales of our common stock or the perception that such sales could occur.
- Share Price & Shareholder Rights - Risk 4Provisions in our certificate of incorporation, our by-laws, and Delaware law could make it more difficult for a third party to acquire us, discourage a takeover, and adversely affect existing stockholders.
Our certificate of incorporation, our by-laws and the Delaware General Corporation Law (the "DGCL") contain provisions that may have the effect of making more difficult, delaying or deterring attempts by others to obtain control of our Company, even when these attempts may be in the best interests of stockholders. These include provisions on our maintaining a classified Board of Directors and limiting the stockholders' powers to remove directors or take action by written consent instead of at a stockholders' meeting. Our certificate of incorporation also authorizes our Board of Directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock. The DGCL also imposes conditions on certain business combination transactions with "interested stockholders." These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
- Share Price & Shareholder Rights - Risk 5AddedA Majority of our Common Stock is Controlled by a Single Stockholder
Together with his affiliates Grace Brothers, Ltd. and Grace Investments, Ltd., Bradford T. Whitmore beneficially owned 53% of our common stock as of May 13, 2019. Therefore, Mr. Whitmore has the legal power, regardless of the votes of our other stockholders, to elect all the members of the Company's board of directors. Consequently, our board of directors and management may be strongly influenced by our controlling stockholder, and the interests of our current controlling stockholder may conflict with the interests of other stockholders. Pursuant to the General Corporation Law of the State of Delaware and our Bylaws, our controlling stockholder is empowered to elect the majority of our board of directors, exercise overall control over our management, determine our policies, sell or, in any other manner, transfer shares representing control over the Company held by him and determine the result of any deliberation of our stockholders, including transactions with related parties, corporate reorganizations, sale of all or substantially all the assets, or delisting our shares from the OTCQB marketplace, as well as to determine the distribution and payment of any future dividends. Our controlling stockholder may have an interest in acquisitions, disposal of assets and partnerships, may seek funding or may take other decisions that could conflict with the interests of other stockholders and which may not result in any improvement in our operating results.
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