Synthesis Energy Systems risk analysis
Synthesis Energy Systems (SYNE) Risk Analysis
Risk Overview Q4, 2019
Source: the company's latest filing for the period ended Dec 31, 2019, filed Mar 02, 2020
Risk Change Over Time
- Share Price & Shareholder Rights - Risk 1We are at risk of being de-listed from The NASDAQ Stock Market if we do not regain compliance with the minimum amount of stockholders' equity for continued listing required by NASDAQ rules and certain other deficiencies.
On May 16, 2019, SES received a notice of noncompliance (the "Notice") from the Listing Qualifications Staff (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") indicating that the Company was not compliant with the minimum stockholders' equity requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Capital Market because the Company's stockholders' equity, as reported in SES's Quarterly Report on Form 10-Q for the period ended March 31, 2019, was below the required minimum of $2.5 million. Based on materials provided to Nasdaq by SES, the Staff granted SES an extension through November 12, 2019 to complete the Merger. On November 13, 2019, SES received notification from the Staff that it did not meet the terms of the previously granted extension and, as a result, the Staff has determined that that the securities of SES would be subject to delisting unless SES timely requested a hearing before a Nasdaq Hearings Panel (the "Panel"). Additionally, on October 17, 2019, the Staff notified SES that since it failed to timely file its Annual Report on Form 10-K for the year ended June 30, 2019, it no longer complied with Nasdaq Listing Rule 5250(c)(1). SES was given until December 16, 2019, to submit a plan of compliance for consideration by the Staff. However, pursuant to Nasdaq Listing Rule 5810(c)(2)(A), the Staff has informed SES that it can no longer consider the Company's plan, and, as a result, the failure to file the Form 10-K serves as an additional and separate basis for delisting. On November 21, 2019, SES received an additional delinquency notification letter from the Staff due to SES's continued non-compliance with Nasdaq Listing Rule 5250(c)(1) as a result of the Company's failure to timely file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. SES requested a hearing before the Panel. The hearing request automatically stayed any suspension/delisting action through December 5, 2019. On December 13, 2019, we received notification from the Panel that it had determined to extend the stay of suspension through the completion of the hearings process, which will take place on December 19, 2019. At the hearing, the Company requested an exception through the closing of the previously announced Merger with AFE. The Panel granted the extension until May 11, 2020, subject to certain milestones being met throughout the timeframe of the stay. On February 20, 2020, the Company received an additional delinquency notification letter from the Staff due to the Company's continued non-compliance with Nasdaq Listing Rule 5250(c)(1) as a result of the Company's failure to timely file this Quarterly Report for the quarter ended December 31, 2019. The Company is required and delivered a plan with respect to this deficiency to the Panel on February 27, 2020.
- Debt & Financing - Risk 2We will require substantial additional funding, and our failure to raise additional capital necessary to support and expand our operations could reduce our ability to compete and could harm our business.
As of December 31, 2019, we had $0.4 million in cash and cash equivalents and negative $1.4 million in working capital. As of March 2, 2020, we had $269,000 in cash and cash equivalents. Of the $269,000 in cash and cash equivalents, $235,000 resides in the United States or easily accessed foreign countries and approximately $34,000 resides in China. In connection with the entry into the Merger Agreement, we entered into New Purchase Agreements with each of the existing holders of our Debentures, whereby each of the holders agreed to exchange their Debentures and accompanying Debenture Warrants for New Debentures and New Debenture Warrants, and certain of the holders agreed to provide $2,000,000 of Interim Financing. Pursuant to the New Purchase Agreements, the Company also issued $2,000,000 of Merger Debentures to certain accredited investors, along with Merger Warrants to purchase 1,333,333 of shares of Common Stock as part of the Interim Financing. The Company shall receive the $2,000,000 pursuant to the Merger Debentures according to the following schedule: (i) $1,000,000 on or before October 14, 2019, (ii) $500,000 upon the filing of the proxy statement for the Company stockholder approval of the Merger, and (iii) $500,000 within two business days of Company stockholder approval of the Merger. The terms of the Merger Debentures are the same as the New Debentures. The Merger Debentures are intended to assist the Company in financing its business through the closing of the Merger. As compensation for its services, the Company agreed to pay the Placement Agent: (i) a cash fee of $140,000 (representing an aggregate fee equal to 7% of the face amount of the Merger Debentures); and (ii) a New Placement Agent Warrant. We have also agreed to reimburse certain expenses of the Placement Agent. The $1,000,000 scheduled payment on or before October 14, 2019 was subsequently received less certain legal costs and escrow fees in the amount of $966,000. As part of the Interim Financing, the Company had also agreed to loan $350,000 of the proceeds from the Merger Debentures to AFE to assist AFE in financing its business through the closing of the Merger. On October 24, 2019, we entered into the loan agreement which is due in full on the later of March 31, 2020 or within five days following the closing of the Merger. If the Merger does not close, the loan will mature on March 31, 2020 or three months following the special stockholder meeting called to approve the merger transactions. The loan accrues interest at 11% per annum and is also due in full upon repayment, subject to an increased default interest in certain limited circumstances. On February 19, 2020, we entered into a securities purchase agreement (the "Securities Purchase Agreement") with certain holders of the Company's 11% Senior Secured Convertible Debentures, pursuant to which, among other things, the holders purchased, in accordance with a private placement offering of the Company, $450,000 in principal amount of additional 11% Senior Secured Convertible Debentures (together, the "Additional Interim Debentures") and warrants exercisable for up to 300,004 shares of common stock, half of which are Series A common stock purchase warrants and half of which are Series B common stock purchase warrants (together, the "Additional Interim Warrants"). The Additional Interim Debentures and Additional Interim Warrants are issued on substantially the same terms as the Merger Debentures and Merger Warrants issued in October 2019, provided that the Additional Interim Debentures include an adjustment to the conversion price in the event of certain dilutive equity issuances by the Company. As compensation for its services, we paid to the Placement Agent: (i) a cash fee of $31,500 (representing an aggregate fee equal to 7% of the face amount of the Additional Interim Debentures); and (ii) a warrant to purchase 22,500 shares of Common Stock (the "Interim Placement Agent Warrant"). We have also agreed to reimburse certain expenses of the Placement Agent. The Interim Placement Agent Warrant has been issued on substantially the same terms as the Additional Interim Warrants. On February 18, 2020, we entered into an amended loan agreement (the "Amended Loan Agreement") with AFE, amending the Loan Agreement entered into with AFE in October 2019. The Loan Agreement contemplates that we would loan a portion of the $2,450,000 proceeds that we received under the New Purchase Agreements dated October 10, 2019 as well as under the Securities Purchase Agreement. We had previously loaned $350,000 to AFE at the time of entering into the Loan Agreement, and on February 19, 2020, we have loaned an additional $100,000 out of the proceeds of the Additional Interim Debentures. An additional $115,000 will be loaned to AFE upon the receipt of the next tranche of funds under the New Purchase Agreements. These loaned amounts are due in full within five days following the closing of the transactions contemplated by the Merger Agreement dated October 10, 2019. If the Merger does not close, the loan will mature three months following the special meeting of the Company's stockholders called to approve the Merger. The loan accrues interest at 11% per annum and is also due in full upon repayment, subject to an increased default interest rate in certain limited circumstances. We can make no assurances that the proposed Merger will be completed on a timely basis or at all. We may also need to raise additional capital through equity and debt financing to complete the Merger or to otherwise strengthen our balance sheet for our corporate general and administrative expenses. We cannot provide any assurance that any financing will be available to us in the future on acceptable terms or at all. Any such financing could be dilutive to our existing stockholders. In addition, we may be forced to seek relief to avoid or end insolvency through other proceedings including bankruptcy. Based on the historical negative cash flows and the continued limited cash inflows in the period subsequent to year end there is substantial doubt about the Company's ability to continue as a going concern.
Risk Highlights Q4, 2019
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 59
- Share Price & Shareholder Rights - Risk 1ChangedWe are at risk of being de-listed from The NASDAQ Stock Market if we do not regain compliance with the minimum amount of stockholders' equity for continued listing required by NASDAQ rules and certain other deficiencies.
On May 16, 2019, SES received a notice of noncompliance (the "Notice") from the Listing Qualifications Staff (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") indicating that the Company was not compliant with the minimum stockholders' equity requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Capital Market because the Company's stockholders' equity, as reported in SES's Quarterly Report on Form 10-Q for the period ended March 31, 2019, was below the required minimum of $2.5 million. Based on materials provided to Nasdaq by SES, the Staff granted SES an extension through November 12, 2019 to complete the Merger. On November 13, 2019, SES received notification from the Staff that it did not meet the terms of the previously granted extension and, as a result, the Staff has determined that that the securities of SES would be subject to delisting unless SES timely requested a hearing before a Nasdaq Hearings Panel (the "Panel"). Additionally, on October 17, 2019, the Staff notified SES that since it failed to timely file its Annual Report on Form 10-K for the year ended June 30, 2019, it no longer complied with Nasdaq Listing Rule 5250(c)(1). SES was given until December 16, 2019, to submit a plan of compliance for consideration by the Staff. However, pursuant to Nasdaq Listing Rule 5810(c)(2)(A), the Staff has informed SES that it can no longer consider the Company's plan, and, as a result, the failure to file the Form 10-K serves as an additional and separate basis for delisting. On November 21, 2019, SES received an additional delinquency notification letter from the Staff due to SES's continued non-compliance with Nasdaq Listing Rule 5250(c)(1) as a result of the Company's failure to timely file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. SES requested a hearing before the Panel. The hearing request automatically stayed any suspension/delisting action through December 5, 2019. On December 13, 2019, we received notification from the Panel that it had determined to extend the stay of suspension through the completion of the hearings process, which will take place on December 19, 2019. At the hearing, the Company requested an exception through the closing of the previously announced Merger with AFE. The Panel granted the extension until May 11, 2020, subject to certain milestones being met throughout the timeframe of the stay. On February 20, 2020, the Company received an additional delinquency notification letter from the Staff due to the Company's continued non-compliance with Nasdaq Listing Rule 5250(c)(1) as a result of the Company's failure to timely file this Quarterly Report for the quarter ended December 31, 2019. The Company is required and delivered a plan with respect to this deficiency to the Panel on February 27, 2020.
- Share Price & Shareholder Rights - Risk 2Our historic stock price has been volatile and the future market price for our common stock is likely to continue to be volatile.
The public market for our common stock has historically been very volatile. Any future market price for our shares is likely to continue to be very volatile. This price volatility may make it more difficult for our stockholders to sell shares when they want at prices that they find attractive. We do not know of any one particular factor that has caused volatility in our stock price. However, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies. Broad market factors and the investing public's negative perception of our business may reduce our stock price, regardless of our operating performance.
- Share Price & Shareholder Rights - Risk 3Our common stock is thinly traded on The NASDAQ Stock Market.
Although our common stock is traded on The NASDAQ Stock Market, the trading volume has historically been low. We cannot assure investors that trading volume will increase or the volatility of the trading price of our common stock will decrease. We cannot assure investors that a more active trading market will develop even if we issue more equity in the future.
- Share Price & Shareholder Rights - Risk 4The market valuation of our business may fluctuate due to factors beyond our control and the value of the investment of our stockholders may fluctuate correspondingly.
The market valuation of clean energy companies, such as us, frequently fluctuate due to factors unrelated to the past or present operating performance of such companies. Our market valuation may fluctuate significantly in response to a number of factors, many of which are beyond our control, including: - Changes in securities analysts' estimates of our financial performance; - Fluctuations in stock market prices and volumes, particularly among securities of energy companies; - Changes in market valuations of similar companies; - Announcements by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments; - Variations in our quarterly operating results; - Fluctuations in coal, oil, natural gas, methanol and ammonia prices; - Loss of a major customer of failure to complete significant commercial contracts; - Loss of a relationship with a partner; and - Additions or departures of key personnel. As a result, the value of your investment in us may fluctuate.
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.
