Wolf Energy Services (WOEN) Risk Analysis
Risk Overview Q2, 2023
Source: the company's latest filing for the period ended Jun 30, 2023, filed Aug 18, 2023
Risk Change Over Time
- Share Price & Shareholder Rights - Risk 1We do not know whether an active, liquid and orderly trading market will develop for our common stock and as a result it may be difficult for you to sell your shares of our common stock.
Our common stock is quoted on the Pink tier of the OTC Markets and is thinly traded. An active trading market in our common stock may never develop or, if developed, sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into business combinations with other companies by using our shares of common stock as consideration. The market price of our common stock may be volatile, and you could lose all or part of your investment.
- Share Price & Shareholder Rights - Risk 2Because our stock currently trades below $5.00 per share and is quoted on the Pink tier of the OTC Markets, 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. SEC 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.
- Accounting & Financial Operations - Risk 3Our ability to generate revenues or profitable operations in the future is not assured.
Since entering into the Grant Back License in June 2017, we have generated limited revenues under the terms of this agreement, nor are there any guarantees that we will be able to generate any meaningful revenues in the future. Our ability to generate future revenues will depend on a number of factors, many of which are beyond our control, including competitive efforts and general economic trends. In addition, we reported a net loss of approximately $714,092 for 2021. There are no assurances we will be able to continue to generate revenues or report profitable operations in the future.
- Accounting & Financial Operations - Risk 4If our revenues do not increase substantially, we do not have sufficient funds to pay our operating expenses.
At December 31, 2021 we had $11,740 of cash and a working capital deficit of $1,160,325. We used $499,511 in net cash in our operations in 2021. We do not have any external sources of liquidity. Although we believe our revenues will increase in 2022 from 2021, mainly initially due to machining work for local South Florida customers, there are no assurances this is correct or that any increase in our revenues in 2022 will be sufficient to pay our operating expenses. In an effort to conserve our cash resources to sustain our operations until such time as the economy begins returning to pre-Covid-19 pandemic activity levels, we reduced employee hours, accrued a portion of management's salary and have begun marketing our machining capabilities to local manufacturers. Our management has also begun exploring possible opportunities for the Company involving mergers, acquisitions or other business combination transactions in an effort to diversify our business. There are no assurances, however, that these efforts will be sufficient to permit us to pay our operating expenses. In that event, our ability to continue as a going concern is in jeopardy. Furthermore, our PPP Loan in the aggregate principal amount of $111,971 matures on May 4, 2022. While we believe our company has used the entire PPP Loan amount for qualifying expenses and we applied for forgiveness of the PPP Loan in accordance with the terms of the CARES Act, there are no assurances that the PPP Loan will be forgiven. We do not have available working capital to satisfy the PPP Loan in the event it becomes due and payable.
- Debt & Financing - Risk 5We have been limited by insufficient capital, and we may continue to be so limited.
In the past, we have lacked the required capital to market the V-Inline Separator. Our inability to raise the funding or to otherwise finance our capital needs could adversely affect our financial condition and our results of operations, and could prevent us from implementing our business plan. We may seek to raise capital through public and private equity offerings, debt financing or collaboration, and strategic alliances. Such financing may not be available when we need it or may not be available on terms that are favorable to us. If we raise additional capital through the sale of our equity securities, your ownership interest will be diluted and the terms of the financing may adversely affect your holdings or rights as a stockholder. If we fail to raise additional funds when needed, or do not have sufficient cash flows from sales, we may be required to scale back or cease operations, sell or liquidate our assets and possibly seek bankruptcy protection.
Risk Highlights Q2, 2023
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 46
- Share Price & Shareholder Rights - Risk 1The price of our common stock is subject to volatility, including for reasons unrelated to our operating performance, which could lead to losses by investors and costly securities litigation.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to several factors, some of which may be outside our control, including but not limited to, the following factors: - changes in market valuations of companies in the oil and gas industry; - future oil prices; - regulatory initiatives from the Biden Administration; - announcements of developments by us or our competitors; - the continuation of the stock market slump and any related adverse events affecting the economy; - announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, capital commitments, significant contracts, or other material developments that may affect our prospects; - actual or anticipated variations in our operating results; - adoption of new accounting standards affecting our industry; - additions or departures of key personnel; and - other events or factors, many of which are beyond our control. The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been initiated against such a company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management's attention and Company resources, which could harm our business and financial condition.
- Share Price & Shareholder Rights - Risk 2The issuance of shares of our common stock upon exercise of our outstanding convertible debt may cause immediate and substantial dilution to our existing shareholders.
We presently have outstanding 6% convertible notes held by our former officers and directors in the principal amount of $845,565 that if converted would result in the issuance of approximately an additional 56,371,000 shares of our common stock. Furthermore, effective March 29, 2023, we issued a promissory note in the principal amount of $165,000, net of discount, with a maturity date of March 27, 2024. The investor may in its option, at any time following an Event of Default, as defined in the note, convert all or any part of the outstanding and unpaid amount of the note into fully paid and non-assessable shares of common stock at a conversion price per share equal to 75% of the average closing bid price of our common stock during the 5 trading days prior to the date of conversion. The issuance of shares upon conversion of any of the notes will result in dilution to the interests of other shareholders.
- Share Price & Shareholder Rights - Risk 3Our common stock may be affected by limited trading volume and may fluctuate significantly.
Our common stock is quoted on the OTCQB tier of the OTC Markets. There is a limited public market for our common stock and there can be no assurance that an active trading market for our common stock will develop. As a result, this could adversely affect our shareholders' ability to sell our common stock in short time periods, or possibly at all. Thinly traded common stock can be more volatile than common stock traded in an active public market. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially.
- Share Price & Shareholder Rights - Risk 4Our common stock is deemed to be "penny stock," which may make it more difficult for investors to sell their shares due to suitability requirements.
Our common stock is deemed to be "penny stock" as that term is defined under the Exchange Act. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges. Our common stock is covered by an SEC rule that imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors, which are generally institutions with assets in excess of $5,000,000, or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. Broker/dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor. These requirements may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline.
- Share Price & Shareholder Rights - Risk 5Because we can issue "blank check" preferred stock without stockholder approval, it could adversely impact the rights of holders of our common stock.
Under our Articles of Incorporation our Board of Directors may approve an issuance of up to 5,000,000 shares of "blank check" preferred stock without seeking stockholder approval. Any additional shares of preferred stock that we issue in the future may rank ahead of our common stock in terms of dividend or liquidation rights and may have greater voting rights than our common stock. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which could dilute the value of common stock to current stockholders and could adversely affect the market price of our common stock. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our Company. Although we have no present intention to issue any shares of authorized preferred stock, there can be no assurance that we will not do so in the future.
- Share Price & Shareholder Rights - Risk 6There is currently a limited trading market for the Company's common stock.
Our common stock is quoted on the OTCQB under the symbol "WOEN." There is currently a limited trading market in our common stock, and we cannot give an assurance that a consistent, active trading market will develop. Trading on the OTCQB is less liquid than the leading national securities exchanges. If an active market for our common stock develops, there is no assurance that such market will be maintained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. Furthermore, there is a significant risk that our stock price may fluctuate in the future in response to any of the following factors, some of which are beyond our control: - Material declines in the price of or market for oil and natural gas on which our operations depend; - Regulation by the federal government including the SEC's proposed climate change rules and whether such rules when adopted as we expect will apply to smaller reporting companies like the Company; - Our ability to maintain relationships with truck drivers and customers in the oil and gas space; - The impact of inflation; - Economic conditions including the onset of a recession or stagflation; - Variations in our quarterly operating results; - Announcements that our revenue or income is below analysts' expectations; - Sales of large volume of our common stock especially after the Spin-Off; and - Announcements by us or our competitors of significant contracts, strategic partnerships, joint ventures or capital commitments.
- Share Price & Shareholder Rights - Risk 7Future sales of our common stock in the public market could lower the price of our common stock and impair our ability to raise funds in future securities offerings.
Of 78,268,332 shares of common stock outstanding as of June 15, 2023, approximately 15,774,652 shares (or approximately 20%) are held by investors who are not our affiliates. The Spin-Off Shares, which currently account for 66% of our issued and outstanding common stock, will become unrestricted and freely tradeable stock following the effectiveness of a registration statement (provided we continue to comply with the period reporting obligations under the Exchange Act). Future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock and could make it more difficult for us to raise funds in the future through an offering of our securities. Future sales of substantial amounts of our common stock in the public market, or the anticipation of these sales, could materially and adversely affect market prices prevailing from time-to-time, and could impair our ability to raise capital through sales of equity or equity-related securities. In addition, the market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market or the perception that these sales may occur.
- Share Price & Shareholder Rights - Risk 8Our common stock is a "penny stock" and thereby be subject to additional sale and trading regulations that may depress the price of our common stock.
Our common stock is a "penny stock" if it does not qualify for one of the exemptions from the definition of "penny stock" under Section 3a51-1 of the Exchange Act. Our common stock may be a "penny stock" if it meets one or more of the following conditions: (i) it trades at a price less than $5 per share; (ii) it is not traded on a "recognized" national securities exchange which excludes the OTC Pink Market or the OTCQB and OTCQX; or (iii) is issued by a company that has been in business less than three years with net tangible assets less than $5 million. Thus, our common stock is a penny stock. The principal result or effect of being designated a penny stock is that securities broker-dealers participating in sales of our common stock are discouraged from soliciting purchases of our common stock by the SEC's rules which generally results in low prices and limited trading volume. For example, SEC Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor's account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to: (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise. In addition, clearing firms, which hold retail accounts dislike penny stocks and through extra compliance efforts and costs they impose, make it hard to sell penny stocks.
- Share Price & Shareholder Rights - Risk 9The future issuance of equity or of debt securities that are convertible into, or exercisable for common stock could have negative pressure on the market price of our common stock and could have a material adverse effect on our ability to raise additional equity capital.
We presently have outstanding 6% convertible notes held by our former officers and directors in the principal amount of $845,565 that if converted would result in the issuance of approximately an additional 56,371,000 shares of our common stock. Furthermore, on March 29, 2023, we issued a promissory note in the principal amount of $165,000, net of discount, with a maturity date of March 27, 2024. The investor may in its option, at any time following an Event of Default, as defined in the Note, convert all or any part of the outstanding and unpaid amount of the note into fully paid and non-assessable shares of common stock at a conversion price per share equal to 75% of the average closing bid price of our common stock during the 5 trading days prior to the date of conversion. To meet our continuing working capital needs, we may choose to raise additional capital in the future, depending on market conditions, strategic considerations and operational requirements. To the extent that additional capital is raised through the issuance of shares or other securities convertible into, or exercisable for, shares of common stock, our stockholders will be diluted. Future issuances of our common stock or other equity securities, or the perception that such sales may occur, could adversely affect the prevailing market price of our common stock and impair our ability to raise capital through future offerings of equity or equity-linked securities. Accordingly, the adverse market and price pressures resulting from an offering pursuant to a registration statement may continue for an extended period of time and continued negative pressure on the market price of our common stock and could have a material adverse effect on our ability to raise additional equity capital.
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