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DigitalTown Inc (DGTW)
OTHER OTC:DGTW
US Market

DigitalTown (DGTW) Risk Analysis

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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.

DigitalTown disclosed 11 risk factors in its most recent earnings report. DigitalTown reported the most risks in the “Finance & Corporate” category.

Risk Overview Q3, 2019

Risk Distribution
11Risks
100% Finance & Corporate
0% Tech & Innovation
0% Legal & Regulatory
0% Production
0% Ability to Sell
0% Macro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
DigitalTown Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q3, 2019

Main Risk Category
Finance & Corporate
With 11 Risks
Finance & Corporate
With 11 Risks
Number of Disclosed Risks
11
No changes from last report
S&P 500 Average: 31
11
No changes from last report
S&P 500 Average: 31
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Aug 2019
0Risks added
0Risks removed
0Risks changed
Since Aug 2019
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 3
0
No changes from last report
S&P 500 Average: 3
See the risk highlights of DigitalTown in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 11

Finance & Corporate
Total Risks: 11/11 (100%)Above Sector Average
Share Price & Shareholder Rights8 | 72.7%
Share Price & Shareholder Rights - Risk 1
Our common stock may be affected by limited trading volume and may fluctuate significantly.
There has been 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 stockholders' ability to sell our common stock in short time periods, or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations that 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 2
Our common stock is traded on the OTC markets, which may make it more difficult for investors to resell their shares due to suitability requirements.
Our common stock is currently traded on the Over-The-Counter market "OTC" and quoted on the OTC Markets. Broker-dealers are challenged to trade in OTC stocks given that the market for such securities is often limited, the stocks are more volatile, and the risks to investors are greater. These factors 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. The Company is exploring the possibility of listing within a different level of OTC or transitioning to the NASDAQ exchange in an effort to help increase the liquidity of the Company's stock.
Share Price & Shareholder Rights - Risk 3
Since our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.
Since our common stock is thinly traded, its trading price is more likely to be volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including (but not necessarily limited to): - the trading volume of our shares;- new products or services introduced or announced by us or our competitors;- actual or anticipated variations in quarterly operating results;- general conditions or trends in our business industries;- announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;- additions or departures of key personnel;- sales of our common stock; and- general stock market price and volume fluctuations of publicly-traded, and particularly microcap, companies.- the number of securities analysts, market-makers and brokers following our common stock; Investors may have difficulty reselling shares of our common stock, either at or above the price they paid for our stock, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, there is a history of securities class action litigation following periods of volatility in the market price of a company's securities. Although there is no such litigation currently pending or threatened against the Company, such activity against us could result in substantial legal fees, potential liabilities and the diversion of management's attention and resources from our business. Moreover and as previously noted, our shares are currently quoted on the OTC Markets and are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.
Share Price & Shareholder Rights - Risk 4
Minnesota law and our charter may inhibit a takeover of our company that stockholders may consider favorable.
Provisions of Minnesota law, such as its business combination statute, may have the effect of delaying, deferring or preventing a change in control of our Company. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.
Share Price & Shareholder Rights - Risk 5
Our officers and directors have the ability to exercise significant influence over matters submitted for stockholder approval and their interests may differ from other stockholders.
Our current directors in the aggregate have the ability to appoint new members to the Board of Directors. Accordingly, our directors and executive officers, whether acting alone or together, may have significant influence in determining the outcome of any corporate transaction or other matter submitted to our Board for approval, including issuing common and preferred stock, and appointing officers. This influence could have a material impact on mergers, acquisitions, consolidations, the sale of all or substantially all of our assets and the power to prevent or cause a change in control. The interests of these board members may differ from the interests of the other stockholders.
Share Price & Shareholder Rights - Risk 6
Our shares may be defined as penny stock, the rules imposed on the sale of the shares may affect your ability to resell any shares you may purchase, if at all.
Shares of our common stock may be defined as a penny stock under the Securities and Exchange Act of 1934 ("Exchange Act") and rules of the Securities and Exchange Commission ("SEC"). The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000, individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the SEC. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect your ability to resell any shares you may purchase in the public markets.
Share Price & Shareholder Rights - Risk 7
Market for penny stock has suffered in recent years from patterns of fraud and abuse.
Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include: - Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; - Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; - Boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons; - Excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and, - The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices creating consequential investor losses. Our management team is aware of the abuses that have occurred historically in the penny stock market. Although we are not in a position to dictate the behavior of the market or of broker-dealers who participate in the market, we will strive within the confines of practical limitations to prevent the described abuses from being established with respect to our securities. The occurrence of these practices could increase the volatility of our share price.
Share Price & Shareholder Rights - Risk 8
Existing stockholders may experience significant dilution from the market sale or short sales of our common stock.
The perceived risk of dilution may cause our stockholders to sell their shares, which may cause a decline in the price of our common stock. Moreover, the perceived risk of dilution and the resulting pressure on our stock price could encourage investors to engage in short sales of our common stock. By increasing the number of shares offered for sale, material amounts of short selling could further contribute to progressive price declines in our common stock.
Accounting & Financial Operations1 | 9.1%
Accounting & Financial Operations - Risk 1
We have a history of operating losses and the report of our independent accountants issued in connection with the audit of our financial statements contained a qualification raising substantial doubt about our ability to continue as a going concern.
We incurred operating losses of $5,788,778 and $8,057,482 for in fiscal years 2019 and 2018 respectively, and had an accumulated deficit of $56,289,322 at February 28, 2019. In addition, we have incurred net losses of $7,403,426 and $10,243,396 for the fiscal years 2019 and 2018, respectively. As a result of these conditions, the report of our independent accountants issued in connection with the audit of our financial statements as of and for the fiscal years ended February 28, 2019 and February 28, 2018 contained a qualification raising substantial doubt about our ability to continue as a going concern. We can provide no assurance regarding when, if ever, we will become profitable. As a result, we may continue to generate losses for the foreseeable future and in the extreme case, discontinue operations.
Debt & Financing2 | 18.2%
Debt & Financing - Risk 1
We may not be able to collect on our stock subscriptions receivable or raise capital through the sale of our common stock as needed to fund our operations.
For fiscal years 2019 and 2018, the Company sold shares of its common stock which generated cash of $1,070,545 and $1,662,732, respectively. We believe our current cash reserves, the amounts we expect to collect on our booked software licensing revenue, and proceeds from the sale of our common stock should be sufficient to enable us to operate for the next 12 months. In the event that we are unable to collect amounts due to us or raise capital through the sale of our common stock as needed, we would be forced to reduce operating expenses or cease operations altogether. No assurances can be given that we will be successful in reaching or maintaining profitable operations. Our current monthly cash operating expenses going forward are approximately $30,000 per month.
Debt & Financing - Risk 2
We may need to raise additional capital to finance operations.
Funding of our operations over the past 2 years has relied almost entirely on proceeds from the sale of our common stock and the issuance of promissory notes. We currently do not have any bank debt. We may need to raise additional capital to fund our anticipated operating expenses and execute our business plan. We cannot be assured that financing will be available or at favorable terms. Any sale of our common stock to raise capital will cause dilution to our existing stockholders, unless the existing holders participate in the capital raise. If we are unable to obtain adequate financing, we will need to reduce or cease business operations. Any of these events would be materially harmful to our business and may result in a lower stock price.
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.