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Regencell Bioscience Holdings Ltd. (RGC)
NASDAQ:RGC
Risk Overview Q2, 2025
Risk Distribution
36% Finance & Corporate
20% Legal & Regulatory
18% Tech & Innovation
13% Ability to Sell
8% Production
5% 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
Regencell Bioscience 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.
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 Q2, 2025
Main Risk Category
Finance & Corporate
With 22 Risks
Finance & Corporate
With 22 Risks
Number of Disclosed Risks
61
+13
From last reportS&P 500 Average: 31
61
+13
From last reportS&P 500 Average: 31
Recent Changes
15Risks added
2Risks removed
15Risks changed
Since Jun 2025
15Risks added
2Risks removed
15Risks changed
Since Jun 2025
Number of Risk Changed
15
+12
From last reportS&P 500 Average: 1
15
+12
From last reportS&P 500 Average: 1
See the risk highlights of Regencell Bioscience 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 61
Finance & Corporate
Total Risks: 22/61 (36%)Above Sector Average
Share Price & Shareholder Rights10 | 16.4%
Share Price & Shareholder Rights - Risk 1
As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq Stock Market corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.Added
Share Price & Shareholder Rights - Risk 2
For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.In April 2012, President Obama signed into law the JOBS Act. We are classified as an "emerging growth company" under the JOBS Act. For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to, among other things, (i) provide an auditor's attestation report on management's assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, (ii) comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (iii) provide certain disclosure regarding executive compensation required of larger public companies or (iv) hold nonbinding advisory votes on executive compensation. We will remain an emerging growth company for up to five years, although we will lose that status sooner if we have more than $1.235 billion of revenues in a fiscal year, become a "large accelerated filer" (having a market value of our Ordinary Shares held by non-affiliates of more than $700 million as of the last business day of our most recently completed second fiscal quarter), or issue more than $1.0 billion of non-convertible debt over a three-year period.
To the extent that we rely on any of the exemptions available to emerging growth companies, you will receive less information about our executive compensation and internal control over financial reporting than issuers that are not emerging growth companies. If some investors find our Ordinary Shares to be less attractive as a result, there may be a less active trading market for our Ordinary Shares and our share price may be more volatile.
Share Price & Shareholder Rights - Risk 3
As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, which may limit the information publicly available to our shareholders.As a foreign private issuer, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and therefore there may be less publicly available information about us than if we were a U.S. domestic issuer. For example, we are not subject to the proxy rules in the United States and disclosure with respect to our annual general meetings will be governed by the Cayman Islands law requirements. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our Ordinary Shares.
Share Price & Shareholder Rights - Risk 4
Our founder and CEO will continue to own a significant percentage of our Ordinary Shares and will be able to exert significant control over matters subject to shareholder approval.Mr. Yat-Gai Au, our founder, director and CEO, currently beneficially owns 88.6% of our company through Regencell (BVI) Limited and his spouse, and our company will continue to be controlled by him. Therefore, he has the ability to substantially influence us through this ownership position. For example, he may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transactions. His interests may not always coincide with our corporate interests or the interests of other shareholders, and he may act in a manner with which you may not agree or that may not be in the best interests of our other shareholders. So long as he continues to own a significant amount of our equity, he will continue to be able to strongly influence or effectively control our decisions.
Share Price & Shareholder Rights - Risk 5
As a "controlled company" under the rules of the Nasdaq Capital Market, we may choose to exempt our company from certain corporate governance requirements that could have an adverse effect on our public shareholders.We are a "controlled company" as defined under the Nasdaq Stock Market listing rules because Mr. Yat-Gai Au, our founder, director and CEO, currently beneficially owns 88.6% of our Ordinary Shares through Regencell (BVI) Limited and his spouse. As long as our officers and directors, either individually or in the aggregate, own at least 50% of the voting power of our company, we are a "controlled company" as defined under Nasdaq Stock Market listing rules.
For so long as we are a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules, including:
- an exemption from the rule that a majority of our board of directors must be independent directors;- an exemption from the rule that the compensation of our CEO must be determined or recommended solely by independent directors; and - an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.
As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
Although we do not intend to rely on the "controlled company" exemption under the Nasdaq Stock Market listing rules, we could elect to rely on this exemption in the future. If we elect to rely on the "controlled company" exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors.
Share Price & Shareholder Rights - Risk 6
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our shares, the price and trading volume of our Ordinary Shares could decline.The trading market for our Ordinary Shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. If no or few securities or industry analysts commence coverage of us, the trading price for our securities would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our share performance, or if our operating results fail to meet the expectations of analysts, the price of our securities would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our Ordinary Shares to decline.
Share Price & Shareholder Rights - Risk 7
Because our business is conducted in Hong Kong dollars and the price of our Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of your investments.Our business is conducted in Hong Kong, our books and records are maintained in Hong Kong dollars, which is the currency of Hong Kong, and the financial statements that we file with the SEC and provide to our shareholders are presented in United States dollars. Changes in the exchange rate between Hong Kong dollar and U.S. dollar affect the value of our assets and the results of our operations in United States dollars. The value of Hong Kong dollar against United States dollar and other currencies may fluctuate and is affected by, among other things, changes in the Hong Kong's political and economic conditions and perceived changes in the economy of Hong Kong and the United States. Any significant revaluation of Hong Kong dollar may materially and adversely affect our cash flows, revenue and financial condition. Changes in the conversion rate between United States dollar and Hong Kong dollar will affect the amount of proceeds we will have available for our business.
Share Price & Shareholder Rights - Risk 8
Our Ordinary Shares may be prohibited from being trading on a national exchange under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors located in Hong Kong. The delisting of our Ordinary Shares, or the threat of their being delisted, may materially and adversely affect the value of your investment.The Holding Foreign Companies Accountable Act (the "HFCAA") was enacted on December 18, 2020. The HFCAA states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit securities of any such company from being traded on a national securities exchange or in the over the counter trading market in the U.S.
On December 2, 2021, the SEC adopted final amendments to its rules implementing the HFCAA and established procedures to identify registrants and prohibit the trading of the securities of certain registrants as required by the HFCAA. On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the People's Republic of China, which the PCAOB believes represents the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong completely, consistent with U.S. law. On December 15, 2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it was unable to inspect or investigate completely registered public accounting firms. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. Whether the PCAOB will continue to be able to conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our and our auditor's control. If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year.
Our auditor, Marcum Asia CPAs LLP, the independent registered public accounting firm that issues the audit report included elsewhere in this Annual Report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Marcum Asia CPAs LLP are currently subject to PCAOB inspections and PCAOB is able to inspect our auditor. However, we cannot assure you whether Nasdaq Stock Market LLC or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor's audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection.
Share Price & Shareholder Rights - Risk 9
A possible "short squeeze" due to a sudden increase in demand of our Ordinary Shares that largely exceeds supply may lead to price volatility in our Ordinary Shares.We believe that investors have purchased our Ordinary Shares to hedge existing exposure in our Ordinary Shares or to speculate on the price of our Ordinary Shares. Speculation on the price of our Ordinary Shares may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our Ordinary Shares available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our Ordinary Shares for delivery to lenders of our Ordinary Shares. Those repurchases may in turn, dramatically increase the price of our Ordinary Shares until additional shares of our Ordinary Shares are available for trading or borrowing. This is often referred to as a "short squeeze." We believe that a large proportion of our Ordinary Shares (other than shares held by the Company's directors and officers) has been and may continue to be traded by short sellers which may increase the likelihood that our Ordinary Shares will be the target of a short squeeze. We believe that this activity has led and could continue to lead to volatile price movements in shares of our Ordinary Shares that are unrelated or disproportionate to our operating performance or prospectus and, once investors purchase the shares of our Ordinary Shares necessary to cover their short positions, the price of our Ordinary Shares may rapidly decline. Investors that purchase shares of our Ordinary Shares during a short squeeze may lose a significant portion of their investment.
Share Price & Shareholder Rights - Risk 10
The market price for our Ordinary Shares may be volatile.The market price for our Ordinary Shares has recently been very volatile and the price may not reflect our value. We believe this volatility may be caused in substantial part by a "short squeeze" or other anomalous trading activity causing demand for, and price of, our Ordinary Shares to increase. There can be no assurance that there will be an active market for our Ordinary Shares in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. The market price for our Ordinary Shares may continue to be volatile and subject to wide fluctuations due to factors such as:
- the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;- actual or anticipated fluctuations in our quarterly operating results;- changes in financial estimates by securities research analysts;- negative publicity, studies or reports;- comments by other third parties, including blogs, articles, message boards and social and other media;- an increase or decrease in the short interest in our Ordinary Shares - our capability to catch up with the technological innovations in the industry;- announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital commitments;- addition or departure of key personnel;- the sale or availability for sale, or perceived sale or availability for sale, of substantial amounts of our Ordinary Shares in the market;- any future financing in the capital market to raise fund for our operations;- fluctuations of exchange rates between Hong Kong dollar and the U.S. dollar; and - general economic or political conditions in Hong Kong.
Many of these factors and conditions are beyond the control of us and our shareholders. In addition, the securities market has from time-to-time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our Ordinary Shares.
Over the last several months, our share price has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of our company. For example, on June 16, 2025, our Ordinary Shares experienced an intra-day trading high of $83.600 per share and a low of $26.200 per share. In addition, from April 26, 2025 to June 20, 2025, the closing price of our Ordinary Shares on the Nasdaq Stock Market LLC ranged from as low as $0.832 per share to $83.600 per share. During this time, we have not experienced any material changes in our financial condition or results of operations that would explain such price volatility or trading volume. These broad market fluctuations may adversely affect the trading price of our Ordinary Shares. We believe a large proportion of our Ordinary Shares has been and may continue to be traded by short sellers which has put and may continue to put pressure on the supply and demand for our Ordinary Shares, further influencing volatility in its market price. Additionally, these and other external factors have caused and may continue to cause the market price and demand for our Ordinary Shares to fluctuate, which may limit or prevent investors from readily selling their Ordinary Shares, selling their Ordinary Shares at a favorable price, and may otherwise negatively affect the liquidity or price of our Ordinary Shares.
The market for our Ordinary Shares may continue to have, when compared to seasoned issuers, significant price volatility. In the past, plaintiffs have often initiated securities class action litigation against public companies following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation, which could result in substantial costs and liabilities and could divert management's attention and resources.
Accounting & Financial Operations5 | 8.2%
Accounting & Financial Operations - Risk 1
Our future operating results are difficult to predict and may vary significantly from quarter to quarter, which may adversely affect the price of our Ordinary Shares.Accounting & Financial Operations - Risk 2
We have a very limited operating history, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.We commenced our operations in Hong Kong through our wholly-owned subsidiary, Regencell Bioscience Limited in 2015. Our operations to date have been limited to organizing and staffing our company, partnering with the TCM Practitioner to conduct research studies, identifying potential partnerships and TCM formula candidate, acquiring TCM raw materials, and conducting research and development activities for our TCM formula candidate. We have not yet demonstrated the ability to successfully complete large-scale, pivotal research studies. We have also not yet applied for or obtained regulatory approval for, or demonstrated an ability to manufacture or commercialize, any of our TCM formula candidate. Consequently, any predictions about our future success, performance, or viability may not be as accurate as they could be if it had a longer operating history or approved products on the market.
Our limited operating history, particularly in light of the evolving TCM formula research and development industry in which we operate, may make it difficult to evaluate our current business and prospects for future performance. Our short history makes any assessment of our future performance or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage companies in evolving fields as we seek to transition to a company capable of supporting commercial activities. In addition, as a new business, we may be more likely to encounter unforeseen expenses, difficulties, complications, and delays due to limited experience. If we do not address these risks and difficulties successfully, our business will suffer.
Accounting & Financial Operations - Risk 3
We do not intend to pay dividends for the foreseeable future.We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases.
Accounting & Financial Operations - Risk 4
We have identified material weaknesses in our internal control over financial reporting. If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.In the course of auditing our consolidated financial statements as of and for the years ended June 30, 2025, 2024 and 2023, we and our independent registered public accounting firms identified three material weaknesses in our internal control over financial reporting as well as other control deficiencies. As defined in standards established by the Public Company Accounting Oversight Board ("PCAOB"), a "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified relate to (1) our lack of sufficient skilled staff with U.S. GAAP knowledge and the U.S. Securities and Exchange Commission (the "SEC") reporting knowledge for the purpose of financial reporting as well as the lack in formal accounting policies and procedures manual to ensure proper financial reporting in accordance with U.S. GAAP and SEC reporting requirements; (2) our lack of internal audit function to establish a formal risk assessment process and internal control framework; and (3) our lack of segregation of duties for certain key functions due to limited staff and resources.
As defined under standards established by PCAOB, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
As a result, we have already taken some steps and have continued to implement measures to remediate the material weaknesses identified, including but not limited to (i) continuing to recruit experienced personnel with relevant past experience working on U.S. GAAP and SEC reporting, (ii) improving our monitoring of and oversight controls for non-recurring transactions to ensure the accuracy and completeness of financial reporting and (iii) engaging external experts to assist with should there be non-recurring and complex transactions and continuing to implement measures to remediate our internal control deficiencies.
All internal control systems, no matter how well designed, have inherent limitations including the possibility of human error and the circumvention or overriding of controls. Further, because of changes in conditions, the effectiveness of internal controls may vary over time. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
We cannot be certain that these measures will successfully remediate the material weaknesses or that other material weaknesses will not be discovered in the future. If our efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately on a timely basis or help prevent fraud, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the market price of our Ordinary Shares to decline. In addition, it could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our securities. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods. Because of our status as an emerging growth company, you will not be able to depend on any attestation from our independent registered public accountants as to our internal control over financial reporting for the foreseeable future.
We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act"). Section 404 of the Sarbanes-Oxley Act requires that we include a management report on our internal control over financial reporting in this Annual Report. In addition, once we cease to be an "emerging growth company" as such term is defined under Jumpstart Our Business Startups Act of 2012, as amended (the "JOBS Act"), our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Generally, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, and harm our results of operations. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.
Accounting & Financial Operations - Risk 5
We are an early-stage TCM bioscience company with a limited operating history. We expect to incur additional losses in the future.Changed
We are an early-stage TCM bioscience company with a limited operating history that focuses on the research, development and commercialization of TCM for the treatment of neurocognitive disorders and degenerations, specifically Attention Deficit Hyperactivity Disorder ("ADHD") and Autism Spectrum Disorder ("ASD") with no currently approved products. To date, we have focused almost exclusively on developing our product candidates. We have funded our operations to date primarily through proceeds from our initial public offering of our Ordinary Shares. We have no saleable products and have not generated any revenue from product sales. We have incurred operating losses since our formation. We incurred total net losses of $3.58 million and $4.36 million, respectively, for the fiscal years ended June 30, 2025 and 2024. Substantially all of our operating losses resulted from costs incurred in connection with our development programs and from general and administrative costs. We expect to continue to incur research and development expenses in the future as we continue the advancement of our efficacy trials and as we potentially pursue additional indications. We may also incur expenses in connection with third-party trials involving our TCM formula or other intellectual property. In addition, if we obtain marketing approval for any of our TCM formula, we may initially incur significant outsourced sales, marketing and manufacturing expenses, as well as continued research and development expenses. As a result, we expect to continue to incur increasing operating losses for the foreseeable future.
The likelihood of success of our business plan and growth strategy must be considered in light of the problems, substantial expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early-stage businesses and the regulatory and competitive environment in which we operate.
Accordingly, you should consider our annual report in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, especially early-stage bioscience research companies such as ours. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history, like us, will face. In particular, potential investors should consider that we cannot assure you that we will be able to, among other things:
- successfully implement or execute our current business plan, and we cannot assure you that our business plan is sound;- successfully manufacture and commercialize our standardized liquid-based TCM formula treatment for ADHD and ASD patients;- successfully complete the research studies to obtain regulatory approval for the marketing of our TCM formula;- obtain, secure, maintain and, as necessary, defend our intellectual property rights;- attract and retain an experienced management and research team;- launch commercial sales of our standardized liquid-based TCM formula, whether alone or in collaboration with others;- raise sufficient funds in the capital markets or otherwise to effectuate our business plan; and - utilize the funds that we do have and/or raise in the future to efficiently execute our business strategy.
If we cannot successfully execute any one of the foregoing, our business may fail and your investment will be adversely affected.
Debt & Financing2 | 3.3%
Debt & Financing - Risk 1
We have limited sources of working capital and may need substantial additional financing. If we are unable to obtain the required additional capital, we may have to curtail our growth plans or cut back on existing business, which may affect our results of operations and financial condition or cause the cease of our operations.Changed
Debt & Financing - Risk 2
Future debt agreements may contain restrictions that may limit our flexibility in operating our business.Documents governing our future indebtedness, or in connection with additional capital raises, if any, may contain numerous financial and operating covenants that limit the discretion of management with respect to certain business matters. Restrictive covenants included in the above-mentioned credit facility include restrictions on, among others, our ability to incur or permit additional indebtedness and change the nature of our business.
Our ability to comply with these and other provisions of the existing loan agreement is dependent on our future performance, which will be subject to many factors, some of which are beyond our control. The breach of any negative covenants in our current or future agreements could result in an event of default, as may be defined in such agreements, thereby leading to a potential default interest rate or immediate repayment of any borrowed amounts. These restrictive covenants which may be in place from time to time and a lack of compliance by us could limit our flexibility in operating our business.
Corporate Activity and Growth5 | 8.2%
Corporate Activity and Growth - Risk 1
The requirements of being a public company may strain our resources and divert management's attention.Corporate Activity and Growth - Risk 2
Our business model may not be sufficient to ensure our success in our intended market.Our survival is currently dependent upon the success of our efforts to gain ADHD and ASD patients' acceptance of liquid-based TCM formula treatment that will ultimately represent a very small segment in our targeted industry when it is completed. Should our target market not be as responsive to our products as we anticipate, we may not have in place alternate products or services that we can offer to ensure our survival.
Our TCM formula treatment may not be desired for purchase by patients, or potential competitors may develop services that imitate or compete with ours or prospective offers and take our targeted revenue stream away from us or reduce our ability to command profitable revenue streams for our products. If international pharmaceutical companies, develop more successful products to cure ADHD and/or ASD or offer competitive products at a lower price, our revenue, margins, and profitability will suffer.
Corporate Activity and Growth - Risk 3
Investment in digital assets could adversely affect our financial condition and results of operations.Added
Our management may consider a Digital Asset Treasury (DAT) policy that permits the investment of digital assets, such as Bitcoin, Ethereum and other cryptocurrencies, either directly or through exchange-traded products ("ETPs") that hold such assets. We have not made any purchases as of the date hereof and have no experience in such type of investment. Investments in digital assets are subject to significant risks and volatility:
- Price Volatility: The market prices of bitcoin, and other cryptocurrencies have historically been highly volatile and may be influenced by factors beyond our control, including market sentiment, macroeconomic conditions, changes in supply and demand, geopolitical events, regulatory developments, technological changes, and market disruptions. Large fluctuations in fair value could materially affect our reported earnings, financial position, and share price.
- Regulatory Risk: Digital assets are a relatively new asset class and are subject to evolving U.S. federal, state, and foreign laws and regulations. Regulatory changes, or the interpretation or enforcement of existing laws, could restrict our ability to buy, sell, hold, or transact in digital assets and could adversely impact their value.
- Custody and Operational Risk: If we invest directly in digital assets, we will be exposed to operational and custody risks, including loss or theft of private keys, cybersecurity breaches, fraud, and insolvency of custodians. If we invest via ETPs, we will be subject to risks specific to those funds, including tracking errors relative to the underlying asset, reliance on the sponsor and custodian, and management fees.
- Liquidity Risk: The trading venues for digital assets and related products may experience outages, disruptions, or other operational issues that can impair our ability to transact, especially during times of market stress.
- Tax and Accounting Impact: Changes in tax law could cause us to incur tax liabilities on unrealized gains in digital assets. Accounting standards require us to record changes in fair value through earnings in each reporting period, which may increase our earnings volatility.
There is no assurance that any investment in digital assets will result in a positive return, and we may incur losses that could adversely affect our business, financial condition, and results of operations.
Corporate Activity and Growth - Risk 4
There is substantial doubt regarding our ability to continue as a going concern, indicating the possibility that we may be required to curtail or discontinue our operations in the future. If we discontinue our operations, you may lose all of your investment.Changed
In the audit report issued in connection with our financial statements as of and for the year ended June 30, 2025, our independent registered public accounting firm included a going concern explanatory paragraph which stated there was substantial doubt about our ability to continue as a going concern. See "Report of Independent Registered Public Accounting Firm" and Note 2 to the consolidated financial statements included elsewhere in this Annual Report. We incurred total net losses of $3.58 million and $4.36 million, respectively, for the fiscal years ended June 30, 2025 and 2024, and have completed only the preliminary stages of our business plan. We anticipate incurring additional losses before realizing any revenues. We may need additional financing in order to meet our continuing obligations and ultimately, to attain profitability in the future. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain enough financing from outside sources before we produce enough revenues, we may be forced to sell our assets, or curtail or discontinue our operations and may not be able to continue as a going concern. If this happens, you could lose all or part of your investment.
Corporate Activity and Growth - Risk 5
Any collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our current and any future product candidates.Added
We may determine to seek collaboration arrangements in the future with third parties for the development and commercialization of our TCM formula and any future product candidates. To the extent that we decide to enter into any collaboration agreements, we may face significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, document and implement. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements. Additionally, the terms of any collaborations or other arrangements that we may establish may not be favorable to us.
Any future collaborations that we enter into may not be successful. The success of our collaboration arrangements, if any, would depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. For example, we may not be able to control the amount and timing of resources that the collaboration partner devotes to the product development or marketing programs, the collaboration partner may experience financial difficulties, or we may be required to relinquish important rights such as marketing, distribution, and intellectual property rights. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve and result in early termination. Any such early termination or expiration could adversely affect us financially and could harm our business reputation. We cannot be certain that, following any collaboration, strategic transaction or license, we will achieve the results, revenue, or specific net income that justifies such transaction.
Legal & Regulatory
Total Risks: 12/61 (20%)Below Sector Average
Regulation8 | 13.1%
Regulation - Risk 1
We have not generated revenue from any TCM formula or applied for any regulatory approvals, nor have distribution capabilities or experience or any granted patents or pending patent applications and may never be profitable.Changed
Regulation - Risk 2
Even if our TCM formula that we may develop receives marketing approval, we will continue to face extensive regulatory requirements, and any such product may still face future development and regulatory difficulties. In addition, we are subject to government regulations, and we may experience delays in obtaining the required regulatory approvals to market our TCM formula.Added
Even if we receive regulatory approval to market our TCM formula, we remain subject to extensive regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and recordkeeping. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the uses for which our TCM formula may be marketed or the conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product, which could adversely affect us by reducing revenues or increasing expenses, and cause the approved TCM formula not to be commercially viable. In addition, as clinical experience with a drug expands after approval, typically because it is used by a greater number and more diverse group of patients after approval than during efficacy trials, side effects and other problems may be observed over time after approval that were not seen or anticipated during pre-approval efficacy trials or other studies. Any adverse effects observed after the approval and marketing of a product candidate could result in limitations on the use of or withdrawal of any approved products from the marketplace. The absence of long-term safety data may also limit the approved uses of our TCM formula, if any. If we fail to comply with the applicable regulatory requirements, we could be subject to administrative or judicially imposed sanctions or other setbacks, including, without limitation, the following: suspend or impose restrictions on operations; refuse to approve pending applications or supplements to applications; suspend any ongoing efficacy trials; suspend or withdraw marketing approval; seek an injunction or impose civil or criminal penalties or monetary fines; seize or detain products; ban or restrict imports and exports; issue warning letters or untitled letters; or refuse to approve pending applications or supplements to applications. Delays in regulatory approval, limitations in regulatory approval and withdrawals of regulatory approval may have a material adverse effect on the Company.
Regulation - Risk 3
Changes in regulatory requirements and guidance or unanticipated events during our efficacy trials may occur, which may result in necessary changes to efficacy trial protocols, which could result in increased costs to us, delay our development timeline or reduce the likelihood of successful completion of our efficacy trials.Added
Changes in regulatory requirements and guidance or unanticipated events during our efficacy trials may occur, and as a result, we may need to amend our efficacy trial protocols. Amendments may require us to resubmit our efficacy trial protocols to the applicable regulatory authorities for review and approval, which may adversely affect the cost, timing and successful completion of an efficacy trial. If we experience delays in the completion of, or if we terminate, any of our efficacy trials, the commercial prospects for our TCM formula would be harmed and our ability to generate product revenue would be delayed, possibly materially.
Regulation - Risk 4
The PRC government exerts substantial influence and discretion over the manner in which companies incorporated under the laws of PRC must conduct their business activities. We are a Hong Kong-based company with no operations in mainland China. However, if we were to become subject to such direct influence or discretion, it may result in a material change in our operations and/or the value of our Ordinary Shares, which would materially affect the interest of the investors.The PRC legal system is evolving rapidly and the PRC laws, regulations, and rules may change quickly with little advance notice. In particular, because these laws, rules and regulations are relatively new, and because of the limited number of published decisions and the non-precedential nature of these decisions, the interpretation of these laws, rules and regulations may contain inconsistences, the enforcement of which involves uncertainties. The PRC government has exercised and continues to exercise substantial control over many sectors of the PRC economy through regulation and/or state ownership. Government actions have had, and may continue to have, a significant effect on economic conditions in the PRC and businesses which are subject to such government actions.
We are a Hong Kong-based company with no operations in mainland China, and we have direct ownership of our operating entities, Regencell Bioscience Limited and Regencell Limited in Hong Kong. Our principal executive offices are located, and we operate, in Hong Kong, a special administrative region of China. The PRC government currently does not exert direct influence and discretion over the manner in which we conduct our business activities outside of mainland China, however, there is no guarantee that we will not be subject to such direct influence or discretion in the future due to changes in laws or other unforeseeable reasons or as a result of our future expansion or acquisition of operations in mainland China. See "- Our business, financial condition and results of operations, and/or the value of our Ordinary Shares or our ability to offer or continue to offer securities to investors may be materially and adversely affected to the extent the laws and regulations of the PRC become applicable to a company such as ours."
We currently do not have plan to expand our operation or acquire any operation in the mainland China. However, if we were to become subject to the direct intervention or influence of the PRC government at any time due to changes in laws or other unforeseeable reasons or as a result of our future development, expansion or acquisition of operations in the PRC, it may require a material change in our operations and/or result in increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. In addition, the market prices of our Ordinary Shares could be adversely affected as a result of anticipated negative impacts of any such government actions, as well as negative investor sentiment towards Hong Kong-based companies subject to direct PRC government oversight and regulation, regardless of our actual operating performance. There can be no assurance that the PRC government would not intervene in or influence our operations at any time.
We were not required to obtain permission from the PRC government to list on a U.S. securities exchange, however there is no guarantee that this will continue to be the case in the future in relation to the continued listing of our securities on a securities exchange outside of the PRC, or even when such permission is obtained, it will not be subsequently denied or rescinded. Any actions by the PRC government to exert more oversight and control over offerings (including of businesses whose primary operations are in Hong Kong) that are conducted overseas and/or foreign investments in Hong Kong-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities, including our Ordinary Shares, to significantly decline or be worthless.
Regulation - Risk 5
The enactment of Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the "Hong Kong National Security Law") could impact our Hong Kong holding subsidiary.On June 30, 2020, the Standing Committee of the PRC National People's Congress adopted the Hong Kong National Security Law. This law defines the duties and government bodies of the Hong Kong National Security Law for safeguarding national security and four categories of offences?-?secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger national security?-?and their corresponding penalties. On July 14, 2020, the former U.S. President Donald Trump signed the HKAA into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong's autonomy. On August 7, 2020 the U.S. government imposed HKAA-authorized sanctions on eleven individuals, including former HKSAR chief executive Carrie Lam. On October 14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under HKAA, identifying persons materially contributing to "the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law." The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as any third parties or customers dealing with any foreign financial institution that is targeted. It is difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong. If our Hong Kong subsidiary is determined to be in violation of the Hong Kong National Security Law or the HKAA by competent authorities, our business operations, financial position and results of operations could be materially and adversely affected.
Regulation - Risk 6
The Hong Kong legal system embodies uncertainties which could limit the availability of legal protections.As one of the conditions for the handover of the sovereignty of Hong Kong to China, China accepted conditions such as Hong Kong's Basic Law. The Basic Law ensured Hong Kong will retain its own currency (Hong Kong Dollar), legal system, parliamentary system and people's rights and freedom for fifty years from 1997. This agreement has given Hong Kong the freedom to function with a high degree of autonomy. The Special Administrative Region of Hong Kong is responsible for its own domestic affairs including, but not limited to, the judiciary and courts of last resort, immigration and customs, public finance, currencies and extradition. Hong Kong continues using the English common law system.
However, if the PRC attempts to alter its agreement to allow Hong Kong to function autonomously, this could potentially impact Hong Kong's common law legal system and may in turn bring about uncertainty in, for example, the enforcement of our contractual rights. This could, in turn, materially and adversely affect our business and operations. Additionally, intellectual property rights and confidentiality protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our customers.
Regulation - Risk 7
Our business, financial condition and results of operations, and/or the value of our Ordinary Shares or our ability to offer or continue to offer securities to investors may be materially and adversely affected to the extent the laws and regulations of the PRC become applicable to a company such as ours.Changed
We currently do not have or intend to have any subsidiary or any contractual arrangement to establish a variable interest entity structure with any entity in mainland China, and we have direct ownership of our operating entities, Regencell Bioscience Limited and Regencell Limited in Hong Kong. However, as our principal executive offices are located, and we operate, in Hong Kong, a special administrative region of China, there is no guarantee that if certain existing or future laws of the PRC become applicable to a company such as us, it will not have a material adverse impact on our business, financial condition and results of operations and/or our ability to offer or continue to offer securities to investors, any of which may cause the value of such securities to significantly decline or be worthless.
Except for the Basic Law, the national laws of the PRC do not apply in Hong Kong unless they are listed in Annex III of the Basic Law and applied locally by promulgation or local legislation. National laws that may be listed in Annex III are currently limited under the Basic Law to those which fall within the scope of defense and foreign affairs as well as other matters outside the limits of the autonomy of Hong Kong. National laws and regulations relating to data protection, cybersecurity and anti-monopoly have not been listed in Annex III and so do not apply directly to Hong Kong.
The laws and regulations in the PRC are evolving, and their enactment timetable, interpretation and implementation involve significant uncertainties. To the extent any PRC laws and regulations become applicable to us, we may be subject to the risks and uncertainties associated with the legal system in the PRC, including with respect to the enforcement of laws and the possibility of changes of rules and regulations with little or no advance notice. We currently do not have plan to expand our operation or acquire any operation in the mainland China. However, we may also become subject to the laws and regulations of the PRC to the extent we commence business and customer facing operations in mainland China as a result of any future acquisition, expansion or organic growth.
Regulation - Risk 8
Significant changes or developments in U.S. laws or policies, including changes in U.S. trade policies and tariffs and the reaction of other countries thereto, may have a material adverse effect on our business, results of operations, and financial condition.Added
Significant changes or developments in U.S. laws and policies, such as laws and policies surrounding international trade, foreign affairs, manufacturing and development and investment in the territories and countries where we or our customers operate, can materially adversely affect our business, results of operations, and financial condition. The U.S. government has imposed (in certain cases, subject to deferral) significant tariffs on imports from certain jurisdictions and indicated the likely imposition of or significant increases in tariffs on goods imported into the United States from many other jurisdictions in the future, which could lead to corresponding punitive actions by the countries with which the U.S. trades. Any changes or potential changes in trade policies in the United States and the potential corresponding actions by other countries in which we do business could adversely and materially affect our business, results of operations, and financial condition.
Litigation & Legal Liabilities2 | 3.3%
Litigation & Legal Liabilities - Risk 1
Our TCM business is subject to inherent risks relating to product liability and personal injury claims.Litigation & Legal Liabilities - Risk 2
Legal and regulatory proceedings involve risks.Added
We may, from time to time, be subject to claims, lawsuits and, government investigations, including but not limited to those relating to our share volatility, our business, operations, intellectual property, consumer protection, privacy, labor and employment, securities, tax, marketing and communications practices, commercial disputes, and other matters. Becoming a public company and the performance of our share price have raised our public profile, which may result in increased inquiries, investigations and risk of litigation as well as increased public awareness of any such litigation. In addition, as discussed further in "Item 8. Financial Information-A. Consolidated Statements and Other Financial Information-Legal Proceedings," we have been subject to a regulatory investigation regarding the recent volatility in our share price. There is substantial uncertainty regarding the scope and application of many of the laws and regulations to which we may be subject, which increases the risk that we will be subject to claims alleging violations of those laws and regulations. In the future, we may also be accused of having, or be found to have, infringed, misappropriated or otherwise violated third-party intellectual property rights.
Regardless of the outcome, legal proceedings can have a material and adverse impact on us due to their costs, diversion of our resources, impact to our financial condition, reputational impact and other factors. Any inquiry or investigation or responding to inquiry or investigation can sometimes attract unwanted attention and consume significant resources. We may decide to settle legal disputes on terms that are unfavorable to us. Furthermore, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that we may not choose to appeal or that may not be reversed upon appeal. In addition, the terms of any settlement or judgment in connection with any legal claims, lawsuits, or proceedings may require us to cease some or all of our operations, or pay substantial amounts to the other party and could materially and adversely affect our business, financial condition and results of operations.
Taxation & Government Incentives1 | 1.6%
Taxation & Government Incentives - Risk 1
We believe we were a passive foreign investment company for United States federal income tax purposes for our taxable year ended June 30, 2025; as a result, United States holders of our Ordinary Shares could be subject to adverse United States federal income tax consequences.Changed
Environmental / Social1 | 1.6%
Environmental / Social - Risk 1
Environmental, social and corporate governance issues, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition and results of operations and damage our reputation.Added
Tech & Innovation
Total Risks: 11/61 (18%)Below Sector Average
Innovation / R&D7 | 11.5%
Innovation / R&D - Risk 1
Although the assessment tools for the assessment of ADHD and ASD are globally recognized, the outcome of our efficacy trial may be subject to some biases of parents and caregivers of patients because we relied on the data provided by them.Innovation / R&D - Risk 2
If any of our TCM formula are approved for marketing and commercialization and we are unable to develop, manufacture, sales, marketing and distribution capabilities on our own or enter into agreements with third parties to produce and sell our products on acceptable terms, we will be unable to successfully commercialize any such future therapeutics.Changed
We currently have no sales and marketing, or distribution capabilities or experience. In order to commercialize our standardized TCM formula, if approved, we must build marketing and sales capabilities or decide to make arrangements with third parties to produce and sell products, and we may not be successful in doing so. Building the requisite sales, marketing or distribution capabilities will be expensive and time-consuming and will require significant attention of our leadership team to manage. Any failure or delay in the development of our sales, marketing or distribution capabilities would adversely impact on the commercialization of our products. The competition for talented individuals experienced in selling and marketing TCM products is intense, and we cannot assure you that we can assemble an effective team. Additionally, we may choose to collaborate with third parties on the commercialization of our standardized TCM formula candidate. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize our standardized TCM formula if and when we receive regulatory approval, or any such commercialization may experience delays or limitations.
We may be subject to additional risks related to operating in foreign countries either ourselves or through a third-party, including:
- differing regulatory requirements in foreign countries;- unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;- economic weakness, including inflation or political instability in particular foreign economies and markets;- compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;- foreign taxes, including withholding of payroll taxes;- foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;- difficulties staffing and managing foreign operations;- workforce uncertainty in countries where labor unrest is more common than in the United States;- potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;- challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;- production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and - business interruptions resulting from geopolitical actions, including war and terrorism.
Innovation / R&D - Risk 3
Our TCM formula candidate may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following regulatory approval, if any.Changed
Potential undesirable side effects caused by our TCM formula candidate may cause it to interrupt, delay, or halt research studies or could cause regulatory authorities to interrupt, delay, or halt our research studies or could result in a more restrictive label or the delay or denial of regulatory approval by the Hong Kong Chinese Medicines Board, or other regulatory authorities. We may observe some potential side effects in future research studies that could affect patient recruitment or the ability of enrolled patients to complete the study or result in potential product liability claims. Any of these occurrences may harm our business, financial condition, and prospects significantly.
Our research studies assessed a sample of the potential patient population. With a limited number of patients and duration of exposure, rare and severe side effects of our TCM formula candidate may only be uncovered with a large number of patients exposed to the TCM formula treatment. If our TCM formula candidate receive regulatory approval and we, our partners, or others identify undesirable side effects caused by such standardized liquid-based TCM formula treatment after such approval, a number of potentially significant negative consequences could result, including:
- the Hong Kong Chinese Medicines Board or other comparable regulatory authorities may withdraw or limit their approval of such standardized TCM formula candidate;- we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;- we may be required to change the way such standardized TCM formula candidate is distributed or administered, conduct additional research studies, or change the labeling of our TCM formula treatment;- the Hong Kong Chinese Medicines Board or other comparable regulatory authorities may require a risk evaluation and mitigation strategy, plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools;- we may be subject to regulatory investigations and government enforcement actions;- we may decide to remove such TCM formula treatment from the marketplace;- we could be sued and held liable for injury caused to individuals exposed to or taking our TCM formula treatment; and - our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the affected TCM formula treatment and could substantially increase the costs of commercializing our TCM formula treatment, if approved, and significantly impact our ability to successfully commercialize our TCM formula and generate revenue.
Innovation / R&D - Risk 4
Results of our earlier studies on personalized TCM formula may not be predictive of future efficacy trial results. Failure can occur at any stage of research and development.Changed
The results of research studies of our personalized TCM formula may not be predictive of the results of standardized TCM formula candidate. Standardized TCM formula candidate may fail to show the desired safety and efficacy despite positive results of personalized TCM formula. Based upon negative or inconclusive results, we, along with our TCM Practitioner or any potential future collaborator may decide, or regulators may require us, to conduct additional research studies. In addition, data obtained from research studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit, or prevent regulatory approval.
As of the date of this Annual Report, our second efficacy trial in ADHD and ASD in Hong Kong is ongoing. However, there is no assurance whether our second efficacy trial needs to be redesigned. Research studies can be delayed or aborted for a variety of reasons, including delay or failure to:
- recruit suitable patients to participate in research studies and have such patients complete the research studies or return for post-treatment follow-up;- address any patient safety concerns that arise during the course of an efficacy trial;- ensure that patients comply with and complete efficacy trial protocol;- initiate or add a sufficient number of efficacy trial sites;- manufacture sufficient quantities of TCM formula candidate for use in research studies and ensure efficacy trial material is provided to efficacy trial sites in a timely manner; and - obtain the statistical analysis plan to be used to evaluate the efficacy trial data.
Qualified patient enrollment is a significant factor in our research studies and is affected by many factors, including the size and nature of the patient population, the eligibility criteria for the studies, the design of the efficacy trial, competing research studies and patients' perceptions as to the potential advantages of the TCM formula being studied in relation to other available therapies.
If we experience delays in the start or completion of, or termination of, any research studies of our TCM formula candidate, the commercial prospects of our TCM formula candidate may be affected, and our ability to generate product revenues will be delayed. In addition, any delays in completing our research studies will increase our costs, slow down our TCM formula candidate's development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may negatively harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of research studies may also ultimately lead to the denial of regulatory approval of our TCM formula candidate.
Innovation / R&D - Risk 5
If we encounter difficulties enrolling patients in our research studies, our TCM formula development could be delayed or otherwise adversely affected.Changed
We conduct research studies involving TCM formula candidates whose activity and specificity have been optimized by our TCM Practitioner in his prior ADHD and ASD treatments. Timely completion of research studies in accordance with the protocols depends, among other things, on our ability to enroll a sufficient number of patients who meet the efficacy trial criteria and remain in the study until the conclusion. We may experience difficulties enrolling and retaining appropriate patients in our efficacy trial for a variety of reasons, including but not limited to:
- the size and nature of the patient population;- eligibility of patients based on our criteria;- the specific design of each study and subsequent changes in the design;- our ability to recruit personnel with the appropriate competencies and experience;- competing research studies for similar therapies or other new therapeutics, which will reduce the number and types of patients available;- patients' perceptions of the potential advantages and side effects of the TCM formula being studied in relation to other available therapies, including any new drug candidates or treatments that may be approved for the indications we are investigating;- our ability to obtain and maintain patient consents;- patients' attrition; and - the availability of approved therapies that are similar to our TCM formula candidates.
Even if we are able to enroll a sufficient number of patients in our efficacy trial, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned research studies, which could prevent completion of these studies and adversely affect our ability to advance the development of our TCM formula candidate.
Innovation / R&D - Risk 6
Our research and development of TCM formula candidates is at an early stage of development and all of our TCM formula candidates may require significant interactions with regulatory authorities and investments before their respective commercial launches. If we are unable to advance our TCM formula candidates to final development, meet regulatory requirements, including obtaining regulatory approval, where applicable, or ultimately commercialize our products or experience significant delays in doing so, our business will be materially harmed.Changed
Our research and development of TCM formula is at an early stage and will require significant investment and regulatory approvals prior to commercialization. Each of our TCM formula candidates will require additional research and development, obtaining regulatory approval, such as obtaining manufacturing supply, substantial investment and significant marketing efforts before it generates any revenue from product sales. We are not permitted to market or promote any of our standardized TCM formula candidates before our receipt of regulatory approval from the Hong Kong Chinese Medicines Board, or comparable regulatory authorities, and we may never receive such regulatory approval for any such standardized TCM formula candidates.
The success of our product candidates will depend on several factors, including but not limited to the following:
- receipt of regulatory approvals from applicable regulatory authorities for drug product candidates or, alternatively, compliance with regulatory requirements applicable to non-drug products;- establishing current Good Manufacturing Practices ("GMP") compliant supply and commercial manufacturing operations or deciding with GMP-compliant third-party manufacturers for supply and commercial manufacturing;- obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our product candidates;- launching commercial sales of our product, if and when approved or allowed for marketing, whether alone or in collaboration with others; and - maintaining a continued acceptable safety profile of the product candidates following approval or commercialization.
We cannot be certain that research and development of any of our TCM formula candidate will be successful or that we will obtain regulatory approval or be able to successfully commercialize any product based on our TCM formula and generate revenue. Success in our research studies does not ensure that application of regulatory approval will be successful. Our research studies may fail to demonstrate that our TCM formula candidates are safe and effective for their proposed uses. Any such failure could cause us to abandon further development of any one or more of our TCM formula candidate and may delay development of other TCM formula candidate. Any delay in, or termination of, our development will delay and possibly preclude the filing with regulatory authorities and, ultimately, our ability to commercialize the TCM formula candidate and generate revenue.
Innovation / R&D - Risk 7
Our standardized TCM formula for ADHD and ASD patients is still in development. If we are unable to obtain regulatory approval or ultimately commercialize our standardized TCM formula and/or products based on our TCM formula, or if we experience significant delays in doing so, our business, financial condition, results of operations and prospects will be materially and adversely affected.Changed
Currently, our standardized TCM formula for ADHD and ASD patients are under research and development. None of the formula is currently in the process of regulatory approval and commercialization. Our ability to generate revenues from our standardized TCM formula is dependent on the completion of our research and development, receipt of regulatory approval and successfully commercializing products based on such formula, which may never occur. Our TCM formula will require additional research and development, regulatory approval in Hong Kong and other jurisdictions where we plan to sell, development of manufacturing supply and capacity, substantial investment, and significant marketing efforts before we generate any revenue from product sales. The success of our standardized TCM formula will depend on several factors, including the following:
- successful enrollment in, and completion of, research studies;- receipt of regulatory approvals from applicable regulatory authorities for planned research studies, future research studies, or drug registrations, manufacturing and commercialization;- successful completion of all safety studies required to obtain regulatory approval in Hong Kong and other jurisdictions in which our standardized TCM formula intend to sell;- developing commercial manufacturing capabilities to the specifications for our candidates for clinical supply and commercial manufacturing;- making and maintaining arrangements with third-party TCM raw material suppliers or manufacturers;- obtaining and maintaining patent, trade secret and other intellectual property protection and/or regulatory exclusivity for our standardized TCM formula;- launching commercial sales of our standardized liquid-based TCM formula treatment, if and when approved, whether alone or in collaboration with others;- acceptance of the standardized liquid-based TCM formula treatment, if and when approved, by patients and the medical community;- effectively competing with other therapies and alternative drugs, particularly those for ADHD and ASD;- successfully enforcing and defending intellectual property rights and claims; and - maintaining a continued acceptable safety profile of the standardized TCM formula following regulatory approval.
The success of our business is highly dependent upon our ability to develop and commercialize our standardized TCM formula for ADHD and ASD, of which research studies are currently on-going. As a result, our business is substantially dependent on our ability to complete the research and development of, obtain regulatory approval for, and successfully commercialize our standardized liquid-based TCM formula treatment and other TCM formula candidate for ADHD and ASD patients in a timely manner.
We cannot commercialize standardized TCM formula in Hong Kong, where we intend to launch our first standardized TCM formula and products, without first obtaining regulatory approval from authorities concerned in Hong Kong. The process to develop, obtain regulatory approval for and commercialize standardized TCM formula is long, complex and costly and approval may not be granted. Obtaining regulatory approval in one jurisdiction does not mean that regulatory approval will be obtained in any other jurisdiction. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. No assurance can be given that we can obtain regulatory approval in Hong Kong, even if our TCM formula candidate obtain approval from the Hong Kong Chinese Medicines Board. We would still need to seek approval in other jurisdictions where we plan to market the product. Any safety issues, product recalls, or other incidents related to products approved and marketed in one jurisdiction may impact the approval of those products by another jurisdiction. If we are unable to obtain regulatory approval for our standardized TCM formula candidates in one or more jurisdictions, or any approval contains significant limitations imposed on certain standardized TCM formula candidates, we may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of our TCM formula candidates or any other TCM formula candidates that we may acquire or develop in the future.
Trade Secrets2 | 3.3%
Trade Secrets - Risk 1
Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.Trade Secrets - Risk 2
Our success depends on our ability to obtain and protect our intellectual property.The TCM formula is the core of our business operation and TCM research and development. We seek to protect the TCM formula candidate and technology that we consider commercially important by filing patent applications in Hong Kong and abroad or rely on our trade secrets. Although we intend to file for patent applications with the authorities concerned in Hong Kong, there is no assurance that they will be granted, or that, if granted, any of our future patents will be held valid and enforceable against third-party infringement, or that our formula will not infringe any third-party patent or intellectual property.
Any patents relating to our formula, if granted, may not be sufficiently broad to protect them. In addition, our patents, if granted, may be challenged, potentially invalidated or potentially circumvented. Our patents, if granted, may not afford us protection against competitors with similar formula or permit the commercialization of our products without infringing third-party patents or other intellectual property rights.
Further, we also rely on or intend to rely on our trademarks, trade names and brand names to distinguish our products from the products of our competitors, and have registered or will apply to register a number of these trademarks. We have received trademark certificates for "???" (directly translates as "brain restoration"), "RGC Regencell", "RGC" and "Sik-Kee Au TCM Brain Theory" from the Hong Kong Registrar of Trade Marks. However, third parties may oppose our trademark applications or otherwise challenge our use of the trademarks. Further, our competitors may infringe our trademarks, or we may not have adequate resources to enforce our trademarks. Effective trademark protection may not be available or may not be sought in every country in which our products are made available in the future. In the event that our trademarks or applications are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing these new brands.
Third parties may make claims challenging the inventorship or ownership of our TCM formula. In addition, we may face claims by third parties that our agreements with employees, contractors or consultants obligating them to assign intellectual property to us are ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such intellectual property. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or may lose our exclusive rights in that intellectual property. Either outcome could harm our business and competitive position.
We also rely on trade secrets, including unpatented know-how, technology and TCM related regulatory protection, to maintain our competitive position in our TCM research. While our current employment agreements with our employees contain provisions protecting our confidential information, including the knowledge of pCm, prescriptions, techniques, and skills, we may seek to protect, in part, by entering into separate confidentiality agreements with licensees, suppliers, employees and consultants in the future. These agreements may be breached and there may not be adequate remedies in the event of a breach. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. Moreover, our trade secrets and proprietary technology may otherwise become known or be independently developed by our competitors. If patents are not issued with respect to products arising from research, we may not be able to maintain the confidentiality of information relating to these products.
Cyber Security1 | 1.6%
Cyber Security - Risk 1
Breaches of network or information technology and data security could have an adverse effect on our business.Added
Technology1 | 1.6%
Technology - Risk 1
We may plan to use new and evolving technologies, such as artificial intelligence ("AI") in our operations. The use may require us to expend material resources and may present risks and challenges that can impact our business, including by posing security and other risks to our confidential information, proprietary information and personal information, any of which may result in reputational harm and liability, or otherwise adversely affect our business.Added
Ability to Sell
Total Risks: 8/61 (13%)Above Sector Average
Competition1 | 1.6%
Competition - Risk 1
We may not be able to compete effectively against our competitors.Sales & Marketing3 | 4.9%
Sales & Marketing - Risk 1
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.Sales & Marketing - Risk 2
Acceptance of our TCM formula is uncertain, and failure to achieve market acceptance, after we obtain approval for marketing, will negatively impact our future business and operations.Added
Our TCM formula may not achieve market acceptance even if they are approved by regulatory authorities. The degree of market acceptance of such products will depend on a number of factors, including the receipt and timing of regulatory approvals for the uses that we are studying, and the establishment and demonstration to the medical community of the safety of our future TCM products and their potential advantages and effectiveness to the patients. Our targeted patients may be unwilling to accept and use any of our products or recommend our products to the other patients. This may impair our future sales volume, our results of operations and our business.
Sales & Marketing - Risk 3
We may engage third parties to market and sell our products, if and when approved for marketing by the applicable regulatory authorities.Added
We have no sales or distribution capabilities. To the extent we engage or rely on third parties to commercialize our products, if marketing approval is obtained, we may receive less revenue than if we commercialize such products ourselves. In addition, we would have less control over the sales efforts of any third parties involved in our commercialization efforts. In the event we are unable to collaborate with a third-party marketing and sales organization to commercialize our products, our ability to generate revenue will be limited.
Although we may ultimately develop a marketing and sales force with technical expertise and supporting distribution capabilities in the longer term after the marketing approval is obtained, we do not currently intend to do so. We, therefore, may not be able to directly market our products, if any, in a short period of time after marketing approval is obtained. To promote any of our potential products through third parties, we will have to locate acceptable third parties for these functions. We may not be able to enter into agreements with them on acceptable terms. In addition, to the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, as well as the terms of our agreements with such third parties. If our products, after marketing approval is obtained, could not be marketed and sold effectively, our business and results of operations may materially and adversely affected.
Brand / Reputation4 | 6.6%
Brand / Reputation - Risk 1
Adverse publicity associated with our TCM formula candidate, ingredients or network marketing program, or those of similar companies, could harm our financial condition and operating results.Changed
Brand / Reputation - Risk 2
If we become directly subject to the scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, share price and reputation and could result in a loss of your investment in our Ordinary Shares, especially if such matter cannot be addressed and resolved favorably.Changed
U.S. public companies that have substantially all of their operations in China, including Hong Kong, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stocks of many U.S. listed Chinese companies have sharply decreased in value and, in some cases, have become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our company, our business and our share price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from growing our company.
Brand / Reputation - Risk 3
Information available in public media that is published by third parties, including blogs, articles, message boards and social and other media may include statements not attributable to our company and may not be reliable or accurate.Added
We have received, and may continue to receive, a high degree of media coverage that is published or otherwise disseminated by third parties, including blogs, articles, message boards and social and other media. This includes coverage that is not attributable to statements made by our directors, officers or employees. Investors should read carefully, evaluate and rely only on the information contained in this Annual Report, or any applicable filings with the SEC in determining whether to invest in our Ordinary Shares. Information provided by third parties may not be reliable or accurate and could materially impact the trading price of our Ordinary Shares which could cause losses to your investments.
Brand / Reputation - Risk 4
If we fail to increase our brand recognition, we may face difficulty in obtaining new customers or patients.We believe that developing, maintaining and enhancing our brand recognition in a cost-effective manner outside of that market is critical to achieving widespread acceptance of our future products and is an important element in our effort to build our customer or patient base. Successful promotion of our brand and products in the TCM and medical industry will depend largely on our ability to maintain a sizeable and active customer or patient base, our marketing efforts and ability to provide reliable and useful products and treatments at competitive prices. Brand promotional activities may not yield increased revenue in the near future, and even if they do, any increased revenue may not offset the expenses we will incur in building our brand. If we fail to successfully promote and maintain our brand during our commercialization period, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough customers or patients to the extent necessary to realize a sufficient return on our brand-building efforts, in which case our business, operating results and financial condition, would be materially adversely affected.
Production
Total Risks: 5/61 (8%)Below Sector Average
Employment / Personnel2 | 3.3%
Employment / Personnel - Risk 1
We are wholly dependent on certain key personnel and our strategic partner, Mr. Sik-Kee Au, the father of our founder, director and CEO, and loss of these individuals could have a material adverse effect on our business, financial condition and results of operations.Employment / Personnel - Risk 2
We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to improve our products and implement our business objectives could be adversely affected.We must attract, recruit and retain a sizeable workforce of technically competent employees. Competition for senior management and personnel in Hong Kong is intense and the pool of qualified candidates in Hong Kong is very limited. We may not be able to retain the services of our senior executives or personnel, or attract and retain high-quality senior executives or personnel in the future. This failure could materially and adversely affect our future growth and financial condition.
Supply Chain3 | 4.9%
Supply Chain - Risk 1
Any disruption in the supply chain of raw materials and our products could adversely impact our ability to produce and deliver products.Supply Chain - Risk 2
We may engage third parties to conduct our efficacy trials.Added
We may engage third parties, such as clinical investigators and contract laboratories to oversee some or all of the operations of our efficacy trials and to perform data collection and analysis. As a result, we may face delays outside of our control if these parties do not fulfill their obligations in a timely fashion or in accordance with regulatory requirements. If these third parties do not successfully carry out their contractual duties or obligations and meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or for other reasons, our financial results and the commercial prospects for our TCM formula could be harmed, our costs could increase and our ability to obtain regulatory approval and commence product sales could be delayed.
Supply Chain - Risk 3
We may rely on third party manufacturers to manufacture our product candidates for purposes of efficacy trials and commercial quantities of our product candidates, if and when approved for marketing by the applicable regulatory authorities.Added
With respect to the production of the starting material required for future efficacy trials, we may rely on the third parties' manufacturing capabilities. Although we have not yet engaged any contract manufacturers or other service providers, if and when we do, our contract manufacturers and service providers must complete technology transfer, process validation for the manufacturing process and demonstrate successful manufacturing of comparable product. Our and any of our contract manufacturers' and other service providers may fail to achieve and maintain high manufacturing standards, in accordance with applicable regulatory requirements, or the incidence of manufacturing errors, could result in patient injury or death, product shortages, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously harm our business. Contract manufacturers and service providers may encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. Our future contract manufacturers and service providers may not perform as agreed or may not remain in the contract manufacturing business. If our contract manufacturers and service providers, and their respective facilities, as applicable, are not approved by the applicable regulatory authorities or if they fail to comply with the applicable regulations on their manufacturing facilities, processes and quality systems, among other things, the commercial supply of TCM formula will be significantly delayed and may result in significant additional costs, and we may even be subject to fines, unanticipated compliance expenses, product recall or enforcement actions. If we need to identify additional finished product manufacturers, we would not be able to do so without significant delay and likely significant additional cost. In addition, In the event of a natural disaster, business failure, strike or other difficulty, we may be unable to replace our manufacturing capacity or a third-party manufacturer or provider in a timely manner and the production of our product candidates would be interrupted, resulting in delays and additional costs.
Macro & Political
Total Risks: 3/61 (5%)Below Sector Average
Economy & Political Environment2 | 3.3%
Economy & Political Environment - Risk 1
Political risks associated with conducting business in Hong Kong.Economy & Political Environment - Risk 2
The global economic and political conditions have been and continue to be challenging and have had, and may continue to have, an adverse effect on the financial markets and the economy in general, which has had, and may continue to have, a material adverse effect on our business, financial performance and results of operations and the prices of our Ordinary Shares.Changed
Adverse global economic and political conditions, crises and terrorist attacks could lead to significant market and other disruptions, including significant volatility in commodity prices, supply of energy resources, supply chain interruptions, political and social instability and changes in consumer or purchaser preferences. These could adversely affect the raw material prices of our TCM products when we commence the production and the patients' financial abilities to consume our products.
Volatility in the domestic politics of major markets may lead to changes in the institutional framework of the international economy. In many countries globally, there are concerns over rising inflation and potential economic recessions. In particular, any worsening of the ongoing labor shortage and ongoing rise in inflation could significantly weaken global economies. Globally, countries have required and may continue to require additional financial support, sovereign credit ratings have declined and may continue to decline, and there may be default on sovereign debt obligations of certain countries. In addition, the U.S. Federal Reserve System and other regulatory bodies around the world may raise, or may announce intentions to raise, interest rates. Any of these global economic conditions may increase the cost of borrowing and cause credit to become more limited, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, economic and political conditions have affected, and may continue to affect, our business in a number of ways. The cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. If these market conditions continue or worsen, they may further limit our ability to access financing or increase our cost of financing to meet liquidity needs, resulting in adverse effects on our financial condition and results of operations. Any global economic slowdown and uncertainty about the future global economic conditions could also continue to increase the volatility of the prices of our Ordinary Shares. We cannot predict the timing or duration of any economic slowdown or strength of a subsequent economic recovery generally or in our industry. If macroeconomic conditions worsen or the current global economic conditions continue for a prolonged period of time, we are not able to predict the impact that such conditions will have on our industry in general, and our results of operations specifically.
Natural and Human Disruptions1 | 1.6%
Natural and Human Disruptions - Risk 1
We face risks related to health epidemics and outbreaks, which could significantly disrupt our ongoing research studies, and therefore our receipt of necessary regulatory approvals could be delayed or prevented.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.