Scientific Energy (SCGY) Risk Analysis

14 Followers

Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Scientific Energy disclosed 12 risk factors in its most recent earnings report. Scientific Energy reported the most risks in the “Finance & Corporate” category.

Risk Overview Q4, 2018

Risk Distribution

67% Finance & Corporate

17% Macro & Political

8% Production

8% Ability to Sell

0% Tech & Innovation

0% Legal & Regulatory

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

Scientific Energy Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

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

Risk Highlights Q4, 2018

Main Risk Category

Finance & Corporate

With 8 Risks

Finance & Corporate

With 8 Risks

Number of Disclosed Risks

No changes from last report

S&P 500 Average: 31

No changes from last report

S&P 500 Average: 31

Recent Changes

0Risks added

0Risks removed

0Risks changed

Since Dec 2018

0Risks added

0Risks removed

0Risks changed

Since Dec 2018

Number of Risk Changed

No changes from last report

S&P 500 Average: 3

No changes from last report

S&P 500 Average: 3

See the risk highlights of Scientific Energy 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 12

Finance & Corporate

Total Risks: 8/12 (67%)Above Sector Average

Share Price & Shareholder Rights4 | 33.3%

Share Price & Shareholder Rights - Risk 1

Because our common stock is deemed a low-priced "Penny" stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.

Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to: o Deliver to the customer, and obtain a written receipt for, a disclosure document;o Disclose certain price information about the stock;o Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;o Send monthly statements to customers with market and price information about the penny stock; and o In some circumstances, approve the purchaser's account under certain standards and deliver written statements to the customer with information specified in the rules. Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.

Share Price & Shareholder Rights - Risk 2

There has been low volume and therefore an inactive market for our common stock, the stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above your stock purchase price.

If you purchase shares of our common stock, you may not be able to resell those shares at or above your original purchase price. An active or liquid market in our common stock may not develop or, if it does develop, it may not be sustainable. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond the Company's control.

Share Price & Shareholder Rights - Risk 3

A number of our shareholders own a large percentage of our voting stock and will have a significant influence over matters requiring stockholder approval and could delay or prevent a change in control.

Kelton Capital Group Ltd. currently owns 31,190,500 shares, or approximately 27.2%, of our outstanding common stock. As a result, if acting together with other shareholders, Kelton Capital may have the ability to determine the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these persons, if acting together, may have the ability to control the management and affairs of the Company, which could have a material adverse effect on the value of the common stock.

Share Price & Shareholder Rights - Risk 4

Our executive officer and director are located outside of the U.S. It is difficult to effect service of process and enforcement of legal judgments upon us and our officers and directors.

Our sole executive officer and director is located outside of the United States. As a result, it may be difficult to effect service of process within the United States and enforce judgment of the US courts obtained against us and our executive officers and directors. Particularly, our shareholders may not be able to: o Effect service of process within the United States on the Company or any of its executive officers and directors;o Enforce judgments obtained in U.S. courts against the Company based upon the civil liability provisions of the U.S. federal securities laws;o Enforce, in a court outside of the U.S. judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws; and o Bring an original action in a court in China to enforce liabilities against the Company or any of its executive officers and directors based upon the U.S. federal securities laws.

Accounting & Financial Operations3 | 25.0%

Accounting & Financial Operations - Risk 1

Our operating results may fluctuate significantly, which makes our future results difficult to predict and could cause our operating results to fall below expectations.

We are new in the e-commerce platform business, and our revenue is difficult to predict. Our revenue may not recur from period to period, which contributes to the variability of our results from period to period. Accordingly, the quarter-to-quarter comparisons of our operating results may not be meaningful, and, therefore, prior results are not necessarily indicative of results to be expected in future periods.

Accounting & Financial Operations - Risk 2

We have never declared or paid cash dividends on our capital stock and we do not anticipate paying any cash dividends in the foreseeable future.

We have never declared or paid cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, operating results, capital requirements, applicable contractual restrictions and other such factors as our Board of Directors may deem relevant.

Accounting & Financial Operations - Risk 3

We have never been profitable. We may never become profitable, and, as a result, we could go out of business.

Since inception we have never been profitable. There can be no guarantee that we will ever be profitable. For the year ended and as of December 31, 2018, the Company had net losses of $342,904 and had accumulated deficit of $8,295,259. There is no assurance that we will be successful in reaching or maintaining profitable operations. If our losses continue, our ability to operate may be severely impacted or alternatively we may be forced to terminate our operations.

Debt & Financing1 | 8.3%

Debt & Financing - Risk 1

If we are not able to obtain adequate funding, we could be required to limit our operations significantly or cease operations entirely.

Our business plan requires us to deploy sufficient capital to generate profit. If adequate funds are not available, we would be required to limit our operations significantly or cease operations entirely. We have no immediate means for obtaining additional financing. There can be no assurance that such additional financing, when and if necessary, will be available to us on acceptable terms, or at all.

Macro & Political

Total Risks: 2/12 (17%)Above Sector Average

Economy & Political Environment1 | 8.3%

Economy & Political Environment - Risk 1

Changes in the political and economic policies of Hong Kong's government may have a significant negative impact upon our business operations.

Substantially all of our assets are located in Hong Kong and a considerable portion of our revenues are expected to derive from our operations in Hong Kong. The Hong Kong government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate in Hong Kong may be adversely affected by changes in Hong Kong laws and regulations. As a result, changes in the political and economic policies of the Hong Kong government could have a significant impact on the results of our operations and financial condition.

Capital Markets1 | 8.3%

Capital Markets - Risk 1

Fluctuations in the exchange rate between the Hong Kong dollar and the United States dollar may bring down our operating income.

The functional currency of our operations in Hong Kong is the Hong Kong dollar. Results of our operations are translated at average exchange rates into United States dollars for purposes of reporting results. During the years ended December 31, 2018 and 2017 and through this date, there has not been significant fluctuation in exchange rates between Hong Kong dollars and US dollars. However, future fluctuations in exchange rates may adversely affect our expenses and results of operations as well as the value of our assets and liabilities. Any future significant fluctuations in the exchange rate between the Hong Kong dollar and the United States dollar may bring down our operating income and lower our stock price. We have no current plans to undertake any hedging activity to minimize exchange rate fluctuations.

Production

Total Risks: 1/12 (8%)Below Sector Average

Employment / Personnel1 | 8.3%

Employment / Personnel - Risk 1

Our success will be dependent upon our management's efforts. We cannot sustain profitability without the efforts of our management.

Our success largely depends on the efforts and abilities of our officers and directors, particularly Stanley Chan, our President and CEO. The loss of his services could materially harm our business because of the cost and time necessary to find successors. Such a loss would also divert management attention away from operational issues. We do not have other key employees who manage our operations. To the extent that we are smaller than our competitors and have fewer resources, we may not be able to attract a sufficient number and quality of staff, when required.

Ability to Sell

Total Risks: 1/12 (8%)Below Sector Average

Competition1 | 8.3%

Competition - Risk 1

If we are unable to compete effectively with our competitors, our profitability and financial condition will be adversely affected.

We are a small company and we face intense competition, many of our competitors have substantially greater resources than us, including greater financial, marketing and distribution resources. We have no proprietary competitive advantage, and there are no substantial barriers to competitors entering the market. There is no assurance that we will be able to compete successfully with any of these competitors. In addition, increased competition could result in price reductions, reduced margins and loss of market share for our services, all of which would adversely affect our business, results of operations and financial condition.

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.