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Forward Industries (FORD)
NASDAQ:FORD
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Risk Overview Q3, 2024
Risk Distribution
31% Finance & Corporate
28% Production
19% Ability to Sell
11% Tech & Innovation
8% Macro & Political
3% 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
Forward Industries 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 Q3, 2024
Main Risk Category
Finance & Corporate
With 11 Risks
Finance & Corporate
With 11 Risks
Number of Disclosed Risks
36
+2
From last reportS&P 500 Average: 31
36
+2
From last reportS&P 500 Average: 31
Recent Changes
2Risks added
0Risks removed
3Risks changed
Since Sep 2024
2Risks added
0Risks removed
3Risks changed
Since Sep 2024
Number of Risk Changed
3
+3
From last reportS&P 500 Average: 3
3
+3
From last reportS&P 500 Average: 3
See the risk highlights of Forward Industries 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 36
Finance & Corporate
Total Risks: 11/36 (31%)Below Sector Average
Share Price & Shareholder Rights3 | 8.3%
Share Price & Shareholder Rights - Risk 1
Due to factors beyond our control, our stock price may be volatile.Share Price & Shareholder Rights - Risk 2
Our Chairman and Chief Executive Officer is a significant shareholder, which makes it possible for him to have significant influence over the outcome of all matters submitted to our shareholders for approval and which influence may be alleged to conflict with our interests and the interests of our other shareholders.Terence Wise, our Chairman and Chief Executive Officer, is a significant shareholder who beneficially owns approximately 19.9% of the outstanding shares of our common stock as of December 9, 2024. Mr. Wise would beneficially own significantly more shares without a 19.9% blocker (shareholder approval cap) under our Series A-1 Convertible Preferred Stock. Mr. Wise has substantial influence over the outcome of all matters submitted to our shareholders for approval, including the election of our directors and other corporate actions. This influence may be alleged to conflict with our interests and the interests of our other shareholders. In addition, such influence by Mr. Wise could have the effect of discouraging potential business partners or create actual or perceived governance instabilities that could adversely affect the price of our common stock.
Share Price & Shareholder Rights - Risk 3
Failure to meet the continued listing standards of Nasdaq could result on the delisting of our common stock.Changed
Our common stock is listed on Nasdaq. As part of being listed on Nasdaq, we are required to meet certain continued listing requirements.
On July 31, 2023, the Company received a notice from Nasdaq that the Company had failed to comply with Nasdaq Listing Rule 5550(a)(2) (the "Minimum Bid Price Rule") by failing to maintain a minimum bid price of at least $1.00 per share of common stock for 30 consecutive business days. The Company was given a 180-day grace period to regain compliance, but the Company failed to regain compliance within the grace period. The Company then timely requested a hearing before an independent Nasdaq Hearings Panel. The hearing occurred on April 9, 2024.
Further, on February 22, 2024, the Company received a notice from Nasdaq that the Company's stockholders' equity did not comply with the applicable Nasdaq Listing Rule 5550(b)(1) (the "Stockholders' Equity Rule"), requiring listed companies to maintain a stockholders' equity of at least $2,500,000, as reported in the Company's Form 10-Q for the fiscal period ended December 31, 2023. The Company was instructed to present its views with respect to its failure to meet the requirements of the Stockholders' Equity Rule at the April 9, 2024, hearing before the Nasdaq Hearings Panel.
As a result of the reverse stock split effected in June 2024 and the entrance into the Accounts Payable Conversion Agreements with Forward China (described in Note 14 to the consolidated financial statements), the Company regained compliance with the Minimum Bid Price Rule and Stockholders' Equity Rule in July 2024 and was formally notified by Nasdaq that such requirements were met. Until July 24, 2025, the Company is subject to a Nasdaq "Panel Monitor" which provides for in the event the Company fails to satisfy the Stockholders' Equity Rule during the monitoring period, the Company will be required to request a hearing before the Panel in order to maintain its listing rather than taking the interim step of submitting a compliance plan for the Nasdaq Listing Qualifications Staff's review or receiving any otherwise applicable grace period. We can provide no assurance that if the Company fails to satisfy the Stockholders' Equity Rule during this period that the Company will be able to maintain its Nasdaq listing.
If our stock price declines below $1.00 for more than 30 consecutive business days, and thereby fails to satisfy the Minimum Bid Price Rule, we may ask shareholders to approve another reverse stock split. Reverse stock splits require approval by stockholders who hold a majority of our voting power. Because many of our shares are held in street name and brokers do not necessarily vote unvoted shares, we may not receive approval for another reverse split. Additionally, a reverse stock split typically has the effect of reducing the number of holders of shares in "round lots" meaning those holding 100 or more shares. Another requirement for being listed on Nasdaq is that the Company have a minimum of 300 round lot holders, so if our stock price falls too low, a reverse split may not be sufficient to cure noncompliance based on the minimum round lot requirement.
If we fail to meet continued listing requirements in the future and are unable to get an extension to regain compliance, Nasdaq may delist our common stock. If our common stock is delisted, we could face significant material adverse consequences, including:
- a limited availability of market quotations for our common stock; - reduced liquidity with respect to our common stock; - a determination that our shares of common stock are a "penny stock" which will require broker-dealers trading in our common stock to adhere to more stringent rules, including being unable to solicit buyers for our common stock; - a limited amount of news and analyst coverage for our Company; and - a limited ability to raise capital in the future.
Accounting & Financial Operations7 | 19.4%
Accounting & Financial Operations - Risk 1
We have incurred, and may in the future incur, impairment charges related to our goodwill, which could have a material adverse effect on our business, results of operations and financial condition.Added
Accounting & Financial Operations - Risk 2
Our gross margins, and therefore our potential profitability, vary considerably by customer and by product and service offering, and if the revenue contribution from one or more customers or products or project changes materially, relative to total revenues, our gross profit percentage may fluctuate.Our gross profit margins on the products and services we sell can vary widely depending on the product or project type, customer, and contract or order size. Because of the broad variability in price ranges and product and project types, we anticipate that gross margins, and accordingly their impact on operating income or loss, may fluctuate depending on the relative revenue contribution from each customer or product. Similarly, because we offer a wide range of services which often vary with each customer and project, we face challenges in maintaining and enhancing operational efficiencies. For example, because of the range of products and services we offer and our general lack of specializations within our fields relative to some of our competitors, we may not enjoy the advantages offered by more focused or streamlined operations, such as economies of scale or improved production capabilities from our labor, facilities, and procedures with the passage of time. If our gross margins decrease, our results of operations will be adversely affected.
Accounting & Financial Operations - Risk 3
Future revenues are difficult to predict and are likely to show significant variability as a consequence of customer concentration and operating in more than one segment.Because our revenues can at times be concentrated in a few large customers, and because the volumes of these customers' order flows to us can fluctuate markedly in a short period of time, our quarterly revenues, and consequently our results of operations, may be highly variable and subject to significant changes over a relatively short period of time. Our largest OEM distribution customers may keep consumer products with which our carry solutions are packaged "in-box" in active promotion for many months, or for a very short period of time, depending on various factors, including sales trends for the product, product development cycles, new product introductions, and our customers' competitors' product offerings. As demand for the consumer products relating to the in-box program matures and decreases, we may be forced to accept significant price and/or volume reductions in customer orders for our carry solutions, which will adversely affect revenues. Additionally, our large design and development customers may have their budgets limited from many factors including economic declines (resulting from a pandemic or any other reason) causing discretionary budgets to decline or may from-time-to-time choose to do their development work in-house. Further, in our design and development business, customers may decline to use us for future work after a project is completed, which may be due to lack of continued need for our services after their product has been developed, produced, and marketed or because they are dissatisfied with our pricing or performance. All of these factors tend to lead to a high degree of variability in our quarterly revenue levels. Significant, rapid shifts in our operating results may occur if and when one or more of these customers increases or decreases the size(s) of, or eliminates, their orders or engagement from us by amounts that are material to our business.
Accounting & Financial Operations - Risk 4
We do not expect to pay dividends in the future, which means that investors may not be able to realize the value of their shares except through a sale.We do not anticipate that we will declare or pay a cash dividend. We expect to retain future earnings, if any, for our business and do not anticipate paying dividends on common stock at any time in the foreseeable future. Because we do not anticipate paying dividends in the future, the only opportunity for our shareholders to realize the creation of value in our common stock will likely be through a sale of those shares.
Accounting & Financial Operations - Risk 5
If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results. As a result, current and potential stockholders could lose confidence in our financial reporting, which could harm our business and the trading price of our stock.Effective internal controls over financial reporting are necessary for us to provide reliable financial reports. If we cannot maintain effective controls and reliable financial reports, our business and operating results could be harmed. We continue to work on improvements to our internal controls over financial reporting. Any failure to implement and maintain internal controls over our financial reporting or difficulties encountered in the implementation of improvements in our controls, could cause us to fail to meet our reporting obligations. Any failure to improve our internal controls over financial reporting or to address identified weaknesses in the future, if they were to occur, could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our stock.
Accounting & Financial Operations - Risk 6
During Fiscal 2024, we generated a net loss. We cannot assure you that we will regain profitability in the future.Changed
In Fiscal 2024, we generated a net loss of approximately $1,951,000. While we generated income from continuing operations in Fiscal 2023, we can provide no assurance that we will not experience operating losses in the future. Forward China holds a $600,000 note which is due on June 30, 2025. Additionally, we owe Forward China approximately $7,226,000 in accounts payable. See Note 14 to the consolidated financial statements for a discussion on these payables and the limited amounts that we are required to pay over any 12-month period. Forward China, which is owned by our Chief Executive Officer and Chairman of the Board, has previously agreed to extend the note on numerous occasions to assist the Company with its liquidity. We cannot provide any assurance that Forward China will continue to grant us extensions on this note. If we cannot generate sufficient revenues to operate profitably, we may be forced to cease, limit or suspend operations, or we may be required to raise capital or incur additional debt to maintain or grow our operations. There is no assurance that we will be able to raise such capital and if so on terms that are not onerous and dilutive to the Company and its shareholders.
Accounting & Financial Operations - Risk 7
We have experienced recurring losses and our ability to continue as a going concern is in doubt.Added
We incurred net losses of approximately $1,951,000 and $3,737,000 in Fiscal 2024 and 2023, respectively. We expect to generate losses for the foreseeable future. We will need to generate increased revenues to achieve profitability in the future. Despite our efforts, we may not achieve profitability in the future or sustain profitability for a prolonged period of time. In December 2024, our largest design customer notified us of its plan to discontinue their insulin patch program on which we were providing design services. In Fiscal 2024, this design customer was responsible for 25.2% of our revenues. While we plan to mitigate the impact of this lost revenue with cost reduction efforts, seeking continued flexibility on payments to Forward China and exploring additional sources of financing, these efforts may not be sufficient to meet our liquidity needs through December 31, 2025.
Accordingly, our independent registered public accounting firm stated in their report on our annual financial statements for the fiscal year ended September 30, 2024, that these conditions raise substantial doubt about our ability to continue as a going concern. If we are unable to continue as a going concern, our shareholders will likely lose all of their investment in the Company.
Debt & Financing1 | 2.8%
Debt & Financing - Risk 1
We maintain cash balances in our bank accounts that exceed the FDIC insurance limitation.Production
Total Risks: 10/36 (28%)Above Sector Average
Manufacturing4 | 11.1%
Manufacturing - Risk 1
Issues with our products or services may lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory actions by governmental authorities that could divert resources, affect business operations, decrease sales, increase costs, and put us at a competitive disadvantage, any of which could have a significant adverse effect on our financial condition.Manufacturing - Risk 2
Our shipments of products may become subject to delays or cancellation due to work stoppages or slowdowns, piracy, damage to port facilities, and congestion due to inadequacy of port terminal equipment and other causes.To the extent that there are disruptions or delays in loading container cargo in ports of origin or off-loading cargo at ports of destination as a result of labor disputes, work-rules related slowdowns, tariff or World Trade Organization-related disputes, piracy, physical damage to port terminal facilities or equipment caused by severe weather or terrorist incidents, congestion in port terminal facilities, inadequate equipment to load, dock and offload container vessels or energy-related tie-ups or otherwise, or for other reasons, product shipments to our customers will be delayed. For example, in Fiscal 2024, we experienced shipping delays resulting from cargo ship piracy in the Red Sea, and in March 2021, a container ship carrying some of our products ran aground in the Suez Canal and was immobilized for six days. Although these events did not have a material adverse effect on our business, there is no assurance that, if they happened again, that they would not. In any such case, our customers may cancel or change the terms of their purchase orders, resulting in a cancellation or delay of payments to us. A closure or partial closure of port facilities or other causes of delays in the loading, importation, offloading or movement of our products to the shipping destination agreed to with our customer could result in increased expenses, as we try to avoid such delays, delayed shipments or cancelled orders, or all of the above. Depending on the severity of such consequences, this may have an adverse effect on our financial condition and results of operations.
Manufacturing - Risk 3
Product manufacture is often outsourced by our distribution customers to contract manufacturing firms and in these cases, it is the contract manufacturer to which we must look for payment.Changed
Contract manufacturing firms perform manufacturing, assembly, and product packaging functions, including the bundling of our product accessories with the OEM distribution customer's product. As a consequence of this business practice, we often sell our carry solutions products directly to the contract manufacturing firm. This is particularly significant in the case of diabetic product sales to certain customers. In these cases, we invoice the contract manufacturing firm and not the OEM distribution customer. Therefore, it is the contract manufacturing firm to which we must look for payment in such cases and not our OEM distribution customer. If we fail to receive payment from the contract manufacturer, our ability to be paid for products already delivered would be limited. In such event, our results of operations and cash flows will be adversely affected.
Manufacturing - Risk 4
If our design teams fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we may incur a loss on that project.Our design engagements often involve large-scale, complex projects. The quality of our performance on such projects depends in large part upon our ability to manage the relationship with our clients and our ability to effectively manage the project and deploy appropriate resources, including third-party contractors and our own personnel, in a timely manner. We may commit to a client that we will complete a project by a scheduled date and/or at a fixed fee. We may also commit that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to meet required performance standards, we may incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project. If the project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling the project. In addition, performance of projects can be affected by a number of factors beyond our control, including unavoidable delays from government inaction, inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards, and labor disruptions. Furthermore, our entrance into fixed price arrangements means that if the costs of supplies, labor and other resources rise due to shortages, heightened demand, inflation or other factors, our margin for a given project will decline. To the extent these events occur, the total costs of the project could exceed our estimates, and we could experience reduced profits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability on that project or in general. Further, any defects or errors, or failures to meet our clients' expectations, could result in claims for damages against us. Failure to meet performance standards or complete performance on a timely basis could also adversely affect our reputation.
Employment / Personnel3 | 8.3%
Employment / Personnel - Risk 1
Employee or agent misconduct, or our failure to comply with anti-bribery and other laws or regulations, could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.Employment / Personnel - Risk 2
Our results of operations could suffer if we are not able to maintain adequate utilization of our workforce.The cost of providing our design services, including the extent to which we utilize our workforce, affects our profitability. The rate at which we utilize our workforce is affected by a number of factors, including:
- our ability to transition employees from completed projects to new assignments and to hire and assimilate new employees; - our ability to forecast demand for our services and thereby maintain an appropriate headcount in each of our operating units; - our ability to engage employees in assignments during natural disasters or pandemics; - our ability to manage attrition; - our need to devote time and resources to training, business development, professional development, and other non-chargeable activities; and - our ability to match the skill sets of our employees to the needs of the marketplace.
If we over-utilize our workforce, our employees may become disengaged, which could impact employee attrition. If we under-utilize our workforce, our profit margin and profitability would suffer.
Employment / Personnel - Risk 3
If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.Our future depends, in part, on our ability to attract and retain key sales personnel and the continued contribution of our executive officers including Terence Wise, our Chief Executive Officer, who would be difficult to replace. Further, as part of the Company's ongoing efforts to reduce expenses, we recently reduced the salaries of three of our executive officers. While the salary reductions were agreed to by the executives, it is possible that the decrease in salary may cause either or both officers to look for employment elsewhere. Our design and development business is highly labor intensive and, therefore, our ability to attract and retain professional and technical staff is an important factor in our future success. The market for qualified engineers is competitive and, from time to time, it may be difficult to attract and retain qualified individuals with the required expertise within the timeframe demanded by our clients. The loss of the services of any of our key personnel and the process to replace any key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.
Supply Chain3 | 8.3%
Supply Chain - Risk 1
Our dependence on foreign manufacturers creates quality control and other risks to our business. From time to time, we may experience certain quality control, on-time delivery, cost, or other issues that may jeopardize customer relationships.Supply Chain - Risk 2
Our distribution business depends on a single exclusive buying agent who, in turn, depends on a limited number of key suppliers.Our Chairman, Chief Executive Officer and largest shareholder is the owner of Forward China, our exclusive sourcing agent in the Asia Pacific region. We have a Buying Agency and Supply Agreement with Forward China under which Forward China acts as the Company's exclusive agent to arrange for sourcing, manufacturing and exporting the Company's distribution products. Historically, Forward China has relied on a limited number of suppliers to supply the component parts and pieces necessary for the production of our carry and protective solutions products. As a result, our ability to effectively push back against rising material costs may diminish. In addition, any inability to obtain supplies from a single or limited number of suppliers may result in difficulty obtaining the supplies necessary for our business and may restrict our ability to produce our carry and protective solutions products. Where practical, we intend to establish alternative sources through Forward China to mitigate the risk that the failure of any single supplier will adversely affect our business. Nevertheless, either a prolonged inability to obtain certain components or the failure of one of our suppliers to do so could impair our ability to ship products and generate revenues, which could adversely affect our operating results and damage our customer relationships.
In addition, we depend significantly on Forward China as our exclusive buying agent for substantially all of our component parts. As a result, we have limited visibility as to our supplier base, making it difficult to forecast future events and to plan our operations. In addition, if Forward China fails to satisfactorily perform its obligations, including payment obligations, to our suppliers or its duties to us as our exclusive buying agent as a result of financial or other difficulties or for any other reason, or if our relationship with Forward China was to suffer or we are unable to maintain our agreement with Forward China, which is currently in effect until April 30, 2025, but may be terminated prior to that with 30 days' notice, we could suffer irreparable harm resulting in substantial damage to the distribution business.
Supply Chain - Risk 3
Increasingly, our OEM distribution customers are requesting that we enter into supply agreements with them that have restrictive terms and conditions. These agreements typically include provisions that increase our financial exposure, which could result in significant costs to us.Increasingly, our OEM distribution customers are requesting that we enter into supply agreements with them. These agreements typically do not include volume commitments but do include provisions that generally serve to increase our exposure for product liability and limited sales returns, which could result in higher costs to us as a result of such claims. In addition, these agreements typically contain provisions that seek to limit our operational and pricing flexibility and extend payment terms, which could materially adversely affect our cash flow, business, financial condition, and results of operations.
Ability to Sell
Total Risks: 7/36 (19%)Above Sector Average
Competition1 | 2.8%
Competition - Risk 1
The product distribution and design businesses are highly competitive and do not pose significant barriers to entry.Demand4 | 11.1%
Demand - Risk 1
We continue to encounter pressure from our largest customers to maintain or even decrease prices, or to provide lower priced solutions, and expect such pressure to persist. The effects of such price constraints on our business may be exacerbated by inflationary pressures that affect our costs of supply and labor.Demand - Risk 2
If any one or more of our OEM distribution customers elect to reduce or discontinue inclusion of cases "in box", our results of operations and financial condition would be materially and adversely affected.The predominant percentage of our OEM distribution revenues is derived from sales of case accessories to our OEM customers who package our cases "in box" with their electronics. During recent years, there have been numerous federal legislative and administrative actions that have affected government programs, including adjustments that have reduced or increased payments to healthcare providers and patients. Any measures to restrict healthcare spending could result in decreased sales of our products. If one or more of our distribution customers reduce or discontinue the practice of including carry case accessories "in box" or if our customers experience reduced demand for their products as a result of political changes, we may incur a significant decline in our revenues and our results of operations and financial condition would be materially and adversely affected.
Demand - Risk 3
The loss of any of, or a material reduction in orders from, our largest customers would materially and adversely affect our results of operations and financial condition.Each of our distribution and design businesses can at times be concentrated with certain larger customers. In Fiscal 2024, our largest design customer accounted for 25.2% of our consolidated net revenue and one OEM distribution customer accounted for 13.0% of our consolidated net revenue. In Fiscal 2023, our largest design customer accounted for 27.9% of our consolidated net revenue and one OEM distribution customer accounted for 11.2% of our consolidated net revenue. In December 2024, our largest design customer notified the Company of its plan to discontinue their insulin patch program, on which the Company was working. We expect this to cause a material decrease in our revenues beginning with the second quarter of fiscal 2025. We are currently working on cost reduction efforts to mitigate the reduction in revenue.
Although our customer concentration changes from year to year, and we continue our efforts to diversify our business, we cannot provide any assurance that we will be successful. The loss of any of these customers would have a material adverse effect on our financial condition, liquidity and results of operations.
Demand - Risk 4
Our OEM distribution business remains highly concentrated in our diabetic products line. If our diabetic products line were to suffer the loss of a principal customer or a material decline in revenues from any such large customer, our business would be materially and adversely affected.In Fiscal 2024, revenues from diabetic products accounted for 77% of our OEM distribution revenues and OEM distribution revenue accounted for 34% of our consolidated net revenue. As a result, our financial condition and results of operations are subject to higher risk from the loss of a major diabetic products customer or changes in their business practices. Many new diabetes monitoring products brought to the market in recent years do not use a carrying case. If consumer demand continues to increase for diabetes product lines that do not use carrying cases, our business would be materially and adversely affected.
Sales & Marketing2 | 5.6%
Sales & Marketing - Risk 1
If we are unable to provide our customers with high-quality products and services or if we are unable to deliver our products and/or services to our customers in a timely manner, our business, financial condition, and results of operations may be materially adversely affected.Sales & Marketing - Risk 2
Our business has benefited from customers deciding to outsource their carry and protective solutions assembly needs, as well as product development and design functions, to us. If our customers choose to provide these services in-house or select other providers, our business could suffer.Our future revenue growth partially depends on new outsourcing opportunities from our current and prospective customers. Current and prospective customers continuously evaluate our performance against other providers. They also evaluate the potential benefits of developing, designing, manufacturing and transporting their products themselves. To the extent that outsourcing opportunities are not available either due to these customers deciding to develop, design, produce or transport these products themselves or to use other providers, our financial results and future growth could be materially adversely affected.
Tech & Innovation
Total Risks: 4/36 (11%)Below Sector Average
Trade Secrets1 | 2.8%
Trade Secrets - Risk 1
If a third party asserts that we are infringing on its intellectual property, whether successful or not, it could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business may be adversely affected.Cyber Security1 | 2.8%
Cyber Security - Risk 1
Because our networks and IT systems may be vulnerable to unauthorized persons hacking our systems, it could disrupt our operations and result in the theft of our proprietary information.Technology2 | 5.6%
Technology - Risk 1
If we experience system interruptions, it may cause us to lose customers and may harm our business.Technology - Risk 2
Our design business uses software that is highly technical, and undetected errors, if any, could adversely affect our business.Our design business may use software that is highly technical and complex. Our software has contained, and may now or in the future contain, undetected errors, bugs, flaws, corrupted data or vulnerabilities. Some errors in our software code may only be discovered after the code has been released. Any errors, bugs, flaws, or corrupted data could result in damage to our reputation, loss of users, or loss of revenue, any of which could adversely affect our business and financial results.
Macro & Political
Total Risks: 3/36 (8%)Below Sector Average
Natural and Human Disruptions1 | 2.8%
Natural and Human Disruptions - Risk 1
The COVID-19 pandemic, or any other future pandemic, has had, and may continue to have, a material and adverse effect on our business and results of operations.Capital Markets2 | 5.6%
Capital Markets - Risk 1
Rising threats of international tariffs, including tariffs applied to goods between the U.S. and China, may materially and adversely affect our business.Capital Markets - Risk 2
Our results of operations are subject to the risks of fluctuations in the values of foreign currencies relative to the U.S. dollar.Our results of operations are expressed in U.S. dollars. When the U.S. dollar appreciates or depreciates in value against a currency in which all or a significant portion of revenues or other accounts receivable are denominated, such as the Euro, our results of operations can be adversely affected or benefited, respectively. The degree of impact is proportional to the amount of foreign currency expense or revenue, as the case may be, and the fluctuations in exchange rates over the period in which the effect is measured on our consolidated financial statements. In addition, such currency fluctuations may affect the comparability of our results of operations between financial periods.
Legal & Regulatory
Total Risks: 1/36 (3%)Below Sector Average
Regulation1 | 2.8%
Regulation - Risk 1
If we become subject to a regulatory investigation, it could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business.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.