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.

Sincerity Applied Materials Holdings disclosed 30 risk factors in its most recent earnings report. Sincerity Applied Materials Holdings reported the most risks in the “Finance & Corporate” category.

Risk Overview Q4, 2020

Risk Distribution

57% Finance & Corporate

17% Production

10% Ability to Sell

10% Macro & Political

3% Tech & Innovation

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

2020

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

Sincerity Applied Materials Holdings 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, 2020

Main Risk Category

Finance & Corporate

With 17 Risks

Finance & Corporate

With 17 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 2020

0Risks added

0Risks removed

0Risks changed

Since Dec 2020

Number of Risk Changed

-1

From last report

S&P 500 Average: 3

-1

From last report

S&P 500 Average: 3

See the risk highlights of Sincerity Applied Materials Holdings 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 30

Finance & Corporate

Total Risks: 17/30 (57%)Above Sector Average

Share Price & Shareholder Rights10 | 33.3%

Share Price & Shareholder Rights - Risk 1

Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern.

Our financial statements have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued a report that includes an explanatory paragraph referring to our net losses for the year ended December 31, 2019 and expressing substantial doubt in our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to obtain additional financing or other capital, attain operating efficiencies, reduce expenditures, and to generate net revenues. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. However, if adequate funds are not available to us when we need it, and we are unable to enter into some form of strategic relationship that will give us access to additional cash resources, we may be required to curtail our operations which would, in turn, further raise substantial doubt about our ability to continue as a going concern.

Share Price & Shareholder Rights - Risk 2

There is currently a limited market for our Common Stock and there can be no assurance that any market will ever develop. You may therefore be unable to re-sell shares of our Common Stock at times and prices that you believe are appropriate.

Our Common Stock is not listed on a national securities exchange or any other exchange, and is presently quoted on the OTC Pink Market. There is no active trading market for our Common Stock and our Common Stock may never be included for trading on any stock exchange. Accordingly, our Common Stock is highly illiquid and you may experience difficulty in re-selling shares of our Common Stock at times and prices that you may desire.

Share Price & Shareholder Rights - Risk 3

The market price of our Common Stock may be highly volatile, and may be influenced by numerous factors, some of which are beyond our control.

If an active market for our Common Stock develops, its market price could fluctuate substantially due to a variety of factors, including market perception of our ability to meet our growth projections and expectations, quarterly operating results of other companies in the same industry, trading volume in our Common Stock, changes in general conditions in the economy and the financial markets or other developments affecting our business and the business of others in our industry. In addition, the stock market itself is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons related and unrelated to their operating performance and could have the same effect on our Common Stock. The market price of shares of our Common Stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including: - regulatory actions with respect to our products or our competitors' products;- actual or anticipated fluctuations in our financial condition and operating results;- publication of research reports by securities analysts about us or our competitors or our industry;- our failure or the failure of our competitors to meet analysts' projections or guidance that we or our competitors may give to the market;- additions and departures of key personnel;- strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;- the passage of legislation or other regulatory developments affecting us or our industry;- fluctuations in the valuation of companies perceived by investors to be comparable to us;- sales of our Common Stock by us, our insiders or our other stockholders;- speculation in the press or investment community;- announcement or expectation of additional financing efforts;- changes in accounting principles;- terrorist acts, acts of war or periods of widespread civil unrest;- natural disasters and other calamities; and - changes in general market and economic conditions.

Share Price & Shareholder Rights - Risk 4

Our principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval.

As of September 13, 2021, our executive officers, directors and principal (5% or greater) stockholders, together with their respective affiliates, owned approximately 94.82% of our Common Stock. Accordingly, these stockholders will be able to exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of our board of directors and approval of significant corporate transactions. This concentration of ownership could have the effect of entrenching our management and/or the board of directors, delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could have a material and adverse effect on the fair market value of our Common Stock.

Share Price & Shareholder Rights - Risk 5

Because we became a reporting company under the Exchange Act by means other than a traditional underwritten initial public offering, we may not be able to attract the attention of research analysts at major brokerage firms.

Because we did not become a reporting company by conducting an underwritten initial public offering of our Common Stock, and because our Common Stock is not listed on a national securities exchange, security analysts of brokerage firms may not provide coverage of our company. In addition, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than they might if we became a public reporting company by means of an underwritten initial public offering, because they may be less familiar with our company as a result of more limited coverage by analysts and the media. The failure to receive research coverage or support in the market for our shares will have an adverse effect on our ability to develop a liquid market for our Common Stock.

Share Price & Shareholder Rights - Risk 6

We are not subject to compliance with rules requiring the adoption of certain corporate governance measures and as a result our stockholders have limited protections against interested director transactions, conflicts of interest and similar matters.

The Sarbanes-Oxley Act, as well as resulting rule changes enacted by the SEC, the New York Stock Exchange and the NASDAQ Stock Market, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges. Because we are not listed on the NASDAQ Stock Market or the New York Stock Exchange, we are not presently required to comply with many of the corporate governance provisions and we have not yet adopted most of these measures. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest and similar matters.

Share Price & Shareholder Rights - Risk 7

We are a smaller reporting company, and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.

We are currently a "smaller reporting company," meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $250 million and annual revenues of less than $100 million during the most recently completed fiscal year. "Smaller reporting companies" are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports and in a registration statement under the Exchange Act on Form 10. Decreased disclosures in our SEC filings due to our status as a "smaller reporting company" may make it harder for investors to analyze our results of operations and financial prospects.

Share Price & Shareholder Rights - Risk 8

Shares of our common stock that have not been registered under federal securities laws are subject to resale restrictions imposed by Rule 144, including those set forth in Rule 144(i) which apply to a former "shell company."

Prior to the closing of the Acquisition, we were deemed a "shell company" under applicable SEC rules and regulations because we had no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets. Pursuant to Rule 144 promulgated under the Securities Act, sales of the securities of a former shell company, such as us, under that rule are not permitted (i) until at least 12 months have elapsed from the September 25, 2017 date on which our Current Report on Form 8-K reflecting our status as a non-shell company, was filed with the SEC; and (ii) unless at the time of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports. We are currently subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed thereunder. Unless we register their shares of common stock for sale under the Securities Act, most of our stockholders were forced to hold their shares of our common stock until September 25, 2018 before they were eligible to sell those shares, and even after Sept 25, 2018, sales may not be made under Rule 144 unless we and the stockholders who plan to sell such shares are in compliance with other requirements of Rule 144. Further, it will be more difficult for us to raise funding to support our operations through the sale of debt or equity securities unless we agree to register such securities under the Securities Act, which could cause us to expend significant time and cash resources. Additionally, our previous status as a shell company could also limit our use of our securities to pay for any acquisitions we may seek to pursue in the future. The lack of liquidity of our securities as a result of the inability to sell under Rule 144 for a longer period of time than a non-former shell company could cause the market price of our securities to decline.

Share Price & Shareholder Rights - Risk 9

Investors may experience dilution of their ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our existing stockholders. We are authorized to issue an aggregate of 290 million shares of common stock and 10 million shares of "blank check" preferred stock. We may issue additional shares of common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the common stock. We may need to raise additional capital in the near future to meet our working capital needs, and there can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with these capital raising efforts.

Share Price & Shareholder Rights - Risk 10

Issuance of stock to fund our operations may dilute your investment and reduce your equity interest.

We may need to raise capital in the future to fund the development of our products or for other purposes. Any equity financing may have a significant dilutive effect to stockholders and a material decrease in our stockholders' equity interest in us. Equity financing, if obtained, could result in substantial dilution to our existing stockholders. At its sole discretion, our board of directors may issue additional securities without seeking stockholder approval, and we do not know when we will need additional capital or, if we do, whether it will be available to us.

Accounting & Financial Operations2 | 6.7%

Accounting & Financial Operations - Risk 1

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

You should not rely on an investment in our Common Stock to provide dividend income. We do not anticipate that we will pay any cash dividends to holders of our Common Stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our operations. In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our Common Stock. Accordingly, investors must rely on sales of their Common Stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our Common Stock.

Accounting & Financial Operations - Risk 2

If we fail to implement and maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors' views of us.

We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), subject to certain exceptions. Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls and to obtain attestations of the effectiveness of internal controls by independent auditors. However, as discussed in detail below, as an emerging growth company and a smaller reporting company, we are not required to obtain an auditor attestation. As a private company, Sincerity Australia Pty Ltd. was not subject to requirements to establish, and did not establish, internal control over financial reporting and disclosure controls and procedures consistent with those of a public company. Our management team and board of directors will need to devote significant efforts to implementing and maintaining adequate and effective disclosure controls and procedures and internal control over financial reporting in order to comply with applicable regulations, which may include hiring additional legal, financial reporting and other finance and accounting staff. Any of our efforts to improve our internal controls and design, implement and maintain an adequate system of disclosure controls may not be successful and will require that we expend significant cash and other resources. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on the tradability of our Common Stock, which in turn would negatively impact our business. We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our Common Stock. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. We currently have a small team with primary responsibility for performing most of our accounting and financial reporting duties. As a result, certain aspects of internal accounting control which require adequate segregation of duties are missing. We believe we do not currently have sufficient accounting and supervisory personnel with the appropriate level of technical accounting experience and training necessary or adequate accounting policies, processes and procedures, particularly in the areas of revenue recognition, equity related transactions and other complex, judgmental areas for U.S. generally accepted accounting principles, or GAAP, financial reporting and SEC reporting purposes and consequently, we must rely on third party consultants. These deficiencies represent a material weakness (as defined under the Exchange Act) in our internal control over financial reporting in both design and operation. We may identify additional material weaknesses in the future. Under the Exchange Act, a material weakness is defined as 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 a company's annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. We are currently developing a plan to design, review, implement and refine internal control over financial reporting. However, we may identify deficiencies and weaknesses or fail to remediate previously identified deficiencies in our internal controls. If material weaknesses or deficiencies in our internal controls exist and go undetected or unremediated, our financial statements could contain material misstatements that, when discovered in the future, could cause us to fail to meet our future reporting obligations and cause the price of our common stock to decline.

Debt & Financing1 | 3.3%

Debt & Financing - Risk 1

Our future capital needs are uncertain and we may need to raise additional funds in the future, and these funds may not be available on acceptable terms or at all.

We believe that our cash flow from operations and cash on hand, together with the net proceeds from recent financings, will be sufficient to satisfy our liquidity requirements for at least the next 3 months from the date of this Report. The expected growth of our business will significantly increase our expenses. In addition, the amount of our future product sales is difficult to predict and actual sales may not be in line with our forecasts. As a result, we believe that we may need to raise additional capital, which may not be available on reasonable terms, if at all. Our future capital requirements will depend on many factors, including: - the revenue generated by our current products and any future product candidates that we may develop and commercialize;- the costs associated with expanding our sales capabilities;- the costs associated with developing and commercializing our proposed products or technologies,- the costs of obtaining and maintaining regulatory clearance or approval for our current or future products;- the costs of ongoing compliance and regulatory requirements;- expenses we incur in connection with potential litigation or governmental investigations;- anticipated or unanticipated capital expenditures; and - unanticipated general and administrative expenses As a result of these and other factors, we do not know the extent to which we may be required to raise additional capital from public or private offerings of our capital stock, borrowings under credit lines or other sources. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we are unable to raise additional capital, we may not be able to expand our sales and marketing infrastructure, enhance our current products or develop new products, take advantage of future opportunities, or respond to competitive pressures, changes in supplier relationships, or unanticipated changes in customer demand. Any of these events could adversely affect our ability to achieve our strategic objectives and impact our ability to continue as a going concern.

Corporate Activity and Growth4 | 13.3%

Corporate Activity and Growth - Risk 1

We may seek to grow our business through acquisitions of complementary products or technologies, and the failure to manage acquisitions, or the failure to integrate them with our existing business, could impair our ability to execute our business strategies.

From time to time, we may consider opportunities to acquire other products or technologies that may enhance our product platform or technology, expand the breadth of our markets or customer base, or advance our business strategies. Potential acquisitions involve numerous risks, including: - problems assimilating the acquired products or technologies;- issues maintaining uniform standards, procedures, controls and policies;- unanticipated costs associated with acquisitions;- diversion of management's attention from our existing business;- risks associated with entering new markets in which we have limited or no experience; and - increased legal and accounting costs relating to the acquisitions or compliance with regulatory matters. We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies. Our inability to integrate any acquired products or technologies effectively could impair our ability to execute our business strategies.

Corporate Activity and Growth - Risk 2

We may enter into strategic collaborations or alliances with third parties that may not result in the development of commercially viable products or the generation of significant future revenue.

In the ordinary course of our business, we may enter into strategic collaborations or alliances to develop product candidates and to pursue new markets. Proposing, negotiating and implementing strategic collaborations or alliances may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenue and could be terminated prior to developing any products. Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. We have limited control over the amount and timing of resources that our current collaborators or any future collaborators devote to our collaborators' or our future products. Disputes between us and our collaborators may result in litigation or arbitration that would increase our expenses and divert the attention of our management. Further, these transactions and arrangements are contractual in nature and may be terminated or dissolved under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

Corporate Activity and Growth - Risk 3

We may be unable to manage our anticipated future growth effectively, which could make it difficult to execute our business strategy.

We anticipate growth in our business operations. This future growth could create a strain on our organizational, administrative and operational infrastructure. We may not be able to maintain the quality of our products or satisfy customer demand as it grows. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. We may implement new enterprise software systems in a number of areas affecting a broad range of business processes and functional areas. The time and resources required to implement these new systems is uncertain and failure to complete this in a timely and efficient manner could harm our business.

Corporate Activity and Growth - Risk 4

We may acquire other businesses, form joint ventures or make investments in other companies or technologies that could negatively affect our operating results, dilute our stockholders' ownership, increase our debt or cause us to incur significant expense.

We may pursue acquisitions of businesses and assets. We also may pursue strategic alliances and joint ventures that leverage our industry experience to expand our offerings or distribution. We have no experience with acquiring other companies and limited experience with forming strategic partnerships. We may not be able to find suitable partners or acquisition candidates, and we may not be able to complete such transactions on favorable terms, if at all. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. Any future acquisitions could also result in the incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a negative impact on our cash flows, financial condition and results of operations. Integration of an acquired company may also disrupt ongoing operations and require management resources that we would otherwise focus on developing our existing business. We may experience losses related to investments in other companies, which could harm our financial condition and results of operations. We may not realize the anticipated benefits of any acquisition, strategic alliance or joint venture. Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. To finance any acquisitions or joint ventures, we may choose to issue Common Stock as consideration, which could dilute the ownership of our stockholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our Common Stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration.

Production

Total Risks: 5/30 (17%)Below Sector Average

Manufacturing1 | 3.3%

Manufacturing - Risk 1

Manufacturing risks, including risks related to manufacturing in China, may adversely affect our ability to manufacture our products and could reduce our gross margin and our profitability.

Our business strategy depends on the ability of our third party manufacturers to manufacture our current and future products in sufficient quantities and on a timely basis so as to meet customer demand, while adhering to product quality standards, complying with regulatory requirements and managing manufacturing costs. We are subject to numerous risks relating to the manufacturing capabilities of such third parties manufacturers including: - quality or reliability defects in product components that are sourced from third-party suppliers;- their inability to secure product components in a timely manner, in sufficient quantities or on commercially reasonable terms;- their failure to increase production of products to meet demand;- their inability to modify production lines to enable them to efficiently produce future products or implement changes in current products in response to regulatory requirements;- difficulty identifying and qualifying alternative suppliers for components in a timely manner; and - potential damage to or destruction of manufacturing equipment or manufacturing facilities. In addition, we rely on our primary contract manufacturer, Changzhou Sincerity Plastics and Chemicals Technology Ltd. ("Sincerity China"), in Changzhou China, as well as other Chinese manufacturers to manufacture our products. As a result, our business is subject to risks associated with doing business in China, including: - trade protection measures, such as tariff increases, and import and export licensing and control requirements;- potentially negative consequences from changes in tax laws;- difficulties associated with the Chinese legal system, including increased costs and uncertainties associated with enforcing contractual obligations in China;- historically lower protection of intellectual property rights;- unexpected or unfavorable changes in regulatory requirements; and - changes and volatility in currency exchange rates.

Employment / Personnel1 | 3.3%

Employment / Personnel - Risk 1

The loss of our Chief Executive Officer or Chief Financial Officer or our inability to attract and retain highly skilled personnel could negatively impact our business.

Our success depends on the skills, experience and performance of our President and Chief Executive Officer, Yiwen Zhang, and our Chief Financial Officer, Chris Lim, although neither of them have experience serving as an officer or director of a publicly-traded U.S. company. The individual and collective efforts of these employees will be important as we continue to develop our business and as we expand our commercial activities. The loss or incapacity of existing members of our executive management team could negatively impact our operations if we experience difficulties in hiring qualified successors. Our executive officers do not presently have employment agreements. Our future operations will depend, in part, on our ability to attract and retain highly skilled employees. We may not be able to attract or retain qualified employees in the future due to the competition for qualified personnel among our competitors. Recruiting and retention difficulties can limit our ability to support our current operations and anticipated future growth programs. All of our employees are and will be at-will, which means that either we or the employee may terminate his or her employment at any time.

Supply Chain3 | 10.0%

Supply Chain - Risk 1

The manufacturing operations of our third-party manufacturers are dependent upon third-party suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business.

The raw materials needed for most of our products are generally available to our third-party manufacturers from multiple sources in sufficient qualities. However, a supply interruption or an increase in demand beyond a current suppliers' capabilities could harm their ability to manufacture our products until new sources of supply are identified and qualified. Their reliance on these suppliers subjects us to a number of risks that could harm our business, including: - interruption of supply resulting from modifications to or discontinuation of a supplier's operations;- delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier's variation in a component;- a lack of long-term supply arrangements for key components with suppliers;- inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;- difficulty and cost associated with locating and qualifying alternative suppliers for components in a timely manner;- production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications;- delay in delivery due to our suppliers prioritizing other customer orders over ours;- damage to our brand reputation caused by defective components produced by suppliers; and - fluctuation in delivery by our suppliers due to changes in demand from our or their other customers. Any interruption in the supply of components or materials, or our third party manufacturers inability to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers, which would have an adverse effect on our business.

Supply Chain - Risk 2

We outsource the manufacturing of our products and rely on a limited number of third-parties for the manufacture of our products. We may not be able to find replacements or immediately transition to alternative manufacturers.

We rely on a limited number of parties for the manufacture of our products. These manufacturers, and any of our other manufacturers, may be unwilling or unable to supply product to us reliably and at the levels we anticipate or are required by the market. For the fiscal year ended December 31, 2020, we have one major supplier, accounting for approximately 87% of our purchase. For us to be successful, our manufacturers must be able to provide us with products and components in substantial quantities, in compliance with regulatory requirements, in accordance with agreed upon specifications, at acceptable costs and on a timely basis. An interruption in our commercial operations could occur if we encounter delays or difficulties in securing these components, and if we cannot then obtain an acceptable substitute. Any such interruption could harm our reputation, business, financial condition and results of operations. If we are required to change the manufacturer of a particular product, we will be required to verify that the new manufacturer maintains facilities, procedures and operations that comply with our quality and applicable regulatory requirements, which could further impede our ability to manufacture our products in a timely manner. Transition to a new manufacturer could be time-consuming and expensive, may result in interruptions in our operations and product delivery, and could affect the performance specifications of our products. We cannot assure you that we will be able to secure alternative manufacturers without experiencing interruptions in our workflow. If we should encounter delays or difficulties in securing, reconfiguring or revalidating the products we require our reputation, business, financial condition and results of operations could be negatively impacted.

Supply Chain - Risk 3

Raw material pricing, availability and allocation by suppliers as well as energy-related costs may negatively impact our results of operations, including our profit margins.

Our third party manufacturers use petrochemical-based raw materials to manufacture many of our products. The prices for these raw materials are cyclical, and increases in market demand or fluctuations in the global trade for petrochemical- based raw materials and energy could increase our costs. In addition, the prices of many of the other key raw materials used in our businesses, such as phosphates, surfactants, polymers and resins and fragrances, are cyclical based on numerous supply and demand factors that are beyond our control. If we are unable to minimize the effects of increased raw material costs our business, consolidated financial condition or results of operations may be materially adversely affected.

Ability to Sell

Total Risks: 3/30 (10%)Above Sector Average

Competition2 | 6.7%

Competition - Risk 1

We face competition from numerous companies, many of whom have greater resources than we do.

The market for high performance synthetic polymer and other packaging materials is characterized by intense competition and pricing pressure. We compete with a number of existing packaging companies. Many of these competitors are large, well-capitalized companies with significantly greater market share and resources than we have. As a result, these companies may be better positioned than we are to spend more aggressively on marketing, sales, intellectual property and other product initiatives and research and development activities. Our current competitors or other potential competitors may develop new products for the packaging industry at any time. In addition, competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. If we are unable to develop products that compete effectively against the products of existing or future competitors, our future revenue could be negatively impacted. Some of our competitors may compete by changing their pricing model or by lowering the price of their products. If these competitors' pricing techniques are effective, it could result in downward pressure on the price of all packaging products. If we are unable to maintain or increase our selling prices in the face of competition, we may not improve our gross margins.

Competition - Risk 2

We experience competition in the markets for our products and services and in the geographic areas in which we operate.

Our packaging products compete with similar products made by competitors and with a number of other types of materials or products. We compete on the basis of performance characteristics of our products, as well as service, price and innovations in technology. A number of competing domestic and foreign companies are well-established. Our inability to maintain a competitive advantage could result in lower prices or lower sales volumes for our products. Additionally, we may not successfully implement our pricing actions. These factors may have an adverse impact on our consolidated financial condition or results of operations.

Demand1 | 3.3%

Demand - Risk 1

If we are unable to support demand for our existing products and our future products, including ensuring that we have adequate resources to meet increased demand, our business could be harmed.

As our commercial operations and sales volume grow, we will need to continue to increase our workflow capacity for manufacturing, customer service, billing and general process improvements and expand our internal quality assurance program, among other things. We cannot assure you that any of these increases in scale, expansion of personnel, purchase of equipment or process enhancements will be successfully implemented.

Macro & Political

Total Risks: 3/30 (10%)Below Sector Average

Economy & Political Environment2 | 6.7%

Economy & Political Environment - Risk 1

Political and economic instability and risk of government actions affecting our business and our customers or suppliers may adversely impact our business, results of operations and cash flows.

We are exposed to risks inherent in doing business in each of the countries or regions in which we or our customers or suppliers operate including civil unrest, acts of terrorism, sabotage, epidemics, force majeure, war or other armed conflict and related government actions, including sanctions/embargoes, the deprivation of contract rights, the inability to obtain or retain licenses or permits required to operate facilities or import or export goods or raw materials, the expropriation or nationalization of our assets, and restrictions on travel, payments or the movement of funds.

Economy & Political Environment - Risk 2

Uncertain global economic conditions could to have an adverse effect on our consolidated financial condition and results of operations.

Uncertain global economic conditions may have an adverse impact on our business in the form of lower net sales due to weakened demand, unfavorable changes in product price/mix, or lower profit margins. For example, global economic downturns may adversely impact some of our end-users and customers, such as food processors, distributors, supermarket retailers, other retailers, business service contractors and other end-users that are particularly sensitive to business and consumer spending. During economic downturns or recessions, there can be a heightened competition for sales and increased pressure to reduce selling prices as our customers may reduce their volume of purchases from us. If we lose significant sales volume or reduce selling prices significantly, there could be a negative impact on our consolidated financial condition or results of operations, profitability and cash flows.

International Operations1 | 3.3%

International Operations - Risk 1

The global nature of our operations exposes us to numerous risks that could materially adversely affect our consolidated financial condition and results of operations.

We manufacture and sell our products in several countries subjecting us to the risks inherent in foreign operations. Economic uncertainty in some of the geographic regions in which we operate, including developing regions, could result in the disruption of commerce and negatively impact cash flows from our product sales in those areas. Risks inherent in our international operations include: - foreign currency exchange controls and tax rates;- foreign currency exchange rate fluctuations, including devaluations;- the potential for changes in regional and local economic conditions, including local inflationary pressures;- restrictive governmental actions such as those on transfer or repatriation of funds and trade protection matters, including antidumping duties, tariffs, embargoes and prohibitions or restrictions on acquisitions or joint ventures;- changes in laws and regulations, including laws and policies affecting trade and foreign investment;- the difficulty of enforcing agreements and collecting receivables through certain foreign legal systems;- more expansive legal rights of foreign unions or works councils;- changes in labor conditions and difficulties in staffing and managing international operations;- import and export delays caused, for example, by an extended strike at the port of entry, could cause a delay in our supply chain operations;- social plans that prohibit or increase the cost of certain restructuring actions;- the potential for nationalization of enterprises or facilities; and - unsettled political conditions and possible terrorist attacks These and other factors may have material adverse effect on our operations and, consequently, on our consolidated financial condition or results of operations.

Tech & Innovation

Total Risks: 1/30 (3%)Below Sector Average

Innovation / R&D1 | 3.3%

Innovation / R&D - Risk 1

We may not be able to develop new products to keep pace with our industry's rapidly changing technology and customer requirements.

Our industry is characterized by rapid technological changes, new product introductions and enhancements and evolving industry standards. Our business prospects depend on our ability to develop new products and applications in new markets that develop as a result of technological and scientific advances. New technologies, techniques or products could emerge that might offer better combinations of price and performance than ours. The market for our products is characterized by innovation and advancement in technology. It is important that we anticipate changes in technology and market demand and successfully introduce new, enhanced and competitive technologies to meet our customers' needs on a timely and cost-effective basis. If we do not successfully innovate and introduce new technology into our anticipated product lines or effectively manage the transitions of our technology to new product offerings, our business, financial condition and results of operations could be harmed. If we do not successfully innovate and introduce new technology into our anticipated product lines or effectively manage the transitions of our technology to new product offerings, our business, financial condition and results of operations could be harmed. We work closely with Sincerity China and its sister company, Shanghai Sincerity Co. Ltd., to provide the technological and product support that drives our business. If, for any reason, we were to become unable to access such technological and product support from Sincerity China and Shanghai Sincerity Co. Ltd., our ability to innovate and provide effective product solutions on behalf of our customers would be negatively impacted, with a deleterious effect on our revenue and profit from operations.

Legal & Regulatory

Total Risks: 1/30 (3%)Below Sector Average

Regulation1 | 3.3%

Regulation - Risk 1

FINRA sales practice requirements may limit a stockholder's ability to buy and sell our stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers buy our Common Stock, which may limit the ability of our stockholders to buy and sell our Common Stock and could have an adverse effect on the market for and price of our Common Stock.

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.

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