Saturday, June 12, 2010

Knowing what type of disclosure is market standard is paramount when preparing SEC filings.


Most Common Form 10-K Risk Factors


Intelligize’s Precedent Check application instantly reviewed almost 5,000 Form 10-Ks filed in the last six months and determined that the following are the most commonly used Risk Factors:



Rank



Risk Factor



Prevalence


1


Failure to Compete Successfully


73%


2


General Economic/Consumer Spending Conditions


57%


3


Dependence on Management Team


47%


4


Difficulty Raising Capital/Insufficient Funding


46%


5


Potential Share Price Volatility


43%


6


Integration Challenges from Merger/Acquisition


33%


7


Negative Impact of Changes in Regulations/Policies


33%


8


Operational Disruptions


32%


9


Failure to Successfully Implement Business Strategy


31%


10


Failure to Protect Intellectual Property Rights


31%




Most Common Form S-1 Risk Factors


Precedent Check reviewed the 1,000 most recent S-1 filings and determined that the below Risk Factors are the most common Business Risks. They generally track the most common Form 10-K Risk Factors, except for a greater emphasis on future growth uncertainties and a  limited track record (see highlighted Risk Factors below).



Rank



Business Risk Factors



Prevalence


1


Failure to Compete Successfully


90%


2


Dependence on Management Team


78%


3


Difficulty Raising Capital/Insufficient Funding


74%


4


Integration Challenges from Merger/Acquisition


52%


5


Failure to Protect Intellectual Property Rights


50%


6


Limited Operating History


44%


7


Failure to Manage Growth / Expansion Costs


43%


8


Threat/Costs of Intellectual Property Infringement Claims


41%


9


Potential/Current Litigation/Claims


39%


10


History of Losses/No Revenue


39%

The most common Form S-1 Offering Risks are listed below.



Rank



Offering Risk Factors



Prevalence


1


Trading Market May Not Develop/Potential Share Price Volatility


86%


2


Principal Shareholders/Management Will Have Significant Control


71%


3


Future Share Sales May Depress Share Price


66%


4


Anti-Takeover Provisions May Prevent a Merger/Acquisition


57%


5


Dividends May Never Be Paid


53%


6


Immediate and Substantial Dilution Following Offering


48%


7


Dilution in Ownership Due to Future Share Issuances/Conversions


37%


8


Failure to Maintain Effective Internal Controls


32%


9


Broad Discretion in the Use of Proceeds From the Offering


30%


10


Stock is Subject to Penny Stock Rules


27%


The above prevalence rankings show that S-1s have significantly less variance in risk factors compared to 10-Ks. Ten Risk Factors appear in  0% or more S-1 filings.  In contrast, only two Risk Factors appear in 50% or more Form 10-K filings.  Precedent Check gives powerful and  useful data about the prevalence of Risk Factors as well as all other headings in SEC filings.


Click here to learn more about how Precedent Check can help you prepare more accurate SEC filings and help you stay a step ahead of your competitors.

Written by Intelligize Staff