Revisited: Corporate risk factors revealed

In their annual report filed with the Securities and Exchange Commission this time last year, General Motors’ auditors said the company’s survival was in “substantial doubt,” and that even if it received all $30 billion it hoped to borrow from the government, the automaker still might have to liquidate its operations. The company was perilously close to bankruptcy and faced a difficult restructuring.

“Our recurring losses from operations, stockholders’ deficit and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern,” GM said in its filing.

In other words, the company needs a little more “going” and a little less “concern.”

As someone who works with corporate filings of this type, I immediately recognized the language as coming from the “risk factors” section of what’s called a Form 10-K (so called because that’s how far report writers often stretch the truth, in kilometers). Public companies have to include a section each year that spells out in agonizing detail everything that could possibly go wrong with the company, so shareholders will be considered fairly warned if and when the firm tanks.

In the past, these were fairly modest confessionals, along the lines of “the husband of our chief risk officer is so ugly that we question her judgment,” for example. But with businesses failing left and right these days, the risk factors have evolved into multi-sectioned excuse-a-thons designed to protect executives from potential lawsuits. So you’ll see subheadings such as “Risks related to our business” or “Risks related to the return of rule by the dinosaur.”

Because this is annual report season (you can just feel it in the air), today’s post will feature some of the more creative caveats told in the risk factors portions of documents you can find online. For more fun-packed reading, check out www.sec.gov. Especially worthwhile are the 10KSB/A’s, the always-intriguing 13F-HR’s, and the steamy 485APOS, a post-effective amendment filed pursuant to Securities Act Rule 485(a) that you won’t be able to put down.

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We operate in a capitalist economic system, which is subject to market variables which could increase or decrease our stock price. At least, we used to operate in such a system.

Those two helicopters and the corporate jet we bought last year may not have been such a good idea in retrospect; we suppose they could crash into each other, allowing us to make a substantial gain from insurance, but such a scenario is not likely at this point.

We make incredibly unreliable electronics that are susceptible to catching fire, and many consumers may find this feature to be inconsistent with their corporate goals.

Our chief financial officer was last seen in a cab speeding to the international airport, and if he flees the country and expects us to figure out this mess he’s left us with, he’s got another think coming.

Our software may not operate properly, which could damage our reputation, impair our sales, and cause our clients to realize we don’t actually make software at all, but dog food.

Any failure by us to protect our intellectual property, or any misappropriation of it, could enable our competitors to market a competitive product with similar features, though that seems highly unlikely considering the garbage we produce.

Our earnings can vary significantly depending on a number of factors beyond our control, although a large majority of the responsibility is in fact ours but you’ll never get us to admit it in a court of law.

Inability to obtain consents needed from third-party providers could impair our ability to provide technology services, but that’s the least of our problems.

We operate in an intensely competitive market that includes companies that have greater financial, technical, marketing, intellectual, artistic and competitive resources than we do. Those taco trucks have incredibly low overhead and use bloodthirsty tactics to win clients that otherwise might choose to do business with us.

Our business strategy includes expansion into markets outside North America, which will require increased expenditures and investments, the difficulty of which will likely be compounded by the fact that we hate foreigners and their stupid languages and cultures, especially Asians.

Our operating results may fluctuate significantly and may cause our stock price to decline. If it’s possible for a share price to fall below zero, we’ll likely be the ones to make it happen.

Loss of revenue from large clients could have significant negative impact on our results of operations and overall financial condition. If we had any large clients. Unless we can count that fat guy who is always sneaking into our breakroom and using our vending machines.

We may be required to repurchase mortgage loans in some circumstances, which could harm our liquidity, results of operations and financial condition. Why do you think we repackaged, disguised and sold them off in the first place?

Recent governmental actions to help stabilize the U.S. financial system or improve the housing market may not be successful. If they are, we’ll be happy. If they aren’t, we’ll remind everybody that we voted for McCain.

Our business is highly regulated, which limits our ability to be profitable and disrupts our revenue stream from protection rackets and gun running.

We have not been profitable in the past and may not be profitable any time soon. We’re not even sure why we’re in business, to tell you the truth.

Compliance with public company rules and regulations is costly and requires significant resources in proportion to our revenue. Contact your congressional representative to let your opinion be known that it’s time to let the marketplace run totally unfettered.

Our internal control systems could fail to detect certain events such as data processing system and accounting software failures. However, if our net income suddenly changes from dollars in thousands to dollars in gazillions, we’ll conveniently be looking the other way.

We received a letter regarding a confidential informal inquiry by the SEC and have recently received a subpoena from the SEC as well. Cooperation with such governmental actions may result in charges filed against us and in fines or penalties. We have not been in compliance with SEC reporting requirements and may continue to face compliance issues. If we continue to fail to comply with these requirements, the price of our common stock could be negatively impacted. Not to mention, this writer could personally go to jail, and that’s not going to happen without me taking a whole bunch of my fellow executives with me.

If we do not respond rapidly to technological changes or changes in industry standards, our products could become obsolete, though we believe typewriters and carbon paper will continue to be significant profit centers for us into the end of this century.

If our employees were to unionize, our operating costs would increase, our ability to compete would be impaired, and our feelings would be hurt.

Our latest pharmaceutical release, Eksinex, could actually make people feel worse rather than better, which could result in lawsuits, damage to our public reputation and decreased gross income. However, as soon as young people discover that it gets you incredibly high, we anticipate a significant rebound in sales.

The condition of the U.S. and international financial markets may adversely affect our ability to draw on our credit facility. Ha-ha, that’s a good one.

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