10-K/A: Scientific Energy Files Amendment No. 3 to 2023 10-K/A Addressing SEC Comments

Scientific Energy, Inc. files Amendment No. 3 to its 2023 Form 10-K/A to address comments from the SEC regarding key information, business operations, risk factors, cybersecurity, and foreign jurisdictions.

Summary

• Scientific Energy, Inc. filed Amendment No. 3 to its Form 10-K/A for the fiscal year ended December 31, 2023, to address comments from the SEC.
• The amendment restates sections related to doing business in China and Macau, business overview, risk factors, cybersecurity, and disclosures regarding foreign jurisdictions.
• The company's business is primarily conducted through its subsidiary in Macau, with some supporting segments in PRC and Hong Kong.
• The company's activities in Macau are mainly regulated by Macau laws and regulations, and other activities in PRC and Hong Kong by local laws and regulations.
• The company's business segments include food ordering & delivery in Macau, sales of graphite products, and a physical gold trading platform.
• In 2023, the company's Platform generated over 9,182,000 transactions, totaling $1,061,530,000 MOP (approximately $133,000,000) in Gross Merchandise Volume.
• The company established a new wholly-owned subsidiary, Graphite Energy, Inc., to enter the graphite sales business.
• The company entered into a Base Agreement for Purchase of Graphite Ore with Madagascar Graphite Limited to ensure a stable supply of graphite ore.
• The company faces risks related to doing business in China and Macau, including potential intervention by the Chinese government and uncertainties in the legal system.
• The company's common stock may be delisted under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB cannot inspect its auditor.
• The company's future success depends on attracting and retaining qualified personnel.
• The company is subject to a wide variety of laws and regulations in Macau.
• The company had approximately 478 full time employees and 369 part time employees as of December 31, 2023.

Sentiment

Score: 5

Explanation: The document is neutral, primarily providing factual information and disclosures required by the SEC. While it highlights both positive and negative aspects of the company's business, it does not express a strong positive or negative sentiment.

Positives

• The company has secured a graphite ore supply agreement with Madagascar Graphite Limited to support its new graphite sales business.
• The company's Platform generated over 9,182,000 transactions, totaling $133,000,000 in Gross Merchandise Volume in 2023.
• The company has a dedicated management standard for information security and cyber-security titled Aomi APP Production Environment Anomaly Handling Guideline W-OM-CZ-001 (Guideline) since August 2020.
• The company has a specialized cyber-security team within the IT department of its subsidiary MED.

Negatives

• The company faces risks related to potential intervention by the Chinese government in its Macau operations.
• The company's common stock may be delisted under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB cannot inspect its auditor.
• The company's revenue heavily depends on a limited customer base, a trend likely to continue.
• There is substantial doubt regarding the company's ability to continue as a going concern.

Risks

• The Chinese government may exercise significant oversight and discretion over the company's business operations in Macau.
• Increased government oversight of overseas offerings or foreign investment in China-based issuers could restrict the company's ability to offer securities.
• The company's common stock may be delisted if the PCAOB is unable to inspect its auditor.
• There are significant uncertainties regarding the interpretation of PRC laws, rules, and regulations.
• The company faces intense competition in the food delivery and graphite industries.
• The company relies on third parties for payment processing, cloud services, and data center hosting.
• Cyberattacks or risks related to cybersecurity could have a material effect on the company's business.
• The company's success depends on certain key personnel.
• The company's business, financial condition, and operational results could be significantly impacted by any economic downturns in Macroeconomic environment, especially Macau and PRC.
• The company is currently operating in a period significantly affected by geopolitical instability.
• The company may not respond quickly and profitably to the cutting-the-edge innovations or technologies in the graphite industry.
• The company's graphite products sales history is limited.

Future Outlook

The company intends to broaden its network of merchants, increase consumer reach, improve delivery driver experience, expand service offerings, deliver excellent customer care, and improve operational efficiency.

Industry Context

The company operates in the competitive mobile food and grocery ordering market, competing with traditional offline ordering processes and other mobile delivery services.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or benchmarks.
• The document mentions MFood as another mobile food delivery service provider in Macau, but states that it is small in scale and unable to compete effectively with the company.

Stakeholder Impact

• Shareholders face risks related to potential intervention by the Chinese government, delisting under the HFCAA, and uncertainties in the legal system.
• Merchants benefit from increased orders and targeted reach through the company's platform.
• Customers benefit from discovery, lower prices, and convenience through the company's platform.
• Employees face potential job insecurity due to the company's financial condition and competitive pressures.

Next Steps

• The company intends to broaden its network of merchants.
• The company plans to continue to increase its consumer reach by more consumer engagement.
• The company invests in improving delivery driver experience and satisfaction.
• The company plans to expand its service offerings, and grow into a full-category service e-commerce company.
• The company will focus on optimizing its cost structure primarily through product improvements meant to enhance the operational efficiency and quality of its logistics platform.

Key Dates