Smart Sand (SND) risk factors, FY2024 10-K

Other

1. 01Our business and financial performance depend on the level of activity in the oil and natural gas industry
2. 02A significant portion of our revenues have been generated with a limited number of customers, and the loss of, material nonpayment or nonperformance by or significant reduction in purchases by any of them could adversely affect our business, results of operations and financial condition
3. 03We are exposed to the credit risk of our customers, and any material nonpayment or nonperformance by our customers could adversely affect our business, results of operations and financial condition
4. 04We face significant competition that may cause us to lose market share
5. 05conditions or other contingencies and uncertainties that are beyond our control. Our failure to obtain the funds necessary to maintain, develop and increase our asset base could adversely impact our business, results of operations and financial condition
6. 06Inaccuracies in estimates of volumes and qualities of our sand reserves could result in lower than expected sales and higher than expected cost of production
7. 07Our sand is currently produced at three facilities and our sales are dependent on delivery by railroads. Any adverse developments at our production facilities, rail terminals, or on any rail line could have a material adverse effect on our business, financial condition and results of operations
8. 08If we are unable to make acquisitions on economically acceptable terms, our future growth would be limited
9. 09Restrictions in our FCB ABL Credit Facility may limit our ability to capitalize on potential acquisition and other business opportunities
10. 10We face distribution and logistical challenges in our business
11. 11We may be adversely affected by decreased demand for frac sand due to the development of effective alternative proppants or new processes to replace hydraulic fracturing
12. 12An increase in the supply of frac sand having similar characteristics as the frac sand we produce could make it more difficult for us to maintain sales with existing customers or obtain new customers on favorable terms, or at all
13. 13Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured
14. 14Our production process consumes large amounts of natural gas and electricity. An increase in the price or a significant interruption in the supply of these or any other energy sources could have a material adverse effect on our business, results of operations and financial condition
15. 15Increases in the price of diesel fuel may adversely affect our business, results of operations and financial condition
16. 16A facility closure entails substantial costs, and if we close any of our facilities sooner than anticipated, our results of operations may be adversely affected
17. 17Our operations are dependent on our rights and ability to mine our properties and on our having renewed or received the required permits and approvals from governmental authorities and other third parties
18. 18A shortage of skilled labor together with rising labor costs in the excavation industry may further increase operating costs, which could adversely affect our business, results of operations and financial condition
19. 19Our business may suffer if we lose, or are unable to attract and retain, key personnel
20. 20Our profitability could be negatively affected if we fail to maintain satisfactory labor relations
21. 21Failure to maintain effective quality control systems at our mining, processing and production facilities could have a material adverse effect on our business, results of operations and financial condition
22. 22Seasonal and severe weather conditions could have a material adverse impact on our business, results of operations and financial condition
23. 23Our cash flow fluctuates on a seasonal basis
24. 24We do not own the land on which our in-basin transload terminals are located, which could disrupt our operations
25. 25A terrorist attack or armed conflict could harm our business
26. 26Diminished access to water may adversely affect our operations or the operations of our customers
27. 27We may be subject to interruptions or failures in our information technology systems, including cyber-attacks
28. 28intervention, reimbursement or other compensatory costs, or otherwise adversely affect our business, financial condition or results of operations
29. 29If we are unable to fully protect our intellectual property rights, we may suffer a loss in our competitive advantage
30. 30We may be adversely affected by disputes regarding intellectual property rights of third parties
31. 31We currently rely on a limited number of suppliers for certain equipment and materials to build our SmartSystems, and our reliance on a limited number of suppliers for such equipment and materials exposes us to risks including price and timing of delivery
32. 32Unsatisfactory safety performance may negatively affect our customer relationships and, to the extent we fail to retain existing customers or attract new customers, adversely impact our revenues
33. 33We may be subject to legal claims, such as personal injury and property damage, which could materially adversely affect our financial condition, prospects and results of operations
34. 34A financial downturn could negatively affect our business, results of operations, financial condition and liquidity

Risks Related to Environmental, Mining and Other Regulation

1. 35Tariffs on goods and services between the United States, Canada and Mexico may be detrimental to our business
2. 36Any such regulations could require us to modify existing permits or obtain new permits, implement additional pollution control technology, curtail operations, significantly increase our operating costs, or impose additional operating restrictions among our customers that reduce demand for our services
3. 37Silica-related legislation, health issues and litigation could have a material adverse effect on our business, reputation or results of operations
4. 38We are subject to the Federal Mine Safety and Health Act of 1977, which imposes stringent health and safety standards on numerous aspects of our operations
5. 39Our inability to acquire, maintain or renew financial assurances related to the reclamation and restoration of mining property could have a material adverse effect on our business, financial condition and results of operations
6. 40Climate change could result in various risks for us and our customers
7. 41Additionally, climate change may increase the frequency and intensity of severe weather events and other natural disasters, as well as contribute to chronic changes (such as to meteorological and hydrological patterns) that may also result in various adverse impacts to our or our customers’ operations
8. 42A negative shift in investor sentiment towards the oil and natural gas industry and increased attention to environmental, social and governance (“ESG”) and conservation matters may adversely impact our business

Risks Related to Ownership of Our Common Stock

1. 43Our stock price could be volatile, and you may not be able to resell shares of your common stock at or above the price you paid
2. 44We are subject to certain requirements of Section 404 of the Sarbanes-Oxley Act. If we are unable to timely comply with Section 404 or if the costs related to compliance are significant, our profitability, stock price, results of operations and financial condition could be materially adversely affected
3. 45The concentration of our capital stock ownership by our largest stockholders and its affiliates will limit your ability to influence corporate matters
4. 46The price of our common stock may fluctuate significantly, and you could lose all or part of your investment
5. 47If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price and trading volume of our common stock could decline
6. 48Our amended and restated certificate of incorporation and amended and restated bylaws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock
7. 49We cannot guarantee the timing, amount, or payment of dividends on our common stock or the repurchase of our common stock
8. 50Future sales of our common stock in the public market could reduce our stock price, and the sale or issuance of equity or convertible securities may dilute your ownership in us
9. 51We have provided certain registration rights for the sale of common stock by certain existing stockholders in the future. The sale of these shares could have an adverse impact on the price of our common stock or on any trading market that may develop
10. 52We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock