Negative Equity & Heavy LeverageDeeply negative shareholders’ equity paired with very large debt relative to a small asset base creates acute solvency and refinancing risk. This capital structure severely limits strategic flexibility, increases default probability under stress, and can force dilutive recapitalizations or creditor-driven restructurings.
Persistent Operating & Net LossesSustained operating and net losses erode retained capital and mask product-market fit issues or pricing/scale problems. Without consistent path to profitability, the business will struggle to self-fund growth, attract investment on favorable terms, or rebuild equity, undermining long-term viability.
Consistent Negative Cash GenerationRecurrent negative operating and free cash flow indicate the company cannot self-fund operations or investments. This persistent cash consumption increases reliance on external financing, raising refinancing, dilution, and covenant risks that threaten continuity absent meaningful profitability improvements.