Shrinking Revenue BaseA very small and declining top line severely limits operating leverage and the ability to scale fixed costs. Persistent revenue contraction undermines sustainable margin expansion, increases per-unit overhead, and makes the business structurally dependent on restoring sales to achieve durable profitability.
Negative Operating And Free Cash FlowConsistent negative operating and free cash flows indicate ongoing cash burn and reliance on external funding. Over a multi-quarter horizon this raises dilution and liquidity risks, constrains reinvestment, and can force difficult trade-offs between operations, capex and financing needs.
Eroding Equity Base From Recurring LossesA declining equity base reflects cumulative losses that shrink the company's loss-absorbing capacity. This reduces financial flexibility, limits ability to secure credit or favorable terms, and increases solvency vulnerability if profitability is not sustainably restored over the medium term.