Liberty Defense Holdings, Ltd. — financial distress indicators

Total liabilities are 1.84× total assets.

Balance-sheet insolvency test: debts exceeding the fair value of assets is the statutory definition of 'insolvent' in 11 U.S.C. §101(32).

At the current free-cash-flow burn, cash covers ~11 months.

Going-concern standard: management must assess ability to continue for 12 months (ASC 205-40). Runway below that horizon forces dilution, asset sales or default.

Current ratio is 0.31 (current assets cover 31% of near-term obligations).

Cash-flow insolvency test: inability to pay debts as they fall due is the trigger for both U.S. involuntary petitions and Indian IBC default.

Net income negative in 3 of 3 fiscal years.

Persistent losses erode equity and the capacity to absorb shocks.

Revenue changed -39% year over year.

A >30% sales drop typically breaches leverage covenants and starves fixed-cost coverage.

Operating cash flow negative in 3 of the last 3 years.

A business that cannot fund itself from operations depends on external capital to survive.

O-score 18.42 → model probability 100%.

Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.

Share count up +97% in a year.

Survival financing: repeated equity raises at depressed prices.

Merton distance-to-default 1.09 σ → PD 13.8%.

Investment-grade issuers typically have 1-year PD well below 1%.

Price is -67% from its 52-week high.

For financial firms a share-price run often precedes a deposit or funding run (confidence channel).

Operating margin fell from -610% to -899% in two years.

Sharp margin compression signals loss of pricing power or cost control.