SXTC — financial distress indicators
Financial-health summary
SXTC's reported numbers place it in the 'Very weak' financial-health band (distress score 81/100). The main indicators are market-implied default probability >20%, losses in each of the last 3 years and revenue collapse. Independently, the Ohlson accounting model puts its 1-year failure probability at 48% and the market-implied (Merton) default probability is 91.2%. In its favour: cash on hand covers all debt (net-cash balance sheet).
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Merton distance-to-default -1.36 σ → PD 91%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
Net income negative in 3 of 3 fiscal years.
Persistent losses erode equity and the capacity to absorb shocks.
Revenue changed -35% 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.
Price is -100% from its 52-week high.
Equity markets price distress early; collapses of this size usually reflect fear of wipe-out in a restructuring.
Share count up +945% in a year.
Survival financing: repeated equity raises at depressed prices.
Last price $0.34.
Below the $1 minimum-bid listing standard (Nasdaq Rule 5550(a)(2) / NYSE 802.01C); sustained breach leads to delisting and loss of capital-market access.
Operating margin fell from -130% to -626% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue declined every year for three years.
Structural, not cyclical, decline.
0 severe and 1 moderate distress-related headlines in the last 6 months.
Headlines are corroborating evidence only; they are weighted lightly and never drive a flag alone.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Cash on hand covers all debt (net-cash balance sheet).
- Strong current ratio (7.93).
- High insider/promoter ownership (33%) aligns management with survival.
📰 Recent news scan
- dilutChina SXT Pharmaceuticals Announces $12 Million Registered Direct Offering With Significant Dilution Potential - Yahoo FinanceGoogle News · 2026-10-08
- China SXT Pharmaceuticals Inc. Announces $12 Million Registered Direct Offering - Stock TitanGoogle News · 2026-10-08
- SXTC Stock Whipsaws As Traders Target Extreme Volatility - StocksToTradeGoogle News · 2026-10-08
- SXTC Stock Draws Day Traders After Wild Price Swings - Timothy SykesGoogle News · 2026-10-08
- Thursday's pre-market session: top gainers and losers - ChartMillGoogle News · 2026-10-08
- China SXT Pharmaceuticals (SXTC) Jumps as Traders Pile Into a Thin-Float Rebound - Quiver QuantitativeGoogle News · 2026-10-07
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do SXTC's financial-health indicators show?
As of 2026-10-08, SXTC's public financial data places it in the 'Very weak' band with a distress score of 81/100, driven by market-implied default probability >20%, losses in each of the last 3 years and revenue collapse. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is SXTC's financial distress score?
81/100 ('Very weak'). Ohlson O-score -0.07 (model 1-year failure probability 48%). Merton distance-to-default -1.36 σ (model default probability 91.2%).
What works in SXTC's favour?
Cash on hand covers all debt (net-cash balance sheet). Strong current ratio (7.93). High insider/promoter ownership (33%) aligns management with survival.
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
Other Unclassified companies with distress indicators
- CNEY (CNEY)Very weak 100/100
- EPOW (EPOW)Very weak 100/100
- GIBO (GIBO)Very weak 100/100
- GNS (GNS)Very weak 100/100
- HKPD (HKPD)Very weak 100/100
- HUBC (HUBC)Very weak 100/100
Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.