Investment Thesis
Zapata Quantum exhibits critical financial distress with negative stockholders equity of -$8.3M, zero cash reserves, and a current ratio of 0.17x indicating severe insolvency. The company's core operations are deeply unprofitable (-$1.7M operating cash flow, -88.4% operating margin) with declining revenue (-31.8% YoY), while the reported $9.3M net income appears driven by one-time gains rather than operational improvements.
Strengths
- Software sector has potential for margin expansion if operational efficiency improves
- Gross margin of 16.4% provides some revenue coverage despite low absolute levels
- Company remains operational and has not ceased business
Risks
- Negative stockholders equity of -$8.3M indicates technical insolvency and high bankruptcy risk
- Zero cash reserves with current ratio of 0.17x creates immediate liquidity crisis
- Operating cash outflow of -$1.7M with declining revenue is unsustainable without external funding
- Cannot service debt or operations from operational cash flows (interest coverage -6.7x)
- Concentrated debt ($1.2M) relative to small asset base ($2.3M) creates refinancing risk
- 31.8% year-over-year revenue decline indicates deteriorating business fundamentals
Key Metrics to Watch
- Cash position and ability to raise capital for operations
- Revenue stabilization or return to growth
- Operating cash flow return to positive territory
- Stockholders equity recovery above zero
- Gross margin sustainability and operating expense rationalization
Financial Metrics
Revenue
3.9M
Net Income
9.3M
EPS (Diluted)
$0.04
Free Cash Flow
-1.7M
Total Assets
2.3M
Cash
0.0
Profitability Ratios
Gross Margin
16.4%
Operating Margin
-88.4%
Net Margin
240.9%
ROE
N/A
ROA
410.9%
FCF Margin
-43.8%
Balance Sheet & Liquidity
Current Ratio
0.17x
Quick Ratio
0.17x
Debt/Equity
N/A
Debt/Assets
463.9%
Interest Coverage
-6.68x
Long-term Debt
1.2M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-19T23:54:21.949373 |
Data as of: 2025-12-31 |
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