Proprietary Research · Financial Distress Intelligence

Distress
Radar

We analyze 2.4 million SEC filings using 14 ML classifiers to detect financial distress before it hits the headlines. Going concern warnings, financing desperation, revenue decline — the language of companies in trouble.

March 2026 · 14 distress classifiers · Biotech Alpha Analytics

The Problem: Distress Hides in Plain Sight

Companies in financial trouble don't announce it on Twitter. They bury it in SEC filings — going concern warnings, desperate financing language, declining revenue signals. We built classifiers to surface these signals before the market reacts.

2.4M
SEC filings analyzed
(2018–2026)
7
Distress classifiers
(negative signals)
7
Recovery classifiers
(positive signals)

We built 14 ML classifiers — 7 detecting distress (going concern, financing desperation, declining revenue) and 7 detecting recovery (strategic financing, beating expectations, growth). The NET health score reveals whether companies are getting sicker or recovering.

Why z-scores? Raw classifier scores are noisy. Q1 filings (10-K) always score higher than Q3 filings (10-Q). To find real distress spikes, we compare each quarter to its recent history. Below -2σ = statistically significant distress.

14 Classifiers: Distress vs. Recovery

Distress Signals (7 classifiers)

Going Concern Warning
Auditor doubts about the company's ability to continue as a going concern. The most serious signal.
Financing Desperation
Language indicating urgent need for capital: "seeking additional financing," "may not be able to continue."
Below Expectations
Missing analyst estimates, revenue targets, or internal projections.
Revenue Declining
Year-over-year or quarter-over-quarter revenue decreases.

Also includes: cautious/hedging tone, negative outcomes, uncertain timeline

Recovery Signals (7 classifiers)

Strategic Financing
Non-desperate capital raises: strategic investors, favorable terms, growth funding.
Above Expectations
Beating analyst estimates, exceeding guidance, outperforming targets.
Revenue Growing
Consistent top-line growth, expanding customer base, market share gains.
Pivoting Successfully
Strategic pivots that are working: new products gaining traction, turnaround executing.

Also includes: non-dilutive financing, positive outcomes, improvement vs prior period

The Z-Score View: Market-Wide Distress

We combine all 14 classifiers into a NET health score for the entire market. The z-score reveals when distress becomes statistically unusual.

Market Financial Health Z-Score: COVID, Rate Hikes, and Recovery
NET health = (recovery signals - distress signals) per 1000 sentences. Z-score compares to rolling 8Q average. Gray band = normal range. Outside ±2σ = statistically significant event.
COVID was a -3.5σ event. Q1 2020 saw market-wide distress spike to levels not seen in our dataset. Going concern warnings, financing desperation, and revenue decline all surged simultaneously.

The Four Signals Since 2020

Q1 2020: COVID Shock
-3.5σ — Pandemic panic. Every company simultaneously filing distressed language. Going concern warnings spiked across all sectors.
Q2 2020: Extended Crisis
-2.4σ — Crisis continued. Companies still scrambling for financing, revenues collapsing, uncertain timelines everywhere.
Q3 2022: Recovery Breakout
+2.3σ — First positive breakout. Despite rate hikes, companies showed recovery language. Strategic financing, beating expectations.
Q4 2022: Sustained Recovery
+2.3σ — Recovery confirmed. NET health improved to best levels since 2019. Companies stabilizing after pandemic disruption.
Current Status (Q4 2025): NET health at -37.8 — near the best in our dataset. Only Q4 2019 was healthier (+12.5). The market has recovered from COVID and rate hike stress.

Current Watchlist: High Distress Companies

These companies showed the highest distress signals in recent filings. High distress percentage means a large fraction of their filing language triggers our distress classifiers.

Ticker Company Filing Date Distress % Recovery %
COSM Cosmos Health Inc. Dec 2025 27.8% 8.4%
SBEV Splash Beverage Group Oct 2025 27.3% 10.7%
KZR Kezar Life Sciences Nov 2025 26.9% 14.6%
MURA Mural Oncology Nov 2025 25.0% 10.6%
IPW iPower Inc. Dec 2025 24.9% 8.8%
GRNQ Greenpro Capital Nov 2025 24.9% 10.8%
XENE Xenon Pharmaceuticals Nov 2025 24.9% 14.8%
CAPC Capstone Companies Nov 2025 24.4% 15.2%

Note: High distress % indicates filing language, not necessarily imminent bankruptcy. Many biotechs show elevated distress due to pre-revenue status and financing discussions.

How We Built This

This analysis processes 2.4 million SEC filings. Each sentence is evaluated by 14 ML classifiers. We aggregate by quarter and apply rolling z-score normalization to reveal market-wide distress patterns.

2.4M SEC filings
→
All public companies
→
14 ML classifiers
→
Rolling Z-Score
→
Distress signals
NET Health = (Recovery − Distress) / Sentences × 1000
Positive = more recovery language. Negative = more distress language. Z-score compares to rolling 8-quarter average.

The 14 Classifiers

Distress (7)
going_concern_warning, financing_desperation, below_expectations, revenue_declining, cautious_or_hedging_tone, negative_outcome, uncertain_timeline
Recovery (7)
strategic_financing, non_dilutive_financing, above_expectations, revenue_growing, positive_outcome, improvement_versus_prior, pivoting_successfully

Key Takeaways

  • 1 COVID was a 3.5σ distress event. Q1-Q2 2020 showed market-wide panic in SEC filings — going concern warnings and financing desperation across all sectors.
  • 2 Q1 is always the most distressed quarter. 10-K filings contain more cautious language than quarterly reports. Don't panic at Q1 spikes.
  • 3 H2 2022 marked the recovery. Despite rate hikes, companies showed recovery language. The market stabilized faster than headlines suggested.
  • 4 High distress ≠ imminent bankruptcy. Pre-revenue biotechs always show elevated distress due to financing discussions. Context matters.