Is SonicStrategy (CSE:SONI) Using Debt In A Risky Way?
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that SonicStrategy Inc. (CSE:SONI) does use debt in its business. But the real question is whether this debt is making the company risky.
When Is Debt Dangerous?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
What Is SonicStrategy's Net Debt?
As you can see below, at the end of September 2025, SonicStrategy had US$34.1m of debt, up from US$1.19m a year ago. Click the image for more detail. And it doesn't have much cash, so its net debt is about the same.
How Strong Is SonicStrategy's Balance Sheet?
According to the balance sheet data, SonicStrategy had liabilities of US$34.2m due within 12 months, but no longer term liabilities. Offsetting these obligations, it had cash of US$545.9k as well as receivables valued at US$18.0k due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$33.6m.
The deficiency here weighs heavily on the US$5.91m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, SonicStrategy would likely require a major re-capitalisation if it had to pay its creditors today. When analysing debt levels, the balance sheet is the obvious place to start. But it is SonicStrategy's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
See our latest analysis for SonicStrategy
In the last year SonicStrategy wasn't profitable at an EBIT level, but managed to grow its revenue by 339%, to US$1.7m. That's virtually the hole-in-one of revenue growth!
Caveat Emptor
Despite the top line growth, SonicStrategy still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable US$2.9m at the EBIT level. Combining this information with the significant liabilities we already touched on makes us very hesitant about this stock, to say the least. Of course, it may be able to improve its situation with a bit of luck and good execution. But we think that is unlikely, given it is low on liquid assets, and burned through US$827k in the last year. So we think this stock is risky, like walking through a dirty dog park with a mask on. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 6 warning signs for SonicStrategy (5 are a bit concerning) you should be aware of.
When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
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