AAW PHARMA LIMITED

Executive Summary

AAW Pharma Limited is a newly incorporated company with negative working capital and net liabilities, indicating liquidity and solvency challenges typical of early-stage businesses. Significant related party loans provide temporary relief but reliance on these is risky. Immediate focus on cash flow management, capital strengthening, and profitability is essential to stabilize and improve financial health.

AAW PHARMA LIMITED - Analysis Report

Company Number: 15033008

Analysis Date: 2025-07-29 15:15 UTC

Financial Health Assessment: AAW Pharma Limited (as at 31 July 2024)

---

1. Financial Health Score: Grade D

Explanation:
AAW Pharma Limited exhibits several warning signs in its financial statements. The company has net current liabilities of £171,250 and an overall net liability position of £16,283, indicating it owes more in the short term than it owns and has a deficit in shareholder equity. This suggests financial distress typical of an early-stage business with startup losses or cash flow challenges. The score D reflects serious concerns about liquidity and solvency but acknowledges this company is newly incorporated and may be in a growth phase.

---

2. Key Vital Signs:

Metric	Value (£)	Interpretation
Fixed Assets	154,967	Represents investment in goodwill and tangible assets; goodwill amortisation is ongoing. Indicates acquisition or intangible asset investment.
Current Assets	94,177	Includes cash (£20,395), debtors (£48,782), and stock (£25,000). Cash balance is low relative to liabilities.
Current Liabilities	265,427	Short term debts, including £191,480 owed to related parties interest-free, potentially a lifeline but a liability nonetheless.
Net Current Assets (Working Capital)	-171,250	Negative working capital indicates liquidity pressure—company may struggle to meet short-term obligations.
Net Assets (Equity)	-16,283	Negative net assets show the company has accumulated losses exceeding its capital, a symptom of financial stress.
Share Capital	3	Very small equity base, typical of start-ups but limits financial resilience.
Related Party Loans	191,480	Interest-free, repayable on demand loans from shareholders; critical to liquidity but may be unstable.

---

3. Diagnosis: What the Numbers Reveal About Business Health

• Liquidity Strain ("Weak Pulse"): The company’s negative working capital indicates it does not currently have enough liquid assets to cover its short-term liabilities. This is a classic symptom of cash flow distress, which requires immediate management attention to avoid insolvency.
• Solvency Concerns ("Low Resilience"): Negative net assets and shareholder funds signal that the company’s liabilities exceed its assets, a red flag for long-term sustainability. Without profitable operations or capital injections, this could lead to insolvency.
• Early Stage / Investment Phase ("Post-Surgery Recovery"): Given the company was incorporated in July 2023 and holds significant goodwill (intangible assets), it appears to be in an acquisition or investment phase. Amortisation of goodwill (£30,320 in the first year) reduces profits and contributes to negative equity.
• Related Party Dependence ("Life Support"): The substantial interest-free loans from shareholders are propping up the company’s finances. While helpful, reliance on related party funding can be risky if the loans are recalled or if additional funding is not forthcoming.
• Limited Operating History ("New Patient"): With just one year of financial data, the company is still establishing its business model and creditworthiness. The lack of turnover data is a concern but may be due to exemption from full financial disclosures.

---

4. Recommendations: Steps to Improve Financial Wellness

• Improve Liquidity Management:

  • Increase cash reserves by accelerating debtor collections and managing stock levels prudently.
  • Negotiate longer payment terms with creditors to ease short-term cash outflows.
  • Explore short-term financing options with favourable terms apart from related parties to diversify funding sources.

• Strengthen Capital Base:

  • Consider equity injections or capital increases to improve net asset position and reduce reliance on debt.
  • Engage investors or partners to provide fresh capital and strategic support.

• Cost Control and Profitability Focus:

  • Monitor and control operating expenses closely, especially amortisation and overheads.
  • Develop and implement strategies to increase sales and gross margins to move towards profitability.

• Transparent Reporting and Planning:

  • Maintain accurate and timely financial reporting to monitor key metrics and detect signs of distress early.
  • Prepare cash flow forecasts and scenario planning to anticipate funding needs and avoid surprises.

• Governance and Risk Management:

  • Directors should actively oversee financial health and engage external advisors if necessary.
  • Prepare contingency plans for potential liquidity shortfalls or adverse market conditions.

---

Medical Analogy Summary:

AAW Pharma Limited currently shows symptoms akin to a patient in the early recovery phase post-major surgery—while vital signs (assets) exist, the pulse (cash flow) is weak, and the patient is reliant on life support (related party loans). Without improved liquidity and capital support, the risk of financial collapse (insolvency) increases. However, with targeted interventions, there is potential for recovery and growth.

---