DIGITAL LYCHEE LIMITED

Executive Summary

Digital Lychee Limited faces significant financial challenges characterized by negative net assets and working capital deficits, which elevate its solvency risk. While regulatory compliance and ongoing business activities are positive signs, the company’s micro-entity scale and concentrated control pose operational and governance risks. Further due diligence on cash flows, director support, and client engagements is advisable to assess future viability.

DIGITAL LYCHEE LIMITED - Analysis Report

Company Number: 13639772

Analysis Date: 2025-07-29 13:41 UTC

1. Risk Rating: HIGH
   Digital Lychee Limited exhibits a high risk profile primarily due to its persistent negative net assets and net current asset position, indicating solvency challenges. The company’s liabilities consistently exceed its current assets, reflecting potential difficulties in meeting short-term obligations and ongoing financial instability.

2. Key Concerns:

• Negative Net Assets and Working Capital Deficit: The company’s net assets have deteriorated from -£2,167 (2023) to -£3,220 (2024), with net current liabilities worsening, signaling an erosion of equity and likely funding issues.
• Limited Financial Scale and Micro Entity Status: As a micro-entity with minimal turnover and assets, the company’s financial buffer is limited, restricting its flexibility to absorb shocks or invest in growth.
• Single Director and Shareholder Concentration: Control and management are concentrated in one individual, which, while not inherently negative, may increase operational and governance risk if the director’s capacity or commitment is constrained.

3. Positive Indicators:

• Compliance with Filing Requirements: The company is up to date with its annual accounts and confirmation statement filings, showing adherence to regulatory obligations.
• Active Web Presence and Business Activity: Operating an active website with social media presence suggests ongoing commercial activity and marketing efforts consistent with its software development SIC classification.
• No Evidence of Insolvency Proceedings: The company is not in liquidation, administration, or receivership, indicating it has not yet reached formal insolvency despite financial challenges.

4. Due Diligence Notes:

• Examine Cash Flow and Revenue Trends: Detailed review of cash flow statements and revenue generation would clarify liquidity and operational performance beyond balance sheet snapshots.
• Assess Director’s Financial Support: Investigate whether the director has provided or plans to provide financial backing or capital injections to address the negative equity position.
• Review Client Contracts and Pipeline: Understanding the company’s order book and client commitments will help gauge sustainability and prospects for improving financial health.
• Confirm No Related Party or Contingent Liabilities: Scrutinize notes for any off-balance sheet liabilities or related-party transactions that might exacerbate financial risk.