Investment Risk Analysis: EASEBANK LTD

1. Risk Rating: HIGH

Justification: The company presents severe liquidity constraints with current assets covering only 5.4% of current liabilities, negative working capital of £326,562, and a declining cash position. While net assets are positive at £119,779, the company's solvency is entirely dependent on continued forbearance from director and family lenders, and the realisability of a single property asset.

2. Key Concerns

Concern 1: Critical Liquidity Deficit

The company holds only £18,759 in cash against current liabilities of £345,321, yielding a current ratio of approximately 0.05:1. This is dangerously low and indicates the company cannot meet its short-term obligations from liquid resources. Cash has declined consistently over three reported periods (£31,139 → £22,084 → £18,759), suggesting ongoing cash consumption.

Concern 2: Extreme Related Party Dependence

The balance sheet is dominated by related-party financing: - Director's loan (current): £339,925 - Family loans (long-term): £495,962 - Total related-party debt: £835,887 (representing ~99.6% of total liabilities)

This structure means the company's survival depends entirely on the continued willingness and ability of directors and family members to maintain this financing. Any withdrawal of support would likely trigger insolvency.

Concern 3: Asset Concentration Risk

Virtually all company value is concentrated in a single freehold property (carrying value: £992,259, including a revaluation surplus of £262,927). This creates: - Limited diversification - Dependency on property market conditions - Potential illiquidity if forced disposal is required - Revaluation surplus that may not be realisable in a distressed scenario

3. Positive Indicators

• Improving Equity Position: Net assets have grown steadily from £45,199 (2018) to £119,779 (2024), demonstrating gradual wealth accumulation through retained profits.

• Historical Recovery: The company recovered from a significant negative equity position of (£186,275) in 2015, suggesting experienced management through financial difficulty.

• Stable Long-Term Debt: Family loans have remained unchanged at £495,962 for at least three consecutive years, indicating no imminent repayment pressure from these lenders.

• Regulatory Compliance: Accounts and confirmation statements are filed on time with no overdue items. The company has maintained active status since 2005.

• Property Asset Backing: The freehold property provides tangible asset support that exceeds total liabilities, offering potential security for refinancing if required.

4. Due Diligence Notes

Priority Investigations:

1. Director's Loan Terms: The director's current loan of £339,925 is classified as due within one year. Clarify whether this is genuinely repayable on demand or effectively long-term. Obtain any loan agreements or board minutes documenting repayment terms and intentions.

2. Family Loan Documentation: The £495,962 in family loans has remained static for multiple years. Investigate the terms, interest rates (if any), maturity dates, and relationships between lenders and shareholders.

3. PSC Register Discrepancy: The PSC register lists five entries with overlapping names (Mohammed Mushtaq appears twice with slightly different formatting; Mohammad Musadaq similarly). This suggests potential administrative errors or duplicate filings. Verify actual ownership structure—current entries could imply ownership exceeding 100%.

4. Property Valuation: The freehold property includes a revaluation surplus of £262,927 on an original cost of £737,073. Determine the date and basis of this valuation. Assess current market value versus carrying value, particularly given property market fluctuations.

5. Trading Activity: The company reports zero employees and SIC code 96090 ("Other service activities not elsewhere classified"). Clarify the nature and extent of trading activity. Revenue figures are not disclosed (filleted accounts), making it impossible to assess operational viability from filed data alone.

6. Director Resignation: Mohammed Mushtaq resigned as secretary on 3 March 2026. Understand the reason for this change and whether it reflects any governance concerns.

7. Cash Flow Sustainability: Request cash flow statements to understand how operational costs are being met with declining cash reserves and no apparent revenue generation.

8. Deferred Tax Position: The deferred tax provision of £49,956 has remained unchanged—verify whether this relates to the property revaluation surplus and assess the likelihood and timing of this liability crystallising.