CREDIT ASSESSMENT: QUALITY BITES LIMITED

1. Credit Opinion: DECLINE

This application must be declined. The company is subject to a Proposal to Strike Off at Companies House, indicating proceedings to dissolve the entity. Extending credit to a company facing dissolution carries unacceptable risk — any facility would likely become unrecoverable upon striking off. Additionally, both annual accounts and the confirmation statement are overdue, and a director resigned as recently as February 2026. These factors collectively demonstrate severe administrative and operational distress that renders this counterparty unsuitable for credit.

2. Financial Strength

Balance Sheet Summary (November 2024):

Observations:

• Growth in net assets appears positive on the surface (£944k → £1,155k), but this masks significant underlying deterioration.
• Debtors collapsed from £2,303,349 to £635,859 — a reduction of £1.67M. The 2023 "other debtors" of £813,956 has been eliminated entirely, and trade debtors fell from £1,489,393 to £593,488. This may indicate collection of overdue balances, write-offs, or a significant contraction in trading activity.
• Stock levels nearly doubled from £329,576 to £637,475 — potentially indicating slow-moving inventory or overstocking in a business facing dissolution.
• Tangible assets are heavily skewed to motor vehicles (£852,044 NBV), representing 68% of fixed assets. This concentration in depreciating assets raises concerns about asset quality and realisable value.
• Share capital remains at £100 — the business has been funded entirely through retained profits and creditor facilities, with no fresh equity injection.

Capital Structure Concern: The company carries £563,159 in long-term liabilities (finance leases £216,741, bank loans £24,017, other creditors £322,401). Combined with current liabilities of £808,900, total borrowings and creditor obligations significantly exceed the liquid asset base.

3. Cash Flow Assessment

Cash Position — Critical Deterioration:

Despite the apparent improvement from £4,466 to £8,418, cash remains critically low at less than 1% of current assets. For a food production and wholesale business with 29 employees, £8,418 provides virtually no buffer for operational continuity.

Liquidity Ratios (2024): - Current Ratio: 1.58x (adequate on paper, but cash-poor) - Quick Ratio (ex-stock): approximately 0.79x — below 1.0x, indicating inability to cover current liabilities without liquidating inventory - Cash to Current Liabilities: 0.01x — critically insufficient

Working Capital Concerns: - Trade creditors of £688,552 suggest the company is heavily reliant on supplier credit to fund operations - Finance lease obligations of £47,291 (current) + £216,741 (long-term) represent committed outflows - The negative taxation balance (£34,505) may indicate a refund due, but could also signal disputes with HMRC

Cash Flow Trajectory: The long-term decline from £284,945 (2016) to £8,418 (2024) demonstrates persistent cash drainage despite reported profitability. This pattern is inconsistent with a sustainable going concern.

4. Monitoring Points

Should the strike-off action be suspended and the company resume normal operations, the following would require ongoing surveillance:

1. Strike-off status: Monitor Companies House for removal of the strike-off proposal and confirmation the company remains active with intent to trade.

2. Filing compliance: Accounts and confirmation statement remain overdue — continued non-compliance could trigger compulsory strike-off or penalties.

3. Cash position: Cash must be monitored monthly. Any further deterioration below current levels would render the business unable to meet payroll and supplier obligations.

4. Trade creditor ageing: With £688,552 in trade creditors, monitor for County Court Judgments, supplier disputes, or evidence of extended payment terms.

5. Director stability: Recent resignation of Hassan AFZAAL (Feb 2026) requires understanding — whether due to internal dispute, loss of confidence, or legitimate restructuring.

6. Debtor quality: The massive reduction in debtors year-on-year should be verified — confirm whether this represents genuine collection, write-offs, or reclassification.

7. Stock composition: With stock nearly doubling, assess whether this represents strategic purchasing or slow-moving/deteriorating inventory in a frozen food business.

8. PSC structure: Four individuals/entities each holding 25-50% creates potential for deadlock in decision-making. Clarify governance arrangements.

9. Related party transactions: The significant "other creditors" balances (both current and long-term) should be examined for connected party lending that may have priority.

10. HMRC position: The negative tax balance warrants clarification — confirm whether a repayment is due or if there are outstanding disputes.