Friday, 18 January 2019

Ethos Global in Liquidation and newco Soma London England in deficit - what is going on here?

Ethos Global, which took £709k off Crowdcube investors and is now in Liquidation, has seen no filings posted at Companies House for almost 12 months. In fact the Liquidation, instructed by court order in July 2017, has never filed a single document referring to the company and its financial status.

We have written about them many times here and this includes an email for Dr Theo laying out how new fully paid up shares will be issued by the end of August 2018 and how investment is flowing into the newco. Neither event has been filed at Companies House. 

As you may know, we have been in touch with the good Doctor Theo to try to help shareholders find out what is happening. He has repeatedly promised to provide an explanation but never has - it is always manana. His newco, set up just before Ethos was forced into Liquidation by Court Order in July 2017, has now filed accounts for its first 13 months to February 2018. Soma London England is using the premises of the old Ethos Global in London. This is before the Liquidation of Ethos has been processed. 

Soma revenues were just over £500k but it filed a loss of £130k and is £70k in deficit as of that date. Despite numerous written promises that shareholders in Ethos would receive free shares in Soma  - this has never happened.

The Soma accounts are micro and make no mention of why they consider themselves able to carry on as a going concern. There is no breakdown of the current creditors totalling £148k as against the current assets of just £24k - it may well be that Dr Theo is the main creditor.  The company filings show only one issued share, owned by the good Doctor. Although this filing is now almost 12 months old, no new shares appear to have been issued.

If you wanted to create a scenario where it showed how easy it is to take the piss out of the UK accounting system and HMRC, then this would be it. It may be that no laws have been broken - but it certainly doesnt make sense. 

Wednesday, 16 January 2019

Bar operator Burningnights to be bought out of administration possibly saving some of the Crowds £7.5m

Following our story of the administration in October 18 of Burningnight, light appears at the end of the tunnel, as a northern based restructuring company, Access Commercial Finance, has offered to buy some of the failed group out of administration.

We do not know yet what price has been paid, so 960 odd Crowdstacker investors will have to wait a little longer to see how much of their £7.5m is recoverable. 

Our October piece is here

The rest of the creditors are unlikely to see anything and if you believe the sums listed on the administrators report, that means losses for them, north of £2m. 

All round a bit of a disaster. 

Tuesday, 15 January 2019

Jivr Bike are back - on Seedrs this time. Still their Kickstarter paid up customers wait for wheels

Anyone contemplating supporting the current funding round for Jivr  (Jam Vehicles) should read the comments section of their still undelivered Kickstarter campaign. 

You can find them here -

We make no comment as to whether this would be a wise investment but we do ask investors to be informed. You wont find this link on Seedrs, where they are currently asking for EU850k. In fact you wont find a reference to the KS confusion (customers' views, not ours). Promised refunds have not been received. And you will find it quite hard to see that EU600k of this round had already been raised prior to the Seedrs campaign - so the current EU619k raised doesnt look quite so impressive. Bit like a painting where viewers are not told that the image was traced from the original and then coloured in.

Seedrs never used to try this sort of thing and it is a shame commercial pressures have changed that. Jivr started on Crowdcube with £160k in 2013.

It isnt just that there are so many complaints over such a long time but its the consistency in topic - Delivery promises broken, refunds unpaid. Misinformation rife.

We have written a few times about this company here. They may well go onto become a success but please invest with all the information in front of you.

In future this information will only be available to members of our new ECF.Buzz which is now taking on members and will open in the summer.

Sunday, 13 January 2019

Airlander ditch prototype and move to production for launch sometime in the 2020's

We have followed the Crowdcube backed Airlander for a while now. After the disaster which wrecked the prototype airship last year, the company received £32m in insurance. Now that prototype has been permanently grounded and the company aims to have a commercial version up in the skies in the 2020's.

We have written about them before here 

This was always going to be a long shot. As it turns out the £32m from the insurance claim may well be a blessing. The prototype had done its job, according to the management and rather than just bury it, they can now show £32m in cash for it. 

With luck like that, it seems that this thing may fly? There is a news report by the BBC here

In the original Crowdcube raise, the company expected to have revenues of £160m this year, resulting in profits of £30m. But as they say, who believes projections. All companies need a moment of luck, a turning point and the apparent disaster last year may just be it. 

Saturday, 12 January 2019

Crowdcube launch a January only £500k Fintech investment competition but have only 1 Fintech company live

So in partnership with Deloitte, Green Shores Capital and Linklaters, Crowdcude are offering winners of their new January Fintech competition, a share of £500k investment. This will be split 3 ways, according to the article in Forbes - here

In order to be eligible to enter, Fintech start ups must be on Crowdcube raising money. Having access to a £500k is fantastic for Fintech start ups but then it may depend on the terms being offered, as this is an investment not a hand out. No details on that appear in the Forbes article. We assume if the terms cant be agreed the investment, much like so many 'agreed' on Dragon's Den, will come to nout. In that case it would just be a PR stunt. 

The rather odd thing is that there is only one company that you could tag as 'Fintech' currently on CC and that one is only 53% funded with 8 days to go. So not exactly a caste iron certainty.

So we have to assume that the platform and its partners know that 3 suitable investment opportunities are booked and ready to go live before the 31 January. Which rather spoils the idea of a competition we think. But that's just our opinion - we certainly wouldnt wish to raise the ire of an internationally recognised law firm! Not again!

PR comes to mind, especially as the article is accompanied by shot of Luke Lang's cheeky grin. 

Friday, 11 January 2019

Crowdcube make considerable improvements in their transparency and revenues. Will it continue?

Crowdcube have produced another of their famous infographics - for calendar year 2018. For the first time we can remember, the facts are plainly explained and seem accurate. 

There is still the opening figure of money pledged - well over £200m. This figure is completely irrelevant and really should be banned by the FCA. But clearly someone has had a word, as at least now they tell people this not the 'invested' total but the pledged total. So some positive progress on the honesty front. 

The invested total is an impressive £147m. But as this includes some whoppers including their own raise, the revenue is still disappointing and loss making at just £6m. It seesm they are still offering the larger companies special terms and having the smaller start ups pay for them. Costs are not mentioned - who wants to know that figure when it spoils the party - but from historic data it is north of £8m, so the losses will be substantial. And unfortunately the PR department got hold of the second section where they compare 2018 with 2017 by using apples and oranges.

Still, it is a long way from previous PRings and maybe signals a change in the ethos of the company? Maybe continued pressure and failures like the very recent Emoov, have eventually forced the management to take the truth more seriously. 

This year is going to be tougher. We have already noticed companies delaying or cancelling pitches. It is impossible to work in quicksand. And in 2019, after 8 years, Crowdcube really do have to deliver a large success or two. Cant see them at the moment but you never know. There are good companies out there that have used Crowdcube and one may be popped. However the weight of the rubbish, now collecting around the Crowdcube keel, is huge and if these companies choose 2019 to close then all bets are off. 

Thursday, 10 January 2019

Socapps Limited is a cautionary tale on how long a company can limp on before closure without filing accounts

Socapps sits on the CH files much like a derelict empty plot sits in a town - just waiting for someone to do something, anything, with it. It hasnt filed accounts since YE February 2015. It raised £77k on Crowdcube in 2014.

We have written about them before - here

The App is now owned by Cornish Media Industries, which appears to have no connection to Socapps Ltd. Although there is some connection between the directors.

Why the company has not been closed down is a mystery. The first First Gazette was posted in May17, suspended and discontinued and then re issued August 2017 and then suspended again. Still no accounts since February 2015 - almost 4 years ago.

Of course this company is currently, quite legitimately, still on Crowdcube's active list. Does that make any sense to anyone? We can confirm this is not the only company funded via Crowdcube that is in this type of situation.

Wednesday, 9 January 2019

Crowdcube's NY starts with a Bang and Whimper as I Love Gorgeous piles into the administration buffers

As yet another expensive flop on Crowdcube heads out of the door to oblivion, we ask if Crowdcube's 1 star rating on Trust Pilot is justified. 

I Love Gorgeous raised £690k on Crowdcube in the Summer of 2016, so just over 2 years ago. Now it has been put into administration in an attempt to find a buyer. As with most administrations, it seems unlikely that Crowdcube investors will see their money again. The company has 3 outstanding charges with HSBC registered at CH. All are 4 years old and do not seem to be for large amounts.

The company had projected that in YE March 2019 it would be making a profit of £1.1m on a turnover of £4.8m. Well if you believed that you will believe anything but clearly investors did. As is alarmingly common on Crowdcube, the actual figures given to potential investors for years gone by bear little resemblance to figures filed at CH. The company was making profits before coming to Crowdcube to 'expand'. Exploded might be a better term. 

Be it bad luck, unfortunate timing, Brexit, the easterly wind or simple crass management, the outcome is a familiar one. Another business failure promoted and facilitated by Crowdcube. HNY boys.   

Monday, 7 January 2019

New S/EIS 'Risk to Capital' rules make a mockery of investing in Start Ups

Image result for hmrc

The new rules brought in the 2018 Finance Act to prevent the abuse of S/EIS tax reliefs for SMEs and start ups, are completely unworkable. We now have evidence of one case where advanced assurance has been denied on the basis that the company's plans showed they aimed to give investors a return. 

Company X applied for advanced assurance (AA) under S/EIS tax reliefs for their current funding round. The company complied with all the standard criteria for these reliefs. However under the new 'risk to capital' criteria that came into force last year, HMRC has denied this company AA. The letter states - 

''The exit provisions provided in the supporting documents are indicative of an arrangement whereby investors will receive a return of their investment''  - thereby contradicting the new rules.

HMRC have made it very plain that this 'risk to capital' criteria must be met as a first hurdle before any other conditions are examined. So if your business shows your investors getting their money back then you will not be eligible. That's the law. 

'Risk to Capital' is 'defined' by the new rules as being the assurance that the risk of losing the investment is greater than the chances of it being returned. How you calculate these chances, which are based almost entirely on future events, is not discussed. What HMRC want people to invest in, are businesses that are more likely to fail than succeed. If you have one of these, then your investors will be eligible for tax relief. Makes perfect sense to us!

The full rules are here

The implication is stark. You cannot hope to get AA if you offer investors a business plan that shows at some stage in future, investors will get their money back. Note -  this is not a return on investment - it is merely the return of the principle sum. 

If we expand on this - companies now hoping to get AA on S/EIS schemes - roughly 100% of all companies using equity CF, then their plans must show that investors will most likely lose all of their money. That is so stupid as to be ridiculous. Who in their right mind seeks investment in a business knowing from the start that they will take that money and lose all of it. Then again, who invests using S/EIS reliefs knowing that they will certainly be making a lose.

There are many ways the Government could improve S/EIS but this isn't one. What we will now get - if this refusal is an indication of things to come, is companies creating a set of plans for HMRC and another set for investors. I do not believe I have ever seen a PD that assumes from the outset that all the investment will be lost.

We get this information to you as we have many contacts now in this sector and they are concerned as to the direction this is all going. When we launch ECFBuzz in July of this year - this sort of advice will be restricted to members - so why not join up now with a 50% discount here - 

Friday, 4 January 2019

Albion Tea trading as Brew packs it in and closes down losing Crowdcube investors another £180k

Brew raised £180k in September 2015. It opened its only unit for just 5 months and has taken until now to be closed down. And you wonder why the failure rate is so low.  Brew was a shambles if you are going to be generous. 

Brew has the doubtful honour of being Crowdcube's first 2019 failure. Well actually it closed over a year ago but if directors do not take their responsibilities seriously and leave it up to HMRC to clear up their mess, then this all takes time. No doubt the directors will be making up some success story for their Linkedin page. 

Yet more evidence that investors in Equity Crowdfunding need our new service ECF Buzz - you can take a look at it here  - it will be the one stop website for all the information you need to make better informed investment decisions and hopefully avoid this type of mess. 

Filmore and Union may make it with backers BGF putting in £3.5m but they are miles off their Crowdcube numbers.

Filmore and Union told Crowdcube investors that YE Mar 2018 they would see the company making profits of just under £1m. Filed accounts show losses of £425k.

No need to panic as the company refuelled in Sept 2017 with a £3.5m investment from BGF (Business Growth Fund). Still it is yet another example of just how wide of the mark these Crowdcube projections are. And yes it does matter as the valuation the company gave itself in 2016 when it raised over £800k from Crowdcube investors, was largely based on future performance - ie the projections. This is the valuation that set the share price for investors.

It may of course all come out in the wash if the company make it. But it doesnt make sense to us as a way to run an investment platform.  All the evidence points to grossly exaggerated projections leading to grossly exaggerated valuations. Which more often than not end up as train cash.

Thursday, 3 January 2019

What the hell are Seaborne Freight up to?

HM Government have awarded start up Seaborne Freight Ltd a £14m contract to launch a new RoRo service from Ramsgate to Ostend on the 1st of April 2019. No, it is not an April Fools. Chris Grayling has told Channel 4 that the Government carried out extensive due diligence on the company, its plans and its directors. Hmmm - really Chris. Well did you know that..........

For the record, we were the first to understand that Ben Sharp was John Sharp, using our DD experience. And that he had been involved in a liquidation owing HMRC £1m plus. We were also the first the tie other liquidations to other Seaborne directors. Both The Times and The FT rang us to get this information, which we gave them on the strict understanding that we would get credit for our work in the articles. Both papers reneged on this agreement. At a time when we are launching a new equity CF information service to promote the truth and honesty in this sector, this kind of shoddy backhanded behaviour is shocking.  

1. Ben Sharp, quoted as the CEO, has never run a  successful company let alone one in shipping. His LI page claims he is currently CEO of Mercator International. This company was forced to close by HMRC back in 2016, having filed a balance sheet £1.4m in the red for YE March 2013. 3 other Mercator companies were also closed. His name at CH is not Ben Sharp but John Edmund Paul Sharp. The total disregard for any attempt to present real accounts with notes doesnt bode well for Graylings KPIs when ot comes to issuing the £1.4m - another claim he made to Cathy Newman. Anyone capable of presenting accounts like this in 2013 is simply not interested in doing things properly. Something most people will recognise as a fact when they know that the new Seaborne copied its Articles from a takeaway company.

2. Sharp is also a director of Albany Shipping which does very little and is technically insolvent. Two other Seaborne directors are also directors of Albany.

3. Other Seaborne directors, are currently involved with the liquidation of Litigation Protection where debts exceeding £500k are also owed to HMRC and the liquidation of Access to Justice 2000, completed in 2014.

4. We couldnt find any other shipping experience save for the so far dormant shipping company Myferry.

This is not exactly the sort of picture painted by Grayling, who claims he has every confidence in Seabourne being able to launch a new service from a port that currently runs no ferry service and will need substantial dredging and infrastructure works before the service starts in less than 3 months . What DD did he really carry out?

Due Diligence is an art and its seems clear Grayling and his team do not have this skill set. We do. That's why we are able to get investors in one of highest risk sectors, the real information so you can make an informed decision.

Finally who in their right mind would award a new piece of vital infrastructure in a national crisis to a start up with so little shipping experience, when they have to launch a new service in 3 months -  a service which has no time to iron out any wrinkles. Well clearly only a total idiot.