Primo sued for patent infringement and adds £1m loss to its balance sheet.

Primo raised £274k on Crowdcube in 2016. Now in its first full year since funding, it has lost £1m and incurred a US lawsuit for patent infringement.

It's not what you would call a good start. Albeit the lawsuit has been dropped.

The company's claim to fame for the moment is that one of its backers is Mark Zuckerberg's sister, Randi. Projected profits of around £300k have been replaced with a £1m loss. Profits for 17/18 are going to be £1.7m according to the company. They make a kids' toy that teaches programming and it seems they may have been using it to create their financial plans.

They had started life by raising $1.5m in pre sales on Kickstarter and from the comments on their page, it has been far from a satisfactory outcome. They appear to have run two KS campaigns - one in 2015 for delivery in 2016 and another with pledges for $700k for delivery end 2017. It is hard to see where all this cash has gone. Complaints are numerous.

The accounts are something of a revelation - in that they show exactly what HMRC is capable of  - which is nothing. This company has been in deficit since incorporation and was at June 17 sitting on a £1.13m liability. Since then there is no evidence of any new money coming in. Randi must be the backstop but it makes a mockery of the UK accounting system that such a company is allowed to call itself a going concern. The Crowdcube 'historic' accounting information looks very dubious when compared to the filed accounts; something we see too frequently.

Finally Amazon sells it but has only 5 reviews. So maybe its not really selling. Who, you might ask, wants to train their 5 yo to code? 

Notes Music and Coffee file further heavy losses after raising £900,000 on Crowdcube

Times are hard. Evidence is plentiful. Notes, which raised over £900k on Crowdcube in 2015, has filed losses of £380k for YE June 17.

Notes had 5 central London coffee shops open when they pitched on Crowdcube, valued at £6.8m. Now they have 10, so they have not been shy coming forward in this climate. 

However, they are way off their Crowdcube target of a profit for last year of £410k. Whilst there is cash in the business, they are heavily geared and the grounds will hit the fan if things dont pick up this year. Their balance sheet is over £600k in the red and this is with rent deposits of £322k taken into debtors. Whoever heard of getting a rent deposit back? 10 units equates to lease liabilities going forward of £5.4m. Cumulative losses are touching £2m.

Projections for this year reveal a profit of £1m - lets hope they can pull that rabbit out of the hat. 

Fanny's Kebabs are exposed as total amateurs having taken £150k off Crowdcube punters

Fanny's Posh Kebabs have made a serious error. Now corrected, they are no longer posh. So what are they? Lads English Kebabs.

The 3 lads who created the idea didnt do much research and have now been rightly ridiculed in the national press and SM for their idea of posh kebabs. The tag line was their key USP when they launched their campaign on Crowdcube. Now it's gone, just over a year later, as they open their first unit in the Turkish restaurant mecca of Stoke Newington. Good luck with that.

Even the founder admitted it was an error.

This article is well worth a read if you want to have a laugh. Investors in Fanny's should look away now............. 

https://london.eater.com/2018/1/22/16908872/new-restaurant-fannys-wants-to-serve-posh-cool-kebabs-in-stoke-newington

Jam Vehicles file new losses of £80k and are still striving to deliver their Jivr bike

Jivr bikes are almost ready to go. Having raised £160k on Crowdcube in 2013 and the same amount in pre sales on Kickstarter - the long delay is almost over.

In the meantime, the company has just filed accounts to April 17 showing losses of £80k. They would appear to be somewhat short of money unless they are about to raise more cash.

It is not clear from these minimal accounts whether the pre orders have already been paid for or indeed what state the business is really in. Still updates on KS declare that delivery of the bikes promised some years ago are about to start.

What will happen next? 

We told you so - Crowdcube success Pizza Rossa crashes out having taken £600k off punters

Pizza Rossa was hailed by Crowdcube as a great start up. It won the Crowdcube 2014 Start Up of the Year. The Kiss of Death. 

The company was founded and run by an Italian of extraordinary arrogance and as we predicted, penetrating ineptitude. In his first Crowdcude pitch he brushed aside our concerns about his numbers. This guy was big on his London Business School credentials but had no head for figures or business.

According to their projections they were due to be making over £500k profit last year with 5 outlets, when in fact they made a £44k loss with just one. Accumulated losses were £674k.  

The company made zero or even negative progress - closing all but one of its units as soon they opened them. The idea, the delivery and brains behind it all were poor, plus plus. This one was inevitable. There are plenty more still 'going' that will end up in the same hole.

In his explanation - below - there are no real reasons for the failure apart from the fact the idea was nonsense and the execution was dreadful. Whether the founder lied to you investors in an attempt to get your cash is a mute point. We know what what we know. LBS are partly to blame for all of this as they backed this guy. QED stay away from LBS backed ideas.

We have written about this shambles many times here

Here is his last attempt to make excuses - 

Sadly, I am not the bearer of good news as Pizza Rossa Ltd will close down at the end of the month.

The UK restaurant sector is under growing pressure from rising costs, with various rises in the legal minimum wage over the last 3 years, lower availability of staff in the market as a result of the Brexit vote, a strong appreciation of the Euro against the pound (which led to increases in the cost of ingredients, packaging, equipment and disposables), higher business rates, market saturation and a squeeze in consumer spending.

The casual dining and fast food sectors have seen widespread signs of decline, with Jamie's Italian and Byron due to close several stores as part of rescue packages, Eat and Prezzo possibly going into administration, Pizza Express converting dozens of restaurants to live entertainment venues to stop the decline. Four Italian pizzerias by-the-slice (out of about 20) closed in the last 18 months in central London alone: Marylebone, Tottenham Court Road, New Oxford St.

Our last update dated August 2017 exposed a decline in like-for-like sales compared with the first 6 months of 2016. This trend increased over the following months due to a number of factors:

• street works in Whittington Avenue between mid-July and early September caused a collapse in footfall in the street that resulted in sales being reduced by 40% between August and September, with the impact being felt until November
• permanent competition in our catchment area increased hugely. When we opened Pizza Rossa in June 2014, our direct competition (fast casual, fast food, takeaway) could be quantified in about 30 outlets in a radius of 400m around us. Over the last 18 months alone we have seen 25 new entrants in the area (including major players such as Marks & Spencer Foodhall, two new Pret, Itsu, Wasabi, even Boots with meal deals, etc). These new outlets did not substitute previous food offering: they were all brand new shops replacing retail or opening in new buildings. As a by-product of increased competition there was continuous heavy discounting and promotions for all new openings, thus resulting in further price competition and erosion of margins
• besides the above permanent competition, new street markets increased the casual/mobile offering, with stalls routinely opening at least once and up to 5 days a week outside the Gherkin (St Mary Axe), Devonshire Square, Fenchurch St and, more lately, a Christmas Market throughout December under the Cheesegrater (Leadenhall St). During the better trading days (Wednesday to Friday) these markets can bring 50 additional cost-competitive food sellers in the area
• overall permanent reduced local footfall in the last 12 months: among others, 650 Amazon staff left our building vacant last November, about 2,000 staff left the building opposite our street for complete redevelopment about 6 months ago. These two alone combined meant that an average of at least 50 regular customers per day do not show up at the shop anymore

Bearing in mind all of the above, we decided that leaving the City would be essential for the survival of the company.  We focused on different locations with a different mix of customers (residential, students, offices, shoppers and possibly tourists) and we increased our efforts in other revenue generators such as deliveries and events.
As part of the re-deployment efforts last year we tried without success to buy out one of our competitors and in Q4 2017 we opened a corner inside another shop in Finsbury Park, which ticked a few of the above requirements. This generates income but it is not a game changer.
Over the last weeks we started a negotiation for a lease of a great corner venue in Lower Marsh (Waterloo), but the landlord eventually decided to sell outright the shop rather than leasing it and we were left with no option.

The combination of the above factors forced us in December to meet the landlord’s agent and tell him that we needed to get out of the Leadenhall venue as we would struggle to survive the difficult period from Christmas to Easter. We were offered a significant rent reduction, with new payment terms that would allow the company to get through these difficult months and buy some time to find a different location.
Eventually, despite all previous conversations that suggested that we could stay at Leadenhall until the end of the year or, likely, early 2019, on Friday 23^rd we received unexpectedly the notice from the landlord to vacate the premises. All tenants in the building received the notice on the same day. And this means that we will have to vacate the premises by the end of March.

A Board call was called on Tuesday 02nd of March. We discussed various options to maintain the company trading. These were all regarded as not viable financially and/or operationally. As a result, the Board voted unanimously to close down Pizza Rossa Ltd after the 30th of March.

At this stage there are three main options in respect of the route to closing down the company, in the following order of preference but in increasing order of likelihood. In all cases, sale of equipment, fittings and furniture will be attempted where possible:

• sell the knowhow and brand to any interested parties and distribute any little proceedings (after repayment of all debt and liabilities) to shareholders
• pay off all creditors and strike off the company. If any monies are left, distribute them to shareholders and dissolve the company afterwards
• if none of the above works out, we may have to apply for Creditors’ Voluntary Liquidation (CVL)

Whilst we know that this news is frustrating, disappointing and unexpected, we gave Pizza Rossa our best.
I personally worked full time and was 100% dedicated to Pizza Rossa since December 2013. I did not receive any salary or other compensation for the first approx 18 months, I was remunerated with less than £1,000/month for the following 2 years and I further supported the company’s cashflow by freezing payment of the last 6 months of my salary.
None of the other Directors in the company were paid for their involvement. Moreover, the Board was formed by 5 of the 6 largest investors in the company, so that the best interest of the company was always at the core of all decisions.

We reached excellence in a lot of areas, from food quality to customer satisfaction to operations. All the venues we operated from (even the temporary ones) achieved 5* food hygiene rating, we delivered without problems in large quantities (Roadchef) and for major events (the largest, 2,000 people, the most recent 10 days ago for 600 people), we validated the business model with centralised production and distribution of products with superb quality and standardisation to other outlets that, indeed, did not require a kitchen.

With the benefit of hindsight we could have done some things differently. Besides systemic and local elements as described above, one of the main issues was that despite extensive research prior to starting up, we did not foresee the strong resistance by the British public to pizza for lunch and for takeaway, despite it being a successful evening and weekend food. The belief that pizza is unhealthy was stronger than it appeared in the initial interviews and trials and we had to fight against this perception throughout the life of Pizza Rossa.

As the Managing Director and founder of Pizza Rossa, I can only thank you for your belief and support and say how deeply I regret not having made Pizza Rossa the success we all hoped for.

I will issue another update in due course when we clarify the route we will follow to terminate the company.

Kind Regards,
Corrado Accardi
Managing Director, Founder

I think the 5 star hygiene award best sums up their achievement. Not sure about the claim that they validated the business model! As for the end game, option one is a non starter, option two is a dream and option three is a dead cert. Still in denial I think.

Brewdog EFP V slows to trickle as company slashes target

Brewdog's fifth Punk Campaign to raise £50m has been a turbulent ride. Now as the funding dries up, the Dog is not looking so confident.

When Brewdog launched EFP 5 they had a stated target of £50m, with an initial aim of £10m in 100 days. 

When the time for the completion of the £10m was drawing near - the company were still at around £8m mark - things looked a little sad. However through some sort of magic within 9 days they had convinced people to produce the required £2m to get them over the line. This was some achievement, as the average investment per day at this time was around £50k-£60k.

Since this large injection, which just happened to be around the date the £10m target was set to be completed - 15 January 2018, the company has received only £3m in 50 days. Doing some maths this takes the investment back to around the average of £50k to £60k per day. You might be forgiven for questioning the coincidence.

Realising that this daily input was not going to get even close to their £50m target, Brewdog have now reduced this 'target' to £15m - with no explanation. Its their crowdfunding so they can do pretty well whatever they like. But you have question the honesty behind it all.

Brewdog is a very successful company run by almost brilliant entrepreneurs. This sort of mucking about and deception isn't necessary. It reflects very poorly on the egos of the two founders who it appears just cannot stand being wrong, even when they are. It also makes the whole EFP project a bit of joke. Like their US EFP project turned out to be.

Lets hope it's not.  

New ICO from Spice being promoted by Crowdcube - is that legal?

So now Crowdcube are licensed by the FCA to promote an ICO? 

Ignoring for the moment the benefits that are claimed by Spice's new ICO to establish a blockchain operated investment fund, why are Crowdcube involved? Is this a last ditch attempt to get the fund filled? Darren Westlake, the Crowdcube CEO who sent out the promotional email, says that - 

I want to let you know about an opportunity quite distinct to others that have previously been available through Crowdcube. 

Applauding the appalling English - what does he mean? Crowdcube are not allowed to get involved in this area but here they are getting involved anyway; using their brand to positively promote this ICO. 

Ok, so we cant ignore the detail behind this offer. What is being issued is a new coin that has an asset value behind it - the NAV of the fund that the pot of money is being invested into.

The offer which is due to close in two days, is for $130m worth of new coin in the Spice VC Fund.

The BIG claim from Spice is that in the old world, VCs locked up cash in these investments for 7 to 10 years. Now apparently this new system will allow investors liquidity - the Holy Grail has arrived.

Well no actually - not so fast. The Holy Grail may be in sight but it is still firmly out of reach.

Reading fewer of the headlines that Spice are good at pushing out and more of the detail reveals the truth.

1. Spice will be putting aside 5% of the fund to allow coin owners to cash in. However the value offered will be automatically set by the calculation that keeps the value at 5% of the fund - so for example a run will mean rapidly falling value and therefore no cashing in. It looks like liquidity but isnt.

2. The NAV of the fund will set the price of the new coin in the 'market'. Who sets the NAV is not mentioned. We all know where that road leads.

3. They state that they have no idea if coin exchanges will accept their coin. So no guarantees of liquidity here.

4. The only liquidity here is that fellow Spice holders will be able to purchase your tokens and vice versa. That is not really liquidity as the attempt by Seedrs to create a secondary market for ECF shares has so far shown.  

In fact despite the pages of technical waffle, their is no real liquidity here at all. There might be but then there might not be. Worthless.

So the whole show rests on whether you believe that the team behind Spice have a clue how to invest in what they are terming companies between Seed investment and an A round. A gap they say is waiting to be filled. Your investment whether held in Spice coin, dollars or bananas will go up and down on the back of the performance of these companies. Which is pretty much where we came in. A fund's NAV is already worked out this way. Without liquidity, Spice offer nothing new. Liquidity can only exist where there is a buyer and seller - Crypto or no Crypto.  

It looks most likely to us that this yet another outfit climbing onto the Crypto tower so that when they waive their flag, someone notices.