Ethos Global and Crowdcube sent this to shareholders - can you understand any of it?

Ethos Global is in Liquidation and there have been issues with setting up of a newco by the founders. In August this year, Dr Theo Koutroukides sent the email below to Crowdcube, who then forwarded it their clients  - the shareholders in Ethos Global - without apparently reading it. 

It is complete nonsense and for an FCA regulated company like Crowdcube to be passing this off as acceptable advice to THEIR clients asks a lot of serious questions. None of which will be answered as usual. Let us know if you can understand what he talking about. 

FYI no new shares have ever been issued by Soma London England, a company solely owned by the two founders of Ethos Global. No shares in SLE have been gifted to Ethos Global SHs as we write. SLE now operates a gym in London which was initially paid for by Ethos Global and therefore by its shareholders' £800k investment. Very little communication has been forthcoming about any of this until we started to dig.

It seems to us highly irregular to suggest to SHs in Ethos Global, that they can claim loss relief in a company, when they are being offered shares FOC in another company in lieu of their Ethos shares. Isnt that illegal? The same must go for the offer of exchanging Ethos shares for value in the newco by way of discounts in the gym. Otherwise HMRC are paying for your yoga lessons! For this suggestion to be sanctioned by Crowdcube is quite astonishing. Although from past experience, this will be down to ignorance rather than anything more sinister.

It is also worth noting that no progress has been made with the liquidation of Ethos Global since it started over a year ago. In the Crowdcube pitch, the soon to be launched London studio was a key driver in the sales pitch. 

Hello Crowdcube, Please see the below email for your attention from Dr Theo Koutroukides, of SOMA House.

Dear investor, You are receiving this communication because you chose to receive shares in Soma London England Ltd. We are now in position to issue the shares to you following restructuring of the company under a new lease, assets, fitouts and successful implementation of the new business plan towards our most successful last month, summer and quarter historically. Thanks for the continuous advice and support from so many of you in all the necessary steps we had to take prior to issuing the shares to ensure validity of (1) your initial 30% EIS; (2) in addition to 45% loss relief upon company liquidation in process, and; (3) new shares in the new company. For example, a £10k investment under normal circumstances would receive back a total of £6,150 plus a discretionary issue of the previous number of shares in the new company; that would be the original number equivalent to £10k investment out of the original total pool of shares plus new ones to include subsequent investments, options and our third, non-salaried Director. These are fully paid-up, ordinary shares with pre-emption and full voting rights. Non-voting B shares have been upgraded to full-voting A shares. The shares will be issued in 14 days, shortly after midnight of Sunday, 26th August, when the current investment round closes at the pre-money valuation of £1,629,653 with a minimum investment of £10k. We are currently exceeding the £200k mark including contributions from all three company directors. By completing the current bridge round to consolidate our London base and model, we are looking to open right after a larger round from next month towards expansion. The current round gives us the flexibility in time and operation to be in a strong position while we are negotiating bigger deals on the table. Please note the above information is presented to you as a direct contact and past peer to become a future shareholder in the new company and is by no means an investment promotion or advert. It is merely intended to honour the principle that shareholders would normally have pre-emption rights by receiving investment information in advance. Please contact me directly if you need more details. Some of you requested whether you could exchange the value of the shares with services at SOMA House. For investments up to £750, we can offer 3x the value of the initial investment in services at SOMA London. For example, instead of £100 equivalent of shares you may benefit from £300 of services that are also transferable to your friends and family. If interested, please contact me by 26th August. You may see our most recent news at www.soma.house and Instagram. Trends are positive and the team is performing remarkably well as we continue to develop new and exciting revenue streams with higher profit margins, further differentiating ourselves from the noise. To reiterate, the offer is made voluntarily by the Directors of the new company without any payment required by you and at the cost of the new company. No response is required from you to have your shareholding issued and maintain your 30% and 45% EIS benefits. Thank you again for being part of a long journey and we look forward to welcoming you officially to SOMA House as new shareholders. Kind regards, Dr. Theo Koutroukides Director of SOMA House T: +44 (0) 759 323 4666 E: ceo@soma.house SOMA HOUSE OLD SPITALFIELDS MARKET 8 HORNER SQUARE LONDON E1 6EW Further to this email, Crowdcube will be in touch after shares have been issued by SOMA House in late August. As a reminder, any shares issued in connection with the above email will be held by the Crowdcube Nominee on your behalf and in accordance with our standard Declaration of Trust. If you have any questions regarding the Nominee, please contact support@crowdcube.com. Kind regards, Crowdcube

Burning Night, the Bierkellar operator, has been placed into Administration by its P2P loan company Crowdstacker

BurningNight Ltd raised £7.5m via a P2P loan with Crowdstacker at the start of 2017. With a healthy 7% interest and short term of just 3 years, the rewards were almost too good to be true.

Well.....they were. 

For reasons as yet undisclosed (but fairly obvious) Crowdstacker has, as their major secured creditor, pulled the plug and emptied all barrels. Their hope is that the venues can be sold on, to recoup the debt. 

The sounds of the Oompah Oompah band will be no longer.

Writing about the opportunity at the time of the raise, the CEO stated -

“When we initially approached Crowdstacker it was because we wanted to choose a way of financing our expansion that would allow our existing loyal customers as well as new potential customers and investors to participate in our growth.  

“It has proven to be very popular with investors, and mutually beneficial to all, so it makes sense to extend this source of funding.”

Maybe customers wont be thanking him for much now. I think it is more likely that the banks said no and everyone else said no.

It does seem a little curious that this company was able to raise £7.5m so easily  - its initial target was £3.5m but it then doubled that. What real DD was done by Crowdstacker has to be questioned. If they did do their job, then someone there needs firing. 

These P2P loans are supposed to go to established companies with relatively solid foundations. Not flighty doubtful operators. 

Hopefully it will all end well. 

Ginx TV files losses of £1.77m - time to change channel?

Crowdcube investors gave Ginx TV £579k in 2016. The company also took in investment from Sky that year.

It appears that the Sky money bought considerably more than the money from Crowdcube investors.

But in the end, what is has all bought so far is, not much. The filed accounts speak about 'almost' signed contracts that will come into play for 2018 and beyond and new funding that will be on the books. Well the new funding has not yet materialised at CH and we just dont know about those contracts.

What we do know is that the company's own estimation of its YE Dec17 profits, in 2016, was a profit of £634k. The real accounts just filed show a loss of £1.77m 

Oh well. Who ever believed their projections anyway. This is just telly after all. 

What has happened at Crowdcube's Ethos Global? We spoke to the good Doctor.

Dr Theo Koutrakides and his wife Jennifer Hersche set up a yoga studio in Cambridge. It took £800k off Crowdcube investors and was then put into liquidation by court order. At the same time the two directors opened up another yoga studio in London as Soma London England Ltd. 

We have written quite a bit about about this - here

The company was put into liquidation over 15 months ago, yet there is no further action filed at CH. What the liquidators are doing, apart from nothing, isnt clear. Meanwhile the two directors continue to trade in London from a venue originally paid for by Ethos Global and sold to Crowdcube investors as THE new opening.

We wrote to the good doctor as we had been approached by several shareholders. Eventually we got a response recently. He rang me from an airport.

The last comms that SHs had received from the good doctor, was a statement that all Crowdcube Ethos Global SHs would receive shares in the newco. That was 5 months ago and nothing has happened.

It is impossible at this stage to know exactly what is going on here. In a 20 minute phone call all the good doctor would tell me was that he was sorting things out - what they were was not explained. When asked simple direct questions, he was totally evasive. Then he had to board. Bye Bye.

We are none the wiser.

But he has promised to tell me the full story when he returns in a week or so. We will hold him to that. It should make for interesting reading either way. 

Eprop Services plc files losses of £13m for YE Dec17.

Eprop, on the back of what they are calling a reverse takeover of GPEA, have filed losses for the year of £13m. 

Eprop raised £1.35m on Crowdcube in 2014. It had up until this last year, had £55m of equity funding. 

Its hard to know what is going on right now. 

It is certainly irrelevant now, but the Crowdcube projections for this last year showed net profits of £9.5m. Oh well. 

Innis and Gunn beers soured by losses

We were not expecting this. Innis and Gunn, an established and well regarded craft brewer, have gone back into loss for YE Dec17. It had told Crowdcube investors, who gave them more than £1m in 2016, that it hoped to be making a net profit of £1.18m for the year. The loss was more than £400k. 

Innis and Gunn saw higher than projected revenues of £22m but their GPM was well below the figure used in the Crowdcube pitch; 58%. It was in fact only 46%. A 12% drop that represents a heavy £2.64m taken off the GP number. That is a massive drop for a retail facing operation and is hard to put down to anything apart from the fact that the Crowdcube figure was a mistake - a very misleading one. The year gave the company an operating profit of just £80k as opposed to the Crowdcube version of £2.76m. The GM is the clue. 

Overall this just may have been a blip - the balance sheet looks healthy and was boosted in the year by another £4.5m equity investment. Exports make up 45% of revenues and are highlighted as a strong growth market for the beers, so there may well be some headwinds to tackle with the Brexit debacle unfolding. the USA , Canada and Sweden make up their three largest markets.

One important strand of the strategy might be questioned. They are opening bars and in the notes to the accounts, the company extols the virtues of this action. At the very end of this section there is an afterthought - brought about by the closure of their St Andrews unit just 2 years after opening. It was the most hopeless sight and as a local I bet back when they opened, that it would close withing 2 years. If they cant do better with their locations then they will be in serious trouble at some stage. Their excuse was that it was too small! 

The loss from this closure, which will be substantial, was not included in the accounts to Dec17. The building still stands empty, fully branded as a sad reminder of an I&G flop. 

Sorry - another Crowdcube funded company goes bust. So sorry.

Health Tech Innovation Labs took £117k off 139 Crowdcube punters 3 years ago; spent it and has just closed via a compulsory striking off.

The End. 

Oh, in case you come across him again, the highly successful serial entrepreneur (with multi exits) is Barry Shrier. By the time the company was dissolved (next Tuesday according to CH) by a compulsory strike off, it had failed to achieve anything. Investors lost the lot.

This information is not available on the Crowdcube website.

What an utter waste of time.