Tuesday, 6 September 2016

September's predicted Tsunami begins with Crowdcube's East End Manufacturing closing down


Another one bites the dust. And another one etc etc

We have written about EEM before -
http://fantasyequitycrowdfunding.blogspot.co.uk/2016/07/east-end-manufacturing-getting-closer.html
http://fantasyequitycrowdfunding.blogspot.co.uk/2015/07/mind-gap-latest-players.html

We never thought they would make it - the pitch was poor and the plan was also poor. According to the note sent around to investors they were hard done by, by circumstances outside their control. Surely that reasoning would be better applied to the poor souls who trusted Crowdcube's due diligence and projections. They raised around £400k through Crowdcube from over 200 people in 2014.

In a Crowdcube blog, a sort of attempt to make them look like they care about about the businesses they help finance, the CEO of EEM said they expected to turn a profit this year. The blog here is dated 13 May 2016. Nice one Luke.

You can expect many more over the next few months.

Here for interest is the text of the conpany's last breath -

Dear Investors,
It is with the utmost sadness that we have to report to you a
series of recent catastrophic adverse events affecting East End
Manufacturing. This rapid series of bad news, coming since the
end of June has served to render the company unable to
continue trading, despite the fact that the business was
improving year on year as per the last report to you after the
last AGM.
It is not for us to comment on the political landscape, but the rapid general downturn in manufacturing and retail from the end of June, has rendered the company so severely damaged,
that despite all our efforts, we are not able to continue our business.
Despite manufacturing bouncing back in August led by those selling abroad thanks to the weaker Pound, we sell only in the UK and our raw materials are paid for in Dollars and Euros, so our costs have significantly increased.
In essence, we have lost our four most important clients in
rapid succession, making up more than half of our business.
Woven Wings (who have cancelled all future orders and
stopped output because of failed sales); The Hut Group (who
have taken all future manufacturing offshore to save costs);
Meng, a high end brand that is taking all production to China
from September and Represent (who have not only stopped
future production and moved this out of London, but have also
sent large amounts of perfectly good stock back to us as they
are heavily overstocked and are refusing to proceed with Autumn/Winter orders they had originally planned. Additionally, other smaller clients have also got into difficulty.
The Directors' fiduciary duty is to ensure that creditors are paid and also that no new money comes into the business without a reasonable prospect of turning the business round.  It would be wrong to borrow money or to ask for new equity funds without a good order book in place. This option was rejected.
This has left us to try to make an orderly closure of the
business: paying off creditors, laying off staff (yesterday), negotiating with the landlord (he has agreed to allow us to surrender the lease without penalty), calling in all outstanding funds to be collected and selling assets.  This is currently taking place and we have today agreed the most sensible way forward is to appoint a professional to ensure this is done correctly.
From an investment loss point of view, Barry Laden will lose his
investment fully and has never received any tax benefits from
that investment of around £50,000.
However, all other investors will have benefited first from SEIS
(at 50%) or EIS tax relief (at 30%) in the year you made your
investment.
As for the remaining loss, you will now be able to claim loss
relief and the following links provide some useful information:
https://www.gov.uk/government/publications/negligible-value-claims-and-income-tax-losses-on-disposals-of-shares-you-have-subscribed-for-in-qualifying-trading-companies-hs286-self-assessment-he/hs286-negligible-value-claims-and-income-tax-losses-on-disposals-of-shares-you-have-subscribed-for-in-qualifying-trading-companies-2016
and also here:
http://www.taxadvisermagazine.com/article/worth-next-nothing
and also here:
http://www.eisa.org.uk/wp-content/uploads/2014/03/No.-4-EIS-Example-Loss-Relief-2014.sw_.pdf
Please consult your tax advisor for further information because all private investors (apart from Barry Laden) in East End Manufacturing will qualify for some type of loss relief.
Please understand we are devastated by this terrible turn of events.  Good people have lost their jobs and investors will not benefit from positive returns in the future.  We tried very hard to create a business that believes in making products in this country, and for a few years we can be proud that we did exactly that for many brands and gave employment to tens of people; paying them properly and creating a wonderful working environment that set a benchmark for the industry.
Sadly all this was not enough to save us from the onslaught that our sector of manufacturing is experiencing right now.
Thank you SO much for believing in East End Manufacturing as we have.  As you can imagine, we have 263 shareholders so it will be difficult to answer any questions if you fire them back at us now, but please rest assured that we have done everything we can to try to make this business succeed.  Unfortunately it was not to be in the end.
The appointed professional will write to you next, to explain the position of the company and to confirm how they propose to settle the finances of the business.
Yours sincerely,

The Directors, East End Manufacturing Ltd.


No comments:

Post a Comment