21st Oct 2019 15:13
(Alliance News) - Mporium Group PLC said Monday it has taken the "difficult decision" to indefinitely adjourn its upcoming general meeting and has requested its shares be temporarily suspended from trading on AIM.
Mporium shares last closed at 0.50 pence on London's junior market.
The marketing technology firm said it made the decision "in view of a critical uncertainty with regard to its financial position", as it may be on the hook for VAT payments it was unaware it had to pay.
Mporium said it understood until recently that collaboration agreement it signed earlier this year was not liable for VAT payments; however recent discussions with its tax advisers and HM Revenue & Customs highlighted this may not be the case.
In January, Mporium entered a collaboration with claims management firm Allay UK Ltd, whereby Mporium would exclusively supply Allay with leads for consumers seeking redress for mis-sold payment protection insurance.
"As part of this arrangement, Allay paid Mporium for selected leads acquired from the company's partners and the company would in turn 'pass through' these payments to its partners," Mporium explained.
Mporium said it thought these services were exempt for VAT purposes.
"The company has received advice that HMRC's position is informed by findings in recent unconnected VAT Tribunal cases that may be subject to further challenge but, as the company is not a party to these disputes, there can be no certainty that these findings would indirectly favour the company's position or their timing," Mporium said.
The company stressed HMRC has not issued a formal notification requiring payment but estimates its potential liability - should HMRC seek payment - to be about GBP3.5 million, from GBP18 million worth of transactions.
Mporium continued: "The company does not expect that it would have the resources to meet such a liability. In light of this and the associated uncertainty, the company's directors have concluded that it would not be appropriate to finalise the fundraising described in the announcement of September 30."
At the end of September, the company announced it would be acquiring Click Laboratories Ltd and We Breathe Media Ltd for a maximum of GBP5.5 million, intending to use a share issue and placing to help pay.
The initial consideration for the acquisitions would be GBP500,000 in cash and the issue of 400.0 million shares, worth GBP2 million, based on a share price of 0.50p per share. Up to GBP3 million in additional cash consideration then would be delivered in eight tranches over the next 24 months based on net profit targets.
The cash portion of the initial consideration, and the subsequent running costs, would be paid for by way a share placing, with which Mporium intended to raise GBP1.3 million. The placing price per share was set at the same 0.50p.
"In the absence of this fundraising, and aside from the uncertainty with regard to the potential VAT liability described above, the directors believe they have no choice but to conclude that there is a fundamental uncertainty regarding the company's ability to continue as a going concern. The company is taking specialist advice on the most appropriate course of action in these circumstances," the company added.
Chair Charles Pendred commented: "It is extremely frustrating that this matter has arisen so unexpectedly at a time when the forward vision for the company looked so promising. The leadership of the company has changed, the cost base had been substantially reduced, the new strategy with its complementary acquisition was being implemented and current trading was encouraging. The lead generation business with Allay had also ceased. The board are deeply upset at this outcome and every effort has been, and is being made, to find a solution."
By Paul McGowan; [email protected]
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