28 September 2020

Vela Technologies plc

("Vela" or the "Company")

Final Results for the year ended 31 March 2020

Notice of AGM

The Board of Vela (AIM: VELA) announces its final results for the year ended 31 March 2020.

Vela's Annual Report and Accounts for the year ended 31 March 2020 and Notice of Annual General Meeting will  be posted to shareholders shortly, and will also be made available on the Company's website at http://www.velatechplc.com/.

The Company's Annual General Meeting ("AGM") will be held at 10.00 a.m. on 29 October 2020 at 15 Victoria Mews, Mill Field Road, Cottingley Business Park, Bingley, West Yorkshire BD16 1PY. Due to Covid-19 and related legal restrictions and guidance from government authorities, shareholders may not physically attend the AGM, and will not be permitted access to the venue on the day of the meeting. Shareholders are strongly encouraged to vote by proxy in advance, and to appoint the Chairman of the AGM to submit proxy votes at the meeting.

chairman's statement

for the year ended 31 March 2020

During the financial year, Vela was presented with a number of opportunities including a prospective corporate transaction which unfortunately was a victim of the restrictive Covid19 lock down earlier this year.

At the beginning of the financial year the company raised £400,000 with a warrant attached for every 4 placing shares subscribed for by investors. The funds enabled Vela to invest a further £91,341 in to Portr, the baggage handling group in which the company was already a minority shareholder, and to redeem certain outstanding convertible unsecured loan notes.

In May 2019, Argo Blockchain announced a strategic alliance with HIVE Blockchain Technologies Ltd ("HIVE") to create the world's largest purpose-built business-to-business mining service provider aimed at large-scale enterprise with a conditionally agreed share swap arrangement, by which Argo would receive 16,321,281 HIVE common shares, representing 5% of the existing outstanding share capital in exchange for 44,062,500 ordinary shares in Argo, representing 15% of Argo's existing issued share capital. 

During February 2020, the company successfully renegotiated the terms of its then outstanding £550,000 bond supported by the security trustee and principal bondholders. Vela was able to extend the repayment date on the bonds by 6 months to August 2020 whilst it continued discussions at that time with a view to effecting a corporate transaction, which would result in a substantial investment or an acquisition to utilise Vela as a reverse takeover vehicle. As noted above this transaction did not proceed due to the impact of COVID-19.

The outlook altered as we entered the new financial year with the Covid-19 tsunami which engulfed several companies. Vela was not immune and our investments in Portr and Vibe bore the brunt of lock down. Portr was severely impacted by the lack of air travel whilst Vibe suffered through the closure of entertainment venues both indoors and out. As outlined below the Company disposed of certain of its investments following the period end, including Portr and Vibe.

But let us end on a happy note!

Following the period end, a number of changes have taken place. As announced in July 2020 and August 2020, the Company disposed of certain of its assets and investments and completed two share capital reorganisations. As part of this transaction, Vela facilitated the conversion of £550,000 bonds into equity, completed a fundraise of £1.0 million via Peterhouse Capital and appointed James Normand as Executive director. As part of the transaction Antony Laiker resigned from the board of Vela. On completion of the transaction the Company retained its interests in five investments (being North Peak Resources, WeShop, BlockchainK2 Corp, Revolve Performance and Disruptive Tech Limited) and had net cash resources of c.£890,000. Subsequent to the completion of the transaction, Vela has received a further c.£860,000 of cash as a result of warrant exercises undertaken by certain of the placees from the aforementioned £1.0 million placing, which has further bolstered the company's balance sheet.

As a result of these changes, the company and its shareholders can look forward to a much brighter future. We continue to implement our investing policy of identifying and making a range of investments within the technology field and remain open to various investment opportunities.

strategic report

for the year ended 31 March 2020

Business review

At the period end, the Company held £9k of cash (31 March 2019: £23k) and continued to keep administration costs to a minimum so that the Company has sufficient resources to cover its ongoing running costs and has maximum funds that can be dedicated to further investments.

Subsequent to the period end, the Company completed a placing to raise gross proceeds of £1.0 million, approved by shareholders in August 2020. Additional funds totalling £860k (before expenses) were received in September 2020 through the issue of shares following the exercise of warrants. These funds have provided the Company with additional capital in order to make additional investments and cover running costs. Further details regarding the shares issued after the period end are provided in note 18 to the financial statements.

The Company's overall total comprehensive income for the year was a loss of £1,412k (2019: £1,554k loss). This loss primarily arose due to fair value losses on the Company's investment portfolio.

The valuation of the investment portfolio at 31 March 2020 was £1,196k (2019: £2,101k), a decrease of £905k on the prior year. During the year, Vela invested £91k in Portr Limited. Further details of these investment additions are given in note 8 to the financial statements. The Company also recorded a reduction in the estimated fair value of the investment portfolio of £979k in the period. As appropriate we update shareholders regularly on investee company performance through the dissemination of regulatory announcements as information becomes available, and further detailed information can be found on our website.

Further details and key points of the investments made and the Company's investee companies are detailed in the Chairman's statement and note 8 to the financial statements.

The Company has no employees and has a Board of one male executive director and one male non-executive director.

Principal risks and uncertainties

The preservation of its cash balances and management of the capital remain key risks for the Company, ensuring that investments are commensurate with the level of risk.

The Company is committed to maintaining its minimal operational costs.

Further information about the Company's principal risks are detailed in note 14, specifically in the currency risk, credit risk, liquidity risk and capital risk management sections.

Approved by the Board of directors and signed on behalf of the Board on 28 September 2020.

Brent Fitzpatrick MBE

Non-Executive Chairman           

For further information, please contact:

About Vela Technologies   

Vela Technologies (AIM: VELA) is an investing company focused on early stage and pre-IPO long term disruptive technology investments. There are currently 5 investments in the portfolio which either have developed ways of utilising technology or developing technology with a view to disrupting the businesses or sector in which they operate. More recently, Vela Technologies has also started to focus on existing listed companies where valuations may offer additional opportunities.

statement of comprehensive income

for the year ended 31 March 2020

balance sheet

as at 31 March 2020

These financial statements were approved by the Board, authorised for issue and signed on their behalf on 28 September 2020 by:

Brent Fitzpatrick MBE

Non-Executive Chairman

Company registration number: 03904195

cash flow statement

for the year ended 31 March 2020

statement of changes in equity

for the year ended 31 March 2020

notes to the financial statements

for the year ended 31 March 2020

1 Revenue and segmental information

The Company is an investing company and as such there is only one identifiable operating segment, being the holding and support of investments.  Furthermore, the Company operates in a single geographic segment being the United Kingdom. The results and balances and cash flows of the segment are as presented in the primary statements. 

2 Loss from operations

Loss from operations is stated after charging/(crediting):

3 Staff costs

The average number of persons engaged by the Company (including Directors) during the period was as follows:

The aggregate amounts charged by these persons were as follows:

The amounts noted above relate to amounts invoiced by the Company's directors. Further details of directors' remuneration is provided in note 5.

4 Finance expense

Included in finance expenses is £34k (2019 - £41k) in respect of the amortisation of loan issue costs.

5 Directors and senior management

Directors' remuneration

Directors' and senior management's interests in shares

The Directors who held office at 31 March 2020 held the following shares:

The total share-based payment costs in respect of options granted are:  

As at 31 March 2020, the total number of outstanding options held by the Directors over ordinary shares was 29,124,854, representing 3.5 per cent of the Company's issued share capital. Each Director held 14,562,427 options as a 31 March 2020.

Further details regarding the options issued are provided in note 16.

6 Tax

There was no charge to current or deferred taxation in the current or prior period.

A deferred tax asset relating to losses carried forward has not been recognised due to uncertainty over the existence of future taxable profits against which the losses can be used.  The Company has unused tax losses of approximately £6.1m (2019: £5m).

Tax reconciliation

7 Loss per share

Loss per share has been calculated on a loss after tax of £1,412,000 (2019: £1,554,000) and the weighted number of average shares in issue for the year of 1,534,283,948 (2019: 836,973,115).

The loss and weighted average number of shares used in the calculations is set out below:

8 Investments

Investments are held at fair value through profit and loss using a three-level hierarchy for estimating fair value.

Note 14 provides details of the three-level hierarchy used.

No investments were held at cost as an approximation of fair value, at 31 March 2020.

Additions and disposals during the year:

Further investment in Portr Limited

On 12 August 2019, the Company completed a subscription for 91,341 shares in Portr Limited, equating to an investment of £91,341. Following completion of the investment, the Company held approximately 3.6% of Portr Limited's share capital.

Disposal in Rosslyn Data Technologies plc

On 19 February 2020, the Company sold 311,111 shares in Rosslyn Data Technologies plc for a consideration of £16,488. Following the year end in August 2020, the company disposed of certain investments held at 31 March 2020. Details are provided in note 18.

9 Trade and other receivables      

10 Trade and other payables

11 Loans and borrowings

In April 2019, the Company entered into an agreement with Scott Fletcher to vary the terms of his £200,000 of loan notes, such that the principal and accrued interest were converted into new ordinary shares at a conversion price of 0.10 pence per share, equivalent to the placing price. This resulted in 240,985,301 new shares being issued in full settlement of his loan notes.

On 24 April 2019, the Company entered into an agreement to repay Antony Laiker's £200,000 loan notes, together with accrued interest. As part of the agreement, it was intended that the entire proceeds of the repayment would be used by Antony Laiker to subscribe for 240,985,301 new ordinary shares at a price of 0.10 pence per share. The share subscription was approved by shareholders on 30 August 2019 and his loan notes were settled in full.

On 1 February 2017, the Company launched the issue of secured bonds (the 'Bonds'), through UK Bond Network, to raise £550,000 for the Company.  The Bonds have a coupon of 10% and an original term of three years with full repayment in cash of the principal amount of the Bonds originally due on 17 February 2020. The Bonds are secured by way of fixed and floating charges over all assets of the Company present and future.

On 13 February 2020, Jade State Wealth Limited (the 'Security Trustee') confirmed, in its capacity as Security Trustee to the Bonds, and under the powers granted to it under the terms of the Bonds, that it had no objection to granting an indulgence of six months to the Company on the repayment date, being satisfied that it was in the interests of all parties to grant this period. Other than the repayment date of the Bonds being extended to 17 August 2020, all other terms of the Bonds remained unchanged.

Following the end of the reporting period, the Bonds were converted into new ordinary shares, as detailed in note 18.

12 Share capital

Allotments during the period

The Company allotted the following ordinary shares during the year:

On 2 May 2019, the Company issued 615,985,301 ordinary shares at a price of 0.10 pence per share. 

On 19 August 2019, the Company issued 25,000,000 ordinary shares at a price of 0.10 pence per share. 

On 2 September 2019, the Company issued 240,985,301 ordinary shares at a price of 0.10 pence per share. 

On 17 March 2020, the Company issued 30,000,000 ordinary shares at a price of 0.10 pence per share. 

13 Cash and cash equivalents

Cash and cash equivalents comprise the following:

14 Financial instruments

The Company uses various financial instruments which include cash and cash equivalents, loans and borrowings and various items such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Company's operations and manage its working capital requirements.

The fair values of all financial instruments are considered equal to their book values. The existence of these financial instruments exposes the Company to a number of financial risks which are described in more detail below.

The main risks arising from the Company's financial instruments are currency risk, credit risk and liquidity risk. The Directors review and agree the policies for managing each of these risks and they are summarised below. The Company does not have any borrowings on which interest is charged at a variable rate. The Directors, therefore, do not consider the Company to be exposed to material interest rate risk.

Currency risk

The Company's shareholdings in Interbit and BlockchainK2 are denominated in Canadian Dollars and the investment in Stream TV is denominated in US Dollars, which gives rise to exposure to foreign currency risk. The Directors have considered the risk and do not deem it necessary to enter into any specific risk management arrangements at the present time. The Directors will continue to review the position going forward to ensure this remains appropriate in the context of the Company's risk profile.

Credit risk

This section, along with the liquidity risk and capital risk management sections below, also forms part of the Strategic Report.

The Company's exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised below:

The Company's management considers that all of the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality.

The Company's financial assets are pledged as security, as detailed in note 11.

The Company is required to report the category of fair value measurements used in determining the value of its financial assets measured at fair value through profit or loss, to be disclosed by the source of its inputs, using a three-level hierarchy. There have been no transfers between Levels in the fair value hierarchy.

Quoted market prices in active markets - "Level 1"

Inputs to Level 1 fair values are quoted prices in active markets for identical assets.  An active market is one in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.  The Company has five (2019: five) investments classified in this category all of which are listed on a regulated exchange with publicly available market prices used to determine the year end value. The aggregate historic cost of the five investments is £887,919 (2019: £904,284) and the fair value as at 31 March 2020 was £197,757 (2019: £657,337).

Valued using models with significant observable market parameters - "Level 2"

Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.  The Company has two (2019: five) unquoted investments classified in this category. The historic cost of these investments is £276,103 (2019: £1,271,581) and the fair value as at 31 March 2020 was £563,584 (2019: £1,293,380). These investments were valued using the latest transaction prices for shares in the investee companies which were obtained through either (a) publicly available information (e.g. registrar), (b) information in respect of recent transactions which the Company was invited to participate or, where available, (c) direct liaison with the investee company.

Valued using models with significant unobservable market parameters - "Level 3"

Inputs to Level 3 fair values are unobservable inputs for the asset.  Unobservable inputs may have been used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date (or market information for the inputs to any valuation models).  As such, unobservable inputs reflect the assumptions the Company considers that market participants would use in pricing the asset.  The Company has five (2019: three) unquoted investments classified in this category. The historic cost of these investments is £1,411,819 (2019: £725,000) and the fair value as at 31 March 2020 was £434,137 (2019: £150,000). One of these investments has been written down to £nil.   The nature of some of the investments that the Company holds, i.e. minority shareholdings in private companies with limited publicly available information, is that significant judgement is required in estimating the value to be applied in the year end accounts. Management uses knowledge of the sector and any specific company information available to determine a valuation estimate.  Shortly before the company's year end of 31 March 2020 the global Covid-19 outbreak occurred and resulted in further estimation uncertainty in relation to the carrying value of these unlisted investments.  The aggregate carrying value of four of the investments in this category has been reduced by £537k in the period and a significant proportion of this reduction reflects the Company's estimate of the potential impact of the Covid-19 pandemic on the investee company as at 31 March 2020. 

Liquidity risk

The Company maintains sufficient cash to meet its liquidity requirements. Management monitors rolling forecasts of the Company's liquidity on the basis of expected cash flow in accordance with practice and limits set by the Company. In addition, the Company's liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet these.

Maturity analysis for financial liabilities

Capital risk management

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. This is achieved by making investments commensurate with the level of risk. The Company is performing in line with the expectations of the Directors.

The Company monitors capital on the basis of the carrying amount of equity. The Company policy is to set the amount of capital in proportion to its overall financing structure, i.e. equity and long-term loans. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or loan notes, or sell assets to reduce debt.

15 Reconciliation of net debt

Non-cash movements on the Convertible loan notes, relates to the loan notes due to Scott Fletcher, which were converted into ordinary shares, as detailed in note 11. The loan notes held by Antony Laiker were repaid and the proceeds were immediately re-invested in new ordinary shares.

Non-cash movements on the Bonds relate to the amortisation of loan issue costs and rolled up unpaid interest.

16 Share-based payments

The Company rewards its Directors using equity settled share-based payments.

No new share options have been issued in the current accounting period and the total number of options outstanding at 31 March 2020 was 29,124,854 (2019: 29,124,854). None of the options issued have either lapsed or been exercised in the period.

The options have historically been valued using the Black Scholes option pricing model.

The amount of remuneration expense in respect of the share options granted amounts to £NIL (2019: £NIL).

Details of the options outstanding at the year end and the inputs to the option pricing model are as follows:

None of the options outstanding as at 31 March 2020 are subject to any performance criteria.

17 Related party transactions

During the period the Company entered into the following related party transactions. All transactions were made on an arm's length basis.

Ocean Park Developments Limited

Brent Fitzpatrick, Non-Executive Director, is also a Director of Ocean Park Developments Limited.  During the year, the Company paid £52,000 (2019: £46,000) in respect of his Directors fees to the Company. The balance due to Ocean Park Developments Limited at the year-end was £8,500 (2019: £nil).

Risk Alliance Insurance Brokers Limited

Brent Fitzpatrick, Non-Executive Director, was also a Director of Risk Alliance Group Limited during the year under review.  He resigned on 26 September 2019.  During the year the Company paid £5,551 (2019: £5,551) in respect of insurance fees at arm's length to Risk Alliance Limited, a wholly owned subsidiary of Risk Alliance Group Limited.  The balance due to Risk Alliance Limited at the year end was £nil (2019: £nil).

Widdington Limited

Antony Laiker, Director, is also a Director of Widdington Limited. During the year the Company paid £64,000 (2019: £64,000) in respect of his Directors fees to the Company. The balance due to Widdington Limited at the year end was £9,500 (2019: £nil).

Kevin Sinclair

Kevin Sinclair, a shareholder of the Company, holds £100,000 of the bonds under the Company's 10% bond issue in February 2017.  At 31 March 2020, Kevin Sinclair held 318,115,666 (18.19%) of the issued share capital of the Company through JIM Nominees Ltd and is classified as a substantial shareholder under the AIM Rules.

The Bonds were converted to ordinary shares after the year end as detailed in note 18.

Scott Fletcher

Scott Fletcher, a shareholder of the Company, holds £NIL (2019: £200,000) of the 8% convertible loan notes issued by the company in September 2016. 

The loan notes were converted to 240,985,301 new ordinary shares at a subscription price of 0.10 pence per share.

Scott Fletcher held 304,929,997 Ordinary Shares at 31 March 2020 representing 17.44 per cent. of the issued share capital of the Company at that time in addition to the 8% convertible loan notes above.  He is also the chairman of UK Bond Network Limited, which acted on behalf of the Company in relation to the bond issue.

Antony Laiker loan notes

Antony Laiker, Director of the Company during the period under review (stepped down 26 August 2020), holds £NIL (2019: £200,000) of the 8% convertible loan notes issued by the company in September 2016.

On 24 April 2019, the Company entered into an agreement to repay Antony Laiker's £200,000 loan notes, together with accrued interest. As part of the agreement, it was intended that the entire proceeds of the repayment would be used by Antony Laiker to subscribe for 240,985,301 new ordinary shares at a price of 0.10 pence per share. The share subscription was approved by shareholders on 30 August 2019.

Following admission of the new shares, Antony Laiker became beneficially interested in 305,108,301 Ordinary Shares, representing approximately 17.75 % of the Company's enlarged share capital.

18 Events after the balance sheet date

Disposal of investment in Rosslyn Data Technologies plc

Between 17 April 2020 and 27 April 2020 the Company disposed of a total of 1,100,000 ordinary shares in Rosslyn Data Technologies plc at prices between 3.8 pence per share and 3.95 pence per share and with an average price of 3.86 pence per share generating proceeds of £42,503 for the Company.  Following the Disposal, Vela no longer holds any shares in Rosslyn Data.

Disposal of certain investments and recapitalisation

On 31 July 2020, the Company announced a series of proposals, the principal items being the disposal of certain investments, two share capital reorganisations, a bond conversion and a share placing. These proposals were approved and executed in August 2020.  Further details regarding these transactions is provided below:

·    Disposal of certain investments

The Directors took the decision to dispose of its investments in Portr, Argo Blockchain, Vibe Group Holdings, Stream TV, Advanced Laser Imaging and Nektan to a newly formed company ("NewCo") for consideration totalling £855,000 payable after ten years. When the proceeds are recognised in next year's financial statements, they will be recorded at a discounted amount, reflecting the deferred payment term.  The NewCo was incorporated on 24 July 2020 and its entire issued share capital was held by existing shareholders of Vela, such that the Vela shareholders as at the respective record date of the transaction had the same proportionate beneficial interest in NewCo as they had in Vela. These investments had a carrying value of £555,000 in the financial statements at 31 March 2020.

·    Conversion of £550,000 outstanding bonds to new ordinary shares

The Company announced that it had insufficient cash resources to settle its outstanding bonds amounting to £550,000 on the scheduled repayment date of 17 August 2020. Furthermore, the security trustee of the bonds was not in a position where it was able to further extend the repayment date for the Bonds. Accordingly, it was proposed and later agreed that the outstanding bonds be converted to new ordinary shares.

·    Share placing

The Company announced it had conditionally raised £1.0 million via the placing of 4,166,666,875 ordinary shares in the Company at a price of 0.024 pence per share. In addition, 4,166,666,875 warrants to subscribe for new Ordinary Shares at a price of 0.06 pence per share were granted to the subscribers in the Placing on a pro rata basis to the size of their subscriptions in the Placing.  Broker Warrants were also issued to cover certain fees incurred in connection with the placing.

To facilitate the above transactions, the Company also undertook capital reorganisations involving the subdivision of shares, further details of which can be seen in the Company's RNS announcement on 31 July 2020.

Grant of Options

On 26 August 2020, the Company announced that James Normand, a newly appointed director, had been granted 180,000,000 options to subscribe for ordinary shares of 0.01p each in the Company. The options have an exercise price of 0.024p and are exercisable for a period of ten years from the date of the grant. Half the options become exercisable 12 months after grant, subject to the Company's closing mid-market share price being at least 0.048p per Ordinary Share for 30 consecutive business days, and the remaining half become exercisable 24 months after grant, subject to the Company's closing mid-market share price being at least 0.072p per Ordinary Share for 30 consecutive business days.

In addition, Brent Fitzpatrick, Non-Executive Chairman of the Company, was granted 90,000,000 options to subscribe for Ordinary Shares in the Company. The options have an exercise price of 0.024p and are exercisable for a period of ten years from the date of the grant. Half the options become exercisable 12 months after grant, subject to the Company's closing mid-market share price being at least 0.048p per Ordinary Share for 30 consecutive business days, and the remaining half become exercisable 24 months after grant, subject to the Company's closing mid-market share price being at least 0.072p per Ordinary Share for 30 consecutive business days. Following this grant of options, Brent Fitzpatrick now holds a total of 104,562,427 share options equivalent to 1.46 per cent. of the issued share capital of the Company.

Following the grant of the options detailed above and the issuance of the Placing Warrants and the Broker Warrants (to cover placing fees) the Company has a total of 299,124,854 share options outstanding representing approximately 4.17% of the Company's issued share capital and a total of 4,481,822,692 warrants outstanding representing approximately 62.49% of the Company's issued share capital.

Exercise of warrants and issue of equity

On 16 September 2020, the Company announced the issue of 1,434,967,250 new ordinary shares of 0.01p pursuant to the exercise of warrants to subscribe for new Ordinary Shares at a price of 0.06p per Ordinary Share, generating proceeds of £860,980 for the Company.

The warrants were issued as part of the placing of new Ordinary Shares completed in conjunction with, inter alia, the disposal of certain of Vela's assets and share capital reorganisations in August 2020.

Extraction of information in this announcement

The financial information, which comprises the statement of comprehensive income, balance sheet, cashflow statement, statement of changes in equity, and related notes to the financial statements, is derived from the full Company financial statements for the year ended 31 March 2020, which have been prepared under European Union endorsed International Financial Reporting Standards (IFRS) and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. It does not constitute full financial statements within the meaning of section 434 of the Companies Act 2006. This financial information has been agreed with the auditor for release.

The full annual report and financial statements for the year ended 31 March 2020, on which the auditor has given an unqualified report, and which does not contain a statement under section 498 of the Companies Act 2006, will be delivered to the Registrar of Companies in due course.