REG - Supply@ME Capital - Business, trading and funding update

Supply@Me CapitalAnnouncement

29/02/2024 07:15

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RNS Number : 8753E  Supply@ME Capital PLC  29 February 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 2014/596/EU, WHICH IS PART OF UNITED KINGDOM DOMESTIC LAW PURSUANT
TO THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK
MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS
DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

29 February 2024

 

 

Supply@ME Capital plc

(the "Company", "Supply@ME" or "SYME" and, together with its subsidiaries, the
"Group")

Business, trading and funding update

SYME, the fintech business which provides an innovative fintech platform (the
"Platform") for use by manufacturing and trading companies to access Inventory
Monetisation© ("IM") solutions enabling their businesses to generate
cashflow, provides the following business, trading and funding update.

Summary

·    On the 3 January 2024, the Company announced that it had commenced
its overall White-Label go-to-market strategy as a result of securing a
commitment with Banco BPM S.p.A ("WL Inventory Funder" or "BBPM") to fund an
initial IM transaction with an inventory value to be monetised of up to €10
million with an existing client of BBPM (respectively the "WL Client Company"
and the "WL Transaction"). Following this announcement, the Company and the
working group (as referred to in the RNS announcement dated 3 January 2024 and
including the WL Inventory Funder and the WL Client Company) have been working
closely to draft, review and finalise the detailed commercial contracts which
will implement the commitment received from BBPM. Alongside this, the working
group has been progressing the onboarding of the remarketers identified, at
the same time as evaluating the opportunity for the remarketer to undertake a
separate dedicated IM transaction. SYME currently expect the contracts to be
completed by the end of March 2024 and will update the market accordingly.

 

·    The Company intends to leverage the results of the contracting
process for the WL Transaction to create a standard scalable format for future
White-Label transactions with other local commercial banks and their client
companies. The Group has recently commenced discussions with two separate
Italian commercial banks who have expressed an interest in replicating the
White-Label model utilising their existing client base, of which certain
clients may also be included in the Group's pipeline.

 

·    The establishment of the track record demonstrated by the first
executed IM transactions, together with the strong reputation of BBPM, has
created the opportunity for the Group to present its business model to a
number of other investment banks, as well as dedicated asset fund managers. As
a result of this, the Group is currently working with an investment banking
division of an Italian neo banking group, who has expertise in the adoption of
the PNP Regulation 1 , and two different asset fund managers, to evaluate
their potential participation in respect of ad hoc IM programmes.

 

·    The Company has continued to make solid progress in structuring a
security token framework with the CH Trading Hub which will allow a first
security token issuance up to US$100 million to be subscribed in tranches,
largely by institutional investors who are active in the digital asset
markets. SYME and the CH Trading Hub are in advanced discussions with an asset
manager specialising in digital assets to secure a first commitment of USD$5
million, together with the involvement of a regulated crypto exchange which
can support the distribution of the security token to its investor base in
order to progress the completion of the programme. The commitment of the first
USD$5 million is currently expected to be finalised by the end of March 2024.

 

·    Following the funding update provided on 5 December 2023, the Company
wishes to provide a further update with regards to the funding payments that
have been made by The AvantGarde Group S.p.A. (an entity ultimately
beneficially wholly-owned and controlled by Alessandro Zamboni, Chief
Executive Officer of the Company) ("TAG"). As at the date of this
announcement, the Group has received £2,276,963 from TAG as a result of the
contractual payments under the Debt Novation Deed, the TAG Unsecured Working
Capital Loan Agreement (which has now been fully received by the Company) and
the Top-Up Shareholder Loan Agreement (together the "TAG Contractual
Commitments"). This amount is £881,779 higher than had been disclosed as
having been received from TAG in the announcement dated 5 December 2023 and
relates to the outstanding payments under the TAG Contractual Commitments. The
continued receipt of funds demonstrates the ongoing commitment from TAG to
support the Company and to provide payments under the TAG Contractual
Commitments, albeit on a delayed payment schedule. An additional amount of
£1,766,552 currently remains outstanding and, accordingly has not been
received by the Company. The outstanding amount includes additional drawdowns
made by the Company under the Top-Up Shareholder Loan Agreement since 5
December 2023 of £642,685 and an amount of £500,000 that fell due on the 31
January 2024 under the Debt Novation Deed. TAG has provided representations to
the board of directors of the Company that it will continue to provide the
outstanding amounts, and that TAG is itself in the process of securing
additional facilities to enable performance against these representations.

Further details of each of these are set out below.

Business update

Background

Over the past year, the Group has continued to make important progress to
enhance its business operating model with continued differentiation of the IM
Platform including, not only the underlying software, but also the supporting
processes, methodologies and legal framework.

In addition, the inventory funding framework also evolved over the past year,
particularly through the launch of an independent Swiss-based trading business
("CH Trading Hub") to replace the Cayman based Global Inventory Fund ("GIF"),
previously advised by Tradeflow Capital Management Pte. Ltd ("TradeFlow"). The
CH Trading Hub, owned by Société Financière Européenne S.A. ("SFE"), has
purchased certain independent Stock Companies, to meet the needs of specific
IM transactions, and is in the process of assuming control of the existing
independent Stock Companies from the GIF. The CH Trading Hub will also
incorporate new independent Stock Companies as required in the future.

The intention is that the CH Trading Hub, through its ownership of the
independent Stock Companies, will act as an asset (inventory) management group
and will invest its equity capital to build up a dedicated internal structured
financing team and provide, when needed, equity capital, or other funding
solutions, for specific IM transactions. The CH Trading Hub also has ownership
of a dedicated securitisation company authorised in Luxembourg which it
intends to leverage to help facilitate the access of inventory funders to IM
transaction, through both the traditional and token financing routes.

The CH Trading Hub is working closely with the Group to maximise the
opportunity for the IM Platform and CH Trading Hub to constitute an IM
infrastructure which can be used by both banks for their White-Label offering,
and investment banks, security token arrangers and inventory funders to adopt
and implement ad hoc IM programmes. In the case of White-Label offerings, it
allows banks to leverage their existing client base, and in the case of other
potential inventory funders it allows them to work closely with the Group to
access its pipeline of client companies who have already expressed interest in
unlocking their working capital through inventory monetisation.

With reference to the CH Trading Hub, it is worth noting that, as of today,
Alessandro Zamboni, the CEO of the Group, has, along with a number of other
investors, a personal non-controlling interest in SFE, with this entity acting
as equity capital partner provider for the CH Trading Hub.

White-Label IM

As outlined above, it was announced on 3 January 2024 that the Group has
secured a commitment provided by BBPM to fund the WL Transaction. This
commenced the Group's overall White-Label go-to-market strategy. Accordingly,
the Group has been working closely with BBPM and the WL Client Company in
drafting, reviewing and finalising the commercial contracts and onboarding the
identified remarketers, at the same time as evaluating the opportunity for the
remarketer to undertake a separate dedicated IM transaction. The intention
being this White-Label IM will be a first template transaction aimed at
creating a scalable format for future White-Label transactions.

In relation to the specific WL Transaction, the WL Inventory Funder is
preparing a loan agreement between itself and the dedicated Stock Company,
which will enable the funding to flow from BBPM to the Stock Company to
execute the purchase of the inventory from the WL Client Company. The WL
Transaction will utilise the Group's IM Platform and inventory servicing
expertise.

Discussions are also underway with the WL Inventory Funder regarding other
potential White-Label transactions that can follow once the initial one has
been successfully executed.

Following the positive momentum created by the announcement on the 3 January
2024, the Group is also now liaising with two other Italian commercial banks
who have expressed an interest in replicating the White-Label model utilising
their existing client base, of which certain clients may also be included in
the Group's pipeline.

Additionally, an asset-based lender based in the UK has approached the Group
and discussions are ongoing to evaluate how the IM infrastructure can be
adapted to meet their needs. This could involve use of only the IM Platform,
and/or specific aspects of the inventory servicing activities provided by the
Group. This would allow the Group to demonstrate the flexibility and
adaptability of its business model through the provision of bespoke services
to interested potential inventory funders and White-Label partners.

Finally, the Group is actively investigating the promotion of the opportunity
for commercial banks to offer an IM facility to their existing clients, and,
in this regard, is in direct contact with the Italian Banking Association 2 
to support a dedicated working group.

Cooperation with investment banks and asset managers

The establishment of the track record demonstrated by the first executed IM
transactions, coupled with the strong reputation of the WL Funder, has created
the opportunity for the Group to present its business model to investment
banks and dedicated asset fund managers in order to evaluate their potential
participation in respect of ad hoc IM programmes. These programmes could cover
the Group's existing client pipeline and, also, new clients that match the
eligibility criteria requested by the potential inventory funders. Discussions
are ongoing around an initial single-name IM transaction and then scaling with
a wider roll-out plan.

The Group is currently working with an investment banking division of an
Italian neo banking group, who has expertise in the adoption of the PNP
Regulation and two different asset fund managers, in order to evaluate their
potential participation in respect of such ad hoc IM programmes.

Digital assets route

In 2023, the trend towards tokenising real-world assets has surged,
positioning itself as a significant transformative force by integrating
digital representations of physical assets onto blockchain technology. This
trend is primarily fueled by the escalating costs of capital, which highlight
capital inefficiencies, thereby urging financial institutions to seek out
tokenisation as a strategic solution.

At the same time, the Markets in Crypto-Assets Regulation (MiCA) created
uniform European Union market rules for crypto-assets. The regulation covers
crypto-assets that are not currently regulated by existing financial services
legislation. Key provisions for those issuing and trading crypto-assets
(including asset-reference tokens and e-money tokens) cover transparency,
disclosure, authorisation and supervision of transactions. The new legal
framework will support market integrity and financial stability by regulating
public offers of crypto-assets and by ensuring consumers are better informed
about their associated risks.

With this background in mind, the Group has been working on the following
digital assets routes:

·    the structuring of a security token framework with the CH Trading Hub
which will allow a first security token issuance up to US$100 million to be
subscribed in tranches, largely by institutional investors active in the
digital asset markets. The Group and the CH Trading Hub are in advanced
discussions with an asset manager specialised in digital assets to achieve a
first commitment of USD$5 million together with the involvement of a regulated
crypto exchange which can support the placing of the security token to its
investors base, in order to complete the programme. This initiative is
expected to attract further investment banks and asset managers with the focus
on crypto to investigate the arranging of similar initiatives.

 

·    On 28 June 2022, the Company announced its entry into a strategic
alliance (the "VeChain Agreement") with the VeChain Foundation ("VeChain"), a
blockchain enterprise service provider focused on supply chain and
sustainability, to fund the first inaugural IM transaction and kick off the
"Web3"  stream.

The VeChain Agreement contained two phases, both in terms of investment
opportunities and technology development.

Phase One comprised the inaugural IM transaction worth approximately US$1.5
million, providing a proof-of-concept, which was announced on 12 September
2022 and, as to date, has performed in line with the requirements of the
VeChain Agreement.

With reference to the Phase Two, SYME and VeChain are evaluating how to
implement this workstream, also considering the new market positioning of
VeChain (which is primarily focused on creating a developing platform for Web3
adopters in the space of sustainability) and the updated regulatory
environment (which imposes specific requirements for financial products
underpinned by the blockchain technology).

The Group will update the market in due course.

Origination

The Group continues to remain focused on its two core jurisdictions for the
origination of new client companies: Italy and UK. However, the Group will
evaluate on a case-by-case basis potential opportunities in new jurisdictions,
particularly if this is driven by the appetite of potential inventory funders.

Additionally, considering the White-Label go-to-market strategy and the
collaboration taking place with other banks and asset fund managers, the Group
is conducting a full review of its pipeline, including the assessment of
current pipeline clients against specific IM funding criteria that is in the
process of being formulated. The objective of the Group is to create pipeline
figures which actually demonstrate the commitment of the client company and,
also, the preliminary eligibility of the client within potential IM
programmes. Further details will be provided within the Annual Report for the
year ended 31 December 2023 ("FY23").

Trading Update

The FY23 Annual Report is currently being prepared and is expected to be
published at the end of April 2024. During the second half of FY23, the Group
continued to recognise revenue from:

·    Completion of due diligence activities for new potential client
companies (pre-IM); and

·    Usage of the IM Platform and performance of inventory servicing
activities in relation to those IM transactions that have been facilitated
over the Platform (post-IM).

The Group's revenue from continuing operations recognised in the second half
of the 2023 is currently expected to be broadly in line with that generated in
the first six months of 2023. It should be noted that this figure is still the
subject of the year end audit procedures.

With respect to the pre-IM revenue, there were no new origination fees
generated in the second half of 2023 due to the delay in the completion of the
initial inventory purchase relating to the first UK IM transaction that was
announced by the Company on 3 July 2023. This delay has largely been the
result of the IM being managed alongside an existing floating charge facility
which has required this client company to gain specific waivers. While this
has resulted in delays to this deal, it has proven that an IM transaction
model is able to work alongside existing financing facilities.

On 30 June 2023, the Company announced the disposal of the majority 81% stake
of TradeFlow (the "TradeFlow Restructure"). In connection with the TradeFlow
Restructure, the Company announced that the Group and TradeFlow also entered a
Platform licence agreement (the "Platform Licence Agreement") pursuant to
which TradeFlow has been granted a non-exclusive white-label licence for an
initial three-year period to use the Group's IM Platform on a non-exclusive
basis and limited to the APAC region. The consideration for which is a payment
by TradeFlow of £1,000,000 over the duration of the initial three-year
period. Following the signing of the Platform Licence Agreement, the two
parties have been undergoing discussions regarding the point in time when the
access to the Platform will be activated and as a result, to date, the
consideration payment has not been requested or received by the Company.

The Company has recently received an early stage expression of interest with
regard to the 19% ownership stake that it currently holds in TradeFlow and
which it is in the process of evaluating. Alongside this, the board of
directors of SYME is in the process of considering and evaluating its longer
term options with regards to its remaining 19% stake in TradeFlow.

Funding update

Debt Novation Deed

On 30 June 2023, the Company stated, as part of the TradeFlow Restructure,
that it had entered into an English law governed debt novation deed with the
buyers of the 81% majority stake in TradeFlow (the "Buyers") and TAG on 30
June 2023 (the "Debt Novation Deed"). The Debt Novation Deed created the
obligation for TAG to settle the £2,000,000 cash payment that was due from
the Buyers to the Company, as a result of the sale of the 81% majority stake
in TradeFlow, in three tranches:

·    £500,000 which was due on 30 June 2023.  As at the date of this
announcement, this instalment has been received in full;

·    £1,000,000 which was originally due on 30 September 2023. The due
date for this instalment was extended to 31 October 2023 under the English law
governed side letter agreement (the "Side Letter Agreement"), cast as a deed
on 28 September 2023. Details of the Side Letter Agreement can be found in the
announcement made by the Company dated 29 September 2023; and

·    £500,000 which is due by 31 January 2024.

As at the date of this announcement, £523,037 of the £2,000,000 receivable
is currently outstanding and has not been received by the Company. The payment
of the £1,476,963 has been received through a split of £998,683 in cash,
£420,670 by way of formal debt novation agreements with specific suppliers
whereby the debt held by the Group was novated to TAG with no recourse by to
the Group, and £57,610 by way of offset against amounts owed by the Group to
TAG. The Company is now charging a late fee to TAG calculated at a compounding
rate of 15% per annum on any amounts of the instalments not transferred to the
Company by the relevant due date, in accordance with the Side Letter
Agreement.

TAG Unsecured Working Capital Loan Agreement

On 30 June 2023, the Company stated, as part of the TradeFlow Restructure,
that it had amended the current obligations of TAG under the English law
governed fixed term unsecured working capital loan agreement that was entered
into by the Company and TAG on 28 April 2023 (the "TAG Unsecured Working
Capital Loan Agreement"). Following the amendment to the TAG Unsecured Working
Capital Loan Agreement, the full amount available to be drawn down by the
Company from TAG was £800,000 and this draw down was notified to TAG by the
Company on 30 June 2023. As at the date of this announcement, the full
£800,000 of this draw down has been received by the Company in cash and as a
result, no further amounts remain outstanding under this facility.

Top-Up Shareholder Loan Agreement

On 29 September 2023, the Company stated, as part of the interim results
announcement, that it entered into an English Law governed top-up unsecured
shareholder loan agreement with TAG (the "Top-Up Shareholder Loan Agreement"),
pursuant to which TAG agreed to provide the Company with a shareholder loan
facility of up to £3,500,000 to cover the Company's working capital and
growth needs up to 30 June 2025 (the "Top-Up Facility"). The details of the
Top-Up Shareholder Loan Agreement can be found in the Company's announcement
dated 29 September 2023.

To date, the Company has issued draw down notices to TAG for a total amount of
£1,243,515 under the Top-Up Shareholder Loan Agreement. As at the date of
this announcement, the full amount of this draw down is currently outstanding
and has not been received by the Company. Under the Top-Up Shareholder Loan
Agreement, the Company is now charging a late fee to TAG calculated at a
compounding rate of 15% per annum on any amounts not transferred to the
Company by the due date set out in the Top-Up Shareholder Loan Agreement.

As a result of the business and funding update detailed above, the Board are
continually reviewing the cashflow position of the Group, on a prudent basis,
and are currently exploring additional funding options to diversify the
sources of funding for the Group and to mitigate the risk of being dependent
on the TAG Contractual Commitments.

For the purposes of UK MAR, the person responsible for arranging release of
this announcement on behalf of SYME is Alessandro Zamboni, CEO.

 

Contact information

Alessandro Zamboni, CEO, Supply@ME Capital plc, investors@supplymecapital.com

 

Notes

SYME and its operating subsidiaries provide its Platform for use by
manufacturing and trading companies to access inventory trade solutions
enabling their businesses to generate cashflow, via a non-credit approach and
without incurring debt.  This is achieved by their existing eligible
inventory being added to the Platform and then monetised via purchase by third
party Inventory Funders.  The inventory to be monetised can include
warehoused goods waiting to be sold to end-customers or goods that are part of
a typical import/export transaction.

 

 

 

 

 1  New Italian legislation - pegno non possessorio (the "PNP Regulation").

 2  ABI - Associazione Bancaria Italiana (https://www.abi.it/) .

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