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16. SHARE CAPITAL

     Issued allotted & Paid share capital

Background - Ordinary shares, warrants and loan notes

In the previous year, on 13 July, 2020 the Company undertook a sub-division of its ordinary shares, which sub divided the 487,690,380 ordinary shares of 0.1p each into 487,690,380 ordinary shares of 0.01p each and 487,690,380 deferred shares of 0.09p each. The deferred shares of 0.09p each were consolidated into deferred shares of 0.9p each ranking pari passu as one class with the existing deferred shares of 0.9p each.

On 14 July 2020, 937,500,000 ordinary shares of 0.01p each were issued under a placing at 0.08p each (at a premium of 0.07p per share) to raise £750,000 before costs of £66,863

In addition, on 14 July 2020, warrants to subscribe for ordinary shares of 0.01p were granted as follows:

(a) Subscribers to the placing were granted warrants to subscribe for up to 937,500,000 shares for a period of two years, exercisable at 0.2p per share;

(b) Peterhouse Capital Limited was granted warrants to subscribe for shares equivalent up to 3% of the issued ordinary share capital for time to time, exercisable for a period of two years, at 0.08p per share.

Following the consolidation of ordinary shares in December 2020, the warrants have been adjusted and comprise placee warrants to subscribe for up to 93,750,000 ordinary shares of 0.1p at 2p per share, and the warrants held by Peterhouse Capital Limited are exercisable at 0.8p per share.

In relation to the granting of these warrants to Peterhouse Capital Limited, these fall under the requirements of IFRS 9 Financial Instruments and as such are accounted for at fair value through profit or loss. At the grant date of these warrants these are valued using a Black Scholes model to determine the intrinsic value of the warrant and a liability is recognized for this amount with a corresponding expense through the income statement. The Directors’ have concluded that the intrinsic value of the warrant as at 31 March 2021 is not material to the results and subsequent movements in the share price have decreased this value further. As such no accounting entries have been made to these results.

Further on 14 July 2020, £600,000 of convertible loan notes were issued to Mr C C Johnson as part of arrangements to reorganize loans between him and the Group. The notes are repayable on 31 July 2022 and are convertible at any time into 300,000,000 ordinary shares of 0.01p at 0.2p per share. On conversion, warrants to subscribe for up to 300,000,000 ordinary shares will be granted to Mr C C Johnson exercisable for a period of two years from the date of grant at 0.2p per share. Following the consolidation of ordinary shares in December 2020, the loan notes have been adjusted and are convertible into 30,000,000 ordinary shares of 0.1p at 2p per share, with warrants to be granted to subscribe for up to 30,000,000 ordinary shares of 0.1p each at 2p per share.

The convertible loan notes have been accounted for as having both a debt and an equity element. This results in the creation of a loan note equity reserve at the point of issue. This loan note equity reserve is the difference between the loan note value received by the Company of £600,000 and the fair value of a debt only instrument with a 10% imputed interest rate and a final settlement figure of £600,000 in July 2022. This 10% imputed interest rate of £33,058 (2020: nil), is managements’ best estimate as to the interest rate that would be expected from the market for an unsecured loan of £600,000 without a conversion element.

Ordinary shares entitle the holder to receive notice of and to attend or vote at any general meeting of the Company or to receive dividends or other distributions.

Deferred shares do not entitle the holder to receive notice of and to attend or vote at any general meeting of the Company or to receive dividends or other distributions. Upon winding up or dissolution of the Company the holders of deferred shares shall be entitled to receive an amount equal to the nominal amount paid up thereon, but only after holders of ordinary shares have received £100,000 per ordinary share. Holders of deferred shares are not entitled to any further rights of participation in the assets of the Company. The Company has the right to purchase the deferred shares in issue at any time for no consideration.

On 29 December 2020, for every ten of the 1,425,190,380 ordinary shares of 0.01p then in issue, were consolidated into one ordinary share of 0.1p resulting in there being 142,519,038 ordinary shares of 0.1p in issue.

Current year position – ordinary shares, warrants and loan notes

During the financial year to 31 March 2022, no changes have taken place with regards to the shares and warrants issued. Further shares were issued post year end details of which are found under note 23.

However on 18th November, 2021, a loan facility for up to £200,000 was entered into with Mr C C Johnson comprising B convertible loan notes repayable on 30 November 2022 and convertible at any time at an exercise  price of 0.7p per share. £80,000 was drawn down initially; as at 31 March 2022 this loan facility was fully drawn down. The loan facility is convertible into up to 28,571,429 new ordinary shares of 0.1p at 0.7p per share.

Since the year end, the Company has agreed with Mr C C Johnson a consolidation and variation of terms of the two unsecured convertible loans notes and director debt held by Mr C C Johnson. Details of this arrangement are given in post year end events - note 23 to these accounts.

Loan note equity reserve is the amount that has been provided for in respect of the difference between the cash value and the liability element of the loan notes. An adjustment has been made of £18,182 as this amount relates to the period from year end to the expiry of the loan notes being 31 July 2022. A further adjustment has been made of £ 58,954 which is the amount provided for to 31 March 2022.

Issued, allotted and fully paid

For the purpose of preparing the consolidated financial statement of the Group, share capital represents the nominal value of the issued share capital of 0.1p per share (2021: 0.1p per share). Share premium represents the excess over nominal value of the fair value consideration received for equity shares net of expenses plus deferred shares of 0.9p after issued share capital of 1p.

The weighted average interest rates paid on the bank loans were as follows: Bank loans: 3.4 % (2021: 3.4%)

All of the Directors’ loans are repayable after more than 1 year with the exception of loan notes amounting to £769,697 relating to Mr C C Johnson and the loan of £ 100,000 from Mr J Dubois’s Pension Scheme. All loans are interest bearing and charged accordingly. However Mr C C Johnson has waived his right to interest in the year with the exception of the first £ 500,000 (2021: first £500,0000). Interest of £25,000 (2021: £25,000) has been accrued in the year. Interest of £12,000 (2021: £32,761) was paid to Mr J Dubois at the rate of 12% pa (2021: 12% pa).

Directors’ loans include a sum of £100,000 (2021: £150,000) advanced by the DFM Pension Scheme of which Mr J Dubois is the principal beneficiary which has been repaid following the year end and as such has been shown within current liabilities. This loan bears interest at 12% per annum (2021: 12% per annum).

Within Directors’ loans is the sum of £240,000 (2021: £ 240,000) provided by Mr C C Johnson for a deposit on an option which was not taken up together with the sum of £581,818 (2021: £528,925) in relation to convertible loan notes issued to Mr C C Johnson on 14 July 2020. These have a nominal value of £600,000 and are repayable on 31 July 2022. In addition, further convertible loan notes were issued to Mr C C Johnson on 30 November 2021. These have a nominal value of £200,000 are repayable on 30 November, 2022. The equity component on these loan notes at year end amounted to £187,879. These are treated as being due for repayment within one year within borrowings. These loan notes have subsequently been reorganised into new convertible loan notes during July 2022 for a term of two years to July 2024, details of which are given in note 23. As a financial instrument with both debt and equity components, an amount was recognised directly into a Loan Note Equity Reserve on issue, as explained further in note 16, with the debt element being unwound at an implied interest rate of 10% and the interest recognized through profit and loss.

The remaining balance is disclosed in note 17.

Included in other loans is £600,000 (2021: £600,000) advanced by Mr G Howard (son-in-law to Mr C C Johnson to the Company at rates of 10% & 5% per annum (2021: 10% & 5% pa) together with £90,000 (2021: £90,000) has been advanced by C Rowe, a former employee of the Group, at a rate of 5% per annum. The balance relates to the Covid Loan. Details of the negotiated loan interest reduction with Mr G Howard for accrued interest are given in note 19.

Mrs S Johnson, wife of Mr C C Johnson has a legal charge on flats 3 & 5 Burnside Court Sandhurst Road, Tunbridge Wells Kent of £33,255 (2021: £380,000) in connection with her loan to Selmat. During the year the sum of £346,745 was repaid.

Selmat has also granted to Paragon Mortgages, legal charges over the freehold property at Hildenborough and leasehold properties of one of the three flats at Burnside. These mortgages are interest only, for a term of seven years with a fixed interest rate for the first five years. These properties are rented out.

The bank borrowings are repayable as follows:

15. BORROWINGS

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