Review of financial projections

I am currently in the process of applying for SEIS approval from HMRC. Please review the four attached slides thoroughly to ensure no numbers and projections are inconsistent. In addition, please ascertain whether the remarks below have been met. I can also provide last year's end-of-year return for your perusal.

Below are some specific remarks:

Pitch Deck:

HMRC is looking for a reason why you need the investor funds in the first place. This is something you need to convince them of (the burden lies on you to show this otherwise HMRC will likely not accept your application). To demonstrate this, please reformat your financial forecast in table format to show a 3 year projection of profit & loss. I have sketched out an example of how to present this P&L table below. Please note the following when drawing this up:

The funding gap: since you’re applying for £250k SEIS, I suggest that you include a breakdown of how you plan on spending these funds within your ‘projected costs’ - for example, £50k on marketing, £25k on R&D etc. Please make sure that these figures (a) add up to a loss of £250k within the first 2 years of your P&L and (b) match the ‘use of funds’ slide (a separate breakdown of how you intend to spend the SEIS funds). The funding gap should be shown by the net losses of the first two years, together adding up to at least the amount of funds sought.

Finally, I would encourage you to keep your projected revenue as conservative as possible (since they are based on assumptions/speculation in any case). This will allow you to highlight the funding gap and strengthen your overall argument that you are a high risk business in need of the funding. Please also be aware that HMRC treats a projected annual profit exceeding £1m as a benchmark for higher scrutiny (meaning further inquiry into your financials, asking why exactly you need the incentive of the scheme in the first place).

Please note the company must be financially healthy to benefit from SEIS and EIS. Their guidelines state 'HMRC will regard any company as being ‘in difficulty’ when it meets the criteria for insolvency under the Insolvency Act 1986, such as: the company is unable to pay its debts as they fall due the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities (the “balance sheet test”)'. If you're unsure of your financial health we advise contacting your accountants to clarify.

If this is your first Advance assurance application, we recommend that you include a note in your Pitch deck that you intend to continue raising EIS funds over the next >7 years as the company grows and scales. This will then likely enable you to benefit from Condition A under EIS (see here for more information), and thus continue raising EIS even after your initial 7-year deadline expires.

Many thanks

I am available to answer any questions you may have.

Warm regards,

Emmanuel