Losses neared £30m at delivery tech platform Sorted ahead of it being bought just £66.73 in a reverse takeover deal, it has been revealed.
The Manchester-based global software company was snapped up by AIM-listed Location Sciences on January 30 after running into financial trouble despite raising almost $100m in investment in recent years.
The deal for Sorted included Location Sciences taking on the firm’s debts of £4m plus interest and invest £3m of capital.
As a result of the takeover, shareholders who previously invested nearly $100m (£72m) into Sorted will not get their money back.
When the deal was announced, it was also confirmed that the entire Sorted board had left apart from chief executive Carmen Carey.
If the deal is ratified by Location Sciences’ shareholders on February 16, the future of Sorted’s 60 employees will be secured.
Location Sciences is based in Cheltenham and counts Boohoo co-founder Mahmud Kamani and Zeus Capital founder Richard Hughes among its shareholders.
According to newly-filed accounts with Companies House, Sorted’s pre-tax losses widened from £12m to £28.7m in the 12 months to September 30, 2022.
The results, which were significantly late being filed, also show its revenue went from £4.4m to £6.1m over the same period.
A statement signed off by the board said: “Sorted experienced significant challenges in both its legacy business and through the acquisition of Clicksit.
“Despite these challenges, Sorted continued to enjoy revenue growth… with a number of client wins increasing during the year.
“However, EBITDA has deteriorated against the prior year due to dealing with legacy issues, customer stabilisation and enhancement costs and platform investment.”
It added: “In fiscal year 2022, Sorted faced significant challenges stemming from a number of legacy issues which had been accumulating during the group’s preceding period of rapid expansion.
“These issues ranged from the necessity to update elements of the technology stack to the need to implement more aggressive end-to-end automation across the business.
“The manifestation of these issues affected the group’s performance and customer experience which resulted in impacts to customer satisfaction, unexpected churn and delayed revenue realisation.
“Consequently, the group took the decision to slow new customer acquisition sales midway through the fiscal year and focus resources on a program of stabilisation and scalability.”