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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Juridica | LSE:JIL | London | Ordinary Share | GG00B29LSW52 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.475 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMJIL
RNS Number : 5971O
Juridica Investments Limited
22 August 2017
Juridica Investments Limited
("Juridica," "JIL" or the "Company")
Results for the six months ended 30 June 2017
Juridica, a provider of strategic capital for corporate legal claims, announces its results for the six months ended 30 June 2017.
Summary of results
-- 30 June 2017 net asset value ("NAV") per ordinary share is US$0.2589, an increase of 0.48 cents from 31 December 2016 NAV per ordinary share due to a total comprehensive gain of US$526,000.
-- Total comprehensive gain of US$526,000, primarily attributable to net realised and unrealised gain totalling US$1.9 million less operating and other expenses of US$1.4 million.
-- Interim dividend declared of 8p per share payable on 29 September 2017.
Investment results
During the six-month period ended 30 June 2017:
-- Proceeds received from Investment 114107 totalling US$893,000 upon exercise of counterparty's option to buy out the Company's interest. Over the two-year life of the investment, the Company received proceeds of US$2.6 million on an investment of US$1.3 million.
-- A net increase in the valuation of the Company's investments of US$1.8 million.
Subsequent to 30 June 2017, the Company (through a wholly owned subsidiary) received US$10.0 million as partial release of tax reserves held by Fields Law Firm PLLC ("Fields Law") relating to the 2016 settlements in the Company's antitrust and competition portfolio. The release of these reserves was due to Fields Law finalising a portion of its tax filings. Additional reserves related to settlement of remaining Fields Law taxes will be released, should any reserves remain, once Fields Law finalises its remaining tax obligations (which is expected no later than third quarter 2017). A further US$3.0 million remains in escrow for certain contingencies related to JIL's investment in the facility that funded the antitrust and competition portfolio. Any unused funds in the escrow will be paid to JIL upon termination of the escrow requirements (expected to occur in September 2020).
A total of 11 investments remain active with four being litigation related, four relating to special purpose vehicles ("SPV"), and three being non-litigation and non-SPV.
Dividend
The Board announces that an interim dividend of 8p per share will be paid on 29 September 2017 to shareholders on the register at 1 September 2017. This brings the total dividend paid since inception to 111.6p per share
Corporate update
The Board of Directors announced on 18 November 2015 that it would not make any new investments (other than further funding of existing investments where such funding was reasonably required in the interests of shareholders) and that it would seek to make distributions to shareholders in the most appropriate manner, following the completion of investments.
The Board of Directors and the Company's Manager continue to work to monetise all of the Company's remaining investments by 31 December 2017 however, should circumstances require the continuation of investments beyond 2017, the Board will make appropriate arrangements as required. The Board will announce any such arrangements before the end of 2017.
- Ends -
This report contains forward looking statements, which are based on the current expectations and assumptions of the Manager and involve known and unknown risks and uncertainties that could cause actual results or performance to differ materially from those expressed or implied in such statements. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of variables that could cause actual results or trends to differ materially. Each forward looking statement speaks only as of the date of this report. Except as required by the AIM Rules or otherwise by law, the Company and the Manager expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the Company's or Manager's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
For further information contact:
Brickell Key Asset Management Limited +1 (866) 443 William Yuen 1080 Cenkos Securities PLC - Nominated Adviser and Joint Broker Nicholas Wells +44 (0) 20 Camilla Hume 7397 8900 Investec Bank PLC - Joint Broker Darren Vickers +44 (0) 20 Jeremy Ellis 7597 5970 Bell Pottinger +44 (0) 20 Dan de Belder 3772 2500
CHAIRMAN'S STATEMENT
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
On behalf of the Board, I present the results of Juridica Investments Limited ("JIL" or the "Company") for the six-month period ended 30 June 2017.
Financial Results
During the first half of 2017, a mixture of results and revaluation of the Company's investment portfolio has resulted in a total value of the Company's investments of US$19.9 million, a five per cent increase on the value at 31 December 2016.
Corporate Run-Off Strategy
The Board explained the Company's run-off strategy in its 2016 Annual Report. The strategy remains the same, namely to realise investments in an efficient and reasonably expeditious manner mindful that litigation investments depend on the administrative/ decision timings within the Court systems, and on other investments market circumstances.
As explained in the 2015 and 2016 Annual Reports, should circumstances involve the continuation of investments beyond 2017, then the Company will make appropriate arrangements as required. It is the Board's intention to announce, before the year end, any such arrangements should they become necessary.
Operating expense reductions will continue to be an objective.
Investment Results
Litigation investments:
Three active cases remain within the Company's litigation investments:
-- Case 5009-S continues and, during the first half of 2017, saw success with its appeal and a direction for the trial judge to consider a new trial on damages. The valuation for this investment has been increased from the year end figure accordingly.
-- Case 1410 investment had its damages award increased during the first half of 2017, after a successful appeal. Both sides are now appealing that decision.
-- Case 2709-E went to appeal following a decision against the Plaintiff on patent infringement. A de minimis value of US$46,000 was assigned to this investment at 30 June 2017, reflecting the high likelihood of the Plaintiff losing the appeal and the uncertainty as to any residual value. Subsequent to 30 June 2017, the Plaintiff has lost their appeal and ceased their efforts on this case. Accordingly, a prior award held in escrow will be released, which will deliver approximately US$85,000 to the Company.
In addition to the three active cases noted above, Investment 3608-A remains active relative to the release of reserves as described below and in the Investment Manager's Report.
Finally, Case 114107, a litigation investment that was active as of the beginning of 2017, was finalised in March 2017. This investment delivered a 100% return to the Company over its two-year investment period.
Special Purpose Vehicles ("SPV"):
There are four active investments held as SPVs, all of which relate to the patent sector. Monetisation of these investments is being actively pursued.
-- In ACK, the Company continues to hold a note related to its interest in an invention.
-- In Grandios, there have been 37 patent applications filed with the United States Patent and Trademark Office ("USPTO"), of which 25 have been issued or allowed as of 30 June 2017.
-- In Rich Media, 25 patent applications have been filed with the USPTO, of which two have been issued or allowed as of 30 June 2017.
-- In ProSports, 55 patent applications have been filed with the USPTO, of which 25 have been issued or allowed as of 30 June 2017.
Other investments:
The Company began 2017 with three other investments being active. One of these investments, Investment 7313, which held an immaterial value at 31 December 2016, has been written to US$Nil due to a deterioration in the financial position of the underlying entity for which the investment was made. Two other investments remain active as of 30 June 2017:
-- JCML 2007 Limited ("JCML 2007")- JIL is a 36.17% shareholder in this previous manager to the fund. The value of this investment is based on the Company's share of the JIL shares held by JCML 2007. JCML 2007 is likely to proceed to liquidation during the second half of 2017. The investment has been valued at the likely liquidation proceeds.
-- Investment 6609-S has been subject to a reduction in its value as there has been limited progress during the first half of 2017.
Dividends
Subsequent to 30 June 2017, US$10.0 million in proceeds have been received by JIL. These proceeds relate to settlements that occurred in 2016 within our antitrust and competition portfolio. These proceeds were held in reserve by Fields Law Firm PLLC ("Fields Law"), the law firm that is the counterparty to our investment pending completion and filing of their tax returns and resolution of certain contingencies (expected no later than September 2020).
Further proceeds from these settlements may yet be received following the filing of Fields Law's remaining tax returns (expected to be filed in third quarter 2017) and again once certain contingencies are relieved (expected no later than end of year 2020).
The Board announces that an interim dividend of 8p per share will be paid on 29 September 2017 to shareholders on the Register at 1 September 2017.
Exchange Rate Movements
The Company continues to benefit from the persisting lower value of Sterling against the U.S. Dollar in view of its U.S. investments.
Conclusion
The Board will seek to continue the run-off strategy with efficiency and with reasonable expedition wherever commercially appropriate.
Lord Daniel Brennan QC
Chairman
21 August 2017
INVESTMENT MANAGER'S REPORT
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
The Company began operations in December 2007 and has, since inception, made 30 investments (some of which have multiple underlying cases or other assets and some which have had supplemental investments). A total of 19 of these investments have come to full conclusion. Of the remaining 11 active investments, five have had some return on the Company's investment, including the Company's investment in JCML 2007, either from settlements or other distributions.
During the six-month period ended 30 June 2017, the Company continued to move forward in its strategy to monetise its remaining investments by 31 December 2017, wherever reasonably possible. This strategy, which was announced on 18 November 2015, directs us to manage the Company's existing investments by balancing the speed of monetisation with what we believe is each investment's potential value and to make distributions to shareholders in the most appropriate manner.
We continue to seek resolution and monetisation of all the remainder of the Company's assets, wherever reasonably possible by the end of 2017.
Financial Performance During 2017
The NAV per ordinary share increased from US$0.2541 (20.59 pence per share) as at 31 December 2016 to US$0.2589 (19.95 pence per share) as at 30 June 2017. This increase of 0.48 cents in NAV per ordinary share was entirely attributable to a total comprehensive gain of US$526,000.
The Company's US$526,000 total comprehensive gain for the six-month period ended 30 June 2017 was due to the net unrealised gain of US$1,801,000 generated from the change in valuation of the Company's investments, net realised gain of US$110,000 associated with the disposal of an investment that was finalised during the six-month period ended 30 June 2017, intangible impairment and amortisation expenses of US$67,000, net operating expenses of US$1,341,000, and foreign exchange gain and other income of US$23,000.
The Company's net unrealised gain from net increase in the valuation of the Company's investments of US$1,801,000 was attributable to the following:
-- US$1,559,000 increase in value associated with the Company's contractual interests. This was due to changes in our expectations on the probability of a successful resolution and changes in the projected quantum and timing of a successful resolution of ongoing cases (primarily Case 5009-S). The value for certain contractual interests (principally the SPVs), include the application of additional risk factors to incorporate the potential of monetising those investments within a shortened development period following the Board's instructions in accordance with the Company's run-off strategy. The risk factors associated with monetising the investment within a shorter development period were maintained at the same level determined for the Company's 2016 annual accounts but may be adjusted in future reporting periods based on our ongoing monetisation efforts.
-- US$351,000 increase in value associated with the Company's debt securities, consisting exclusively of our antitrust and competition portfolio.
-- US$109,000 reduction in value associated with the Company's equity investments. This change was principally due to changes in our expectations on the quantum and timing and application of additional risk factors on one equity investment and the reduction of another equity investment to US$Nil following negative developments with the underlying entity.
Investment Results During 2017
Proceeds Received:
Investment 114107: In March 2015, the Company invested US$1.3 million in a patent portfolio. As part of the investment terms, the counterparty was provided with an option to buy out the Company's interest within two years after ensuring the Company received a 100% return on its investment. During the six-month period ended 30 June 2017, this option was exercised and the Company received gross proceeds of US$893,000 which finalised the investment. Over the two-year duration of the investment, the Company received total proceeds of US$2.6 million on an investment of US$1.3 million.
Investment Written to Nil:
Investment 7313: As part of the Company's 2014 revised patent strategy, the Company acquired a 7.8% preferred ownership in ipCreate, Inc. ("ipCreate") for US$2.0 million. The expectation was to monetise this investment as part of future capital raising by ipCreate. In the second half of 2016, ipCreate underwent a restructuring that severely diluted the Company's interest but positioned ipCreate for a potential sale. The valuation of this investment at 31 December 2016 reflected this dilution and the risk adjusted valuation of the Company's investment in ipCreate was determined to be approximately US$22,000. As of 30 June 2017, it has been determined that a sale (should one occur) will not result in sufficient funds to pay any equity holders after debt holders and the Company has moved this investment's valuation to US$Nil and recorded an unrealised loss of US$22,000 for the six-month period ended 30 June 2017 reflecting a write-down of the valuation held at 31 December 2016.
Fair Value of Investments
The fair value of the Company's investments at 30 June 2017 was US$19.9 million (excluding US$45,000 of an amortised intangible that is related to one of the Company's investments). From an accounting standpoint, these investments are categorised as contractual interests, debt securities, or equity investments.
These categories reflect the following changes from the fair value as at 31 December 2016.
Hot Features
Premium
31 December Additions Net Realised Fair Value 30 June
2016 During Proceeds Gains Change 2017
Fair the Attributable Attributable During Fair
Value Six-Month to the to the the Six-Month Value
$USM Period Six-Month Six-Month Period $USM
Ended Period Period Ended
30 June Ended Ended 30 June
2017 30 June 30 June 2017
$USM 2017 2017 $USM
$USM $USM
------------------ ------------ ----------- -------------- -------------- --------------- --------
Contractual
Interests:
includes
assets
from the
Company's
patent
and commercial
claims
portfolios 7.8 - (0.9) 0.1 1.6 8.6
------------------ ------------ ----------- -------------- -------------- --------------- --------
Debt Securities:
includes
assets
from the
Company's
antitrust
and competition
portfolio
(1) 10.5 - - - 0.3 10.8
------------------ ------------ ----------- -------------- -------------- --------------- --------
Equity
Investments:
includes
assets
from the
Company's
patent
and commercial
claims
portfolios
as well
as other
investments
(2,3) 0.6 - - - (0.1) 0.5
------------------ ------------ ----------- -------------- -------------- --------------- --------
Total 18.9 - (0.9) 0.1 1.8 19.9
------------------ ------------ ----------- -------------- -------------- --------------- --------
(1) Current valuation of the Company's investments accounted for as debt securities reflects expected release of excess reserves currently being held by Fields Law, the law firm that is counterparty to the antitrust and competition investment that makes up the entirety of the Company's single investment categorized as debt securities. During 2016, the Company's interest in each of the underlying cases for this investment were finalised and the loan and swap arrangements that served as the Company's facility agreement with Fields Law were terminated and replaced with termination agreements. The termination agreements provide for additional proceeds to ultimately be remitted to the Company, if additional proceeds become available. Specifically, additional proceeds may become available once Fields Law's 2016 tax liabilities in respect of the antitrust and competition investments are settled and certain other potential contingencies associated with the investments are cleared (which, in the case of non-tax contingencies, is expected no later than September 2020).
At 30 June 2017, the risk and time adjusted value of expected additional proceeds to be released were determined to be US$10.9 million, an increase of US$351,000 over the value established at 31 December 2016.
On 2 August 2017, a total of US$10.0 million was transferred to Riverbend Investments Limited ("Riverbend"), a wholly owned subsidiary of the Company after a portion of Fields Law's 2016 tax liability was determined. Additional reserves related to settlement of taxes will be released, should any reserves remain, once Fields Law finalises its remaining tax obligations (which is expected no later than end of third quarter 2017).
A further US$3.0 million remains in escrow and, as described above, a portion may be released once certain Fields Law contingencies related to the investment are relieved, and should any reserves remain, this release is expected no later than September 2020.
(2) The fair value change in the Company's equity investments includes US$22,000 unrealised loss attributable to an investment that was written down to US$Nil as of 30 June 2017.
(3) Equity investments exclude a related intangible, with amortised value of approximately US$45,000.
As discussed in previous reports, we value JIL's investments using valuation and accounting methods that are applied in a manner that follows International Financial Reporting Standards' ("IFRS") accounting principles. In particular, we follow guidance provided by IFRS 13 in establishing the method of applying fair value accounting. Under this guidance, we develop a fair value of a case or investment by discounting its expected terminal value from its expected completion date.
We determine our initial expectations on quantum and timing of case results by assigning a probability of various scenarios coming to fruition and applying risk factors that: i) are intrinsic to the specific case; and ii) reflect general risks within and outside of the legal process. Our assumptions behind an investment's fair value are revisited on a semi-annual basis (to coincide with the Statement of Financial Position date). If needed, we will re-run the investment's valuation model and revise its expected future cash flow which we then discount to the reporting date. The discount rate used for valuation purposes is the Company's cost of equity. All due diligence and transaction costs related to an investment are expensed.
Unlike an investment that is backed by a physical asset, litigation assets are subject to certain legal hurdles each of which has the potential to cause the litigation portion of any investment to be worthless. A key element in selecting investment worthy cases is the likelihood of a particular case overcoming any remaining hurdles and generate either a settlement or trial victory.
For the Company's litigation investments, we consider the current legal merits of each underlying case, the legal history of the case, the current legal environment, and any other factors we feel are relevant as of the date of our valuation. Working with the lawyers assigned to each case, we develop scenarios of potential outcomes, including the various situations that can generate outsized returns, moderate returns, or a complete loss, and assign each scenario a probability. The Monte Carlo simulation runs the statistically relevant number of iterations to provide us with an expected value and timing. These results are then discounted to the reporting date at the Company's cost of equity. For certain of the Company's investments, it is more appropriate to value them by using discounted cash flow models incorporating the various risks associated with the investment.
Of significance is the risk of loss that is assigned to each case. This must be considered given the typical binary characteristics of a legal case (i.e. win or lose).
Beginning in 2016 and in response to the Company's run-off strategy, as part of us reaching a fair value assessment of the Company's investments, we have considered the potential likelihood of monetising certain investments within a shortened development period.
Our accounting fair value on the Company's investments is not intended to express our prediction about the ultimate outcome of any investment, but rather our fair value estimate based on the best information available to us at the Statement of Financial Position date using a range of possible outcomes
Portfolio Update
As the Company's portfolio has progressed, it has evolved into three types of investments: litigation related investments; SPV related investments; and other investments. As such, our portfolio update is grouped in the same manner.
The summary of our investment holding at 30 June 2017 for each of these groups is as noted on the following table, together with the current concentration risk:
Number of
Portfolio Active Fair value % of Total
category Investments $US Million NAV
--------------------- ----------------- ----------------- ------------------
30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2017 2016 2017 2016 2017 2016
Litigation
investments 4 5 17.0 15.8 59.6% 56.5%
SPV investments 4 4 2.9 2.9 10.0% 10.3%
Other investments
(1) 3 3 0.1 0.3 0.4% 1.0%
-------- ------- -------- ------- -------- --------
Total investments 11 12 20.0 19.0 70.0% 67.8%
======== ======= ======== ======= ======== ========
(1) Includes the Company's investment in JCML 2007. Also includes an investment in which US$45,000 of its fair value at 30 June 2017 is categorised as an intangible.
Litigation investments
The Company began 2017 with five remaining investments in litigation. During the six-month period ended 30 June 2017, one investment, Investment 114107, came to full resolution leaving four investments in litigation remaining active as of 30 June 2017.
Case summaries:
-- Investment 3608-A: This investment originally included six cases of which five were related to antitrust and competition and one was related to statutory claims against an international bank. The investment was initiated in 2008 with terms that required funding obligations by the Company through 2016 with an annual option providing for the Company to extend the funding obligation beyond 2016. During 2016, the Company declined to exercise its option to continue funding the investment.
Under the terms of the facility agreement (consisting of a consolidated loan agreement and a swap agreement), gross proceeds generated from the investment are received and held by Fields Law, which is the law firm that is the counterparty to the Company's investment. Deducted from the gross proceeds are taxes and reserves required for certain contingencies. Per the terms of the facility agreement, the Company received net proceeds at the end of each calendar year, or earlier if approved by JIL and Fields Law.
As of 31 December 2016, all of the Company's interest in the underlying cases came to a conclusion. Although the Company's interest in the underlying cases in Investment 3608-A ended, additional proceeds may be delivered as described above. As of 30 June 2017, the expected release of US$10.9 million in excess reserves is reflected as the remaining valuation of this investment.
Subsequent to 30 June 2017, Fields Law finalised a portion of its tax returns and released a total of US$10.0 million in reserves. These funds were transferred to Riverbend on 2 August 2017. Additional reserves related to settlement of taxes will be released, should any reserves remain, once Fields Law finalises its remaining tax obligations (which is expected no later than third quarter 2017).
A further US$3.0 million remains in escrow and, as described above, a portion may be released once certain Fields Law contingencies related to the investment are relieved, and should any reserves remain, this release is expected to be no later than September 2020.
-- Case 2709-E: This case originally consisted of a portfolio of three patents with claims against three defendants. After a protracted patent re-examination, one patent was abandoned. During 2016, an unexpected event occurred which severely impacted one of the remaining patents and resulted in partial settlements relating to this patent. Proceeds generated were far below our expectations and were reinvested into the case to further the legal proceedings on the remaining patent. A Markman hearing on the remaining patent completed during 2016 with the Plaintiff prevailing on validity. The issue of infringement remained in question and both parties sought appellate review of the ruling by the Court of Appeals for the Federal Circuit.
At 30 June 2017, the valuation assigned to this investment continued to reflect the high likelihood of us losing our appeal. Subsequent to 30 June 2017, the Court of Appeals for the Federal Circuit affirmed the decision of the District Court and the Plaintiff will not appeal further. As a result, a prior award in this case, which was held in escrow, is expected to be released and deliver approximately US$85,000 to the Company.
-- Case 5009-S: This case completed its trial by jury during 2015. Although the Plaintiff fully won on liability, the jury only awarded an amount of damages of approximately US$2.0 million (including interest) as compared to an investment of approximately US$3.5 million. Both sides filed post-trial motions for a new trial with the Plaintiff requesting a new trial on damages only and the Defendant requesting a new trial on all issues as well as dismissal of the case due to lack of standing by the Plaintiff. These motions were decided in favour of the Defendant; however, the Plaintiff appealed this adverse decision of the trial court.
As of 30 June 2017, discussions with the Plaintiff and with Plaintiff's counsel led us to become more confident that we would win elements of our appeal. As such, the valuation of this investment at 30 June 2017 reflects a higher probability of success. Subsequent to 30 June 2017, a decision by the United State Court of Appeals reversed the trial court's decision to dismiss the case due to lack of standing and the case was sent back to the District Court to rule on Plaintiff's request for a new trial on damages only.
-- Case 1410: This case completed its non-jury trial during 2011 and judgment was entered in 2012 which was positive on liability but damages awarded were far less than expected. Cross-appeals on liability and Plaintiff's appeal on damages were filed after the ruling. In early 2016, the Plaintiff's appeal received a favourable appeals court ruling overturning the trial court's damages award and in early 2017, the trial court judge added punitive damages to the award. Although the total award has increased, the Plaintiff and their counsel still believe damages should be higher. Both parties filed further legal appeals during the six-month period ended 30 June 2017. Although risk remains, we believe there is the possibility of a new award on damages without a further trial.
SPV investments
In early 2014, we identified a changing patent market whereby value was maximised by developing operating entities around a portfolio of patents. We identified several existing patent investments in which the underlying patents were at risk of not realising their full potential. Working with subject matter experts, new inventions were developed with the intention of obtaining patents, developing commercial applications, and monetising each SPV through litigation or other commercial strategies. These investments were funded through SPVs in order to facilitate monetisation of each developed entity.
A total of four SPVs were created. Three of these SPVs were developed around existing core patents. The fourth SPV was developed in partnership with the National Football League's Players Association ("NFLPA").
SPV summaries:
-- Rich Media: This investment originated with litigation involving an underlying patent for which the Company previously received proceeds. In 2014, we began to develop a portfolio of related patents in the areas of rich media and multimedia. The inventor of the patent that was the subject of the original litigation, along with other subject matter experts, developed 25 additional inventions all of which were filed as patent applications in early 2016. At 30 June 2017, two patents have been issued or allowed and the remaining 23 are still under review by the United States Patent and Trademark Office ("USPTO"). We are working with several parties to monetise the SPV.
-- ACK / Smooth3D: This investment consisted of three components:
o Litigation component: The investment originated with litigation that resulted in a judgment of liability but low damages and which provided no proceeds to the Company. Although elements of the case continue, it became clear during 2015 that there was no prospect of the Company generating any proceeds from the ongoing litigation and the Company ceased assigning any value to the litigation component.
o Patent development component: During 2014, we worked with the inventor of the patents that were the subject of the original litigation and other subject matter experts to develop a portfolio of related inventions with the intention of procuring patents. In early 2016, it was determined that the underlying inventions had no commercial value and all work on these inventions ceased.
o Collateral component: As collateral for the Company's original investment in the litigation, JIL received an equity interest in a company that has developed energy-saving software for electrical motors. A major industrial conglomerate has been testing the energy-saving software and has made ongoing capital contributions to further its development. During 2016, JIL exchanged its equity interest in the company for a note subject to agreed discounts if redeemed early. The redemption discounts, along with other risk factors, have been factored into the Company's reported fair value for this investment at 30 June 2017.
-- GrandiOS: This investment consists of two components:
o The investment originated with litigation surrounding core computer technology. Although prior settlements have provided the Company with some small return, during the year ended 2016 we learned of new hurdles related to the original litigation which we believe put severe doubt on the ability of the Company to generate any further proceeds. As such, the Company ceased assigning any value to the litigation component.
o The original investment included an interest in certain mobile phone related patents. In 2014, we worked with subject matter experts to develop a portfolio of patents related to mobile phone technology and a total of 37 patent applications were filed with the USPTO. At 30 June 2017, a total of 25 patents have been issued or allowed by the USPTO. We continue to market this developing portfolio of patents to several buyers.
-- ProSports: This SPV was established to develop and monetise a large portfolio of patents in the technology and sports market. The Company has partnered with the NFLPA in this endeavour. As of 30 June 2017, a total of 55 patent applications have been filed with the USPTO. At 30 June 2017, a total of 25 patents have been issued or allowed by the USPTO. We continue to market this developing portfolio of patents and inventions to prospective buyers.
Other investments:
The Company began 2017 with three investments that are not directly related to litigation and are not specific to a particular SPV. During the six-month period ended 30 June 2017, one of these investments, Investment 7313, was written to US$Nil (as detailed above) but remains active until the underlying entity completes its capital transaction. The remaining two investments are detailed below:
-- Investment in JCML 2007: At admission of the Company's shares to AIM on 21 December 2007, the Company acquired 15 per cent (subsequently diluted to 13.6 per cent) of JCML 2007 for US$2.9 million. In 2012, the Company acquired a further holding in JCML 2007, its then investment manager, for US$4.3 million, bringing its overall holding in JCML 2007 to 36.17%. As a result of its interest in JCML 2007, the Company is entitled to its percentage share of any performance fees paid to JCML 2007 as well as its percentage share of any assets distributed. In 2015, the Company received dividend income of approximately US$5.4 million from a combination of performance fees and a distribution of the Company's shares held by JCML 2007. No further performance fees are expected to be earned by JCML 2007 and at 30 June 2017, the value attributable to JIL's investment in JCML 2007 is based on the Company's share of its own stock still held by JCML 2007.
-- Investment 6609-S: Beginning in 2010, the Company made a series of investments in a large, multi-party pre-litigation settlement opportunity that we believed had the potential to generate significant proceeds for the Company. This highly complex investment had significant activity in 2016 with increased prospect for a partial settlement to occur. However, just prior to the end of 2016, these prospects had a significant setback which has greatly increased the risk associated with monetisation of the investment. During the six-month period ended 30 June 2017, efforts continued to structure partial settlements but significant risk remains. At 30 June 2017, this investment represented approximately US$100,000 of the Company's NAV.
Outlook
We will continue to work with the Company's Board of Directors to maximise shareholder value and to make distributions to shareholders in the most appropriate manner, following the completion of investments.
Disclaimer on Forward Looking Statements
This report contains forward looking statements, which are based on the current expectations and assumptions of the Investment Manager and involve known and unknown risks and uncertainties that could cause actual results or performance to differ materially from those expressed or implied in such statements. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of variables that could cause actual results or trends to differ materially. Each forward-looking statement speaks only as of the date of this report. Except as required by the AIM Rules or otherwise by law, the Company and the Manager expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's or Manager's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Brickell Key Asset Management Limited
21 August 2017
INDEPENT REVIEW REPORT
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
Introduction
We have been engaged by Juridica Investments Limited ("the Company") to review the condensed unaudited set of financial statements in the half-yearly financial report for the six months ended 30 June 2017, which comprises the unaudited condensed statement of comprehensive income, the unaudited condensed statement of financial position as at 30 June 2017, the unaudited condensed statement of changes in equity, the unaudited condensed cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly report and unaudited condensed financial statements is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the Company's annual financial statements.
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on the unaudited condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the International Auditing and Assurance Standards Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the unaudited condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 are not prepared, in all material respects, in accordance with International Accounting Standard 34 and the AIM Rules for Companies.
Emphasis of Matter
Without qualifying our conclusion, we draw attention to Notes 6 and 7 to the unaudited condensed financial statements surrounding the fair value of non-current assets. The unaudited condensed set of financial statements includes non-current assets stated at their fair value of US$19,942,269. Due to the inherent uncertainty associated with the valuation of such non-current assets and the absence of a liquid market, these fair values may differ from their realisable values, and the differences could be material.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
21 August 2017
The maintenance and integrity of the Juridica Investments Limited website is the responsibility of the Directors; the work carried out by us does not involve consideration of these matters and, accordingly, we accept no responsibility for any changes that may have occurred to the unaudited condensed financial statements since they were initially presented on the website.
Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
1 January 1 January
2017 to 2016 to
30 June 30 June
2017 2016
--------------------- --------------------
Notes US$ US$
INCOME
Bank interest - 1,029
Other income 2,182 -
Foreign exchange gain/(loss) 20,644 (13,157)
22,826 (12,128)
--------------------- --------------------
EXPENSES
Management fees 12(a) 875,000 1,500,360
Due diligence and transaction
costs - 29,696
Directors' fees and expenses 12(e) 100,673 210,824
Audit fees 102,557 106,456
Legal and professional
expenses 70,082 46,029
Administration fees 50,620 90,443
Other expenses 141,825 172,309
1,340,757 2,156,117
--------------------- --------------------
INVESTMENT MOVEMENTS
Amortisation of intangible
assets 5 (55,694) (514,699)
Impairment of intangible
assets 5 (11,138) -
Realised gains/(losses)
on financial assets at
fair value through profit
or loss 6 109,682 (753,750)
Movement in unrealised
gains/(losses) on financial
assets at fair value through
profit or loss 6 1,801,227 (23,783,610)
1,844,077 (25,052,059)
--------------------- --------------------
Gain/(loss) for the period 526,146 (27,220,304)
===================== ====================
Total comprehensive gain/(loss)
for the period 526,146 (27,220,304)
===================== ====================
Gain/(deficit) per ordinary
share
Basic Cents 0.48 (24.67)
Fully diluted Cents 0.47 (24.57)
The notes on pages 19 to 28 form an integral part of these unaudited condensed financial statements.
UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
30 June 31 December
2017 2016
------------------------ -------------------------
Notes US$ US$
ASSETS
Non-current assets
Intangible assets 5 44,555 111,387
Financial assets at fair
value through profit
or loss 6 19,942,269 18,913,238
19,986,824 19,024,625
------------------------ -------------------------
Current assets
Other receivables and
prepayments 8 5,097,561 4,167,210
Cash and cash equivalents 3,672,961 5,017,077
8,770,522 9,184,287
------------------------ -------------------------
TOTAL ASSETS 28,757,346 28,208,912
======================== =========================
EQUITY AND LIABILITIES
Equity
Reserves 28,563,024 28,036,878
Net assets attributable to
ordinary shareholders 28,563,024 28,036,878
Current liabilities
Other payables 9 194,322 172,034
Total liabilities 194,322 172,034
------------------------ -------------------------
TOTAL EQUITY AND LIABILITIES 28,757,346 28,208,912
======================== =========================
Number of ordinary shares
(excluding treasury shares) 13 110,340,019 110,340,019
Net asset value per ordinary
share $0.2589 $0.2541
These half yearly unaudited condensed financial statements were approved by the Board of Directors on
21 August 2017 and signed on its behalf by:
RJ Battey
Director
The notes on pages 19 to 28 form an integral part of these unaudited condensed financial statements.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
Note Reserves Treasury Total
shares
----------------- ------------------------ ----------------
US$ US$ US$
Balance at 1 January
2017 28,036,878 - 28,036,878
Changes in equity
for 2017
Gain for the period 526,146 - 526,146
Total comprehensive
gain 526,146 - 526,146
Dividend declared 15 - - -
Balance at 30 June
2017 28,563,024 - 28,563,024
================= ======================== ================
Reserves Treasury Total
shares
----------------- ------------------------ ----------------
US$ US$ US$
Balance at 1 January
2016 126,783,917 (645,459) 126,138,458
Changes in equity
for 2016
Loss for the period (27,220,304) - (27,220,304)
Total comprehensive
loss (27,220,304) - (27,220,304)
Dividend declared 15 (13,042,102) - (13,042,102)
Balance at 30 June
2016 86,521,511 (645,459) 85,876,052
================= ======================== ================
The notes on pages 19 to 28 form an integral part of these unaudited condensed financial statements.
UNAUDITED CONDENSED CASH FLOW STATEMENT
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
1 January 1 January
2017 to 2016 to
30 June 30 June
2017 2016
----------------------- -----------------------
Notes US$ US$
Cash flows from operating
activities
Gain/(loss) for the period 526,146 (27,220,304)
Adjusted for:
Realised (gains)/losses on
financial assets at fair
value
through profit or loss 6 (109,682) 753,750
Movement in unrealised (gains)/losses
on financial assets
at fair value through profit
or loss 6 (1,801,227) 23,783,610
Impairment of intangible 11,138 -
assest
Amortisation of intangible
asset 5 55,694 514,699
Foreign exchange (gains)/losses (20,644) 13,157
Bank interest - (1,029)
Changes in working capital
Purchases of non-current
assets at fair value
through profit or loss (18,457) (5,498,656)
Additions to intangible assets 5 - (120,000)
Net settlement of non-current
assets at fair value
through profit or loss 2,780 517,162
(Increase)/decrease in trade
and other receivables 8 (40,296) 136,757
Decrease/(increase) in other
payables 9 29,788 (113,697)
Net cash flow from operating
activities (1,364,760) (7,234,551)
Cash flows from investing
activities
Interest received - 1,029
Net cash flow from investing
activities - 1,029
----------------------- -----------------------
Cash flows from financing
activities
Dividend paid 15 - (13,042,102)
Net cash flow from financing
activities - (13,042,102)
----------------------- -----------------------
Net increase in cash and
cash equivalents (1,364,760) (20,275,624)
Cash and cash equivalents
at 1 January 5,017,077 27,384,242
Effect of foreign exchange
rate changes 20,644 (13,157)
Cash and cash equivalents
at 30 June 3,672,961 7,095,461
======================= =======================
The notes on pages 19 to 28 form an integral part of these unaudited condensed financial statements.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2017 TO 30 JUNE 2017
1. LEGAL FORM AND PRINCIPAL ACTIVITY
The Company is an authorised closed-ended investment company incorporated under The Companies (Guernsey) Law, 2008 ("the Law"). The Law does not make a distinction between private and public companies. Shares in the Company were admitted to trading on AIM, a market operated by the London Stock Exchange, on 21 December 2007. The address of the Company's registered office is 11 New Street, St. Peter Port, Guernsey, Channel Islands, GY1 2PF. The condensed interim financial statements have been reviewed, not audited.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of the financial statements are set out below:
Basis of Preparation
These half yearly unaudited condensed financial statements ("the condensed financial statements") for the six months ended 30 June 2017 have been prepared in accordance with International Accounting Standard 34: Interim Financial Reporting ("IAS 34"), and on a going concern basis. The condensed financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2016 which have been prepared in accordance with International Financial Reporting Standards ("IFRS"), issued by the International Accounting Standards Board ("IASB"), interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") and applicable legal and regulatory requirements of Guernsey Law.
The following IFRS standards became effective for periods commencing on or after 1 January 2017:
-- IAS 7 'Statement of Cashflows' (Amendments to IAS 7) -- IFRS Annual Improvements Cycle 2014 - 2016
However, these have had no material impact on the presentation of the financial statements.
Accounting policies
The preparation of financial statements in conformity with IAS 34 requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgement in the process of applying the Company's accounting policies. The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2016.
Financial risk management
The Company's activities expose it to a variety of financial risks. The main risks arising from the Company's financial instruments are market risk, insurance risk, credit risk and liquidity risk. These condensed financial statements do not include all financial risk management information and disclosures required in the annual financial statements and, accordingly, should be read in conjunction with the Company's annual financial statements for the year ended 31 December 2016.
Fair value estimation
The Company's investments are categorised as level 3 within the fair value hierarchy under IFRS 13 (as was the case at 31 December 2016). There have been no transfers between levels during the six months to 30 June 2017. Further details are presented in Note 7.
Geographical and segmental reporting
Since the Company is engaged in the provision of similar products and services within a particular economic environment, being subject to similar risks and returns, management considers that the Company has only one business segment and geographical focus, being investments in legal claims primarily in the United States (US), and accordingly does not present additional business and geographical segment information. The Directors are responsible for the investment decisions for the Company's entire portfolio and considers the business to have a single operating segment. Asset allocation decisions are based on a single, integrated investment strategy, and the Company's performance is evaluated on an overall basis.
Earnings/deficit per share
The basic earnings/deficit per share value is calculated by taking the total comprehensive income/loss for the period and dividing it by the weighted average number of ordinary shares in issue over the period. The diluted earnings per share figure is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Manager makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are outlined below:
Critical accounting judgements in applying the Company's accounting policies
The Company makes investments in claims that may involve litigation. The nature of the investments made by the Company reduces by some predetermined amount the cost of litigating a matter to a plaintiff and/or a law firm. A typical investment by the Company will include cash and may also include cash commitments subject to certain restrictions. In most arrangements, the Company is paid only from proceeds generated from the litigation and any related settlement or award. If a lawsuit fails to generate any proceeds and all legal remedies are exhausted, the Company will often not be entitled to reimbursement of the facility they advanced to the counterparty for the specific claim. In these cases the Company will write off their investment in the claim as a loss. The Company is compensated for this risk through the return structure built into the investment. The Company mitigates this risk through the use of their Manager who is experienced in evaluating the investment worthiness of a particular opportunity.
In the process of applying the Company's accounting policies, which are described in Note 2, the Directors have reviewed the Manager's assessment of the fair value of the Company's investments, including the probability of success on the merits of each claim, likelihood of settlement and claim duration. This is most evident in the assessment of the fair value applied to contracts entered into by the Company, as disclosed in Note 6.
To determine the appropriate fair value to apply to each contract, the Manager follows a formal process of developing a set of scenarios for each case and assigns probabilities to each potential outcome. The probabilities are based on the expected progression path of each particular case. In addition, each potential successful scenario has a range of likely settlement proceeds assigned to it as well as a most likely resolution or settlement date. The scenarios not only incorporate the merits of each particular case but also consider known risks intrinsic to the particular matter, as well as general risks found in any litigation matter.
For certain of the Company's investments, the Manager determines fair value by developing a discounted cash flow model incorporating various risk factors such as: quantum risk; timing risk; execution risk; and
for certain investments, consideration of monetising an investment within a shortened development period (following the Company's intention to seek resolution and monetisation of the remaining investments if possible by the end of 2017).
4. UNCONSOLIDATED SUBSIDIARY INVESTMENTS
The following subsidiary investments are held by the Company but have not been consolidated, following the adoption of the investment entities exemption per IFRS 10.
% Share holdings
Date incorporated Country 30 31 December
of incorporation June 2016
2017
------------------- -------------------- ------ ------------
JCML 2007 Limited(#) 28-Nov-07 Guernsey 36.2% 36.2%
Riverbend Investments
Limited 08-Oct-08 Guernsey 100% 100%
GrandiOs Technologies, United
LLC 25-Feb-09 States 100% 100%
Juridica Ventures
KFT 02-Mar-09 Hungary 100% 100%
Juridica Ventures United
(US) Inc. 31-May-09 States 100% 100%
United
Escon Capital, Inc.(#) 26-Apr-10 States 38.6% 38.6%
United
Spinal Spot LLC 28-Feb-11 States 65.9% 65.9%
United
Spinal Ventures LLC 25-Mar-11 States 100% 100%
Juridica Sports Technology United
LLC 22-Apr-14 States 100% 100%
ProSports Technologies, United
LLC 22-Apr-14 States 81.3% 81.3%
Juridica RMIP Holdings, United
LLC 31-Jul-14 States 100% 100%
Rich Media Ventures, United
LLC 31-Jul-14 States 86.6% 86.6%
Juridica Holdings, United
LLC 15-Jun-16 States 100% 100%
Turtle Bay Technologies United
Limited ^ 22-Oct-08 Kingdom 100% 100%
Eleven Engineering United
Game Control LLC 05-Aug-09 States 100% 100%
There are no outstanding commitments with these unconsolidated subsidiaries at the period end, other than those disclosed in Note 10.
(#) JCML 2007 Limited and Escon Capital, Inc. are not subsidiaries, however Juridica Investments Limited has a significant interest in them.
Juridica Holdings LLC, a Delaware limited liability company formed and registered on 15 June 2016, is 100% owned by JIL. Its only asset is a $7.25M Note received in exchange for the shares of AC Kinetics.
^Turtle Bay Technologies Limited, previously owned by JCML 2007, became 100% owned by JIL during 2016. Turtle Bay Technologies Limited is the sole owner of Eleven Engineering Game Control LLC.
5. INTANGIBLE ASSET
30 June 31 December
2017 2016
---------------- -------------
US$ US$
Balance at start of
the period/year 111,387 2,058,796
Additions - 200,000
Amortisation (55,694) (1,069,398)
Impairment of
Intangible Asset (11,138) (1,078,011)
Balance at end of the
period/year 44,555 111,387
================ =============
The Company's intangible asset comprises an investment structured as an agency agreement. Additions to the intangible asset during the period are deemed to have occurred at 30 June 2016. The Company amortises the intangible asset on a straight line balance basis so that the balance is US$Nil by 31 December 2017.
The Directors consider that this basis of amortisation most accurately reflects the pattern in which the asset's future economic benefits are expected to be consumed by the Company.
In addition, the Company purchased common and preferred stock related to the intangible asset, which has been classified as a financial asset at fair value through profit or loss (Note 6).
As at 30 June 2017, the intangible asset and related common and preferred stock was assessed to have a combined fair value of $100,000. A provision for impairment of the Company's intangible asset has been recognised accordingly.
6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
30 June 2017
----------------------------------------------------------------------------------------------
1 Jan Additions Disposal Movement Realised 30 Jun
2017 proceeds in fair gains 2017
value
----------- ---------------- ---------------- ------------- ---------------- ------------
Financial US$ US$ US$ US$ US$ US$
Assets
Contractual
interests 7,791,562 10,957 (892,835) 1,559,068 109,682 8,578,434
Equity investments 621,676 - - (108,522) - 513,154
Debt securities 10,500,000 - - 350,681 - 10,850,681
Total 18,913,238 10,957 (892,835) 1,801,227 109,682 19,942,269
=========== ================ ================ ============= ================ ============
31 December 2016
----------------------------------------------------------------------------------------------
1 Jan Additions Disposal Movement Realised 31 Dec
2016 proceeds in fair losses 2016
value
----------- ---------------- ---------------- ------------- ---------------- ------------
Financial US$ US$ US$ US$ US$ US$
Assets
Contractual
interests 29,435,299 997,274 (748,210) (15,159,640) (6,733,161) 7,791,562
Equity investments 5,950,296 100,000 - (1,744,063) (3,684,557) 621,676
Debt securities 55,392,082 30,431,136 (71,968,979) (3,354,239) - 10,500,000
.
Total 90,777,677 31,528,410 (72,717,189) (20,257,942) (10,417,718) 18,913,238
=========== ================ ================ ============= ================ ============
(a) Contractual interests
Contractual interests have been accounted for using the fair value model. At 30 June 2017, the Company had investments in 6 contractual interests (31 December 2016: 7 contractual interests).
Fair value movements of contractual interests are due to amendments in estimated cash flows arising from changes in expectations surrounding each case. Realised gains or losses due to the full completion of cases with proceeds, if any, are first being allocated to the return of any remaining principal. Any remaining proceeds are then compared against any prior gain or loss recognised with the difference reflected as current period/year realised gain or loss.
(b) Equity investments
The Company's equity investments include a holding in JCML 2007. The fair value of the Company's investment in JCML 2007 was assessed as at 30 June 2017 to be US$5,508 (31 December 2016: US$9,240). This assessment of fair value is deemed appropriate given the investment in the company in prior years, remaining level of assets, and the expected value of future income and earnings and the projection of future cash flows. The remaining value comprises two investments.
(c) Debt securities
During 2016, the Company's interest in each of the underlying cases for this investment were finalised and the loan and swap arrangements that served as the Company's facility agreement with Field's Law were terminated and replaced with termination agreements that provide for additional proceeds to ultimately be remitted to the Company, if additional proceeds become available. Specifically, additional proceeds will become available once Fields Law's 2016 tax returns are filed and any tax obligations are paid (a portion of Fields Law's required 2016 tax returns were filed in August 2017 with the remainder to be filed no later than end of third quarter 2017) and again once Field Law's contingencies are cleared (expected to occur no later than September 2020).
7. FAIR VALUE ESTIMATION
For instruments for which there is no active market and for which reliable pricing sources cannot be obtained, the Company may use internally developed models, which are usually based on valuation methods and techniques generally recognised within the industry. Valuation models are used primarily to value unlisted equity, debt securities and other debt instruments for which markets are or have been inactive during the financial year. Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions.
The carrying value less impairment provision of other receivables and payables are assumed to approximate their fair values.
IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
-- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety.
If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular
input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 instruments include equity investments. As observable prices are not available for these securities, the Company has used valuation techniques to derive their fair value.
There were no transfers between levels for the period ended 30 June 2017 (31 December 2016: None).
The Company has identified three key unobservable inputs to the valuation model used in the valuation of investments held at fair value through profit or loss: expected quantum, expected duration, and cost of equity. Not all of these unobservable inputs are applicable to every investment and thus a sensitivity analysis on each unobservable input may not be applicable to every investment.
Expected quantum
The greater the quantum expected at conclusion, the greater the valuation at any point in time. A reduction in the quantum expected at conclusion will reduce the valuation at any point in time.
Expected duration
The greater the expected duration of an investment, the lower the valuation at any point in time, other than at conclusion. A reduction in the expected duration of an investment will increase the valuation at any point in time, other than at conclusion. In response to the Company's intention to monetise all remaining investments if possible by the end of 2017, the risk of resolving an investment within a shortened development period has been incorporated into the expected duration input for certain investments.
Cost of equity
The Company's cost of equity is 11%. As the Company's cost of equity decreases, the valuations at any point in time will increase, other than at conclusion. As the Company's cost of equity increases, the valuation at any point in time will decrease, other than at conclusion.
The following table summarised the sensitivities:
Unobservable Reasonable Change in valuation
input possible (due to +/- change
shift (+/-) in input)
--------------- ------------- --------------------
Quantum 10% 8.77% / (9.01%)
Duration 1 year (13.00%) / 3.72%
Cost of equity 3% (1.81%) / 1.96%
8. OTHER RECEIVABLES AND PREPAYMENTS
30 June 31 December
2017 2016
---------------- ----------------
US$ US$
Settlement proceeds 5,025,214 4,135,159
Management fees 366 366
Prepayments 71,981 31,685
5,097,561 4,167,210
================ ================
9. OTHER PAYABLES
30 June 31 December
2017 2016
-------------- -----------------
US$ US$
Payable on investment
purchases 1,960 9,460
Audit fees 85,229 59,216
Administration fees 76,773 -
Other creditors 30,360 103,358
194,322 172,034
============== =================
10. COMMITMENTS & GUARANTEES
Under the terms of some of its contracts, JIL provides a line of credit to counterparties. As at 30 June 2017, the maximum commitment under these lines of credit was US$Nil (31 December 2016: US$7,000).
11. FUNCTIONAL AND PRESENTATION CURRENCY / EXCHANGE RATES
The financial statements are presented in United States Dollar ("US$") which is also the Company's functional currency. The following exchange rate was applicable as at 30 June 2017:
Closing rate
----------------------
30 June 31 December
2017 2016
-------- ------------
US$ US$
British pounds (GBP) 1.2978 1.2337
======== ============
12. RELATED PARTY TRANSACTIONS
Richard Battey, as investor representative and non-executive director of the Company, is also a non-executive director of JCML 2007. The principal of JCML 2007 is Richard Fields, who owns 103,000 Ordinary Shares in the Company (0.093 per cent equity interest) (31 December 2016: 103,000). JCML 2007 owns 118,254 Ordinary Shares in the Company (0.107 per cent equity interest) (2015: 118,254 shares). Mr Fields was also sole beneficial owner of Juridica Asset Management Limited ("JAML") until 11 January 2017.
a) Management fee
The Investment Manager changed its name from Juridica Asset Management Limited to Brickell Key Asset Management Limited ("BKAML") on 19 January 2017.
Previously, BKAML was entitled to a management fee of 2 per cent of the adjusted net asset value of the Company.
The adjusted net asset value is the net asset value of the Company at the relevant time and will be calculated, after accruing for the annual management fee but not taking into account any liability of the Company for accrued performance fees, and after:
(i) deducting any unrealised gains on non-current assets; and
(ii) adding the amount of any write downs with respect to contractual interests which have not been written off.
On 8 February 2016, the Company entered into an amended management agreement with BKAML. Under the terms of the amendments the existing arrangements for management fees to BKAML as stated above have been altered to state that from 1 January 2016, the Company will pay US$3,000,000 in management fees for the year ending 31 December 2016, and US$1,750,000 in management fees for the year ending 31 December 2017. Management fees for the period ended 30 June 2017 are US$875,000 (30 June 2016: US$1,500,360).
b) Investment in JCML 2007
The Company acquired 15 per cent of JCML 2007 on Admission, which was subsequently diluted to 13.6 per cent by the exercise of share options by certain of JCML 2007's employees. In 2012, the Company acquired a further holding in JCML 2007, taking the Company's overall holding in JCML 2007 to 36.17 per cent. An impairment review of JCML 2007 has been performed as part of the fair value assessment and continues to be carried out on a semi-annual basis. The Company received dividend income from JCML 2007 during the year of US$Nil (2016: US$Nil).
c) Performance fee
No performance fee was payable to either JCML 2007 or BKAML for the period ended 30 June 2017 (31 December 2016: US$Nil).
d) Facility agreement and collateral account
The Company entered into a facility agreement (the "Facility") with which it agreed to loan to Fields Law, a law firm in which Richard Fields is a partner, money for funding cases in which Fields Law is to act under a Co-counsel Agreement. Prior to adopting its run-off Strategy, the Company expected to enter into loan arrangements with other law firms (which could have included other law firms established by the Principal of the Company) on terms and conditions similar to those contained in the Facility. The Facility available to Fields Law was to be for up to approximately 50 per cent of the net proceeds of the capital raised by the Company less any loans made to other law firms.
In August 2016, the Facility was terminated by agreement between the Company and Fields Law. In conjunction with the termination of the Facility and planned wind-up of Fields Law, US$3.0 million was returned by Fields Law to Riverbend. This amount is to be held in escrow for certain tax contingencies relating to JIL's investment in the facility. The escrow requirements will terminate three years after the filing of Fields Law's final tax returns (which is expected to occur no later than third quarter 2017). Upon termination of the escrow requirements (expected to occur no later than September 2020), any unused funds in the escrow will be paid to JIL.
In addition to the reserves held under the escrow arrangement described above, at 30 June 2017, Fields Law held reserves from settlement proceeds received in 2016 from the underlying cases funded by the Facility. These reserves were held for Fields Law's expected tax payments. The termination agreement provided that once Fields Law has determined and paid its final tax obligations, all remaining funds held in reserves at Fields Law will be returned to Riverbend. Fields Law filed and determined and paid a portion of its tax obligation in August 2017 and on 2 August 2017 a total of US$10.0 million was remitted to Riverbend. See Note 16.
Additional reserves related to settlement of taxes will be released, should any reserves remain, once Fields Law finalises its remaining tax obligations.
e) Directors' fees and expenses
Fees and expenses are attributable to the Directors of the Company as follows:
30 June 30 June
2017 2016
-------- --------
US$ US$
Directors' remuneration
Lord Daniel Brennan 30,981 88,761
Richard Battey 30,981 34,574
Kermit Birchfield 32,250 38,702
-------- --------
94,212 162,037
Director expenses 6,461 48,787
100,673 210,824
======== ========
No pension contributions were paid or were payable on behalf of the Directors. Effective from 1 January 2017, the Chairman's fee was reduced to GBP50,000 per annum (up to 31 December 2016: GBP 90,000 per annum) and Kermit Birchfield's fees were reduced to USD65,000 each per annum (up to 31 December 2016: USD 110,000 per annum). Richard Battey's fee remained at GBP50,000 per annum.
Lord Daniel Brennan has an interest in 447,817 shares (31 December 2016: 447,817 shares) under a Share Option Agreement, details of which were disclosed in the Admission Document. Lord Brennan can exercise these share options at any time up until 17 December 2017. The other Directors have no beneficial interest in the share capital of the Company.
f) Escon Capital Inc.
The Company has an interest in 38.6% (31 December 2016: 38.6%) of the voting common stock and 100% of the issued preference shares of Escon Capital Inc. ("Escon"), a Delaware corporation of which Kermit Birchfield and Richard Fields are Directors.
During the period ended 30 June 2017, Kermit Birchfield received a Director's fee of US$25,000 from Escon Capital Inc. (31 December 2016: US$50,000).
g) Eleven Engineering Game Control LLC
The Company has provided a loan of US$575,000 to Eleven Engineering Game Control LLC (31 December 2016: US$575,000). As at 30 June 2017 no further facility remains available to be drawn (31 December 2016: US$Nil). Interest will be accrued at a rate of 10% per annum, and the loan and interest are repayable on Eleven Engineering Game Control LLC's receipt of net recoveries.
h) Special purpose vehicles
As compensation for providing management services, Kermit Birchfield receives a fee from each of Smooth 3D IP, LLC, Rich Media Ventures, LLC, and GrandiOS Technologies, LLC. For the period ending 30 June 2017, Mr Birchfield received fees totalling US$17,500 for provision of these services (2016: US$90,000). Lord Daniel Brennan is an unpaid Director of ProSports Technologies, LLC.
13. CAPITAL AND RESERVES
Authorised share capital: Unlimited number of ordinary shares of no par value ("shares").
Issued share capital: 110,340,019 shares as at 30 June 2017 (31 December 2016: 110,340,019 shares), of which 80,000,000 shares were issued at a premium of GBP1 per share on admission, and a further 30,701,754
shares issued at a premium of GBP1.14 on 6 April 2009. On 4 June 2015, the Company received 361,735 of its own shares as a result of an in-specie dividend received from JCML 2007 at GBP1.16. During 2016 these shares were cancelled.
The Company's capital is represented by ordinary shares of no par value and share premium which are included in the reserves figure on the statement of changes in equity. Each share carries one vote and is entitled to dividends when declared. The Treasury shares have no right.
The Company has authority to make market purchases of up to 14.99 per cent of its own issued ordinary shares. This authority was renewed at the annual general meeting of the Company held on 4 May 2017.
A renewal of the authority to make purchases of ordinary shares will be sought from Shareholders at each annual general meeting of the Company. The timing of any purchases will be decided by the Board.
14. SEASONALITY
The Company's operations are not affected by seasonality or cyclicality and as such they have no impact on the unaudited condensed financial statements.
15. DIVIDS
No dividends were declared or paid during the period.
16. SUBSEQUENT EVENTS
The following events occurred subsequent to 30 June 2017:
Fields Law finalised a portion of its tax returns allowing Fields Law to release a total of US$10.0 million in reserves. These funds were transferred to Riverbend on 2 August 2017. Additional reserves related to settlement of taxes will be released, should any reserves remain, once Fields Law finalises its remaining tax obligations (which is expected no later than third quarter 2017).
The Board announced that an interim dividend of 8p per share (approximately US$11.3 million in total) will be paid on 29 September 2017 to shareholders on the register at 1 September 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UAVURBAAWUUR
(END) Dow Jones Newswires
August 22, 2017 02:01 ET (06:01 GMT)
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