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.
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)
Juridica (LSE:JIL)
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