Juridica Inv Ltd (AIM:JIL) 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.

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

 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.

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. 

 Source: www.investegate.co.uk/juridica-inv-ltd–jil-/rns/results-for-the-six-months-ended-30-june-2017

 

 

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