TIDMBEK
RNS Number : 2513Q
Berkeley Technology Limited
30 July 2010
+--------------------------------+--------------------------------+
| FOR IMMEDIATE PRESS RELEASE | July 30, 2010 |
+--------------------------------+--------------------------------+
Financial Results
For the Three and Six Months Ended June 30, 2010
London, July 30, 2010 - Berkeley Technology Limited (London: BEK.L) (the
"Company") is an international venture capital consulting company incorporated
under the laws of Jersey, Channel Islands, with an office in San Francisco,
California.
The Company's typical client is a Silicon Valley technology company or a large
international telecommunications company. The Company's objective is the
development of large European and Asian telecommunications relationships with
Silicon Valley technology companies. These relationships have led to several
equity investments by one client, and new opportunities generated through
others. In certain cases, the Company may benefit from investments made by its
clients if their investments are successful. The Company is actively seeking
new clients and business opportunities.
By definition, venture capital operates in a highly volatile environment, even
more so than the economy as a whole. This industry faces significant challenges
in this adverse environment, especially related to the raising of new funds.
Operating in this segment creates the potential for tremendous growth, but is
also subject to a high level of risk. The Company is therefore challenged, not
only by the severe downturn in the economy, but also by the particular
complications facing those companies operating in the venture capital markets.
From these challenges come opportunities that may reward patience and
discipline. In addressing these challenges, the Company is taking significant
steps to curtail and contain its expenditures while aggressively pursuing new
business opportunities. The Company has further reduced staffing levels and
focused operations on its core expertise. In order to reduce and contain costs,
the Company terminated its ADR program. As much smaller and cost efficient, the
Company expects to more easily capitalize on positive revenue events with its
current and future clients.
The Company reports a consolidated net loss for the second quarter of 2010 of
$0.47 million or $0.01 per diluted share compared with a consolidated net loss
of $0.75 million, or $0.01 per diluted share, for the second quarter of 2009.
The Company computes and reports consolidated net losses and diluted losses per
share in accordance with U.S. generally accepted accounting principles ("U.S.
GAAP").
For the six months ended June 30, 2010, the Company's consolidated net loss was
$1.45 million (which includes $0.4 million non-recurring net realization of
accumulated foreign currency translation losses), or $0.03 per diluted share
compared with a consolidated net loss of $1.72 million, or $0.03 per diluted
share for the first six months of 2009.
A $0.3 million decrease in operating expenses offset by a $0.05 million decline
in consulting fee revenues contributed to the $0.28 million lower net loss for
the second quarter of 2010, compared with the second quarter of 2009.
A $0.49 million decrease in operating expenses offset by a $0.04 million decline
in consulting fee revenues contributed to the $0.46 million lower operating loss
for the first six months of 2010, compared with the first six months of 2009.
The net results for the first six months of 2010 included the realization of the
non-recurring accumulated foreign currency translation losses of $399,000,
whereas the net results for the first six months of 2009 included an
other-than-temporary loss of $200,000 taken on one of the Group's private equity
investments.
We continue to make progress in reducing operating expenses, however, the effect
of such cost reduction measures taken will not be fully realized until future
periods.
This interim management report and the following condensed set of financial
statements and responsibility statement represent the Company's half yearly
financial report for the six months ended June 30, 2010, in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority in the
U.K.
**********
Berkeley Technology Limited and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(Under U.S. GAAP)
(In thousands, except share amounts)
+---------------------------------------------+--------+----------+----------+
| | June | |December |
| | 30, | | 31, |
+---------------------------------------------+--------+----------+----------+
| | 2010 | | 2009 |
+---------------------------------------------+--------+----------+----------+
| | | | |
+---------------------------------------------+--------+----------+----------+
| ASSETS | | | |
+---------------------------------------------+--------+----------+----------+
| | | | |
+---------------------------------------------+--------+----------+----------+
| Current assets: | | | |
+---------------------------------------------+--------+----------+----------+
| Cash and cash equivalents | $ | | $ |
| | 10,338 | | 11,480 |
+---------------------------------------------+--------+----------+----------+
| Accounts receivable, less allowances of $0 | | | |
| as of June 30, 2010 | | | |
+---------------------------------------------+--------+----------+----------+
| and December 31, 2009 | 93 | | 141 |
+---------------------------------------------+--------+----------+----------+
| Prepaid expenses and deposits | 46 | | 68 |
+---------------------------------------------+--------+----------+----------+
| Total current assets | 10,477 | | 11,689 |
+---------------------------------------------+--------+----------+----------+
| | | | |
+---------------------------------------------+--------+----------+----------+
| Private equity investments (at lower of | 1,469 | | 1,469 |
| cost or estimated fair value) | | | |
+---------------------------------------------+--------+----------+----------+
| Property and equipment, net of accumulated | | | |
| depreciation of $181 | | | |
+---------------------------------------------+--------+----------+----------+
| as of June 30, 2010 and December 31, | 3 | | 6 |
| 2009 | | | |
+---------------------------------------------+--------+----------+----------+
| Total assets | $ | | $ |
| | 11,949 | | 13,164 |
+---------------------------------------------+--------+----------+----------+
+---------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------+----------+----------+----------+
| LIABILITIES AND SHAREHOLDERS' EQUITY | | |
+--------------------------------------------------------+----------+----------+
| | | | |
+---------------------------------------------+----------+----------+----------+
| Current liabilities: | | | |
+---------------------------------------------+----------+----------+----------+
| Accounts payable and accrued expenses | $ | | $ |
| | 350 | | 417 |
+---------------------------------------------+----------+----------+----------+
| Total current liabilities | 350 | | 417 |
+---------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------+----------+----------+----------+
| Commitments and contingencies (Note 7) | | | |
+---------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------+----------+----------+----------+
| Shareholders' equity: | | | |
+---------------------------------------------+----------+----------+----------+
| Ordinary shares, $0.05 par value per share: | | | |
| 86,400,000 shares | | | |
+---------------------------------------------+----------+----------+----------+
| authorized; 64,439,073 shares issued and | | | |
| outstanding as of | | | |
+---------------------------------------------+----------+----------+----------+
| June 30, 2010 and December 31, 2009 | 3,222 | | 3,222 |
+---------------------------------------------+----------+----------+----------+
| Additional paid-in capital | 67,925 | | 67,915 |
+---------------------------------------------+----------+----------+----------+
| Retained earnings | 3,153 | | 4,607 |
+---------------------------------------------+----------+----------+----------+
| Employee benefit trusts, at cost | | | |
| (16,967,547 and 13,522,381 shares | | | |
+---------------------------------------------+----------+----------+----------+
| as of June 30, 2010 and December 31, 2009, | (62,701) | | (62,598) |
| respectively) | | | |
+---------------------------------------------+----------+----------+----------+
| Accumulated other comprehensive loss | - | | (399) |
+---------------------------------------------+----------+----------+----------+
| Total shareholders' equity | 11,599 | | 12,747 |
+---------------------------------------------+----------+----------+----------+
| Total liabilities and shareholders' equity | $ | | $ |
| | 11,949 | | 13,164 |
+---------------------------------------------+----------+----------+----------+
See accompanying Notes which are an integral part of these Unaudited Condensed
Consolidated Financial Statements.
Berkeley Technology Limited and Subsidiaries
Unaudited Condensed Consolidated Statements
of Operations
(Under U.S. GAAP)
(In thousands, except per share amounts)
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | Three Months Ended | | Six Months Ended |
+-----------------------------+----------------------------+-+------------------------------+
| | June 30, | | June 30, |
+-----------------------------+----------------------------+-+------------------------------+
| | 2010 | | 2009 | | 2010 | | 2009 |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Revenues: | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Consulting fees | $ 96 | | $ | | $ | | $ |
| | | | 150 | | 212 | | 247 |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Total revenues | 96 | | 150 | | 212 | | 247 |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Operating expenses: | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Cost of services | 163 | | 205 | | 302 | | 409 |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Selling, general and | 413 | | 701 | | 979 | | 1,365 |
| administrative expenses | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Total operating expenses | 576 | | 906 | | 1,281 | | 1,774 |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Operating loss | (480) | | (756) | | (1,069) | | (1,527) |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Interest income | 9 | | 7 | | 16 | | 14 |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Net realized investment | - | | - | | - | | (200) |
| loss | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Net realized foreign | - | | - | | (399) | | - |
| currency translation loss | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Loss before income tax | (471) | | (749) | | (1,452) | | (1,713) |
| expense | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Income tax expense | - | | - | | 2 | | 2 |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Net loss | $ | | $ | | $ | | $ |
| | (471) | | (749) | | (1,454) | | (1,715) |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| Basic and diluted loss per | $ | | $ | | $ | | $ |
| share | (0.01) | | (0.01) | | (0.03) | | (0.03) |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
| | | | | | | | |
+-----------------------------+--------+----------+--------+-+---------+----------+---------+
See accompanying Notes which are an integral part of these Unaudited Condensed
Consolidated Financial Statements.
Berkeley Technology Limited and Subsidiaries
Unaudited Condensed Consolidated Statements
of Cash Flows
(Under U.S. GAAP)
(In thousands)
+-----------------------------------------------+---------+----------+------------+
| | Six Months Ended |
+-----------------------------------------------+---------------------------------+
| | June 30, |
+-----------------------------------------------+---------------------------------+
| | 2010 | | 2009 |
+-----------------------------------------------+---------+----------+------------+
| | | | |
+-----------------------------------------------+---------+----------+------------+
| Cash flows from operating activities: | | | |
+-----------------------------------------------+---------+----------+------------+
| | | | |
+-----------------------------------------------+---------+----------+------------+
| Net loss | $ | | $(1,715) |
| | (1,454) | | |
+-----------------------------------------------+---------+----------+------------+
| | | | |
+-----------------------------------------------+---------+----------+------------+
| Adjustments to reconcile net loss to net | | | |
| cash used in operating activities: | | | |
+-----------------------------------------------+---------+----------+------------+
| Depreciation and amortization | 3 | | 2 |
+-----------------------------------------------+---------+----------+------------+
| Net realized investment loss | - | | 200 |
+-----------------------------------------------+---------+----------+------------+
| Share based compensation | 10 | | 32 |
+-----------------------------------------------+---------+----------+------------+
| Net realized foreign currency translation | 399 | | - |
| loss | | | |
+-----------------------------------------------+---------+----------+------------+
| | | | |
+-----------------------------------------------+---------+----------+------------+
| Net changes in operating assets and | | | |
| liabilities: | | | |
+-----------------------------------------------+---------+----------+------------+
| Accrued investment income | - | | 1 |
+-----------------------------------------------+---------+----------+------------+
| Accounts receivable and other assets | 70 | | 82 |
+-----------------------------------------------+---------+----------+------------+
| Accounts payable, accruals and other | (65) | | (8) |
| liabilities | | | |
+-----------------------------------------------+---------+----------+------------+
| Net cash used in operating activities | (1,037) | | (1,406) |
+-----------------------------------------------+---------+----------+------------+
| | | | |
+-----------------------------------------------+---------+----------+------------+
| Cash flows from financing activities: | | | |
+-----------------------------------------------+---------+----------+------------+
| ESOT purchase of Berkeley Technology Limited | (103) | | - |
| Ordinary Shares | | | |
+-----------------------------------------------+---------+----------+------------+
| Insurance policyholder benefits | - | | (74) |
+-----------------------------------------------+---------+----------+------------+
| Net cash used in financing activities | (103) | | (74) |
+-----------------------------------------------+---------+----------+------------+
| | | | |
+-----------------------------------------------+---------+----------+------------+
| Effect of exchange rate changes on cash | (2) | | 12 |
+-----------------------------------------------+---------+----------+------------+
| | | | |
+-----------------------------------------------+---------+----------+------------+
| Net decrease in cash and cash equivalents | (1,142) | | (1,468) |
+-----------------------------------------------+---------+----------+------------+
| Cash and cash equivalents at beginning of | 11,480 | | 13,681 |
| period | | | |
+-----------------------------------------------+---------+----------+------------+
| Cash and cash equivalents at end of period | $ | | $ |
| | 10,338 | | 12,213 |
+-----------------------------------------------+---------+----------+------------+
+------------------------------------------------+------+----------+------+
| Supplemental disclosure of non-cash operating | | | |
| activities: | | | |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| Realization of accumulated foreign currency | $ | | $ |
| translation adjustment | 399 | | - |
+------------------------------------------------+------+----------+------+
| Exchange of receivable from consulting client | | | |
| for additional private | | | |
+------------------------------------------------+------+----------+------+
| equity investment in consulting client | $ | | $ |
| | - | | 57 |
| | | | |
| | | | |
+------------------------------------------------+------+----------+------+
See accompanying Notes which are an integral part of these Unaudited Condensed
Consolidated Financial Statements.
Berkeley Technology Limited and Subsidiaries
Notes to the Interim Report
For the Three and Six Months Ended June 30, 2010
This interim report has not been audited or reviewed by independent auditors
pursuant to the Auditing Practices Board guidance on Review of Interim Financial
Information.
As used herein, the terms "Company," "we," "us" and "our" refer to Berkeley
Technology Limited. Except as the context otherwise requires, the term "Group"
refers collectively to the Company and its subsidiaries.
Note 1. Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements are unaudited and
have been prepared by the Company in conformity with United States generally
accepted accounting principles ("U.S. GAAP"). These unaudited condensed
consolidated financial statements include the accounts of the Company, its
subsidiaries, the Employee Share Option Trust ("ESOT") and the Agent Loyalty
Opportunity Trust ("ALOT"). Significant subsidiaries included in the operations
of the Group and discussed in this document include Berkeley International
Capital Corporation ("BICC") and Berkeley VC LLC ("BVC"). All intercompany
transactions and balances have been eliminated in consolidation.
Certain information and note disclosures normally included in the Company's
annual consolidated financial statements have been condensed or omitted. In the
opinion of management, the unaudited condensed consolidated financial statements
reflect all adjustments (consisting of normal recurring accruals) which are
necessary for a fair statement of the results for the interim periods presented.
These unaudited condensed consolidated financial statements should be read in
conjunction with the audited financial statements and related notes for the year
ended December 31, 2009, which are contained in the Company's Annual Report.
The December 31, 2009 condensed balance sheet data was derived from audited
financial statements but does not include all disclosures required by U.S. GAAP.
As the level of consulting fees earned by the Company is expected to fluctuate
depending on the nature and extent of consulting work at any point in time, the
results for the six month period ended June 30, 2010 may not be indicative of
the results to be expected for the full fiscal year or future years.
On January 14, 2010, the Jersey Financial Services Commission approved
London Pacific Limited's (LPL) Cessation of Business Plan (COBP) and cancelled
its insurance permit. As of March 31, 2010, LPL was substantially liquidated,
thereby requiring the non-recurring accumulated foreign currency translation
adjustment net loss held by LPL to be realized.
Prior to the cessation of its insurance business during the third
quarter of 2009, the Company reported its results of operations using an
insurance company format and in two operating segments: the consulting in
venture capital segment, and the life insurance and annuities segment.
Beginning with the third quarter of 2009, the Company changed its reporting of
results to a commercial company format with only one operating business segment
(consulting in venture capital). Certain reclassifications were made to prior
period amounts to conform with the current period's presentation. These
reclassifications had no effect on the net loss or shareholders' equity for the
prior periods.
The Company is incorporated under the laws of Jersey, Channel Islands. Its
Ordinary Shares are traded on the London Stock Exchange and until April 20,
2010, in the U.S. on the Over-the-Counter Bulletin Board in the form of American
Depositary Shares ("ADSs"), which were evidenced by American Depositary Receipts
("ADRs").
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of these unaudited condensed consolidated financial
statements as well as the reported amount of revenues and expenses during this
reporting period. The Group's management's estimates are based on historical
experience, input from sources outside of the Company, and other relevant facts
and circumstances. Actual results could differ materially from those estimates.
Accounting policies that include particularly significant estimates include the
assessment of recoverability and measuring impairment of private equity
investments, investment and impairment valuations, measurement of deferred tax
assets and the corresponding valuation allowances, fair value estimates for the
expense of employee share options, valuation of accounts receivable, and
estimates related to commitments and contingencies.
Foreign Currencies
Prior to July 1, 2007, the Group used the British pound sterling
("sterling") as the functional currency of LPL and the U.S. dollar as the
functional currency of the Company and all other significant subsidiaries. Due
to significant changes in the operating environment of LPL, the functional
currency of LPL was changed to the U.S. dollar effective July 1, 2007. With
this change in functional currency, LPL's foreign exchange gains and losses
resulting from the remeasurement of foreign currency assets and liabilities into
U.S. dollars were included in operating expenses in the Group's consolidated
statement of operations, rather than included in a separate component of other
comprehensive income in shareholders' equity, effective July 1, 2007. The
$(399,000) balance as of June 30, 2007 in accumulated other comprehensive loss
in the Group's consolidated balance sheet remained until such time LPL was
substantially liquidated. On January 14, 2010, the JFSC approved LPL's COBP and
cancelled its insurance permit. As of March 31, 2010, LPL was substantially
liquidated and thereby realized the non-recurring accumulated foreign currency
translation adjustment net loss in the Group's consolidated statement of
operations.
Comprehensive Loss
The Company had no other comprehensive income or loss for the three and six
month periods ended June 30, 2010. Therefore, the Company's comprehensive loss
was equal to the Company's consolidated net loss for the periods.
Recently Issued Accounting Pronouncements
In April 2009, the FASB issued three related sets of accounting
guidance intended to enhance disclosures regarding fair value measurements and
impairments of securities. This guidance sets forth rules related to
determining the fair value of financial assets and financial liabilities when
the activity levels have significantly decreased in relation to the normal
market, guidance related to the determination of other-than temporary
impairments to include intent and ability of the holder as an indicator in the
determination of whether an other-than-temporary impairment exists and interim
disclosure requirements for the fair value of financial instruments. These sets
of accounting guidance became effective for interim and annual reporting periods
ended after June 15, 2009. The adoption of this guidance did not have an impact
on the Company's condensed consolidated financial statements.
In May 2009, the FASB issued new accounting guidance related to the
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or available to be issued. The
Company adopted this guidance as of the quarter ended June 30, 2009. The
adoption of this guidance did not have an impact on the Company's condensed
consolidated financial statements.
In June 2009, the FASB issued the FASB Accounting Standards
Codification ("ASC"). The ASC has become the authoritative source of generally
accepted accounting principles in the United States. Rules and interpretive
releases of the SEC under federal securities laws are also sources of
authoritative GAAP for SEC registrants. ASC became effective for financial
statements issued for interim and annual periods ending after September 15,
2009. The adoption did not have a material impact on the Company's condensed
consolidated financial statements.
In January 2010, the FASB issued new guidance related to fair value
disclosures. This amended guidance requiring disclosures about inputs and
valuation techniques is used to measure fair value as well as disclosure about
significant transfers, beginning in the first quarter of 2010. Additionally,
these amended standards require presentation of disaggregated activity within
the reconciliation for fair value measurements using significant unobservable
inputs (Level 3), beginning in the first quarter of 2011. The Company does not
expect the adoption of this guidance to have a material impact on its condensed
consolidated financial statements.
Note 2. Earnings Per Share
Basic earnings per share is calculated by dividing net income or loss
by the weighted-average number of Ordinary Shares outstanding during the
applicable period, excluding shares held by the ESOT and the ALOT which are
regarded as treasury stock for the purposes of this calculation. The Company
has issued employee share options, which are considered potential common stock.
The Company had previously issued Ordinary Share warrants to Bank of Scotland in
connection with the Company's bank facility (now terminated), which were also
considered potential common stock. However, the warrants expired, unexercised,
on February 14, 2010. Diluted earnings per share is calculated by dividing net
income or loss by the weighted-average number of Ordinary Shares outstanding
during the applicable period as adjusted for these potentially dilutive options
and warrants which are determined based on the "Treasury Stock Method."
For the three and six month periods ended June 30, 2010 and 2009, there were no
"in-the-money" options or warrants, and therefore no potentially dilutive
securities. As a result, the diluted loss per share is the same as basic loss
per share.
A reconciliation of the numerators and denominators for the basic and diluted
loss per share calculations is as follows:
+--------------------------+--------+----------+--------------+----------+-------------+----------+---------+
| | Three Months Ended | | Six Months Ended |
+--------------------------+----------------------------------+----------+----------------------------------+
| | June 30, | | June 30, |
+--------------------------+----------------------------------+----------+----------------------------------+
| | 2010 | | 2009 | | 2010 | | 2009 |
+--------------------------+--------+----------+--------------+----------+-------------+----------+---------+
| | | (In thousands, except | |
| | | per share amounts) | |
+--------------------------+--------+-------------------------------------------------------------+---------+
| | | | | | | | |
+--------------------------+--------+----------+--------------+----------+-------------+----------+---------+
| Net loss | $ | | $(749) | | $(1,454) | | $ |
| | (471) | | | | | | (1,715) |
+--------------------------+--------+----------+--------------+----------+-------------+----------+---------+
| Basic and diluted loss | | | | | | | |
| per share: | | | | | | | |
+--------------------------+--------+----------+--------------+----------+-------------+----------+---------+
| Weighted-average number | 47,472 | | 50,917 | | 49,194 | | 50,917 |
| of Ordinary Shares | | | | | | | |
| outstanding, excluding | | | | | | | |
| shares held by the | | | | | | | |
| employee benefit trusts | | | | | | | |
+--------------------------+--------+----------+--------------+----------+-------------+----------+---------+
| | | | | | | | |
+--------------------------+--------+----------+--------------+----------+-------------+----------+---------+
| Basic and diluted loss | $ | | $ | | $ | | $ |
| per share | (0.01) | | (0.01) | | (0.03) | | (0.03) |
+--------------------------+--------+----------+--------------+----------+-------------+----------+---------+
| | | | | | | | |
+--------------------------+--------+----------+--------------+----------+-------------+----------+---------+
Note 3. Investments
As of June 30, 2010 and December 31, 2009, the Group's only investments were
private equity securities.
For 2009 and the first six months of 2010, because all of the Group's
private equity investments are less than 20% in the investee companies, and the
Group does not have any significant influence on the investee companies, all
such investments are accounted for in accordance with the cost method. The
Group's management evaluates the Group's investments for any events or changes
in circumstances ("impairment indicators") that may have significant adverse
effects on the Group's investments. If impairment indicators exist, then the
carrying amount of the investment is compared to its estimated fair value. If
any impairment is determined to be other-than-temporary, then a realized
investment loss would be recognized during the period in which such
determination is made by the Group's management.
The accounting guidance for fair value measurements defines fair value
as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date (an exit price). That accounting guidance has also established
a fair value hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value into three broad levels. See Note 4, "Fair Value of
Financial Instruments" below for the three levels of the fair value hierarchy.
Level 3 inputs apply to the determination of fair value for the Group's private
equity investments. These are unobservable inputs where the determination of
fair values of investments requires the application of significant judgment.
Only other-than-temporary impairments will be recognized and the carrying value
of a private equity investment cannot be increased above its cost unless the
investee company completes an initial public offering or is acquired. During
the first quarter of 2009, the Group determined that impairment indicators
existed for one of its private equity investments, and then determined that the
impairment was other-than-temporary. The Group recognized a realized investment
loss in its consolidated statement of operations of $200,000 on this investment
as of the end of March 2009. During the first six months of 2010, the Group
determined that no impairment indicators existed for its private equity
investments. It is possible that the factorsevaluated by management and fair
values will change in subsequent periods, resulting in material impairment
charges in future periods.
When a quoted market price is available for a security, the Group uses
this price to determine fair value. If a quoted market price is not available
for a security, management estimates the security's fair value based on
appropriate valuation methodologies. Management's valuation methodologies
include fundamental analysis that evaluates the investee company's progress in
developing products, building intellectual property portfolios and securing
customer relationships, as well as overall industry conditions, conditions in
and prospects for the investee's geographic region, overall equity market
conditions, and the level of financing already secured and available. This is
combined with analysis of comparable acquisition transactions and values to
determine if the security's liquidation preferences will ensure full recovery of
the Group's investment in a likely acquisition outcome. In its valuation
analysis, management also considers the most recent transaction in a company's
shares.
Realized gains and losses on securities are included in net income using the
specific identification method. Any other-than-temporary declines in the fair
value of the Group's investments, below the cost or amortized cost basis, are
recognized as realized investment losses in the consolidated statements of
operations. The cost basis of such securities is adjusted to reflect the
write-down recorded.
Investment Concentration and Risk
As of June 30, 2010, the Group's investments consisted of three private
equity securities with individual carrying values of less than 10% of the
Group's shareholders' equity. One of these investments, with a carrying value
of $485,000, is in preferred stock and warrants of a technology company that was
a consulting client of BICC. Another investment, with a carrying value of
$140,000, is in preferred stock of another technology company that was a
consulting client of BICC in prior years. The third investment has a carrying
value of $844,000 and is in preferred stock of a technology company.
The Group held no fixed maturity securities as of June 30, 2010 and December 31,
2009.
Note 4. Fair Value of Financial Instruments
The Company has adopted the accounting guidance for fair value
measurements. The accounting guidance for fair value measurements provides a
framework for measuring fair value and expands related disclosures. Fair value
is defined as the price that would be received for an asset or paid to transfer
a liability in an orderly transaction between market participants at the
measurement date (an exit price). The accounting guidance also established a
hierarchy which requires an entity to maximize the use of observable inputs,
when available. The accounting guidance requires that fair value measurements
be classified and disclosed in one of the following three categories:
Level 1 - Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities that are accessible by the Company. As of June
30, 2010, the Company's Level 1 assets included money market accounts which are
included in cash and cash equivalents in the condensed consolidated balance
sheets.
Level 2 - Inputs include quoted prices in markets that are not active
or financial instruments for which all significant inputs are observable, either
directly or indirectly. As of June 30, 2010, the Company's Level 2 assets
included money market mutual funds which are included in cash and cash
equivalents in the condensed consolidated balance sheets.
Level 3 - Unobservable inputs for the asset or liability including
significant assumptions of the Company and other market participants. As of
June 30, 2010 and December 31, 2009, the Group held $1,469,000 of private equity
investments which are carried at cost, as adjusted for other-than-temporary
impairments. In order to determine if any other-than-temporary impairments
exist, the Group must first determine the fair values of its private equity
investments using Level 3 unobservable inputs, including the analysis of various
financial, performance and market factors.
The following table presents the Company's fair value measurements that
are measured at the estimated fair value, on a recurring basis, categorized in
accordance with the fair value hierarchy:
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| | Quoted | |Significant | | Significant | | Total |
| | Prices | | Other | |Unobservable | | |
| | In | | Observable | | Inputs | | |
| | Active | | Inputs | | (Level 3) | | |
| | Markets | | (Level 2) | | | | |
| | For | | | | | | |
| |Identical | | | | | | |
| | Assets | | | | | | |
| |(Level 1) | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| | | (In thousands) | |
+--------------------+-----------+-------------------------------------------------------------+--------+
| As of June 30, | | | | | | | |
| 2010 | | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| Money market | $ | | $ | | $ | | $ |
| mutual funds | - | | 1 | | - | | 1 |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| | | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| As of December 31, | | | | | | | |
| 2009 | | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| Money market | $ | | $ | | $ | | $ |
| mutual funds | - | | 4,008 | | - | | 4,008 |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| | | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
Certain assets are measured at fair value on a nonrecurring basis;
that is, the instruments are not measured at fair value on an ongoing basis but
are subject to fair value adjustment only in certain circumstances (for example,
when there is evidence of impairment). See Note 3 for discussion of the
investments. The Company classifies these measurements as Level 3.
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| | Quoted | |Significant | | Significant | | Total |
| | Prices | | Other | |Unobservable | | |
| | In | | Observable | | Inputs | | |
| | Active | | Inputs | | (Level 3) | | |
| | Markets | | (Level 2) | | | | |
| | For | | | | | | |
| |Identical | | | | | | |
| | Assets | | | | | | |
| |(Level 1) | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| | | (In thousands) | |
+--------------------+-----------+-------------------------------------------------------------+--------+
| As of June 30, | | | | | | | |
| 2010 | | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| Private equity | $ | | $ | | $ | | $ |
| investments | - | | - | | 1,469 | | 1,469 |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| | | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| As of December 31, | | | | | | | |
| 2009 | | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| Private equity | $ | | $ | | $ | | $ |
| investments | - | | - | | 1,469 | | 1,469 |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
| | | | | | | | |
+--------------------+-----------+----------+-------------+----------+--------------+----------+--------+
Cash and cash equivalents, accounts receivable, prepaid expenses and
deposits, accounts payable and accrued expenses are reflected in the condensed
consolidated balance sheets at carrying values which approximate fair values due
to the short-term nature of these instruments.
Note 5. Share Based Compensation
Equity Compensation Plan
The Berkeley Technology Limited 1990 Employee Share Option Trust, formerly The
London Pacific Group 1990 Employee Share Option Trust, ("ESOT"), which was
approved by shareholders in 1990, provides for the granting of share options to
employees and directors. Such grants to employees and directors are generally
exercisable in four equal annual installments beginning one year from the date
of grant, subject to employment continuation, and expire seven to ten years from
the date of grant. Until August 2008, options were generally granted with an
exercise price equal to the fair market value of the underlying shares at the
date of grant. Until further notice, new option grants will have an exercise
price equal to the net book value of the shares as of the end of the previous
quarter.
Share Based Compensation Expense
The accounting guidance for share based payment establishes standards
for the accounting of transactions in which an entity exchanges its equity
instruments for goods or services, primarily focusing on accounting for
transactions where an entity obtains employee services in share based payment
transactions. A public entity is required to measure the cost of employee
services received in exchange for an award of equity instruments, including
share options, based on the fair value of the award on the grant date, and to
recognize it as compensation expense over the period the employee is required to
provide service in exchange for the award, usually the vesting period.
Companies are required to estimate the fair value of share based payment awards
on the date of grant using an option pricing model. The value of the portion of
the award that is ultimately expected to vest is recognized as expense over the
requisite service periods in the Company's consolidated statement of operations.
Share based compensation expense recognized in the Company's
consolidated statement of operations for the three and six months ended June 30,
2010 and 2009 includes compensation expense for share options granted prior to,
but not yet vested as of December 31, 2005, as well as compensation expense for
4,500,000 share options granted to employees and directors on March 27, 2007,
and 3,450,000 share options granted to employees and directors on August 20,
2008. No share options have been granted since August 20, 2008. The accounting
guidance for share based payment requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. Share based compensation expense is to
be based on awards ultimately expected to vest, and therefore the expense should
be reduced for estimated forfeitures. The Company's estimated forfeiture rate
of zero percent for the first six months of 2010 and 2009 was based upon the
fact that all unvested options related to longstanding employees and directors.
One employee who held share options left the company during the first quarter of
2010 and that employee's 650,000 unvested share options were forfeited. Despite
the departure of this employee, the Group's management continues to believe that
a zero percent forfeiture rate for future periods is appropriate.
The accounting guidance for share based payment requires the cash flows
resulting from the tax benefits resulting from tax deductions in excess of the
compensation cost recognized for those options to be classified as financing
cash flows. As there were no share option exercises during 2009 or the first
six months of 2010, the Company had no related tax benefits during those
periods.
The fair value of share option grants to employees and directors is
calculated using the Black-Scholes option pricing model, even though this model
was developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which differ significantly from the
Company's share options. The Black-Scholes model also requires subjective
assumptions, including future share price volatility and expected time to
exercise, which greatly affect the calculated values. The expected term of
options granted is derived from historical data on employee exercises and
post-vesting employment termination behavior. The risk-free rate is based on
the U.S. Treasury rates in effect during the corresponding period of grant. The
expected volatility is based on the historical volatility of the Company's share
price. These factors could change in the future, which would affect the share
based compensation expense in future periods, if the Company, through the ESOT,
should grant additional share options.
Option Valuation and Expense Information
The estimated fair value of share option compensation awards to employees and
directors, as calculated using the Black-Scholes option pricing model as of the
date of grant, is amortized using the straight-line method over the vesting
period of the options. For the three months ended June 30, 2010 and 2009,
compensation expense related to share options totaled $8,000 and $13,000,
respectively, and is included in operating expenses in the accompanying
statement of operations. For the six months ended June 30, 2010 and 2009,
compensation expense related to share options totaled $10,000 and $32,000,
respectively.
For additional information relating to the Group's share options, see Note 10 to
the Company's consolidated financial statements included in the Company's Annual
Report for the year ended December 31, 2009.
Note 6. Income Taxes
The Company has adopted the FASB guidance on accounting for uncertainty
in income taxes. The Company's management believes that its income tax
positions would be sustained upon examination by appropriate taxing authorities
based on the technical merits of such positions, and therefore the Company has
not provided for any unrecognized tax benefits at the adoption date, and there
has been no change to the $0 unrecognized tax benefits from January 1, 2007
through March 31, 2010. In general, the Company's tax returns remain subject to
examination by taxing authorities for the tax years 2006 through 2009, and for
2010 once the returns are filed in 2011.
During the third quarter of 2008, the Internal Revenue Service
("IRS") issued a private letter ruling that the Group's U.S. holding company,
Berkeley (USA) Holdings Limited ("BUSA"), should include London Pacific Life &
Annuity Company in Liquidation ("LCL") in its federal consolidated tax returns
for tax years commencing with 2005. BUSA holds the common stock of LCL, but
BUSA does not have any voting or management control over LCL. The financial
statements of LCL have not been included in the Company's consolidated financial
statements and they will not be included in the future.
BUSA and LCL have signed a tax allocation and sharing agreement
dated March 18, 2009. Under this agreement, any benefit to BUSA of utilizing
the tax losses of LCL to offset BUSA's separate taxable income in BUSA's federal
consolidated tax returns, should BUSA not have any of its own carryforward
losses, will be paid by BUSA to LCL. Similarly, any benefit to LCL of utilizing
the tax losses of BUSA to offset LCL's separate taxable income in BUSA's federal
consolidated tax returns, should LCL not have any of its own carryforward
losses, will be paid by LCL to BUSA. Any tax liabilities, including alternative
minimum taxes, created by the inclusion of LCL in the federal consolidated tax
returns of BUSA will be paid by LCL either directly to the IRS or reimbursed to
BUSA by LCL if payment is made to the IRS by BUSA. For purposes of computing
allocable federal income tax liability, BUSA will allocate taxable income
brackets and exemptions on a pro-rated basis among members of the affiliated tax
group.
In September 2009, the Group filed amended federal consolidated tax
returns for 2005 through 2008, and the inclusion of LCL in the federal
consolidated tax returns of BUSA for 2005 through 2008 did not result in any tax
liabilities for the Group, except for a $1,585 payment due to the IRS related to
alternative minimum taxes for 2007. As of the end of 2009, LCL has
approximately $43 million of net operating loss carryforwards and approximately
$60 million of capital loss carryforwards. The Group's management believes that
these loss carryforwards should be sufficient to offset any taxable income of
LCL in the foreseeable future. However, LCL could have liabilities for
alternative minimum taxes ("AMT") in future periods due to the utilization of
net operating losses to offset current taxable income. Any AMT liability
attributable to LCL computed on a standalone basis would be the responsibility
of LCL, not of the Group, and accordingly, any such liability has not been
included in the condensed consolidated financial statements of the Company.
Note 7. Commitments and Contingencies
Guarantees
Under its Memorandum and Articles of Association, the Company has agreed to
indemnify its officers and directors for certain events or occurrences arising
as a result of the officer or director serving in such capacity. The maximum
potential amount of future payments the Company could be required to make under
these indemnification agreements is unlimited. However, the Company maintains
directors and officers' liability insurance that limits the Company's exposure
and enables it to recover a portion of any future amounts paid. As a result of
its insurance coverage, the Company believes the estimated fair value of these
indemnification agreements is minimal and has no liabilities recorded for these
agreements as of June 30, 2010.
The Company enters into indemnification provisions under its agreements with
other companies in its ordinary course of business, typically with business
partners, service providers, clients and landlords. Under these provisions, the
Company generally indemnifies and holds harmless the indemnified party for
losses suffered or incurred by the indemnified party as a result of the
Company's activities. These indemnification provisions sometime include
indemnifications relating to representations made by the Company with regard to
intellectual property rights. These indemnification provisions generally
survive termination of the underlying agreement. The maximum potential amount
of future payments the Company could be required to make under these
indemnification provisions is unlimited. The Company believes the estimated
fair value of these agreements is minimal as historically, no payments have been
made by the Company under these indemnification obligations. Accordingly, the
Company has no liabilities recorded for these agreements as of June 30, 2010.
Note 8. Business Segment and Geographical Information
Prior to the third quarter of 2009, the Company's reportable operating
segments were classified according to its businesses of consulting in venture
capital, and life insurance and annuities.
As the Company ceased its insurance business during the third quarter of 2009,
only one operating business remains: consulting in venture capital. Beginning
with the third quarter of 2009, the Company changed its reporting of results to
a commercial company format with only one operating business segment (consulting
in venture capital). Certain reclassifications were made to prior period
amounts to conform to the current period's presentation. These
reclassifications had no effect on the net income or shareholders' equity for
the prior periods.
Summary consulting fee revenues by geographic segment, based on the domicile of
the Group company generating those revenues, is as follows:
+------------------------------+------+----------+------+----------+------+----------+------+
| | Three Months Ended | | Six Months Ended |
+------------------------------+------------------------+----------+------------------------+
| | June 30, | | June 30, |
+------------------------------+------------------------+----------+------------------------+
| |2010 | |2009 | |2010 | |2009 |
+------------------------------+------+----------+------+----------+------+----------+------+
| | | | (In thousands) | | |
+------------------------------+------+----------+------------------------+----------+------+
| | | | | | | | |
+------------------------------+------+----------+------+----------+------+----------+------+
| Jersey | $ | | $ | | $ | | $ |
| | - | | - | | - | | - |
+------------------------------+------+----------+------+----------+------+----------+------+
| United States | 96 | | 150 | | 212 | | 247 |
+------------------------------+------+----------+------+----------+------+----------+------+
| | | | | | | | |
+------------------------------+------+----------+------+----------+------+----------+------+
| Consolidated revenues | $ | | $ | | $ | | $ |
| | 96 | | 150 | | 212 | | 247 |
+------------------------------+------+----------+------+----------+------+----------+------+
Total consolidated assets by geographic segment were as follows:
+------------------------------------------+---------------+----------+--------------+
| | June | | December |
| | 30, | | 31, |
+------------------------------------------+---------------+----------+--------------+
| | 2010 | | 2009 |
+------------------------------------------+---------------+----------+--------------+
| | (In thousands) |
+------------------------------------------+-----------------------------------------+
| | | | |
+------------------------------------------+---------------+----------+--------------+
| Jersey | $ | | $ |
| | 4,176 | | 4,953 |
+------------------------------------------+---------------+----------+--------------+
| United States | 7,773 | | 8,211 |
+------------------------------------------+---------------+----------+--------------+
| | | | |
+------------------------------------------+---------------+----------+--------------+
| Consolidated total assets | $ | | $ |
| | 11,949 | | 13,164 |
+------------------------------------------+---------------+----------+--------------+
Note 9. Client Concentration
The Group's consulting revenues are from a few major clients. In the first six
months of 2010, the Group's largest consulting client accounted for 80% of its
consulting revenues, and another client accounted for 20% of its consulting
revenues while in the first six months of 2009, the Group's largest consulting
client accounted for 67% and another client accounted for 26% of its consulting
revenues.
Note 10. Subsequent Events
Subsequent events have been evaluated to July 30, 2010, the date the condensed
consolidated financial statements were issued. No events have occurred since
June 30, 2010 that would require adjustment to, or disclosure in, the condensed
consolidated financial statements.
Note 11. Related Party Transactions
The Company had no related party transactions during the first six months of
2010 that have materially affected the financial position or the performance of
the Company during that period, and there were no changes in the related party
transactions described in the Company's Annual Report for 2009 that could have a
material effect on the financial position or performance of the Company in the
first six months of 2010.
Note 12. Principal Risks and Uncertainties
We consider the principal risks and uncertainties for the remaining six months
of 2010 to be the following: (1) the level of consulting fees earned by the
Company is expected to fluctuate depending on the nature and extent of
consulting work at any point in time, particularly in the current economic
environment; and (2) by their very nature, venture capital investments are
risky, and the private equity investments held by the Company could decline in
value.
Responsibility and Cautionary Statements
Responsibility Statement
We confirm that to the best of our knowledge:
· The condensed set of consolidated financial statements for the six months
ended June 30, 2010 included in this interim report, which has been prepared in
conformity with United States generally accepted accounting principles ("U.S.
GAAP"), gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company;
· This interim report includes a fair review of the information required by
the Financial Services Authority's Disclosure and Transparency Rules ("DTR")
4.2.7 R (an indication of important events that have occurred during the first
six months of the financial year and a description of principal risks and
uncertainties for the remaining six months of the financial year); and
· This interim report includes a fair review of the information required by
DTR 4.2.8 R (disclosure of related party transactions and changes therein).
Cautionary Statement
This report is addressed to shareholders of Berkeley Technology Limited and has
been prepared solely to provide information to them.
This report is intended to inform the shareholders of the Company's performance
during the six months ended June 30, 2010. Statements contained herein which
are not historical facts are forward-looking statements that involve a number of
risks and uncertainties that could cause the actual results of the future events
described in such forward-looking statements to differ materially from those
anticipated in such forward-looking statements. Factors that could cause or
contribute to deviations from the forward-looking statements include, but are
not limited to, (i) variations in demand for the Company's products and
services, (ii) the success of the Company's new products and services, (iii)
significant changes in net cash flows in or out of the Company's businesses,
(iv) fluctuations in the performance of debt and equity markets worldwide, (v)
the enactment of adverse state, federal or foreign regulation or changes in
government policy or regulation (including accounting standards) affecting the
Company's operations, (vi) the effect of economic conditions and interest rates
in the U.S., the U.K. or internationally, (vii) the ability of the Company's
subsidiaries to compete in their respective businesses, (viii) the ability of
the Company to attract and retain key personnel, and (ix) actions by
governmental authorities that regulate the Company's businesses. The Company
undertakes no obligation to update any forward-looking statements, whether as a
result of new information, future developments or otherwise.
On behalf of the Board
Arthur I. Trueger
Executive Chairman and Principal Financial Officer
July 30, 2010
********
Please address any inquiries to:
+----------------------------+--------+------------------------+
| Robert A. Cornman | Jersey | (0)1534 607700 |
+----------------------------+--------+------------------------+
| Company Secretary | | |
+----------------------------+--------+------------------------+
| Berkeley Technology | | |
| Limited | | |
+----------------------------+--------+------------------------+
Interim Report for the sixmonths ended June 30, 2010
A copy of the above document will be submitted to the U.K. Listing Authority and
will be shortly available for inspection at the U.K. Listing Authority's
Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel: 020 7676 1000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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