TIDMBEK
RNS Number : 6131F
Berkeley Technology Limited
28 April 2011
FOR IMMEDIATE PRESS RELEASE April 28, 2011
Berkeley Technology Limited (In Liquidation)
Annual Report
For the Twelve Months Ended
December 31, 2010
London, April 28, 2011 - Berkeley Technology Limited (In
Liquidation) (BEK.L) (the "Company"), is an international venture
capital consulting firm incorporated under the laws of Jersey,
Channel Islands, with an office in San Francisco, California.
At the extraordinary general meeting held November 23, 2010, the
Company's shareholders approved a special resolution to wind-up the
Company. The Company's corporate structure is expensive, very
complex and inappropriate for a company of its size. The continued
operation of the Company has been consuming valuable corporate
cash. On or about December 6, 2010, the Company noticed
shareholders that it would be proceeding with the distribution of
the Company's assets to shareholders who own shares in the Company
according to each shareholder's ownership interest in the Company,
and requested a photocopy of stock certificates to confirm such
interest. On January 5, 2011, the Company established a record date
for the first distribution to shareholders. The first distribution
of $0.1675 per share was mailed to such confirmed shareholders on
or about March 7, 2011.
The Company adopted the liquidation basis of accounting
effective as of close of business on November 30, 2010, whereby
assets are valued at their estimated net realizable value and
liabilities are stated at their estimated settlement amounts. Under
the liquidation basis of accounting, the Company accrues for the
estimated costs to be incurred during liquidation offset by
estimated future earnings. The actual values and costs associated
with carrying out the wind-up are expected to differ from the
amounts shown herein because of the inherent uncertainty and will
be greater than or less than the amounts recorded. Such differences
may be material. References to the Company's business and
operations in this Annual Report relate to, as the context may
require, the Company's business and operations in 2010 prior to the
wind-up.
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.
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. In addressing these
challenges, the Company is taking significant steps to curtail and
contain its expenditures. The Company has further reduced staffing
levels significantly and focused operations on its core expertise.
In order to reduce and contain costs, the Company has terminated
its ADR program.
Consulting fee revenues were lower in the eleven months ended
November 30, 2010 compared to the year ended December 31, 2009 due
to a reduction in the Company's client base. Operating expenses
decreased by $0.7 million in the eleven months ended November 30,
2010, primarily due to lower staff costs. Net realized investment
losses in the eleven months ended November 30, 2010 were $0.6
million compared to a small net realized investment gain in the
year ended December 31, 2009.
In September 2010, the Company received a $103,000 final
distribution from the WorldCom, Inc. securities litigation. In
December 2010, the Company received a final distribution of
$362,000 from the Enron securities litigation. These payments
recover part of the losses that the Company realized in 2002 upon
the sale of publicly traded WorldCom and Enron bonds. The $465,000
in recoveries in 2010 was offset by a reduction in the carrying
value of the Company's private equity investments during difficult
market conditions. The Company's review of investment values
identified "other-than-temporary" impairments as well as liquidity
concerns and thus write-downs were taken during 2010 totaling $1.5
million.
In January 2010, the Jersey Financial Services Commission
("JFSC") approved the Company's subsidiary, London Pacific
Limited's ("LPL") (formerly London Pacific Assurance Limited),
Cessation Of Business Plan ("COBP") and cancelled its insurance
permit. As of March 31, 2010, LPL was substantially liquidated and
thereby was required to realize a $0.4 million non-recurring
accumulated other comprehensive loss (foreign currency translation
adjustment net loss).
The Company today reports its consolidated net loss, computed in
accordance with U.S. generally accepted accounting principles
("U.S. GAAP"), for the eleven months ended November 30, 2010, was
$(2.8) million, or $(0.06) per diluted share, compared with
consolidated net loss of $(2.3) million, or $(0.04) per diluted
share, for the year ended December 31, 2009.
**********
The above should be read in conjunction with the Cautionary
Statement included at the end of this Annual Report.
Please address any inquiries to:
Arthur Trueger Jersey (0)1534 607700
Principal Financial Officer
Berkeley Technology Limited
(In Liquidation)
The financial information set out in this announcement does not
constitute the Company's statutory accounts for the years ended
December 31, 2010 and 2009. The financial information for the year
ended December 31, 2009 is derived from the statutory accounts for
that year.
The audit of its statutory accounts for the year ended December
31, 2010 is complete. The auditors reported on those accounts;
their report was unqualified and did not include references to any
matters to which the auditors draw attention to by way of emphasis
without qualifying their report.
The Company's 2010 Annual Report and consolidated financial
statements will be sent to shareholders during May. Copies of this
report may be obtained by contacting the registered office in
Jersey, Channel Islands.
Annual Report for the year ended December 31, 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
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS (Liquidation Basis)
(In thousands, except per share amounts)
December
31,
2010
ASSETS
Cash and cash equivalents $ 9,696
Accounts receivable 87
Other receivables 363
Prepaid expenses and deposits 47
Total assets $ 10,193
LIABILITIES
Accounts payable $ 10
Accrued expenses 113
Estimated net costs to be incurred during liquidation 880
Total liabilities $ 1,003
NET ASSETS IN LIQUIDATION $ 9,190
Ordinary shares outstanding 64,439
NET ASSETS IN LIQUIDATION PER SHARE (1) $ 0.19
(1) Based on the number of shares outstanding excluding the
shares held by the employee benefit trusts.
See accompanying Notes which are an integral part of these
Consolidated Financial Statements.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (Liquidation
Basis)
(In thousands)
December
1,
2010 to
December
31,
2010
Shareholders' equity at November 30, 2010 (going
concern basis) $ 10,339
Liquidation basis adjustments upon adoption
Adjust net assets to fair value (616)
Accrue estimated costs to be incurred during
liquidation (1,017)
Estimated income to be earned during liquidation 112
Net assets on liquidation basis as of November
30, 2010 $ 8,818
Changes in fair value of net assets in liquidation
November 30, 2010 to December 31, 2010
Adjust net assets to fair value 8
Adjust accrued estimated costs to be incurred
during liquidation 2
Adjust estimated income to be earned during
liquidation 362
Net assets on liquidation basis as of December
31, 2010 $ 9,190
See accompanying Notes which are an integral part of these
Consolidated Financial Statements.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Going Concern Basis)
(In thousands, except share amounts)
December
31,
2009
ASSETS
Current assets:
Cash and cash equivalents $ 11,480
Accounts receivable, less allowances of $0
December 31, 2009 141
Other receivables -
Prepaid expenses and deposits 68
Total current assets 11,689
Private equity investments (at lower of cost
or estimated fair value) 1,469
Property and equipment, net of accumulated
depreciation of $181
as of December 31, 2009 6
Total assets $ 13,164
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 417
Total current liabilities 417
Commitments and contingencies (See Note 12)
Shareholders' equity:
Ordinary shares, $0.05 par value per share:
86,400,000 shares authorized;
64,439,073 shares issued and outstanding as
of December 31, 2009 3,222
Additional paid-in capital 67,915
Retained earnings 4,607
Employee benefit trusts, at cost (13,522,381
shares as of December 31, 2009) (62,598)
Accumulated other comprehensive loss (399)
Total shareholders' equity 12,747
Total liabilities and shareholders' equity $ 13,164
( )
( )
( )
( )
( )
See accompanying Notes which are an integral part of these
Consolidated Financial Statements.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Going Concern Basis)
(In thousands, except per share amounts)
Eleven
Months Ended Year Ended
November December
30, 31,
2010 2009
Revenues:
Consulting fee income $ 368 $ 547
Total revenues 368 547
Operating expenses:
Cost of services 596 804
Selling, general and administrative
expenses 1,637 2,146
Total operating expenses 2,233 2,950
Operating loss (1,865) (2,403)
Interest income 29 41
Distributions from securities litigation
settlements 103 264
Other-than-temporary impairment on
investments (719) (200)
Net realized foreign currency translation
loss (399) -
Loss before income tax expense (2,851) (2,298)
Income tax benefit (12) (11)
Net loss $ (2,839) $ (2,287)
Basic and diluted loss per share $ (0.06) $ (0.04)
See accompanying Notes which are an integral part of these
Consolidated Financial Statements.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Going Concern Basis)
(In thousands)
Eleven
Months Ended Year Ended
November December
30, 31,
2010 2009
Net loss $ (2,839) $ (2,287)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Depreciation and amortization 3 5
Amounts credited on insurance policyholder
accounts - 1
Net realized investment (gains)/losses and
other-than-temporary
impairment on investment 616 (64)
Share based compensation 135 55
Net realized foreign currency translation
loss 399 -
Net changes in operating assets and liabilities:
Accrued investment income - 1
Other assets 87 92
Accounts payable, accruals and other
liabilities (53) (43)
Net cash used in operating activities (1,652) (2,240)
Cash flows from investing activities:
Purchases of private equity investments - (117)
Proceeds from WorldCom, Inc. and Enron securities
litigation settlements 103 264
Capital expenditures 3 (2)
Net cash provided by investing activities 106 145
Cash flows from financing activities:
Insurance policyholder benefits - (111)
Purchase of shares by the Employee Stock
Option Trust (103) -
Net cash used in financing activities (103) (111)
Effect of exchange rate changes on cash (1) 5
Net decrease in cash and cash equivalents (1,650) (2,201)
Cash and cash equivalents at beginning of
year 11,480 13,681
Cash and cash equivalents at end of period $ 9,830 $ 11,480
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes (net of amounts recovered) $ (12) $ (11)
Non-cash investing activities:
Realization of accumulated foreign currency
translation adjustment $ 399 $ -
Exchange of receivable from former consulting
client for additional private
equity investment in former consulting
client $ - $ 68
See accompanying Notes which are an integral part of these
Consolidated Financial Statements.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Going Concern Basis)
(In thousands)
Accumulated
Other
Ordinary Shares Additional Employee Compre- Total
Paid-in Retained Benefit hensive Shareholders'
Number Amount Capital Earnings Trusts Loss Equity
Balance as of
January 1,
2009 64,439 $ 3,222 $ 67,860 $ 6,894 $ (62,598) $ (399) $ 14,979
Net loss - - - (2,287) - - (2,287)
Share based
compensation,
including
income tax
effect of $0 - - 55 - - - 55
Balance as of
December 31,
2009 64,439 $ 3,222 $ 67,915 $ 4,607 $ (62,598) $ (399) $ 12,747
Net loss - $ - $ - $ (2,839) $ - $ - $ (2,839)
Realization of
accumulated
foreign
currency
Translation
adjustments - - - - - 399 399
Share based
compensation,
including
income tax
effect of $0 - - 135 - - - 135
Purchase of
shares by the
Employee Share
Option Trust - - - - (103) - (103)
Balance as of
November 30,
2010 64,439 $ 3,222 $ 68,050 $ 1,768 $ (62,701) $ 0 $ 10,339
See accompanying Notes which are an integral part of these
Consolidated Financial Statements.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
As used herein, the term "Company" refers to Berkeley Technology
Limited (In Liquidation). Except as the context otherwise requires,
the term "Group" refers collectively to the Company and its
subsidiaries.
Note 1. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been
prepared by the Company in conformity with United States generally
accepted accounting principles ("U.S. GAAP"). These 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. The Group's
primary business is consulting in venture capital. All consolidated
financial statements are presented in a consulting company
format.
The Company is incorporated under the laws of Jersey, Channel
Islands. Its Ordinary Shares are traded on the London Stock
Exchange and previously in the U.S. on the OTC Bulletin Board in
the form of American Depositary Shares ("ADSs"), which were
evidenced by American Depositary Receipts ("ADRs"). Each ADS
represented ten Ordinary Shares. As part of our cost reduction
measures, the offering of ADRs was terminated on January 20, 2010.
Our Deposit Agreement with The Bank of New York Mellon terminated
on April 20, 2010. We entered into an amendment to our Deposit
Agreement on January 20, 2010, to decrease from one year to thirty
(30) days the amount of time that must pass after termination of
the Deposit Agreement before The Bank of New York Mellon may sell
any ADRs that had not been surrendered. The Bank of New York Mellon
notified our ADR holders, by letter dated January 20, 2010, of
their right to surrender their ADRs for our Ordinary Shares on or
before May 20, 2010. For the ADR holders who did not surrender
their ADRs for our Ordinary Shares by May 20, 2010, The Bank of New
York Mellon used reasonable efforts to sell such ADRs and such ADR
holders received the net proceeds of sale of such ADRs. Pursuant to
the regulations of the U.S. Securities and Exchange Commission
("SEC"), as of June 30, 2010, the Company is now considered a
foreign private issuer, rather than a U.S. domestic registrant.
Liquidation Basis of Accounting
The Group has adopted the liquidation basis of accounting
effective as of close of business on November 30, 2010. The
liquidation basis of accounting will continue to be used by the
Group until such time that it completes the wind-up. Under the
liquidation basis of accounting, assets are stated at their
estimated net realizable value and liabilities are stated at their
estimated settlement amounts, which estimates will be periodically
reviewed and adjusted as appropriate. Consolidated Statements of
Net Assets in Liquidation and Changes in Net Assets in Liquidation
are the principal financial statements presented under the
liquidation basis of accounting. The valuations of assets at their
net realizable value and liabilities at their anticipated
settlement amounts represent estimates, based on historical
experience, present facts and circumstances, and on various other
assumptions that are believed to be reasonable under the
circumstances. The actual values and costs associated with carrying
out the wind-up are expected to differ from the amounts shown
herein because of the inherent uncertainty and will be greater than
or less than the amounts recorded. Such differences may be
material. Accordingly, it is not possible to predict the aggregate
amount or timing of future distributions to shareholders as long as
the wind-up is in effect, and no assurances can be given that the
amount of liquidation distributions to be received will equal or
exceed the estimate of net assets in liquidation presented in the
accompanying Statement of Net Assets in Liquidation.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Under the liquidation basis of accounting, the carrying amounts
of assets as of the close of business on November 30, 2010 were
adjusted to their estimated net realizable values and liabilities
include the estimated costs associated with implementing the
wind-up. Such value estimates were updated by the Group as of
December 31, 2010. The majority of net assets in liquidation at
December 31, 2010 were highly liquid and did not require adjustment
as their estimated net realizable value approximates their current
book value. The carrying value of the Group's private equity
investments was reduced from $750,000 to $0 as of December 31,
2010. The liabilities were reduced by $124,000 as unclaimed
dividends that were paid in or prior to 2002 are likely to be
forfeited.
The Group is also required to estimate and accrue the costs
associated with implementing and completing the wind-up under the
liquidation basis of accounting. The process of winding-up will
require substantial time due to our complex corporate structure,
the realization, if any, of investments and entitlements,
regulatory matters, as well as the fulfillment of our contractual
obligations with our client. The Company's Directors appointed the
Executive Chairman to oversee the wind-up and liquidation of the
Company. We accrued an estimate of $905,000 for such net costs as
of November 30, 2010. As of December 31, 2010, our estimated net
costs were reduced to an estimate of $880,000. Such estimates are
based on assumptions regarding the Group's ability to fulfill
outstanding contractual obligations to our client, regulatory
issues and the ultimate timing of distributions to our
shareholders. These estimates will be adjusted from time to time as
projections and assumption change. The actual costs to wind-up are
expected to differ from the amount shown herein because of the
inherent uncertainty. Such differences may be material.
The following table summarizes the changes in estimated
liquidation costs from November 30, 2010 to December 31, 2010:
(Costs
Incurred)
November Changes December
30, In Income 31,
2010 Estimates Received 2010
(In thousands)
Estimated net costs to be incurred
during liquidation:
Compensation and related
costs for remaining employees $ 735 $ - $ (81) $ 654
Office and other costs 56 18 (2) 72
Insurance 46 - (4) 42
Professional fees 127 20 (3) 144
Regulatory & shareholder
reporting costs 57 - (7) 50
Income taxes (4) - 6 2
Less consulting fee revenue (108) - 27 (81)
Less interest income on
cash balances (4) - 1 (3)
Less Enron securities
litigation settlement - (362) 362 -
Total estimated net costs to be
incurred during liquidation $905 $ (324) $ 299 $ 880
Going Concern Basis of Accounting
For all periods preceding November 30, 2010, the Group's
financial statements are presented on the going concern basis of
accounting. Such financial statements reflect the historical basis
of assets and liabilities and the historical results of operations
related to the Group's assets and liabilities for the period from
January 1, 2010 to November 30, 2010 and the year ended December
31, 2009.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 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.
Cash and Cash Equivalents
The Group considers all highly liquid investments with an
original maturity of three months or less to be cash
equivalents.
Investments
As discussed above, the Group's primary business for financial
reporting purposes is considered to be consulting in venture
capital. As of November 30, 2010 and December 31, 2009, the Group's
only investments were private equity securities which are carried
at cost less any other-than-temporary impairment.
As all of the Group's private equity investments for the eleven
months ended November 30, 2010 and for the year ended December 31,
2009 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 5 "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 are 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 eleven months ended November
30, 2010, the Group determined that impairment indicators existed
for its private equity investments, and then determined that the
impairments were other-than-temporary. The Group recognized a
realized investment loss in its consolidated statement of
operations totaling $0.7 million on these investments during the
eleven months ended, November 30, 2010.
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
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements are stated at
cost less accumulated depreciation. Depreciation is calculated on a
straight-line basis at rates sufficient to write-off such assets
over their estimated useful lives on the following basis:
Furniture and equipment - five years
Computer equipment, including - three years
software
Leasehold improvements - life of lease
Revenue Recognition
Consulting fees are recognized in income on an accrual basis,
based upon when services are performed and in accordance with
accounting revenue guidance. Under the guidance, revenue is
realized or realizable and earned when persuasive evidence of an
arrangement exists, delivery has occurred or services have been
rendered, the seller's price to the buyer is fixed and determinable
and collectibility is reasonably assured. Performance based
revenues under a consulting arrangement are not recorded until the
payments are earned, the client has acknowledged the liability in
writing and collectibility is reasonably assured.
Investment income comprises interest on fixed maturity
securities and cash balances and is accounted for on an accrual
basis. Dividends are accounted for when declared.
Share Based Compensation
Equity compensation plan
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, or, may be exercisable
upon grant, and expire seven to ten years from 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 payments 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
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 eleven months ended
November 30, 2010 and the year ended December 31, 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, 3,450,000 share options granted on August 20, 2008
and 4,000,000 granted on September 2, 2010. No share options were
granted during 2006 or 2009. 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 calculated 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 eleven months ended November 30, 2010 was based
upon the fact that all unvested options related to longstanding
employees and directors.
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. The Company had
no related tax benefits during the eleven months ended November 30,
2010 or the year ended December 31, 2009, as the share options
exercised during the eleven months ended November 30, 2010 were at
a price higher than the then market values and there were no share
options exercised during the year ended December 31, 2009.
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.
Income Taxes
The Group accounts for income taxes under the asset and
liability method. Under this method the Group recognizes taxes
payable or refundable for the current year, and deferred tax assets
and liabilities due to temporary differences in the basis of assets
and liabilities between amounts recorded for financial statement
and tax purposes.
The Group provides a valuation allowance for deferred income tax
assets if it is more likely than not that some portion of the
deferred income tax asset will not be realized. The Group includes
in income any increase or decrease in a valuation allowance that
results from a change in circumstances that causes a change in
judgment about the realization of the related deferred income tax
asset.
The Group includes in additional paid-in capital the tax benefit
on share options exercised during the period to the extent that
such exercises result in a permanent difference between financial
statement and tax basis compensation expense.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 the Bank of Scotland
in connection with the Company's bank facility (now terminated),
which were also considered potential common stock. However, these
warrants expired, unexercised, on February 14, 2010. Diluted
earnings per share is calculated by dividing net income 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."
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
eleven months ended November 30, 2010 or the year ended December
31, 2009. Therefore, the Company's comprehensive loss was equal to
the Company's consolidated net loss for these periods.
Recently Issued Accounting Pronouncements
In April 2009, the FASB issued additional guidance on estimating
fair value when the volume and level of activity for an asset or
liability have significantly decreased and is effective for interim
and annual reporting periods ended after June 15, 2009. The
Company's adoption of this standard did not have an impact on the
Company's 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 guidance sets forth (1) the period
after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements;
(2) the circumstances under which an entity should recognize events
or transactions occurring after the balance sheet date in its
financial statements; and (3) the disclosures that an entity should
make about events or transactions that occurred after the balance
sheet date. This statement is effective for interim or annual
periods ending after June 15, 2009. The Company adopted this
guidance in the second quarter of 2009. The adoption of this
guidance did not have an impact on the Company's consolidated
financial statements.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 an impact on the financial results of the Company.
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. We do not expect the adoption of this guidance to have a
material impact on the Company's consolidated financial
statements.
Note 2. Shareholders' Equity
The Company has authorized 86,400,000 Ordinary Shares with a par
value of $0.05 per share. As of November 30, 2010 and December 31,
2009, there were 64,439,073 Ordinary Shares issued and
outstanding.
No dividends were declared or paid in the eleven months ended
November 30, 2010 or in the year ended December 31, 2009.
As of November 30, 2010, the Company had a liability on its
consolidated balance sheet of $124,000, representing the amount of
dividend checks issued by the Company's share registrar to
shareholders that have not been cashed. As the Company had
previously remitted the full amount of the dividends to its
registrar, after a period of time, the registrar would return the
funds to the Company in the amount of the uncashed dividend checks.
Pursuant to the Company's Memorandum and Articles, any unclaimed
dividend after twelve or more years after the date of its
declaration shall be forfeited and shall revert back to the
Company.
Accumulated other comprehensive loss consisted of one component,
foreign currency translation adjustments. The accumulated foreign
currency translation adjustments of $(399,000) as of December 31,
2009 was realized in the eleven months ended November 30, 2010 in
the Group's consolidated statement of operations. See "Foreign
Currencies" in Note 1 "Summary of Significant Accounting Policies"
above for information regarding the accumulated foreign currency
translation adjustments.
The Group has two share incentive plans as described in Note 7
"Share Incentive Plans" below. Under the terms of these plans,
shares of the Company may be purchased in the open market and held
in trust. These shares are owned by the employee benefit trusts,
which are subsidiaries of the Company for financial reporting
purposes.
Changes in the number of shares held by The London Pacific Group
1990 Employee Share Option Trust ("ESOT") and the Agent Loyalty
Opportunity Trust ("ALOT") were as follows:
Eleven Months
Ended Year Ended
November 30, December 31,
2010 2009
ESOT ALOT ESOT ALOT
(In thousands)
Shares held as of January 1 13,084 438 13,084 438
Purchased 3,446 - - -
Exercised (100) - - -
Shares held as of end of period 16,430 438 13,084 438
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Warrants
On November 11, 2002, the Company agreed to grant 1,933,172
warrants to subscribe for the Company's Ordinary Shares to Bank of
Scotland in connection with the extension of the Group's credit
facility (which was fully repaid and terminated in June 2003). The
warrants were granted on February 14, 2003 and had an exercise
price of GBP0.1143 (based on the average of the closing prices of
the Ordinary Shares over the trading days from November 1, 2002
through November 11, 2002), which was higher than the market price
of GBP0.09 on November 11, 2002. These warrants were exercisable at
any time prior to February 14, 2010 and their fair value was
determined to be $251,125, based on a risk-free rate of 2.80%,
volatility of 179% and a dividend yield of zero. The Company
recognized $30,625 of expense relating to these warrants in 2002.
The balance of $220,500 was recognized as an expense in 2003, with
the corresponding entries to additional paid-in capital. These
warrants expired, unexercised, on February 14, 2010.
Note 3. Loss Per Share
A reconciliation of the numerators and denominators for the
basic and diluted loss per share calculations is as follows:
Eleven
Months Ended Year Ended
November December
30, 31,
2010 2009
(In thousands, except
per
share amounts)
Net loss $ (2,839) $ (2,287)
Basic loss per share:
Weighted-average number of Ordinary Shares
outstanding,
excluding shares held by the employee benefit
trusts 48,333 50,917
Basic loss per share $ (0.06) $ (0.04)
Diluted loss per share:
Weighted-average number of Ordinary Shares
outstanding,
excluding shares held by the employee benefit
trusts 48,333 50,917
Effect of dilutive securities (warrants
and employee share options) - -
Weighted-average number of Ordinary Shares
used in diluted
loss per share calculations 48,333 50,917
Diluted loss per share $ (0.06) $ (0.04)
For the eleven months ended November 30, 2010, there were no
"in-the-money" options or warrants, and therefore no potentially
dilutive securities. As a result, if the Company had reported net
income for the eleven months November 30, 2010, diluted earnings
per share would be the same as basic earnings per share.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Investments
See Note 1 "Summary of Significant Accounting Policies" above
for a discussion of the Group's accounting policies with respect to
its investments. As of November 30, 2010 and December 31, 2009, the
Group's only investments were private equity securities. As of
December 31, 2009, the carrying value of these investments totaled
$1,469,000, which represented their estimated fair value and which
was also their cost basis. Late in 2010, the Group recognized
other-than-temporary impairment losses totaling $719,000 on its
private equity investments. Aggregate carrying value of all the
Group's investments was $750,000 as of November 30, 2010.
Investment Concentration and Risk
As of November 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 is in preferred stock and warrants of a technology
company (the company referenced above) that was a consulting client
of BICC. Another investment is in preferred stock of another
technology company that was a consulting client of BICC in prior
years. The third investment is in preferred stock of a technology
company.
Distributions from Securities Litigation Settlements
In September 2010, the Group received a $103,000 payment
representing the final distribution from the WorldCom, Inc.
securities litigation. The Group held certain WorldCom, Inc.
publicly traded bonds which it sold at a loss in 2002. This payment
recovers part of the Group's realized loss on the WorldCom bonds
recognized in 2002.
In December 2009, the Group received a $264,000 partial
distribution from the Enron Corporation securities litigation. The
Group held certain Enron Corporation publicly traded bonds which it
sold at a loss in 2002. This payment recovers part of the Group's
realized loss on the Enron Corporation bonds recognized in
2002.
Note 5. Fair Value of Financial Instruments
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). The
accounting guidance also outlines a valuation framework and creates
a fair value hierarchy in order to increase the consistency and
comparability of fair value measurements and the related
disclosures. Under U.S. GAAP, certain assets and liabilities must
be measured at fair value, and the accounting guidance details the
disclosures that are required for items measured at fair value.
Financial assets and liabilities are measured using inputs from
three levels of hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets
for identical assets or liabilities that are accessible by the
Company. During the eleven months ended November 30, 2010 and the
twelve months ended December 31, 2009, the Company's Level 1 assets
included money market mutual funds which are included in cash and
cash equivalents in the 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.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Level 3 - Unobservable inputs for the asset or liability
including significant assumptions of the Company and other market
participants. As of November 30, 2010 and December 31, 2009, the
Group held $750,000 and $1,469,000, respectively, 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. During the eleven months
ended November 30, 2010, the Group recognized other-than-temporary
impairment losses totaling $719,000 on its private equity
investments. The Group's management considered the investee
companies' declining cash positions, less favorable business
environments and likely acquisition values in determining the fair
value estimates of these investments.
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 Prices
In Active Significant
Markets
For Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
(Level (Level
(Level 1) 2) 3) Total
(In thousands)
As of November 30,
2010:
Money market funds $ - $ - $ - $ -
As of December 31,
2009:
Money market 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). During the eleven months ended November 30, 2010 and
the twelve months ended December 31, 2009 the Company recorded an
impairment charge of $719,000 and $200,000 respectively relating to
the private equity investments. See Note 4 for discussion of the
investments. The Company classifies these measurements as Level
3.
Quoted
Prices
In Active Significant
Markets
For Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
(Level (Level (Level
1) 2) 3) Total
(In thousands)
As of November 30, 2010:
Private equity
investments - - $ 750 $ 750
As of December 31, 2009:
Private equity
investments - - $ 1,469 $ 1,469
Cash and cash equivalents, accounts receivable, interest
receivable, prepaid expenses and deposits, accounts payable and
accrued expenses, and insurance policyholder liabilities are
reflected in the consolidated balance sheets at carrying values
which approximate fair values due to the short-term nature of these
instruments.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Property and Equipment
Property and equipment are carried at cost and consisted of the
following:
November December
30, 31,
2010 2009
(In thousands)
Property, equipment and leasehold improvements $ - $ 187
Accumulated depreciation - (181)
Property and equipment, net $ - $ 6
Note 7. Share Incentive Plans
The Group has two share incentive plans for employees, agents
and directors of Berkeley Technology Limited and its subsidiaries
that provide for the issuance of share options and stock
appreciation rights.
Employee Share Option Trust
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. The
objectives of this plan include retaining the best personnel and
providing for additional performance incentives. 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, or, may be exercisable upon
grant, 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.
The ESOT may purchase shares of the Company in the open market,
funded each year by a loan from the Company or its subsidiaries.
While the loan is limited up to an annual maximum of 5% of the
consolidated net assets of the Group, the ESOT is not limited as to
the number of options that may be granted, as long as it holds the
shares underlying the total outstanding options. The loan is
secured by the shares held in the trust, is interest-free, and is
eliminated in the consolidated financial statements. The ESOT has
waived its entitlement to dividends on any shares held. See Note 2
"Shareholders' Equity" for a summary of the share activity within
the ESOT.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Share option activity for the eleven months ended November 30,
2010 and the year ended December 31, 2009 was as follows:
Eleven Months Ended Year Ended
November 30, December 31,
2010 2009
Weighted- Weighted-
Number Average Number Average
of Exercise of Exercise
(Options in thousands) Options Price Options Price
Outstanding as of January
1 6,475 $2.09 9,675 $1.54
Granted 4,000 0.25 - -
Forfeited (2,820) 0.35 (3,200) 0.43
Exercised - - - -
Expired (80) 16.38 - -
Outstanding as of end of period 7,575 $1.62 6,475 $2.09
Options exercisable as of
end of period 6,988 $1.73 4,213 $3.05
See Note 1 "Summary of Significant Accounting Policies" for
information regarding the Group's accounting for share based
compensation.
Summary information about the Group's share options outstanding
as of November 30, 2010 is as follows:
Options Exercisable
Options Outstanding (1) (1)
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
(In thousands) (Years) (In thousands)
$0.11 -
$0.31 5,575 8.80 $0.26 4,988 $0.26
5.40 2,000 0.46 5.40 2,000 5.40
$0.11 -
$5.40 7,575 6.60 $1.62 6,988 $1.73
( )
(1) ( ) The intrinsic value of all options outstanding as of
December 31, 2010 was zero, as the market value of the underlying
shares was $0.12 as of that date.
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 each of the eleven months ended November 30, 2010 and the year
ended December 31, 2009, compensation expense related to employee
share options totaled $135,000 and $55,000, respectively, and is
included in operating expenses in the accompanying statements of
operations.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On September 2, 2010, 4,000,000 options were granted to
employees and directors with an exercise price of $0.25, the net
book value of the shares as of June 30, 2010. All options were
fully vested at the date of grant.
During the eleven months ended November 30, 2010, 625,000
options became vested, 4,000,000 options were granted and fully
vested, 2,820,000 were forfeited and no options were exercised. At
November 30, 2010, there were 7,575,000 options outstanding with a
weighted average exercise price of $1.62. There were no
in-the-money options outstanding at that date. Of the outstanding
options, 6,987,500 were exercisable at November 30, 2010, and these
have a weighted average exercise price of $1.73. The remaining
587,500 options were unvested at November 30, 2010. These unvested
options have a weighted average exercise price of $0.30. As of
November 30, 2010, total unrecognized compensation expense related
to unvested share options was $22,000.
Agent Loyalty Opportunity Trust
The Agent Loyalty Opportunity Trust ("ALOT") was established in
1997 (without shareholders' approval) to provide for the granting
of stock appreciation rights ("SARs") on the Company's Ordinary
Shares to agents of the Company's former U.S. life insurance
subsidiary. Each award unit entitled the holder to cash
compensation equal to the difference between the Company's
prevailing share price and the exercise price. The award units were
exercisable in four equal annual installments commencing on the
first anniversary of the date of grant and were forfeited upon
termination of the agency contract. Vesting of the award in any
given year was also contingent on the holder of the award
surpassing a predetermined benchmark tied to sales and persistency.
The SARs expired seven years from the date of grant. No awards have
been outstanding under this plan since 2006.
The ALOT may purchase Ordinary Shares in the open market, funded
by a loan from a Group subsidiary. The loan is secured by the
shares held in the trust and bears interest based upon the trust's
net income before interest for each financial period. The trust
receives dividends on all Ordinary Shares held. The loan, interest
income and dividend income are eliminated in the consolidated
financial statements. See Note 2 "Shareholders' Equity" for a
summary of the share activity within the ALOT.
Note 8. Pension Plan
The Group provided a defined contribution plan for its former
U.K. employees. There are currently no participants in the plan.
The Group has no ongoing liabilities associated with the plan.
Contributions of $0 and $186,000 were made by the Group to the plan
in the eleven months ended November 30, 2010 and the year ended
December 31, 2009, respectively. The 2009 contributions of $159,000
were offset by a salary waiver.
Note 9. 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 of unrecognized tax benefits for the eleven
months ended November 30, 2010 and for the year ended December 31,
2009. 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.
The Group is subject to taxation on its income in all countries
in which it operates based upon the taxable income arising in each
country. However, realized gains on certain investments are exempt
from Jersey and Guernsey taxation. This tax benefit which may not
recur has reduced the tax charge in 2010 and 2009.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Group is subject to income tax in Jersey at a rate of 0% for
2009 and 2010. In the United States, the Group is subject to both
federal and California taxes at rates up to 34% and 8.84%,
respectively.
A breakdown of the Group's book loss before income taxes by tax
jurisdiction follows:
Eleven
Months Ended Year Ended
November December
30, 31,
2010 2009
(In thousands)
Loss before income taxes:
Jersey, Guernsey and United Kingdom $ (1,889) $ (1,433)
United States (962) (865)
Total loss before income taxes $ (2,851) $ (2,298)
The provision for income taxes differs from the amount computed
by applying the Jersey, Channel Islands statutory income tax rate
of 0% for 2010 and 2009 to the losses before income taxes. The
sources and tax effects of the difference are as follows:
Eleven
Months
Ended Year Ended
November December
30, 31,
2010 2009
(In thousands)
Income tax expense (benefit) computed at
Jersey statutory income tax
rate of 0% for 2010 and 2009 $ - $ -
Tax benefit on losses at higher than 0% statutory
Jersey rate:
Losses in the U.S. (412) (370)
Increase in valuation allowance 411 369
Utilization of net operating loss carryforwards
by a federal consolidated
tax group affiliate (1) (1,061) 1,830
Increase (decrease) in valuation allowance
related to utilization of net
operating loss carryforwards by a federal
consolidated tax group affiliate (1) 1,061 (1,830)
Expiration of net operating loss carryforwards
of U.S. entities 196 173
Decrease in valuation allowance related to
expiration of net operating loss
carryforwards (196) (173)
Other (11) (10)
Actual tax benefit $ (12) $ (11)
( )
(1) See discussion below regarding the inclusion of
non-consolidated federal tax group affiliate.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of the actual tax expense (benefit) were as
follows:
Eleven
Months Ended Year Ended
November December
30, 31,
2010 2009
(In thousands)
Jersey, Guernsey and United Kingdom:
Current tax expense $ - $ -
Deferred tax expense - -
United States:
Current tax benefit (12) (11)
Deferred tax expense - -
Total actual tax expense $ (12) $ (11)
The Group recognizes assets and liabilities for the deferred tax
consequences of temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial
statements. These temporary differences will result in taxable or
deductible amounts in future years when the reported amounts of
assets and liabilities are recovered or settled. The deferred
income tax assets are reviewed periodically for recoverability and
valuation allowances are provided as necessary. Deferred income tax
assets and liabilities are disclosed net in the consolidated
financial statements when they arise within the same tax
jurisdiction and tax return.
The tax effects of temporary differences that give rise to
significant portions of the deferred income tax assets and deferred
income tax liabilities are presented below. As of November 30, 2010
and December 31, 2009, full valuation allowances were provided on
the net deferred tax assets of the U.S. tax group due to the
uncertainty of generating future taxable income or capital gains to
benefit from the deferred tax assets.
November December
30, 31,
2010 2009
(In thousands)
U.S. subsidiaries:
Deferred income tax assets:
Net operating loss carryforwards $ 5,450 $ 4,231
Deferred compensation - 3
Other assets 65 5
Valuation allowance (5,515) (4,239)
Net deferred income tax assets - U.S. $ - $ -
subsidiaries
As of November 30, 2010, the Group's U.S. subsidiaries have
pre-tax federal net operating loss carryforwards of approximately
$12.5 million expiring as follows: approximately $0.2 million in
2011, and approximately $12.3 million from 2020 to 2030. These
subsidiaries have California net operating loss carryforwards of
approximately $13.6 million expiring from 2014 to 2030. The Group
has recorded a full valuation allowance for the deferred tax assets
arising from these carryforward amounts as of November 30, 2010 due
to the uncertainty of generating future taxable income to benefit
from the deferred tax assets.
The Company's Jersey, Channel Islands subsidiaries have net
operating loss carryforwards of approximately $19.5 million as of
November 30, 2010; however, no deferred tax assets, and no
corresponding valuation reserves, have been recorded for these net
operating loss carryforwards due to the introduction of a
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
new tax system in Jersey in 2009 when the tax rate for certain
Jersey corporations became zero. The Company's tax rate for its
Jersey entities is zero.
During the third quarter of 2008, the Internal Revenue Service
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. LCL is not considered a variable interest entity within the
scope of FASB guidance for the consolidation of variable interest
entities. 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, and 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 2007, 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 2010, LCL has approximately $39.6
million of net operating loss carryforwards (unaudited) and
approximately $72.0 million capital loss carryforwards (unaudited).
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 stand
alone basis would be the responsibility of LCL, not the Group, and
accordingly, any such liability has not been included in the
consolidated financial statements of the Company.
Note 10. Business Segment and Geographical Information
Summary revenue, interest income and net investment gain (loss)
information by geographic segment, based on the domicile of the
Group company generating those revenues, is as follows:
Eleven
Months Ended Year Ended
November December
30, 31,
2010 2009
(In thousands)
Jersey $ (869) $ 75
United States 250 577
Consolidated revenues and net investment
gains and losses $ (619) $ 652
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Total assets by geographic segment were as follows:
November December
30, 31,
2010 2009
(In thousands)
Jersey $ 3,424 $ 4,953
United States 7,278 8,211
Consolidated total assets $ 10,702 $ 13,164
Note 11. Client Concentration
The Group's revenues are from a few major clients. During the
eleven months ended November 30, 2010, the Group's two largest
consulting clients accounted for 83% and 17% of its consolidated
revenues. No other consulting client accounted for more than 10% of
consolidated revenues.
Note 12. Commitments and Contingencies
Lease Commitments
The Group leased office space under operating leases. Total
rents under these operating leases were $136,000 (net of sublease
income of $32,000) and $235,000 (net of sublease income of
$68,000), for the eleven months ended November 30, 2010 and the
year ended December 31, 2009, respectively. Our Jersey and San
Francisco office space leases expired in September 2010 and October
2010, respectively. The Group had no capital leases as of November
30, 2010 or December 31, 2009.
There are no future minimum lease payments required under
non-cancelable operating leases with terms of one year or more, as
of November 30, 2010.
Guarantees
Under our 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 our 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 November 30, 2010.
The Company enters into indemnification provisions under our
agreements with other companies in our ordinary course of business,
typically with business partners, clients, banks 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 sometimes 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. Accordingly, the Company has no liabilities
recorded for these agreements as of November 30, 2010.
BERKELEY TECHNOLOGY LIMITED (IN LIQUIDATION) AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 13. Transactions with Related Parties
The Group had no related party transactions during the eleven
months ended November 30, 2010 and the year ended December 31, 2009
that have materially affected the financial position or the
performance of the Group during these periods.
Note 14. Subsequent Events
At the extraordinary general meeting held on November 23, 2010,
shareholders approved a special resolution to wind-up the Company.
On or about December 6, 2010, the Company noticed shareholders that
the Company would be proceeding with the distribution of the
Company's assets to shareholders who own shares in the Company
according to each shareholder's ownership interest in the Company,
and requested a photocopy of stock certificates to confirm such
interest. On January 5, 2011 the Company established a record date
for the first distribution to shareholders. A distribution of
$0.1675 per share was mailed to such confirmed shareholders on or
about March 7, 2011.
On April 21, 2011, the Company filed a certification under Form
15F, thereby terminating the registration of its Ordinary Shares
and terminating its reporting obligations with the United States
Securities and Exchange Commission (the "SEC") under Section 12(g)
and Section 15(d) respectively, of the Securities Exchange Act of
1934, as amended. Upon such filing, the Company's registration of
its Ordinary Shares and reporting obligations with the SEC are
suspended immediately. The termination of the registration and
reporting obligations is expected to become effective no later than
90 days after such filing if there are no objections from the
SEC.
MANAGEMENT REPORT
This Management Report should be read in conjunction with the
audited consolidated financial statements, and the notes thereto,
presented in this Annual Report. The consolidated financial
statements are prepared in accordance with accounting principles
generally accepted in the United States. This section should also
be read in conjunction with the Cautionary Statement included in
this Annual Report.
Results of Operations (Going Concern Basis)
Prior to November 30, 2010, our financial statements are
presented on the going concern basis of accounting. Accordingly,
the following discussion of the results of operations compares the
eleven months ended November 30, 2010 to the twelve months ended
December 31, 2009 as reflected in the Consolidated Statements of
Operations.
Revenues
Consulting fee revenues for the eleven months ended November 30,
2010 were lower primarily due to fewer clients. New contracts were
entered into for slightly reduced services and fees with an
existing client during 2010 that generated $216,000 in consulting
fees for the eleven months ended November 30, 2010.
Under a consulting arrangement with a client we had in 2007, we
may be entitled to earn additional compensation in the future
depending upon the performance of certain venture capital
investments made with our assistance by that client during 2007.
Any such compensation would be paid to us as a proportion of any
capital gain realized by the client, after deducting certain costs,
upon a defined realization of the investment by the client. To
date, no such compensation has been realized.
Operating Expenses
Cost of services decreased by $0.2 million for the eleven months
ended November 30, 2010 compared to the year ended December 31,
2009, due primarily to reductions in staff costs and reduced
facilities expense.
Selling, general and administrative expenses decreased
significantly by $0.5 million to $1.6 million for the eleven months
ended November 30, 2010, compared to $2.1 million for the year
ended December 31, 2009. This decrease was due primarily to lower
staff costs with fewer employees, reduced rent and other insurance
costs, and reduced professional fees.
We have focused our resources and have closed our Jersey
insurance business. This insurance business was regulated which
required audit fees and expenses, actuary fees, independent
director fees, administrative expenses and other related costs. We
have closed several dormant subsidiaries, all which reduced our
auditing and administrative costs.
We have also reduced costs by eliminating our ADR program. These
costs included additional auditing fees and expenses, staffing
costs (reduction of an additional employee), other professional and
administrative fees and related costs.
Our operating loss for the eleven months ended November 30, 2010
decreased to $1.9 million compared to an operating loss of $2.4
million for the year ended December 31, 2009. This decrease was
attributable to a decrease in operating expenses partially offset
by a decrease in revenues as discussed above.
Interest Income
Interest income decreased by $12,000 to $29,000 for the eleven
months ended November 30, 2010 compared to $41,000 for the year
ended December 31, 2009, due to declining cash balances, as well as
continued low interest rates. As of November 30, 2010, our cash and
cash equivalents amounted to $9.8 million, a decrease of $1.7
million from December 31, 2009. This decrease resulted primarily
from the use of cash in operating activities. Although we are
continuing to implement, and realize, a wide array of cost
reduction measures, the liquidation distribution to shareholders in
March 2011 will significantly reduce interest income in the
future.
Realized Investment Gains and Losses
Net realized investment losses for the eleven months ended
November 30, 2010 were $0.6 million, compared to $64,000 in net
realized investment gains for the year ended December 31, 2009.
In September 2010, the Group received a WorldCom final
distribution of $103,000. The Group held certain WorldCom, Inc.
publicly traded bonds which it sold at a loss in 2002. This payment
recovers part of the realized loss recognized by the Group in 2002.
Our total recovery from WorldCom totaled $1.6 million during 2007,
2008 and 2010.
In December 2009, the Group received a partial distribution of
$264,000 from the Enron Corporation securities litigation. The
Group did not receive any distributions from Enron during the
eleven months ended November 30, 2010. The Group held certain Enron
Corporation publicly traded bonds which it sold at a loss in 2002.
This payment recovers part of the realized loss recognized by the
Group in 2002. Our total recovery from Enron totaled $1.6 million
during 2008 and 2009.
The WorldCom and Enron payments received were offset by
other-than-temporary impairment write-downs totaling $0.7 million
for the eleven months ended November 30, 2010 compared to $0.2
million for the year ended December 31, 2009 on the Group's private
equity investments.
Realized Foreign Currency Translation Loss
In January 2010, the JFSC approved LPL's COBP and cancelled its
insurance permit. As of March 31, 2010, LPL was substantially
liquidated and thereby was required to realize a $0.4 million
non-recurring accumulated other comprehensive loss (foreign
currency translation adjustment net loss).
INCOME TAXES
We are subject to taxation on our income in all countries in
which we operate based upon the taxable income arising in each
country. However, realized gains on certain investments are exempt
from Jersey and Guernsey taxation. Since 2009, under a new tax
system in Jersey, Channel Islands, our tax rate is zero. In the
United States, we are subject to both federal and California taxes
at rates up to 34% and 8.84%, respectively.
In the eleven months ended November 30, 2010, we received a
$14,000 payment from London Pacific Life & Annuity Company
("LCL") for the use of our federal net operating losses to reduce
LCL's alternative minimum tax expense as a result of the
consolidation of LCL in our U.S. tax group's consolidated returns.
This payment offsets $2,000 minimum California taxes, resulting in
a $12,000 tax benefit to the Group for the eleven months ended
November 30, 2010. For more information, see Note 9 "Income Taxes"
to our consolidated financial statements. Other than these taxes
and benefits, no other tax expense or benefits were applicable to
our Group for the eleven months ended November 30, 2010. A loss
before income taxes of $1.8 million was contributed by our Jersey
operations, and a loss before income taxes of $0.9 million was
contributed by our U.S. operations; however, we did not recognize
any tax benefits due to the 100% valuation allowances that we have
provided for all deferred tax assets.
CRITICAL ACCOUNTING POLICIES
Management has identified those accounting policies that are
most important to the accurate portrayal of our financial condition
and results of operations and that require management's most
complex or subjective judgments, often as a result of the need to
make estimates about the effect of matters that are inherently
uncertain. These most critical accounting policies pertain to our
investments, revenue recognition, and assumptions used to value
share options granted. These critical accounting policies are
described below.
Accounting for Investments
Our primary business for financial reporting purposes is
considered to be consulting in venture capital. As such, our
private equity investments are carried at cost less any
other-than-temporary impairments.
Our private equity investments for the eleven months ended
November 30, 2010 and for the year ended December 31, 2009 are less
than 20% in the investee companies, and we do not have any
significant influence on the investee companies. Accordingly, all
such investments are accounted for in accordance with the cost
method. We evaluate the Group's investments for any events or
changes in circumstances ("impairment indicators") that may have
significant adverse effects on our 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 for which we make such
determination.
Determination of Fair Values of Investments
When a quoted market price is available for a security, we use
this price in the determination of fair value. If a quoted market
price is not available for a security, management estimates the
security's fair value based on valuation methodologies as described
below.
We hold investments in privately held equity securities,
primarily convertible preferred stock in companies doing business
in various segments of technology industries. These investments are
normally held for a number of years. Investments in convertible
preferred stock come with rights that vary dramatically both from
company to company and between rounds of financing within the same
company. These rights, such as anti-dilution, redemption,
liquidation preferences and participation, bear directly on the
price an investor is willing to pay for a security. The returns on
these investments are generally realized through an initial public
offering of the company's shares or, more commonly, through the
company's acquisition by a public company.
One of the factors affecting fair value is the amount of time
before a company requires additional financing to support its
operations. Management believes that companies that are financed to
the estimated point of operational profitability or for a period
greater than one year will most likely return value to the investor
through an acquisition between a willing buyer and seller, as the
company does not need to seek financing from an opportunistic
investor or insider in an adverse investment environment. If a
particular company needs capital in the near term, management
considers a range of factors in its fair value analysis, including
our ability to recover our investment through surviving liquidation
preferences. Management's valuation methodologies also 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, and overall equity market conditions. This is
combined with analysis of comparable acquisition transactions and
values to determine if the security's liquidation preferences will
ensure full recovery of our investment in a likely acquisition
outcome. In its valuation analysis, management also considers the
most recent transaction in a company's shares.
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. Level 3 inputs apply to the
determination of fair value for our private equity investments.
These are unobservable inputs where the determination of fair
values of investments requires the application of significant
judgment. It is possible that the factorsevaluated by management
and fair values will change in subsequent periods, especially with
respect to our privately held equity securities in technology
companies, resulting in material impairment charges in future
periods. Only other-than-temporary impairments are 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.
Other-than-temporary Impairments of Investments
Management performs an ongoing review of all investments in the
portfolio to determine if there are any declines in fair value that
are other-than-temporary.
In relation to our private equity securities that do not have a
readily determinable fair value, factors considered in impairment
reviews include: (i) the length of time and extent to which
estimated fair values have been below cost and the reasons for the
decline, (ii) the investee's recent financial performance and
condition, earnings trends and future prospects, (iii) the market
condition of either the investee's geographic area or industry as a
whole, and (iv) concerns regarding the investee's ability to
continue as a going concern (such as the inability to obtain
additional financing). If the evidence supports that a decline in
fair value is other-than-temporary, then the investment is reduced
to its estimated fair value, which becomes its new cost basis, and
a realized loss is reflected in earnings.
Revenue Recognition
The timing of revenue recognition for consulting services
requires a degree of judgment. Under revenue accounting guidance,
revenue is realized or realizable and earned when persuasive
evidence of an arrangement exists, delivery has occurred or
services have been rendered, the seller's price to the buyer is
fixed and determinable and collectibility is reasonably assured. We
recognize consulting fee revenues in our consolidated statement of
operations as the services are performed, if all the conditions of
the guidance are met. We do not recognize performance based
revenues under a consulting arrangement until the payments are
earned, the client has acknowledged the liability and
collectibility is reasonably assured.
Valuation of Share Options Granted
We calculate the fair value of share option grants to employees
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. It should be noted, however, that
share based compensation expense in the Company's consolidated
statement of operations has no negative impact on total
shareholders' equity because there is an offsetting entry to
additional paid-in capital in the Company's consolidated balance
sheet.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
See Note 1 to the Consolidated Financial Statements included in
this Annual Report for a summary of recently issued accounting
pronouncements.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents decreased during the eleven months
ended November 30, 2010 by $1.7 million from $11.5 million as of
December 31, 2009 to $9.8 million as of November 30, 2010. This
decrease in cash and cash equivalents resulted from $1.7 million of
cash used in operating activities. Cash provided by investing
activities primarily resulted from the $103,000 final proceeds from
the WorldCom securities litigation settlement.
Shareholders' equity decreased during the eleven months ended
November 30, 2010 by $2.4 million from $12.7 million at December
31, 2009 to $10.3 million as of November 30, 2010, primarily due to
the net loss for the period of $2.8 million (which includes a
non-recurring accumulated foreign currency translation adjustment
net loss of $0.4 million). As of November 30, 2010 and December 31,
2009, $62.7 million and $62.6 million, respectively of our Ordinary
Shares, at cost, held by the employee benefit trusts have been
netted against shareholders' equity.
As of November 30, 2010, we had no bank borrowings, guarantee
obligations, material commitments outstanding for capital
expenditures or additional funding for private equity portfolio
companies.
As of November 30, 2010, we had $9.8 million of cash and cash
equivalents. We believe that this cash balance is sufficient to:
(1) fund our operations (consulting in venture capital) through our
remaining contractual obligation, (2) fund our corporate activities
to wind-up the company, (3) to fund the first shareholder
liquidation distribution of $0.1675 per share in March 2011 and (4)
to allow for reasonable contingencies identified in the winding-up
process.
We adopted the liquidation basis of accounting effective as of
close of business on November 30, 2010, whereby assets are valued
at their estimated net realizable value and liabilities are stated
at their estimated settlement amounts. Under the liquidation basis
of accounting, we accrue for the estimated costs to be incurred
during liquidation offset by estimated future earnings. The actual
values and costs associated with carrying out the wind-up are
expected to differ from the amounts shown herein because of the
inherent uncertainty and will be greater than or less than the
amounts recorded. Such differences may be material. Accordingly, it
is not possible to predict the aggregate amount or timing of future
distributions to shareholders as long as the wind-up is in effect,
and no assurances can be given that the amount of liquidation
distributions to be received will equal or exceed the estimate of
net assets in liquidation presented in the accompanying Statement
of Net Assets in Liquidation.
As of November 30, 2010 our net assets in liquidation were $8.8
million and as of December 31, 2010 our net assets in liquidation
were $9.2 million. The net increase primarily resulted from the
$362,000 final proceeds received from the Enron securities
litigation settlement.
PRINCIPAL RISKS AND UNCERTAINTIES
We consider the principal risks and uncertainties for 2011 to be
the following: The process of winding-up will require substantial
time due to our complex corporate structure, the realization, if
any, of investments and entitlements, regulatory matters, as well
as fulfilling contractual obligations to our client. Winding-up
costs may greatly impact future shareholder liquidation
distributions, if any, made after the first shareholder liquidation
distribution in March 2011.
RESPONSIBILITY AND CAUTIONARY STATEMENTS
Responsibility Statement
We confirm that to the best of our knowledge:
-- The consolidated statement of net assets (liquidation basis)
as of December 31, 2010, the consolidated changes in net assets
(liquidation basis) for the period from December 1, 2010 to
December 31, 2010, the consolidated balance sheet as of December
31, 2009, and the consolidated statements of operations, cash flows
and changes in shareholders' equity for the period from January 1,
2010 to November 30, 2010 and for the year ended December 31, 2009
included in this Annual Report, which have been prepared in
conformity with United States generally accepted accounting
principles ("U.S. GAAP"), give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a
whole; and
-- This Annual Report includes a fair review of the information
required by the Financial Services Authority's Disclosure and
Transparency Rules ("DTR") 4.1.8 to 4.1.11 (including a fair review
of the business, a description of the principal risks and
uncertainties facing the Company, a review of the development and
performance of the Company, any important events since the end of
the financial year and likely future developments).
Cautionary Statement
This Annual Report is addressed to shareholders of Berkeley
Technology Limited (In Liquidation) and has been prepared solely to
provide information to them.
This Annual Report is intended to inform the shareholders of the
Company's performance during the eleven months ended November 30,
2010 and the changes in net asset for the period from December 1,
2010 to December 31, 2010 in addition to the statement of net
assets as of December 31, 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) the
time and effort needed to wind-up and liquidate the Company, (ii)
the ability of the Company to address regulatory matters, (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 to retain key personnel, and (viii) actions by
governmental authorities that regulate the Company's business and
wind-up, including insurance commissions. 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
Principal Financial Officer
April 28, 2011
This information is provided by RNS
The company news service from the London Stock Exchange
END
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