2018
Annual Report
for the six months ended 31 December 2018
ABN 72 088 749 008
LawFinance Limited (formerly JustKapital Limited)
Contents
31 December 2018
Corporate directory
Chief Executive Officer's Letter
Directors' report
Auditor's independence declaration
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of LawFinance Limited
Shareholder information
2
3
4
19
20
21
22
23
24
70
71
76
1
LawFinance Limited (formerly JustKapital Limited)
Corporate directory
31 December 2018
Directors
Tim Storey - Non-Executive Chairman
Diane Jones - Chief Executive Officer, Executive Director
Anthony Murphy - Non-Executive Director
David Wattel - Executive Director
Company secretary
Dean Jagger
Registered office
Share register
Auditor
Solicitors
Level 16
56 Pitt Street
Sydney NSW 2000
Tel: +61 2 9696 0220
Fax: +61 2 9252 3430
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Tel: 1300 554 474
Fax: +61 2 9287 0303
Stantons International
Level 2
22 Pitt Street
Sydney NSW 2000
Corrs Chambers Westgarth
Level 17
8-12 Chifley Square
Sydney NSW 2000
Stock exchange listing
LawFinance Limited shares are listed on the Australian Securities Exchange (ASX
code: LAW)
Website
www.lawfinance.com.au
Corporate Governance Statement
The corporate governance statement which is approved at the same time as the
Annual Report can be found at: http://www.lawfinance.com.au/investor-
centre/governance/
The directors support and adhere to the principles of corporate governance,
recognising the need for the highest standard of corporate behaviour and
accountability.
2
LawFinance Limited (formerly JustKapital Limited)
Chief Executive Officer's Letter
31 December 2018
Dear Shareholders
This has been a very demanding period for LawFinance Limited. We finalised the purchase of National Health Finance,
Holdco, LLC and its subsidiaries (“NHF”) on 28 September 2018, following approval by you, our shareholders, on 26
September 2018.
The purchase of NHF for US$53M (plus acquisition costs) was funded by a mixture of new debt (US$42M) which is
repayable 4 years from now, and new equity (US$18M). The transaction was supported by debt and equity from several
well-known institutions and family offices including cornerstone funding from Washington H Soul Pattinson Limited and
two of our major shareholders: EGP Capital and Lucerne Investment Partners.
NHF funds personal injury liens related to medical expenses incurred by an accident victim which are covered by the at
fault and/or the victim’s automobile insurer. The business is very similar to our disbursement funding operation in Australia,
which also operates in the personal injury area.
We are now a much bigger Group with operations in Australia and the US. We expect our two books of debtors to
collect approximately US$123M over the next three or so years. The integration of the two organisations is well
underway and we have developed strong working relationships across the Group.
There have been a number of key achievements that I wanted to highlight:
•
•
•
•
•
The Australian disbursement funding business has US$27M of Net Loan Receivables (or expected cash collections)
as at 31 December 2018. This represents year on year growth of 21%.
The Australian disbursement funding business achieved cash collections of US$10M in CY2018, a 30% growth
rate from CY2017.
The US medical lien funding business has US$96M of Net Loan Receivables (or expected cash collections) as at
31 December 2018.
The US medical lien funding business generated cash collections of US$6M for the three months to 31
December 2018.
There have now been four case settlements in the litigation portfolio. The remaining 7 cases will be funded to
their conclusion, which is expected over the next 12 to 18 months. The litigation portfolio is expected to generate
further cash to the Group of over US$16M in this period.
Although the above highlights are extremely positive, as a fellow shareholder, I am disappointed with the loss we
have delivered in this period. There are no excuses for underperformance but there were a number of factors that
contributed to this outcome. The Group incurred significant costs of US$5.8M undertaking this transformation and
a number of one-off expenses, including a US$3.5M write-down of our litigation funding assets.
Due to the application of the accounting standards, the US operations contributed a loss during the one quarter
of our ownership of US$1.8M (as we were only able to record 9% of expected profit from the sales achieved in
the quarter). We do not believe that this is a meaningful reflection of the operations value to LawFinance.
After a long journey completing this transaction we are very excited about the future. We have substantial cashflow;
US dollar earnings; and a business that is cyclically resilient. I feel confident that the business is well placed to
take advantage of the exciting opportunities that lie ahead.
Diane Jones
Chief Executive Officer
3
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of LawFinance Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it
controlled at the end of, or during, the period ended 31 December 2018.
Directors
The following persons were directors of LawFinance Limited during the whole of the financial year and up to the date of this
report, unless otherwise stated:
Tim Storey
Anthony Murphy
Diane Jones
David Wattel (Appointed 26 September 2018)
Nature of operations and principal activities
During the financial period the Group purchased National Health Finance Holdco, LLC and its subsidiaries ('NHF'). NHF
operates a medical lien funding business in the United States. NHF purchases medical treatment receivables associated
with a personal injury case (a car accident) from medical practitioners at a discount from the full value of the invoice. NHF’s
return is realised upon payment by the at-fault party or their insurance carrier. Due to its size, this business has now become
the most significant component of the Group’s operations.
The principal activities of the Group consisted of:
● Medical lien funding;
●
●
●
Disbursement funding and short-term funding;
Insurance broking for after the event insurance, which has now ceased operations; and
Litigation funding, which is being wound down.
Medical lien funding
Established in 1999, the NHF business is an Arizona based medical lien funding business with operations in 19 states in the
United States. The medical liens purchased generally relate to the not at fault personal injury victims involved in motor vehicle
accidents.
NHF purchases a lien or obtains a letter of protection over medical receivables associated with personal injury cases from
healthcare providers and hospitals. The return to NHF is realised upon payment by the at-fault party or their insurance carrier
on conclusion of the litigation either by settlement or judgment.
NHF provides a funding solution for the victim of a motor vehicle accident by facilitating access to medical care they would
likely not otherwise receive. NHF’s funding solution enables medical providers to obtain quick liquidity and reduce the
administrative burden by managing the medical claims through the litigation process. Medical providers working on a lien
basis who do not use the NHF solution are required to wait for a successful conclusion of the legal proceeding before being
paid.
Disbursement funding and short-term funding
The disbursement funding division and short-term funding division have been merged and are referred to as 'JustKapital
Finance'.
4
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
JustKapital Finance provides finance to law firms to fund the legal disbursements required by lawyers to progress the claims
of their clients which the client generally cannot fund themselves. The deferred payment structure offered by JustKapital
Finance addresses the immediate and growing market requirement whereby the client or firm cannot, nor may not be willing
to, fund disbursements directly. The Group does not fund the legal fees related to the case. The Group pays the
disbursements directly, charges a standardised mark-up and immediately invoices the law firm once the disbursements are
paid. The Group’s invoice becomes payable upon completion of the underlying case, which on average is in about 18 months'
time. Discounts may be provided from the invoiced cost if the case concludes quickly or in other exceptional circumstances.
The key business driver of the disbursement funding business is to ensure that the law firm client progresses the case within
normal parameters. In any given financial period, the profitability of the disbursement funding business is dependent upon
revenue and discount levels. Legislative, regulatory, judicial and policy changes may have an impact on future profitability.
JustKapital Finance also provides short-term working capital finance to law firms for a duration of less than 12 months. There
appears to be demand for this funding structure, which is otherwise unavailable to the law firm. The short-term facility is only
provided to law firms who use JustKapital exclusively for their disbursement funding requirements (where the client of the
law firm cannot pay their disbursements). The short-term funding division was established in July 2016 and has been tested
successfully since its inception. The Group continues to assess whether there is a large market requirement for this product.
Insurance broking
This business line provides insurance broking services to place policies for Adverse Costs Order Insurance and Security for
Costs Deeds, earning broker fees and commissions. This business line was established in September 2016. The key
business driver of this business line is the negotiation with Insurers and the placement of Adverse Costs Order Insurance
policies and Security for Costs Deeds for applicants. This operation has not developed as was anticipated and therefore the
Board determined this division should be closed down during the period.
Litigation funding
During the 2018 financial year the Board resolved to exit the litigation funding division. The litigation funding division is capital
intensive which created a strain on the Group’s working capital resources. Therefore, the Board determined that the best use
of the Group’s limited resources was to invest in its profitable businesses.
The litigation funding division provided investigation and management services, as well as providing finance to claimants to
progress their claim. These services and funding are provided pursuant to a contract with a claimant. The Group does not
provide legal advice to any claimant. The key business driver is to manage and fund the litigation to a successful conclusion.
If the litigation is successful, the Group earns a fee and will also be reimbursed the costs paid to progress the litigation, both
of which are payable from the sums recovered in the litigation. The fee is generally a percentage of the settlement or
judgement proceeds. If the litigation is unsuccessful, the Group does not generate any income. In certain jurisdictions, the
litigation funding agreement contains an undertaking to the contracted parties that the Group will pay any adverse costs
ordered in respect of the costs incurred by the defendant(s) during the period of funding.
Since its inception the has Group funded 11 cases. Four of these cases have been successfully concluded. The remaining
7 cases will continue to be funded until their conclusion.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial period.
Review of operations
The loss for the Group for the six months ended 31 December 2018 after providing for income tax and non-controlling interest
amounted to US$11,227,000 (year ended 30 June 2018: US$5,142,000). The contribution from the medical lien funding
business included in this result was for the period 1 October 2018 to 31 December 2018, reflecting the Group’s
commencement of effective control.
The Group changed its financial year from 30 June to 31 December in order to synchronise its financial year with that of its
US subsidiaries. The financial statements have been prepared for the 6 months ended 31 December 2018. The comparative
accounting period is for the 12 months ended 30 June 2018, therefore the results are not directly comparable.
During the period, the Group changed the currency in which it presents its financial statements from Australian dollars to US
dollars, in order to better reflect the underlying performance of the Group.
5
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Significant changes in the state of affairs
Effective 1 October 2018, the Company obtained control of the medical lien funding business in the United States. Following
completion of this acquisition, the Group now operates in 5 states in Australia and 19 states in the United States, becoming
an international operation. Prior to the acquisition, the Group was an Australian based business.
The acquisition was approved by shareholders at an extraordinary shareholders meeting held on 26 September 2018.
On 1 October 2018, the Company changed its name from JustKapital Limited to LawFinance Limited.
As noted in the last annual report, the litigation funding division has agreed not to fund any new cases and the existing cases
are continuing to be funded to their completion.
During the period the Board decided to cease operating the insurance broking operations as this operation had not developed
as was anticipated.
There were no other significant changes in the state of affairs of the Group during the financial period.
Matters subsequent to the end of the financial period
No matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
Information on likely developments in the operations of the Group and the expected results of operations have not been
included in this report because the directors believe it would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on directors
Name:
Title:
Experience and expertise:
Other current directorships:
Tim Storey
Non-Executive Chairman, Non-Executive Director
Tim holds a number of directorships in various private and public companies. He is a
barrister and solicitor and was a partner at one of New Zealand’s premier law firms
through to 2006 and has practised in both Australia and New Zealand, focusing on
corporate, commercial and property transactions. He is a member of the Institute of
Directors (NZ) and the Financial Services Institute of Australasia.
Chairman of Stride Property Group (NZX: SPG) and Director of Investore Property
Limited (NZX: IPL).
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options/warrants:
Interests in rights:
Member of the Remuneration Committee and Chairman of the Audit and Risk
Committee
6,603,014 ordinary shares
Nil options/warrants over ordinary shares
Nil performance rights over ordinary shares
6
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Name:
Title:
Experience and expertise:
Anthony Murphy
Non-Executive Director
Anthony is the Chief Executive Officer of Lucerne Investment Partners and is
responsible for overseeing and leading both Group strategy and ongoing management
at Lucerne Investment Partners. Anthony founded and led the Australian Wealth
Management business at Canaccord Genuity – a global investment bank. Anthony
holds a Bachelor of Economics and Bachelor of Commerce degrees from Australian
National University.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Chairman of the Remuneration Committee and member of the Audit and Risk
Committee
1,015,000 ordinary shares
Nil options/warrants over ordinary shares
Nil performance rights over ordinary shares
Interests in shares:
Interests in options/warrants:
Interests in rights:
Name:
Title:
Experience and expertise:
Diane Jones
Chief Executive Officer, Executive Director
Prior to joining LawFinance Limited in 2016, Diane was the Chief Operating Officer,
Chief Financial Officer and Company Secretary of Australia’s largest litigation funder
IMF Bentham Limited (ASX: IMF).
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options/warrants:
Interests in rights:
Contractual rights to shares:
Diane retained the role of Group Company Secretary up to 15 November 2018.
3,574,098 ordinary shares
Nil options/warrants over ordinary shares
Nil performance rights over ordinary shares
500 convertible bonds
Name:
Title:
Experience and expertise:
David Wattel
Executive Director
David graduated from the University of Illinois in 1984 with a degree in economics
before obtaining his Juris Doctor (JD) in 1988 from Arizona State University College of
Law. He has practiced personal injury law ever since graduating. He founded Wattel &
York; a multi-state personal injury and medical malpractice law firm. He speaks at
numerous conferences in the area of personal injury and litigation. David has been
actively managing and overseeing the growth of NHF.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
107,548,701 ordinary shares
Interests in shares:
61,431,818 warrants over ordinary shares; Nil options over ordinary shares
Interests in options/warrants:
Nil performance rights over ordinary shares
Interests in rights:
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Company secretary
Dean Jagger was appointed Company Secretary on 15 November 2018. Dean works in the company secretarial division of
Automic Group, a professional services company providing company secretarial, legal, registry and accounting services to
Australian entities. Dean provides company secretarial and corporate compliance services to several listed and private
companies. Dean has over 10 years’ experience in the financial services sector.
The previous Company Secretary was Diane Jones who resigned from the position on 15 November 2018.
7
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held during the period ended 31 December 2018,
and the number of meetings attended by each director were:
Tim Storey
Anthony Murphy
Diane Jones
David Wattel
Full Board
Attended
Held
6
6
6
3
6
6
6
4
Held: represents the number of meetings held during the time the director held office.
The Audit and Risk Committee and Remuneration Committee meetings were combined with Board meetings as detailed
above.
Remuneration report (audited)
The remuneration report details the key management personnel ('KMP') remuneration arrangements for the Group, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
General performance and link to remuneration policy
Additional disclosures relating to KMP
Details of the KMP
The KMP currently comprise of the following directors and other senior executives of the Group.
Name
Title
Non-Executive Directors
Tim Storey
Anthony Murphy
Non-Executive Chairman, Non-Executive Director
Non-Executive Director
Executive Director
Diane Jones
David Wattel
Senior Executives
Anthony Hersch
Craig Beatton
Sarika Merchant
Richard Cruz
Chief Executive Officer, Executive Director
Chief Executive Officer - NHF, Executive Director (Appointed on 26 September 2018)
Chief Operating Officer
Chief Financial Officer
Chief Financial Officer - NHF (Appointed on 1 October 2018)*
Chief Operating Officer - NHF (Appointed on 1 October 2018)*
*
Date of effective control of NHF
8
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Principles used to determine the nature and amount of remuneration
Remuneration & Nominations Committee ('R&NC')
Due to changes to the size and composition of the Board, the responsibilities of the R&NC continued to be performed by the
full Board during the financial period ended 31 December 2018. Therefore, during the financial period ended 31 December
2018 the Board was responsible for the following in relation to the remuneration policy and practices of the Group:
●
determining and reviewing remuneration arrangements for the Board of Directors ('the Board') and the senior
executives; and
assessing the appropriateness of the nature and amount of the emoluments of the directors and senior executives by
reference to relevant employment market conditions, with the overall objective of ensuring the best stakeholder benefit
from the Board and executive team
●
Remuneration policy
The remuneration policy of the Group has been designed to align KMP objectives with shareholder and business objectives
by providing a fixed remuneration component and offering specific short term and long term incentives based on key
performance areas affecting the Group’s financial results.
During the financial period ended 31 December 2018, the Board’s policy for determining the nature and amount of
remuneration for KMP of the Group was developed by the R&NC and approved by the Board prior to the financial period
ended 31 December 2018. This is detailed below:
●
●
●
●
senior executives receive a fixed remuneration component;
senior executives may receive a variable remuneration component via performance incentives;
performance incentives are paid once predetermined key performance indicators ('KPIs') have been met;
incentives paid in the form of options or rights are intended to align the interests of the Group and senior executives
with those of the shareholders. In this regard, KMP are prohibited from limiting risk attached to those instruments by
use of derivatives or other means; and
senior executive packages are reviewed annually by reference to the Group’s performance, executive performance and
comparable information from industry sectors.
●
Non-executive directors remuneration
Non-executive directors' fees and payments are reviewed annually. Usually, this review will be undertaken by the R&NC,
however, due to the current structure of the Board, this responsibility has currently moved to the Board. The chairman's fees
are determined independently to the fees of other non-executive directors based on comparative roles in the external market.
The chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive directors
may be offered the opportunity, and encouraged, to participate in the Group’s equity plan arrangements to align their interests
with shareholder interests.
Non-executive director fees
Role
US$
Chairman
Non-Executive Director
75,905
54,218
ASX listing rules require the aggregate non-executive director remuneration be determined periodically by a general meeting.
The most recent determination was at the Annual General Meeting held on 30 November 2011, where the shareholders
approved a maximum annual aggregate remuneration of US$216,870 (A$300,000).
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which
has both fixed and variable components. The executive remuneration and reward framework has the following components,
the combination of these comprise the executive's total remuneration.
Fixed remuneration
Fixed compensation, consisting of base salary, superannuation and non-monetary benefits, is reviewed annually by the
R&NC. The process consists of a review of Group and individual performance, relevant comparative compensation in the
market and internally and, where appropriate, external advice on policies and practices.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the Group and provides additional value to the executive.
9
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Variable remuneration
The objective of the variable compensation incentive is to reward executives in a manner that aligns this element of their
compensation with the objectives and internal KPIs of the Group. The total potential incentive available is set at a level so
as to provide sufficient incentive to the executive to achieve the operational targets and such that the cost to the Group is
reasonable in the circumstances.
The variable component is delivered in two parts:
a) Short Term Incentive Plan ('STIP')
The STIP is a discretionary annual bonus payment available to participants who are senior executives of the Company and
is based on a percentage (up to 30% for the financial period ended 31 December 2018) of the senior executive participants
total fixed remuneration ('TFR'), payable in cash or ordinary shares of the Company at the discretion of the Board.
The purpose of the STIP component is to provide an annual 'at risk' incentive to senior executive participants that is linked
to the achievement of specific financial and non-financial objectives. Participants are eligible to participate in the STIP from
the beginning of each financial year, which is also when financial and non-financial performance objectives are set for each
Executive Participant. At the end of the financial year, the financial objectives are reassessed for the following financial year,
and may include stretch targets where the Board thinks this is consistent with enhancing Total Shareholders Return ('TSR').
b) Long Term Incentive Plan ('LTIP')
The LTIP is a discretionary bonus available to directors and senior executives and complements the STIP. The LTIP
encourages equity ownership and gives participants the opportunity to be rewarded for shareholder value creation.
options;
The LTIP comprises any one, or a combination of the following:
(i)
(ii) performance rights (or, in certain circumstances, a cash payment in lieu of shares); and/or
(iii) plan loan under the Loan Agreement (for the purpose of funding the issue price of the shares offered
Use of remuneration consultants
During the financial period ended 31 December 2018, the Board engaged HRascent to review and advise on KMP
remuneration, for both directors and senior executives. The fees paid for this review and advice was US$19,880.
Voting and comments made at the Company's 2018 Annual General Meeting ('AGM')
At the 2018 AGM held on 15 November 2018, 98.68% of the votes received supported the adoption of the remuneration
report for the year ended 30 June 2018.
10
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Details of remuneration
Amounts of remuneration
Remuneration for the period 1 July 2018 to 31 December 2018.
Short-term
benefits
EIP and
bonuses
Salary and
fees
Post-
employment
benefits
Super-
Long-term
benefits
Long
service
leave
Share-
based
payments
Equity-
settled
Non-
monetary annuation
6 months ended 31
December 2018
Executive directors:
Diane Jones
David Wattel (i)
Non-Executive Directors:
Tim Storey (ii)
Anthony Murphy
Other KMP:
Anthony Hersch
Craig Beatton
Sarika Merchant (iii)
Richard Cruz (iii)
US$
US$
US$
US$
US$
US$
164,268
100,833
72,290
2,298
27,651
20,301
-
-
-
-
-
-
7,421
-
-
1,929
119,086
74,271
56,400
57,500
620,310
-
-
27,298
52,298
154,184
-
-
983
1,135
2,118
7,421
7,056
-
-
23,827
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
US$
243,979
103,131
27,651
22,230
126,507
81,327
84,681
110,933
800,439
(i)
From date of appointment, 26 September 2018 to 31 December 2018. The short-term benefits paid in the period
related to liabilities assumed as part of the purchase of NHF.
(ii) Prolex Limited, an entity associated with Tim Storey, was paid US$27,651 for directors fees and bonuses (2018:
US$65,056).
(iii) From date of appointment, 1 October 2018 to 31 December 2018 (date of effective control of NHF). The short-term
benefits paid in the period related to liabilities assumed as part of the purchase of NHF.
Remuneration for the period 1 July 2017 to 30 June 2018.
12 months ended 30 June
2018
Executive Directors:
Philip Kapp (i), (viii)
Diane Jones (ii)
Non-Executive Directors:
Tim Storey (iii), (ix)
Michael Hill (iv)
Anthony Murphy (v)
Other KMP:
Anthony Hersch (vi)
Craig Beatton (vii)
Short-term
benefits
EIP and
bonuses
Salary and
fees
Post-
employment
benefits
Super-
Long term
benefits
Long
service
Leave
Share-
based
payments
Equity-
settled
Non-
monetary annuation
US$
US$
US$
US$
US$
US$
Total
US$
329,806
318,105
-
116,040
47,963
24,020
22,608
-
-
-
255,250
144,829
1,142,581
58,020
38,680
212,740
-
-
-
-
-
-
-
-
-
15,510
-
2,282
2,148
15,510
13,759
49,209
-
-
-
-
-
-
-
-
93,233
73,810
423,039
523,465
17,093
-
-
65,056
26,302
24,756
38,847
-
367,627
197,268
222,983 1,627,513
11
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
(i)
(ii)
(iii)
Philip Kapp resigned as Executive Chairman and Managing Director on 31 October 2017. He received a payment of
US$147,695 inclusive of notice on termination which is included in Salaries and fees above.
Diane Jones was appointed interim Chief Executive Officer on 31 October 2017 and appointed Executive Director
and Chief Executive Officer on 27 November 2017.
Tim Storey was appointed Non-executive Chairman on 31 October 2017, prior to which he was a Non-Executive
Director.
Michael Hill resigned as Non-Executive Director on 27 November 2017.
Anthony Murphy was appointed Non-Executive Director on 31 October 2017.
Anthony Hersch was appointed Chief Operating Officer on 27 November 2017.
(iv)
(v)
(vi)
(vii) Craig Beatton was appointed Chief Financial Officer on 27 November 2017.
(viii) Kapp Consulting Pty Limited, an entity associated with Philip Kapp, was paid US$329,806 for directors fees.
(ix)
Prolex Limited, an entity associated with Tim Storey, was paid US$47,963 for directors fees and bonuses.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Executive Directors:
Philip Kapp
Diane Jones
David Wattel
Non-Executive Directors:
Tim Storey
Michael Hill
Anthony Murphy
Other KMP:
Anthony Hersch
Craig Beatton
Sarika Merchant
Richard Cruz
Fixed remuneration
6 months 31
December
2018
12 months
30 June
2018
Performance related - STIP Performance related - LTIP
12 months
30 June
2018
12 months
30 June
2018
6 months 31
December
2018
6 months 31
December
2018
-
70%
98%
100%
-
100%
100%
100%
68%
53%
78%
64%
-
74%
100%
100%
73%
80%
-
-
-
30%
2%
-
-
-
-
-
32%
47%
-
22%
-
-
-
-
16%
20%
-
-
-
-
-
-
-
-
-
-
-
-
22%
14%
-
26%
-
-
11%
-
-
-
Service agreements
Remuneration and other terms of employment for KMP are formalised in service agreements. Details of these agreements
are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Tim Storey
Non-Executive Chairman, Non-Executive Director
1 April 2015
Ongoing
Tim is paid a gross salary of US$75,905 (A$105,000) (US$34,700 (A$48,000) until 30
September 2018) per annum.
Anthony Murphy
Non-Executive Director
31 October 2017
Ongoing
Anthony is paid a gross salary of US$54,218 (A$75,000) (US$34,700 (A$48,000) until
30 September 2018) per annum inclusive of superannuation.
12
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Diane Jones
Chief Executive Officer, Executive Director
15 March 2016
Ongoing
Diane is paid a gross salary of US$397,595 (A$550,000) (US$289,160 (A$400,000)
until 30 September 2018) per annum inclusive of superannuation. Notice period is 6
months by the Company or 3 months by the employee.
David Wattel
Executive Director
28 September 2018
Ongoing
David is paid a gross salary of US$400,000 per annum inclusive of superannuation.
Notice period is 1 month by the company, or 3 months by the employee. Refer to details
of bonus at the end of this section.
Anthony Hersch
Chief Operating Officer
18 April 2016
Ongoing
Anthony is paid a gross salary of US$253,015 (A$350,000) per annum inclusive of
superannuation. Notice period is 3 months.
Craig Beatton
Chief Financial Officer
9 September 2016
Ongoing
Craig is paid a gross salary of US$162,653 (A$225,000) per annum inclusive of
superannuation. Notice period is 1 month.
Sarika Merchant
Chief Financial Officer - NHF
11 April 2018
Ongoing
Sarika is paid an annual salary of US$225,000 per annum; No notice period.
Richard Cruz
Chief Operating Officer - NHF
No signed agreement in place
NA
Richard is paid an annual salary of US$230,000 per annum; No notice period.
KMPs have no entitlement to termination payments in the event of removal for misconduct.
Details of bonus
David Wattel is entitled to receive a US$4.15m non-discretionary bonus paid equally over 5 quarterly payments (US$0.83m
per quarter) after satisfaction of the following criteria:
(a) US$50m of the acquired book of Net Receivables (Gross Accounts Receivables less provision for discounts) is collected;
and
(b) Net Receivables (Gross Accounts Receivables less provision for discounts) has achieved the following hurdles:
●
●
●
●
●
By 31/03/2020, Net Receivables is at least US$175m
By 30/06/2020, Net Receivables is at least US$180m
By 30/09/2020, Net Receivables is at least US$190m
By 31/12/2020, Net Receivables is at least US$199m
By 31/03/2021, Net Receivables is at least US$209m
(c) The NHF Founder Promissory Notes of US$9m are repaid in full (Refer to note 19); and
13
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
(d) Both Atalaya Capital Management and Washington H. Soul Pattinson have consented to the payment in writing.
Share-based compensation
Issue of shares
During the period ended 31 December 2018, 1,264,569 ordinary shares were issued to directors and senior executives as a
result of performance rights granted through the financial year ended 30 June 2017 LTIP vesting and being exercised. Details
are provided in the following tables.
Options
There were no options over ordinary shares granted to or vested by directors and other KMP as part of compensation during
the period ended 31 December 2018.
Performance rights
There were no performance rights over ordinary shares granted to directors and other KMP as part of compensation during
the period ended 31 December 2018.
General performance and link to remuneration policy
The earnings of the Group for the five years to 31 December 2018 are summarised below:
31 December
2018
30 June
30 June
30 June
30 June
2018
2017
2016
2015
US$'000
US$'000
US$'000
US$'000
US$'000
Total revenue and other income
EBITDA (excluding the litigation funding
business)
Loss after income tax
4,675
5,918
3,570
(675)
-
240
(11,427)
2,857
(5,142)
1,929
(4,279)
(1,603)
(2,034)
-
(4,965)
The factors that are considered to affect TSR are summarised below:
31 December
2018
30 June
30 June
30 June
30 June
2018
2017
2016
2015
Share price at financial year end (A$)
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
0.074
(4.56)
(4.56)
0.070
(3.68)
(3.68)
0.200
(3.53)
(3.53)
0.230
(1.85)
(1.85)
0.190
(10.94)
(10.94)
Short Term Incentive Plan
Financial period ended 31 December 2018 - STIP
Diane Jones was paid a short term incentive of $72,290 to reflect her efforts in successfully completing the purchase of
NHF. There were no other short term incentives granted during the financial period ended 31 December 2018.
Short Term Incentive Plan
Financial year ended 30 June 2018 - STIP
The following table provides the details of STIP opportunity for directors and KMP’s for performance during the financial year
ended 30 June 2018:
Name
Diane Jones
Anthony Hersch
Craig Beatton
Role
Maximum US$
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
116,040
58,020
38,680
Long Term Incentive Plan
There were no grants of equity under the LTIP during the financial period ended 31 December 2018 and 30 June 2018.
14
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Additional disclosures relating to KMP
Shareholding
The number of ordinary shares in the Company held during the financial period by each director and other members of KMP
of the Group, including their personally related parties, is set out below:
Tim Storey
Anthony Murphy
Diane Jones
David Wattel
Anthony Hersch
Craig Beatton
Balance at Received
as part of
the start of
the period
3,218,212
840,000
1,427,366
-
578,614
-
6,064,192
remuneration Additions
3,218,212
-
175,000
-
-
1,427,366
- 107,548,701
-
-
-
50,000
- 112,419,279
Disposals/
other*
Balance at
the end of
the period
166,590
-
719,366
6,603,014
1,015,000
3,574,098
- 107,548,701
957,227
50,000
1,264,569 119,748,040
378,613
-
*
Includes vesting of previously granted Performance rights.
During the financial period ended 31 December 2018, there were no shares in the Company held by directors and KMP’s
other than those disclosed in the table above.
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial period by each director and
other members of KMP of the Group, including their personally related parties, is set out below:
Tim Storey
Diane Jones
Anthony Hersch
Balance at
the start of
the period
Granted
166,590
719,366
378,613
1,264,569
Vested
(166,590)
(719,366)
(378,613)
(1,264,569)
-
-
-
-
Expired/
forfeited/
other
Balance at
the end of
the period
-
-
-
-
-
-
-
-
During the financial period ended 31 December 2018, there were no performance rights over ordinary shares in the Company
held by directors and KMP’s other than those disclosed in the table above.
Convertible bonds
The number of convertible bonds in the Company held during the financial period by each director and other members of
KMP of the Group, including their personally related parties, is set below:
Balance at Received
the start of
the period
part of
remuneration Additions
Disposals/
Other
Balance at
the end of
of the period
Diane Jones
500
-
-
-
500
During the financial period ended 31 December 2018, there were no convertible bonds in the Company held by directors and
KMP’s other than those disclosed in the table above.
Warrants holding
The number of warrants over ordinary shares in the Company held during the financial period by each director and other
members of KMP of the Group, including their personally related parties, is set out below:
David Wattel
Balance at
the start of
the period
Granted
- 61,431,818
- 61,431,818
Vested
Expired/
forfeited/
other
Balance at
the end of
the period
- 61,431,818
- 61,431,818
-
-
15
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
During the financial period ended 31 December 2018, there were no warrants over ordinary shares in the Company held by
directors and KMP’s other than those disclosed in the table above.
Other transactions with KMP and their related parties
Lucerne Group manages funds on behalf of third parties. Anthony Murphy is the Chief Executive Officer of Lucerne
Investment Partners, part of the Lucerne Group. Refer to note 29 for further details.
David Wattel is a director of Multus Medical LLC, a company that specialises in creating 3-Dimensional anatomical
schematics from standardised MRI data. This company provides services to patients to assist in their personal injury
insurance claims, and NHF fund the cost of these services. David is also a founding member of Wattel & York – Attorneys
at Law, a personal injury and property damage law firm. Wattel & York have the carriage and conduct over a small number
of personal injury matters where NHF holds a medical lien. Refer to note 29 for further details.
This concludes the remuneration report, which has been audited.
Shares under option
There were no unissued ordinary shares of LawFinance Limited under option outstanding at the date of this report.
Shares under performance rights
There were no unissued ordinary shares of LawFinance Limited under performance rights outstanding at the date of this
report.
Shares under warrants
Unissued ordinary shares of LawFinance Limited under warrants at the date of this report are as follows:
Grant date
28/09/2018**
28/09/2018***
Expiry date
28/09/2022
28/09/2022
Exercise price - A$0.14
Warrants issued to other Syndicated Acquisition Facility participants
*
**
*** Warrants issued to NHF Founders
Exercise
price*
Number
under rights
US$0.099 329,880,000
US$0.099 122,863,636
452,743,636
Shares issued on the exercise of options
There were no ordinary shares of LawFinance Limited issued on the exercise of options during the period ended 31
December 2018 and up to the date of this report.
Shares issued on the exercise of performance rights
The following ordinary shares of LawFinance Limited were issued during the period ended 31 December 2018 and up to the
date of this report on the exercise of performance rights granted:
Date performance
rights granted
30/11/2016
30/11/2016
Vesting date
Exercise date
30/06/2018
30/06/2018
07/11/2018
21/11/2018
Number of
Exercise price shares issued
US$0.00
US$0.00
545,203
719,366
1,264,569
16
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Shares issued on the exercise of warrants
There were no ordinary shares of LawFinance Limited issued on the exercise of warrants during the period ended 31
December 2018 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial period, the Company paid a premium in respect of a contract to insure the directors and executives of
the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial period, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial period, the Company has not paid a premium in respect of a contract to insure the auditor of the Company
or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial period by the auditor
are outlined in note 26 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial period, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 26 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
●
Officers of the Company who are former directors of Stantons International
There are no officers of the Company who are former directors of Stantons International.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
17
LawFinance Limited (formerly JustKapital Limited)
Directors' report
31 December 2018
Auditor
Stantons International continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Tim Storey
Chairman
29 March 2019
Sydney
18
PO Box 1908
West Perth WA 6872
Australia
Level 2, 1 Walker Avenue
West Perth WA 6005
Australia
Tel: +61 8 9481 3188
Fax: +61 8 9321 1204
ABN: 84 144 581 519
www.stantons.com.au
Stantons International Audit and Consulting Pty Ltd
trading as
Chartered Accountants and Consultants
29 March 2019
Board of Directors
LawFinance Limited
Suite 2, Level 16
56 Pitt Street
Sydney NSW 2000
Dear Directors
RE: LAW FINANCE LIMITED
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of LawFinance Limited.
As Audit Director for the audit of the financial statements of LawFinance Limited for the year ended
31 December 2018, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(ii)
any applicable code of professional conduct in relation to the audit.
Yours faithfully
STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD
(Trading as Stantons International)
(An Authorised Audit Company)
Martin Michalik
Director
Liability limited by a scheme approved
under Professional Standards Legislation
LawFinance Limited (formerly JustKapital Limited)
Statement of profit or loss and other comprehensive income
For the period ended 31 December 2018
Revenue
Net income from disbursement funding/medical lien funding
Other revenue
Total revenue
Non-supplier related cost of sales
Gross margin
Other income
Foreign exchange gain
Expenses
Employee benefits expense
Depreciation and amortisation expense
Impairment of assets
Administration and other expenses
Business purchase/selling expenses
Finance costs
Loss before income tax benefit
Consolidated
6 months
31 December
2018
12 months
30 June
2018
US$'000
US$'000
Note
5
6
7
7
15
7
7
7
2,149
192
2,341
(278)
4,017
441
4,458
(174)
2,063
4,284
1,744
590
1,460
-
(1,727)
(82)
(2,765)
(2,553)
(5,768)
(5,333)
(2,018)
(78)
(808)
(1,630)
(2,804)
(4,015)
(13,831)
(5,609)
Income tax benefit
8
2,404
467
Loss after income tax benefit for the period
(11,427)
(5,142)
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income/(loss) for the period, net of tax
Total comprehensive loss for the period
Loss for the period is attributable to:
Non-controlling interest
Owners of LawFinance Limited
Total comprehensive loss for the period is attributable to:
Non-controlling interest
Owners of LawFinance Limited
559
559
(152)
(152)
(10,868)
(5,294)
(200)
(11,227)
-
(5,142)
(11,427)
(5,142)
(200)
(10,668)
-
(5,294)
(10,868)
(5,294)
Cents
Cents
Basic loss per share
Diluted loss per share
35
35
(4.56)
(4.56)
(3.68)
(3.68)
All amounts presented in respect of prior years have been restated to reflect the change in presentation currency as explained in the accounting policies.
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
LawFinance Limited (formerly JustKapital Limited)
Statement of financial position
As at 31 December 2018
Consolidated
31 December
2018
Note
30 June
1 July
2017
2018
Assets
Current assets
Cash and cash equivalents
Loan and other receivables
Prepayments
Total current assets
Non-current assets
Loan and other receivables
Investment held in joint operations
Property, plant and equipment
Goodwill
Other intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Employee benefits
Deferred consideration
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Equity attributable to the owners of LawFinance Limited
Non-controlling interest
Total equity
US$'000
US$'000
US$'000
9
10
11
12
13
14
15
8
16
17
18
19
20
21
3,696
29,883
67
33,646
69,438
1,166
198
40,539
8,784
6,789
126,914
934
8,959
82
9,975
12,645
1,221
105
4,392
10,999
4,630
33,992
5,867
6,245
161
12,273
12,606
1,243
165
4,571
6,733
4,354
29,672
160,560
43,967
41,945
11,649
19,602
215
-
31,466
3,192
4,744
97
370
8,403
2,656
7,230
463
385
10,734
111,120
111,120
30,929
30,929
23,371
23,371
142,586
39,332
34,105
17,974
4,635
7,840
37,649
5,998
(26,197)
17,450
524
18,421
1,184
(14,970)
4,635
-
16,555
1,113
(9,828)
7,840
-
17,974
4,635
7,840
All amounts presented in respect of prior years have been restated to reflect the change in presentation currency as explained in the accounting policies.
The above statement of financial position should be read in conjunction with the accompanying notes
21
LawFinance Limited (formerly JustKapital Limited)
Statement of changes in equity
For the period ended 31 December 2018
Consolidated
Issued
capital
US$'000
Reserves
US$'000
Accumulated
losses
US$'000
Non-
controlling
interest
US$'000
Total equity
US$'000
Balance at 1 July 2017
16,555
1,113
(9,828)
Loss after income tax benefit for the year
Other comprehensive loss for the year, net of
tax
Total comprehensive loss for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
(note 20)
Share-based payments
-
-
-
-
(5,142)
(152)
-
(152)
(5,142)
1,866
-
-
223
-
-
Balance at 30 June 2018
18,421
1,184
(14,970)
-
-
-
-
-
-
-
7,840
(5,142)
(152)
(5,294)
1,866
223
4,635
Consolidated
Issued
capital
US$'000
Reserves
US$'000
Accumulated
losses
US$'000
Non-
controlling
interest
US$'000
Total equity
US$'000
Balance at 1 July 2018
18,421
1,184
(14,970)
-
4,635
Loss after income tax benefit for the period
Other comprehensive income for the period,
net of tax
Total comprehensive income/(loss) for the
period
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
(note 20)
Acquisition of non-controlling interests (note
31)
Distributions to NCI
Share-based payments
-
-
-
-
(11,227)
(200)
(11,427)
559
-
-
559
559
(11,227)
(200)
(10,868)
19,228
-
-
-
-
-
-
4,255
-
-
-
-
-
19,228
903
(179)
-
903
(179)
4,255
Balance at 31 December 2018
37,649
5,998
(26,197)
524
17,974
All amounts presented in respect of prior years have been restated to reflect the change in presentation currency as explained in the accounting policies.
The above statement of changes in equity should be read in conjunction with the accompanying notes
22
LawFinance Limited (formerly JustKapital Limited)
Statement of cash flows
For the period ended 31 December 2018
Cash flows from operating activities
Cash collections from customers (inclusive of GST)
Payments to suppliers and employees
Interest received
Consolidated
6 months
31 December
2018
12 months
30 June
2018
US$'000
US$'000
Note
10,674
(4,632)
72
9,537
(6,369)
237
Net cash from operating activities
33
6,114
3,405
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Payments for property, plant and equipment
Payments for joint venture capital invested
Receipts/(payments) for other intangibles (net of co-funders contributions)
Net proceeds from realisation of investments (case settlements)
Payments for disbursement reports and medical liens
Loans from other entities
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Proceeds from borrowings - disbursement funding division
Proceeds from borrowings - medical lien funding division
Proceeds from borrowings - corporate
Repayment of borrowings - disbursement funding division
Repayment of borrowings - medical lien funding division
Repayment of borrowings - corporate
Interest and fees related to loans and borrowings
Net cash from financing activities
31
15
20
34
34
34
34
34
34
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial period
9
(27,520)
(158)
-
901
1,348
(9,600)
30,546
-
(21)
(26)
(4,916)
2,105
(9,321)
-
(4,483)
(12,179)
5,093
(55)
5,919
4,912
438
(3,840)
(4,697)
(1,988)
(4,954)
1,910
(147)
10,662
-
3,181
(7,677)
-
(35)
(3,717)
828
4,177
2,459
934
303
3,696
(4,597)
5,867
(336)
934
All amounts presented in respect of prior years have been restated to reflect the change in presentation currency as explained in the accounting policies.
The above statement of cash flows should be read in conjunction with the accompanying notes
23
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 1. General information
The financial statements cover LawFinance Limited (formerly JustKapital Limited) as a Group consisting of LawFinance
Limited ('Company' or 'parent entity') and the entities it controlled ('the Group') at the end of, or during, the period.
The Group changed its financial year end from 30 June to 31 December in order to synchronise its financial year with that of
its US subsidiaries. The financial statements have been prepared for the 6 months ended 31 December 2018. The
comparative accounting period is for the 12 months ended 30 June 2018, therefore the results are not directly comparable.
LawFinance Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office
and principal place of business is:
Level 16
56 Pitt Street
Sydney NSW 2000
A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is
not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 29 March 2019.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are consistent with those of the
previous financial year. These policies have been consistently applied to all the periods presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these Accounting
Standards and Interpretations did not have any significant impact on the financial performance or position of the Group.
Australian Accounting Standards AASB 9 ‘Financial Instruments’ and AASB 15 'Revenue from Contracts with Customers'
(and their related amendments) which were mandatorily effective for annual periods commencing on or after 1 January 2018
were early adopted by the Group effective from 1 July 2017.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate
for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, modified where appropriate, by the
measurement at fair value of selected non-current assets, financial assets and financial liabilities.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Presentation currency
During the period, the Group changed the currency in which it presents its financial statements from Australian dollars to US
dollars ('US$' or '$'), in order to better reflect the majority of the Group's revenues and operating expenses which are expected
to be denominated in US dollars.
A change in presentation currency is a change in accounting policy which is accounted for retrospectively. Statutory financial
information included in the Group’s Annual Report for the year ended 30 June 2018 previously reported in Australian dollars
has been restated into US dollars using the procedures outlined below:
24
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
●
●
●
assets and liabilities denominated in non-US dollar currencies were translated into US dollars at the closing rates of
exchange on the relevant statement of financial position date (31 December 2018: $0.7058, 30 June 2018: $0.7391);
non-US dollar income and expenditure were translated at the monthly average rates of exchange prevailing for the
relevant period; and
issued capital was translated at historic rates.
Going concern
As at 31 December 2018 the Group had net current assets of $2,180,000 (30 June 2018: $1,572,000). The directors’ have
evaluated the Group’s principal operations and expected events and conditions and concluded that the Group will be able to
continue as a going concern. The Group does not hold significant cash reserves. However, the directors’ assessment of the
significant judgments made by management, including expected cash collections from the medical lien funding business;
expected cash collections from the disbursement funding business; and expected case completions from the litigation funding
portfolio, as part of the Group’s financial planning processes, has formed part of this assessment.
The directors’ have also noted that the Group’s facility providers have historically provided repayment extensions to the
Group as required, due to the lumpy nature of the Group’s litigation funding receipts. Although facilities are due to be repaid
within 12 months, the litigation portfolio is also expected to mature in that time frame, which is expected to generate sufficient
returns to meet these obligations. Should there be delays in receiving settlement proceeds from the litigation funding
business, the directors expect to be able to secure favourable extension terms from the Group’s financiers in relation to these
maturing facilities.
If, which is not expected, the completions of the litigation funding cases do not resolve favourable, the Group will be required
to seek additional capital, either by way of additional facilities or equity. Again given the historical ability for the Group to raise
such funds, the directors expect to be able to raise this additional capital if it is required. As such, no adjustment is required
to the carrying value of the assets or liabilities of the Group to reflect the situation if the Group were not a going concern.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 30.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of LawFinance Limited as at 31
December 2018 and the results of all subsidiaries for the period then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses
incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises
the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in
profit or loss.
25
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same basis
as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation
of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in United States dollars, which is LawFinance Limited's presentation currency. The
functional currency of the Group's Australian operations is Australian dollars and that of its United States operations is United
States dollars.
Foreign currency transactions
Foreign currency transactions are translated into United States dollars using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into United States dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into United States dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
The Group elected to apply AASB 15 'Revenue from Contracts with Customers' on a full retrospective basis as permitted by
this standard as if it had been applied since the inception of all its contracts with customers that are presented in the financial
statements. The cumulative effect of retrospective application was recognised as an adjustment to the opening accumulated
losses or other relevant components of equity as at 1 July 2016.
In the Australian disbursement funding business, the Group enters into contracts with law firms to pay, on the law firms’
behalf, legal disbursements to progress their clients’ claims. These disbursements include as independent expert reports
and medico-legal reports relating to the client’s injuries.
In the US medical lien funding business, the Group purchases a lien or obtains a letter of protection over the medical
receivables associated with the personal injury cases from health care providers and hospitals.
Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled
in exchange for transferring goods or services to a customer. The standard defines a customer as ‘a party that has contracted
with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration’.
Management had undertaken an exercise to assess the Group’s contractual arrangements within its disbursement funding
business and medical lien funding business as part of its implementation of AASB 15. The primary factor considered in
making this assessment was most notably whether the Group is contractually engaged to provide or deliver a good or service
to the law firm.
As a result of this assessment, the Group determined that it does not take primary responsibility and does not have any
obligation for the supply or accuracy of the underlying expert reports funded by the Group’s Australian disbursement funding
business. The Group solely enters into a contract with the law firm to provide financing for legal disbursements in relation to
their clients’ legal matters. Considering the nature of the disbursement funding arrangements whereby it does not involve the
provision of any good or service to the law firm, the Group had concluded that the arrangement does not meet the definition
of a contract with a customer under AASB 15.
Further, the Group does not take primary responsibility for the actual medical treatment in the United States nor is it obliged
to purchase any medical lien. The Group solely enters into a contract with the medical provider to provide financing for that
individual medical treatment and takes a lien over the invoice from the medical provider and notifies the law firm of that
medical lien. Considering this arrangement does not involve the provision of any good or service to the law firm, the Group
had concluded that the arrangement does not meet the definition of a contract with a customer under AASB 15.
26
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
As both arrangements give rise to a contractual right to receive cash from the law firm, the Group has concluded that the
financing arrangements, both in the US and Australia, meets the definition of a financial instrument. Income arising from
changes in the fair value of financial instruments is within the scope of AASB 9 'Financial Instruments'. In applying AASB 9,
given the final financial outcome of the provision of the financing arrangement is variable, that is the final amount to be
received by the Group is conditional upon the decisions of either the relevant Court or the Insurer to the counterparty for
whom the financial arrangement has been sought, the financial arrangement has been treated on a fair value through profit
or loss basis.
The Group recognises revenue as follows:
Revenue
Revenue is measured at the fair value of the gross consideration received or receivable. The Group recognises revenue
when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and
specific criteria have been met for each of Group’s activities. The amount of revenue is not considered to be reliably
measurable until all material contingencies relating to the sale have been resolved. The Group bases its estimates on
historical results, taking into consideration the type of customer, the type of transaction and the specifics of each
arrangement.
The Group’s revenue recognition policy for the disbursement funding business takes into consideration the inherent finance
component embedded in that revenue. Refer to the 'financial instruments' policy.
The Group’s revenue recognition policy for the medical lien funding business takes into consideration the inherent finance
component embedded in that revenue. Refer to the 'financial instruments' policy.
The Group’s revenue recognition policy for the short-term loan product is to recognise the interest component attaching to
the loan as it is earned under the short-term loan contract.
The Group’s revenue recognition policy for the Insurance broking division recognises revenue upon the acceptance of the
insurance policy by the customer.
For revenue recognition of litigation contracts, refer to 'intangible assets' accounting policy below.
Rent
Rent revenue is recognised on a straight-line basis over the lease term. Lease incentives granted are recognised as part of
the rental revenue.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
●
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
27
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on
either the same taxable entity or different taxable entities which intend to settle simultaneously.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's
normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
Loan receivables at fair value through profit or loss
Initial recognition and measurement
The Group’s financial assets at fair value through profit or loss relates to the loan receivables arising from its disbursement
funding business and medical lien funding business. The Group’s loan receivables from these funding businesses are
classified, at initial recognition, as financial assets at fair value through profit or loss. The determination is made at initial
recognition based on the Group’s business model for managing its financial instruments and the non-contractual cash flow
characteristics of its instruments.
The Group’s financial asset at fair value through profit or loss is recognised initially at fair value. The best evidence of fair
value of a financial instrument at initial recognition is normally the transaction price (i.e. the fair value of the consideration
given or received). In the case of a legal disbursement funding arrangement or medical lien funding arrangement, the fair
value of the loan receivable at initial recognition may differ from the transaction price.
The fair value of the financial asset represents the invoice amount (where the final amount to be received by the Group is
subject to change and conditional upon the outcome of decisions made by the relevant Court or the Insurer), adjusted for
such factors as time value of money, discounts and write offs, and credit risk. The transaction price of the financial asset is
the amount of cash paid to fund the legal disbursement costs.
No active market exists for these loans. The difference between the fair value and the transaction price (also known as day
1 margin) is deferred and the Group recognises the deferred difference as a gain or loss only to the extent that it arises from
a change in a factor (including time) that market participants would take into account when pricing the asset.
28
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
Subsequent measurement
Loan receivables are carried in the statement of financial position at fair value, with changes in fair value presented in the
statement of profit or loss as net gains or losses on loan receivables at fair value. The net gains or losses are calculated
based on actuarial assumptions including information on changes to actual and expected write offs, discounts and collections
of loan receivables, as well as interest margin, taking into account the time value of money, credit risk, and the amortisation
of day 1 margins.
The deferred day 1 margin is recognised in the profit or loss on a systematic basis over the term of the arrangement using
actuarial methodologies. It is based on the profile of cash collections and the subsequent weighted average calculation of
these collections applied to the recognition of the day 1 margin.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily
derecognised (i.e. removed from the Group’s consolidated statement of financial position) when the contractual rights to
receive cash flows from the loan receivables have expired.
Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
When a Group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to
its interest in a joint operation:
●
●
●
●
●
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance
with the relevant Accounting Standard applicable to the particular assets, liabilities, revenues and expenses.
Trade and other receivables
Trade receivables, other than loan receivables from its disbursement funding business and medical lien funding business
mentioned previously in the Financial instruments note, are initially recognised at fair value and subsequently measured at
amortised cost using the effective interest method, less any allowance for expected credit losses.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment over
their expected useful lives as follows:
Plant and equipment
3-7 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
29
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis
over the term of the lease.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at
the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising
from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying
amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in
the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or
period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment,
or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Customer relationships
As part of the acquisition of NHF a portion of the business consideration was applied to the value of existing long-standing
customer relationships. This value will be amortised over a 10-year period.
Website
Significant costs associated with the development of the revenue generating aspects of the website, including the capacity
of placing orders, are deferred and amortised on a straight-line basis over the period of their expected benefit, being their
useful life of 3 years.
Litigation contracts in progress
Litigation contracts in progress represent future economic benefits controlled by the Group. As Litigation contracts in progress
may be exchanged or sold, the Group is able to control the expected future economic benefit flowing from the Litigation
contracts in progress. Accordingly, Litigation contracts in progress meet the definition of intangible assets. The carrying value
of Litigation contracts in progress includes the capitalisation of external costs of funding the litigation, such as solicitors’ fees,
counsels’ fees and experts’ fees, the capitalisation of certain directly attributable internal costs of managing the litigation,
such as certain wages and other out of pocket expenses. Litigation contracts in progress are not amortised as the assets are
not available-for-use until the determination of a successful judgement or settlement, at which point the assets are realised,
and revenue is recognised.
The following specific asset recognition rules have been applied to Litigation contracts in progress:
Actions still outstanding: When litigation is outstanding and pending a determination, Litigation contracts in progress are
carried at cost. Subsequent expenditure is capitalised when it meets all of the following criteria:
●
Demonstration of ability of the Group to complete the litigation so that the asset will be available-for-use and the benefits
embodied in the asset will be realised;
Demonstration that the asset will generate future economic benefits;
Demonstration that the Group intends to complete the litigation;
Demonstration of the availability of adequate technical, financial and other resources to complete the litigation; and
Ability to measure reliably the expenditure attributable to the asset during the Litigation contract in progress.
●
●
●
●
30
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
Successful judgements: Where the litigation has been determined in favour of the Group or a positive settlement has been
agreed, this constitutes a derecognition of the intangible asset and accordingly a gain or loss is recognised in profit or loss.
Any future costs relating to the defence of an appeal by the defendant are expensed as incurred.
Unsuccessful judgement: Where the litigation is unsuccessful at trial, this is a trigger for impairment of the intangible asset
and the asset is written down to its recoverable amount. If the claimant, having been unsuccessful at trial appeals against
the judgement, then future costs incurred by the Group on appeal are expensed as incurred.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-
financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period and
which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts
are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Convertible bonds are redeemable at the discretion of the Group and are classified as a liability in the statement of financial
position due to the operability of the convertible bond’s anti-dilution clauses. As the convertible bonds include a conversion
feature the convertible bonds are considered to represent a liability with an equity conversion option derivative. The
conversion feature has been fair valued separately and on initial recognition and deducted from the value of the convertible
bonds. The derivative is subsequently measured at fair valued at each reporting date and any movement in fair value is
accounted for in profit or loss. The convertible bonds liability is recorded at amortised cost and interest is accreted to the face
value of the convertible bonds over the term of the convertible bond.
Finance costs
All other finance costs are expensed in the period in which they are incurred.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted using market yields at the reporting date on high quality
corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Equity-settled share-based compensation benefits are provided to employees and directors.
31
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees and directors in
exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution,
the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk
free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group
receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period,
any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, they are treated as if they had vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair
value is based on 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; and assumes that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and
best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure
fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers
between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value
measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where
applicable, with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
32
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit
or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or
accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the
acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest
in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the
acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value
of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly
in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement
of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's
previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new
information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends
on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information
possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of LawFinance Limited, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial period, adjusted for bonus elements in ordinary shares issued during the financial period.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
33
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 2. Significant accounting policies (continued)
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Comparatives
Comparatives have been realigned where necessary, to agree with current year presentation.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the Group for the annual reporting period ended 31 December 2018. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset and lease liability are recognised at the commencement of the lease. The right-of-use asset is
recognised at an amount that is equivalent to the initial measurement of the lease liability, adjusted for lease prepayments,
lease incentives received, initial direct costs incurred, and an estimate of any future restoration, removal or dismantling costs.
The lease liability is recognised at the present value of future lease payments comprising fixed lease payments less
incentives, variable lease payments, residual guarantees payable, payment of purchase options where exercise is
reasonably certain, and any anticipated termination penalties. The lease payments are discounted at the rate implicit in the
lease, or where not readily determinable, the entity’s incremental borrowing rate. The exceptions relate to short-term leases
of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or
loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a
principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the
standard does not substantially change how a lessor accounts for leases. The Group will adopt this standard from 1 January
2019. There is expected to be an accounting impact, but management are yet quantify the impact of its adoption on the
Group.
IASB revised Conceptual Framework for Financial Reporting
The revised Conceptual Framework has been issued by the International Accounting Standards Board ('IASB'), but the
Australian equivalent has yet to be published. The revised framework is applicable for annual reporting periods beginning on
or after 1 January 2020 and the application of the new definition and recognition criteria may result in future amendments to
several accounting standards. Furthermore, entities who rely on the conceptual framework in determining their accounting
policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting Standards may
need to revisit such policies. The Group will apply the revised conceptual framework from 1 January 2020 and is yet to
assess its impact.
Other amending accounting standards
Other amending accounting standards issued are not considered to have a significant impact on the financial statements of
the company as their amendments provide either clarification of existing accounting treatment or editorial amendments.
34
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Fair value measurement and carrying value measurement of loan receivables
When the fair values of loan receivables recorded in the statement of financial position cannot be measured based on quoted
prices in active markets, their fair value is measured using actuarial valuation techniques that take into account discount
rates, credit risk and analysis of discounts and write offs. The inputs to these models are taken from observable markets
where possible, but where this is not feasible, a degree of judgement is required in establishing fair values and the deferred
day 1 margin. Changes in assumptions relating to these factors could affect the reported fair value and carrying value of loan
receivables and its fair value movement through profit or loss.
The key assumptions used to determine the fair value of the loan receivables are provided in note 24.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into
account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions
relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within
the next annual reporting period but may impact profit or loss and equity.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the
lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit
loss rate for each group. These assumptions include recent sales experience and historical collection rates.
Goodwill
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
has suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-
generating units have been determined based on value-in-use calculations. These calculations require the use of
assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future
cash flows (refer to note 14).
Impairment of non-financial assets other than goodwill
The Group assesses impairment of non-financial assets other than goodwill at each reporting date by evaluating conditions
specific to the Group and to the particular asset that may lead to impairment. This includes an assessment of each individual
Litigation contract in progress as to whether it is likely to be successful, the cost and timing of future expected cash flows to
completion and the ability of the defendant(s) to pay upon successful completion. If an impairment trigger exists, the
recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations,
which incorporate a number of key estimates and assumptions (refer to note 15).
Provision for adverse costs
In the event that litigation funded by the Group is unsuccessful, the Group raises a provision which is based upon the Group’s
best estimate of the amount of the adverse costs it will have to remit following consultation with external advisors.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining
the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business
for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based
on the Group's current understanding of the tax law. Where the final tax outcome of these matters is different from the
carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such
determination is made.
35
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Note 4. Operating segments
Identification of reportable operating segments
Since the purchase of National Health Finance Holdco, LLC and its subsidiaries, the Group has been organised into three
operating segments: (i) JustKapital Finance, comprising the Australian disbursement funding business and short-term
funding, (ii) National Health Finance, comprising the US medical lien funding business and (iii) all other operations including
litigation funding and head office costs.
Prior to this, the Group was organised into two operating segments: (i) JustKapital Finance, comprising disbursement funding
and short-term funding and (ii) litigation funding, insurance and head office.
These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are
identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of
resources.
Operating segment information
Consolidated - 6 months - 31 December 2018
Revenue
Net income from disbursement funding/medical lien funding
Other revenue
Total revenue
Other income
Total revenue
Segment result
Depreciation and amortisation
Finance costs
Profit/(loss) before income tax benefit
Income tax benefit
Loss after income tax benefit
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
JustKapital
Finance
US$'000
National
Health
Finance
US$'000
Other
Total
US$'000
US$'000
2,008
94
2,102
-
2,102
1,185
(25)
(1,064)
96
141
-
141
600
741
(945)
(6)
(1,914)
(2,865)
-
98
98
1,734
1,832
(8,656)
(51)
(2,355)
(11,062)
26,477
118,175
15,908
21,253
61,158
60,175
2,149
192
2,341
2,334
4,675
(8,416)
(82)
(5,333)
(13,831)
2,404
(11,427)
160,560
160,560
142,586
142,586
36
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 4. Operating segments (continued)
Consolidated - 12 months - 30 June 2018
Revenue
Net income from disbursement funding
Other revenue
Total revenue
Other income
Total revenue
Segment result
Depreciation and amortisation
Finance costs
Profit/(loss) before income tax benefit
Income tax benefit
Loss after income tax benefit
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Litigation
funding,
insurance and
head office
US$'000
Total
US$'000
JustKapital
Finance
US$'000
4,017
394
4,411
1
4,412
2,857
(51)
(2,224)
582
-
47
47
1,459
1,506
(4,373)
(27)
(1,791)
(6,191)
26,132
17,835
20,857
18,475
4,017
441
4,458
1,460
5,918
(1,516)
(78)
(4,015)
(5,609)
467
(5,142)
43,967
43,967
39,332
39,332
Segment assets
Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of
economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their
nature and physical location.
Segment liabilities
Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations
of the segment. Accordingly, all liabilities are allocated based on the operations of the segment.
Revenue from external
customers
Geographical non-current
assets
6 months
31 December
2018
12 months
30 June
2018
31 December
2018
30 June
2018
Australia
United States
US$'000
US$'000
US$'000
US$'000
2,200
141
4,458
-
12,279
38,408
16,717
-
2,341
4,458
50,687
16,717
The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets,
post-employment benefits assets and rights under insurance contracts.
37
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 5. Other revenue
Interest received – short-term lending
Brokerage commission received – insurance
Rental income - office sub-lease
Other revenue
Note 6. Other income
Litigation contracts in progress – settlements and judgements
Litigation contracts in progress – expenses
Interest income
Other income
Consolidated
6 months
31 December
2018
12 months
30 June
2018
US$'000
US$'000
94
33
65
192
394
47
-
441
Consolidated
6 months
31 December
2018
12 months
30 June
2018
US$'000
US$'000
4,475
(2,744)
13
2,557
(1,103)
6
1,744
1,460
38
Consolidated
6 months
31 December
2018
12 months
30 June
2018
US$'000
US$'000
34
27
1,666
61
223
1,734
1,727
2,018
80
2
82
135
98
752
925
273
119
251
70
8
78
56
46
853
-
341
103
231
2,553
1,630
5,333
4,015
2,612
3,156
2,804
-
5,768
2,804
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 7. Expenses
Loss before income tax includes the following specific expenses:
Employee benefits expense
Defined contribution superannuation expense
Share-based payments expense
Employee benefits expense excluding superannuation
Depreciation and amortisation
Depreciation (note 13)
Amortisation (note 15)
Administration and other expenses
ASIC, ASX and share registry fees
Insurance
Legal and professional fees
Write-off of acquisition costs of litigation assets
Rent and office costs
Travel and accommodation
Other
Finance costs and expenses
Interest expense and line fees
Business purchase/selling expenses
Legal and professional fees
Warrant costs
39
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 8. Income tax
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Expenses not deductible
Share-based payments
Bad debts
Adjustment recognised for prior periods
Difference in overseas tax rates
Income tax benefit
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Tax losses
Property, plant and equipment
Other temporary differences
Loans and other receivables
Set off deferred tax liability
Deferred tax asset
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Property, plant and equipment
Intangibles
Loan and other receivables
Prepayments
Work in progress
Set off deferred tax asset
Deferred tax liability
40
Consolidated
6 months
31 December
2018
12 months
30 June
2018
US$'000
US$'000
(13,831)
(5,609)
(3,804)
(1,542)
481
855
80
1
(2,387)
(17)
660
50
-
365
(467)
-
(2,404)
(467)
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
4,866
-
1,317
2,559
(1,953)
4,352
2
1,283
2,342
(3,349)
6,789
4,630
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
2
124
-
2
1,825
(1,953)
-
4
1,735
-
1,610
(3,349)
-
-
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 8. Income tax (continued)
The deferred tax assets will only be obtained if:
i) Future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
ii) The conditions for deductibility imposed by tax legislation continue to be complied with; and
iii) No changes in tax legislation adversely affect the consolidated entity in realising the benefit.
Note 9. Current assets - cash and cash equivalents
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
Cash at bank and on hand
3,696
934
Short-term cash deposits are used as bank guarantee security. Refer to note 27.
Note 10. Current assets - loan and other receivables
Loan receivables - disbursement funding/medical lien funding (gross)
Fair value movement
Unrecognised day 1 margin
Other trade receivables
Short-term loans
Other receivables
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
56,707
(27,264)
(1,983)
27,460
180
488
668
10,920
(2,281)
(1,306)
7,333
373
888
1,261
1,755
365
29,883
8,959
Loan receivables are dependent upon a decision in the related matter by the Court or the insurance company if a case is
settled. The loan receivables disclosed above are neither past due nor impaired.
Other receivables include amounts due to the Group from a completion of a case and its joint venture partner for its share of
investments made in co-funded cases.
41
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 11. Non-current assets - loan and other receivables
Loan receivables - disbursement funding/medical lien funding (gross)
Fair value movement
Unrecognised day 1 margin
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
148,541
(76,612)
(2,491)
18,646
(3,894)
(2,107)
69,438
12,645
Loan receivables are dependent upon a decision in the related matter by the Court or the insurance company if a case is
settled. The loan receivables disclosed above are neither past due nor impaired.
Note 12. Non-current assets - investment held in joint operations
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
Investment held in joint operation
1,166
1,221
The Group has a material joint operation with Longford Capital Management LP ('Longford Capital') where the Group co-
invests with Longford Capital in litigation funding. The joint operation is funding one case in the United States on a 50:50
basis. The Group is entitled to its proportionate share of the Litigation contracts in progress income received and bears a
proportionate share of the joint operation’s investment in cases.
Note 13. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
57
(57)
-
345
(147)
198
198
43
(15)
28
211
(134)
77
105
42
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 13. Non-current assets - property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial period are set out
below:
Consolidated
Balance at 1 July 2017
Additions
Exchange differences
Depreciation expense
Balance at 30 June 2018
Additions
Additions through business combinations (note 31)
Exchange differences
Depreciation expense
Balance at 31 December 2018
Note 14. Non-current assets - goodwill
Goodwill - Australian disbursement funding business
Goodwill - US medical lien funding business (note 31)
Leasehold
improvements
US$'000
Plant and
equipment
US$'000
Total
US$'000
37
-
-
(9)
28
17
-
(1)
(44)
-
122
18
(2)
(61)
77
3
157
(3)
(36)
198
159
18
(2)
(70)
105
20
157
(4)
(80)
198
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
4,194
36,345
4,392
-
40,539
4,392
Goodwill - Australian disbursement funding business
Goodwill arose from the acquisition of the Macquarie Medico Legal business in 2016 and is allocated to the Australian
operating division ('AOD'). The Group performed its annual impairment test at the reporting date. The Group considers the
relationship between its market value, among other factors when assessing impairment. The recoverable amount of the
Australian disbursement funding business has been determined based upon a value-in-use calculation using cash flow
projections from financial budgets approved by management covering a five-year period. The pre-tax discount rate applied
to the cash flow projections was 15% (30 June 2018: 14%) and cash flows beyond the five-year period are extrapolated
using a 1% (30 June 2018: 1%) growth rate. It was concluded that the recoverable amount did not exceed its value-in-use.
Key assumptions used in value-in-use calculations and sensitivity to changes in assumptions
The calculation of value-in-use for the JustKapital Financing is most sensitive to the following assumptions:
●
●
Discount rates; and
Growth rate estimates.
43
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 14. Non-current assets - goodwill (continued)
Discount rates
Discount rates represent the current market assessment of the risks specific to the business unit, taking into consideration
the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow
estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and
is derived from its weighted average cost of capital ('WACC'). The WACC takes into account both debt and equity. The cost
of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the interest-
bearing borrowings the Group is obliged to service. Segment-specific risk is incorporated by applying individual beta factors.
The beta factors are evaluated annually based on publicly available market data. Adjustments to the discount rate are made
to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate. A rise in the pre-
tax discount rate to 20% (30 June 2018: 20%) would result in goodwill being impaired.
Growth rate estimates
Rates are based on management’s estimates. Management recognises that the possibility of new entrants can have a
significant impact on growth rate assumptions, however, given this is a relatively new industry, the effect of new entrants is
not expected to have an adverse impact on the forecasts. A reduction to negative 4% (30 June 2018: negative 2%) in the
long-term growth rate would result in goodwill being impaired.
Goodwill – US medical lien funding business
Goodwill arose from the acquisition of the National Health Finance business in September 2018 with an effective date of
control of 1 October 2018 and is allocated to the US operating division ('USOD'). The Group performed its annual impairment
test at the reporting date. The Group considers the relationship between its market value, among other factors when
assessing impairment. The recoverable amount of the US medical lien funding business has been determined based upon
a value-in-use calculation using cash flow projections from financial budgets approved by management covering a five-year
period. The pre-tax discount rate applied to the cash flow projections was 15% (30 June 2018: N/A) and cash flows beyond
the five-year period are extrapolated using a 1% (30 June 2018: N/A) growth rate. It was concluded that the recoverable
amount did not exceed its value-in-use.
Key assumptions used in value-in-use calculations and sensitivity to changes in assumptions
The calculation of value-in-use for the National Health Finance business is most sensitive to the following assumptions:
●
●
Discount rates; and
Growth rate estimates.
Discount rates
Discount rates represent the current market assessment of the risks specific to the business unit, taking into consideration
the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow
estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and
is derived from its weighted average cost of capital ('WACC'). The WACC takes into account both debt and equity. The cost
of equity is derived from the expected return on investment by the Group's investors. The cost of the debt is based on the
interest-bearing borrowings the Group is obliged to service. Segment-specific risk is incorporated by applying individual beta
factors. The beta factors are evaluated annually based on publicly available market data. Adjustments to the discount rate
are made to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate. A rise
in the pre-tax discount rate to 24% (30 June 2018: N/A) would result in goodwill being impaired.
Growth rate estimates
Rates are based on management's estimates. Management recognises that the possibility of new entrants can have a
significant impact on growth rate assumptions, however, given this is a relatively new industry, the effect of new entrants is
not expected to have an adverse impact on the forecasts.
44
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 15. Non-current assets - other intangibles
Website - at cost
Less: Accumulated amortisation
Customer relationships – US medical lien funding business
Litigation contracts in progress - capitalised external costs
Litigation contracts in progress - capitalised internal costs
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
17
(10)
7
1,913
6,314
550
6,864
13
(8)
5
-
10,237
757
10,994
8,784
10,999
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial period are set out
below:
Consolidated
Balance at 1 July 2017
Additions
Disposals
Exchange differences
Amortisation expense
Balance at 30 June 2018
Additions
Disposals
Exchange differences
Amortisation expense
Balance at 31 December 2018
Customer
relationships
US$'000
Litigation
contracts in
progress
US$'000
Total
US$'000
Website
US$'000
13
-
-
-
(8)
5
4
-
-
(2)
7
-
-
-
-
-
-
1,913
-
-
-
6,722
5,285
(750)
(263)
-
10,994
3,429
(5,914)
(1,645)
-
6,735
5,285
(750)
(263)
(8)
10,999
5,346
(5,914)
(1,645)
(2)
1,913
6,864
8,784
The recoverable amount of each Litigation contract in progress is determined based upon a value-in-use calculation using
cash flow projections based upon financial budgets approved by management.
Key assumptions used in value in use calculations and sensitivity to changes in assumptions
The following describes each key assumption on which management has based its cash flow projections when determining
the value-in-use of Litigation contracts in progress:
(i)
The estimated cost to complete the Litigation contracts in progress is budgeted, based upon estimates provided by
the external legal advisor in charge of the litigation;
The value of the Litigation contracts in progress, once completed, is estimated based upon the expected settlement
or judgement amount of the litigation and the fees due to the Group under the litigation funding contract; and
The discount rate applied to the cash flow projections is based on the Group’s WACC; and other factors relevant to
the particular Litigation contract in progress. The discount rate applied was 15.0% (30 June 2018: 13.5%).
(ii)
(iii)
As a result of the impairment testing performed an amount of $2,528,000 was determined to be impaired and was written off
during the period. No significant change in the key assumptions would result in any additional impairment charge.
45
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 16. Current liabilities - trade and other payables
Trade and other payables
Accruals
Goods and services tax payable
Trade and other payables are paid within the agreed credit terms.
Refer to note 23 for further information on financial instruments.
Note 17. Current liabilities - borrowings
Vendor loan - Australian disbursement funding business (i)
Convertible bonds payable (ii)
Lucerne Group combined loan (iii)
Lucerne Group facility - US medical lien funding business (iv)
Lockton insurance financing
Credit cards
Other NHF subordinated debt (v)
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
7,556
3,992
101
1,936
1,133
123
11,649
3,192
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
824
3,529
8,548
5,238
49
414
1,000
1,048
3,696
-
-
-
-
-
19,602
4,744
Refer to note 23 for further information on financial instruments.
(i) Vendor loan - Australian disbursement funding business
The loan due to the vendor of the Australian disbursement funding business was repayable on 22 January 2019. Interest is
payable at 7.5% (30 June 2018: 7.5%) per annum. The Group has received verbal agreement to extend the facility to 30
June 2019 and is currently documenting that extension. The loan is unsecured. The Vendor may convert the outstanding
loan amount to ordinary shares of the Company at a conversion price of A$0.14 per share.
(ii) Convertible bonds payable
On 15 July 2016, the Company issued 50,000 convertible bonds, each with a face value of A$100. The total consideration
received from the convertible bonds was $3,695,500 (A$5,000,000). During the financial year, the bonds maturity date was
extended to 29 November 2019. Interest payments are cumulative and payable at 11.5% per annum, quarterly in arrears.
The bonds are convertible into ordinary shares of the Company at the option of the holder prior to their maturity. The holder
can elect to convert prior to maturity date by providing notice only after the Company’s next annual general meeting. The
conversion price, if such an election is made, is A$0.30 per ordinary share, or 80% of the issue price of any future equity
issued should the issue price be lower than A$0.30 per ordinary share. The Company undertook a capital raising in November
2018 at A$0.08 per share. As a result of that capital raising the conversion price of the convertible bonds is now A$0.064 per
ordinary share.
The Company has a right to redeem the bonds earlier than their maturity date at a 10% premium to face value. With the
agreement of the Company, the bond holders may partially or fully apply the redemption amount to subscribe for ordinary
shares at a price that represents a 10% discount to a 5-day volume weighted average price ('VWAP') determined by the
holder within the previous 90 days.
46
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 17. Current liabilities - borrowings (continued)
The convertible bonds are categorised as a liability in the statement of financial position due to the terms of the anti-dilution
clauses. Due to the conversion feature the convertible bonds are considered to include a derivative liability. As such the
convertible bonds are considered to represent a liability with an equity conversion option derivative with the entire instrument
being accounted for at fair value through profit or loss.
The facility is subject to a number of covenants. A breach of a covenant may require the Group to repay the bond earlier. No
covenants have been breached as at 31 December 2018.
(iii) Lucerne Group combined loan
The Lucerne Finance Pty Limited short-term loan facility and the Lucerne Composite Master Fund loan facility were
amalgamated during the year ended 30 June 2018 to become the Lucerne Group combined loan. The loan is repayable on
31 December 2019. Ongoing interest payable is 13.5% per annum (30 June 2018: 16.75% per annum (including
establishment fees). The loan is unsecured. During the period the Lucerne Group assigned a portion of this loan to third
parties on the same terms and conditions noted.
The facility is subject to a number of covenants. A breach of a covenant may require the Group to repay the loan earlier. No
covenants have been breached as at 31 December 2018.
(iv) Lucerne Group facility - US medical lien funding business
Lucerne Finance Pty Limited and the Principis Master Fund have jointly provided facilities totalling $5,238,000 to the medical
lien funding business in the US as at 31 December 2018 (30 June 2018: $N/A). The facilities are repayable on 28 September
2019. Interest is payable at 15% per annum with a step up to 19% per annum from 1 April 2019 should the loan remain
outstanding at that time. The loan is unsecured.
(v) Other NHF subordinated debt
A third party has provided a $1,000,000 facility to NHF which remains payable as at 31 December 2018 (30 June 2018:
$N/A). The facilities are repayable on demand. Interest is payable at 12% per annum. The loan is unsecured.
Note 18. Current liabilities - deferred consideration
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
Deferred consideration
-
370
Deferred consideration relates to the acquisition of the litigation funding portfolio and is payable on the successful resolution
of one of the cases within the portfolio.
Note 19. Non-current liabilities - borrowings
Assetsecure Pty Limited loan (i)
Atalaya Capital Management (ii)
NHF Founder Promissory Notes (iii)
Lucerne Group combined loan
Syndicated acquisition facility (iv)
Vendor loan - NHF Founders (v)
47
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
20,028
39,902
9,000
-
29,644
12,546
18,844
-
-
12,085
-
-
111,120
30,929
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 19. Non-current liabilities - borrowings (continued)
Refer to note 23 for further information on financial instruments.
(i) Assetsecure Pty Limited ('Assetsecure')
The loan facility of $24,703,000 (A$35,000,000) (30 June 2018: $25,869,000) (A$35,000,000) is available to fund the
Australian disbursement funding business operated by JustKapital Financing Pty Limited. It expires on 30 September 2020.
This loan is classified as non-current in the current financial period. However, it is repayable on demand if loan covenants
are breached and not rectified. Interest and management fees payable total 7.95% per annum on the drawn down amounts
(30 June 2018: 7.95% per annum) and the undrawn line fees are 1%.
The facility is subject to a number of covenants. A breach of a covenants may require the Group to repay the loan earlier.
No covenants have been breached as at 31 December 2018.
The loan is secured by a fixed and floating charge over the assets of JustKapital Financing Pty Limited. The parent entity
and other entities within the Group have guaranteed the facility.
(ii) Atalaya Capital Management ('Atalaya')
The loan facility of $80,000,000 (30 June 2018: $N/A) is available to fund the US medical lien funding business. The facility
is repayable on 25 April 2022. However, it is repayable on demand if loan covenants are breached and not rectified. The
facility is secured by a first-ranking charge over the assets of NHF SPV I, LLC (being the company which owns the accounts
receivables in the US). The interest and fees payable under the drawn down facility total 13.25% per annum and the undrawn
line fees are 1%.
(iii) NHF Founder Promissory Notes (David Wattel and Mark Siegel)
The NHF Founder Promissory Notes were $9,000,000 ($4,500,000 per founder) as at 31 December 2018 and are repayable
on 16 January 2020. The loan is interest free and is unsecured.
(iv) Syndicated acquisition facility
The Syndicated acquisition facility of $29,644,000 (A$42,000,000) (30 June 2018: $N/A) was provided by leading Australian
institutions and family offices, including Washington H. Soul Pattinson & Company Limited. The facility is repayable on 28
September 2022 but may be repaid at any time after 28 September 2021. Interest payable under this facility is 13% per
annum. The loan is secured over all of the assets of the Group, with second ranking security provided behind the assets
secured to Assetsecure and Atalaya (noted above).
(v) Vendor loan - NHF Founders
A vendor loan facility totalling $12,546,000 (A$17,200,000) (30 June 2018: $N/A) was provided by the NHF Founders David
Wattel and Mark Siegel. This facility is repayable on 28 September 2022 but may be repaid any time after 28 September
2021. Interest payable under this facility is 13% per annum. The loan is unsecured.
48
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 19. Non-current liabilities - borrowings (continued)
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Assetsecure Pty Limited loan*
Atalaya Capital Management**
Lucerne Group combined loan
NHF founder promissory notes
Syndicated acquisition facility
Vendor loan - NHF Founders
Used at the reporting date
Assetsecure Pty Limited loan*
Atalaya Capital Management**
Lucerne Group combined loan
NHF founder promissory notes
Syndicated acquisition facility
Vendor loan - NHF Founders
Unused at the reporting date
Assetsecure Pty Limited loan*
Atalaya Capital Management**
Lucerne Group combined loan
NHF founder promissory notes
Syndicated acquisition facility
Vendor loan - NHF Founders
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
24,703
80,000
-
9,000
29,644
12,546
155,893
20,028
39,902
-
9,000
29,644
12,546
111,120
4,675
40,098
-
-
-
-
44,773
25,869
-
12,529
-
-
-
38,398
18,844
-
12,085
-
-
-
30,929
7,025
-
444
-
-
-
7,469
*
**
The facility can be drawn-down based upon various calculations relating to the underlying disbursement funding
receivables. As at 31 December 2018, $20,863 could be drawn down as a result of these calculations (30 June 2018:
$37,594).
The facility can be drawn-down based upon various calculations relating to the underlying medical lien funding
receivables. As at 31 December 2018, $238,530 could be drawn down as a result of these calculations (30 June 2018:
$N/A).
Note 20. Equity - issued capital
Consolidated
31 December
2018
Shares
2018
Shares
31 December
30 June
2018
30 June
2018
US$'000
US$'000
Ordinary shares - fully paid
483,635,467 147,933,598
37,649
18,421
49
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 20. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price US$'000
Balance
Issue of shares
Issue of shares - performance rights
Share issue costs
1 July 2017
8 November 2017
21 December 2017
Balance
30 June 2018
7 November 2018
Issue of shares - 1:1 rights issue
Issue of shares - founder shares - acquisition of NHF 7 November 2018
7 November 2018
Issue of shares - placement
7 November 2018
Issue of shares - performance rights
21 November 2018
Issue of shares - performance rights
21 November 2018
Issue of shares - employee incentive plan
26 November 2018
Issue of shares - rights issue shortfall
Issue of shares - cleansing prospectus
13 December 2018
Share issue costs
125,813,124
18,871,969
3,248,505
-
147,933,598
24,514,797
215,097,403
93,750,000
545,203
719,366
475,000
600,000
100
-
US$0.107
US$0.000
US$0.000
US$0.058
US$0.058
US$0.058
US$0.000
US$0.000
US$0.000
US$0.058
US$0.058
US$0.000
Balance
31 December 2018
483,635,467
16,555
2,022
-
(156)
18,421
1,425
12,500
5,448
-
-
-
35
-
(180)
37,649
Movements in convertible notes
There was no movement in convertible notes during the financial period ended 31 December 2018.
Movements in options, performance rights and warrants
Refer to note 36.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company
does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are 222,430,736 (30 June 2018: 8,764,493) ordinary shares escrowed at 31 December 2018.
Options
Options do not entitle the holder to participate in dividends or to vote at a meeting of the Company.
Performance rights
Performance rights do not entitle the holder to participate in dividends or to vote at a meeting of the Company.
Convertible bonds
Convertible bonds do not entitle the holder to participate in dividends or to vote at a meeting of the Company.
Warrants
Warrants issued on acquisition of NHF do not entitle the holder to participate in dividends or to vote at a meeting of the
Company.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term
shareholder value and ensure that the Group can fund its operations and continue as a going concern.
50
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 20. Equity - issued capital (continued)
The Group’s debt and capital include ordinary share capital and financial liabilities, supported by financial assets.
The Group is not subject to any externally imposed capital requirements. Management effectively manages the Group’s
capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and
in the market. These responses include the management of debt levels, distributions to shareholders and share issues.
The capital risk management policy remains unchanged from the 30 June 2018 Annual Report.
Note 21. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
2
5,996
(557)
1,741
5,998
1,184
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements into United
States dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in reserves during the current and previous financial period are set out below:
Consolidated
Balance at 1 July 2017
Foreign currency translation
Share-based payments
Balance at 30 June 2018
Foreign currency translation
Share-based payments
Foreign
currency
US$'000
Share-based
payments
US$'000
Total
US$'000
(405)
(152)
-
(557)
559
-
1,518
-
223
1,741
-
4,255
1,113
(152)
223
1,184
559
4,255
Balance at 31 December 2018
2
5,996
5,998
Note 22. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial period.
Note 23. Financial instruments
Financial risk management objectives
The Group’s principal financial instruments comprise cash and short-term deposits, receivables and payables and its finance
facilities.
51
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 23. Financial instruments (continued)
The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. The
objective of the policy is to support the delivery of the Group’s financial targets whilst protecting its future financial security.
The main risks arising from the Group’s financial instruments are market risk (foreign currency risk and interest rate risk),
credit risk and liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is
exposed. These include monitoring levels of exposure to interest rates and currencies and assessments of market forecasts
for interest rates and foreign currencies. Ageing analyses and monitoring of receivables using an expected credit loss matrix
are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts.
Market risk
Foreign currency risk
Foreign currency risk arises from investments and borrowings that are denominated in a currency other than the functional
currencies of the entities within the Group. These are Australian dollars and United States dollars based on country of
operation of the entities within the Group.
In addition, the Group is exposed to non-financial instrument risk on the translation of these entities from their functional
currency to the presentation currency of United States dollars. This presentation risk is separate to the foreign currency risk
dealt with here.
The Group’s does not hedge any foreign currency risks as those currency positions are considered to be long-term in nature.
The carrying amount of the Group's foreign currency denominated financial assets at the reporting date was as follows:
Consolidated
Australian dollars
United States dollars
Assets
Liabilities
31 December
2018
31 December
30 June
2018
2018
30 June
2018
US$'000
US$'000
US$'000
US$'000
17,195
78,931
22,538
-
(79,492)
(61,056)
(38,865)
-
96,126
22,538
(140,548)
(38,865)
The Group had net liabilities denominated in foreign currencies of US$44,422,000 (US$96,126,000 less liabilities of
US$140,548,000) as at 31 December 2018 (30 June 2018: net liabilities of US$16,327,000 (US$22,538,000 less liabilities
of US$38,865,000)).
Consolidated - 31 December
2018
% change
Effect on
Effect on
profit before
tax US'000
equity
US'000
% change
USD strengthened
USD weakened
Effect on
Effect on
profit before
tax US'000
equity
US'000
Australian dollars
10%
(8,790)
(8,790)
10%
(6,230)
(6,230)
Consolidated - 30 June
2018
% change
profit before
tax '000
Effect on
equity '000
% change
profit before
tax '000
Effect on
equity '000
USD strengthened
Effect on
USD weakened
Effect on
Australian dollars
10%
1,484
1,484
10%
(1,633)
(1,633)
The percentage change is the expected overall volatility of the significant currencies, which is based on management's
assessment of reasonable possible fluctuations taking into consideration movements over the last 12 months each year and
the spot rate at each reporting date.
52
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 23. Financial instruments (continued)
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group's main interest rate risk arises from borrowings and cash and cash equivalents. The Group’s exposure to interest
rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market rates and the
effective weighted average interest rates on financial liabilities, is as follows:
Consolidated
Vendor loan - Australian disbursement funding business
Convertible bonds payable
Lucerne Group combined loan
Lucerne Group - working capital facility
Lucerne Group facility - US medical lien funding business
Lockton insurance financing
Credit cards
Other NHF subordinated debt
Assetsecure Pty Limited loan
Atalaya Capital Management
NHF Founder promissory note
Syndicated acquisition facility
Vendor loan - NHF Founders
Cash and cash equivalents
Net exposure to cash flow interest rate risk
31 December
2018
31 December
2018
30 June
30 June
2018
2018
Weighted
average
interest rate
%
Balance
US$'000
Weighted
average
interest rate
%
Balance
US$'000
7.50%
11.50%
13.50%
-
15.00%
10.00%
17.86%
12.00%
8.95%
14.25%
-
13.00%
13.00%
0.04%
824
3,529
8,548
-
5,238
49
414
1,000
20,028
39,902
9,000
29,644
12,546
(3,696)
127,026
7.50%
11.50%
13.50%
7.95%
-
-
-
-
9.76%
-
-
-
-
0.04%
1,048
3,696
9,868
2,217
-
-
-
-
18,844
-
-
-
-
(934)
34,739
The weighted average interest rate for the period ended 31 December 2018 was 11.93% (Year ended 30 June 2018:
11.56%).
The Group has net interest-bearing liabilities and therefore income and operating cash flows are subject to changes in the
market rates. The Group regularly analyses its interest rate exposure. Within this analysis consideration is given to expected
interest rate movements and the Group’s future cash requirements, potential renewals of existing positions, alternative
financing, and the mix of fixed and variable interest rates. A movement in interest rates of +/-100 basis points will result in
less than a +/-US$1,243,000 (2018: US$475,000) impact on the Group’s results and operating cash flows.
Credit risk
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through
the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative
across all customers of the Group based on recent sales experience, historical collection rates and forward-looking
information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than 1 year.
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s cash and cash equivalents and receivables.
Cash and cash equivalents comprise of cash on hand and demand deposits. The Group limits its credit risk by holding cash
balances and demand deposits with reputable counterparties with acceptable credit ratings.
53
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 23. Financial instruments (continued)
Receivables for the disbursement funding division are with registered solicitors as the counterparty. The Group transacts
with in excess of 160 law firms and limits its credit risk by ensuring that there is a credit limit applied to any law firm and that
settlement funds are deposited into the law firm’s trust accounts (which are periodically audited by the Law Society).
Receivables for the short-term loans division are with registered solicitors as the counterparty. The Group limits its credit risk
by ensuring that there is a credit limit applied to any law firm. Personal guarantees are obtained from the principals of the
firm and the loans are monitored on a monthly basis.
Receivables relating to the litigation funding division are as a result of a funded case concluding. The Group assesses the
defendants in the matters funded by the Group prior to entering into any agreement to provide funding and continues this
assessment during the course of funding. The Group’s continual monitoring of the defendants’ financial capacity mitigates
this risk.
Receivables for the US medical lien funding division are held with licensed lawyers who have a fiduciary duty to protect the
Receivable. The Group transacts with in excess of 1,060 law firms and limits its credit risk by ensuring that the lawyer has a
valid and active license to practice law in their respective state. Settlement funds are required to be deposited into the law
firm’s trust accounts where State Bar rules and regulations apply, protecting the funds from mismanagement.
Liquidity risk
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet the Group’s expected
financial commitments in a timely and cost effective manner.
Management continually reviews the Group’s liquidity position, including the preparation of cash flow forecasts, to determine
the forecast liquidity position and to maintain appropriate liquidity levels.
The liquidity risk for the Group is the ability to raise equity or debt financing in the future. This risk is mitigated by the headroom
available from the following facilities:
Assetsecure Pty Limited loan (subject to certain calculations, see note 19)
Atalaya Capital Management (subject to certain calculations, see note 19)
Lucerne Group combined loan
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
4,675
40,098
-
7,025
-
444
44,773
7,469
54
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 23. Financial instruments (continued)
Remaining contractual maturities
The following are the remaining contractual maturities as at the reporting date. The amounts are gross and undiscounted
and include contractual interest payments and exclude the impact of netting agreements.
Weighted
average
interest rate
1 year or less
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Remaining
contractual
maturities
Consolidated - 31 December
2018
Non-derivatives
Non-interest bearing
Trade and other payables
Interest-bearing
Vendor loan - Australian
disbursement funding business
Convertible bonds payable
Lucerne Group combined loan
Lucerne Group facility - US
medical lien funding business
Other NHF subordinated debt
Assetsecure Pty Limited loan
Atalaya Capital Management
NHF Founder Promissory Notes
Syndicated acquisition facility
Vendor loan - NHF Founders
Lockton insurance financing
Credit cards
Total non-derivatives
%
US$'000
US$'000
US$'000
US$'000
US$'000
-
7,657
7.50%
11.50%
13.50%
15.00%
12.00%
8.95%
14.25%
-
13.00%
13.00%
10.00%
17.86%
855
3,983
9,702
5,435
-
1,793
5,301
-
3,854
1,631
53
455
40,719
-
-
-
-
-
-
21,374
5,287
9,000
3,864
1,635
-
-
41,160
-
-
-
-
-
1,600
-
41,568
-
36,348
15,384
-
-
94,900
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,657
855
3,983
9,702
5,435
1,600
23,167
52,156
9,000
44,066
18,650
53
455
176,779
Weighted
average
interest rate
1 year or less
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Remaining
contractual
maturities
Consolidated - 30 June
2018
%
US$'000
US$'000
US$'000
US$'000
US$'000
Non-derivatives
Non-interest bearing
Trade and other payables
Deferred consideration
Interest-bearing
Vendor loan - Australian
disbursement funding business
Convertible bonds payable
Lucerne Group combined loan
Lucerne Group - working capital
facility
Assetsecure Pty Limited loan
Total non-derivatives
-
-
2,059
370
-
-
7.50%
11.50%
13.50%
7.95%
9.76%
1,068
4,013
1,332
176
1,687
10,705
-
-
10,540
2,312
1,691
14,543
-
-
-
-
-
-
19,269
19,269
-
-
-
-
-
-
-
-
2,059
370
1,068
4,013
11,872
2,488
22,647
44,517
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
55
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 24. Fair value measurement
Fair value measurement hierarchy for assets
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 31 December 2018
Level 1
US$'000
Level 2
US$'000
Level 3
US$'000
Total
US$'000
Assets measured at fair value:
Loan receivables - disbursement funding/medical lien funding
Total assets
-
-
-
-
101,372
101,372
101,372
101,372
Consolidated - 30 June 2018
Level 1
US$'000
Level 2
US$'000
Level 3
US$'000
Total
US$'000
Assets measured at fair value:
Loan receivables - disbursement funding
Total assets
-
-
-
-
23,391
23,391
23,391
23,391
The above Loan receivables are shown excluding the adjustment for the unrecognised day 1 margin. There were no transfers
between levels during the financial period.
Description of significant unobservable inputs to valuation
The significant unobservable inputs used in the fair value measurements of loan receivables categorised within Level 3 of
the fair value hierarchy, performed by an actuarial firm as at 31 December 2018 and 30 June 2018 are as shown below.
The actuarial valuation involves:
●
●
Analysis of historical collections data;
Setting assumptions based on the experience of historical collections data (including repayment patterns, proportion of
write-offs and discounts);
Application of assumptions to the open receivables in order to project the future repayments over the expected life of
the contracts;
Discounting the projected repayments for the open receivables using an appropriate discount rate to the valuation date;
Calculation of the fair value of the invoices taking into account the discounted repayments which have allowed for
discounts and write-offs and credit risk; and
Calculation of the day 1 margin and its systematic recognition within profit and loss over the expected term of the
arrangement is based on the profile of cash collections and the subsequent weighted average calculation of these
collections applied to the recognition of the day 1 margin.
●
●
●
●
Loan receivables fair value measurement – valuation process
Valuations are performed on a half-yearly basis by a qualified external actuarial firm. For the purpose of the valuation,
Management provides the external actuarial firm with the inputs and data required to be applied in the valuations.
Management performs a reconciliation of the fair value based on the valuation results and as part of the reconciliation
process, discussions are conducted with the external actuarial firm if there are any unusual movements noted.
56
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 24. Fair value measurement (continued)
Reconciliation of fair value measurement of the Loan receivables and deferred day 1 margin
Consolidated
Balance at 1 July 2017
Cash disbursements in relation to new loans
New day 1 margin
Cash collections - disbursement funding
Gains or losses recognised in profit or loss
Amortisation of day 1 margin
Exchange differences
Balance at 30 June 2018
Additions through business combinations (note 31)
Change in assumption
Cash disbursements in relation to new loans
New day 1 margin
Cash collections - disbursement funding
Gains or losses recognised in profit or loss
Amortisation of day 1 margin
Exchange rate movement
Fair value
US$'000
Deferred day
1 margin
US$'000
Total
US$'000
19,125
10,005
-
(8,969)
4,164
-
(934)
23,391
76,003
-
9,445
-
(10,378)
3,965
-
(1,054)
(3,381)
-
(3,065)
-
-
2,897
136
(3,413)
-
106
-
(2,886)
-
-
1,573
146
15,744
10,005
(3,065)
(8,969)
4,164
2,897
(798)
19,978
76,003
106
9,445
(2,886)
(10,378)
3,965
1,573
(908)
Balance at 31 December 2018
101,372
(4,474)
96,898
This reconciliation excludes other receivables and short-term loans.
The loan receivables - disbursement funding/medical lien funding (gross) balance was US$205,248,000 as at 31 December
2018 (30 June 2018: US$29,566,000).
Note 25. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel ('KMP') of the Group is
set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
6 months
31 December
2018
US$
12 months
30 June
2018
US$
776,612
23,827
-
1,355,321
49,209
222,983
800,439
1,627,513
The above figures include amounts paid to companies related to directors for the service and/or director fees payable to
directors.
57
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 26. Remuneration of auditors
During the financial period the following fees were paid or payable for services provided by Stantons International ('Stantons'),
the auditor of the company, and Spielman Koenigsberg & Parker, LLP ('SKP'), the auditor of NHF:
Audit services - Stantons
Audit or review of the financial statements
Other services - Stantons
Preparation of the Investigating Accountant’s Report
Other accounting services
Audit services - SKP
Audit or review of the financial statements
Note 27. Contingent liabilities
Consolidated
6 months
31 December
2018
US$
12 months
30 June
2018
US$
125,580
95,932
41,559
6,547
48,106
-
-
-
173,686
95,932
100,965
-
Bank guarantees
The Group has given bank guarantees as at 31 December 2018 of $112,000 (30 June 2018: $117,000) to various landlords.
The guarantees are secured by an offset arrangement with the short-term cash deposits.
Litigation funding agreements
In certain jurisdictions litigation funding agreements contain an undertaking from the Group that it will pay adverse costs
awarded to the successful party in respect of costs incurred during the period of funding, should the client’s litigation be
unsuccessful. It is not possible to predict in which cases such an award might be made or the quantum of such awards. In
general terms an award of adverse costs to a defendant will approximate 70% (30 June 2018: 70%) of the amount paid by
the plaintiff to pursue the litigation (although in some cases there may be more than one defendant). Accordingly, an estimate
of the total potential adverse costs exposure of the Group which has accumulated from time to time may be made by
assuming all cases are lost, that adverse costs equal 70% (30 June 2018: 70%) of the amount spent by the plaintiff and that
there is only one defendant per case.
At 31 December 2018 the total amount spent by the Group where undertakings to pay adverse costs have been provided
was $5,750,000 (30 June 2018: $8,780,000). The potential adverse costs orders using the above methodology would amount
to $3,883,000 (30 June 2018: $6,267,000). The Group does not currently expect that any of the matters will be unsuccessful.
The Group has obtained adverse costs order insurance for these matters which should respond if any matter is unsuccessful
and an adverse costs order is payable.
Earn out - Litigation funding portfolio
The seller of the Litigation funding portfolio, which was acquired by the Group on 11 July 2016, is entitled to receive 50% of
all proceeds over A$4,000,000 from the "free carry" component of the litigation funding agreements. There is presently a
dispute with the seller in relation to the calculation of the "free carry" entitlement generated by four case settlements in the
portfolio (there is one on-going case from this portfolio). The seller of this portfolio claims that amounts are due to be paid by
the Company under the "free carry" entitlement. The Company's position is that under the terms of the relevant agreements
there is no amount payable.
58
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 27. Contingent liabilities (continued)
Litigation commenced by former Executive Chairman
The former Executive Chairman of the Group has commenced proceedings against LawFinance Limited in relation to various
aspects of his exit from the Group. The Company believes that his claims are un-meritorious and intends to vigorously defend
those proceedings.
Litigation against NHF
Two separate proceedings were commenced against NHF in Florida in 2017. These proceedings relate to a failed medical
practice which sold various medical invoices to NHF. The proceedings are being defended as the medical invoices purchased
were on an arm’s length basis and are subject to a contract entered into with the now bankrupt medical practice. As such,
NHF believes there are no amounts payable to the medical practice or its creditors.
Note 28. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
31 December
2018
30 June
2018
US$'000
US$'000
312
209
521
276
-
276
Operating lease commitments includes contracted amounts for offices under non-cancellable operating leases expiring within
one year with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the
leases are renegotiated.
Note 29. Related party transactions
Parent entity
LawFinance Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 32.
Key management personnel
Disclosures relating to key management personnel are set out in note 25 and the remuneration report included in the
directors' report.
59
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 29. Related party transactions (continued)
Transactions with related parties
The following transactions occurred with related parties:
Other related parties - expenses:
Lucerne Group - interest on borrowings
Lucerne Group - facility fees
Lucerne Group - underwriting fees
Multus Medical LLC - cost of sales
David Wattel - interest on vendor loan
Mark Siegel - interest on vendor loan
Other related parties - income:
Multus Medical LLC - office rental
Multus Medical LLC - staff and administration costs
Wattel & York - staff costs
Consolidated
6 months
31 December
2018
US$
12 months
30 June
2018
US$
946,158
-
-
6,850
208,140
208,140
17,500
6,178
3,385
1,565,850
150,489
132,861
-
-
-
-
-
-
Lucerne Group manages funds on behalf of third parties. Anthony Murphy is the Chief Executive Officer of Lucerne
Investment Partners, part of the Lucerne Group.
David Wattel is a director of Multus Medical LLC, a company that specialises in creating 3-Dimensional anatomical
schematics from standardised MRI data – this company provides services to patients to assist in their personal injury
insurance claims, and NHF fund the cost of these services. David is also a founding member of Wattel & York – Attorneys
at Law, a personal injury and property damage law firm.
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables from other related parties:
Multus Medical LLC
Current payables to other related parties:
Lucerne Group
Wattel & York
David Wattel
Mark Siegel
Consolidated
31 December
2018
US$
30 June
2018
US$
44,955
-
225,813
3,704
208,140
208,140
123,988
-
-
-
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date, except for the facilities with the
Lucerne Group as detailed in note 19.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
60
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 30. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive loss
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Foreign currency reserve
Share-based payments reserve
Accumulated losses
Total equity
Parent
6 months
31 December
2018
US$'000
12 months
30 June
2018
US$'000
(8,060)
(5,980)
(8,060)
(5,980)
Parent
31 December
2018
US$'000
30 June
2018
US$'000
519
574
78,087
23,213
15,222
5,757
57,412
17,843
20,675
5,370
37,649
(3,591)
5,996
(19,379)
18,421
(3,473)
1,741
(11,319)
20,675
5,370
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
Except as described in note 27, the parent entity had no guarantees in relation to the debts of its subsidiaries as at 31
December 2018 and 30 June 2018.
Contingent liabilities
The parent entity had no contingent liabilities as at 31 December 2018 and 30 June 2018 other than those disclosed in note
27.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 31 December 2018 and 30 June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the
following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
indicator of an impairment of the investment.
61
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 31. Business combinations
On 28 September 2018, JustKapital NHF USA Holdings, LLC, a wholly owned subsidiary of LawFinance Limited, acquired
100% of the ordinary shares of National Health Finance HoldCo, LLC (NHF) for the total consideration transferred of
US$53,000,000. NHF is a US medical lien funding business with operations very similar to the Group's Australian
disbursement funding business. The acquisition expanded the Group's financing business into the much larger US market.
The goodwill paid on acquisition of US$36,345,000 represents the strong brand associated with NHF, reflected in its large
book of receivables (over 33,000 active matters). An amount of US$1,913,000 was attributed to existing long-term working
relationships with NHF’s network of attorneys and medical providers of over 3,000. The effective date of control of NHF was
1 October 2018.
AASB 3 Business Combinations allow the acquirer a reasonable time to obtain the information necessary to identify and
measure all the various components of the business combination as of acquisition date. As at the 31 December 2018 the
acquisition accounting for the NHF acquisition remains provisional.
Details of the acquisition are as follows:
Cash and cash equivalents
Trade receivables - medical lien funding
Other assets
Plant and equipment
Trade and other payables
Notes payables
Financing facility
Non-controlling interest
Net assets acquired
Customer relationships
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Shares of the Company issued to vendor
NHF vendor loan
Acquisition costs expensed to profit or loss
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: shares issued by Company as part of consideration
Less: NHF vendor loan
Exchange rate movement
Pre-acquisition loan provided to NHF at acquisition
Net cash used
62
Fair value
US$'000
5,081
76,003
180
157
(5,386)
(20,703)
(39,687)
(903)
14,742
1,913
36,345
53,000
26,500
13,250
13,250
53,000
5,768
53,000
(13,250)
(13,250)
498
5,603
32,601
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 32. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 2:
Name
JustKapital Financing Pty Limited
JustKapital Litigation Pty Limited
JustKapital Litigation Insurance Pty Limited
JustKapital Co-Funding No 1 Pty Limited
JustKapital Portfolio Pty Limited
JustKapital STL Pty Limited
JustKapital NHF USA Holdings, LLC
JustKapital NHF Holdings Pty Limited
National Health Finance HoldCo, LLC*
JustKapital Litigation Partners (NZ)
Limited**
JustKapital Insolvency Services Pty
Limited***
LongKapital Pty Limited***
JustKapital No 1 Pty Limited***
MML Services Pty Limited***
Subsidiaries of National Health Finance
HoldCo, LLC:
Accident Medical Funding, LLC*
Apex Injury Network, LLC*
Arizona Injury Medical Specialists, LLC*
Atlanta Health Funding, LLC*
Auto Medical Funding, LLC*
Balboa Medical Funding, LLC*
Bay Area Medical Finance, LLC*
Bayou Health Finance, LLC*
California Health Finance, LLC*
Complete Health Network, LLC*
Desert Sky Medical Funding, LLC*
DFW Medical Finance, LLC*
Fresno Injury Treatment Network, LLC*
Georgia Injury Treatment Network, LLC*
Great Salt Lake Medical Finance, LLC*
HALO Medical Funding, LLC*
Illinois Injury Solutions, LLC*
Injury Medical Network, LLC*
Kentucky Injury Network, LLC*
Louisiana HealthNet Solutions, LLC*
Lone Star Lien Solutions, LLC*
Medical Financial Group, LLC*
Metroplex Medical Finance, LLC*
Nashville Injury Network, LLC*
National Health Finance DM, LLC*
National Health Finance of Florida, LLC*
National Health Finance of Florida 2, LLC*
National Medical Finance & Assistance,
LLC*
Principal place of business /
Country of incorporation
Ownership interest
31 December
2018
%
30 June
2018
%
Australia
Australia
Australia
Australia
Australia
Australia
USA
Australia
USA
New Zealand
Australia
Australia
Australia
Australia
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
63
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
70.00%
75.00%
75.00%
75.00%
75.00%
75.00%
74.00%
75.00%
50.50%
48.50%
75.00%
90.50%
72.50%
70.00%
88.00%
75.00%
75.00%
67.00%
75.00%
73.00%
55.00%
70.00%
70.00%
75.00%
100.00%
100.00%
60.80%
100.00%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 32. Interests in subsidiaries (continued)
Name
Principal place of business /
Country of incorporation
Ownership interest
31 December
2018
%
30 June
2018
%
Southern California Injury Treatment Network, LLC*
Nevada Health Finance, LLC*
New Mexico Health Finance, LLC*
New Mexico Medical Financing, LLC*
North Texas Medical Finance, LLC*
Northern Florida Medical Finance, LLC*
Nevada Orthopedic and Spinal Financing, LLC*
NW Health Network, LLC*
Oklahoma Health Finance, LLC*
Oklahoma Injury Network, LLC*
Old Pueblo Medical Financing, LLC*
ONYX Medical Funding Group, LLC*
Pikes Peak Medical Funding, LLC*
Rocky Mountain Medical Finance, LLC*
Silver State Surgical Solutions, LLC*
SMD Medical Finance, LLC*
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
99.00%
60.00%
68.00%
49.00%
69.00%
88.00%
75.00%
66.00%
83.00%
70.00%
50.00%
70.00%
72.50%
71.00%
80.00%
68.00%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Acquired on 28 September 2018.
Dormant
*
**
*** Entities placed into members voluntary liquidation on 21 September 2018, as they did not trade.
64
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 33. Reconciliation of loss after income tax to net cash from operating activities
Loss after income tax benefit for the period
Adjustments for:
Depreciation and amortisation
Share-based payments
Employee leave provision
Interest
Commissions payable
Write off of acquisition costs of litigation assets
Impairment of assets
Warrant costs
Net foreign exchange differences
Change in operating assets and liabilities:
Increase in loan and other receivables
Decrease/(increase) in deferred tax assets
Decrease in prepayments
Increase in trade and other payables
Increase/(decrease) in provisions or employee benefits
Net cash from operating activities
Consolidated
6 months
31 December
2018
US$'000
12 months
30 June
2018
US$'000
(11,427)
(5,142)
82
27
21
(94)
71
925
2,765
3,156
636
(797)
2,159
15
8,457
118
6,114
78
223
26
(146)
164
-
808
-
678
(3,655)
(467)
76
11,126
(364)
3,405
65
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 34. Changes in liabilities arising from financing activities
Asset-
secure Pty
Limited
loan
US$'000
Lucerne
Composite
Master
Fund loan
US$'000
Lucerne
Finance Pty
Limited
short-
term loan
US$'000
Lucerne
Group
combined
loan
US$'000
Lucerne
Group –
working
capital
facility
US$'000
Vendor
loan
US$'000
Convertible
bonds
payable
US$'000
Total
US$'000
15,679
3,846
5,384
-
-
1,846
3,846
30,601
-
10,662
(7,677)
(3,771)
-
-
(5,279)
-
-
9,050
1,012
(35)
-
2,169
-
-
-
(741)
-
-
-
-
13,843
(8,453)
180
(75)
(105)
(159)
48
(57)
(150)
(318)
18,844
-
5,919
(3,840)
(895)
20,028
-
-
-
-
-
-
-
-
-
-
-
-
9,868
2,217
1,048
3,696
35,673
(1,331)
438
-
(361)
-
(1,807)
-
-
(181)
-
-
-
(1,692)
6,357
(5,828)
(427)
(49)
(43)
(167)
(1,581)
8,548
-
824
3,529
32,929
Syndicated
acquisition
facility
US$'000
Vendor loan
- NHF
Founders
US$'000
Atalaya
Capital
Man-
agement
US$'000
Other NHF
subordin-
ated debt
US$'000
NHF
Founder
Promissory
Notes
US$'000
Lucerne
Group
facility
US$'000
Lockton
insurance
financing
and other
US$'000
Total
US$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
30,546
-
-
12,434
-
39,687
4,912
(4,697)
1,000
-
-
9,000
-
-
-
416
(902)
(304)
-
-
-
-
-
-
5,100
-
-
138
-
-
-
335
518
(390)
-
-
-
-
55,122
48,410
(5,087)
554
(1,206)
29,644
12,546
39,902
1,000
9,000
5,238
463
97,793
Consolidated
Balance at 1 July
2017
Lucerne loans
combined
Loans received
Loans repaid
Exchange
differences
Balance at 30
June 2018
Conversion to
shares
Loans received
Loans repaid
Exchange
differences
Balance at 31
December 2018
Consolidated
Balance at 1 July
2017
Balance at 30
June 2018
Changes through
business
combinations
(note 31)
Loans received
Loans repaid
Capitalised
interest
Exchange
differences
Balance at 31
December 2018
66
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 35. Earnings per share
Loss after income tax
Non-controlling interest
Consolidated
6 months
31 December
2018
12 months
30 June
2018
US$'000
US$'000
(11,427)
200
(5,142)
-
Loss after income tax attributable to the owners of LawFinance Limited
(11,227)
(5,142)
Weighted average number of ordinary shares used in calculating basic earnings per share
246,301,947 139,611,768
Weighted average number of ordinary shares used in calculating diluted earnings per share 246,301,947 139,611,768
Number
Number
Basic loss per share
Diluted loss per share
Cents
Cents
(4.56)
(4.56)
(3.68)
(3.68)
The Company's 1,500,000 options on issue (30 June 2018: 1,500,000), 50,000 convertible bonds (30 June 2018: 50,000)
and 452,743,636 warrants (30 June 2018: nil) have been excluded from the diluted earnings calculations as they are anti-
dilutive for the financial period.
Note 36. Share-based payments
Share options
At the 2016 Annual General Meeting held on 30 November 2016, shareholders approved for the Company to adopt the JKL
Incentive Plan ('Incentive Plan') and associated Non-Recourse Loan Agreements for directors, officers, employees and
consultants ('Participants'). The Incentive Plan, effective from 1 July 2016, replaced the previous Incentive Option Plan and
Executive Incentive Plans ('EIP').
The objectives of the Incentive Plan are to:
supplement Participant remuneration;
●
ensure that the Group's remuneration policy is competitive in retaining and motivating the Participants;
●
provide a mechanism for achieving the Group's overarching remuneration objective of aligning the interests of
●
Participants and shareholders; and
reward Participants based on the Group's overall performance including achieving successful judgements or
settlements of individual cases, growth of the disbursements funding business (JustKapital Finance) and other
businesses and high performance.
●
Set out below are summaries of options granted under the plans:
31 December
2018
Grant date
Expiry date
price*
Exercise
Balance at
the start of
the period
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the period
22/01/2016
22/01/2019
US$0.176
1,500,000
1,500,000
-
-
-
-
-
-
1,500,000
1,500,000
Weighted average exercise price
US$0.176
US$0.000
US$0.000
US$0.000
US$0.176
67
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 36. Share-based payments (continued)
*
Exercise price - A$0.25
These options lapsed at their expiry date, and were not exercised.
30 June
2018
Grant date
Expiry date
10/03/2015
10/03/2015
10/03/2015
27/03/2015
27/03/2015
22/01/2016
10/03/2018
10/03/2018
10/03/2018
27/03/2018
27/03/2018
22/01/2019
Exercise
price*
US$0.176
US$0.176
US$0.176
US$0.176
US$0.176
US$0.176
Balance at
the start of
the period
1,200,000
1,195,673
4,000,000
398,558
1,500,000
1,500,000
9,794,231
Granted
Exercised
-
-
-
-
-
-
-
Expired/
forfeited/
other
Balance at
the end of
the period
-
-
-
-
-
-
-
(1,200,000)
(1,195,673)
(4,000,000)
(398,558)
(1,500,000)
-
(8,294,231)
-
-
-
-
-
1,500,000
1,500,000
Weighted average exercise price
US$0.176
US$0.000
US$0.000
US$0.176
US$0.176
*
Exercise price - A$0.25
The weighted average share price during the financial period was US$0.052 (30 June 2018: US$0.074).
The weighted average remaining contractual life of options outstanding at the end of the financial period was 0.06 years (30
June 2018: 0.56 years).
Performance rights
Set out below are summaries of performance rights granted under the plan:
31 December
2018
Grant date
Vesting date
Exercise
price
30/11/2016
30/06/2018
US$0.000
30 June
2018
Grant date
Vesting date
Exercise
price
30/11/2016
30/06/2018
US$0.000
Balance at
the start of
the period
1,264,569
1,264,569
Balance at
the start of
the period
4,679,664
4,679,664
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the period
-
-
(1,264,569)
(1,264,569)
-
-
-
-
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the period
-
-
(3,248,505)
(3,248,505)
(166,590)
(166,590)
1,264,569
1,264,569
The weighted average remaining contractual life of performance rights outstanding at 30 June 2018 was nil months.
68
LawFinance Limited (formerly JustKapital Limited)
Notes to the financial statements
31 December 2018
Note 36. Share-based payments (continued)
Warrants
Set out below are summaries of warrants granted on acquisition of NHF:
31 December
2018
Grant date
Expiry date
Exercise
price*
Balance at
the start of
the period
Granted**
Exercised
Expired/
forfeited/
other
Balance at
the end of
the period
28/09/2018
28/09/2022
US$0.099
-
-
452,743,636
452,743,636
-
-
- 452,743,636
- 452,743,636
*
**
Exercise price - A$0.14
329,880,000 warrants issued to other Syndicated Acquisition Facility participants and 122,863,636 warrants issued to
NHF Founders.
The weighted average remaining contractual life of warrants outstanding at the end of the financial period was 3.75 years.
For the warrants granted during the current financial period, the valuation model inputs used to determine the fair value at
the grant date, are as follows:
Grant date
Expiry date
Share price
at grant date*
Exercise
price**
Expected
volatility
Dividend
yield
Risk-free
Fair value
interest rate at grant date
28/09/2018
28/09/2022
US$0.056
US$0.099
40.00%
-
2.08%
US$0.000
*
**
Share price at grant date - A$0.08
Exercise price - A$0.14
Shares issued
During the period the Company issued 1,250,000 shares to Diane Jones in lieu of part of her short-term incentive granted
during the period. The shares were issued at US$0.058 cents per share as part of the rights issue undertaken by the
Company on 7 November 2018 (Refer to note 20).
During the period the Company issued 29,266,700 to Lucerne at US$0.058 cents per share as part of the share placement
undertaken by the Company on 7 November 2018 (Refer to note 20).
Note 37. Events after the reporting period
No matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
69
LawFinance Limited (formerly JustKapital Limited)
Directors' declaration
31 December 2018
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 31 December
2018 and of its performance for the financial period ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Tim Storey
Chairman
29 March 2019
Sydney
70
Stantons International Audit and Consulting Pty Ltd
trading as
Chartered Accountants and Consultants
PO Box 1908
West Perth WA 6872
Australia
Level 2, 1 Walker Avenue
West Perth WA 6005
Australia
Tel: +61 8 9481 3188
Fax: +61 8 9321 1204
ABN: 84 144 581 519
www.stantons.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
LAWFINANCE LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of LawFinance Limited, the Company and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 31 December 2018, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity
and the consolidated statement of cash flows for the half year then ended, and notes to the financial
statements, including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the Group's financial position as at 31 December 2018 and of its financial
performance for the half year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Liability limited by a scheme approved
under Professional Standards Legislation
Key Audit Matters
How the matter was addressed in the audit
Going Concern
In considering the going concern basis of accounting,
management considered whether there are any material
uncertainties on the Group’s ability to continue as a going
concern. In making this assessment management need to
consider the period of at least 12 months from the date
our audit opinion is signed.
The assessment is largely based on the assumptions
made by the management in their cash flow forecasts.
These forecasts include management and directors’
assumptions regarding the timing of future cash flows,
variations to or extensions of current financing facilities,
operating results, capital raising activities (if any) and
future settlement of litigation funding cases.
its dependence on
This is a key audit matter due to the nature of the
business,
future
cashflows, support from financiers and its ability to raise
additional funds, as well as the Group’s history of
operating losses and negative cashflows.
timing of
the
Acquisition of National Health Finance Holdco LLC
/Impairment of Goodwill and Other Intangibles
On 28 September 2018, JustKapital NHF USA Holdings,
LLC, a wholly owned subsidiary of LawFinance Limited,
acquired 100% of the ordinary share capital of National
Health Finance Holdco LLC (“NHF”). The acquisition
resulted in the Group recognising $38,258,000 of goodwill
on acquisition for its US medical lien Cash Generating
Unit (CGU).
The Group carries Goodwill of $42,452,000 (refer to Note
14) and Other Intangibles of $6,871,000 (refer to Note
15), as per the application of the Group's accounting
policy for Intangible assets, set out in Note 2.
The carrying value of Goodwill and Other Intangibles is a
key audit matter due to:
The significance of the total balance of both
Intangibles combined
Goodwill and Other
(approximately 31% of total assets);
For the Cash Generating Unit (CGU’s) which
contain goodwill, the determination of recoverable
amount, being the higher of fair value less costs
to sell and value-in-use, requires judgement on
the part of management in both identifying and
then valuing the relevant CGU’s;
Litigation contracts, and their impact upon the
the Group’s
flows meeting
future
cash
expectations;
The assessment of impairment of the Group’s
Goodwill and Other
Intangibles balances
incorporated significant judgement in respect of
factors such as discount rates and growth rates;
and
Goodwill is also considered to be a key audit
matter as the Group’s value in use model for
impairment included appropriate consideration of
these factors on their significant estimates and
judgements and the selection of key external and
internal inputs.
Inter alia, our audit procedures included the following:
i.
ii.
iii.
iv.
Obtaining and reviewing management’s cash
flow forecasts to assess whether current cash
levels and proposed capital management
initiatives can sustain operations for a period of
at least 12 months from the proposed date of
signing the financial statements;
the
assumptions
Reviewing
by
management in the going concern forecasts for
reasonableness and challenging these where
necessary;
used
in
Corroborating, where possible, management’s
flow
relation
assumptions
forecasts, including enquiry, verifications of and
discussions pertaining to these assumptions;
and
its cash
to
Assessing the adequacy of the Group’s related
disclosures within the financial report.
Inter alia, our audit procedures included the following:
i.
ii.
iii.
iv.
v.
of
assessment
The
management’s
determination of the Group’s CGUs based on
our understanding of the nature of the Group’s
Business and economic environment in which
the segments operate. We also analysed the
internal reporting of the Group to assess how
earnings streams are monitored and reported;
The evaluation of management’s process
regarding valuation of the Group’s goodwill
assets
to determine any potential asset
impairment. We tested management’s models,
review of
the preparation and
such as
forecasts;
The audit of the Group’s assumptions and
estimates used to determine the recoverable
value of its assets, including those relating to
the
in
forecasted
receivables book and discount rates used;
revenue, costs, growth
Checking
corroboration of underlying data; and
cash
the
flow models and
Performing sensitivity analysis in the main
areas. These included the appropriateness of
the discount rate used and growth assumptions
for the CGUs with a higher risk of impairment.
Carrying Value of Disbursement receivables – Current
$27,460,000 and Non-Current $69,438,000
As discussed in Note 2 of the financial report the Group has
from Contracts with
(Revenue
adopted AASB 15
Customers). As a result of this adoption, the Group
concluded the funding provided by its disbursement funding
arrangements does not meet the definition of a contract
with a customer under AASB 15 and concluded that the
income arising from changes in the fair value of financial
instruments is within the scope of AASB 9 (Financial
Instruments).
The key elements of judgement associated with the
application is the calculation of the fair value and day 1
margin and its adjustment to the carrying value of the
disbursement receivables (both current and non-current).
This area is a key audit matter due to the significance of the
total balance (approximately 60% of total assets) as well as
the inherent subjectivity that is involved in the Group
making judgements as discussed in the paragraph above.
Inter alia, our audit procedures included the following:
i.
ii.
iii.
iv.
v.
Review the Group’s new accounting policy and
its compliance with AASB 9;
Obtained a copy of
the valuation report
compiled by an independent expert on the fair
value and carrying value of the disbursement
receivables. Audited the assumptions within the
report and questioned the expert on the validity
of those assumptions;
Testing key controls, approval processes, and
performing debtor circularisations on a sample
of disbursement receivables;
Reviewing management’s assumptions
current
splitting
disbursement receivables; and
in
non-current
and
of
Assessing
the adequacy of
disclosures in the financial report.
the Group’s
Valuation of Deferred Tax assets $6,789,000
The group has recognised a significant amount of deferred
tax assets $6,789,000, mainly resulting from net operating
losses. The risk exists that future profits will not be sufficient
to fully recover the deferred tax assets.
Management supports the recoverability of the deferred tax
assets by the income projections which include estimates
of, and tax strategies for, future taxable income. Changes in
the business and its markets and changes in regulations
may impact these projections.
This area is a key audit matter as the valuation of deferred
tax assets required an assessment process is subjective
and is based on estimates of future taxable income.
Inter alia, our audit procedures included the following:
i.
ii.
iii.
iv.
Auditing the work of tax specialists in assessing
the appropriateness of the level of the deferred
tax asset balance recognised in the balance
sheet;
Auditing the forecasts and critically assessing
the assumptions and judgments included in
these forecasts by considering the historical
accuracy of forecasts;
Reviewing management’s key assumptions;
and
the adequacy of
Assessing
the Group’s
disclosures in respect of the deferred tax
assets.
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 31 December 2018, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor's judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity's preparation of the financial report that gives a true and
fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity's internal control.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial
report.
We conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
We evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that achieves
fair presentation.
We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in Internal control that we identify during our
audit.
The Auditing Standards require that we comply with relevant ethical requirements relating to audit
engagements. We also provide the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance
in the audit of the consolidated financial report of the current period and are therefore key audit matters. We
describe these matters in our auditor's report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 8 to 16 of the directors’ report for the year ended
31 December 2018.
In our opinion, the Remuneration Report of LawFinance Limited for the year ended 31 December 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD
(Trading as Stantons International)
(An Authorised Audit Company)
Martin Michalik
Director
West Perth, Western Australia
29 March 2019
LawFinance Limited (formerly JustKapital Limited)
Shareholder information
31 December 2018
The shareholder information set out below was applicable as at 25 March 2019.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Number
of holders
of options
over
ordinary
shares
Number
of holders
of ordinary
shares
2,070
142
87
284
153
2,736
2,243
-
-
-
-
-
-
-
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
Number held
% of total
shares
issued
107,548,702
107,548,701
43,750,000
42,411,334
35,193,263
15,846,390
7,333,333
5,218,059
4,800,000
4,488,552
3,899,146
3,500,000
3,175,000
2,800,000
2,688,732
2,600,000
2,600,000
2,566,568
2,450,928
2,266,667
402,685,375
22.24
22.24
9.05
8.77
7.28
3.28
1.52
1.08
0.99
0.93
0.81
0.72
0.66
0.58
0.56
0.54
0.54
0.53
0.51
0.47
83.30
Mr Mark Siegel
Mr David Wattel
Washington H Soul Pattinson & Company Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Mr John Herbert Bannister
Litigation Management Pty Limited
Prolex Holdings Limited (PHL A/C)
Wattle Laboratories Pty Limited (Advanced Culture Systems A/c)
BNP Paribas Noms Pty Ltd (IB AU Noms Retail Client DRP)
Barbright Australia Pty Ltd (Interquartz Super Fund A/C)
Alpha Bronte Pty Limited (The Bronte Carlo A/c)
Mr Jason Maxwell Yu
Onmell Pty Ltd (ONM BPSF A/C)
Diane Lesley Jones
Mr Ping Kin Yu & Mrs Wai Ying Elsa Yu (PK and Elsa Super Fund A/c)
Mr Alistair David Strong
Garrett Smythe Limited
BT Portfolio Services Limited
Mrs Adele Whyte
Unquoted equity securities (options)
There are no unquoted equity securities.
76
LawFinance Limited (formerly JustKapital Limited)
Shareholder information
31 December 2018
Substantial holders
Substantial holders in the Company are set out below:
Mr Mark Siegel
Mr David Wattel
Washington H Soul Pattinson & Company Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number held
107,548,702
107,548,701
43,750,000
42,411,334
35,193,263
% of total
shares
issued
22.24
22.24
9.05
8.77
7.28
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Warrants
Details
Warrants issued to other Syndicated Acquisition
Facility participants
Warrants issued to NHF Founders
Securities subject to voluntary escrow
Details
Escrowed related party vendor shares related to the
purchase of the Litigation funding portfolio
Escrowed director and NHF Founders shares related
to the purchase of NHF
Number
of warrants
329,880,000
122,863,636
452,743,636
Number
of shares
7,333,333
215,097,403
222,430,736
77