RNS Number:6588E
Shariah Capital, Inc
28 September 2007
Shariah Capital Inc. ("Shariah Capital" or "the Company")
Interim Results
Shariah Capital announces interim results for the period ending 30 June 2007.
Shariah Capital is a U.S.-based company that creates and customizes Shariah
compliant financial products and platforms and provides Shariah consulting and
advisory services primarily to financial institutions and investment firms with
product initiatives directed to Islamic investors.
Highlights
Shariah Capital made significant progress in the first half of 2007, meeting the
following corporate objectives.
On 18 March 2007, the Company was granted a license to operate from the Dubai
International Financial Centre (DIFC) in the United Arab Emirates.
Subsequently, the company opened an office in Dubai. The DIFC license and the
Dubai office will enable the company to access revenue-generating business
opportunities through the DIFC and its member companies and increase its
visibility in the Gulf.
On 27 March 2007, the Company announced a Shariah compliant separate account
using Shariah Capital's screening software and short-sale solutions within a
customized prime brokerage structure. The separately managed-account, at
Barclays Prime Services in New York, is managed under a 130/30 strategy by GRT
Capital Partners (GRT), a hedge fund manager in Boston with $1 billion assets
under management. This account is unique because it is operated Shariah
compliant, with a major prime broker, in the U.S. The Company believes the
success of this account's operation will encourage more hedge fund managers to
adopt its screens and methodologies and thereby drive revenue for the Company.
For this account, GRT and Shariah Capital have been nominated for a Terrapinn
Islamic Funds World award in Dubai as the Most Innovative Islamic Fund for 2007.
These developments led to two new advisory agreements for the Company:
On 10 September 2007, the Company issued a joint press release with Barclays
Capital, the investment banking division of Barclays Bank PLC, announcing the
signing of a memorandum of understanding to launch a Shariah compliant
investment platform entitled the Al Safi Trust. Comprised initially of hedge
fund strategies utilizing Shariah Capital's screening and short-sale
methodologies, the Al Safi Trust is designed to accommodate products covering a
range of investment classes, including hedge funds, real estate and commodities.
Shariah Capital is the exclusive Shariah advisor to Al Safi. Barclays is the
prime broker and global marketer. Al Safi Trust intends to be opened for
investment in fourth quarter 2007. Shariah Capital will be compensated as
Shariah advisor based on the size of assets on the Al Safi Trust platform.
Shariah Capital also in September signed an agreement with an agency of the
Dubai government to develop a range of Shariah compliant investment products.
With Shariah Capital as Shariah advisor, there is an opportunity to generate
revenue for the Company and establish a long-term relationship with an important
client.
Enquiries:
Eric Meyer
Chairman and Chief Executive Officer
Shariah Capital, Inc.
Telephone: +1 (203) 972-0331
emeyer@shariahcap.com
Bill Redman
Managing Director and Treasurer
Telephone: +1 (203) 972-0331
bredman@shariahcap.com
Investec Investment Banking
James Wheatcroft
+44 207 597 5308
Chairman's statement
Key First Half Achievements and Announcements
Shariah Capital is a multi-dimensional company that creates Shariah-compliant
financial products and provides Shariah compliant consulting and related
services. It delivers these products and services under its own brand name,
under co-branding arrangements with joint venture partners or on a private label
basis. Its targeted clients are financial institutions and investment management
firms that are building product platforms primarily directed to the Middle East,
Asia and the Far East and, specifically, to Islamic institutional and high net
worth investors.
The Company continues to selectively undertake Shariah mandates that can lead to
more extensive, longer-term product development relationships. Its efforts
include assembling teams of knowledgeable and experienced Islamic jurists to
coordinate research followed by product certification and ongoing Shariah
supervision. The Company also typically works with institutional clients and
their legal counsel to explain the Shariah process and to facilitate
compliance-related issues, including management of Shariah compliance risk and
the challenges to specific product solutions.
The Board of Shariah Capital is pleased with the Company's performance in the
first half of 2007 and subsequent developments.
On 27 March 2007, Shariah Capital announced a Shariah-compliant separate account
which utilizes the Company's Shariah screening software and Shariah-compliant
shorting structure. This structure provides Shariah compliant solutions for
short-sales, options and balance sheet leverage within a customized prime
brokerage arrangement. We believe this account represents a major step in
bridging Islamic finance with the alternative investment world. The account is
the first to utilize Shariah Capital's proprietary screening software and
compliance criteria.
On 18 March 2007, Shariah Capital was granted a license to operate in the Dubai
International Financial Centre (DIFC). In conjunction with the license, the
Company opened an office in Dubai. Shariah Capital intends to use its DIFC
registration to pursue business opportunities originating from DIFC member
institutions and from the Gulf.
In June 2007, Shariah Capital and William D. Witter, Inc. announced a strategic
alliance focusing on Witter's plans to offer Shariah compliant investment funds
to select investors. Witter plans to launch a Shariah compliant version of its
Penfield Partners Fund, a long-short equity hedge fund. Witter also expects to
launch a Shariah compliant real estate fund focused on residential and
commercial properties located in high growth cities in the Western U.S.
On 10 September 2007, the Company issued a joint press release with Barclays
Capital, the investment banking division of Barclays Bank PLC regarding a
memorandum of understanding between the two firms to launch a Shariah-compliant
investment platform. The Al Safi Trust initially will offer equity long-short
and market neutral hedge fund strategies. The Al Safi Trust is expected to open
for investment in the 4th quarter of 2007.
Also in September 2007, Shariah Capital signed an agreement with an agency of
the Dubai government to develop Shariah compliant investment products. As part
of this agreement, the Company will collaborate on a suite of Shariah compliant
products privately-labeled under the agency's brand name.
The Company continues to receive interest from the global press for its
longstanding efforts in Islamic finance. Coverage during the first half of 2007
included articles and interviews in Forbes, The Wall Street Journal, U.S. News
and World Report, Islamic Finance News and a live interview on CNBC. All of
these are accessible on the Company's website, www.shariahcap.com
Our personnel
With the rise in demand for Shariah compliant products,
internationally-recognized Shariah scholars are in short supply and high demand.
Shariah Capital has always enjoyed close working relationships with some of the
most reputable scholars in Islamic finance. As part of its original and on-going
business strategy and to address the problems caused by scholar shortages,
Shariah Capital consolidated and enhanced its capacity with Shariah scholars in
October 2006 by hiring Shaykh Yusuf Talal DeLorenzo of Washington, D.C. Shaykh
Yusuf is the Company's full-time Chief Shariah Officer and a member of its Board
of Directors. In this role, Shaykh Yusuf draws upon key relationships with
Shariah scholars around the world to assemble committed critical thinkers best
suited for Shariah Capital's advisory mandates. Under his leadership, Shariah
Capital has formulated a process for identifying and sourcing
appropriately-qualified Shariah scholars to projects best suited to their
particular capabilities. This access to leading Shariah scholars gives the
Company a decided advantage over competing firms and enables it to commit to
product timelines and workflows.
Financial review
During the first six months of 2007, the Company realized a net loss of
US$1,431,480, US$655,459 of which was for non-cash charges. This loss compares
to a loss of US$285,451 for the same period in 2006. Cash charges were
attributable primarily to management salaries, ongoing nominating advisor fees,
office rents and travel expenses. The cash charges reflect the addition of two
senior executives to the firm and the increase in compensation to
market-competitive levels for all employees, including restricted stock awards.
In the first six months of 2007, the Company made a strategic decision to focus
on securing larger recurring revenue opportunities at the expense of near-term
consulting engagements. Consequently, revenues from the first half of the fiscal
year reflected the Company's efforts to obtain its DIFC license and finalize
negotiations relating to its new business relationship with Barclays Capital.
The Company's revenues totaled US$180,630 during the first six months of 2007
comprised of consulting revenue and income generated from its cash position. As
investment products from existing agreements are launched, the Company looks
forward to realizing the revenue opportunities presented by these agreements
during the remainder of the fiscal year and into 2008.
Liquidity and Capital Resources
The Company's cash position of $3.3 million at 30 June 2007 is more than
sufficient to allow the Company to meet existing contract commitments and pursue
additional new business.
Outlook
We look forward to the future with continued confidence. Our key accomplishments
demonstrate our first mover advantage and strong position in Islamic Finance.
With our DIFC license and the Barclays advisory relationship, in addition to the
Dubai government contract and formal recognition for an innovative Islamic
product, we believe that we now are a recognized competitor in this market. We
are well positioned to benefit from the rising demand for Islamic investment
products.
Financial Information Shariah Capital Inc.
Balance Sheets
Shariah Capital, Inc.
(formerly Meyer Fund Management, LLC)
Balance Sheet (unaudited as of 30 June 2007; audited as of 30 June 2006)
30 June 2007 30 June 2006
US$ US$
-------------------------------------------------------------------------------------
Assets
Cash 113,185 96,317
Certificates of deposit 2,703,926 -
Securities purchased, at fair value 785,220 -
Due from related parties 1,038 11,097
Prepaid expenses and other current assets 63,874 855
Property and equipment-net 7,435 4,596
-------------------------------------------------------------------------------------
Total assets 3,674,678 112,865
=====================================================================================
Liabilities and Stockholders' Equity
Accounts payable - $14,821
Accrued expenses and other current liabilities 33,228 104,651
Securities sold, not yet purchased, at fair value 248,477 -
Deferred revenue - 25,000
-------------------------------------------------------------------------------------
Total liabilities 281,705 144,472
-------------------------------------------------------------------------------------
Stockholders' equity
Common stock, $.01 par value; 70,000,000 shares
authorized; 58,540,600 shares issued and
outstanding 585,406 -
Additional paid-in capital 4,827,509 -
Retained deficit (2,019,942) -
Total stockholders' equity 3,392,973 (31,607)
-------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 3,674,678 112,865
=====================================================================================
Statements of Operations
Shariah Capital, Inc.
(formerly Meyer Fund Management, LLC)
Statements of Operations (unaudited as of 30 June 2007; audited as of 30 June
2006)
Six months ended Six months ended
30 June 2007 30 June 2006
US$ US$
------------------------------------------------------------------------------------
Revenues
Interest income 88,713 -
Consulting 39,980 172,500
Investment income
Net realized gain 34,886 -
Net change in unrealized (depreciation) (875) -
Dividend income 1,426 -
----------------------------------
Total investment income 35,437 -
Rental income 16,500 6,750
Conference attendee and sponsorship - 18,868
------------------------------------------------------------------------------------
Total revenues 180,630 198,118
Expenses
General and administrative expenses 1,604,651 $239,331
Consultant expenses 7,459 29,431
Conference hosting expenses - 15,107
Interest expense - 1,582
------------------------------------------------------------------------------------
Total expenses 1,612,110 285,451
------------------------------------------------------------------------------------
Net loss (1,431,480) (87,333)
=====================================================================================
Earnings (loss) per share, basic & diluted $(.02) $(.002)
=====================================================================================
Weighted average shares outstanding, basic & diluted 58,480,932 50,000,000
=====================================================================================
Statements of Cash Flows
Shariah Capital, Inc.
(formerly Meyer Fund Management, LLC)
Statements of Cash Flows (unaudited as of 30 June 2007; audited as of 30 June
2006)
Six months ended Six months ended
30 June 2007 30 June 2006
US$ US$
--------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss (1,431,480) (87,333)
Adjustments to reconcile net loss to net cash
used in operating activities:
Restricted stock issued 665,479
Net change in unrealized depreciation 875
Depreciation and amortization 898 619
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 27,715 7,812
Accounts payable (9,446) 8,028
Accrued expenses and other current liabilities (534,943) 51,462
--------------------------------------------------------------------------------
Net cash used in operating activities (1,280,902) (19,412)
--------------------------------------------------------------------------------
Cash flows from investing activities:
Sale of certificate of deposit 813,891 -
Cost of securities purchased (782,374) -
Proceeds from securities sold, not yet purchased 244,756 -
Purchases of property and equipment (2,110) -
--------------------------------------------------------------------------------
Net cash provided by investing activities 274,163 -
--------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from sale of common stock, net of AIM
expenses (1,869) -
Due from related parties 28,059 -
--------------------------------------------------------------------------------
Net cash provided by financing activities 26,190 -
--------------------------------------------------------------------------------
Net (decrease) in cash (980,549) (19,412)
Cash, beginning of period 1,093,734 115,729
--------------------------------------------------------------------------------
Cash, end of period 113,185 96,317
================================================================================
Summary of Significant Accounting Policies
The Company and Nature of Operations
Shariah Capital, Inc. ("the Company") was formed on September 6, 2006 as a
Delaware Corporation. The Company creates and customizes Shariah compliant
financial products and platforms and provides Shariah consulting and advisory
services primarily to financial institutions and investment firms with product
initiatives directed to Islamic investors. The Company's targeted clients are
financial institutions and investment management firms that are building product
platforms directed to the Middle East and Far East and, specifically to, Islamic
institutional and high net worth investors. The firm also is exploring and
expects to pursue a number of business opportunities with financial and
investment firms in Europe, Asia and the United States.
On September 26, 2006, the Company increased the authorized shares of common
stock that it may issue to 70,000,000 shares.
On November 8, 2006, the Company acquired the assets and liabilities of Meyer
Fund Management, LLC ("Meyer"), the predecessor Company. The current members of
Meyer were given 50,000,000 shares of common stock in the Company, based on
their existing percentage holdings in Meyer. The merger was accounted for as
entities under common control, whereby the Company recognized the assets and
liabilities of Meyer at their carryover basis as of the date of the merger.
Accordingly, the accompanying financial statements present the operations of
Shariah Capital, Inc. as of June 30, 2007 and for the six months ended June 30,
2007 and the operations of Meyer Fund Management, LLC as of June 30, 2006 and
for the six months ended June 30, 2006. Post merger, Meyer has since been
dissolved.
Revenue Recognition
The Company recognizes revenue in the month when the services are provided.
Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation and amortization are
provided principally on the straight-line method over the estimated useful
lives. Fully depreciated assets are written off in the year following its last
depreciation charge. The estimated useful life of the computer equipment is 5
years.
Cash and Cash Equivalents
Cash and cash equivalents consist of short term highly liquid investments
purchased with original maturities of three months or less and are readily
convertible into cash.
Concentration of Credit Risk
The Company maintains cash balances with a major money center bank. The balance
in this account at this institution at times maybe in excess of the FDIC insured
limit. The Company has not expensed any losses on such accounts.
Additionally, the Company maintains a brokerage account with a financial
institution that carried an AA rating as of 30 June 2007. The balance in this
account at this institution at times may be in excess of the SIPC insured limit.
The Company has not expensed any losses on such accounts.
Advertising
The Company expenses advertising costs as they are incurred.
Income Taxes
On September 6, 2006, Shariah Capital, Inc. was incorporated in Delaware as a C
Corp. under the provisions of the Internal Revenue Code. The Company is
responsible for minimum taxes to the States of Delaware and Connecticut. Due to
the current period loss, no income tax provision has been made in the
accompanying financial statements and only the required minimum and capital
taxes have been provided for.
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under this method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying statutory tax rates expected to be applicable in future
years to differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities.
A valuation allowance reduces deferred tax assets when it is more than likely
than not that some or all of the deferred tax assets will not be realized.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing net income (loss) by the
weighted average common shares outstanding. Diluted earnings (loss) per share is
computed by dividing net income (loss) by the weighted average common shares
outstanding adjusted for incremental dilution of potentially dilutive
securities. There were no potentially dilutive securities in 2006 or for the six
months ended June 30, 2007.
Notes to Financial Statements (unaudited) as of June 30, 2007; audited as of
June 30, 2006)
Private Placement and Recapitalization
On September 1, 2006, the Company entered into a "Master Participation
Agreement" with numerous individuals and entities. These participants funded the
Company in the aggregate of US$1.2 million. The funding provided working capital
to the Company and to fund costs and expenses related to having its common stock
admitted for trading on the London Alternative Investment Market (the "AIM") on
terms and conditions as defined in the Agreement.
On September 27, 2006 the Company entered into a Private Placement Memorandum
with numerous individuals and entities. These participants funded the Company in
the aggregate of US$3.0 million. The funding finalized the capitalization of the
company prior to having its common stock admitted for trading on the London
Alternative Investment Market (the "AIM") on terms and conditions as defined in
the Agreement.
On December 13, 2006, the Company started publicly trading on the AIM under the
ticker symbol ("SCAP"). In total, the Company was capitalized with US$5,740,600,
of which US$1,200,000 was raised from the Master Participation Agreement,
US$3,000,000 as part of the private placement, and the remaining US$1,540,600
raised from an Investec (AIM representative). Included in the funds raised are
shares issued in lieu of payment for professional services that amounted to
US$190,600. Total costs incurred amounted to approximately US$1,064,000 for 2006
and US$1,900 for six months ended June 30, 2007.
Property and Equipment - net
Property and equipment - net, held and used at June 30, 2007 and June 30, 2006
consists of the following:
2007 2006
US$ US$
------------------------------------------------------------------------
Computer equipment 10,559 6,190
------------------------------------------------------------------------
Less: Accumulated depreciation and amortization 3,124 1,594
------------------------------------------------------------------------
7,435 4,596
========================================================================
Depreciation expense amounted to $898 and $619 for the period ended June 30,
2007 and June 30, 2006, respectively. Depreciation expense is included in
general and administrative expenses.
Commitments
The Company is a party to an operating lease agreement relating to the rental of
its corporate office that expires on August 31, 2007, with an annual base rent
of approximately US$72,000. The lease also includes a provision to pay
additional rent for its proportionate share of utilities of approximately
US$1,600 per month over the lease term. The Company is also a party to a
month-to-month operating lease agreement relating to the rental of corporate
office space in Dubai that commenced in April 2007. Total rent expense amounted
to approximately US$69,615 and US$43,898 for the six months ended June 30, 2007
and June 30, 2006, respectively. Rent expense is included in general and
administrative expenses. The Company sublets a portion of this corporate office
on a month-to-month basis to two tenants. Since April 2007, only one tenant
subleased space. Rental income amounted to approximately US$19,500 and US$6,750
for the six months ended June 30, 2007, and June 30, 2006, respectively.
Subsequently, the Company is a party to a lease with annual base rent of
approximately US$73,160 that expires on 31 August 2008 with a proportionate
share of utilities of US$1,745 per month.
Employment Agreements
The Company entered into employment agreements with its management employees
effective December 7, 2006, whereby annual cash salaries aggregate US$1,050,000.
The agreements provide for 6 to 12 months notice of termination and provide for
the annual salaries to be paid through the termination date. In addition, the
agreement with the Chairman and Chief Executive Officer of the Company provides
for a US$650,000 termination fee.
Non Executive Director Service Agreement
Effective December 6, 2006, the Company entered into a Non Executive Director
Service Agreement whereby the individual will serve as the Chairman of the
audit, nomination and compensation committees of the board of directors for an
annual fee of US$32,500. The term of the agreement shall be for a period of not
less than six months unless notice is given in writing by either party to
terminate the agreement.
Supplemental Disclosures of Cash Flow Information
Supplemental disclosures of cash flow information are as follows:
Six months Six months
ended 30 June ended 30 June
2007 2006
US$ US$
--------------------------------------------------------------
Cash paid during the period -0- 1,582
==============================================================
Share Based Compensation
In December 2004, the Financial Accounting Standards Board ("FASB") issues SFAS
123R, "Share-based Payment," a revision of SFAS 123 which supersedes APB 25
"Accounting for Stock Issued to Employees". The Company adopted SFAS 123R using
the modified prospective application. Under this method, compensation cost is
recognized for all share-based payments granted, modified, or settled after the
date of adoption as well as for any unvested awards that were granted prior to
the date of the adoption.
The Company granted 2,700,000 shares of restricted stock on December 7, 2006 to
several of its employees. These 2006 restricted stock grants vest over a period
of three years. Under the provisions of SFAS 123R, share-based compensation
cost is measured at the grant date, based on the calculated fair value of the
award, and is recognized as an expense over the employee's requisite service
period, which is the vesting period of the grant. Accordingly, compensation
expense of US$545,479 was recorded for the six months ended June 30, 2007 in
connection with the restricted stock grants and is included in general and
administrative expenses. Additional compensation expense costs amounting to
US$528,220, US$713,151 and US$840,822 will be recognized over the next three
years.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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