SRI - open questionsPlease, don't call me a party breaker, but I did some reading (below is an excerpt of Management’s Discussion and Analysis dated May 29, 2019) and here are my calculations of actual SRI's ownership share in VRB Energy (share in profit from the sale of VRB shares SRI would be entitled to in case “liquidity event” occurs).
| VRB shares owned by SRI before 2017 equity increase | 9.000.000 |
| VRB Shares acquired by SRI in 2017 (only entitled to 20% od profit from sale) | 6.976.744 |
| % of VRB in total | 9,80% |
| % of VRB (taking into account only 20% od 2017 acquired shares)* | 6,38% |
| % od VanSpar owned by SRI | 87,46% |
| Final ownership share of SRI in VRB Energy (profit share after potential sale) | 5,58% |
| *I disregarded "transaction costs and principal fund provided by the private investor plus 7% annual interest" |
Furthermore, I really, really dislike the text I bolded below. Why are shares bought by the funds provided by the Private investor addressed as “Addition shares”, but when talking about profit distribution, the text clearly says “VRB share sales” and not “Additional share sales”. Could it mean that the private investor will be entitled to 80% of the profit from the sale of all VRB Shares (whole 9.8%), which would bring the share in the profit belonging to SRI down to 1.71%???
EXCERPT:
»In 2017, the Company’s subsidiary VanSpar executed a profit-sharing agreement with a private investor for VanSpar to acquire additional shares in JDH (renamed VRB). Before the agreement VanSpar owned 9,000,000 common shares of VRB or 18% of the total VRB shares. Under the profit-sharing agreement, the private investor agreed to provide funds required for VanSpar to participate in any VRB financing and acquire additional VRB shares (“Additional Shares”) in VRB’s future financings, to maintain VanSpar’s 18% in VRB. The funds could be used only for this purpose. Once the Additional Shares are sold subsequent to a liquidity event, the Investor will be entitled to 80% of the profits from VRB share sales (calculated as proceeds of sales minus transaction costs minus the principal fund provided by the private investor plus 7% annual interest) and VanSpar 20% of the profit. In the case where there is no profit or even a loss VanSpar will not be responsible for repayment of the principal funds to the investor. In 2017 VanSpar participated in a VRB financing where VRB raised US $5 million through the sale of 38,759,690 shares at a deemed value of USD$0.129 per share, completed by 5 tranches. As of December 31, 2017, VanSpar had received five payments for a total of US$900,000 from the private investor to participate in this financing and had made five payments to VRB for purchase of 6,976,744 Additional Shares. The Company has determined this profit-sharing agreement with the investor to be a joint operation and had recognized no share of gain, asset or liability as of December 31, 2018 and March 31, 2019.« Regards,
Luka