UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from   _______________ to _______________ 

 

Commission File Number 001-37402

 

Till Capital Ltd.

(Exact name of registrant as specified in its Charter)

 

Bermuda (State or Other Jurisdiction of Incorporation or Organization)

Not Applicable (I.R.S. Employer Identification Number)

Crawford House

50 Cedar Avenue

Hamilton, HM11, Bermuda

(Address of Principal Executive Offices, Including Zip Code)

 

(208) 635-5415

(Registrant’s Telephone Number, Including Area Code)

 

N/A

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

______________________

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

YES

X

NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

 

YES

X

NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer     o		Accelerated filer  o
Non-accelerated filer       o	(Do not check if a smaller reporting company)	Smaller reporting company  x
		Emerging growth company   x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

YES				NO	X

 

As of August 14, 2017, the registrant had 3,350,284 restricted voting shares outstanding.

 

TILL CAPITAL LTD.

TABLE OF CONTENTS

 

 

 

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets at June 30, 2017 and December 31, 2016	1
	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2017 and 2016	2
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016	3
	Notes to Interim Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Interim Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Under Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	23
	Signatures	24

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

TILL CAPITAL LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

TILL CAPITAL LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

TILL CAPITAL LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

TILL CAPITAL LTD.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2017 and 2016

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Interim Operations

 

The following should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Till’s consolidated financial statements for the year ended December 31, 2016 included in Till’s Annual Report on Form 10-K as filed with the SEC (the “2016 Report”).

 

Cautionary Statement for Forward-Looking Information

 

Certain statements in this Quarterly Report on Form 10-Q (this “Report”) of Till Capital Ltd. ("Till," "we," "us" or "our"), including statements in this MD&A, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events, or performance (often, but not always, using phrases such as “expects” or “does not expect,” “is expected,” “anticipates”, or “does not anticipate,” “plans,” “scheduled,” “forecasts,” “estimates,” “believes,” “intends,” or variations of such words and phrases or stating that certain actions, events, or results “may,” “could,” “would,” “might,” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements and are intended to identify forward-looking statements. Those forward-looking statements are based on the beliefs of our management, as well as on assumptions that such management believes to be reasonable, based on information currently available at the time such statements were made. Forward-looking statements speak only as of the date they are made, and we assume no duty to, and do not undertake to, update forward-looking statements.

 

Any or all forward-looking statements may turn out to be wrong, and, accordingly, Till cautions readers not to place undue reliance on such statements. Till bases these statements on current expectations and the current economic environment as of the date of this Report. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance; actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties that may be important in determining Till’s actual future results and financial condition.

 

Factors that could cause actual results to differ materially from any results projected, forecasted, estimated, or budgeted or that may materially and adversely affect our actual results include but are not limited to (i) the cyclical nature of the insurance and reinsurance markets, (ii) fluctuations in the number and severity of insurance claims, (iii) our ability to purchase reinsurance on favorable terms when required, (iv) changes in the legal and regulatory environment in the U.S., Canada or Bermuda, (v) changes in insurance industry trends and significant industry developments, (vi) the effect of emerging claim and coverage issues on our business, (vii) any suspension or revocation of RRL’s or Omega’s reinsurance/insurance license, (viii) fluctuations in interest rates that could have an impact on our ability to generate investment income, (ix) our ability to access capital when needed, and (x) changes in ratings by ratings agencies of Till and/or its insurance company subsidiaries.  For additional information, see pages 1-3 and Part I, Item 1A. Risk Factors in the 2016 Report.

 

Overview

 

Till is an insurance holding company domiciled in Bermuda. Through Till’s two wholly-owned insurance subsidiaries, RRL and Omega, we provide property and casualty insurance and reinsurance business. Till operates in a single segment, specifically insurance.

 

RRL, a Bermuda domiciled company, was organized to offer reinsurance coverage to a select group of insurance companies, e.g., captive insurers, privately-held insurers, and other global insurers and reinsurers. RRL entered into its initial reinsurance contracts effective December 31, 2014. Those initial reinsurance contracts were novated in September 2015. RRL currently does not have any active reinsurance contracts in force. RRL intends to participate in reinsurance contracts using the Multi-Strat Re platform to underwrite medium- to long-term property and casualty business, as acceptable opportunities are identified. RRL’s primary sources of income are reinsurance premiums and investment income. RRL also owns 64% of the outstanding shares of Silver Predator Corp., a Canadian-based junior mineral exploration company that has historically been engaged in exploring for and developing economically viable silver, gold, and tungsten deposits in Canada and the United States, with a focus on Nevada and Idaho.

 

Omega, a Canada domiciled company, underwrites direct and reinsurance business. As a reinsurer, Omega provides assumption reinsurance to insurance companies that want to exit the Canadian market, and to insurance companies that want to transfer all of their remaining claim liabilities on particular books of business; those arrangements are commonly referred to as “run-off” or “loss portfolio transfer” assumption business. Omega also is a primary insurer, direct writer, for insurance companies looking to write Canadian business, but lacking the appropriate Canadian insurance licenses. In that capacity, Omega acts as the direct writer, or fronting company, for a specific insurance company and typically will cede most or all of that fronted business to that insurer. Omega has three sources of revenue, namely, (i) premiums on portfolio transfer transactions and fees related to managing Canadian branch offices in “run-off”, (ii) assumption reinsurance, including servicing fees in certain transactions, and (iii) premiums on direct business.

 

Till’s other subsidiaries include Till Management Company (“TMC”), Golden Predator US Holding Corp. (“GPUS”), and Focus. TMC provides investment advisory and investment management services, and GPUS provides personnel services, financial accounting, corporate and compliance, and other back-office support to Till and its subsidiaries, and Focus provides management services to Omega and consulting and management services to third-party insurers.

 

The discussion of Till's financial condition and results of operations that follows is intended to provide summarized information to assist the reader in understating Till's condensed consolidated financial statements, as well as to provide explanations as regards the primary factors that accounted for those financial statement changes from year to year and quarter to quarter. This discussion should be read in conjunction with Till's condensed consolidated financial statements that appear in Part I, Item 1 of this Report.

 

Critical Accounting Estimates

 

When Till prepares its condensed consolidated financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America ("GAAP"), Till must make estimates and assumptions about future events that affect the amounts reported. Certain of those estimates result from judgments that can be subjective and complex. As a result of that subjectivity and complexity, and because Till continuously evaluates those estimates and assumptions based on a variety of factors, actual results could materially differ from Till's estimates and assumptions if changes in one or more factors require Till to make accounting adjustments. During the six months ended June 30, 2017, Till reassessed its critical accounting policies and estimates as disclosed within the 2016 Report; Till has made no material changes or additions with regard to such policies and estimates.

 

Results of Operations - Three and six month periods ended June 30, 2017 compared with three and six month periods ended June 30, 2016

 

The following table summarizes Till’s consolidated results of operations for the periods indicated:

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2017				2016				2017				2016
Revenue:
Insurance premiums written		$	15,227,032			$	9,352,770			$	35,060,344			$	19,294,908
Insurance premiums ceded to reinsurers			(14,455,148	)			(9,182,235	)			(32,889,624	)			(18,799,337	)
Change in unearned premiums			(475,157	)			44,028				(1,580,593	)			(133,364	)
Net premiums earned			296,727				214,563				590,127				362,207
Investment income (loss), net			(342,410	)			1,203,104				622,941				1,248,392
Gain on sale of mineral interests and PP&E			1,070,835				—				1,075,335				43,000
Other revenue			114,135				124,356				274,305				294,129
Total Revenue			1,139,287				1,542,023				2,562,708				1,947,728
Expenses:
Losses and loss adjustment expenses, net			264,955				177,466				582,986				388,804
General and administrative expenses			616,078				530,408				1,197,242				996,066
Salaries and benefits			296,447				289,163				592,292				845,026
Stock-based compensation			3,776				16,781				23,527				25,107
Mining related expenses and property impairment			17,601				13,104				28,633				24,521
Foreign exchange (gain) loss			26,380				3,325				22,020				(231,685	)
Interest and other (income) expense			1,633				(31,788	)			4,199				(26,239	)
Total Expenses			1,226,870				998,459				2,450,899				2,021,600
Income (loss) before income taxes and equity loss on equity method investment			(87,583	)			543,564				111,809				(73,872	)
Current income tax expense			(23,879	)			(121,193	)			(34,825	)			(176,954	)
Deferred income tax benefit			65,474				36,683				111,923				119,419
Loss on equity method investment			(34,597	)			(3,847	)			(50,283	)			(12,428	)
Net income (loss)		$	(80,585	)		$	455,207			$	138,624			$	(143,835	)
Income (loss) attributable to:
Shareholders of Till Capital Ltd.			(67,221	)			479,250				142,882				(162,706	)
Non-controlling interests			(13,364	)			(24,043	)			(4,258	)			18,871
Net income (loss)		$	(80,585	)		$	455,207			$	138,624			$	(143,835	)
Basic and diluted income (loss) per share of Till Capital Ltd.		$	(0.02	)		$	0.14			$	0.04			$	(0.05	)
Weighted average number of shares outstanding			3,350,284				3,426,577				3,350,284				3,427,931

 

Comparison of the three month periods ended June 30, 2017 and 2016

 

Revenue

 

Insurance premiums written

Insurance premiums written increased from $9.4 million for the three months ended June 30, 2016 to $15.2 million for the three months ended June 30, 2017. That increase in insurance premiums relates primarily to a new insurance program at Omega and growth in other Omega insurance programs during the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

 

Insurance premiums ceded to reinsurers

Insurance premiums ceded to reinsurers increased from $9.2 million for the three months ended June 30, 2016 to $14.5 million for the three months ended June 30, 2017. That increase in insurance premiums ceded to reinsurers relates primarily to a new insurance program at Omega and growth in other Omega insurance programs during the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

 

Change in unearned premiums

Change in unearned premiums increased from a decrease of $44,028 for the three months ended June 30, 2016 to an increase of $0.5 million for the three months ended June 30, 2017. That increase in the change in unearned premiums relates primarily to a new insurance program at Omega and growth in other Omega insurance programs during the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

 

Investment income (loss), net

Investment income (loss), inclusive of net realized investment gains and losses, decreased from $1.2 million for the three months ended June 30, 2016 to a loss of $0.3 million for the three months ended June 30, 2017. That decrease in net investment income (loss) was due mostly to losses in trading of futures strategies during the three months ended June 30, 2017 and larger gains in legacy natural resource investments for the three months ended June 30, 2016 as compared to the three months ended June 30, 2017.

 

Gain on sale of mineral interests and PP&E

Gain on sale of mineral interests and PP&E increased from $nil for the three months ended June 30, 2016 to $1.1 million for the three months ended June 30, 2017. That increase in gain on sale of mineral interests and PP&E was due mostly to the completion of an option agreement that resulted in the sale of a mineral property during the three months ended June 30, 2017 compared to no sales of mineral interests and PP&E during the three months ended June 30, 2016.

 

Total revenue

Total revenue decreased from $1.5 million for the three months ended June 30, 2016 to $1.1 million for the three months ended June 30, 2017. That decrease in total revenue was due principally to decreased investment income for the three months ended June 30, 2017 compared to the three months ended June 30, 2016, partially offset by increased gain on sale of mineral interests and PP&E as well as increased net premiums earned for the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

 

Expenses

 

Losses and loss adjustment expenses, net

Losses and loss adjustment expenses, net of amounts ceded to reinsurers, increased from $0.2 million for the three months ended June 30, 2016 to $0.3 million for the three months ended June 30, 2017. That increase in loss and loss adjustment expenses net of amounts ceded to reinsurers was due to higher adverse development on prior-year claims mostly related to the hospitality program incurred in the three months ended June 30, 2017 as compared to the three months ended June 30, 2016.

 

General and administrative expenses

General and administrative expenses increased from $0.5 million for the three months ended June 30, 2016 to $0.6 million for the three months ended June 30, 2017. That increase in general and administrative expenses was due to higher professional fees for the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

 

Net income (loss)

Net income decreased from $0.5 million for the three months ended June 30, 2016 to a net loss of $0.1 million for the three months ended June 30, 2017. That decrease in net income was due principally to decreased investment income for the three months ended June 30, 2017 compared to the three months ended June 30, 2016, partially offset by increased gain on sale of mineral interests and PP&E as well as increased net premiums earned for the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

 

Comparison of the six month periods ended June 30, 2017 and 2016

 

Revenue

 

Insurance premiums written

Insurance premiums written increased from $19.3 million for the six months ended June 30, 2016 to $35.1 million for the six months ended June 30, 2017. That increase in insurance premiums relates primarily to a new insurance program at Omega and growth in other Omega insurance programs during the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

 

Insurance premiums ceded to reinsurers

Insurance premiums ceded to reinsurers increased from $18.8 million for the six months ended June 30, 2016 to $32.9 million for the six months ended June 30, 2017. That increase in insurance premiums ceded to reinsurers relates primarily to a new insurance program at Omega and growth in other Omega insurance programs during the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

 

Change in unearned premiums

Change in unearned premiums increased from $0.1 million for the six months ended June 30, 2016 to $1.6 million for the six months ended June 30, 2017. That increase in the change in unearned premiums relates primarily to a new insurance program at Omega and growth in other Omega insurance programs during the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

 

Investment income (loss), net

Investment income (loss), inclusive of net realized investment gains and losses, decreased from $1.2 million for the six months ended June 30, 2016 to $0.6 million for the six months ended June 30, 2017. That decrease in net investment income (loss) was due mostly to losses incurred in the trading of futures strategies for the six month ended June 30, 2017 and larger gains in legacy natural resource investments for the six months ended June 30, 2016 as compared to the six months ended June 30, 2017.

 

Gain on sale mineral interests and PP&E

Gain on sale of mineral interests and PP&E increased from $43,000 for the six months ended June 30, 2016 to $1.1 million for the six months ended June 30, 2017. That increase in gain on sale of mineral interests and PP&E was due mostly to the completion of an option agreement that resulted in the sale of a mineral property during the six months ended June 30, 2017 compared to minor sales of mineral interests and PP&E during the six months ended June 30, 2016.

 

Total revenue

Total revenue increased from $1.9 million for the six months ended June 30, 2016 to $2.6 million for the six months ended June 30, 2017. That increase in total revenue was due principally to increased gain on sale of mineral interests and PP&E as well as increased net premiums earned for the six months ended June 30, 2017 compared to the six months ended June 30, 2016, partially offset by decreased investment income for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

 

Expenses

 

Losses and loss adjustment expenses, net

Losses and loss adjustment expenses, net of amounts ceded to reinsurers, increased from $0.4 million for the six months ended June 30, 2016 to $0.6 million for the six months ended June 30, 2017. That increase in loss and loss adjustment expenses net of amounts ceded to reinsurers was due to higher adverse development on prior-year claims mostly related to the hospitality program incurred in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016.

 

General and administrative expenses

General and administrative expenses increased from $1.0 million for the six months ended June 30, 2016 to $1.2 million for the six months ended June 30, 2017. That increase in general and administrative expenses was due to higher professional fees for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

 

Salaries and benefits

Salaries and benefits decreased from $0.8 million for the six months ended June 30, 2016 to $0.6 million for the six months ended June 30, 2017. That decrease in salaries and benefits resulted principally from a one-time payment to Till's former CFO during the six months ended June 30, 2016.

 

Foreign exchange (gain) loss

Foreign exchange (gain) loss decreased from a gain of $231,685 for the six months ended June 30, 2016 to a loss of $22,020 for the six months ended June 30, 2017. That decrease in foreign exchange gain is due primarily to payments received on the Canadian dollar denominated note receivable during the six months ended June 30, 2017. Foreign exchange gain for the six months ended June 30, 2016 was mainly associated with the Canadian dollar denominated note receivable.

 

Net income (loss)

Net income increased from a net loss of $0.1 million for the six months ended June 30, 2016 to net income of $0.1 million for the six months ended June 30, 2017. That increase in net income was due principally to increased gain on sale of mineral interests and PP&E as well as increased net premiums earned for the six months ended June 30, 2017 compared to the six months ended June 30, 2016, partially offset by decreased investment income, increased expenses, and decreased foreign exchange gain for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

 

Financial Condition - June 30, 2017 compared with December 31, 2016

 

		June 30, 2017				December 31, 2016
Cash and cash equivalents		$	5,600,203			$	5,320,208
Investments			19,611,013				16,769,265
Unpaid losses and loss adjustment expenses ceded			7,884,515				7,058,004
Unearned premiums ceded			12,264,323				1,614,803
Premiums receivable and reinsurance recoverables			13,319,154				2,391,427
Deferred policy acquisition costs			1,796,052				498,889
Assets held for sale			4,542,646				4,543,239
Promissory note receivable			—				2,410,494
Other assets			1,366,838				1,848,801
Deferred income tax asset			695,076				583,153
Goodwill			3,084,184				2,980,819
Total assets		$	70,164,004			$	46,019,102
Reserve for unpaid losses and loss adjustment expenses		$	14,125,263			$	13,212,366
Unearned premiums			14,497,030				2,283,118
Reinsurance payables			12,545,864				3,193,409
Accounts payable and accrued liabilities			1,449,003				1,143,825
Other liabilities			1,962,834				397,103
Total liabilities		$	44,579,994			$	20,229,821
Total shareholders’ equity		$	25,584,010			$	25,789,281

 

Cash and cash equivalents and investments

 

Cash and cash equivalents ($5.6 million) and investments ($19.6 million) totaled $25.2 million at June 30, 2017 as compared to cash and cash equivalents ($5.3 million) and investments ($16.8 million) that totaled $22.1 million at December 31, 2016. That increase in cash and cash equivalents resulted from the receipt of payments on a note receivable, partially offset by the purchase of investments. The increase in investments resulted mostly from net purchase of investments.

 

Unearned premiums ceded

 

Unearned premiums ceded totaled $12.3 million at June 30, 2017 as compared to $1.6 million at December 31, 2016. That increase in unearned premiums ceded relates primarily to a new insurance program at Omega during the six months ended June 30, 2017, growth in other Omega insurance programs, and fluctuations resulting from renewals occurring during the six months ended June 30, 2017 for insurance policies renewed under Omega's insurance programs.

 

Premiums receivable and reinsurance recoverables

 

Premiums receivable and reinsurance recoverables totaled $13.3 million at June 30, 2017 as compared to $2.4 million at December 31, 2016. That increase in premiums receivable and reinsurance recoverables relates primarily to a new insurance program at Omega and growth in other Omega insurance programs during the six months ended June 30, 2017.

 

Deferred policy acquisition costs ("DPAC")

 

DPAC totaled $1.8 million at June 30, 2017 as compared to $0.5 million at December 31, 2016. That increase in DPAC relates primarily to a new insurance program at Omega and growth in Omega's other insurance programs during the six months ended June 30, 2017.

 

		June 30, 2017				December 31, 2016
Balance, beginning of period		$	498,889			$	465,472
Acquisition costs deferred			7,708,127				11,110,040
Amortization of DPAC			(6,410,964	)			(11,076,623	)
Balance, end of period		$	1,796,052			$	498,889

 

Promissory note receivable

 

Promissory note receivable was full paid in the 2nd quarter of 2017 and totaled $nil at June 30, 2017 as compared to $2.4 million at December 31, 2016. That decrease in promissory note receivable is due to receipt of payments on the promissory note during the six months ended June 30, 2017.

 

Reserve for unpaid losses and loss adjustment expenses

 

Reserve for unpaid losses and loss adjustment expenses totaled $14.1 million at June 30, 2017 as compared to $13.2 million at December 31, 2016. That increase in reserve for unpaid losses and loss adjustment expenses is in the normal course of business and was due to incurred claims being higher than paid claims during the six months ended June 30, 2017.

 

Unearned premiums

 

Unearned premiums totaled $14.5 million at June 30, 2017 as compared to $2.3 million at December 31, 2016. That increase in unearned premiums relates primarily a new insurance program at Omega during the six months ended June 30, 2017, significant growth in other Omega insurance programs, and fluctuations resulting from renewals occurring during the six months ended June 30, 2017 for insurance policies renewed under Omega's insurance programs.

 

Reinsurance payables

 

Reinsurance payables totaled $12.5 million at June 30, 2017 as compared to $3.2 million at December 31, 2016. That increase in reinsurance payables relates primarily to a new insurance program at Omega and growth in Omega's other insurance programs during the six months ended June 30, 2017.

 

Accounts payable and accrued liabilities

 

Accounts payable and accrued liabilities totaled $1.4 million at June 30, 2017 as compared to $1.1 million at December 31, 2016. That increase in accounts payable and accrued liabilities relates primarily to increased securities sold-short as of June 30, 2017 compared to December 31, 2016.

 

Other liabilities

 

Other liabilities totaled $2.0 million at June 30, 2017 as compared to $0.4 million at December 31, 2016 and is comprised of unearned commissions at Omega. That increase in other liabilities related primarily to a new insurance program at Omega and growth in Omega's other insurance programs during the six months ended June 30, 2017.

 

Liquidity and Capital Resources

 

Cash Flows

 

		Six Months Ended June 30,
		2017				2016
Net cash (used in) provided by:
Operating activities		$	(1,052,728	)		$	(1,518,449	)
Investing activities			(1,577,857	)			3,107,025
Financing activities			2,565,253				491,187
(Decrease) Increase in cash and cash equivalents			(65,332	)			2,079,763
Effects of foreign exchange			345,327				342,495
Cash and cash equivalents, beginning of period			5,320,208				1,519,881
Cash and cash equivalents, end of period		$	5,600,203			$	3,942,139

 

Operating activities

Net cash used in operating activities was $1.1 million for the six months ended June 30, 2017 compared to $1.5 million for the six months ended June 30, 2016, a change of $0.4 million. That decrease in cash used in operating activities in the six months ended June 30, 2017 compared to the six months ended June 30, 2016 is primarily due to an increase in accounts payable and other liabilities of $2.1 million and an increase in unearned premium of $1.5M, partly offset by an increase of premium receivable and reinsurance recoverables net of reinsurance payables of $2.1M, and an increase in deferred policy and acquisition costs of $1.1M for the six months ended June 30, 2017 due primarily to a new insurance program at Omega.

 

Investing activities

Net cash used in investing activities was $1.6 million for the six months ended June 30, 2017 compared to net cash provided of $3.1 million for the six months ended June 30, 2016, a change of $4.7 million. That increase in cash used in investing activities is primarily the result of net purchases of investments of $2.9 million for the six months ended June 30, 2017 compared to cash provided from the net sales of investments of $3.1 million for the six months ended June 30, 2016.

 

Financing activities

Net cash provided by financing activities was $2.6 million for the six months ended June 30, 2017 compared to $0.5 million for the six months ended June 30, 2016, an increase of $2.1 million. The source of cash for the six months ended June 30, 2017 and 2016 was the receipt of $2.6 million and $0.5 million on the note receivable, respectively.

 

Off-Balance Sheet Arrangements

As of June 30, 2017, Till did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

 

Contractual Obligations

 

Not applicable.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not Applicable.

 

Item 4. Controls and Procedures

 

Till’s management evaluated, with the participation of Till’s principal executive and principal financial officers, the effectiveness of Till's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") as of June 30, 2017.  Based on their evaluation, Till’s principal executive and principal financial officers concluded that Till’s disclosure controls and procedures were effective as of June 30, 2017. There has been no change in Till’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the six months ended June 30, 2017 that has materially affected, or is reasonably likely to materially affect, Till's internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Till is party to various litigation matters in the ordinary course of business. Till cannot estimate with certainty its ultimate legal and financial liability with respect to our pending litigation matters. However, Till believes, based on its knowledge of such matters, that its ultimate liability with respect to those matters will not have a material adverse effect on Till's financial position, results of operations, or cash flows.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in the 2016 Report, including those set forth on pages 1-3 and discussed in Part I, “Item 1A. Risk Factors”, that could materially affect Till's business, results of operations, or financial condition. Till may also be subject to additional risks and uncertainties not currently known to Till or that Till currently deems to be immaterial that may prove to materially adversely affect Till's business, results of operations, or financial condition.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

 

Item 6. Exhibits

 

 

2.1	Arrangement Agreement, dated as of February 18, 2014, between Americas Bullion Royalty Corp. and Resource Holdings Ltd. (incorporated by reference to Exhibit 4.11 to Form 20-F filed on March 13, 2015).
3.1	Memorandum of Association of Resource Holdings Ltd. (incorporated by reference to Exhibit 1.1 to Form 20-F filed on March 13, 2015).
3.2	Bye-laws of Till Capital Ltd. (incorporated by reference to Exhibit 1.2 to Form 20-F filed on March 13, 2015).
4.1	Specimen of Restricted Voting Share Certificate (incorporated by reference to Exhibit 4.1 to Form 10-K filed on April 17, 2017).
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Financial statements from the Quarterly Report on Form 10-Q of Till Capital Ltd. as of and for the quarter ended June 30, 2017, formatted in Extensible Business Reporting Language ("XBRL"), namely, (i) the Condensed Consolidated Balance Sheets at June 30, 2017 and December 31, 2016, (ii) the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the three and six months ended June 30, 2017 and 2016, (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016, and (iv) the Notes to Unaudited Interim Condensed Consolidated Financial Statements.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

		TILL CAPITAL LTD.
		(Registrant)
Date: August 14, 2017	By:	/s/ Brian P. Lupien
		Brian P. Lupien
		Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24