Canbras Announces First Quarter Results.MONTREAL Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. -- Canbras Communications Corp. (NEX NEX abbr. Navy exchange BOARD:CBC (1) (Cell Broadcast Center) See cell broadcast. (2) (Cipher Block Chaining) In cryptography, a mode of operation that combines the ciphertext of one block with the plaintext of the next block. .H) ("Canbras" or the "Corporation") today released unaudited interim consolidated financial results for the first quarter of 2005.As the Corporation completed the sale of all of its operations in December December: see month. 2003 (the "Sale Transaction") to Horizon Cablevision For the unrelated Canadian company, see . Cablevision Systems Corporation is an American cable television company. It is the 5th largest cable provider in the USA, with most customers residing in New York, New Jersey, Connecticut, and Pennsylvania. do Brasil, S.A. ("Horizon") pursuant to a share purchase agreement ("SPA"), the Corporation's unaudited interim consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the first quarter of 2005 reflect only the winding up activities of the Corporation.Such unaudited interim consolidated financial statements are attached hereto here·to adv. To this document, matter, or proposition. hereto Adverb Formal or law to this place, matter, or document Adv. 1. and readers are encouraged to refer to them for additional details. The Sale Transaction and Horizon Claims Pursuant to the SPA, Canbras received gross proceeds of $32.6 million comprised of $22.168 million in cash and a one-year adj. 1. completing its life cycle within a year. Adj. 1. one-year - completing its life cycle within a year; "a border of annual flowering plants" annual phytology, botany - the branch of biology that studies plants promissory note promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. in the original principal amount of $10.432 million bearing interest at 10% (the "Note").The SPA contains certain customary representations and warranties made by the Corporation to Horizon and the Corporation is responsible for indemnifying Horizon for damages, if any, which are suffered by Horizon if any of the representations and warranties prove, within the 12-month period ending December 19, 2004, to have been materially false or incorrect as of December 19, 2003. Under the SPA, the Corporation's indemnification Indemnification Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from obligations are limited to the balance due under the Note and any indemnification obligations of the Corporation are to be satisfied by a reduction in the amounts due to the Corporation under the Note. As more fully described in Note 4) to the unaudited interim consolidated financial statements, as of December 20, 2004, the deadline for the filing of such claims, the Corporation had received written notice from Horizon asserting as·sert tr.v. as·sert·ed, as·sert·ing, as·serts 1. To state or express positively; affirm: asserted his innocence. 2. To defend or maintain (one's rights, for example). claims for indemnification under the SPA in an aggregate amount of R$58.1 million, or approximately $26.3 million at the exchange rate on March 31, 2005 (the "Horizon Claims"). Canbras believes that it will ultimately be held liable for an amount of less than R$2 million of the Horizon Claims and accordingly recorded a provision for loss of $0.8 million (including a reduction in interest income of $0.1 million) in the audited consolidated financial statements during the fourth quarter of 2004.At March 31, 2005, the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. for the Note, together with accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. thereon there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that was $10.9 million. To the extent that the amount of the Horizon Claims that are ultimately indemnifiable by Canbras is less than the amount of the Note (the "Non-indemnified Amount") then Canbras will be entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to receive the Non-indemnified Amount, together with accrued interest thereon at 10% per annum Per annum Yearly. calculated from December 19, 2003.However, there can be no assurance that the Corporation will not ultimately be held to be contractually responsible for an amount of indemnification that equals the entire amount of the Note and all accrued interest due thereon.Furthermore, there can be no assurances that the issuer of the Note or its guarantor guarantor n. a person or entity that agrees to be responsible for another's debt or performance under a contract, if the other fails to pay or perform. (See: guarantee) GUARANTOR, contracts. He who makes a guaranty. 2. will be capable from a credit worthiness perspective of paying any amounts due under the Note. First QuarterResults As at March 31, 2005, Canbras' shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. was $17,199 thousand down from $17,224 thousand at December 31, 2004.This decrease reflects the net loss of $25 thousand for the first quarter of 2005 comprised principally of administrative expenses which were substantially offset by interest income. Canbras' cash and cash equivalents together with temporary investments as at March 31, 2005 were $7,179 thousand down from $7,267 thousand at December 31, 2004.The decline was due principally to the payment in cash of administrative expenses of $130 thousand.While total expenses amounted to $307 thousand, an important portion of the expenses were non-cash accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. .Cash and cash equivalents held by the Corporation pending shareholder distributions are being invested in high-grade High-grade Credit quality of AAA or AA. high-grade Of, relating to, or being a bond with little risk of default on the part of the issuer. High-grade is usually reserved for bonds rated AAA or AA by the rating services. money market instruments Money market instruments See: Cash investments . The carrying value of the Note at March 31, 2005, was $10,917 thousand including non-cash interest accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. in the first quarter of 2005 of $239 thousand. Accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. were $933 thousand at March 31, 2005, compared to $803 thousand at December 31, 2004. The increase is mainly due to accrued legal fees. Net loss for the first quarter of 2005, was $25 thousand. Corporate overhead costs overhead costs see fixed costs. of $307 thousand for the period were comprised mainly of professional fees of $226 thousand, in particular legal fees incurred mainly in anticipation of arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the proceeding related to certain of the Horizon Claims as well as office costs and other administrative expenses.During the first quarter of 2005, the Corporation recorded interest income of $282 thousand. At March 31, 2005, no amounts were held in temporary investments compared to $6,999 thousand at December 31, 2004.This reduction is attributable to a shortening of the maturity profile for the Corporation's investment portfolio resulting in $7,179 thousand being held in the form of cash and cash equivalents at the end of the first quarter. Estimated Future Net Assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. Estimated future net assets at June 30, 2007, the earliest date by which Canbras now believes it will be able to make a final distribution to shareholders, are $16.9 million.This amount reflects Canbras' net assets as at March 31, 2005 of$17.2 million less estimated net costs of wind-up of $0.3 million and assumes no unforeseen claims against the Corporation will arise. Estimated future net assets at June 30, 2007 of $16.9 million have increased by $0.1 million from the estimate of future net assets at June 30, 2006 made on April 6, 2005 in connection with the Corporation's 2004 financial results.This increase reflects higher interest income on the Note as it isnow assumed to be outstanding for an additional year.This increased interest income is almost entirely offset by increased administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. that are expected to be incurred during the additional year now foreseen fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. to be required before Canbras can make a final distribution to shareholders. Further Distributions to Shareholders As described above, the earliest date by which Canbras believes it will be able to make a final distribution to shareholders is June 30, 2007.However this date is based on a number of important assumptions, could be significantly delayed and for a discussion of the factors that could cause such a delay, readers are encouraged to refer to the Corporation's Interim Report to Shareholders for the First Quarter of 2005, the Corporation's 2004 Annual Report and other documents filed with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. Securities Commissions. Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This news release may contain certain forward-looking statements that reflect the current views and/or expectations of Canbras with respect to future events.Forward looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future events, and may contain words like "believe" "anticipate", "expect", "will likely result", or words or phrases of similar meaning.Such statements are subject to a number of important risks and uncertainties which are difficult to predict and assumptions which may prove to be inaccurate. Whether actual events and developments conform with the Corporation's expectations and predictions are subject to a number of known and unknown risks and uncertainties. For additional information with respect to risk factors relevant to Canbras, see the Corporation's 2004 Annual Report and other documents filed with Canadian Securities Commissions. Canbras disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
CANBRAS COMMUNICATIONS CORP.
Consolidated Financial Statements
March 31, 2005
(Unaudited)
CANBRAS COMMUNICATIONS CORP
CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars)
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Unaudited
As at As at
March 31 December 31
2005 2004
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Assets
Current assets
Cash and cash equivalents $7,179 $268
Temporary investments (note 3) - 6,999
Note and accrued interest
receivable (note 4) 10,917 10,678
Prepaid expenses and other 36 82
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18,132 $18,027
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Liabilities
Current liabilities
Accounts payable and accrued
liabilities (note 4) $933 $803
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Shareholders' equity
Capital stock (note 5) 266,112 266,112
Contributed surplus 61 61
Deficit (248,974) (248,949)
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17,199 17,224
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$18,132 $18,027
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Sale of operations (notes 1 and 4)
Commitments and contingencies (note 8)
CANBRAS COMMUNICATIONS CORP
Consolidated Interim Statements of Deficit (Unaudited)
(in thousands of Canadian dollars)
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Three Months ended
March 31,
2005 2004
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Deficit, beginning of period, as
previously reported $(248,949) $(248,372)
Cumulative effect on prior years of change
in accounting policy
For stock-based compensation - (57)
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Deficit, beginning of period, as restated (248,949) (248,429)
Net (loss) earnings for the period (25) 102
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Deficit, end of period $(248,974) $(248,327)
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CANBRAS COMMUNICATIONS CORP
Consolidated Interim Statements Of Operations (Unaudited)
(in thousands of Canadian dollars, except per share amounts
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Three Months ended
March 31,
2005 2004
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Legal, audit and other professional fees $(226) $(29)
Office and administrative expenses (81) (205)
Interest income 282 365
Foreign exchange and other - (29)
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Net (loss) earnings $(25) $102
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Earnings (Loss) per share - basic and
diluted (note 5) $- $-
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Weighted average number of shares
outstanding (note 5) 55,098,071 55,098,071
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CANBRAS COMMUNICATIONS CORP
Consolidated Statements of Cash Flows (Unaudited)
(in thousands of Canadian dollars)
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Three Months ended
March 31,
2005 2004
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Cash provided by (used for) operating activities
Net (loss) earnings $(25) $102
Items not affecting cash
Foreign exchange and other - 24
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(25) 126
Changes in non-cash working capital
items (note 6) (63) (2,252)
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(88) (2,126)
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Cash provided by investing activities
Decrease in temporary investments 6,999 -
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6,999 -
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Effect of exchange rate changes on cash and
cash equivalents - (23)
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Net increase (decrease) in cash and
cash equivalents 6,911 (2,149)
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Cash and cash equivalents, beginning of period 268 21,321
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Cash and cash equivalents, end of period $7,179 $19,172
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(See note 6 for supplementary cash flow information)
Canbras Communications Corp.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Three months period ended March 31, 2005
(All tabular amounts are in thousands of Canadian dollars, except
per share amounts)
1. Description of the business and basis of presentation Canbras Communications Corp. (the "Corporation" or "Canbras"), originally incorporated under the laws of British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography on August 7, 1986, was continued under the Canada Business Corporations Act The Canada Business Corporations Act, also known as Bill C-44, is a Canadian act respecting Canadian business corporations. See also
BCI Brain-Computer Interface BCI Business Continuity Institute BCI Business Cycle Indicators BCI Banco de Credito e Inversiones (Chilean bank) BCI Bell Canada International ").Canbras, through its subsidiaries (collectively the "Canbras Group") was engaged in the acquisition, development and operation of broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). communications services in Brazil including cable television ("CATV (Community Antenna TV) The original name for cable TV. It used a single antenna at the highest location in the community in order to deliver a quality signal to homes in areas with hilly terrain or other interference. "), Internet access See how to access the Internet. and data services. On October 8, 2003, the Corporation announced that, pursuant to the sale process commenced by it in 2002, it had entered into definitive agreements for the sale of all of its operations to Horizon Cablevision do Brasil S.A. ("Horizon"). Subsequently, on December 24, 2003, the Corporation announced that following the receipt of the requisite approval of Canbras' shareholders at the special shareholders' meeting shareholders' meeting n. a meeting, usually annual, of all shareholders of a corporation (although in large corporations only a small percentage attend) to elect the Board of Directors and hear reports on the company's business situation. held on December 17, 2003, the Corporation had completed the sale of all of its operations to Horizon (the "Sale Transaction"). In addition, the Corporation also obtained the requisite shareholder approval to wind-up and dissolve A Web site design technique borrowed from the film and video industry in which the transition between two Web pages is represented visually by one page fading into another. Also known as a "soft cut," the result is achieved in the HTML coding of the images to gradual pre-determined the Corporation following the final distribution to shareholders of the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). received by the Corporation from the Sale Transaction(see note 4). On January 14, 2004, following the filing by Canbras of a Statement of Intent to Dissolve, the Corporation was issued, by the Director under the Canada Business Corporations Act, a Certificate of Intent to Dissolve and, upon conclusion of the winding up process, Canbras intends to apply for a Certificate of Dissolution Act or process of dissolving; termination; winding up. In this sense it is frequently used in the phrase dissolution of a partnership. The dissolution of a contract is its Rescission by the parties themselves or by a court that nullifies its binding force and reinstates each . The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2004 as set out in the 2004 Annual Report of the Corporation, prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting in Canada ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "). Capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. terms used herein, and not otherwise defined, have the meanings defined in the 2004 Annual Report of the Corporation. 2. Significant accounting policies In the opinion of the Corporation, the unaudited interim consolidated financial statements have been prepared on a basis consistent with the annual audited financial statements, and contain all adjustments necessary for a fair presentation of the financial position as at March 31, 2005 and the results of operations and cash flows for the three months ended March 31, 2005 and 2004, respectively. The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities, the recognition of revenues and expenses, and the disclosure of contingent assets Contingent Asset An asset in which the possibility of ownership depends solely upon future events uncontrollable by the company. Notes: An example might be a settlement from a lawsuit. See also: Asset, Balance Sheet, Contingent Liability, Liability and liabilities. Actual results could differ from those estimates. (a) Cash and cash equivalents The Corporation considers all highly liquid investments, with a term to maturity of three months or less when purchased, to be cash equivalents. (b) Temporary investments Temporary investments may consist of treasury bills, bankers' acceptances A bankers' acceptance, or BA, is a time draft drawn on and accepted by a bank. Before acceptance, the draft is not an obligation of the bank; it is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the and commercial paper with an initial maturity date greater than three months at the date of acquisition which the Corporation intends to hold to maturity.The temporary investments are carried at cost with discounts or premiums arising on purchase amortized to maturity. (C) Financial Instruments The Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. ("CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) ") recently issued revisions to section 3860 of the CICA Handbook
This article is about reference works. For the subnotebook computer, see .
These revisions came into effect on January 1, 2005. Because Canbras does not have any instruments with these characteristics, adopting this section on January 1, 2005 did not affect the unaudited interim consolidated financial statements of the Corporation. For a complete description of the Corporation's significant accounting policies, refer to Canbras' consolidated financial statements for the year ended December 31, 2004. 3. Temporary Investments As at March 31, 2005, the Corporation had no temporary investments outstanding. 4. Note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. Pursuant to the Sale Transaction, Canbras sold to Horizon all of its equity and debt interests in its subsidiary Canbras Participacoes Ltda. ("CPAR CPAR Canadian Physicians for Aid and Relief CPAR Country Procurement Assessment Review (World Bank) CPAR Contractor Performance Assessment Report CPAR Center for Public Affairs Research CPAR Corrective Preventive Action Request "). Through CPAR, Canbras held substantially all of its interests in its broadband subsidiaries operating in the Greater Sao Paulo and surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. areas, including all of its interests in its core subsidiary, Canbras TVA TVA: see Tennessee Valley Authority. Cabo Ltda.Canbras received gross proceeds of $32,600,000, comprised of $22,168,000 in cash and a one year promissory note in the original principal amount of $10,432,000, bearing interest at 10% (the "Note") due December 19, 2004. The Note was issued by CPAR and guaranteed by Horizon, and the amount of the Note is subject to reduction in respect of indemnification obligations of the Corporation under the sale agreement entered into with Horizon (the "SPA"). The SPA contains certain customary representations and warranties made by the Corporation to Horizon relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc CPAR and its subsidiaries and the business conducted by them.The Corporation is responsible for indemnifying Horizon for damages, if any, which are suffered by Horizon if any of the representations and warranties prove, within the 12-month period ending December 19, 2004, to have been materially false or incorrect as of December 19, 2003 (the closing date of the Sale Transaction).Under the SPA: (i), any indemnification obligations of the Corporation are to be satisfied by a reduction in the amounts due to the Corporation under the Note and (ii) the Corporation's indemnification obligations are limited to the amount of the Note. Under the terms of the SPA, if Horizon desired to seek indemnification from the Corporation, it was required to send written notice thereof to the Corporation prior to December 19, 2004, describing the facts giving rise to the claim, the amount (or a reasonable estimate of the likely amount) of the claim and the provision of the SPA (or the schedules thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. ) alleged to have been breached.If Horizon provided an indemnification notice to the Corporation prior to December 19, 2004 in accordance with the relevant provisions of the SPA, and if by December 19, 2004 (the due date of the Note), the asserted indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. claims have not been resolved between the parties (by mutual agreement or by final decision in arbitration between them or by final judgment by a court of competent jurisdiction in respect of the underlying claim for which indemnification is sought), then on December 19, 2004, Horizon was required to (a) pay the Corporation an amount equal to (x) the amount due under the Note,less (y) the amount of Horizon's claim for Losses in respect of the unresolved Not completed; not finished; not linked together. See resolve. asserted indemnity claims, and (b) deliver a new promissory note to the Corporation (a "Replacement Note").The Replacement Note would: (i) be for a principal amount equal to the claimed Losses in respect of the unresolved asserted indemnity claims (but not to exceed $10.432 million); (ii) have a maturity date of the 5th Business Day following the earlier of (A) the mutual agreement of settlement reached between Horizon and the Corporation in relation to such unresolved indemnity claims and (B) final judgment or award in relation to such unresolved indemnity claims; and (iii) bear interest in respect of the amount of the claim for Losses to which Horizon is determined not to be entitled to indemnification as a result of said settlement, judgment or award, at a rate of 10% per annum calculated (on a simple and not compounded basis) from December 19, 2003 (the closing date of the Sale Transaction) until payment of said amount. As of December 20, 2004, the deadline for the filing of such claims, the Corporation had received written notice from Horizon asserting claims for indemnification under the SPA in an aggregate amount of R$58.1 million, or approximately $26.3 million at March 31, 2005.The amount of these claims increased from the R$57.6 million previously announced by the Corporation on November 16, 2004. The Horizon notices state that it is reserving its rights to supplement, review, adjust and otherwise modify its claims in accordance with the SPA. Under the terms of the SPA, the Corporation's indemnification obligations are limited to the balance of the purchase price due under the SPA, which balance was represented by the Note, plus accrued interest thereon at 10% per annum. The notices of claims received from Horizon are summarized in the following table and described in the paragraphs which follow it.
(Millions of
Brazilian Reals)
----------------
Municipal claims for taxes on services rendered
("Tax Claims") 49.0(1)
Under accrual of copyright fees ("Copyright Claims") 5.1(2)
Employee and customer claims together with various
Fees and expenses ("Other Claims") 4.0(3)
-------
58.1(i)
(i) approximately $26.3 M at the exchange rate on March 31, 2005
(1) In July 2004, the City of Santo Andre San·to An·dré A city of southern Brazil, an industrial suburb of São Paulo. Population: 682,000. assessed Canbras TVA Cabo Ltda ("CTVA") approximately R$49 million representing taxes on services on all of CTVA's revenues for the period of 1996 to 2003. CTVA has hired counsel and is contesting this assessment.Canbras believes that there are no valid grounds for the assessment of these Tax Claims by the City of Santo Andre, and that CTVA will ultimately be successful in having these Tax Claims overturned. However, the process could take 6 years or more, and there can be no guarantee that CTVA will ultimately be successful.In any event, as Canbras is responsible for 78% of any indemnification claims relating to CTVA, and as the tax assessments are against CTVA, Canbras' indemnification obligation for the Tax Claims, if any, would be limited to 78% of the amount claimed by Horizon. (2) The Corporation believes that the Copyright Claims are not valid claims for indemnification under the SPA.In any event, R$4.6 million of the Copyright Claims are against CTVA, and accordingly Canbras' indemnification obligation, if any, would be limited to 78% of the amount claimed by Horizon. (3) In the Other Claims category, the Corporation believes that at least R$2.0 million of these claims are not valid claims for indemnification under the SPA. A portion of the remaining R$2.0 million of Other Claims are against CTVA and accordingly Canbras' indemnification obligation, if any, would be limited to 78% of the such amounts claimed by Horizon. On November 24, 2004, the Corporation objected to all of the claims made against it by Horizon ("Disputed Claims") with the exception of one claim in the amount of R$36,000 (C$16,300).On January 19, 2005, the Corporation withdrew its objection A formal attestation or declaration of disapproval concerning a specific point of law or procedure during the course of a trial; a statement indicating disagreement with a judge's ruling. to the Tax Claims (to the extent the City of Santo Andre is ultimately successful with its claims against CTVA) and obtained Horizon's agreement to allow Canbras to participate in the defense of, and approve any settlement of such claims.If Canbras and Horizon cannot reach an agreement on the Disputed Claims, then the SPA allows either party to commence arbitration procedures in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of .Such proceedings, if required, could commence at any time and could take approximately twelve months to result in a decision. To the extent that the amount of claims that are ultimately indemnifiable by Canbras is less than the amount of the Note (the "Non-indemnified Amount") then Canbras will be entitled to receive the Non-indemnified Amount, together with accrued interest thereon at 10% per annum calculated (on a simple and not compounded basis) from December 19, 2003. Based on the foregoing analysis of the Horizon Claims as well as Canbras' analysis of Horizon's ability to pay the amounts that may come due under the Note, the Note and accrued interest thereon are recorded on Canbras' consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. at March 31, 2005 at a value of approximately $10.9 million which is net of a provision for loss of $0.8 million recorded during the fourth quarter of 2004. However, there can be no assurance that the Corporation will not ultimately be held to be contractually responsible for an amount of indemnification that equals the entire amount of the Note and all accrued interest due thereon.Furthermore, there can be no assurance that the issuer of the Note or its guarantor will be capable from a credit worthiness perspective of paying any amounts due under the Note. 5. Capital stock
Capital stock is comprised of the following:
(a) Authorized
An unlimited number of common shares
(b) Issued and outstanding
Number Amount
--------------------------
Balance at December 31, 2004 55,098,071 $266,112
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Balance at March 31, 2005 55,098,071 $266,112
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(C) Stock options At March 31, 2005, 520,300 stock options were outstanding, all of which were exercisable. The stock options are exercisable on a one-for-one basis for common shares of the Corporation. The total stock options outstanding have exercise prices ranging from $4.00 to $11.75 per share over the remaining term of the options of between 1.75 to 3.75 years.As a result of the consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the Horizon Sale in December 2003, the Corporation's Board of Directors determined that no stock options would be issued by the Corporation at and after January 1, 2004.
6. Supplemental cash flow information
Three Months ended
March 31,
2005 2004
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Changes in non-cash working capital items
Note and accrued interest receivable $(239) $(259)
Prepaid expenses and other 46 92
Accounts payable and accrued liabilities 130 (2,085)
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$(63) $(2,252)
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7. Financial instruments (a) Concentration of credit risk The Corporation's financial assets Financial assets Claims on real assets. that are exposed to credit risk consist primarily of cash and cash equivalents, temporary investments and the Note.In the case of cash and cash equivalents and temporary investments, credit risk is minimized substantially by ensuring that these financial assets are invested in treasury bills, bankers' acceptances and commercial paper with investment grade credit ratings.In addition, dollar limits are established on a per investment basis.The Note is a direct obligation of CPAR, which obligation is guaranteed by Horizon and it is also secured by a pledge of the CPAR shares.Credit risk associated with the Note results from the exposure of the issuer and its guarantor to variations in operating results, their level of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. , currency fluctuations and other factors.There can be no assurance that any amounts due under the Note will be paid when due. (b) Fair value of financial instruments The fair value of cash and cash equivalents, temporary investments and current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. approximates their carrying amount, given their relatively short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. to maturity. 8. Commitments and Contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. The Corporation has provided indemnification to its officers and directors, and former officers and directors, against costs, charges and expenses, including amounts paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal or other proceeding to which such individual may be made a party by reason of his association with the Corporation.The Corporation is obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to indemnify To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. Insurance companies indemnify their policyholders against damage caused by such things as fire, theft, and flooding, which such individuals to the extent that they acted honestly and in good faith with a view to the Corporation's best interest and had reasonable grounds for believing their conduct was lawful Licit; legally warranted or authorized. The terms lawful and legal differ in that the former contemplates the substance of law, whereas the latter alludes to the form of law. A lawful act is authorized, sanctioned, or not forbidden by law. , all as permitted by the Canada Business Corporations Act.In addition, the Corporation has provided indemnification, on substantially the same terms and conditions, to certain persons who had served at the Corporation's request as directors or managers of certain of its former subsidiaries operating in Brazil.These indemnification obligations are not subject to any dollar limit.In May 2004, the Corporation received requests for indemnification in respect of legal fees and related expenses to be incurred by two individuals who formerly served as directors or managers of certain of the Corporation's former Brazilian subsidiaries in connection with certain legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. brought in Brazil against the previous owners of such subsidiaries.To date, none of these former Brazilian subsidiaries nor the two individuals have been directly named in the Brazilian legal proceedings, however, there can be no assurance at this time that they will not ultimately be made parties to such legal proceedings.As a result, the Corporation is paying the legal fees and related expenses in connection with the monitoring of these Brazilian legal proceedings on behalf of such individuals.The Corporation is expensing these costs as incurred. During the fourth quarter of 2004, a former employee also commenced legal proceedings against the Corporation and other affiliates of the Corporation relative to an alleged promise of employment following termination. The Corporation has included a provision in the consolidated financial statements for the estimated amount of its potential liability for this claim. With the exception of such provisional Temporary; not permanent. Tentative, contingent, preliminary. A provisional civil service appointment is a temporary position that fills a vacancy until a test can be properly administered and statutory requirements can be fulfilled to make a permanent appointment. amount, the Corporation believes the claim is without merit and will defend its position vigorously. However, there can be no assurance that such provision is sufficient to cover the Corporation's ultimate liability for such claim. 9. Comparative figures Certain comparative figures have been reclassified to conform with the presentation adopted in 2005. The TSX Venture Exchange TSX Venture Exchange Originally called the Canadian Venture Exchange (CDNX), this was a result of the merger of the Vancouver and Alberta stock exchanges. The goal of TSX Venture Exchange is to provide venture companies with effective access to capital while protecting investors. does not accept responsibility for the adequacy or accuracy of this release. CANBRAS COMMUNICATIONS CORP. (NEX BOARD:CBC.H) |
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