CANBRAS COMMUNICATIONS CORP.
NEX BOARD : CBC.H

CANBRAS COMMUNICATIONS CORP.

April 11, 2007 11:27 ET

Canbras Announces 2006 Results

MONTREAL, QUEBEC--(CCNMatthews - April 11, 2007) - Canbras Communications Corp. (NEX:CBC.H) ("Canbras" or the "Corporation") today released audited consolidated financial results for the year 2006. As the Corporation completed the sale of all of its operations in December 2003 (the "Sale Transaction") to Horizon Cablevision do Brasil, S.A. ("Horizon") pursuant to a share purchase agreement ("SPA"), the Corporation's audited consolidated financial statements for 2006 reflect only the winding up activities of the Corporation. Such audited consolidated financial statements together with management's discussion and analysis ("MD&A") are attached hereto and readers are encouraged to refer to such documents for full details as well as for a discussion of the Corporation's estimated future net assets and factors impacting the timing and amount of the final distribution to shareholders.

Final Distribution to Shareholders, NEX Delisting and Canbras Dissolution

The Corporation expects to make a final distribution to shareholders before May 31, 2007, totalling approximately $0.10 per share ($5.5 million in the aggregate) following receipt by the Corporation of updated tax clearance certificates, and assuming no unforeseen claims are made against the Corporation. The estimated amount and timing of the final distribution have not changed materially from the estimates made on November 14, 2006 in connection with the Corporation's third quarter 2006 financial results. The final shareholder distribution will be in the form of a return of capital and will bring total shareholder distributions to $0.49 per share (approximately $27.0 million in the aggregate) since the liquidation and dissolution process began in December 2003. After all required clearances are obtained, the Board of Directors will confirm the precise amount of the final distribution and fix record and payment dates.

Immediately following its final distribution to shareholders, Canbras intends to delist its shares from the NEX Exchange and to dissolve the Corporation which will result in the Corporation's website being no longer operative. After these steps are taken, shareholders will no longer have a means to trade their shares or to obtain information about the Corporation from its website. Thereafter, the only sources of information about the Corporation will be historical publications in your possession or such publications that may be accessible through websites such as www.sedar.com.

Results of Operations for 2006

As at December 31, 2006, Canbras' shareholders' equity was $5,611 thousand down from $5,790 thousand at December 31, 2005. This decrease reflects the net loss of $179 thousand for 2006. Contributing to the loss in 2006 were professional fees of $257 thousand (including fees associated with exploring tax loss monetization possibilities) and office costs and other administrative expenses of $160 thousand. During 2006, the Corporation recorded interest income of $238 thousand on its cash, cash equivalents and temporary investments.

Canbras' cash, cash equivalents and temporary investments as at December 31, 2006 were $5,603 thousand down from $6,386 thousand at December 31, 2005. The decrease was due principally to a net decline in accounts payable and accrued liabilities of $629 thousand as well as cash required for operations. Cash, cash equivalents and temporary investments held by the Corporation pending the final shareholder distribution are being invested in high-grade money market instruments.

Accounts Payable and accrued liabilities were $43 thousand at December 31, 2006, compared to $672 thousand at December 31, 2005. The decrease is mainly due to payments during the year of amounts required to settle indemnification obligations and employee litigation (see Note 5 to the audited consolidated financial statements) as well as to suppliers of professional services.

Forward Looking Statements

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 attached MD&A. 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.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This management's discussion and analysis of financial condition and results of operations ("MD&A") for Canbras Communications Corp. (the "Corporation" or "Canbras") for 2006 should be read in conjunction with the Corporation's audited consolidated financial statements for such period including related notes thereto. The audited consolidated financial statements, as well as the information in this MD&A, are prepared in accordance with Canadian generally accepted accounting principles and reported in Canadian dollars. Information contained in this MD&A includes all material developments up to April 11, 2007 the date as of which the audited consolidated financial statements were approved for release by the Board of Directors.

Following the receipt, at the special shareholders' meeting held on December 17, 2003, of the requisite approvals in respect of the sale of all of the Corporation's operations (the "Horizon Sale") and the wind-up and dissolution of the Corporation, Canbras ceased all business activities other than those related to the completion of the Horizon Sale and the winding up process. The winding up process, consists of the satisfaction of all remaining liabilities and obligations of the Corporation, the distribution of the sale proceeds to shareholders, compliance with reporting obligations under applicable laws and regulations until the dissolution of the Corporation is completed, and such other activities as are ancillary to the winding up and final liquidation of the Corporation. 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.

As a result of the Horizon Sale and the Corporation's intention of distributing its net assets to its shareholders and winding up, this MD&A does not provide a detailed analysis of the results of operations for the year ended December 31, 2006 compared to the previous year. Instead, this MD&A focuses on an analysis of Canbras' balance sheet at December 31, 2006 and develops it into a statement of estimated future net assets at April 30, 2007, (the "Wind up Date") the approximate date by which Canbras believes it will be able to make a final distribution to shareholders (see Risk Factors - "Timing of Distributions to Shareholders"). The Wind up Date is approximately the same as that announced on November 14, 2006 in connection with the release of the Corporation's third quarter 2006 financial results.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this MD&A constitute forward-looking statements. These forward-looking statements reflect the current views and/or expectations of Canbras with respect to its performance and future events. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance, or achievements, 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 assumptions, risks and uncertainties which are difficult to predict and which may prove to be inaccurate. Whether actual results and developments conform with the Corporation's expectations and predictions are subject to a number of known and unknown risks and uncertainties, including the risk factors described below under "Risk Factors". These factors, among others, could cause actual results to differ materially from those expressed in any forward-looking statements.

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.

FINAL DISTRIBUTION TO SHAREHOLDERS, NEX DELISTING AND CANBRAS' DISSOLUTION

As more fully described below under "Statement of Estimated Future Net Assets", the Corporation expects to make a final distribution to shareholders before May 31, 2007, totalling approximately $0.10 per share ($5.5 million in aggregate) following receipt by the Corporation of updated tax clearance certificates, and assuming no unforeseen claims are made against the Corporation. The final shareholder distribution will be in the form of a return of capital and will bring total shareholder distributions to $0.49 per share (approximately $27.0 million in the aggregate) since the liquidation and dissolution process began in December 2003.

Immediately following its final distribution to shareholders, Canbras intends to delist its shares from the NEX Exchange and to dissolve the Corporation which will result in the Corporation's website being no longer operative. After these steps are taken, shareholders will no longer have a means to trade their shares or to obtain information about the Corporation from its website. Thereafter, the only sources of information about the Corporation will be historical publications in your possession or such publications that may be accessible through websites such as www.sedar.com.

The Corporation had been exploring the possibility of realizing additional value by monetizing its tax losses. After exploring numerous possibilities with respect to such a transaction, the Corporation determined that such a transaction cannot be completed on acceptable terms.

SALE OF ALL OF THE CORPORATION'S OPERATIONS AND SETTLEMENT OF RELATED CLAIMS AGAINST THE CORPORATION

On October 8, 2003, the Corporation announced that it had entered into definitive agreements for the sale of all of its operations to Horizon Cablevision do Brasil S.A. ("Horizon"). Subsequently, the Corporation announced that following the receipt of the requisite approval of Canbras' shareholders at the special shareholders' meeting held on December 17, 2003, the Corporation had completed the sale of all of its operations to Horizon in December 2003.

Pursuant to the agreement entered into in October 2003 with Horizon (the "SPA"), Canbras sold to Horizon all of its equity and debt interests in its subsidiary Canbras Participacoes Ltda. ("CPAR"). Through CPAR, Canbras held substantially all of its interests in its broadband subsidiaries operating in the Greater Sao Paulo and surrounding area, including all of its interests in its core subsidiary Canbras TVA Cabo Ltda.

Canbras received gross proceeds of $32.6 million comprised of $22.168 million in cash and a one-year promissory note in the original principal amount of $10.432 million bearing interest at 10% (the "Note"). At December 31, 2003, the Note and accrued interest were recorded at their fair value of $10.452 million. The Note was issued by CPAR and guaranteed by Horizon. The SPA contained certain customary representations and warranties made by the Corporation to Horizon relating to CPAR and its subsidiaries and the business conducted by them. The Corporation was responsible for indemnifying Horizon for damages, if any, which were suffered by Horizon if any of the representations and warranties proved, 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 obligations were limited to the balance due under the Note and any indemnification obligations of the Corporation were to be satisfied by a reduction in the amounts due to the Corporation under the Note.

On July 21, 2005, the Corporation received $9.5 million in cash from Horizon in exchange for the cancellation of the Note and final settlement of all historic and future indemnification claims of Horizon in connection with the Sale Transaction (the "Horizon Settlement"). As a result, a net loss of $739 thousand was recorded in the second quarter of 2005 which loss was net of certain accrued liabilities related to the Sale Transaction in the amount of $678 thousand.

STATEMENT OF ESTIMATED FUTURE NET ASSETS

The following table provides an estimate of future net assets at the Wind up Date. The only difference between the audited consolidated balance sheet at December 31, 2006, and the statement of estimated future net assets is the inclusion of estimated future net costs to wind-up and liquidate the Corporation of $80 thousand until the Wind up Date (before the final distribution to shareholders). The April 30, 2007 Wind up Date assumes that the Corporation receives final tax clearance certificates early in the second quarter of 2007 and that no unforeseen claims are made against it.



STATEMENT OF ESTIMATED FUTURE NET ASSETS
AT APRIL 30, 2007
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(thousands of Canadian dollars)

Assets as at December 31, 2006
Cash, cash equivalents and temporary investments $5,603
Accrued interest receivable and other 51
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Total assets 5,654
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Liabilities at December 31, 2006
Accounts payable and accrued liabilities 43
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Total liabilities 43

Net assets at December 31, 2006 5,611

Item affecting the estimated future net assets
to April 30, 2007:
Estimated future net costs for wind-up to April 30, 2007 (80)
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Estimated future net assets at April 30, 2007 before the
final distribution to shareholders $5,531
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Estimated total proceeds to be distributed to shareholders of $5.5 million reflect Canbras' net assets as at December 31, 2006 of $5.6 million less estimated net costs of wind-up of $80 thousand and assume no unforeseen claims against the Corporation will arise. Accounts payable and accrued liabilities of $43 thousand at December 31, 2006 include amounts in relation to legal, auditor and other professional advisors. Excess cash held by the Corporation pending the final shareholder distribution is being invested in high grade money market instruments.

Estimated future net assets at the Wind up Date of $5.5 million have not changed from the estimate of future net assets made on November 14, 2006 in connection with the Corporation's third quarter 2006 financial results.

RESULTS OF OPERATIONS FOR 2006

As at December 31, 2006, Canbras' shareholders' equity was $5,611 thousand down from $5,790 thousand at December 31, 2005. This decrease reflects the net loss of $179 thousand for 2006. Contributing to the loss in 2006 were professional fees of $257 thousand (including fees associated with exploring tax loss monetization possibilities) and office costs and other administrative expenses of $160 thousand. During 2006, the Corporation recorded interest income of $238 thousand on its cash, cash equivalents and temporary investments.

Canbras' cash, cash equivalents and temporary investments as at December 31, 2006 were $5,603 thousand down from $6,386 thousand at December 31, 2005. The decrease was due principally to a net decline in accounts payable and accrued liabilities of $629 thousand as well as cash required for operations. Cash, cash equivalents and temporary investments held by the Corporation pending the final shareholder distribution are being invested in high-grade money market instruments.

Accounts Payable and accrued liabilities were $43 thousand at December 31, 2006, compared to $672 thousand at December 31, 2005. The decrease is mainly due to payments during the year of amounts required to settle indemnification obligations and employee litigation (see Note 5 to the audited consolidated financial statements) as well as to suppliers of professional services.

RESULTS OF OPERATIONS FOR THE FOURTH QUARTER OF 2006

As at December 31, 2006, Canbras' shareholders' equity was $5,611 thousand down from $5,685 thousand at September 30, 2006. This decrease reflects the net loss of $74 thousand for the fourth quarter of 2006. Contributing to the loss in the fourth quarter of 2006 were professional fees of $83 thousand (including fees associated with exploring tax loss monetization possibilities), as well as office costs and other administrative expenses of $51 thousand. During the fourth quarter of 2006, the Corporation recorded interest income of $60 thousand on its cash, cash equivalents and temporary investments.

Canbras' cash, cash equivalents and temporary investments as at December 31, 2006 were $5,603 thousand down from $5,704 thousand at September 30, 2006. The decrease was due principally to cash required for operations as well as an increase in other current assets, mainly prepaid insurance. Cash, cash equivalents and temporary investments held by the Corporation pending shareholder distributions are being invested in high-grade money market instruments.

Accounts payable and accrued liabilities were $43 thousand at December 31, 2006, compared to $33 thousand at September 30, 2006.

At December 31, 2006, $3,107 thousand were held in temporary investments, up substantially from the level at September 30, 2006 of NIL due to a temporary lengthening in the maturity profile of the Corporation's liquid investments.

STATED CAPITAL

An unlimited number of common shares are authorized. All authorized classes of shares are without nominal or par value.



Number of
Shares Stated Capital
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Balance as at December 31, 2005 55,098,071 $256,195,000

Balance as at December 31, 2006 55,098,071 $256,195,000


At December 31, 2006, 356,800 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 0.5 to 2 years.

RISK FACTORS

The following is a discussion of possible future events and circumstances that may affect the Corporation and the amounts available for distribution to shareholders. The Corporation cannot give any assurance that these matters will not have an adverse effect on its financial condition, or that any such adverse effect will not be material.

Possibility of Unforeseen Claims Asserted against the Corporation or its Directors and Officers

There can be no assurance that in connection with the winding up and liquidation of the Corporation or otherwise, that claims will not be asserted or that legal proceedings will not be commenced against the Corporation or any of its current or former directors or officers. The Corporation's on-going indemnification obligations, and/or any other claims or proceedings could delay distributions to shareholders and/or could reduce the amounts available for distribution to shareholders.

Timing of and Costs Associated with the Winding Up and Liquidation of the Corporation

The timing of the completion of the winding up and liquidation of the Corporation is dependent upon the receipt of updated tax clearance certificates and the resolution of unknown claims which may be asserted against the Corporation and/or its directors or officers (or former directors or officers) and which the Corporation may contest. The Corporation's management currently estimates that the winding up and liquidation of the Corporation can be concluded by approximately April 30, 2007. However, in light of the uncertainties and other factors discussed above, the Corporation can give no assurances as to the actual length of time that may be necessary to conclude the winding up and liquidation of the Corporation.

The costs associated with the winding up and liquidation of the Corporation, as set forth in the Statement of Estimated Future Net Assets at approximately April 30, 2007 in this MD&A, represent the current estimates of management of the Corporation and are based upon an assumed winding up and liquidation date of approximately April 30, 2007. Such costs of wind-up and liquidation as set forth in the Statement of Estimated Future Net Assets at approximately April 30, 2007 in this MD&A exclude any amounts that may be incurred in respect of unforeseen claims that may be asserted by third parties. Therefore, the cost of winding up and liquidating the Corporation may exceed such estimated amounts, and such increased costs may be material. To the extent that the Corporation is delayed in the timing of a final distribution to shareholders, it will continue to incur operating costs and earn interest income beyond April 30, 2007. It is currently estimated that overhead expenses would amount to approximately $30 thousand per month, excluding amounts associated with any unforeseen claims that may be asserted by third parties. Interest income on the Corporation's cash and cash equivalents and temporary investments are not expected to be sufficient to cover all such expenses. If the Corporation continues to operate after its parent company is wound-up, which is expected to occur by June 30, 2007, then Canbras' expenses could increase to about $60 thousand per month as cost sharing arrangements would no longer be available. Interest income on the Corporation's cash and cash equivalents and temporary investments are not expected to be sufficient to cover all such expenses.

Timing of Distributions to Shareholders

The timing of the final distribution is anticipated to be made before May 31, 2007 after the receipt by the Corporation of updated tax clearance certificates and assuming that no unforeseen claims are asserted against the Corporation. As there is no certainty that such events will occur on a timely basis or that no unforeseen claims will be asserted against the Corporation, there can be no assurance that a final distribution will be made before May 31, 2007.

Amount of Distributions to Shareholders

In addition to the factors which could reduce the amounts available for distribution to shareholders described above, the amounts available for distribution to shareholders could also be reduced, as a result of reductions in interest income due to decreased interest rates.

Cash, Cash Equivalents and Temporary Investments

At December 31, 2006, the Corporation had approximately $5,603 thousand of cash, cash equivalents and temporary investments. Some of the funds will be used to pay expected future costs of operations pending the winding up and liquidation of the Corporation prior to making a final distribution to shareholders, as well as accounts payable, or costs associated with contesting and/or defending and/or settling unforeseen claims that may be asserted by third parties. In the interim, it is the Corporation's intention to invest such funds in investment grade treasury bills, bankers' acceptances and commercial paper with various maturities, not extending beyond three months. There can be no assurance that one or more issuers of such money-market instruments will not default on such obligations.

Internal Control over Financial Reporting

As of December 31, 2006, an evaluation was carried out, under the supervision of and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Corporation's disclosure controls and procedures as defined in Multilateral Instrument 52-109 pursuant to Canadian regulatory requirements. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.

During 2006, the Corporation completed an evaluation of the design of internal controls over financial reporting as required under Multilateral Instrument 52-109. Based on the results of the evaluation, the Chief Executive Officer and the Chief Financial Officer have attested that the internal controls over financial reporting are designed to provide reasonable assurance that the Corporation's consolidated financial statements for external purposes are in accordance with Canadian GAAP are reliable.

The Corporation has concluded that during the fiscal year ended December 31, 2006, there were no changes made to internal controls that would have materially affected these controls.

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

Management of Canbras Communications Corp. is responsible for the preparation, integrity and fair presentation of the financial statements and all other information contained in the Annual Report. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles, and are based on management's best information and judgments.

In fulfilling its responsibilities, management has developed internal control systems and procedures designed to provide reasonable assurance that the Corporation's assets are safeguarded, that transactions are executed in accordance with appropriate authorization and that accounting records may be relied upon to properly reflect the Corporation's business transactions.

The Audit Committee of the Board of Directors reviews the audited consolidated financial statements of the Corporation and recommends them to the Board for approval. The Audit Committee meets with both management and the independent auditors to review the Corporation's operations and results, management's financial statements and the auditors' report and findings.

The financial statements were audited by Deloitte Touche LLP and their report follows.

Howard N. Hendrick

Chairman, Chief Executive Officer and Chief Financial Officer

Canbras Communications Corp.

AUDITOR'S REPORT

To the Shareholders of Canbras Communications Corp.

We have audited the consolidated balance sheets of Canbras Communications Corp. ("Corporation") as at December 31, 2006 and 2005 and the consolidated statements of operations, deficit and cash flows for the years then ended. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

Chartered Accountants

Montreal, Canada

March 9, 2007



CONSOLIDATED BALANCE SHEETS
As at December 31, 2006 and 2005
(in thousands of Canadian dollars)
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2006 2005
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$ $

Assets

Current assets
Cash and cash equivalents 2,496 440
Temporary investments (note 3) 3,107 5,946
Accrued interest receivable and other 51 76
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5,654 6,462
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Liabilities

Current liabilities
Accounts payable and accrued liabilities (note 5) 43 672
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Shareholder's equity
Capital stock (note 6) 256,195 256,195
Contributed surplus (note 2 (e)) 61 61
Deficit (250,645) (250,466)
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5,611 5,790
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5,654 6,462
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Commitments and contingencies (note 5)

Approved by the Board of Directors

Louis A. Tanguay Philip R. Patterson
Director Director



CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2006 and 2005
(in thousands of Canadian dollars, except per share amounts)
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2006 2005
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$ $
Legal, auditor and other professional fees (257) (652)
Office and administrative expenses (160) (178)
Interest income 238 532
Other (note 5) - (480)
Loss on note (note 4) - (739)
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Net loss (179) (1,517)

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Loss per share -- basic and diluted (note 6) - (0.03)
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Weighted average number of shares
outstanding (note 6) 55,098,071 55,098,071

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CONSOLIDATED STATEMENTS OF DEFICIT
Years ended December 31, 2006 and 2005
(in thousands of Canadian dollars)
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2006 2005
--------------------------------------------------------------------
$ $

Deficit, beginning of year (250,466) (248,949)

Net loss (179) (1,517)

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Deficit, end of year (250,645) (250,466)
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2006 and 2005
(in thousands of Canadian dollars)
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2006 2005
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$ $

Cash (used for) provided by operating activities

Net loss (179) (1,517)
Items not affecting cash
Foreign exchange and other - 1
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(179) (1,516)

Changes in non-cash working capital items (note 8) (604) 10,553
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(783) 9,037
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Cash provided by investing activities
Decrease in temporary investments 2,839 1,053
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2,839 1,053
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Financing activities

Distribution to shareholders (note 6) - (9,918)
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Net increase in cash and cash equivalents 2,056 172
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Cash and cash equivalents, beginning of year 440 268
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Cash and cash equivalents, end of year 2,496 440
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(see note 8 for supplementary cash flow information)


1. Description of the business and basis of presentation

Canbras Communications Corp. (the "Corporation" or "Canbras"), originally incorporated under the laws of British Columbia on August 7, 1986, was continued under the Canada Business Corporations Act effective June 22, 1998. The majority shareholder of Canbras is Bell Canada International Inc. ("BCI"). Canbras, through its subsidiaries (collectively the "Canbras Group") was engaged in the acquisition, development and operation of broadband communications services in Brazil including cable television ("CATV"), internet access 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 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 the Corporation following the final distribution to shareholders of the net proceeds 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.

2. Significant accounting policies

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 and liabilities. Actual results could differ from those estimates.

(a) Principles of consolidation

These audited consolidated financial statements include the accounts of the Corporation and all of its subsidiaries, from their date of acquisition. All intercompany transactions are eliminated upon consolidation.

(b) 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.

(C) Temporary investments

Temporary investments may consist of treasury bills, bankers' acceptances and commercial paper with an initial maturity date greater than three but less than twelve 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.

(d) Income taxes

Future income taxes relate to the expected future tax consequences of differences between the carrying amount of balance sheet items and their corresponding tax values. Future tax assets are recognized only to the extent that, in the opinion of management, it is more likely than not that the future income tax assets will be realized. Future income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment or substantive enactment.

(e) Stock-based compensation

Stock-based compensation cost is recorded using the fair value based method. This method consists of recording compensation cost to earnings over the vesting period of options granted. When stock options are exercised, any consideration paid by employees is credited to capital stock and the recorded fair value of the option is removed from contributed surplus and credited to capital stock.

(f) Financial instruments

On January 1, 2005 revisions came into effect with respect to section 3860 of the CICA Handbook, Financial instruments - Disclosure and presentation. The revisions change the accounting for certain financial instruments that have liability and equity characteristics. It requires instruments that meet specific criteria to be classified as liabilities on the balance sheet. Some of these financial instruments were previously classified as equity. Because Canbras does not have any instruments with these characteristics, adopting this section on January 1, 2005 did not have an impact on the results or financial position of the Corporation.

3. Temporary Investments

As at December 31, 2006, the Corporation held investment grade commercial paper in the amount of $3,107,000 ($5,946,000 at December 31, 2005). The commercial paper matures on various dates up to February 26, 2007. The effective yields on the commercial paper ranged from 4.10% to 4.13%. At December 31, 2006 the estimated fair value of the commercial paper amounted to $3,130,000.

4. Note receivable and loss on note

Pursuant to the Sale Transaction, Canbras sold to Horizon all of its equity and debt interests in its subsidiary Canbras Participacoes Ltda. ("CPAR"). Through CPAR, Canbras held substantially all of its interests in its broadband subsidiaries operating in the Greater Sao Paulo and surrounding areas, including all of its interests in its core subsidiary, Canbras TVA 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 was subject to reduction in respect of indemnification obligations of the Corporation under the sale agreement entered into with Horizon (the "SPA").

The SPA contained certain customary representations and warranties made by the Corporation to Horizon relating to CPAR and its subsidiaries and the business conducted by them. The Corporation was responsible for indemnifying Horizon for damages, if any, which were suffered by Horizon if any of the representations and warranties proved, 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 were to be satisfied by a reduction in the amounts due to the Corporation under the Note and (ii) the Corporation's indemnification obligations were limited to the amount of the Note.

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 December 31, 2004.

Based on analyses of the Horizon Claims, as well as Canbras' analysis of Horizon's ability to pay the amounts that may have come due under the Note, the Note and accrued interest thereon were recorded on Canbras' consolidated balance sheet at December 31, 2004 at a value of $10.7 million, which was net of a provision for loss of $0.8 million recorded during the fourth quarter of 2004. On July 21, 2005, the Corporation announced that it received $9.5 million in cash in exchange for the cancellation of the Note and final settlement of all present or future indemnification claims of Horizon in connection with the Sale Transaction (the "Horizon Settlement"), and a net loss of $739 thousand was recorded. The loss was net of certain liabilities related to the Sale Transaction in the amount of $678 thousand, which were no longer required.

5. Release from Indemnification Obligations and Employee Litigation

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 brought in Brazil against the previous owners of such subsidiaries. None of these former Brazilian subsidiaries nor the two individuals had been directly named in the Brazilian legal proceedings, however, there could be no assurance that they would not ultimately be made parties to such legal proceedings. As a result, the Corporation was paying the legal fees and related expenses in connection with the monitoring of these Brazilian legal proceedings on behalf of such individuals, and was expensing these costs as incurred. In February 2006, the Corporation reached an agreement whereby it was released from all of its indemnification obligations in favour of these two individuals in return for a payment that was recorded as a reduction of "Accounts payable and accrued liabilities" during the second quarter of 2006.

During the fourth quarter of 2004, a former employee commenced legal proceedings against the Corporation and two of its affiliates relative to an alleged promise of employment following termination. The plaintiff was seeking damages of approximately $5.5 million on a joint and several basis from the Corporation and its affiliates who were also defendants in this litigation. During 2005, the Corporation increased its provision for the estimated amount of its potential liability for this claim and included such increase in "Other expenses" in the audited consolidated statement of operations and in "Accounts payable and accrued liabilities" on the December 31, 2005 audited consolidated balance sheet. In April 2006, the Corporation obtained a complete release from this contingent liability in return for a payment that was less than 10% of the amount claimed. This payment was recorded as a reduction of "Accounts payable and accrued liabilities" during the second quarter of 2006.

6. Capital stock

Capital is comprised of the following:



(a) Authorized
An unlimited number of common shares

(b) Issued and outstanding

Number Amount
$
--------------------------------------------------------------------
Balance at December 31, 2005 55,098,071 256,195
Balance at December 31, 2006 55,098,071 256,195
--------------------------------------------------------------------


On August 23, 2004, the Corporation made an initial distribution to common shareholders, in the amount of $0.21 per common share or $11,571,000 in the aggregate. On December 22, 2005, the Corporation made a second distribution to common shareholders in the amount of $0.18 per common share or $9,918,000 in the aggregate. Both of these distributions were from the proceeds received by Canbras from the Horizon Sale and both were recorded as a reduction in stated capital in the audited consolidated financial statements.

(C) Stock-based compensation plans

During the year ended December 31, 2001, the Corporation adopted a long-term incentive stock option plan for key employees and consultants ("2001 ESOP"). Prior to the adoption of the 2001 ESOP, stock options were awarded under the 2000 long-term incentive stock option plan for key employees ("2000 Plan"), and prior to that, on an individual grant basis.

Under the terms of the 2001 ESOP, options could be granted to officers, other employees and consultants of the Corporation and/or certain controlled subsidiaries of the Corporation. The exercise price for each share covered by an option was established at 100% of the market value per share on the last trading day prior to the effective date of the grant. Options are exercisable during a period not to exceed seven years. The right to exercise options accrues over a period of four years of continuous employment, commencing on the first annual anniversary date of the subject grant. The terms of the 2000 Plan were similar to those of the 2001 ESOP. Upon adoption of the 2001 ESOP, the Corporation decided that no new options would be issued under the 2000 Plan. Also during the year ended December 31, 2001, the Corporation adopted a stock option plan for non-employee directors ("2001 Outside Directors Option Plan"). Under such plan, two types of option grants were available: "Earned Grants", and "Discretionary Grants". Under the terms of the 2001 Outside Directors Option Plan, options could be granted to directors of the Corporation who were not employees of the Corporation or any of its affiliates.

An aggregate of 5,505,845 common shares of the Corporation have been reserved for issuance under all stock option grants.

The exercise price for each share covered by an option was established at 100% of the market value per share on the last trading day prior to the effective date of the grant. Options under Earned Grants are not exercisable until the sixth anniversary of the date of grant and the options are deemed "earned" on a quarterly basis over the one-year period following the date of grant. The terms of options under Discretionary Grants were determined by the Corporate Governance Committee of the Board of Directors of the Corporation on an individual basis.

A summary of the status of the outstanding stock options of the Corporation as at December 31, 2006 and 2005, and changes during the years ending on those dates is presented below. As a result of the consummation of the Sale Transaction in December 2003, the Corporation's Board of Directors determined that no stock options would be issued by the Corporation effective at and after January 1, 2004.



2006 2005
--------------------------------------------------------------------
Weighted Weighted
Number average average
of exercise Number of exercise
options price options price
per share per share
--------------------------------------------------------------------
$ $
Options outstanding,
beginning of year 520,300 5.13 520,300 5.13

Forfeited (163,500) -
--------------------------------------------------------------------
Outstanding, end of year 356,800 4.76 520,300 5.13
--------------------------------------------------------------------
--------------------------------------------------------------------
Options exercisable,
end of year 356,800 4.76 520,300 5.13
--------------------------------------------------------------------
--------------------------------------------------------------------

The following table summarizes information about stock options
outstanding at December 31, 2006:


Weighted
average
Exercise remaining
price Outstanding contractual Number
per share options life (years) exercisable
--------------------------------------------------------------------
--------------------------------------------------------------------
$
4.00 300,000 1.25 300,000
7.21 37,000 2.00 37,000
11.75 19,800 0.50 19,800
--------------------------------------------------------------------
356,800 1.29 356,800
--------------------------------------------------------------------
--------------------------------------------------------------------



For the years ended December 31, 2006 and 2005, no options were granted. The compensation expense related to stock options amounted to NIL in 2006 and 2005.

(g) Loss per share:

The following table sets forth the computation of basic and diluted loss per share:



2006 2005
--------------------------------------------------------------------
Numerator:
Net loss $ $(179) $(1,517)
--------------------------------------------------------------------
--------------------------------------------------------------------
Denominator:
Denominator for basic and diluted lost
per share - weighted average number
of shares 55,098,071 55,098,071
--------------------------------------------------------------------
--------------------------------------------------------------------
Basic and diluted loss per share $- $(0.03)
--------------------------------------------------------------------
--------------------------------------------------------------------

The Corporation excluded potential common share equivalents from
the loss per share calculation as they were considered anti-dilutive.

7. Income taxes

As at December 31, 2006 and 2005, future income tax benefits are
as follows:
2006 2005
--------------------------------------------------------------------
$ $
Future income tax assets:
Tax benefit on losses 48,625 51,684

Valuation allowance (48,625) (51,684)
--------------------------------------------------------------------
Net future income tax asset - -
--------------------------------------------------------------------
--------------------------------------------------------------------


At December 31, 2006, the Corporation had Canadian non-capital tax losses carried forward amounting to approximately $24,111,000 expiring at various dates to the year 2026. In addition, the Corporation has Canadian capital losses amounting to approximately $213,156,000 that can be carried forward indefinitely. The benefits of these losses have not been recognized in these financial statements, since realization will not occur.



8. Supplemental cash flow information

2006 2005
$ $
Changes in non-cash working capital items

Accrued interest receivable and other 25 10,684
Accounts payable and accrued liabilities (629) (131)
--------------------------------------------------------------------
(604) 10,553
--------------------------------------------------------------------
--------------------------------------------------------------------

No interest or income taxes have been paid during the year.


2006 2005
$ $
Cash and cash equivalent are comprised of the
following:
Cash (14) 16
Cash equivalents 2,510 424
--------------------------------------------------------------------
2,496 440
--------------------------------------------------------------------
--------------------------------------------------------------------


9. Financial instruments

(a) Credit risk

The Corporation's financial assets that are exposed to credit risk consist primarily 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.

(b) Fair value of financial instruments

The fair value of cash and cash equivalents and current liabilities approximates their carrying amount, given their relatively short-term to maturity.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Canbras Communications Corp.
    Howard N. Hendrick
    Chairman and Chief Executive Officer
    514-392-2260
    howard.hendrick@bci.ca