SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment #2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
Date of Report: October 12, 2004
(Date of Earliest Event Reported)
GREENBRIAR CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Nevada 0-8187 75-2399477
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File No.) Identification No.)
1755 Wittington Place, Suite 340
Dallas, Texas 75234
(Address of principal executive offices)
972-407-8400
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the Registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.01. Completion of Acquisition or Disposition of Assets
On October 12, 2004, Greenbriar Corporation (the "Company" or "GBR" or
"Registrant") entered into an Acquisition Agreement with four individuals,
Ronald Finley, Jeffrey A. Finley, Bradford A. Phillips and Gene E. Phillips,
pursuant to which GBR acquired in a stock-for-stock exchange all of the issued
and outstanding equity interests of two privately-held corporations, Finley
Equities, Inc., a Texas corporation ("FEINC"), and American Realty Management,
Inc., a Nevada corporation ("ARM") in exchange for 31,500 shares of GBR's
newly-designated 2% Series J Preferred Stock, liquidation value $1,000 per
share. FEINC and ARM each own an undivided one-half of the equity interest in
Tacaruna B.V., a Netherlands company, which in turn directly owns 30% of
CableTEL AD (formerly Cable Bulgaria AD), which does business as "CableTEL."
Tacaruna BV also owns 64% of the equity of Narisma Holdings Limited, a Cypress
Company, which in turn owns the balance of 70% of CableTEL. Tacaruna BV also
holds a right (presently scheduled to mature or expire October 31, 2004) to
acquire the remaining 36% of the Narisma Holdings Limited outstanding stock for
(euro)7,000,000 (approximately $8,470,000 at today's conversion rate). The
result is that GBR through the acquisition indirectly owns and controls 74.8% of
the equity interest in CableTEL.
CableTEL is the largest cable television operator in Bulgaria,
providing cable television services to approximately 11.5% of the Bulgarian
market, or approximately 130,000 households in 20 cities. CableTEL is also a
vertically-integrated communications company which provides in addition to cable
television, telephony services (including voice-over IP), internet services, and
fiberoptic connectivity to individual and commercial customers in the country of
Bulgaria. CableTEL owns the only land-based fiberoptic network encircling the
country of Bulgaria that offers this combination of services. CableTEL is
currently the only company in Bulgaria licensed to provide the bundled services
of telephone, internet access and cable television.
Prior to this transaction, GBR had no material relationship with Ronald
Finley, Jeffrey A. Finley or Bradford A. Phillips. Bradford A. Phillips is the
son of Gene E. Phillips. Gene E. Phillips is an individual who has significant
contact with and influence upon matters handled by Basic Capital Management,
Inc., a Nevada corporation ("BCM"), International Health Products, Inc., a
Nevada corporation ("IHPI"), TacCo Financial, Inc., a Nevada corporation ("TFI")
and its wholly-owned subsidiary, JRG Investment Co., Inc., a Nevada corporation
("JRGIC"). Gene E. Phillips, BCM, IHPI, TFI and JRGIC are all Reporting Persons
who may be deemed to constitute a "Person" within the meaning of Section 13d of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
corporations are the owners of shares of Common Stock of GBR which are the
subject of a Schedule 13D and amendments thereto filed on behalf of Mr. Phillips
and such corporations with the Securities and Exchange Commission (the
"Commission"). Reference is made to Amendment No. 5 to Statement on Schedule 13D
for event date of August 18, 2004 on file with the Commission for a summary of
the information contained therein. As of such date, IHPI owned 9.970 shares of
Common Stock of GBR (approximately 1% of the outstanding), TFI owned 28,596
shares of Common Stock of GBR (approximately 2.93% of the outstanding) and JRGIC
owned 156,886 shares of Common Stock of GBR (approximately 16.06% of the
outstanding), which in the aggregate total 195,452 shares of Common Stock of
GBR, or approximately 20% of the then issued and outstanding shares of Common
Stock.
The consideration given by GBR for the assets received was an aggregate
of 31,500 shares of GBR's newly-designated 2% Series J Preferred Stock,
liquidation value $1,000 per share. Such Preferred Stock has the right to
receive cumulative cash dividends of $20 per share per annum, payable quarterly,
payment of $1,000 per share in the event of dissolution, liquidation or winding
up of GBR before any distribution is made by GBR to its common stockholders,
optional redemption at any time after September 30, 2006, at a price of $1,000
per share plus cumulative dividends, no initial right of conversion into any
other securities of GBR, and voting rights consisting of five votes per share
voting together with all other classes of stock. The shares of 2% Series J
Preferred Stock are restricted in transfer, have not been registered under the
Securities Act, and were issued to Jeffrey A. Finley, 1,575 shares (5%), Ronald
Finley, 14,175 shares (45%), Bradford A. Phillips, 3,150 shares (10%) and Gene
E. Phillips, 12,600 shares (40%). The Acquisition Agreement contains customary
representations and warranties and covenants by the parties, but also requires,
as soon as reasonably practicable and in no event later than September 30, 2005,
that GBR present the transaction represented by the Acquisition Agreement,
together with a proposed mandatory exchange of preferred stock for common stock
to its current stockholders in accordance with the applicable requirements of
the Commission and the American Stock Exchange, Inc. ("AMEX") for a vote (or
written consent by the requisite number) of stockholders to approve the
transaction, including a mandatory exchange of all shares of preferred stock for
shares of GBR's Common Stock on the basis of 279 shares of Common Stock for each
share of 2% Series J Preferred Stock, which will result in an aggregate of
8,788,500 shares of Common Stock being issued to the four individuals (or their
transferees), which shall then constitute at least 89% of the total issued and
outstanding shares of Common Stock of GBR, all subject to the listing
requirements with AMEX. In the event the stockholders of GBR do not approve by
the requisite number of votes either the transaction covered by the Acquisition
Agreement or the mandatory exchange of shares of Common Stock for shares of the
2% Series J Preferred Stock, the holders of the 2% Series J Preferred Stock have
the option exercisable by all of them but not less than all of them at any time
after September 30, 2005, until September 30, 2006 to either (a) rescind in full
and revoke the transaction covered by the Acquisition Agreement by returning all
31,500 shares of 2% Series J Preferred Stock to GBR upon which GBR shall deliver
back to the four individuals all equity securities of any entity owning all of
the ordinary shares and other securities of Tacaruna B.V. or of CableTEL, or (b)
deliver to GBR all 31,500 shares of 2% Series J Preferred Stock of GBR and
receive in exchange therefor all of the ordinary shares and other securities of
Tacaruna B.V. outstanding and owned by GBR such that the four individuals will
become the owner and holder of all of the issued and outstanding securities of
Tacaruna B.V., which in turn continues to own shares of CableTEL and shares of
Narisma Holdings Limited.
Item 3.02. Unregistered Sales of Equity Securities
On October 12, 2004, GBR issued the right to receive 31,500 shares of
its newly-designated 2% Series J Preferred Stock to four individuals pursuant to
an Acquisition Agreement dated October 8, 2004. Each share of 2% Series J
Preferred Stock has a liquidation value of $1,000 per share, has a right to
cumulative cash dividends of $20 per share per annum payable quarterly, has the
right to payment of $1,000 per share in the event of dissolution, liquidation or
winding up of the Company before any distribution is made by the Company to its
common stockholders, optional redemption at any time after September 30, 2006 at
a price of $1,000 per share plus cumulative dividends, no initial right to
conversion into any other securities of the Company, and voting rights
consisting of five votes per share of 2% Series J Cumulative Preferred Stock
outstanding voting together with all other classes of stock, all as set forth in
the Certificate of Designations filed with the Secretary of State of Nevada. The
distribution of the 31,500 shares of 2% Series J Preferred Stock of GBR was made
pursuant to the Acquisition Agreement described in Item 2.01 above, and such
shares were issued without registration pursuant to the exemption afforded by
Section 4(2) of the Securities Act. Such shares of 2% Series J Preferred Stock
may not be transferred by the holders except in transactions which are exempt
from the registration requirements of the Securities Act.
Item 7.01. Regulation FD Disclosure
On October 12, 2004, the Company issued a press release announcing the
acquisition of assets and issuance of securities described until Items 2.01 and
3.02 above. A copy of the press release is attached hereto as Exhibit 99.1.
The information in this Form 8-K being furnished under Item 7.01 and
Exhibit 99.1 under Item 9.01 shall not be deemed to be "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or
otherwise subject to the liabilities of such Section, nor shall such information
be deemed incorporated by reference in any filing under the Securities Act or
the Exchange Act, except as shall be expressly set forth by specific reference
in such filing.
Item 9.01. Financial Statements and Exhibits
The following financial statements and pro forma financial information
regarding Tacaruna Holdings B.V. were filed with Amendment #1 to this Form 8-K.
(a) Financial Statements of Businesses Acquired.
Tacaruna Holdings B.V.
1. Financial Statement for Tacaruna Holdings B.V. for the nine
months ending September 30, 2004.
2. Financial Statement for Tacaruna Holdings B.V. for the twelve
months ending December 31, 2003.
3. Financial Statement for Tacaruna Holdings B.V. for the twelve
months ending December 31, 2002.
The following financial statements and pro forma financial information
regarding Narisma Holdings Limited and CabelTEL AD are filed herewith.
Narisma Holdings Limited
1. Unaudited Financial Statement for Narisma Holdings Limited for
the nine months ending September 30, 2004.
2. Audited Financial Statement for Narisma Holdings Limited for
the twelve months ending December 31, 2003.
3. Audited Financial Statement for Narisma Holdings Limited for
the twelve months ending December 31, 2002.
Cable Bulgaria (CabelTEL) AD
1. Unaudited Financial Statement for CabelTEL AD for the nine
months ending September 30, 2004.
2. Audited Financial Statement for Cable Bulgaria AD for the
twelve months ending December 31, 2003.
3. Audited Financial Statement for Cable Bulgaria AD for the
twelve months ending December 31, 2002.
(b) Pro Forma Financial Information.
Pro Forma financial information required by this item is filed
herewith.
(c) Exhibits.
The following exhibits were filed with the Company's Form 8-K on
October 15, 2004:
Exhibit
Designation Description of Exhibit
3.4 Certificate of Designations dated October 12, 2004, as filed with the
Secretary of State of Nevada on October 13, 2004 (also an exhibit to
10.1 below).
10.1 Acquisition Agreement dated October 12, 2004, among Greenbriar
Corporation, Ronald Finley, Jeffrey A. Finley, Bradford A. Phillips and
Gene E. Phillips (excluding exhibits and schedules).
99.1 Press Release dated October 12, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly-caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly-authorized.
Dated: December 29, 2004. GREENBRIAR CORPORATION
By: /s/ Gene S. Bertcher
-------------------------------
Gene S. Bertcher, President and
Chief Executive Officer
NARISMA HOLDINGS LIMITED
REPORT AND FINANCIAL STATEMENTS
Nine months ended
30 September 2004
NARISMA HOLDINGS LIMITED
PROFIT AND LOSS ACCOUNT
Nine Months Twelve Months
Ended Ended
30 September 31 December
2004 2003
Note US$ US$
Consulting fees 430.304 0
Administration expenses (329.387) (8.325)
------- -------
Operating income (3) 100.917 (8.325)
Finance income - net (4) 272.250 363.600
------- -------
Profit before taxation 373.167 355.275
Taxation (5) (17.427) (16.609)
------- -------
Net profit 355.740 338.666
======= =======
NARISMA HOLDINGS LIMITED
BALANCE SHEET
Nine Months Twelve Months
Ended Ended
30 September 31 December
2004 2003
Note US$ US$
Assets
Non - current assets
Investment in subsidiary company (6) 7,329,861 7,329,861
---------- ----------
Current assets
Accounts receivable 95,729 0
Loans receivable (7) 3,344,485 3,072,235
---------- ----------
Total assets 10,770,075 10,402,096
========== ==========
Equity and liabilities
Capital and Reserves
Share capital (8) 1,747 1,747
Reserves (9) 1,343,737 987,997
---------- ----------
1,362,143 989,744
Current liabilities
Amounts due to shareholders (10) 9,358,610 9,358,610
Accrued expenses 16,656 5,235
Taxation 49,325 48,507
---------- ----------
9,424,591 9,412,352
Total liabilities 9,424,591 9,412,352
---------- ----------
Total equity and liabilities 10,770,075 10,402,096
========== ==========
NOTES TO THE FINANCIAL STATEMENTS
1 Incorporation and main activities
(a) The company was incorporated in Cyprus on 15 March 1999 as a
private limited liability company in accordance with the
provisions of the Companies Law, Cap. 113, of Cyprus.
(b) The company's main activity is the holding of investments.
2 Accounting policies
The principal accounting policies adopted in the preparation of these financial
statements are set out below:
Basis of preparation
The financial statements, which are expressed in US Dollars, have been prepared
in accordance with International Financial Reporting Standards and the
provisions of the Companies Law, Cap. 113. The financial statements have been
prepared under the historical cost convention, except as disclosed in the
accounting policies below .
Reporting currency
The reporting currency is the US Dollar. The company does not use the currency
of the country in which it is domiciled, the Cyprus Pound, as the vast majority
of the transactions of the company are in US Dollars.
Revenue recognition
Other revenues earned by the Company are recognised when the Company's right to
receive payment is established.
Foreign currencies
Foreign currency transactions are translated into US Dollars at the rate of
exchange ruling at the time of the transaction. Monetary assets and liabilities
expressed in foreign currencies are translated into US Dollars at the rates of
exchange ruling at the end of the financial period. Share capital was translated
at the time of issue. Differences on exchange are included in profit before
taxation
Taxation
Provision is made for corporation tax on the taxable profit for the year at the
appropriate rates in force.
Investment in subsidiary company
Investment in subsidiary company is shown at cost and provision is only made
where, in the opinion of the Directors, there is a permanent diminution in
value. Where there has been a permanent diminution in the value of an
investment, it is recognised as an expense when the diminution is identified.
Loans receivable
Loans receivable represent amounts advanced based on agreements and are carried
at original amount advanced plus interest accrued less any repayments. Interest
for the year is credited in the profit and loss account.
Provisions
Provisions are recognised when the Company has a present obligation as a result
of past events, if it is probable that an outflow of funds will be required to
settle the obligation, and a reliable estimate of the amount of the obligation
can be made.
3. Operating Income
2004 2003
US$ US$
The following items have been charged in
arriving at operating loss:
Auditors' remuneration 2,000 1,150
4. Finance income - net
2004 2003
US$ US$
Interest income on loans receivable 272,250 363,600
========= =========
5. Taxation
2004 2003
US$ US$
Current taxation 17,427 16,609
========= =========
The tax on the Company's profit before taxation differs from the
theoretical amount that would arise using the applicable tax rates as
follows: 2004 2003 US$ US$
Profit before taxation 373,167 355,275
========= =========
Tax calculated at the applicable tax rates 15,860 15,099
Tax penalties 1,567 1,510
--------- ---------
Taxation charge 17,427 16,609
========= =========
The Company is subject to income tax at the rate of 4,25% of taxable profit.
6. Investment in subsidiary company
2004 2003
US$ US$
122.543 shares of BGN100 each of the
Bulgarian private company Cabletel 70% / 65%) 7,329,861 7,329,861
========= =========
7. Loans receivable
2004 2003
US$ US$
Loans to third parties:
As at 1 January / 31 December -- 300,000
Amounts payment for the year -- (300,000)
---------
As at 31 December -- --
========= =========
Loans to subsidiary company
Capital amount:
As at 1 January 2,020,000 2,020,000
Amounts advanced in year -- --
--------- ---------
As at 30 September 2,020,000 2,020,000
--------- ---------
Interest charged:
As at 1 January 1,052,235 688,635
For the year 272,250 363,600
--------- ---------
As at 30 September 1,324,485 1,052,235
--------- ---------
Total amount due from subsidiary company 3,344,485 3,072,235
========= =========
Total loans receivable as at 30 September 3,344,485 3,072,235
========= =========
The above loans are repayable on demand by written notice to the
borrower. The loan to the third party is interest free while the loan
to the subsidiary company bears interest at the rate of 18% per annum.
8. Share capital
2003 2002
US$ US$
Authorised
5.000 shares of C(pound)1 each - equivalent to: 8,735 8,735
===== =====
Issued and fully paid
At 1 January
1.000 shares of C(pound)1 each - equivalent to: 1,747 1,747
----- -----
At 30 September 1,747 1,747
===== =====
9. Reserves
2004 2003
US$ US$
Retained earnings
At 1 January 987,997 649,331
Net profit for the year 355,740 338,666
--------- ---------
At 31 December 1,343,737 987,997
========= =========
10. Related party transactions
The following transactions were carried out with related parties:
(a) Amounts due to Shareholders
2004 2003
US$ US$
Amounts due to the Shareholders of the Company
At beginning of year 9,358,610 9,350,000
Amounts received during the year 0 8,610
--------- ---------
At end of year 9,358,610 9,358,610
========= =========
Amounts due to shareholders are repayable on demand and bear no interest.
ANALYSIS OF EXPENSES
FOR THE NINE MONTHS ENDED 30 September 2004
2003 2002
US$ US$
ADMINISTRATION EXPENSES
Accounting and audit fees 2,000 1,150
Administration expenses 6,335 460
Exchange difference (10) --
------ ------
8,325 1,610
====== ======
NARISMA HOLDINGS LIMITED
REPORT AND FINANCIAL STATEMENTS
31 DECEMBER 2003
NARISMA HOLDINGS LIMITED
REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2003
Contents
Page
Directors and advisers 1
Directors report 2
Auditors report 3 - 4
Income statement and statement of
recognised gains and losses 5
Balance sheet 6
Cash flow statement 7
Notes to the financial statements 8 - 12
NARISMA HOLDINGS LIMITED
DIRECTORS AND ADVISERS
Directors Registered Office
Andreas Mavromatis (appointed 31.10.2003) 42 Nestoros street
Georgia Georgiou (appointed 31.10.2003) Kaimakli, 1026 Nicosia,
Ronald Charles Finley (appointed 31.10.2003) Cyprus
Kenneth Fields (resigned 31.10.2003)
Declan James Ganley (resigned 31.10.2003)
Company Secretary Auditors
Dema Secretarial Limited Demetriades Shakos Pifanis
24 Agias Varvaras street Photiades Business Centre
Archangelos, Nicosia Avenue
Cyprus Nicosia
P.O.Box 22545
Nicosia 1522
CYPRUS
NARISMA HOLDINGS LIMITED
DIRECTORS REPORT
FOR THE YEAR ENDED 31 DECEMBER 2003
1. The directors present their report together with the audited financial
statements of the company for the year ended 31 December 2003.
Principal activities
2. The company's main activity is the holding of investments.
Results
3. The results for the year are set out on page 5. The Board of Directors does
not recommended the payment of a dividend and the remaining net profit for the
year is retained.
Share capital
4. There were no changes in the share capital of the Company.
Board of Directors
5. The members of the Board of Directors at 31 December 2003 and at the date of
this report are shown on page 1. Mr Kenneth Fields and Mr Declan James Ganley
who were directors as at 1 January 2003, resigned on 31 October 2003. Mr Andreas
Mavromatis, Mr Ronald Charles Finley and Ms Georgia Georgiou were appointed
directors on the same date.
6. There were no significant changes in the assignment of responsibilities and
remuneration of the Board of Directors.
Auditors
7. The auditors, Demetriades Shakos Pifanis, have expressed their willingness to
continue in office. A resolution giving authority to the directors to fix their
remuneration will be proposed at the annual general meeting.
By order of the Board
-----------------
Andreas Mavromatis
Director
Nicosia, 15 December 2004
NARISMA HOLDINGS LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2003
2003 2002
Note US$ US$
Administration expenses (8,325) (1,610)
-------- --------
Operating (loss) (3) (8,325) (1,610)
Finance income - net (4) 363,600 363,600
-------- --------
Profit before taxation 355,275 361,990
Taxation (5) (16,609) (16,923)
-------- --------
Net profit 338,666 345,067
======== ========
Statement of recognised gains and losses
for the year ended 31 December 2003
2003 2002
US$ US$
Total recognised gains 338,666 345,067
======== ========
The notes on pages 8 to 12 form part of these financial statements.
NARISMA HOLDINGS LIMITED
BALANCE SHEET
31 DECEMBER 2003
2003 2002
Note US$ US$
Assets
Non - current assets
Investment in subsidiary company (6) 7,329,861 7,029,861
----------- -----------
Current assets
Loans receivable (7) 3,072,235 3,008,635
----------- -----------
Total assets 10,402,096 10,038,496
=========== ===========
Equity and liabilities
Capital and Reserves
Share capital (8) 1,747 1,747
Reserves (9) 987,997 649,331
----------- -----------
989,744 651,078
----------- -----------
Current liabilities
Amounts due to shareholders (10) 9,358,610 9,350,000
Accrued expenses 5,235 5,520
Taxation 48,507 31,898
----------- -----------
9,412,352 9,387,418
Total liabilities 9,412,352 9,387,418
----------- -----------
Total equity and liabilities 10,402,096 10,038,496
=========== ===========
Approved by the Board of Directors on 15 December 2004.
----------------- ----------------
Andreas Mavromatis Georgia Georgiou
Director Director
The notes on pages 8 to 12 form part of these financial statements.
NARISMA HOLDINGS LIMITED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2003
2003 2002
US$ US$
Cash flows from operating activities
Profit for the year before taxation 355,275 361,990
Adjustments for:
Interest received (363,600) (363,600)
-------- --------
Operating (loss) before working capital changes (8,325) (1,610)
Changes in working capital:
Amounts due to shareholders 8,610 104,164
Amounts due to subsidiary company -- (104,164)
Accrued expenses (285) 1,610
-------- --------
Net cash from operating activities -- --
-------- --------
Cash flows from investing activities
Interest received 363,600 363,600
Acquisition of investment in subsidiary company (300,000) --
Loans made (63,600) (363,600)
-------- --------
Net cash (used in) investing activities -- --
-------- --------
Net movement in cash and cash equivalents -- --
-------- --------
Cash and cash equivalents at beginning of year -- --
-------- --------
Cash and cash equivalents at end of year -- --
======== ========
The notes on pages 8 to 12 form part of these financial statements.
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1 Incorporation and main activities
(a) The company was incorporated in Cyprus on 15 March 1999 as a
private limited liability company in accordance with the
provisions of the Companies Law, Cap. 113, of Cyprus.
(b) The company's main activity is the holding of investments.
2 Accounting policies
The principal accounting policies adopted in the preparation of these financial
statements are set out below:
Basis of preparation
The financial statements, which are expressed in US Dollars, have been prepared
in accordance with International Financial Reporting Standards and the
provisions of the Companies Law, Cap. 113. The financial statements have been
prepared under the historical cost convention, except as disclosed in the
accounting policies below.
Reporting currency
The reporting currency is the US Dollar. The company does not use the currency
of the country in which it is domiciled, the Cyprus Pound, as the vast majority
of the transactions of the company are in US Dollars.
Revenue recognition
Other revenues earned by the Company are recognised when the Company' s right to
receive payment is established.
Foreign currencies
Foreign currency transactions are translated into US Dollars at the rate of
exchange ruling at the time of the transaction. Monetary assets and liabilities
expressed in foreign currencies are translated into US Dollars at the rates of
exchange ruling at the end of the financial period. Share capital was translated
at the time of issue. Differences on exchange are included in profit before
taxation.
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Taxation
Provision is made for corporation tax on the taxable profit for the year at the
appropriate rates in force.
Investment in subsidiary company
Investment in subsidiary company is shown at cost and provision is only made
where, in the opinion of the Directors, there is a permanent diminution in
value. Where there has been a permanent diminution in the value of an
investment, it is recognised as an expense when the diminution is identified.
Loans receivable
Loans receivable represent amounts advanced based on agreements and are carried
at original amount advanced plus interest accrued less any repayments. Interest
for the year is credited in the profit and loss account.
Provisions
Provisions are recognised when the Company has a present obligation as a result
of past events, if it is probable that an outflow of funds will be required to
settle the obligation, and a reliable estimate of the amount of the obligation
can be made.
3. Operating Loss
2003 2002
US$ US$
The following items have been charged in
arriving at operating loss:
Auditors' remuneration 2,000 1,150
4. Finance income - net
2003 2002
US$ US$
Interest income on loans receivable 363,600 363,600
======= =======
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
5. Taxation 2003 2002
US$ US$
Current taxation 16,609 16,923
======= =======
The tax on the Company's profit before taxation differs from the
theoretical amount that would arise using the applicable tax rates as
follows: 2003 2002 US$ US$
Profit before taxation 355,275 361,990
======= =======
Tax calculated at the applicable tax rates 15,099 15,385
Tax penalties 1,510 1,538
------- -------
Taxation charge 16,609 16,923
======= =======
The Company is subject to income tax at the rate of 4,25% of taxable
profit.
6. Investment in subsidiary company
2003 2002
US$ US$
122.543 shares of BGN100 each of the
Bulgarian private company Cabletel 70% / 65%) 7,329,861 7,029,861
During the year the company acquired 1.839 shares at a cost of
US$300.000 representing 1,5% of the subsidiary company's issued share
capital.
Consolidated accounts have not been prepared as in the opinion of
directors it would be of no real value to the members of the company
compared to the costs involved.
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
7. Loans receivable
2003 2002
US$ US$
---------- ----------
Loans to third parties:
As at 1 January / 31 December 300,000 300,000
Amounts payment for the year (300,000) --
---------- ----------
As at 31 December -- 300,000
========== ==========
Loans to subsidiary company
Capital amount:
As at 1 January 2,020,000 2,020,000
Amounts advanced in year -- --
As at 31 December 2,020,000 2,020,000
---------- ----------
Interest charged:
As at 1 January 688,635 325,035
For the year 363,600 363,600
---------- ----------
As at 31 December 1,052,235 688,635
---------- ----------
Total amount due from subsidiary company 3,072,235 2,708,635
========== ==========
Total loans receivable as at 31 December 3,072,235 3,008,635
========== ==========
The above loans are repayable on demand by written notice to the
borrower. The loan to the third party is interest free while the loan
to the subsidiary company bears interest at the rate of 18% per annum.
8. Share capital
2003 2002
US$ US$
Authorised
5.000 shares of C(pound)1 each - equivalent to: 8,735 8,735
===== =====
Issued and fully paid
At 1 January
1,000 shares of C(pound)1 each - equivalent to: 1,747 1,747
----- -----
At 31 December 1,747 1,747
===== =====
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
9. Reserves
2003 2002
US$ US$
Retained earnings
At 1 January 649,331 304,264
Net profit for the year 338,666 345,067
------- -------
At 31 December 987,997 649,331
======= =======
10. Related party transactions
The following transactions were carried out with related parties:
(a) Amounts due to Shareholders
2003 2002
US$ US$
Amounts due to the Shareholders of the Company
At beginning of year 9,350,000 9,245,836
Amounts received during the year 8,610 104,164
--------- ---------
At end of year 9,358,610 9,350,000
========= =========
Amounts due to shareholders are repayable on demand and bear no
interest.
II. Financial instruments
The main financial assets of the Company are the loans receivable. The
main financial liabilities are the accruals and amounts due to the
shareholders.
(a) Credit risk
Concentrations of credit risk with respect to trade debtors are limited
as the company has policies in place to assess the creditworthiness of
its customers. Due to these factors, management believes that no
additional credit risk is inherent in the Company's trade debtors.
(b) Fair values
The fair values of the Company' s financial assets and financial
liabilities approximate their carrying amounts at the balance sheet
date.
NARISMA HOLDINGS LIMITED
ANALYSIS OF EXPENSES
FOR THE YEAR ENDED 31 DECEMBER 2003
2003 2002
US$ US$
ADMINISTRATION EXPENSES
Accounting and audit fees 2,000 1,150
Administration expenses 6,335 460
Exchange difference (10) --
------ ------
8,325 1,610
====== ======
NARISMA HOLDINGS LIMITED
Nicosia
Cyprus
15 December2004
Demetriades Shakos Pifanis
P.O.Box 22545
Nicosia
Dear Sirs,
Letter of representation
1. We confirm to the best of our knowledge and belief, and having made
appropriate inquiries of other directors and officials of the company,
the following representations given to you in connection with your
audit of the company's financial statements for the year ended 31
December 2003.
2. We acknowledge as directors our responsibility for ensuring:
(a) The accuracy of the accounting records and the financial
statements prepared from them; and
(b) that the financial statements give a true and fair view of the
state of affairs of the company as at 31 December 2003 and of
the loss for the year then ended.
Accounting records and transactions
3 All the accounting records have been made available to you for the
purpose of your audit, and all the transactions undertaken have been
reflected and recorded in the accounting records. All other records and
related information which might affect the truth and fairness of, or
necessary disclosure in, the financial statements including minutes of
directors and shareholders meetings (and of all relevant management
meetings), have been made available to you and no such information has
been withheld.
Related parties
4 We confirm that we have disclosed all related party transactions
relevant to the company and that we are not aware of any other such
matters required to be disclosed in the financial statements whether
under International Financial Reporting Standards 24("IFRS 24") Related
Party Disclosures or other requirements. Assets 5 Provisions for
depreciation and diminution in value, including obsolescence, have been
made against fixed assets on bases and at rates calculated to reduce
the net book amount of each asset to its estimated residual value by
the end of its probable useful life in the company' a business. In this
respect we are satisfied that the probable useful lives have been
realistically estimated.
6 In our opinion on realisation in the ordinary course of the business
the current assets in the balance sheet are expected to produce not
less than the net book amounts at which they are stated.
7 All assets included in the balance sheet were at that date and remain
free from any lien, encumbrance or charge (except as disclosed in the
financial statements).
Liabilities
8 Full provision has been made for all liabilities at the balance sheet
date, including guarantees, commitments and contingencies where the
items are expected to result in significant loss. Other such items,
where in our opinion provision is unnecessary, have been appropriately
disclosed in the financial statements.
9 We are not aware of any pending litigation, proceedings, hearing or
claims negotiations which may result in significant loss to the
company.
Other matters
10 We are not aware of any breaches or possible breaches of statute,
regulations, contracts, agreements or the company's Memorandum and
Articles of Association which might result in the company suffering
significant penalties or other loss. No allegations of such breaches
have come to our notice.
11 No circumstances have arisen, or events occurred, between the balance
sheet date and the date of this letter in respect of matters which
would require adjustment to or disclosure in the financial statements,
or which should be disclosed to shareholders through some other medium.
We have no plans or intentions that may materially affect the carrying
value or classification of assets and liabilities.
12 Except as disclosed in the financial statements, no transactions
involving directors, officers and others requiring disclosure in the
financial statements under the Companies Acts have been entered into.
Yours truly
---------------
Director
NARISMA HOLDINGS LIMITED
REPORT AND FINANCIAL STATEMENTS
31 DECEMBER 2002
NARISMA HOLDINGS LIMITED
REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2002
Contents
Page
Directors and advisers 1
Directors report 2
Auditors report 3
Profit and loss account and statement of
recognised gains and losses 4
Balance sheet 5
Cash flow statement 6
Notes to the financial statements 7-11
Additional information to the profit and loss account 12
NARISMA HOLDINGS LIMITED
DIRECTORS AND ADVISERS
Directors Registered Office
Kenneth Fields 2 Sofouli street
Declan James 1096 Nicosia
Cyprus
Company Secretary Auditors
Dema Secretarial Limited Demetriades Shakos Pifanis
24 Agias Varvaras street Photiades Business Centre
Archangelos, Nicosia 1st floor, 8 Stassinos Avenue
Cyprus Nicosia
P.O.Box 22545
Nicosia 1522
CYPRUS
NARISMA HOLDINGS LIMITED
DIRECTORS REPORT
FOR THE YEAR ENDED 31 DECEMBER 2003
1. The directors present their report together with the audited financial
statements of the company for the year ended 31 December 2002.
Principal activities
2. The company's main activity is the holding of investments.
Results
3. The results for the year are set out on page 4.
Directors
4. The directors at the date of this report are shown on page 1 and will
continue in office.
Auditors
5. The auditors, Demetriades Shakos Pifanis, have expressed their willingness to
continue in office. A resolution giving authority to the directors to fix their
remuneration will be proposed at the annual general meeting.
By order of the Board
-----------------
Director
Nicosia, 16 September 2003
Demetriades Shakos Pifanis
--------------------------
Chartered Certified Accountants
AUDITOR'S REPORT TO THE MEMBERS OF
NARISMA HOLDINGS LIMITED
1. We have audited the financial statements, on pages 4 to 11 and have obtained
all the information and explanations we considered necessary. These financial
statements are the responsibility of the Company's Directors. Our responsibility
is to express an opinion on these financial statements based on our audit. This
report is made solely to the Company's members, as a body, in accordance with
Section 156 of the Companies Law, Cap.113: Our work has been undertaken so that
we might state to the Company s members those matters we are required to state
to them in an auditor's report and for no other purpose. To the fullest extend
permitted by taw, we do not accept or assume responsibility to anyone other than
the Company and the Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
2. We conducted our audit in accordance with international Standards on
Auditing. Those Standards require that we plan and perform the audit to obtain
reasonable assurance about 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 the
directors, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.'
3. As stated in note 6 the Company has not prepared consolidated financial
statements because the Company's directors are of the opinion that it would be
of no real value to the members of the Company compared to the costs involved.
This is permitted by the Companies Law, Cap 113. However, consolidated financial
statements are required by lnternational Financial Reporting Standard IFRS 27
"Consolidated Financial Statements and Accounting for Investments in
Subsidiaries". In our opinion, presentation of consolidated information is
necessary for a proper understanding of the financial position and operations of
the group.
4. In our opinion proper books of account have been kept by the company and the
financial statements, which are in agreement therewith, give a true and fair
view of the state of affairs of Narisma Holdings Limited, as of 31 December 2002
and of its loss and cash flows for the year then ended and comply with the
Companies Law, Cap.113 and, except for the failure to present consolidated
financial statements for the Company and its subsidiary, are in accordance with
International Financial Reporting Standards.
Demetriades Shakos Pifanis
Chartered Certified Accountants
Nicosia, 16 September 2003
NARISMA HOLDINGS LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
Note US$ US$
Administration expenses (1,610) (1,726)
-------- --------
Operating (loss) (3) (1,610) (1,726)
Finance income - net (4) 363,600 314,951
-------- --------
Profit before taxation 361,990 313,225
Taxation (5) (16,923) (14,643)
-------- --------
Net profit 345,067 298,582
======== ========
Statement of recognised gains and losses
for the year ended 31 December 2003
2003 2002
US$ US$
Total recognised gains 345,067 298,582
======== ========
The notes on pages 7 to 11 form part of these financial statements.
NARISMA
HOLDINGS LIMITED
BALANCE SHEET
31 DECEMBER 2002
2002 2001
Note US$ US$
Assets
Non - current assets
Investment in subsidiary company (6) 7,029,861 7,029,861
---------- ----------
Current assets
Loans receivable (7) 3,008,635 2,645,035
---------- ----------
Total assets 10,038,496 9,674,896
========== ==========
Equity and liabilities
Capital and Reserves
Share capital (8) 1,747 1,747
Reserves (9) 649,331 304,264
---------- ----------
651,078 306,011
---------- ----------
Current liabilities
Amounts due to shareholders (10) 9,350,000 9,245,836
Amounts due to subsidiary company -- 104,164
Accrued expenses 5,520 3,910
Taxation 31,898 14,975
---------- ----------
9,387,418 9,368,885
Total liabilities 9,387,418 9,368,885
---------- ----------
Total equity and liabilities 10,038,496 9,674,896
========== ==========
Approved by the Board of Directors on 16 September 2002.
----------------- ---------------
Director Director
The notes on pages 7 to 11 form part of these financial statements.
NARISMA HOLDINGS LIMITED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2003
2002 2001
US$ US$
Cash flows from operating activities
Profit for the year before taxation 361,990 313,225
Adjustments for:
Interest received (363,600) (314,951)
---------- ----------
Operating (loss) before working capital changes (1,610) (1,726)
Changes in working capital:
Amounts due to shareholders 104,164 2,204,557
Amounts due to subsidiary company (104,164) (1,554,157)
Accrued expenses 1,610 1,150
---------- ----------
Net cash from operating activities -- 650,000
---------- ----------
Cash flows from investing activities
Interest received 363,600 10,084
Acquisition of investment in subsidiary company (300,000) --
Loans made (363,600) (660,084)
---------- ----------
Net cash (used in) investing activities -- 650,000
---------- ----------
Net movement in cash and cash equivalents -- --
---------- ----------
Cash and cash equivalents at beginning of year -- --
---------- ----------
Cash and cash equivalents at end of year -- --
========== ==========
The notes on pages 7 to 11 form part of these financial statements.
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1 Incorporation and main activities
(a) The company was incorporated in Cyprus on 15 March 1999 as a
private limited liability company in accordance with the
provisions of the Companies Law, Cap. 113, of Cyprus.
(b) The company's main activity is the holding of investments.
2 Accounting policies
The principal accounting policies adopted in the preparation of these financial
statements are set out below:
Basis of preparation
The financial statements, which are expressed in US Dollars, have been prepared
in accordance with International Financial Reporting Standards and the
provisions of the Companies Law, Cap. 113. The financial statements have been
prepared under the historical cost convention, except as disclosed in the
accounting policies below.
Reporting currency
The reporting currency is the US Dollar. The company does not use the currency
of the country in which it is domiciled, the Cyprus Pound, as the vast majority
of the transactions of the company are in US Dollars.
Revenue recognition
Other revenues earned by the Company are recognised when the Company's right to
receive payment is established.
Foreign currencies
Foreign currency transactions are translated into US Dollars at the rate of
exchange ruling at the time of the transaction. Monetary assets and liabilities
expressed in foreign currencies are translated into US Dollars at the rates of
exchange ruling at the end of the financial period. Share capital was translated
at the time of issue. Differences on exchange are included in profit before
taxation.
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Taxation
Provision is made for corporation tax on the taxable profit for the year at the
appropriate rates in force.
Investment in subsidiary company
Investment in subsidiary company is shown at cost and provision is only made
where, in the opinion of the Directors, there is a permanent diminution in
value. Where there has been a permanent diminution in the value of an
investment, it is recognised as an expense when the diminution is identified.
Loans receivable
Loans receivable represent amounts advanced based on agreements and are carried
at original amount advanced plus interest accrued less any repayments. Interest
for the year is credited in the profit and loss account.
Provisions
Provisions are recognised when the Company has a present obligation as a result
of past events, if it is probable that an outflow of funds will be required to
settle the obligation, and a reliable estimate of the amount of the obligation
can be made.
3. Operating Loss
2002 2001
US$ US$
The following items have been charged in
arriving at operating loss:
Auditors' remuneration 1,150 1,150
4. Finance income - net
2002 2001
US$ US$
Interest income on loans receivable 363,600 314,951
======= =======
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
5. Taxation
2002 2001
US$ US$
Current taxation 16,923 14,643
====== ======
The tax on the Company's profit before taxation differs from the theoretical
amount that would arise using the applicable tax rates as follows: 2002 2001 US$
US$
Profit before taxation 361,990 313,225
======= =======
Tax calculated at the applicable tax rates 15,385 13,312
Tax penalties 1,538 1,331
------- -------
Taxation charge 16,923 14,643
======= =======
The Company is subject to income tax at the rate of 4,25% of taxable profit.
6. Investment in subsidiary company
2002 2001
US$ US$
83.942 shares of BGN100 each of the
Bulgarian private company Cable Bulgaria AD 7,029,861 7,029,861
During the year the company disposed of 9.828 shares at cost,
representing 8,02% of the subsidiary's issued share capital.
Consolidated accounts have not been prepared as in the opinion of
directors it would be of no real value to the members of the company
compared to the costs involved.
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
7. Loans receivable
2002 2001
US$ US$
Loans to third parties:
As at 1 January / 31 December 300,000 300,000
========= =========
Loans to subsidiary company
Capital amount:
As at 1 January 2,020,000 650,000
Amounts advanced in year -- 1,370,000
As at 31 December 2,020,000 2,020,000
--------- ---------
Interest charged:
As at 1 January 325,035 10,084
For the year 363,600 314,951
--------- ---------
As at 31 December 668,635 325,035
--------- ---------
Total amount due from subsidiary company 2,708,635 2,345,035
========= =========
Total loans receivable as at 31 December 3,008,635 2,645,035
========= =========
The above loans are repayable on demand by written notice to the borrower. The
loan to the third party is interest free while the loan to the subsidiary
company bears interest at the rate of 18% per annum.
8. Share capital
2002 2001
US$ US$
Authorised
5.000 shares of C(pound)1 each - equivalent to: 8,735 8,735
===== =====
Issued and fully paid
At 1 January
1.000 shares of C(pound)1 each - equivalent to: 1,747 1,747
----- -----
At 31 December 1,747 1,747
===== =====
NARISMA HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
9. Reserves
2002 2001
US$ US$
Retained earnings
At 1 January 304,264 5,682
Net profit for the year 345,067 298,582
------- -------
At 31 December 649,331 304,264
======= =======
10. Related party tra nsactions
The following transactions were carried out with related parties:
(a) Amounts due to Shareholders
2002 2001
US$ US$
Amounts due to the Shareholders of the Company
At beginning of year 9,245,836 7,678,035
Amounts received during the year 104,164 1,752,580
Amounts advanced during the year -- (184,779)
---------- ----------
At end of year 9,350,000 9,245,836
========== ==========
Amounts due to shareholders are repayable on demand and bear no interest.
II. Financial instruments
The main financial assets of the Company are the loans receivable. The main
financial liabilities are the accruals and amounts due to the shareholders.
(a) Credit risk
Concentrations of credit risk with respect to trade debtors are limited
as the company has policies in place to assess the creditworthiness of
its customers. Due to these factors, management believes that no
additional credit risk is inherent in the Company's trade debtors.
(b) Fair values
The fair values of the Company' s financial assets and financial
liabilities approximate their carrying amounts at the balance sheet
date.
NARISMA HOLDINGS LIMITED
ANALYSIS OF EXPENSES
FOR THE YEAR ENDED 31 DECEMBER 2002
2002 2001
US$ US$
ADMINISTRATION EXPENSES
Accounting and audit fees 1,150 1,150
Administration expenses 460 576
----- -----
1,610 1,726
===== =====
CABLETEL AD
CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED
SEPTEMBER 30, 2004
"CableTEL" AD
--------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT
Nine Months
Ended Year Ended
Note 30 September 2004 31 December 2003
BGN '000 BGN '000
Net sales revenues
Services 11,153 14,369
Sale of duct 2,746 --
Cost of sales (10,965) (12,851)
----------------- -----------------
Gross profit 2,934 1,518
----------------- -----------------
Administrative expenses (4,301) (3,394)
Imapirment charge -- (240)
Profit on acquisition of investment 299 --
Other operating income 418 671
(Loss)/profit on disposal of investment (554) 634
----------------- -----------------
Operating loss (1,204) (811)
----------------- -----------------
Finance income (net) (679) 374
Loss before tax (1,883) (437)
Tax charge 58 114
----------------- -----------------
Group loss (1,825) (323)
----------------- -----------------
Minority interest (109) 57
----------------- -----------------
Net loss (1,934) (266)
----------------- -----------------
"CableTEL" AD
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
Nine Months Ended Year Ended
Note 30 September 2004 31 December 2003
BGN '000 BGN '000
----------------- -----------------
ASSETS
Fixed (non-current) assets
Prtoperty, plant and equipment 19,935 12,940
Intangible assets 84 80
Investments 11 45
Goodwill 2,217 2,232
----------------- -----------------
Total 22,247 15,297
----------------- -----------------
Current assets
Inventories 3,237 367
Receivables 4,293 3,026
Cash and cash equivalents 844 2,214
Prepayments 102 105
----------------- -----------------
Total 8,476 5,712
----------------- -----------------
Total assets 30,723 21,009
================= =================
LIABILITIES
Equity
Share capital 12,254 12,254
Revaluation reserves 82 90
Other Reserves 47 47
Accumulated deficit (7,325) (5,457)
----------------- -----------------
Total 5,058 6,934
----------------- -----------------
Minority interest 231 1,022
Long-term liabilities
Bank borrowings and leases 1,885 4,135
Deferred tax liabilities 43 106
Total 1,928 4,241
----------------- -----------------
Short-term liabilities
Borrowings from shareholders 3,666 3,505
Trade and other payables 12,693 4,925
Borrowings 6,911 192
Deferred income 236 190
Total 23,506 8,812
----------------- -----------------
Total liabilities 25,434 13,053
----------------- -----------------
Total equity and liabilities 30,723 21,009
================= =================
"CableTEL" AD
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT
Nine Months
Ended Year Ended
Note 30 September 2004 31 December 2003
BGN '000 BGN '000
----------------- -----------------
Operating activities
Cash generated from operations 4,065 2,405
Interest received 10
Interest paid (535) --
Tax paid (4) (75)
----------------- -----------------
Net cash from operating activities 3,526 2,340
----------------- -----------------
Investing activities
Acquisition of subsidiary, net of cash acquired 34 (76)
Purchase of property, plant and equipment (9,146) (3,952)
----------------- -----------------
Net cash used in investing activities (9,112) (4,028)
----------------- -----------------
Financing activities
Repaid short-term borrowings (83)
Received long-term borrowings 4,469 3,192
Lease payments (144) 0
Divident paid to minotirty shareholders (109) 0
----------------- -----------------
Net cash from financing activities 4,216 3,109
----------------- -----------------
Increase/(Decrease) in cash and cash equivalents (1,370) 1,421
================= =================
Movement in cash and cash equivalents
As at 1 January in the corresponding year 2,214 793
Increase/(Decrease)
----------------- -----------------
At the end of period 844 2,214
================= =================
"Cable Bulgaria" AD
--------------------------------------------------------------------------------
Consolidated statement for the changes in equity
for the nine months ended 30 September 2004
Share Revaluation Other Accumulated
capital reserves reserves deficit Total
----------- ----------- ----------- ----------- -----------
Balance at 31 December 2003 12,254 90 46 (5,457) 6,933
=========== =========== =========== =========== ===========
Dividents paid to minority -- -- -- -- --
Other movements -- -- 1 66 67
Revaluation of property -- (8) -- -- (8)
Net loss -- -- -- (1,934) (1,934)
----------- ----------- ----------- ----------- -----------
Balance at 30 September 2004 12,254 82 47 (7,325) 5,058
=========== =========== =========== =========== ===========
1. Operating profit
The following items have been charged in arriving at the operating result:
Year ended Year ended
30 September 31 December
2004 2003
Depreciation on property, plant and equipment (Note 6) 1,800 2,411
Amortisation of intangible assets (Note 7) 347 1,447
- goodwill (included in 'Administrative expenses') 347 1,378
- other intangible assets (included in 'Administrative expenses') -- 69
Impairment charge 259 240
Program rights expenditure 3,523 3,423
Raw materials and consumables used 808 1,670
Staff costs (Note 3) 2,961 3,589
Consulting services and marketing research 1,946 1,075
Rents 1,085 965
Satellite transmission
Telecommunication costs 421 295
License fees -- 106
Other hired services 526 706
Other expenses 260 518
Cost of merchandise sold 1,330 40
------ ------
Total operating expenses 15,266 15,132
====== ======
2. Staff costs
Year ended Year ended
30 September 31 December
2004 2003
Wages and salaries 2,008 2,234
Social security contributions and social costs for staff 953 1,355
----- -----
Total staff cost 2,961 3,589
===== =====
The number of employees in 2003 was 390 (2003: 390).
3. Finance costs
Year ended Year ended
31 December 31 December
2003 2002
Interest income 4 10
Net foreign exchange transaction (loss)/gain (37) 712
Interest expense (600) (207)
Other financial expense (46) (141)
---- ----
Net financial income (679) 374
==== ====
4. Fixed assets
Assets
Nine months ended 30 Sept. 2004 Land & Plant & Vehicles & under Total
Buildings Machinery Equipment construction
Opening net
book amount 699 5,643 623 5,975 12,940
Additions 28 3084 344 10,003 13,459
Disposals -5 -423 -128 -4,135 -4,691
Depreciation charge -21 -1610 -142 -1,773
Closing net book amount 701 6,694 697 11,843 19,935
At 30 September 2004
Cost or fair value 856 13,347 1,237 11,843 27,283
Accumulated depreciation -155 -6,653 -540 0 -7,348
Net book amount 701 6,694 697 11,843 19,935
CABLE BULGARIA AD
REPORT AND AUDITED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2003
PricewaterhouseCoopers
9-11 Maria Louisa Blvd
1000 Sofia
Bulgaria
Telephone +359 2 9355200
Facsimile +359 2 9355266
REPORT OF THE AUDITORS
TO THE SHAREHOLDERS OF CABLETEL AD
We have audited the accompanying consolidated balance sheet of CableTEL AD and
its subsidiaries (the Group) as of December 31, 2003, and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity for the year then ended. These consolidated financial statements set out
on pages 1 to 24 are the responsibility of the Group's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit in
accordance with International Standards on Auditing. Those Standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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.
We believe that our audit provides a reasonable basis for our opinion.
The Union Television AD (UTV) subsidiary was disposed in May 2003. However the
subsidiary results and cash flows until the date of disposal have not been
consolidated based on the assumption of the Group management that the effect of
this non-compliance with IAS 27 "Consolidated and Separate Financial Statements"
is insignificant in value. We were unable to satisfy ourselves as to the
validity of this management assumption. In addition no disclosure was made for
discontinuing operations as required by IAS 35 "Discontinuing Operations".
In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to satisfy ourselves as to
the effect on the financial result of the disposed subsidiary until its
disposal, the consolidated financial statements present fairly, in all material
respects, the financial position of the Group as of December 31, 2003, and the
results of its operations and its cash flows for the year then ended in
accordance with the International Financial Reporting Standards.
Without qualifying our opinion, we draw attention to the fact that the
consolidated financial statements of the Group have been prepared on the basis
of going concern which means that the Group will continue its operations in the
foreseeable future. As at 31 December 2003 the short-term liabilities of the
Group exceed its short-term assets by BGN 3,100 thousand (2002: BGN 2,167
thousand, the loss for the year is BGN 266 thousand (2002: BGN 1,129 thousand)
and the accumulated deficit is BGN 5,457 thousand (2002: BGN 5,124 thousand).
However, the management of the Group still considers that the financial
statements should be prepared on the basis of going concern. The validity of
this consideration is dependent on the intention and abilities of the owners of
the Company and its lenders to continue providing adequate financial support of
the company's operations.
Certified by
-------------------------------
Jean-Pierre Vigroux
PricewaterhouseCoopers Odit OOD
22 December 2004
Sofia
"Cable Bulgaria" AD
--------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2003
Note 2003 2002
BGN '000 BGN '000
Net sales revenues
Services 14,369 13,753
Cost of sales (12,851) (11,334)
------- -------
Gross profit 1,518 2,419
------- -------
Administrative expenses (3,394) (3,798)
Imapirment charge (240) --
Profit on disposal of investment 634
Other operating income 671 13
------- -------
Operating loss (811) (1,366)
------- -------
Finance income (net) 374 648
Loss before tax (437) (718)
Taxation 114 (250)
------- -------
Group loss (323) (968)
------- -------
Minority interest 57 (161)
------- -------
Net loss (266) (1,129)
------- -------
"Cable Bulgaria" AD
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
as at 31 December 2003
Note 31 December 2003 31 December 2002
BGN '000 BGN '000
ASSETS
Fixed (non-current) assets
Prtoperty, plant and equipment 12,940 11,213
Intangible assets 80 173
Investments 45 12
Goodwill 2,232 3,611
------- -------
Total 15,297 15,009
------- -------
Current assets
Inventories 367 339
Receivables 3,026 716
Cash and cash equivalents 2,214 793
Prepayments 105 122
------- -------
Total 5,712 1,970
------- -------
Total assets 21,009 16,979
======= =======
LIABILITIES
Equity
Share capital 12,254 12,254
Revaluation reserves 90 --
Other Reserves 47 46
Accumulated deficit (5,457) (4,795)
------- -------
Total 6,934 7,505
------- -------
Minority interest 1,022 1,087
Long-term liabilities
Borrowings from shareholders -- 3,808
Bank borrowings and leases 4,135 90
Deferred tax liabilities 106 352
Total 4,241 4,250
------- -------
Short-term liabilities
Borrowings from shareholders 3,505 --
Trade and other payables 4,925 3,822
Borrowings 192 42
Deferred income 190 273
Total 8,812 4,137
------- -------
Total liabilities 13,053 8,387
------- -------
Total equity and liabilities 21,009 16,979
======= =======
"Cable Bulgaria" AD
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2003
Note 2003 BGN '000 2002 BGN '000
Operating activities
Cash generated from operations 2,405 1,946
Interest received 10 4
Interest paid -- (35)
Sponsorship paid -- (12)
Tax paid (75) (142)
------ ------
Net cash from operating activities 2,340 1,761
------ ------
Investing activities
Acquisition of subsidiary, net of cash acquired (76) (17)
Purchase of property, plant and equipment (3,952) (1,462)
------ ------
Net cash used in investing activities (4,028) (1,479)
------ ------
Financing activities
Repaid short-term borrowings (83) (454)
Received long-term borrowings 3,192 240
Decrease in restricted cash 100
Divident paid to minotirty shareholders 0 (124)
------ ------
Net cash from financing activities 3,109 (238)
------ ------
------ ------
Increase/(Decrease) in cash and cash equivalents 1,421 44
====== ======
Movement in cash and cash equivalents
As at 1 January in the corresponding year 793 749
Increase/(Decrease)
------ ------
------ ------
At the end of period 2,214 793
====== ======
"Cable Bulgaria" AD
--------------------------------------------------------------------------------
Consolidated statement for the changes in equity
for the year ended 31 December 2003
Share Revaluation Other Accumulated Total
capital reserves reserves deficit
Balance at 1 January 2002
Opening balance 12,254 - 46 (3,530) 8,770
Sponsorships - - - (12) (12)
Dividents - - - (124) (124)
Net loss - - - (1,129) (1,129)
--------- --------- --------- ---------- -----------
Balance at 31 December 2002 12,254 - 46 (4,795) 7,505
========= ========= ========= ========== ===========
Balance at 1 January 2003
Opening balance 12,254 - 46 (4,795) 7,505
Fundamental errors
(See accounting policy 21) - - - (329) (329)
--------- --------- --------- ---------- -----------
Restated opening balance 12,254 - 46 (5,124) 7,176
========= ========= ========= ========== ===========
Dividents paid to minority - - - (80) (80)
Other movements - - 1 13 14
Revaluation of property - 90 - - 90
Net loss - - - (266) (266)
--------- --------- --------- ---------- -----------
Balance at 31 December 2003 12,254 90 47 (5,457) 6,934
========= ========= ========= ========== ===========
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements
`Cable Bulgaria AD is a limited liability company, the shares of which are not
publicly traded. The company is domiciled in the Republic of Bulgaria and has
the following address of its registered office: Sofia 1000, Business Center
Vitosha, Blvd. Bulgaria 49.
The Group operates in the telecommunications and information services sector,
primarily by running cable TV distribution networks.
The Group has direct or indirect controlling interest in 8 subsidiaries involved
in cable TV distribution.
1. Accounting policies
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below:
1. Basis of preparation
The consolidated financial statements are prepared in accordance with and comply
with International Financial Reporting Standards.
The consolidated financial statements are prepared under the historical cost
convention, except as disclosed in the accounting policies below.
The consolidated financial statements have been prepared in the functional
currency of the company, which is the Bulgarian Lev (BGN).
Accounting convention
The preparation of the financial statements in conformity with generally
accepted accounting principles that require the use of estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements as
well as the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best knowledge of
current events and actions, actual results ultimately may differ from those
estimates.
Going concern
The consolidated financial statements have been prepared on a going concern
basis, which assumes that the Group will continue in operational existence for
the foreseeable future. As at 31 December 2003 the current liabilities exceed
current assets by BGN 3,100 thousand (2002: BGN 2,167 thousand), the loss for
the year is BGN 266 thousand (2002: BGN 1,129 thousand), the accumulated deficit
is BGN 5,457 thousand (2002: BGN 5,124 thousand).
This may cast doubt as to the ability of the Group to operate as a going
concern; this indicates that the Group depends upon the continuing support of
the owners and providers of finance. If these withdraw their support and the
going concern basis become inapplicable, assets and liabilities would have to be
revalued at their realisable amount. These may differ significantly from the
values stated in the financial statements on a going concern basis.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
Going concern (Continued)
The directors, in light of their assessment of expected future cash flows and
based on the obtained confirmation of support from the majority shareholder,
stating the commitment of the latter to continue in providing financial support
to the Company and assisting it in its capital expenditure commitments as they
fall due, are satisfied that it is appropriate for the consolidated financial
statements to be prepared on a going concern basis.
2. Consolidation
Subsidiary undertakings, which are those companies in which the Group, directly
or indirectly, has an interest of more than one half of the voting rights or
otherwise has power to exercise control over the operations, have been
consolidated. The existence and effect of potential voting rights that are
presently exercisable or presently convertible are considered when assessing
whether the Group controls another entity. Subsidiaries are consolidated from
the date on which effective control is transferred to the Group and are no
longer consolidated from the date of disposal. Where the effect is immaterial
companies are not included in consolidation even if not disposed exactly at the
beginning of the year. The purchase method of accounting is used to account for
the acquisition of subsidiaries. The cost of an acquisition is measured as the
fair value of the assets given up, shares issued or liabilities undertaken at
the date of acquisition plus costs directly attributable to the acquisition. The
excess of the cost of acquisition over the fair value of the net assets of the
subsidiary acquired is recorded as goodwill. Intercompany transactions, balances
and unrealized surpluses and deficits on transactions between group companies
have been eliminated. Where necessary, accounting policies for subsidiaries have
been changed to ensure consistency with the policies adopted by the Group.
Separate disclosure is made of minority interests. A listing of the Group's
principal subsidiaries is set out in Note 20.
3. Investments in associates
Investments in associated undertakings are accounted for by the equity method of
accounting. These are undertakings over which the Group has between 20% and 50%
of the voting rights, and over which the Group exercises significant influence,
but which it does not control. Provisions are recgnised for long-term impairment
in value.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
4. Financial Risk Management
Financial risk factors
The Group's activities expose it to a variety of financial risks, including the
effects of foreign currency exchange rates and interest rates. Management
monitors the overall risk and seeks to minimise potential adverse effects on the
financial performance of the Group.
(i) Foreign exchange risk
The Group operates in Bulgaria and is currently exposed to a foreign exchange
risk arising from purchase of program rights and of equipment from foreign
suppliers and from borrowing from the shareholders, both denominated in USD a
currency, different from the functional currency. The exposures involved are
closely monitored to ensure effective risk management by hedging the exposures
involved.
(ii) Interest rate risk
The Group usually borrows at fixed and floating rates and the exposures involved
are monitored regularly.
(iii) Credit risk
The Group has no significant concentrations of credit risk. In cable TV
distribution business in Bulgaria normally the subscribers pay regularly.
(iv) Liquidity risk
All major liquidity risk is managed by the Group by monitoring the cash
generation in the cable TV distribution business; the business is additionally
financed by its shareholders for its investrnent activity in cable network and
acquisition of cable TV distribution operators.
5. Foreign currencies
Foreign currency transactions in Group companies are accounted for at the
exchange rates prevailing at the date of the transactions; gains and losses
resulting from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies, are
recognised in the income statement. Such balances are translated at year-end
exchange rates unless hedged by forward foreign exchange contracts, in which
case the rates specified in such forward contracts are used.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
6. Financial instruments
Financial instruments carried on the balance sheet include cash and bank
balances, investments, receivables, trade creditors, leases and borrowings. The
particular recognition methods adopted are disclosed in the individual policy
statements associated with each item.
7. Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net assets of the acquired subsidiary/associated
undertaking at the date of acquisition. Goodwill on acquisitions is reported in
the balance sheet as an intangible asset and is amortised over the period of 5
years using the straight-line method over its estimated useful life. The
carrying amount of goodwill is reviewed annually and written down for permanent
impairment where it is considered necessary. The gain or loss on disposal of an
entity includes the carrying amount of goodwill relating to the entity sold.
8. Other intangible assets
Expenditure on acquired patents, trademarks and licenses is capitalised and
amortised using the straight-line method over their useful lives, generally over
7 years. Intangible assets are not revalued. The carrying amount of each
intangible asset is reviewed annually and adjusted for permanent impairment
where it is considered necessary.
9. Other investments
Investments intended to be held for an indefinite period of time, which may be
sold in response to needs for liquidity or changes in interest rates, are
classified as available-for-sale and are included in non-current assets.
Investments are shown at cost and provision is only made where, in the opinion
of the Directors, there is a permanent diminution in value. Where there has been
a permanent diminution in the value of an investment, it is recognised as an
expense in the period in which the diminution is identified. On disposal of an
investment, the difference between the net disposal proceeds and the carrying
amount is charged or credited to the income statement.
On disposal of an investment, amounts in revaluation and other reserves relating
to that marketable security are transferred to retained earnings.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
10. Property, plant and equipment
All property, plant and equipment is initially recorded at cost. Property, plant
and equipment of subsidiaries are stated at fair values determined as at the
dates of acquisition. Additions to property, plant and equipment are stated at
cost or fair value following the application of acquisition accounting. Land and
buildings are presented at fair value less depreciation using the allowed
alternative treatment under IAS 16 "Property, Plant and Equipment". All other
property, plant and equipment is stated at historical cost less depreciation.
Depreciation is calculated using the straight-line method to write off the cost
of each asset, or the revalued amounts, to their residual values over their
estimated useful life as follows:
Buildings 25 years
Plant and machinery 5-25 years
Other equipment 3-6 years
Land is not depreciated as it is deemed to have an indefinite life.
Where the carrying amount of an asset is greater than its estimated recoverable
amount, it is written down immediately to its recoverable amount.
Gains and losses on disposal of property, plant and equipment are determined by
reference to their carrying amount and are taken into account in determining
operating profit.
Part of Group expenses directly attributable to acquisition of property, plant
and equipment are capitalized. Impairment of assets based on management
estimates has not been performed. All assets held are utilized in the operations
and the future economic benefits are expected to flow in the Group.
Repairs and maintenance are charged to the income statement during the financial
period in which they are incurred. The cost of major improvements and
renovations is included in the carrying amount of the asset when it is probable
that future economic benefits in excess of the originally assessed standard of
performance of the existing asset will flow to the Group. Major improvements and
renovations are depreciated over the remaining useful life of the related asset.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
11. Accounting for leases
Finance leases
Leases of property, plant and equipment where the Group assumes substantially
all the benefits and risks of ownership are classified as finance leases.
Finance leases are capitalised at the estimated present value of the underlying
lease payments. Each lease payment is allocated between the liability and
finance charges so as to achieve a constant rate on the finance balance
outstanding. The corresponding rental obligations, net of finance charges, are
included in other long-term payables. The interest element of the finance charge
is charged to the income statement over the lease period. The property, plant
and equipment acquired under finance leasing contracts is depreciated over the
useful life of the asset.
Operating leases
Leases of assets under which all the risks and benefits of ownership are
effectively retained by the lessor are classified as operating leases. Payments
made under operating leases are charged to the income statement on a
straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any
payment required to be made to the lessor by way of penalty is recognised as an
expense in the period in which termination takes place.
12. Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is
determined by weighted average method. Net realisable value is the estimate of
the selling price in the ordinary course of business, less the cost of
completion and selling expenses.
13. Trade receivables
Trade receivables are carried at original invoice amount less provision made for
impairment of these receivables. An estimate is made for doubtful receivables
based on a review of all outstanding amounts at the year-end. Bad debts are
written off during the period in which they are identified.
14. Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the
purposes of the cash flow statement, cash and cash equivalents comprise cash in
hand and deposits held at call with banks.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
15. Borrowings
Borrowings are recognized initially at the proceeds received, net of transaction
costs incurred. Borrowings are subsequently stated at amortised cost using the
effective yield method; any difference between proceeds (net of transaction
costs) and the redemption value is recognized in the income statement over the
period of the borrowing.
16. Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate of the amount of the obligation can be made.
17. Pension obligations
No formal or informal pension plans are currently operated by the Group. The
Government of Bulgaria is responsible for providing pensions in Bulgaria under a
defined contribution pension plan. The company's contributions to the defined
contribution pension plan are charged to the income statement in the year to
which they relate. The company has made calculations following the requirements
of IAS 19 (Employee Benefits) and has determined that pension obligations are
immaterial (less than BGN 20 thousand) and decided not to accrue them.
18. Deferred income taxes
Deferred income tax is using the liability method, for all temporary differences
arising between the tax bases of assets and liabilities and their carrying
values for financial reporting purposes. Currently enacted tax rates are used to
determine deferred income tax.
The principal temporary differences arise from different valuation on property,
plant and equipment and unused paid leave. Deferred tax assets relating to the
carry forward of unused tax losses are recognised to the extent that it is
probable that future taxable profit will be available against which the unused
tax losses can be utilised.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
19. Revenue recognition
Sales are recognised upon performance of the services (in line with the
timescale of the contracts for access to the cable TV network), net of sales
taxes and discounts, and after eliminating sales within the Group, unless there
is a significant uncertainty as to their collectibility.
Interest income is recognised as it accrues (taking into account the effective
yield on the asset) unless collectibility is in doubt.
20. Cash flows
The Group prepares its Cash Flow Statement in accordance with IAS 7 "Cash flow
statements" using the indirect method of cash flow preparation.
21. Related parties
For the purposes of the accompanying consolidated financial statements, the
parent companies and their subsidiaries and associated companies, key management
personnel and Board members, together with the close members of their families
in each case and with companies controlled by them, are considered and referred
to as related parties. A number of transactions are entered into with related
parties in the normal course of business. A detailed breakdown of related party
transactions and balances outstanding at the year-end is provided in Note 19.
21. Fundamental errors
Fundamental errors are reported using the benchmark treatment of IAS 8
("Accounting Policies, Changes in Accounting Estimates and Errors"). The
fundamental error represents an accrual of interest calculated on a loan
provided by the major shareholder, Narisma Holding. The Group has not recorded
any interest until the end of 2002 following the clause for grace period
stipulated in the loan contract. In 2003 the Group has calculated and accrued
interest on that loan following the requirements of IAS 39 ("Financial
Instruments: Recognition and Measurement") to present the loan at its amortised
value using stepped interest charge when loan contract specifies for grace
period.
The interest related to the periods before 2003 was presented as a restatement
of the opening balance of accumulated deficit.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
2. Operating profit
The following items have been charged in arriving at the operating result:
Year ended Year ended
31 December 2003 31 December 2002
Depreciation on property, plant and equipment (Note 6) 2,411 1,814
Amortisation of intangible assets (Note 7) 1,447 1,457
- goodwill (included in 'Administrative expenses') 1,378 1,388
- other intangible assets (included in 'Administrative expenses') 69 69
Impairment charge 240 --
Program rights expenditure 3,423 3,036
Film rights expenditure -- 300
Raw materials and consumables used 1,670 751
Staff costs (Note 3) 3,589 3,812
Consulting services and marketing research 1,075 391
Rentals 965 1,265
Satellite transmission -- 380
Telecommunication costs 295 270
License fees 106 168
Other hired services 706 989
Other expenses 518 405
Cost of goods sold 40 94
---------------- ----------------
Total operating expenses 16,485 15,132
================ ================
3. Staff costs
Year ended Year ended
31 December 2003 31 December 2002
Wages and salaries 2,234 2,143
Social security contributions and social costs for staff 1,355 1,669
---------------- ----------------
Total staff cost 3,589 3,812
================ ================
The number of employees in 2003 was 390 (2002: 396).
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
4. Finance costs
Year ended Year ended
31 December 2003 31 December 2002
Interest income 10 7
Dividend income -- 12
Net foreign exchange transaction (loss)/gain 712 698
Interest expense (207) (36)
Other financial expense (141) (33)
---------------- ----------------
Net financial income 374 648
================ ================
Net foreign exchange gains include BGN 900 thousand (2002: 1,114) of revaluation
gain on the balances denominated in USD due to shareholders.
5. Tax
Year ended Year ended
31 December 2003 31 December 2002
Current tax 129 151
Deferred tax (Note 14) (243) 99
---------------- ----------------
Total taxes (114) 250
================ ================
The tax in the income statement of the Group differs from the theoretical amount
that would arise when applying the applicable tax rate to the financial result
before tax of the Group as follows:
Year ended Year ended
31 December 2003 31 December 2002
Loss before tax (437) (718)
---------------- ----------------
Tax calculated at a tax rate of 23.5 % (2002: 23.5 %) (103) (169)
Effect of income/expenses not recognized/deductible for tax
purposes (11) 419
---------------- ----------------
Total taxe in income statement (114) 250
================ ================
The parent company Cable Bulgaria was subject to a tax inspection in 2003 by Tax
office Krasno Selo for the period from June 04, 1999 until December 31, 2002.
The tax inspection covered the determination of Corporate income tax, Municipal
tax and Personal income tax.
The tax liabilities additionally determined as a result of the tax inspection
report amount to BGN 4 thousand principal and BGN 2 thousand of penalty
interest.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
5. Tax (Continued)
The tax authorities may at any time inspect the books and statements of the
Group for five consecutive years back in time and to charge additional taxes.
Management has no knowledge of any circumstances that might lead to such
significant new unrecorded tax liabilities.
6. Property, Plant and Equipment
Year ended 31 December 2003
Land & Plant & Vehicles & Assets under
Buildings Machinery Equipment construction Total
Opening carrying value 708 7,468 482 2,555 11,213
Additions 1 896 418 3,984 5,299
Disposals (29) (227) (74) (564) (872)
Disposal of UTV -- (285) (94) -- (379)
Depreciation charge (93) (2,209) (109) -- (2,411)
Revaluation 112 -- -- -- 90
----------------------------------------------------------------------------
Closing carrying value 699 5,643 623 5,975 12,940
Cost or valuation 848 10,617 884 5,975 18,324
Accumulated depreciation (149) (4,974) (261) -- (5,384)
----------------------------------------------------------------------------
Closing carrying value 699 5,643 623 5,975 12,940
----------------------------------------------------------------------------
Assets under construction as at 31 December 2003 contain expenses for
acquisition of TFA amounting to BGN 5,924 thousand (31 December 2002: BGN 2,507
thousand). Such expenses relate to the Company's optical ring currently under
construction. It is expected that the assets related to this ring be put into
operation by the end of 2004.
The land and buildings were last valuated in the beginning of 2003 by an
independent valueas, based on current market prices. The resulting revaluation
reserve, net of deferred tax liability was recorded as an increase in
"revaluation reserve" in the equity.
Based on the review of the carrying value of the assets, the management of the
Group considers that as at 31 December 2003 there are no indicators requiring
impairment of the tangible non-current assets.
Non-current assets amounting to BGN 10,086 thousands have been pledged to secure
bank loans received by the Group (see also Note 13).
Cable Bulgaria AD (as a whole entity) has been pledged as collateral to secure
the bank loans.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
6. Property, Plant and Equipment (Continued)
The newly acquired non-current assets include assets acquired under finance
lease arrangements in the amount of BGN 331 thousand. (2002: BGN 86 thousand).
Leased assets where the Group is a lessee under a finance lease, comprise
vehicles and equipment as follows:
31 December 2002 31 December 2003
Cost - capitalised finance leases 331 86
Accumulated depreciation (45) (2)
---------------- ----------------
Carrying value 286 84
================ ================
7. Intangible assets
Year ended 31 December 2003 Other
intangible
Goodwill assets Total
Opening carrying value 3,611 173 3,784
Additions (1) 30 29
Disposals -- (21) (21)
Disposal of UTV -- (33) (33)
Depreciation charge (1,378) (69) (1,447)
------------ ------------ ------------
Closing carrying value 2,232 80 2,312
Cost 6,892 293 7,185
Accumulated depreciation (4,660) (213) (4,873)
------------ ------------ ------------
Closing carrying value 2,232 80 2,312
------------ ------------ ------------
Other intangible assets represents primarily software
8. Investments
The amount represents a minority participation of 16.5% held by UTY (100%
subsidiary of Cable Bulgaria) in Telekabel - Pazardjik. The investment is stated
at cost with no indications for necessity of impairment.
9. Inventories
31 December 2003 31 December 2002
Materials (at cost) 367 339
---------------- ----------------
Total inventories 367 339
================ ================
Materials balance comprises mainly optic fibres and components for the cable
network.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
10. Receivables
31 December 2003 31 December 2002
Trade receivables and accrued income 692 473
Recoverable tax 95 85
Prepayments 2,132 67
Other receivables 107 91
---------------- ----------------
Total receivables 3,026 716
================ ================
Prepayments represent a payment to Global Technologies Inc under a contract for
delivery of an Excel Switch, which will be used for the provision of telephone
services. The equipment has been received in 2004.
11. Cash and cash equivalents
31 December 2003 31 December 2002
Cash in hand 213 287
Cash at bank 2,001 506
---------------- ----------------
Total cash 2,214 793
================ ================
For the purposes of the cash flow statement, the period-end cash and cash
equivalents comprise the following:
31 December 2003 31 December 2002
Cash in hand and bank 2,214 793
---------------- ----------------
Total cash 2,214 793
================ ================
12. Trade and other payables
31 December 2003 31 December 2002
Trade payables 1,480 1,412
Payables to employees 308 541
Social security and other taxes 366 653
Accrual for program rights payable 2,344 396
Accrual for broadcast licenses payable -- 159
Accrual for construction works -- 192
Other payables and accruals 427 469
---------------- ----------------
Total trade and other payables 4,925 3,822
================ ================
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
13. Borrowings
Current 31 December 2003 31 December 2002
Loans from related parties (Note 19) 3,505 --
Bank borrowings 192 28
Other -- 14
---------------- ----------------
Total current borrowings 3,697 42
================ ================
Non-current 31 December 2003 31 December 2002
Loans from related parties (Note 19) -- 3,808
Loans from banks 3,840 35
Payable under finance leases 295 55
---------------- ----------------
Total non-current borrowings 4,135 3,898
================ ================
Total borrowings 7,832 3,940
================ ================
The current bank borrowings include:
A loan received from Roseximbank AD by Cable Bulgaria amounting to BGN 200
thousand.
The balance outstanding at 31 Decembet 2003 is BGN 192 thousand. The collateral
includes properties owned by Cable Bulgaria valued at BGN 699 thousand.
The non-current bank loans include:
Loan provided by Roseximbank AD to Cable Bulgaria AD amounting to BGN 1,400
thousand. The balance outstanding at 31 Decembet 2003 is BGN 1,400 thousand. The
collateral includes properties owned by Cable Bulgaria valued at BGN 699
thousand;
Loan provided by Roseximbank AD to Cable Bulgaria amounting to EUR 3,695
thousand. The balance outstanding at 31 Decembet 2003 is EUR 1,248 thousand. The
entire commercial enterprise of Cable Bulgaria AD has been pledged as
collateral.
The non-current loans are used for the construction of a national fibre optic
backbone. Maturity of non-current borrowings is as follows:
31 December 2003 31 December 2002
Between 1 and 2 years 3,840 3,843
---------------- ----------------
Total non-current borrowings 3,840 3,843
================ ================
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
13. Borrowings (Continued)
Lease liability - minimum lease payments: 31 December 2003 31 December 2002
Up to 1 year 113 14
From 1 to 5 years 155 44
---------------- ----------------
Unearned financial expense related to a finance lease (36) (10)
---------------- ----------------
Present value of the lease liability 232 48
================ ================
The present value of the lease liability is allocated as follows:
31 December 2003 31 December 2002
Up to 1 year 96 13
From 1 to 5 years 136 35
---------------- ----------------
232 48
================ ================
14. Deferred income taxes
Deferred income taxes are calculated on all temporary differences under the
liability method using a principal tax rate of 19.5% (2002: 23.5%). Cable
Bulgaria AD has incurred tax losses amounting to BGN 3,205 thousand as at 31
December 2003 (31 December 2002: BGN 1,494 thousand). As the recoverability of
these losses in the future is not certain, no deferred tax asset has been
recognised in the consolidated balance sheet.
31 December 2003 31 December 2002
Deferred tax liabilities 147 584
Deferred tax assets (41) (232)
---------------- ----------------
Total 106 352
================ ================
Deferred tax liabilities and deferred tax charge in the income statement are
attributable to the following items:
31 December 2002 (Charge)/credit 31 December 2003
Deferred income tax assets
Intangible assets recognised as expense 203 (187) 16
Holiday pay accrual recognised as expense 29 (4) 25
Deferred income tax liabilities
Property, plant and equipment (584) 434 (147)
---------------- ---------------- ----------------
Net deferred tax liability (352) 243 (106)
================ ================ ================
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
15. Ordinary shares and share premium
The total authorised number of ordinary shares is 122,542 shares (31 December
2002: 122,542) with a par value of BGN 100 per share. All issued shares are
fully paid.
16. Minority interests
31 December 2003 31 December 2002
At beginning of period 1,087 991
Acquisitions (net) (7) (65)
Minority interest in Income Statement (58) 161
---------------- -----------------
At 31 December 1,022 1,087
================ =================
17. Cash generated from operations
Reconciliation of loss before tax and minority interest to cash generated from
operations:
31 December 2003 31 December 2002
Loss before tax and minority interest (833) (718)
Adjustments for:
Depreciation 2,411 1,883
Amortisation 1,447 1,388
Impairment charge 21 --
Interest expense (net) (Note 4) (30) 31
---------------- ----------------
3,016 2,584
Changes in working capital (excluding the effects of acquisition
and disposal):
- trade and other receivables (2,310) 11
- inventories (28) 37
- payables 1,710 (875)
- prepayments 17 189
---------------- ----------------
Cash generated from operations 2,405 1,946
================ ================
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
18. Acquisition and disposals
During the year ended 31 December 2003 the group made the following partial
acquisition in already existing subsidiary: KIS Russe - additional 0.69%
purchased
Details of net assets acquired and goodwill from the acquisition during the
period are as follows:
31 December 2003
Purchase consideration :
Cash paid 6
Fair value of net assets acquired (7)
----------------
Goodwill (Note 7) (1)
================
19. Related party transactions
The company did not undertake any related party transactions during the year
ended 31 December 2003 in relation to purchases and sales activities. Other
related party balances include:
Loans from related parties 31 December 2003 31 December 2002
Narisma Holdings - loan, long-term in 2002; -- 3,808
Short-term in 2003 3,505 --
---------------- ----------------
At December 31, 2003 3,505 3,808
================ ================
The loan payable to Narisma Holding has maturity and is repayable at December
31, 2004. The management of Cable Bulgaria AD believes that the loan should be
classified as short-term borrowing as the maturity is 12 months from the
preparation of the financial statements.
Loans to related parties 31 December 2003 31 December 2002
Loans to minority shareholders -- 90
---------------- ----------------
At December 31, 2003 -- 90
================ ================
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
20. Principal subsidiary undertakings
Effective Effective
Name Country of Percentage held Percentage held
incorporation at 31.12.2003 at 31.12.2002
Union Television AD Bulgaria - 100.00
TV Mix, Burgas AD Bulgaria 100.00 100.00
Pleven - Sprint OOD Bulgaria 51.00 51.00
Union Kabel, Dobrich OOD Bulgaria 52.50 52.50
Dovacom, Dobrich EOOD Bulgaria 52.50 52.50
Union Television - Velingrad OOD Bulgaria 70.00 70.00
Broadnet AD Bulgaria 100.00 100.00
KIS AD Bulgaria 60.64 59.94
Globo Lom AD Bulgaria 51.00 51.00
Globo Stara Zagora AD Bulgaria - 95.80
Globo EOOD Bulgaria - 100.00
All holdings are in the ordinary share capital of the undertakings concerned.
21. Discontinued operations
In 2003 the Group disposed of two entities.
The Board of Directors took a decision to dispose UTV (part of the Group), the
operator of the DEN TV channel in 2003. The management decided to dispose of UTV
as its operations were considered not to fall within the core business of the
Group. Further, the results for the last years of UTV were unsatisfactory and
were not in line with the trends in the core business results.
The profit from the disposal of this investment recorded in the consolidated
results for 2003 amounts to BGN 634 thousand.
Although the disposal was legally effected in May, for consolidation purposes,
it was recognised as if the disposal happened as at 1 January 2003. Management
believes that due to the insignificant value and volume of operations of DEN TV,
as well as no significant change in the value of its net assets in the period
from January to May 2004, no further adjustments are necessary to ensure true
and fair presentation of this disposal. The management considers the revenues
and expenses of UTV for 2003 as immaterial and has not included them in the
consolidation. The decision not to consolidate the results of the company until
the date of disposal is taken also with respect that this will have no effect on
the net result for the year. Any profit or loss of UTV for the period it was
part of the group would have been offset with the result from the disposal of
that investment.
The Globo Stara Zagora subsidiary was liquidated in March 2003. The company was
in process of liquidation since 2000 and had no activity in 2003.
These notes represent an integral part of the financial statements presented on
pages 1-4
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2003
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (continued)
All amounts in BGN thousands unless otherwise stated
22. Subsequent event
In 2003 Dovacom provided a loan of BGN 85 thousand to Camisto Mati EOOD. In 2004
the creditor was declared insolvent. Impairment charge on the loan receivable
was recognised in 2003 following the requirements of IAS 10 "Events After the
Balance Sheet Date" as an adjusting event.
These notes represent an integral part of the financial statements presented on
pages 1-4
CABLE BULGARIA AD
REPORT AND FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2002
PricewaterhouseCoopers
--------------------------------------------------------------------------------
PricewaterhouseCoopers
9-11 Maria Louisa Blvd
1000 Sofia
Bulgaria
Telephone +359 2 9355200
Facsimile +359 2 9355266
AUDIT REPORT
TO THE SHAREHOLDERS OF CABLE BULGARIA AD
We have audited the accompanying consolidated balance sheet of Cable Bulgaria AD
Group and its subsidiaries as of 31 December 2002 and the related consolidated
income, cash flow and statement of changes in shareholder's equity for the year
then ended. The consolidated financial statements set out on pages 3 to 20 are
the responsibility of the Group's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with International Financial Reporting
Standards. Those Standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statements presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion the consolidated financial statements present fairly in all
material respects the financial position of the Group as of 31 December 2002 and
the results of its cash flows for the year ended 31 December 2002 in accordance
with International Financial Reporting Standards.
/s/ Pricewaterhouse Coopers
PricewaterhouseCoopers
Sofia
30 November 2003
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Cable Bulgaria AD
Consolidated Financial Statements
31 December 2002
Contents
Page
Consolidated income statement 3
Consolidated balance sheet 4
Consolidated statement of changes in shareholders' equity 5
Consolidated cash flow statement 6
Accounting policies 7-11
Notes to the consolidated financial statements 12-20
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Consolidated income statement
(all amounts in BGN thousands) Notes Cable - CATV Studio Total
2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Sales 12,917 11,732 836 977 13,753 12,709
Cost of sales 2 (9,529) (7,437) (1,805) (1,978) (11,334) (9,415)
------- ------- ------- ------- ------- -------
Gross profit 3,388 4,295 (969) (1,001) 2,419 3,294
Administrative expenses 2 (3,666) (3,669) (132) (262) (3,798) (3,931)
Impairment charge -- -- -- (281) -- (281)
Other operating income 3 262 10 -- 13 262
Other operating expenses 2 -- (189) -- -- -- (189)
------- ------- ------- ------- ------- -------
Operating profit (loss) (275) 699 (1,091) (1,544) (1,366) (845)
Finance income 4 605 (441) 43 (40) 648 (481)
------- ------- ------- ------- ------- -------
Profit/(loss) before tax 330 258 (1,048) (1,584) (718) (1,326)
Tax charge 5 (250) (478) -- -- (250) (478)
------- ------- ------- ------- ------- -------
Group loss 80 (220) (1,048) (1,584) (968) (1,804)
Minority interest 16 (161) (333) -- -- (161) (333)
------- ------- ------- ------- ------- -------
Net loss (81) (553) (1,048) (1,584) (1,129) (2,137)
------- ------- ------- ------- ------- -------
The accompanying notes form an integral part of these financial statements.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Consolidated balance sheet
(all amounts in BGN thousands) Notes 31 December 2002 31 December 2001
ASSETS
Non-current assets
Property, plant and equipment 6 11,213 10,130
Intangible assets 7 173 225
Investments 8 12 12
Goodwill 7 3,611 5,047
---------------- ----------------
15,009 15,414
Current assets
Inventories 9 339 376
Receivables 10 716 727
Cash and cash equivalents 11 793 849
Prepayments 122 311
---------------- ----------------
1,970 2,263
Total assets 16,979 17,677
================ ================
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shares 15 12,254 12,254
Other reserves 46 46
Accumulated deficit (4,795) (3,530)
---------------- ----------------
7,505 8,770
Minority interest 16 1,087 991
Non-current liabilities
Borrowings from shareholders 13 3,808 4,483
Bank borrowings and leases 13 90 69
Deferred tax liabilities 14 352 253
---------------- ----------------
4,250 4,805
Current liabilities
Trade and other payables 12 3,822 2,449
Borrowings 13 42 448
Deferred income 273 214
---------------- ----------------
4,137 3,111
Total liabilities 8,387 7,916
---------------- ----------------
Total equity and liabilities 16,979 17,677
================ ================
30 November 2003
Executive Director: Financial Director:
The accompanying notes form an integral part of these financial statements.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Consolidated statement of changes in equity
(all amounts in BGN thousands) Notes Share Other Accumulated Total
capital reserves deficit
Balance at 1 January 2001
Opening balance 9,134 46 (1,393) 7,787
Increase in share capital 3,120 -- -- 3,120
Net loss -- -- (2,137) (2,137)
---------- ---------- ---------- ----------
Balance at 31 December 2001 12,254 46 (3,530) 8,770
Balance at 1 January 2002
Opening balance 12,254 46 (3,530) 8,770
Sponsorship -- -- (12) (12)
Dividends -- -- (124) (124)
Net loss -- -- (1,129) (1,129)
---------- ---------- ---------- ----------
Balance at 31 December 2002 12,254 46 (4,795) 7,505
========== ========== ========== ==========
The accompanying notes form an integral part of these financial statements.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Consolidated cash flow statement
(all amounts in BGN thousands) Notes Cable CATV Studio Total
2002 2001 2002 2001 2002 2001
------ ------ ------ ------ ------ ------
Operating activities
Cash generated from operations 17 1,920 3,330 26 (594) 1,946 2,736
Interest received 4 6 -- -- 4 6
Interest paid (31) (24) (4) (32) (35) (56)
Sponsorship paid (12) -- (12)
Tax paid (142) (163) -- -- (142) (163)
------ ------ ------ ------ ------ ------
Net cash from operating activities 1,739 3,149 22 (626) 1,761 2,523
------ ------ ------ ------ ------ ------
Investing activities
Acquisition of subsidiary, net of cash (17) (1,545) -- -- (17) (1,545)
acquired
Purchase of property, plant and (1,462) (4,309) -- (68) (1,462) (4,377)
equipment
------ ------ ------ ------ ------ ------
Net cash used in investing activities (1,479) (5,854) -- (68) (1,479) (5,922)
------ ------ ------ ------ ------ ------
Financing activities
Repaid short-term borrowings (209) 203 (245) 245 (454) 448
Received long-term borrowings 40 2,824 200 477 240 3,301
Decrease in restricted cash 100 -- -- (100) 100 (100)
Dividend paid to minority shareholders (124) -- -- -- (124) --
------ ------ ------ ------ ------ ------
Net cash from financing activities (193) 3,027 (45) 622 (238) 3,649
------ ------ ------ ------ ------ ------
Increase/(Decrease) in cash and cash 67 322 (23) (72) 44 250
equivalents
====== ====== ====== ====== ====== ======
Movement in cash and cash equivalents
As at 1 January in the corresponding 703 410 46 89 749 499
year
Increase/(Decrease) 67 322 (23) (72) 44 250
------ ------ ------ ------ ------ ------
At end of period 770 732 23 17 793 749
====== ====== ====== ====== ====== ======
The accompanying notes form an integral part of these financial statements.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements
1 Accounting policies
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below:
1 Basis of preparation
The consolidated financial statements are prepared in accordance with
and comply with International Financial Reporting Standards. The
consolidated financial statements are prepared under the historical
cost convention, except as disclosed in the accounting policies below.
Going concern
The consolidated financial statements have been prepared on a going
concern basis, which assumes that the Group will continue in
operational existence for the foreseeable future. The future viability
of the Group depends upon the business environment as well as upon the
continuing support of the existing and potential owners and providers
of finance. If this risk is not mitigated and if the business of the
Group was to be wound down and its assets sold, then adjustments would
have to be made to reduce the balance sheet value of assets to their
liquidation value, to provide for further liabilities that might arise,
and to reclassify property, plant and equipment and long term
liabilities as current assets and liabilities.
The directors, in light of their assessment of expected future cash
flows and based on the obtained confirmation of support from Narisma
Holdings, the majority shareholder, stating the commitment of the
latter to continue in providing financial support to the Company and
assisting it in its capital expenditure commitments as they fall due,
are satisfied that it is appropriate for the consolidated financial
statements to be prepared on a going concern basis.
2 Consolidation
Subsidiary undertakings, which are those companies in which the Group,
directly or indirectly, has an interest of more than one half of the
voting rights or otherwise has power to exercise control over the
operations, have been consolidated. Subsidiaries are consolidated from
the date on which effective control is transferred to the Group and are
no longer consolidated from the date of disposal. All intercompany
transactions, balances and unrealised surpluses and deficits on
transactions between group companies have been eliminated. Where
necessary, accounting policies for subsidiaries have been changed to
ensure consistency with the policies adopted by the Group. Separate
disclosure is made of minority interests. A listing of the Group's
principal subsidiaries is set out in Note 20
3 Investments in associates
Investments in associated undertakings are accounted for by the equity
method of accounting. These are undertakings over which the Group has
between 20% and 50% of the voting rights, and over which the Group
exercises significant influence, but which it does not control.
Provisions are recorded for long-term impairment in value.
4 Financial Risk Management
Financial risk factors
The Group's activities expose it to a variety of financial risks,
including the effects of foreign currency exchange rates and interest
rates. Management monitors the overall risk and seeks to minimise
potential adverse effects on the financial performance of the Group.
(i) Foreign exchange risk
The Group operates in Bulgaria and is currently exposed to foreign
exchange risk arising from purchase of program and film rights from
foreign suppliers and from borrowing from the shareholders, both
denominated in USD, different form the reporting currency. The
exposures involved are closely monitored to ensure effective risk
management.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
1 Accounting policies (Continued)
4 Financial Risk Management (Continued)
(ii) Interest rate risk
The Group's interest bearing liabilities are with fixed and floating
interest rates. The Group usually borrows at fixed and floating rates
and the exposures involved are monitored regularly.
(iii) Credit risk
The Group has no significant concentrations of credit risk. The Group
operates in the CATV business where normally the subscribers pay
regularly in their majority.
(iv) Liquidity risk
No major liquidity risk exists as the Group is operating in the cash
generating CATV business and is additionally financed by its
shareholders for its investment activity in cable network and
acquisition of CATV operators.
5 Foreign currencies
Foreign currency transactions in Group companies are accounted for at
the exchange rates prevailing at the date of the transactions; gains
and losses resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities denominated in
foreign currencies, are recognised in the income statement. Such
balances are translated at year-end exchange rates unless hedged by
forward foreign exchange contracts, in which case the rates specified
in such forward contracts are used.
6 Financial instruments
Financial instruments carried on the balance sheet include cash and
bank balances, investments, receivables, trade creditors, leases and
borrowings. The particular recognition methods adopted are disclosed in
the individual policy statements associated with each item.
7 Goodwill
Goodwill represents the excess of the cost of an acquisition over the
fair value of the Group's share of the net assets of the acquired
subsidiary/associated undertaking at the date of acquisition. Goodwill
on acquisitions is reported in the balance sheet as an intangible asset
and is amortised using the straight-line method over its estimated
useful life.
Goodwill is amortised over a period of 5 years.
The carrying amount of goodwill is reviewed annually and written down
for permanent impairment where it is considered necessary.
8 Other intangible assets
Expenditure on acquired patents, trademarks and licences is capitalised
and amortised using the straight-line method over their useful lives,
generally over 7 years. Intangible assets are not revalued. The
carrying amount of each intangible asset is reviewed annually and
adjusted for permanent impairment where it is considered necessary.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
1 Accounting policies (Continued)
9 Other investments
Fixed asset investments excluding marketable securities are shown at
cost and provision is only made where, in the opinion of the Directors,
there is a permanent diminution in value. Where there has been a
permanent diminution in the value of an investment, it is recognised as
an expense in the period in which the diminution is identified.
Increases in the carrying amount of marketable securities classified as
long-term assets are credited to revaluation and other reserves in
shareholders' equity. Decreases that offset previous increases of the
same marketable security are charged against revaluation and other
reserves; all other decreases are charged to the income statement.
Increases/decreases in the carrying amount of marketable securities
classified as current assets are credited/charged to the income
statement.
On disposal of an investment, the difference between the net disposal
proceeds and the carrying amount is charged or credited to the income
statement. On disposal of a marketable security classified as long-term
asset, amounts in revaluation and other reserves relating to that
marketable security are transferred to retained earnings.
10 Property, plant and equipment
All property, plant and equipment is initially recorded at cost.
Property, plant and equipment of subsidiaries are stated at fair values
determined as at the dates of acquisition. All property, plant and
equipment is stated at historical cost less depreciation.
Depreciation is calculated on the straight line method to write off the
cost of each asset, or the revalued amounts, to their residual values
over their estimated useful life as follows:
Buildings 25 years
Plant and machinery 5-25 years
Land is not depreciated as it is deemed to have an indefinite life.
Where the carrying amount of an asset is greater than its estimated
recoverable amount, it is written down immediately to its recoverable
amount.
Gains and losses on disposal of property, plant and equipment are
determined by reference to their carrying amount and are taken into
account in determining operating profit.
11 Accounting for leases
Leases of property, plant and equipment where the Group assumes
substantially all the benefits and risks of ownership are classified as
finance leases. Finance leases are capitalised at the estimated present
value of the underlying lease payments. Each lease payment is allocated
between the liability and finance charges so as to achieve a constant
rate on the finance balance outstanding. The corresponding rental
obligations, net of finance charges, are included in other long-term
payables. The interest element of the finance charge is charged to the
income statement over the lease period. The property, plant and
equipment acquired under finance leasing contracts is depreciated over
the useful life of the asset.
Leases of assets under which all the risks and benefits of ownership
are effectively retained by the less or are classified as operating
leases. Payments made under operating leases are charged to the income
statement on a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease period has
expired, any payment required to be made to the lessor by way of
penalty is recognised as an expense in the period in which termination
takes place.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
1 Accounting policies (Continued)
12 Inventories
Inventories are stated at the lower of cost or net realisable value.
Cost is determined by the first-in, first-out (FIFO) method. Net
realisable value is the estimate of the selling price in the ordinary
course of business, less the costs of completion and selling expenses.
13 Trade receivables
Trade receivables are carried at anticipated realisable value. An
estimate is made for doubtful receivables based on a review of all
outstanding amounts at the year end. Bad debts are written off during
the year in which they are identified.
14 Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents
comprise cash in hand, deposits held at call with banks, and
investments in money market instruments, net of bank overdrafts.
15 Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable that
an outflow of resources embodying economic benefits will be required to
settle the obligation, and a reliable estimate of the amount of the
obligation can be made.
16 Pension obligations
The Government of Bulgaria is responsible for providing pensions in
Bulgaria under a defined contribution pension plan. The company's
contributions to the defined contribution pension plan are charged to
the income statement in the year to which they relate.
17 Deferred income taxes
Deferred income tax is using the liability method, for all temporary
differences arising between the tax bases of assets and liabilities and
their carrying values for financial reporting purposes. Currently
enacted tax rates are used to determine deferred income tax.
The principal temporary differences arise from depreciation on
property, plant and equipment and revaluation of certain non-current
assets. Deferred tax assets relating to the carry forward of unused tax
losses are recognised to the extent that it is probable that future
taxable profit will be available against which the unused tax losses
can be utilised.
18 Revenue recognition
Sales are recognised upon delivery of products and customer acceptance,
if any, or performance of services, net of sales taxes and discounts,
and after eliminating sales within the Group, unless there is a
significant uncertainty as to their collectibility.
Other revenues earned by the Group are recognised on the following
bases:
Royalty income - on an accrual basis in accordance with the substance
of the relevant agreement. Interest income - as it accrues (taking into
account the effective yield on the asset) unless collectibility is in
doubt.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
1 Accounting policies (Continued)
19 Discontinuing operations
These financial statements are prepared on the presumption that part of
the activities of the Group, relating to the operation of the TV
channel DEN, will be discontinued. In May 2003 the Group has disposed
of the TV programme DEN, owned by UTV, part of the Cable Bulgaria
Group. These financial statements present separately the results of
operations of the cable network and the TV programme.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
2 Operating profit
The following items have been charged in arriving at the operating
result:
Cable Studio
2002 2001 2002 2001
------ ------ ------ ------
Depreciation on property, plant and equipment (Note 6) 1,572 937 242 225
Amortisation of intangible assets (Note 7) 1,445 1,341 12 18
- goodwill (included in `Administrative expenses') 1,388 1,309 -- --
- other intangible assets (included in `Administrative expenses') 57 32 12 18
Impairment charge -- -- -- 281
Program rights expenditure 3,036 2,520 -- --
Film rights expenditure -- -- 300 275
Raw materials and consumables used 707 578 44 99
Staff costs (Note 2) 3,224 3,251 588 627
Consulting services and marketing research 304 492 87 77
Rents 1,166 912 99 119
Satellite transmission -- -- 380 416
Telecommunication costs 223 209 47 78
Licence fees 168 128 --
Other external services 912 348 77 293
Other expenses 358 579 47 13
Cost of merchandise sold 80 -- 14 --
------ ------ ------ ------
Total operating expenses 13,195 11,295 1,937 2,521
====== ====== ====== ======
3 Staff costs
31 December 2002 31 December 2001
Wages and salaries 2,143 2,431
Social security contributions and social costs for staff 1,669 1,447
---------------- ----------------
3,812 3,878
---------------- ----------------
4 Finance costs
31 December 2002 31 December 2001
Interest income 7 6
Dividend income 12 14
Net foreign exchange transaction (loss)/gain 698 (379)
Interest expense (36) (56)
Other financial expense (33) (66)
---------------- ----------------
Net financial income 648 (481)
---------------- ----------------
The above figure for net foreign exchange gain includes gain of BGN
1,114,000, which is mostly due to the revaluation of the balances
denominated in USD due to shareholders at the end of period.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
(all amounts in BGN thousands)
5 Tax
31 December 2002 31 December 2001
Current tax 151 250
Deferred tax (Note 14) 99 228
---------------- ----------------
250 478
================ ================
6 Property, Plant and Equipment
Land & Plant & Vehicles & Assets Total
buildings machinery equipment under
construction
Year ended 31 December 2001
Opening net book amount 539 6,497 511 2,583 10,130
Additions 187 1,934 195 743 3,059
Disposals -- (67) (95) -- (162)
Transfer -- 771 -- (771) --
Depreciation charge (Note 1) (18) (1,667) (129) -- (1,814)
---------- ---------- ---------- ---------- ----------
Closing net book amount 708 7,468 482 2,555 11,213
---------- ---------- ---------- ---------- ----------
At 31 December 2001
Cost or fair value 750 10,795 755 2,555 14,855
Accumulated depreciation (42) (3,327) (273) -- (3,642)
---------- ---------- ---------- ---------- ----------
Net book amount 708 7,468 482 2,555 11,213
========== ========== ========== ========== ==========
Additions to plant and machinery are stated at cost or fair value
following the application of acquisition accounting.
7 Intangible assets
Goodwill Other intangible
Assets
Year ended 31 December 2002
Opening net book amount 5,047 225
Additions (Note 18) (48) 18
Disposals -- (1)
Amortisation charge (Note 1) (1,388) (69)
---------------- ----------------
Closing net book amount 3,611 173
================ ================
At 31 December 2002
Cost 6,893 359
Accumulated amortisation (3,282) (186)
---------------- ----------------
Net book amount 3,611 173
================ ================
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
(all amounts in BGN thousands)
8 Investments
The amount represents a minority participation of 16.5% held by UTV
(100% subsidiary of Cable Bulgaria) in Telekabel - Pazardjik.
9 Inventories
31 December 2002 31 December 2001
Materials (at cost) 339 376
---------------- ----------------
339 376
================ ================
Materials balance comprises mainly of optic fibres and components for
the cable network.
10 Receivables
31 December 2002 31 December 2001
Trade receivables and accrued income at year-end 473 361
Recoverable tax 85 64
Advance payments 67 44
Receivables from related parties -- 178
Other receivables 91 80
---------------- ----------------
716 727
================ ================
11 Cash and cash equivalents
31 December 2002 31 December 2001
Cash in hand 287 749
Cash in bank 506 100
---------------- ----------------
793 849
================ ================
For the purposes of the cash flow statement, the period-end cash and
cash equivalents comprise the following:
31 December 2002 31 December 2001
Cash in hand and bank 793 849
Restricted cash -- (100)
---------------- ----------------
793 749
================ ================
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
(all amounts in BGN thousands)
12 Trade and other payables
31 December 2002 31 December 2001
Trade payables 1,412 1,150
Payables to employees 541 309
Social security and other taxes 653 369
Advances received -- 23
Payables to related parties (Note 19) -- 204
Accrual for program rights payable 396 187
Accrual for broadcast licenses payable 159 99
Accrual for construction works payable 192 --
Other payables and accruals 469 108
---------------- ----------------
3,822 2,449
================ ================
13 Borrowings
31 December 2002 31 December 2001
Current
Bank borrowings 28 448
Other 14 --
---------------- ----------------
42 448
---------------- ----------------
Non-current
Loans from related parties (Note 19) 3,808 4,483
Loans from banks 35 --
Payable under finance leases 55 69
---------------- ----------------
3,898 4,552
================ ================
Total borrowings 3,940 5,000
================ ================
The current bank borrowings include:
o A loan received from Roseximbank AD by Cable Bulgaria - branch
in Bourgas amounting to BGN 100,000. The balance outstanding
at 31 December 2002 is BGN 30,000. The collateral imposed
includes properties owned by Cable Bulgaria valued at BGN
206,000.
o A loan received from Eurobank AD by Cable Bulgaria - branch in
Haskovo amounting to EUR 25,000 (BGN 48,896). The balance
outstanding at 31 December 2002 is EUR 14,534. The collateral
imposed includes fixed assets owned by Cable Bulgaria valued
at BGN 108,000.
o A loan received from Roseximbank AD by Cable Bulgaria Haskovo
branch with a balance outstanding at 31 December 2002 of BGN
5,000. The collateral imposed includes a building owned by
Cable Bulgaria valued at BGN 108,000.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
(all amounts in BGN thousands)
13 Borrowings (Continued)
Maturity of non current borrowings:
31 December 2002 31 December 2001
Between 1 and 2 years 3,898 4,552
---------------- ----------------
3,898 4,552
================ ================
14 Deferred income taxes
Deferred income taxes are calculated on all temporary differences under
the liability method using a principal tax rate of 23.5% (2001: 23.5%).
Cable Bulgaria AD has incurred tax losses amounting to BGN 1,494,000 as
at 31 December 2002 (31 December 2001: BGN 903,000). As the
recoverability of these losses in the future is not certain, no
deferred tax asset has been recognised in the consolidated balance
sheet.
31 December 2002 31 December 2001
Deferred tax liabilities 352 253
---------------- ----------------
352 253
================ ================
Deferred tax liabilities and deferred tax charge in the income
statement are attributable to the following items:
31 December 2001 Charge 31 December 2002
Deferred income tax assets
Intangible assets recognised as expense 217 (14) 203
Holiday pay accrual recognised as expense -- 29 29
Deferred income tax liabilities
Accrued income at year end (14) 14 --
Fixed assets (456) (128) (584)
------------------------------------------------
Net deferred tax liability (253) (99) (352)
================================================
15 Ordinary shares and share premium
The total authorised number of ordinary shares is 122,542 shares (31
December 2001: 122,542) with a par value of BGN 100 per share. All
issued shares are fully paid. There were no changes in the share
capital of the company during the year ended 31 December 2002.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
(all amounts in BGN thousands)
16 Minority interests
31 December 2002 31 December 2001
At beginning of period 991 387
Acquisitions (net) (65) 271
Minority interest in Income Statement 161 333
---------------- ----------------
At 31 December 2002 1,087 991
================ ================
17 Cash generated from operations
Reconciliation of loss before tax and minority interest to cash
generated from operations:
Year ended Year ended
31 December 2002 31 December 2001
Loss before tax and minority interest (718) (1,326)
Adjustments for:
Depreciation (Note 1) 1,883 1,162
Amortisation (Note 1) 1,388 1,359
Impairment charge -- 281
Interest expense (net) (Note 4) 31 50
---------------- ----------------
2,584 1,526
Changes in working capital (excluding the effects of acquisition and
disposal):
- trade and other receivables 11 190
- inventories 37 335
- payables (675) 279
- prepayments 189 406
Cash generated from operations 2,146 2,736
================ ================
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
(all amounts in BGN thousands)
18 Acquisition and disposals
During the twelve months ended 31 December 2002 the group made the
following partial acquisition in already existing subsidiary:
KIS Russe - additional 2.69% purchased
Details of net assets acquired and goodwill from the acquisition during
the period are as follows:
Purchase consideration:
Cash paid 17
Fair value of net assets acquired (65)
----------
Goodwill (Note 7) (48)
==========
From 1 July 2001 Globo EOOD was excluded from the consolidation as the
entity is in a process of liquidation and there are restrictions
regarding the outflow of future benefits to Cable Bulgaria Group.
In February 2002 the assets of the branches of UTV relating to the CATV
business were legally separated and new entity was formed with the name
Cable Bulgaria West EOOD. In August 2002 Cable Bulgaria West EOOD was
legally merged into Cable Bulgaria AD and the former branches of UTV
became branches of Cable Bulgaria.
19 Related party transactions
The company did not undertake any related party transactions during the
year ended 31 December 2002 in relation to purchases and sales
activities.
Loans from related parties 31 December 2002 31 December 2001
Narisma Holdings - loan 3,808 4,483
------------------------------------
3,808 4,483
====================================
The loan payable to Narisma Holding has no maturity and is repayable
upon request from the lender. The management of Cable Bulgaria AD
believes that the loan should be classified as long-term borrowing as
the purpose was investment in long-term assets and Narisma has
committed itself not to withdraw the loan in the short-term period and
disturb the operations of Cable Bulgaria and its subsidiaries.
Loans to related parties
Loans to minority shareholders 90 178
------------------------------------
90 178
====================================
Payables to related parties
Payables to related parties -- 204
------------------------------------
-- 204
====================================
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
20 Principal subsidiary undertakings
Name Country of Effective Effective percentage
incorporation percentage held at held at
31 December 2002 31 December 2001
Union Television AD Bulgaria 100.00 100.00
TV Mix, Burgas AD Bulgaria 100.00 100.00
Pleven - Sprint OOD Bulgaria 51.00 51.00
Union Kabel, Dobrich OOD Bulgaria 52.50 52.50
Dovacom, Dobrich EOOD Bulgaria 52.50 52.50
Union Television - Velingrad OOD Bulgaria 70.00 70.00
Broadnet AD Bulgaria 100.00 100.00
KIS AD Bulgaria 59.94 57.25
Globo Lom AD Bulgaria 51.00 51.00
Globo Shumen EAD Bulgaria - 100.00
Globo Stara Zagora AD Bulgaria 95.80 95.80
Globo EOOD (excluded from consolidation) Bulgaria 100.00 100.00
All holdings are in the ordinary share capital of the undertaking
concerned.
In August 2002 Globo Shumen EAD was legally merged together with Cable
Bulgaria West EOOD in Cable Bulgaria AD.
21 Subsequent events and discontinuing operations
In March 2003 Globo Stara Zagora AD was liquidated with a decision of
the court.
Up to August 2003 Cable Bulgaria acquired an additional 0.48%
shareholding in KIS AD, Rousse. The consideration paid for this share
was in the amount of BGN 6,000.
Discontinuing operations
The Board of Directors took a decision to dispose Union Television AD
(part of the Group) operator of the DEN TV channel in 2003. The
management decided to dispose of UTV AD because its operations are in
area apart of the core business (CATV) that forms the long-term
direction of the Group. Further the results for the last couple of
years related to the UTV AD were negative and were not in line with the
trends in the core CATV business results.
Management have reviewed the need for provision relating to the
possible losses, which the Group may incur in this disposal and have
concluded that no provision is required in these consolidated financial
statements.
The total assets of UTV AD as at 31 December 2002 are BGN 732,000 and
total liabilities are BGN 1,215,000 giving a negative net assets of BGN
483,000.
In March 2003 a frame agreement was concluded which was signed as
official contract in May 2003 between Cable Bulgaria AD and two of its
shareholders, namely Narisma Holdings and Clearway Investments
concerning the sale of UTV AD to Clearway Investments. According to the
agreement Cable Bulgaria AD transfers 100% of its shares in UTV AD as
part of the consideration on a share purchase deal between Narisma
Holdings and Clearway Investments. According to the provisions of the
agreement 1.5% of the share capital of Cable Bulgaria AD owned by
Clearway Investments is transferred to Narisma Holdings, thus
increasing its shareholding to 70%.
Cable Bulgaria AD
Consolidated Financial Statements
for the year ended 31 December 2002
--------------------------------------------------------------------------------
Notes to the consolidated financial statements (Continued)
22 Contingent liabilities
As part of the above deal an amount of USD 90,000 was committed for
payment to Clearway Investments by Cable Bulgaria by 29 February 2004.
No transfer of ownership of the shares of Narisma Holdings in Cable
Bulgaria AD can take place before that payment is made in case such
deal occurs before the aforementioned final date for the payment.
GREENBRIAR CORPORATION
PRO FORMA FINANCIALS FOR THE
NINE MONTHS ENDED 30 SEPTEMBER 2004
AND TWELVE MONTHS ENDED 31 DECEMBER 2003
On October 12, 2004 Greenbriar Corporation, through the acquisition of two US
Corporations, acquired 100% of the outstanding common stock of Tacaruna Holdings
B.V. a Netherlands Company whose only principal assets are 30% of the
outstanding stock CableTEL A.D., a Bulgarian Company and 64% of the outstanding
stock of Narisma Holdings Limited, a Cyprus Company. The principal asset of
Narisma is the ownership of 70% of CableTEL A.D. Through the ownership of
Tacaruna, Greenbriar acquired 74.8% of the outstanding stock of CableTEL A.D.
Greenbriar is the acquiring company in this acquisition however due to
the relative values of the companies for accounting purposes this transaction is
being treated as a reverse merger. As a reverse merger, for accounting purposes
Greenbriar is being accounted for as if it had been the acquired company
The pro forma combined Balance Sheet gives effect to the acquisition as
if it had occurred on September 30, 2004. The pro forma combined condensed
Statement of Operations for the Year ended December 31, 2003 and the nine months
ended September 30, 2004 gives effect to the transaction as if it had occurred
on January 1, 2003.
The pro forma condensed combined information is presented for
illustrative purposes only. Such information does not purport to be indicative
of the results of operations and financial position that actually would have
resulted had the acquisition actually occurred on the dates indicated, nor is it
indicative of the results that may be expected in future periods. The pro forma
adjustments are based upon information and assumptions available at the time of
filing this Form 8-K.
Greenbriar Corporation
Consolidated Balance Sheets
September 30, 2004
(Amounts in thousands)
Euros US$ BGN BGN
Tacaruna Narisma
Holdings Holdings CableTel Historical
B.V. Limited AD Consolidated
----------- ----------- ----------- -----------
Assets
Current assets
Cash and cash equivalents 5 0 844 849
Accounts receivable-trade 0 0 4,293 4,293
Inventory 0 0 3,237 3,237
Notes receivable 0 3,344 0 3,344
Property held for sale 0 0 0 0
Other current assets 298 96 102 496
----------- ----------- ----------- -----------
Total current assets 303 3,440 8,476 12,219
----------- ----------- ----------- -----------
Notes receivable, from sale of properties 0 0 0 0
Less deferred gains 0 0 0 0
----------- ----------- ----------- -----------
0 0 0 0
----------- ----------- ----------- -----------
Deferred income tax benefit 0 0 0 0
Investment in subsidiaries 7,593 7,330 0 14,923
Property and equipment, at cost
Land and improvements 0 0 848 848
Buildings and improvements 0 0 0 0
Equipment and furnishings 0 0 11,501 11,501
Assets under construction 0 0 14,770 14,770
Proven oil and gas properties
(full cost method) 0 0 0 0
----------- ----------- ----------- -----------
0 0 27,119 27,119
Less accumulated depreciation and
depletion 0 0 7,184 7,184
----------- ----------- ----------- -----------
0 0 19,935 19,935
----------- ----------- ----------- -----------
Deposits 0 0 0 0
Other assets 0 0 2,312 2,312
----------- ----------- ----------- -----------
Total Assets 7,896 10,770 30,723 49,389
=========== =========== =========== ===========
Greenbriar Corporation
Consolidated Balance Sheets - Continued
(Amounts in thousands, except share amounts)
Historical US$ US$ US$
Historical
Tacaruna
Consolidated Historical Pro Forma
Converted Greenbriar Pro Forma Combined
to US$ Corporation Adjustments Greenbriar
----------- ----------- ----------- -----------
Assets
Current assets
Cash and cash equivalents 538 324 0 862
Accounts receivable-trade 2,705 336 0 3,041
Inventory 2,039 0 0 2,039
Notes receivable 3,344 1,156 (3,344) A 1,156
Property held for sale 0 1,876 0 1,876
Other current assets 527 241 0 768
----------- ----------- ----------- -----------
Total current assets 9,153 3,933 (3,344) 9,742
----------- ----------- ----------- -----------
Notes receivable, from sale of properties 0 4,107 (387) B 3,720
Less deferred gains 0 (3,720) 0 (3,720)
----------- ----------- ----------- -----------
0 387 (387) 0
----------- ----------- ----------- -----------
Deferred income tax benefit 0 1,161 (1,161) B 0
Investment in subsidiaries 16,669 0 (7,330) A 0
Property and equipment, at cost
Land and improvements 534 2,240 0 2,774
Buildings and improvements 0 6,549 1,702 B 8,251
Equipment and furnishings 7,246 1,228 (400) B 8,074
Assets under construction 9,305 0 0 9,305
Proven oil and gas properties
(full cost method) 0 1,466 (150) B 1,316
----------- ----------- ----------- -----------
17,085 11,483 1,152 29,720
Less accumulated depreciation and
depletion 4,526 1,288 (1,288) B 4,526
----------- ----------- ----------- -----------
12,559 10,195 2,440 25,194
----------- ----------- ----------- -----------
Deposits 0 307 (210) B 97
Other assets 1,457 691 (167) B 1,981
----------- ----------- ----------- -----------
Total Assets 39,838 16,674 (19,498) 37,014
=========== =========== =========== ===========
Greenbriar Corporation
Consolidated Balance Sheets - Continued
(Amounts in thousands, except share amounts)
Euros US$ BGN BGN
Tacaruna Narisma
Holdings Holdings CableTel Historical
B.V. Limited AD Consolidated
----------- ----------- ----------- -----------
Liabilities and Stockholders' equity
Current liabilities
Current maturities of long-term debt 0 0 0 0
Current notes payable 0 9,359 10,577 19,936
0 0 0 0
Accounts payable - trade 0 0 12,693 12,693
Accrued expenses 13 17 0 30
Other current liabilities 291 49 0 340
----------- ----------- ----------- -----------
Total current liabilities 304 9,425 23,270 32,999
Long-term debt 7,607 0 1,885 9,492
Deferred Gain 0 0 236 236
Other long term liabilities 0 0 43 43
----------- ----------- ----------- -----------
Total liabilities 7,911 9,425 25,434 42,770
Minority interest 0 0 231 231
Stockholders' equity
Preferred stock 0 0 0 0
Common stock $.01 par value; authorized,
4,000,000 shares; 977,000 shares
issued and outstanding 0 2 0 2
Additional paid-in capital 20 0 12,383 12,403
0 0 0 0
0 0 0 0
Retained Earnings (35) 1,343 (7,325) (6,017)
----------- ----------- ----------- -----------
(15) 1,345 5,058 6,388
----------- ----------- ----------- -----------
Total Liabilities & Equity 7,896 10,770 30,723 49,389
=========== =========== =========== ===========
Greenbriar Corporation
Consolidated Balance Sheets - Continued
(Amounts in thousands, except share amounts)
Historical US$ US$ US$
Historical
Tacaruna
Consolidated Historical Pro Forma
Converted Greenbriar Pro Forma Combined
to US$ Corporation Adjustments Greenbriar
----------- ----------- ----------- -----------
Liabilities and Stockholders' equity
Current liabilities
Current maturities of long-term debt 0 4,756 0 4,756
Current notes payable 16,023 0 (7,330) A 5,349
0 0 (3,344) A 0
Accounts payable - trade 7,997 214 0 8,211
Accrued expenses 33 821 0 854
Other current liabilities 407 309 0 716
----------- ----------- ----------- -----------
Total current liabilities 24,459 6,100 (10,674) 19,885
Long-term debt 10,544 7,589 0 18,133
Deferred Gain 149 0 0 149
Other long term liabilities 27 188 (188) B 27
----------- ----------- ----------- -----------
Total liabilities 35,179 13,877 (10,862) 38,194
Minority interest 146 0 0 146
Stockholders' equity
Preferred stock 0 1 0 1
Common stock $.01 par value; authorized,
4,000,000 shares; 977,000 shares
issued and outstanding 2 10 88 100
Additional paid-in capital 7,826 55,966 (9,339) C 1,888
0 0 703 B 0
0 0 (53,268) D 0
Retained Earnings (53,180) 53,180 (3,315) D
----------- ----------- ----------- -----------
4,513 2,797 (8,636) (1,326)
----------- ----------- ----------- -----------
Total Liabilities & Equity 39,838 16,674 (19,498) 37,014
=========== =========== =========== ===========
Footnotes
A- To eliminate intercompany debt
B- To adjust Greenbriar to reflect assets and liabilities at fair market value
C- To eliminated intercompany investment in subsidiaries
D - To eliminated Greenbriar's historical retained earnings
E- Foreign monetary conversions were based on the values existing on September
30, 2004. On that date one Euro converted into $ 1.23 and one Bulgarian Leva
(BGN) converted into $ .63
F - The deferred tax asset of Greenbriar Corporation was supported by Net
Operating Loss Carry forwards held by Greenbriar. This acquisition will be
viewed by the Internal Revenue service as a change in control which severely
limits the Company's ability to utilize these loss carry forwards.
Greenbriar Corporation
Pro Forma Historical Combined Statement of Operations
Nine Months Ended September 30, 2004
Amounts in Thousands
Euros US$ BGN BGN
Tacaruna Narisma
Holdings Holdings CableTel Historical
B.V. Limited AD Consolidated
--------------------------------------------------------
Revenue
Real estate operations 0 0 0 0
Oil & gas operations 0 0 0 0
Cable operations 0 0 11,153 11,153
--------------------------------------------------------
0 0 11,153 11,153
--------------------------------------------------------
Operating expenses
Real estate operations 0 0 0 0
Oil & gas operations 0 0 0 0
Cable operations 0 0 8,080 8,080
Lease expense 0 0 1,085 1,085
Depletion, depreciation and
amortization 0 0 2,147 2,147
Corporate general and
administrative 8 329 3,954 4,291
--------------------------------------------------------
8 329 15,266 15,603
--------------------------------------------------------
Operating earning (loss) (8) (329) (4,113) (4,450)
Other income (expense)
Interest income 0 272 4 276
Interest expense 0 0 (600) (600)
Gain on foreign exchange
transactions, net 0 0 (37) (37)
Net gain on sale of assets 0 0 2,491 2,491
Other 0 430 372 802
--------------------------------------------------------
0 702 2,230 2,932
--------------------------------------------------------
Earnings from continuing operations
before income taxes and minority
interest (8) 373 (1,883) (1,518)
Income tax (income) expense 0 17 (58) (41)
Minority interest 0 0 109 109
--------------------------------------------------------
Net earnings (loss) from
continuing operations (8) 356 (1,934) (1,586)
--------------------------------------------------------
Earnings (loss) per share from
continuing operations
Weighted average number of common
shares outstanding
Greenbriar Corporation
Pro Forma Historical Combined Statement of Operations Continued
Nine Months Ended September 30, 2004
Amounts in Thousands
US$ US$ US$
Historical
Tacaruna
Consolidated Historical Pro Forma
Converted Greenbriar Pro Forma Combined
to US$ Corporation Adjustments Greenbriar
----------------------------------------------------------
Revenue
Real estate operations 0 $ 4,477 0 $ 4,477
Oil & gas operations 0 996 0 996
Cable operations 5,878 0 0 5,878
----------------------------------------------------------
5,878 5,473 0 11,351
----------------------------------------------------------
Operating expenses
Real estate operations 0 2,602 0 2,602
Oil & gas operations 0 758 0 758
Cable operations 4,258 0 0 4,258
Lease expense 572 686 0 1,258
Depletion, depreciation and
amortization 1,131 365 (385) 1,111
Corporate general and
administrative 2,413 774 0 3,187
----------------------------------------------------------
8,374 5,185 (385) B 13,174
----------------------------------------------------------
Operating earning (loss) (2,497) 288 385 (1,824)
Other income (expense)
Interest income 274 179 (272) A 181
Interest expense (316) (994) 72 A (994)
244 C 12
Gain on foreign exchange
transactions, net (19) 0 0 (19)
Net gain on sale of assets 1,313 1,409 2,722
Other 626 (618) 0 8
----------------------------------------------------------
1,877 (24) 44 1,909
----------------------------------------------------------
Earnings from continuing operations
before income taxes and minority
interest (619) 264 429 86
Income tax (income) expense (14) 0 0 (14)
Minority interest 63 0 141 D 204
----------------------------------------------------------
Net earnings (loss) from
continuing operations (669) 264 288 (105)
----------------------------------------------------------
Earnings (loss) per share from
continuing operations $ (0.01)
Weighted average number of common
shares outstanding 9,997
Footnotes
A - To eliminate intercompany interest
B - To adjust amortization of intangible assets to reflect a write off period of
14 years
C- To capitalize construction interest incurred in 2004.
C - To record the minority interest in Narisma which is 36% owned by an
independent third party.
D- The acquisition was completed by the issuance of 31,500 shares of Greenbriar
Series J Preferred Stock. It is anticipated that the Series J Preferred Stock
will be converted into 9,000,000 common shares of Greenbriar Corporation. This
proforma assumes theconversion has occurred as of January 1, 2003
E- Foreign monetary conversions were based on the average conversion price for
the nine months ended September 30, 2004. On that date one Euro converted into $
1.23 and one Bulgarian Leva (BGN) converted into $ .63
Greenbriar Corporation Consolidated
Pro Forma Historical Combined Statement of Operations
Year Ended December 31, 2003
Amounts in Thousands
Euros US$ BGN BGN
Tacaruna Narisma
Holdings Holdings CableTel Historical
B.V. Limited AD Consolidated
--------------------------------------------------------
Revenue
Real estate operations 0 0 0 0
Oil & gas operations 0 0 0 0
Cable operations 0 0 14,369 14,369
--------------------------------------------------------
0 0 14,369 14,369
--------------------------------------------------------
Operating expenses
Real estate operations 0 0 0 0
Oil & gas operations 0 0 0 0
Cable operations 0 0 9,475 9,475
Lease expense 965 965
Depletion, depreciation and
amortization 0 0 3,858 3,858
Corporate general and
administrative 11 8 2,187 2,206
--------------------------------------------------------
11 8 16,485 16,504
--------------------------------------------------------
Operating earning (loss) (11) (8) (2,116) (2,135)
Other income (expense)
Interest income 0 364 10 374
Interest expense 0 0 (207) (207)
Gain on foreign exchange
transactions, net 0 0 712 712
Net gain on sale of assets 0 0 634 634
Other 0 0 530 530
--------------------------------------------------------
0 364 1,679 2,043
--------------------------------------------------------
Earnings from continuing operations
before income taxes and minority
interest (11) 356 (437) (92)
Income tax (income) expense 0 17 (114) (97)
Minority interest 0 0 (57) (57)
--------------------------------------------------------
Net earnings from
continuing operations (11) 339 (266) 62
--------------------------------------------------------
Earnings per share from
continuing operations
Weighted average number of common
shares outstanding
Greenbriar Corporation Consolidated
Pro Forma Historical Combined Statement of Operations - Continued
Year Ended December 31, 2003
Amounts in Thousands
US$ US$ US$
Historical
Tacaruna
Consolidated Historical Pro Forma
Converted Greenbriar Pro Forma Combined
to US$ Corporation Adjustments Greenbriar
----------------------------------------------------------
Revenue
Real estate operations 0 $ 4,585 0 $ 4,585
Oil & gas operations 0 449 0 449
Cable operations 8,320 0 0 8,320
----------------------------------------------------------
8,320 5,034 0 13,354
----------------------------------------------------------
Operating expenses
Real estate operations 0 2,522 0 2,522
Oil & gas operations 0 400 0 400
Cable operations 5,486 0 0 5,486
Lease expense 559 1,412 1,971
Depletion, depreciation and
amortization 2,234 331 (513) B 2,052
Corporate general and
administrative 1,277 1,146 0 2,423
----------------------------------------------------------
9,556 5,811 (513) 14,854
----------------------------------------------------------
Operating earning (loss) (1,236) (777) 513 (1,500)
Other income (expense)
Interest income 370 304 (364) A 310
Interest expense (120) (705) 85 A (740)
Gain on foreign exchange
transactions, net 412 0 0 412
Net gain on sale of assets 367 1,058 0 1,425
Other 307 342 0 649
----------------------------------------------------------
1,336 999 (279) 2,056
----------------------------------------------------------
Earnings from continuing operations
before income taxes and minority
interest 100 222 234 556
Income tax (income) expense (49) 0 0 (49)
Minority interest (33) 0 97 C 64
----------------------------------------------------------
Net earnings from
continuing operations 182 222 137 $ 541
----------------------------------------------------------
Earnings per share from
continuing operations $ 0.05
Weighted average number of common
shares outstanding D 10,977
Footnotes
A - To eliminate intercompany interest
B - To adjust amortization of intangible assets to reflect a write off period of
14 years
C - To record the minority interest in Narisma which is 36% owned by an
independent third party.
D- The acquisition was completed by the issuance of 31,500 shares of Greenbriar
Series J Preferred Stock. It is anticipated that the Series J Preferred Stock
will be converted into 9,000,000 common shares of Greenbriar Corporation. This
proforma assumes theconversion has occurred as of January 1, 2003
E- Foreign monetary conversions were based on the average conversion price for
the nine months ended September 30, 2004. On that date one Euro converted into $
1.29 and one Bulgarian Leva (BGN) converted into $ .579