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Technology Stocks : Zi-Corp (ZICA), formerly MCUAF -- Ignore unavailable to you. Want to Upgrade?

To: leigh aulper who wrote (2078)	4/28/2003 3:32:16 PM
From: Uncle Clive	Respond to of 2082

GOING CONCERN BASIS OF PRESENTATION These consolidated financial statements are prepared on a going concern basis, which assumes that the Company will be able to realize its assets at the amounts recorded and discharge its liabilities in the normal course of business in the foreseeable future. The Company has incurred operating losses over the past three years. On December 5, 2002, the Company borrowed US$3.3 million (before fees and expenses) through the issuance of a note payable, originally due March 5, 2003 and subsequently extended to April 30, 2003. At present, Zi has not arranged replacement financing to repay the note and there can be no assurance that Zi will be successful in its efforts to complete such refinancing. On December 6, 2002, the Company settled a judgment in favour of Tegic Communications Inc., a division of AOL Time Warner. Under the terms of the settlement agreement, the Company, among other things, is obliged to pay a further US$1.5 million comprised of three installments between June 2003 and January 2004. Continuing operations are dependent on the Company being able to refinance its borrowings due April 30, 2003, pay the remaining installment payments due under the settlement agreement with AOL, increase revenue and achieve profitability. These financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that may be necessary should the Company be unable to pay the remaining installment payments due under the terms of the settlement agreement with AOL, raise additional capital to meet the repayment of the note payable, increase revenue and continue as a going concern. CONTINGENT LIABILITIES The US$9 million damages judgment awarded to Tegic was settled pursuant to a written settlement agreement with AOL dated December 6, 2002 and a consent judgment dated December 20, 2002. Settlement costs have been included as part of legal and litigation costs as at December 31, 2002, including US$1.5 million which remains to be paid in scheduled installment payments beginning in June 2003 and ending on January 2, 2004. In the event that any of the scheduled Outstanding Balance payments are not paid as required under the terms of the settlement agreement, then the amount of US$9 million less all payments made to AOL to the date of such payment default becomes immediately due and payable by the Company to AOL (the "Default Payment Amount"). In the event of any Outstanding Balance payment default, the Default Payment Amount would range between US$4.5 million to US$6 million depending upon the date of such payment default. Security agreements entered into by the Company with AOL to secure payment of the Default Payment Amount become enforceable in the event of any Outstanding Balance payment default. When the Outstanding Balance is paid to AOL in full on or before the scheduled payment dates, the security agreements entered into by the Company with AOL are terminated and the Company is fully released from any obligation to pay the Default Payment Amount to AOL. The Default Payment Amount also becomes due and payable by the Company to AOL if, prior to the payment in full of the Outstanding Balance to AOL, any of the following circumstances occurs and are not cured within ten days of occurrence: (i) the Company advances any claims against AOL or its affiliates in respect of patent infringement before July 6, 2003; (ii) the Company or any other person commences any action to avoid any payments made by the Company to AOL including any of the remaining scheduled installment payments; (iii) the Company violates the terms of the Consent Judgment; or (iv) the Company breaches any of the terms of the settlement agreement.