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In addition, starting with our fiscal year 2004 Annual Report on Form 10-K, we must comply with Section 404(a) of the Sarbanes-Oxley Act of
2002, and the related SEC rules, which require management to assess the effectiveness of our internal control over financial reporting annually
and to include in our Annual Report on Form 10-K a management report on that assessment, together with an attestation by our independent
registered public accounting firm. In light of the material weaknesses identified in connection with the First Restatement and Second
Restatement, our management expects to conclude that our internal control over financial reporting as at December 31, 2004 is ineffective, and
D&T has advised us that they expect their report on management’s assessment of internal control over financial reporting also to indicate that
internal control over financial reporting is ineffective. While we are implementing steps to ensure the effectiveness of our internal control over
financial reporting, failure to restore the effectiveness of our internal control over financial reporting could continue to impact our ability to
report our financial condition and results of operations accurately and could have a material adverse effect on our business, results of
operations, financial condition and liquidity.
The governing principles of the Independent Review for remedial measures may take time to implement.
As a result of the Independent Review, a number of significant remedial steps have been identified as necessary to improve our process and
procedures. These remedial steps may take time to implement. In addition, the process of implementing the governing principles of the
Independent Review may be time consuming for our senior management and disrupt our business.
The delayed filing of our Reports and related matters caused us to breach our public debt indentures and seek waivers from EDC
under the EDC Support Facility, which may affect our liquidity. Continuing delays in filing certain of our Reports and related matters
has resulted in a breach of our public debt indentures and our obligations under the EDC Support Facility. It is possible that the
holders of our public debt will seek to accelerate the maturity of that debt and EDC will not grant us additional waivers
.
As a result of the delayed filing of our Reports, we and NNL breached our obligations to deliver the Reports to the trustees under our and
NNL’s public debt indentures. While continuing delays in filing certain of our Reports will not result in an automatic event of default and
acceleration of the outstanding debt, if holders of 25% of the outstanding principal amount of
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