2007 annual report aveiro investment corp. - First West Properties

additional fi nancing on satisfactory terms. If additional fi nancing
is raised by the issuance of securities, control of Aveiro may
change and owners may suffer additional dilution. If Aveiro is
unable to successfully secure adequate or satisfactory fi nancing
as required, Aveiro’s ability to implement its business plan could
be seriously and adversely affected.
Risks Relating to Taxation and Reassessment
Aveiro may be subject to certain provisions of the Income Tax Act
(Canada) and applicable provincial income tax legislation relating
to characterization of costs incurred in its business which affects
whether such costs are deductible and, if deductible, the rate
at which they may be deducted for the purposes of calculating
taxable income. Aveiro has reviewed its income tax returns and
has found no basis for change or amendment. Aveiro has fi led all
required income tax returns and believes that it has complied fully
with the provisions of the Income Tax Act (Canada) and applicable
provincial income tax legislation, but such returns are subject to
review and reassessment. Aveiro may potentially be subject to a
higher than expected past or future tax liability as well as interest
and penalties in the event of a successful reassessment of Aveiro,
and such amount could be material.
Potential Conflicts of Interest
Aveiro may be subject to various confl icts of interest because of
the fact that the directors and executive management, and their
associates, and the manager of Aveiro, True North Strategy Corp.,
are engaged in a wide range of real estate and other business
activities. Aveiro may become involved in transactions which
confl ict with the interests of the foregoing.
The directors, executive management and their associates or
affi liates and the manager of Aveiro, True North Strategy Corp.,
may from time to time deal with persons, fi rms, institutions or
corporations with which Aveiro may be dealing, or which may
be seeking investments similar to those desired by Aveiro. The
26 | Aveiro Investment Corp. | 2007 Annual Report
interests of these persons could confl ict with those of Aveiro. In
addition, from time to time, these persons may be competing with
Aveiro for available investment opportunities.
John Mackay and Harold Kunik, directors and offi cers of Aveiro,
each own 50% of True North Strategy Corp., which provides
strategic management services to Aveiro. (See “Results of
Operations - Expenses”).
CRITICAL ACCOUNTING ESTIMATES
The preparation of fi nancial statements in accordance with
Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the fi nancial
statements and the reported amounts of revenues and expenses
during the period then ended. Actual results could differ
from those estimates. Signifi cant areas requiring the use of
management estimates include assessing the recoverability of
income producing properties and property held for development.
Accounting standard setters have determined that the use of the
Black-Scholes or a customized lattice option pricing model will
provide a reasonable estimate of the fair value of options granted
by an enterprise. The Company has selected the Black-Scholes
model as appropriate for its circumstances. The factors used in
the Black-Scholes calculation are a signifi cant estimate. See
“Results of Operations – Expenses”.